One of Moldbugs' ideas is that the state should be broken up into a patchwork of sovereign city states that are run on a for-profit basis. He wants "shareholder republics" where nations are structured like corporations run for the profit of their shareholders.
This commits a fundamental error that all economists commit, an error that causes economists to make normative statements. If the subject of economics is properly understood, there are no normative statement — no "oughts." The result is only positive statements, or "is" statements. After all, if you have described reality accurately then how can you rage against it? Hans Herman Hoppe wrote Democracy The God That Failed and advocated for monarchy. In doing so he showed that he did not completely understand reality. (Though it is still better than all other descriptions of democracy). Just like Moldbug, he made a fundamental error. Because accurate perception of reality gives you only facts and options, not dreamy ideas about how things could be.
The error is the assumption that humans are monetary maximizers. They simply aren't.
Rather, humans maximize social status, and not money. Money is just a proxy for gaining social status, and a worse proxy than power. Take two people as an example; Bob is a millionaire who owns a big house and a sports car. Sally is a tenured professor of woman's studies who sits on a committee that reviews her peers work. Sally makes 65 K per year. Bob makes 400 K per year. Who is more effectively maximizing utility? Bob or Sally? The answer is actually Sally.
But why? Because utility is really social in nature.
Let us say that when Bob shows off his new sports car he gains about 5 minutes of social utility. And when he brags about his house he gets approximately 7 minutes of social utility. Let's say he does that 20 times for his car and 50 times for his house. So;
Car = 5 minutes x 20 = 100 minutes
House = 7 minutes x 50 = 350 minutes
Let's also say that he has a hot wife who is generous enough to bang him 3 times per week, and he gets 30 minutes of utility out of that. And let's say for reasons of comparison that will become clear in a minute, he bangs her for 13 weeks straight.
So; 30 minutes x 3 times per week x 13 weeks = 1170 minutes
Total utility = 1620 minutes, or 27 hours, (in a 13 week time period).
Now let us run Sally's calculations. Sally teaches 4 women's studies classes twice per week for 2 hours straight each. During this time, she exerts a mesmerizing cult-like control over her mostly female students. Each semester is 13 weeks long. So her numbers look like this;
120 minutes per class period x 2 times per week per class x 4 classes x 13 weeks per semester.
= 12,480 minutes of utility per 13 weeks.
She also gets immense power tripping utility from siting on the academic committee that "reviews" her peers work for political correctness. She does that 3 hours per week for each 13 weeks each semester.
So; 180 minute meetings x 13 weeks = 2,340 minutes of utility.
Total utility is 14,820 minutes, or 247 hours, (in a 13 week time period).
This is why meetings always go long. Social utility is being extracted by every complaint, order, rant, and criticism. Economists measure utility in monetary units like dollars. They should be measuring it in time, and they should be measuring social utility, not just "utility." Maybe they should also multiply time by some gratification factor of pleasure: a rating of how much pleasure you get for each unit of time.
Now notice that Sally gets 915 % as much utility as a millionaire with a hot wife. (247 hours versus 27 hours) Even if the rich guy fucks his wife like 2 hours each time, 6 days per week, that is still only a total of 163.5 hours. Sally still gets 1.5 times more utility from her power tripping lectures.
Does the rich guy have meetings? Of course. But does he psychologically dominate his subordinates with political indoctrination and fear the way Sally does? In her meetings? Is that even legal in the corporate world? Is a White male even allowed to do that these days?
Of course what one person calls utility and what another person calls utility are relative things. Maybe Millionaire-guy just doesn't get that much pleasure out of dominating people the way Teaching-bitch does. Maybe he gets a lot more utility out of sex because he is a man and can have orgasms predictably. Sally doesn't get that. She gets feminism instead, and builds a small cult.
Utility is relative.
But getting back to Moldbug. . .
He says that Sovereign corporations will maximize profit. This is laughable. Nations already are corporations, and they will do exactly what they already do: maximize power.
Power is simply a more efficient method to gain utility. There is a "thrill" in dominating others, even if the power you exercise is trivial. While you may not experience this thrill, everyone who wants power does. If you are unscrupulous then a university is a far better place to maximize social utility than a business. You can dominate your students and peers with holiness. You cannot dominate a customer, and dominating your employees leads to high turnover and lawsuits.
Democracy does exactly what people want it to do: it spreads power out. Democracy is actually the social utility maximizing form of government. That is why it is so resilient once it is set up. It may be difficult to set it up because despots do not want to divide their power, (and therefore diminish their net social utility), but once set up it is nearly impossible to get rid of unless it destroys itself. It is not a "fragile convention of limited warfare" like Moldbug says it is, but rather an impenetrable game of social power maximization. Because any consolidation of power would diminish the utility of some actors in the system, all actors are against consolidation.
