During the dark ages, nations like China were relatively advanced while Europeans were living in squalid huts.
But that began to change several hundred years ago. Europe experienced the enlightenment and industrial revolution while the empires of Asia languished.
What accounts for this dramatic shift?
I’m not going to pretend there’s a single explanation, but part of the answer is that Europe benefited from decentralization and jurisdictional competition. More specifically, governments were forced to adopt better policies because labor and capital had significant ability to cross borders in search of less oppression.
I’m certainly a big fan of making governments compete with each other, but even I didn’t realize how jurisdictional rivalry gave us modernity.
But you don’t have to believe me. This topic was discussed by Professor Roland Vaubel at last week’s Mont Pelerin Society meeting. Here are some excerpts from one of Professor Vaubel’s papers on the topic.
…competition among the public institutions of different countries can benefit from an international competitive order which preserves peace and prevents governments from colluding with each other at the expense of third parties, notably their citizens.
This post will have lots of additional excerpts, but if you’re not as excited by the issue as I am, just take a moment to review this table from Vaubel’s paper (click it for a larger image). You will see that the intellectual history of this issue is enormous, and the common theme is that big, centralized states hinder development.
Remember that this table merely looks at the classical thinkers on the issue. The paper also includes modern thinkers, some of who are quoted below. And I also have a postscript that shows how many Nobel Prize-winning economists see jurisdictional competition as a tool for restraining excessive government.
But let’s see what insights we can find from the great thinkers of history, starting with this passage from Charles Montesquieu that Vaubel cites in his paper.
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