If you dislike the service and selection provided at your local Borders book store, you can use another merchant. You can go to Barnes and Noble, or a small independent book-seller, or buy from Amazon. If you don’t like the cheeseburgers at McDonald’s, you can go to Five Guys for lunch instead. If your apartment is lousy, you can search around for a new one. If you don’t like your doctor, you can get referred to a different one. If you don’t like your employer, you can switch jobs. If you don’t like your friends, you can hang out with other people. If you don’t like your girlfriend, you can break up with her.
But if you don’t like your current government, you have to find a new country and a new bookstore, burger place, apartment, doctor, job, friends, girlfriend, and more. You may have to learn a new language, and you will have to make expensive travel arrangements and pay shipping costs for whatever possessions you want to bring along.
This is the monopoly power of government. There are high costs to shifting the system of laws under which we live, costs that allow our government to charge us far more for the security it provides than the cost of providing it. These costs are exacerbated by our uncertainty, risk aversion, and limited individual knowledge of our alternatives. The “shareholders” of government – some members of the controlling majority – may benefit from the profit created by this monopoly power. Or they may not, if multiple overlapping majorities simultaneously extract different “profits” from different groups. But as a whole, society always suffers. Economists would say that there is a “dead-weight loss”.
From this monopoly point of view, the efficient government is one that is not able to price above its cost. This might be achieved by states so small that people could hop between them without having to change the other circumstances of their lives. Or it might be fostered by radical decreases in transportation costs. If a man could live in London and work in New York without suffering any travel costs (time or money), both countries would have less leverage over him.
It is hard to predict what types of laws and regulations would be adopted by the competitive state. But one thing seems clear. The redistributive burden thrown on the most productive citizens of a state represents no competitive pricing of the services it provides them. It is a monopolistic extraction of profit and odious to any person who would have a state treat its citizens equally.