What this means is that a "patch" or "Sovcorp" within a patchwork is far more likely to threaten its neighbors than a Rights Enforcement Agency is under anarcho capitalism. I have worked in both law enforcement, (in the Air Force) and security, and law enforcement is a far more corrupt and threatening to peoples' rights. A security company is just a business. A police department is always a miniature fiefdom of some petty tyrant. Tyrannical security companies go out of business, just like my last employer did, (whom I won't name here for privacy reasons).
So take it from the man who does the job: anarcho capitalism is less dangerous than patchwork. This is because it depends on customers who can leave while patchworks are still governments. Moreover, if customers pool their purchasing power in consumer purchasing unions then the potential for extortion is greatly diminished. A universal basic income voucher that requires a person to purchase rights protection services to unlock the additional money would also help. Basically: the more voluntary the purchase of police services is the less abusive it will be.
After all, the mercenary company Blackwater literally operates a private military base within the borders of the US. I have never heard of any of America's private militaries trying to overthrow the government. As long as a defense company gets all of its income from the state it will not pose a threat to the population. This is why I have modified David Friedman's conception of a private law society to make it a governance marketplace. In Friedman's idea people buy rights protection (police services) directly on the open market. This is insane because it gives a wealthy client the power to exterminate a poor client, since he can simply outbid them. It is also insane because it does not have an intermediately between the consumer of police services and the provider, allowing the provider to extort the consumer like a protection racket does. It is also insane because without a central licencing authority there will be open war between private police companies.
Moldbugs' idea is even more irrational because a patchwork would never stay divided, and because, as already stated, humans are social utility maximizers, and not money maximizers.
But this does not mean that a system of private law enforcement could not work, would not be superior to what we currently have, reduce crime, provide better rights protection, etc. Indeed, private law enforcement is an excellent way to eliminate anarcho tyranny. It just needs to be regulated properly — like any other business. Regulated by whom? By people with police experience of course, just like your humble author. The difference between Moldbug, Friedman, and myself is that I actually did the job, and I know exactly what cops are capable of first hand. I am not just an academician sitting in an ivory tower. I lived this, and here is what I recommend.
1. Licence all private police according to strict rules to prevent abuses of power.
2. Instead of letting people buy rights enforcement services privately, tax them, then distribute vouchers for purchase. This prevents one person from buying the extermination of another since all customers have the same purchasing power.
3. Tax additional side payments made at a much higher rate. The tax money is then redistributed to everyone else in the form of more vouchers.
4. Require people to use a purchasing union. This gives people safety in numbers, and prevents a single person from enacting tyranny by setting up their own private dictatorship.
In this system the law is made by private actors. Exit is built into the system from scratch. There are no opportunities for parasitical behavior, affirmative action quotas, liberal domination, etc. As long as the central government that licences these private police companies is not a democracy you can have a combination of non-democracy + freedom.
Let us just leave aside the question of the internal structure of the federal government for now. Assume that the federal structure is competent at regulating markets and libertarian in its attitudes. We will call this federal structure the sovereign, or the Sovereign Licensing Corporation, (SLC).
The SLC provides licencing, and the market provides freedom. The sovereign just lets the people govern themselves by buying the kind of law they want. Legal disputes between competing private police companies are settled by private arbitration. Negotiations and side payments determine the shape of the market equilibrium for law. Since everyone gets a voucher worth the same amount, and since the side payments by the rich are taxed and redistributed as more vouchers, everyone gets a relatively equal level of law without legalizing crime for any segment of the population.
That is what market formalism is all about. Why would a sovereign do this? Because giving people self-government prevents insurrection, and this self-government is delivered through capitalism rather than democracy. It also eliminates a potentially troublesome bureaucracy, and lets the SLC keep its work to a minimum. The SLC is just there to occupy the position of supreme power and prevent others from taking it. It fills a power vacuum, preventing war between private police agencies. Also, because the sovereign does not have to decide thorny issues of religion, morals, values, etc., he is not an irritant to the people. No one has a justification for civil war under a libertarian government. Also, once market formalism is set up the freedom it provides creates an expectation for its continuance. Thus, the central government is forced by custom to continue being libertarian even if its leaders are not so generously inclined. It constrains all actors involved without the need for a constitution. Since the state is just a market regulator, and not a determinant of values, it can never honestly be accused of tyranny, unless it fails in its licencing duties.