Polycentricity and the Theory of Order



Sterpan, Ion

Journal Title

Journal ISSN

Volume Title



This work explains social order as the outcome of governance systems' capacity to use dispersed knowledge. The first chapter examines mainstream institutionalism as exemplified by D. C. North in his work with Wallis and Weingast on the elite compact theory of social order and of the West's transitions to impersonal rights, and proposes instead an Austrian process-oriented perspective. We argue that mainstream institutionalism may account for peace but does not fully account for why the West's impersonal rules are also efficient. Their efficiency can be better explained by a market for rules, which aggregates knowledge about which performs better. But a market for rules requires a stable plurality of power centers, with each center being able to enforce the rules it provides, even while facing opposition from the other. The implication of stable plural power centers contradicts the idea of that a doorstop condition to successful transitions is a consolidation of the organized means for violence at the center. The second chapter examines the political element within political economy. The usual reduction of the political to ethics (social preference functions) or economics (trade, as in a Tiebout model) is enabled by the presumption of closed choice data or given utility and cost functions. We argue that subjective choice data is indeterminate, and that the way in which individuals respond to that indeterminacy projects them into systems of leaders and followers. Such systems have causal efficacy on individuals' cost and preference functions. Situations of indeterminacy is most dramatic in situations of exception to constitutional law, which makes politics an answer to the "challenge of the exception." Much of our inspiration for this argument traces to the work of Friedrich Wieser, Carl Schmitt and Vincent Ostrom. The third chapter renders Vincent Ostrom's and Michael Polanyi's theory of polycentric order consistent with the Austrian idea that what matters for order is a systematic use of dispersed knowledge. We use two Austrian research keys to revise Ostrom's concept of polycentricity. The first is that central planning is impossible. If central planning cannot exist anyway, then the only questions left to investigate, and the only way left to use the term polycentricity, is in opposition not to monocentricity but to other kinds of decentralized systems. Not all decentralized systems are polycentric. Polycentric systems are decentralized systems where decision center achieve functional interdependence by acting according to a certain unique set of rules. The second research key is methodological individualism. To reformulate polycentricity theory in strict observance to methodological individualism we discharge it of concepts like collective unit and quasi-market, and decompose the phenomenon of governance in micro associations between individuals. A governance system is made of at least two polycentric subsystems, market and precedent based law, and a decentralized but non-polycentric residual: the network of political associations. Each polycentric subsystem has two layers, an associated infrastructure or base, and an informational superstructure able to aggregate a large amount of information in an accessible way and coordinate individuals. The superstructure emerges on the infrastructure, provided associations in the base are made according to the rule. We identify each system's specific rule and its specific superstructure. The rules are private property and coherence with precedent. The superstructures are the price network and the network of judicial summaries. Political associations do not have a rule of association and have not given rise to a superstructure. This makes the assembly of political associations a poor problem solver relative to genuine polycentric systems within the composition of governance.



Governance, Austrian economics, Institutionalism, Complex systems