This piece originally appeared at Second Best.
The very first thing I wrote when I moved to Washington, D.C., in the summer of 2015 was an essay called, Disrupting Bureaucracy: How Uber and Estonia are paving the way for software to eat the state. It represented my attempted answer to what’s sometimes called the “transition problem” in political economy. Just as our economic theories tend to assume a static market equilibrium, our political theories tend to assume a more-or-less stable institutional regime. Our theoretical understanding of how markets and institutions transition to a wholly new equilibrium (e.g. how the Soviet system collapsed and then transitioned to capitalism) is far less developed.
As a young techno-libertarian, I had grown suspicious of the “starve the beast” strategy favored by my anti-statist friends and colleagues. It seemed to me that, at least in a democracy, the size and scope of government was endogenous to popular political demands (see: Wagner’s Law). Cutting taxes and sabotaging government services can thus paradoxically lead to an even bigger government, both because deficit financing makes government programs feel artificially “cheap” to the public (see: fiscal illusion), and because governments end up having to redouble their spending and regulation to offset bureaucratic inefficiencies (see: Kludgeocracy in America).
I concluded that, if we were ever going to transition to a more libertarian form of government, it would be essential to first use information technology to improve and streamline core government services in a way that creates space for crowding-in privatized forms of governance. Just as Uber and Lyft disrupted regulated taxi commissions, for example, perhaps many other governmental functions could one day be provided by the private governance of competing software platforms using AI-enabled reputation mechanisms, dispute resolution systems and the like — an “Uber for governance” that solves for the transaction costs and market failures that are today internalized by the Weberian nation-state.
In short, just as Marc Andreessen said “software is eating the world,” perhaps software will eventually eat the state. And nearly a decade later, it seems like this strategy for disrupting bureaucracy is finally coming to fruition in the form of Elon Musk’s Department of Government Efficiency.
