Political Ramifications of an Interstate Market for Sovereign Territory
In my last post I tried to sketch some of the major constitutional considerations that would arise if one state were to purchase sovereign territory from another. Those considerations are weighty, to be sure, but they don’t seem sufficient to explain the total lack of an interstate market for sovereign territory. Perhaps part of the explanation lies in politics.
On the one hand, it’s not too hard to imagine some significant political upsides. A simplified Coasean story suggests that territory should be purchased by the state that values it the most, which seems like a good thing. And because a market for sovereign territory would make borders more fluid, it might also open up opportunities for Tiebout-like movement of citizens seeking a more congenial state government. (More precisely, it would permit the government to come to the citizens, rather than the other way around.) This could, in turn, inspire a beneficial competition between states seeking to acquire or retain citizens and valuable territory. Likewise, states that find themselves enmeshed in border disputes could resolve them with side-payments, as private landowners might, or simply find mutually beneficial ways to sell or adjust existing borders.
On the other hand, the political downsides of such a market would also be considerable. Some of those costs are the kind captured by ordinary politics; they could therefore help explain why the market is inactive. Other costs, however, represent potential political failures and might demand some external corrective.
As to the former, an interstate sale of sovereign territory would obviously raise immense transaction costs, particularly for the residents of the territory being sold. Elected officials and perhaps even state employees (those in the territory, at least) would stand to lose their jobs, and thus have plenty of incentive to oppose the transaction. Furthermore, it seems to me — and I’d love to know if this is a shared intuition — that the market for sovereign territory might never clear because states would generally set a higher price on their own borders than any potential buyer would ever be willing to pay.
The second set of political concerns consists of those costs that current political structures could fail to prevent. Some of the comments and emails I’ve received on my previous posts have emphasized the importance of self-determination and the danger of selling a territory against the will of its residents. Many historical transactions, after all, involved territory that was either sparsely populated or whose population did not “count” for one reason or another. Given the enormous and complex reliance interests that have arisen around our current state borders, the costs of change alone would be enormous. Moreover, the Tieboutian story above wouldn’t necessarily spin in a positive direction, and competition between states is not necessarily an unalloyed good. The possibilities for political corruption and side-dealing would be extreme, for one thing. And the costs to the system as a whole — political balkanization, upsetting the balance of vertical or horizontal federalism, the possibility of “rotten boroughs” (as Gerard pointed out), and so on — could also be considerable.
I’m not sure where the balance between these concerns should lie, or even whether it’s possible to weigh them in the abstract. What if the transaction involved only a small slice of territory, or a large but uninhabited one? What if a super-majority of the territory’s residents supported the sale, or were trying to buy their way out of one state and into another with the blessing of both? Would it make things better if deals were structured so that those residents received a disproportionate share of the proceeds, in order to compensate them for the costs of changing state citizenship?
My guess is that even if the constitutional straits are navigable, and the political winds sufficient, people will still have major concerns about an interstate market for sovereign territory. Perhaps sovereign territory is (or has become, at least) market inalienable. I’ll try to address that next week. In the meantime, thank you for all of the comments and emails so far — I’m extremely grateful for your thoughts.