Connect with us


Balaji-land: Getting From Here to There

A network state is a social network with a moral innovation, a sense of national consciousness, a recognized founder, a capacity for collective action,…



This article was originally published by EconLog
  • A network state is a social network with a moral innovation, a sense of national consciousness, a recognized founder, a capacity for collective action, an in-person level of civility, an integrated cryptocurrency, a consensual government limited by a social smart contract, an archipelago of crowdfunded physical territories, a virtual capital, and an on-chain census that proves a large enough population, income, and real-estate footprint to attain a measure of diplomatic recognition.
  • —Balaji Srinivasan, The Network State1
Balaji Srinivasan’s The Network State (TNS) is filled with provocative arguments and insights. I strongly recommend TNS for your book discussion group. It can fit into either the fiction or the non-fiction category.

Like Neal Stephenson or J. K. Rowling, TNS uses original linguistic expressions that create a sense of an alternate universe. As just one example, you probably know that the Democratic Party once represented the white racists of the South, and the Republican Party was stronger in the more racially progressive Northeast, but that these positions have switched. In TNS, this is termed a “flippening.”2

Substantively, TNS also struck me as fictional, in that it does not address the issue of how people can extricate themselves from existing states in order to join a Network State. Suppose that my house is located in Silver Spring, Maryland, in the United States, and I wish to join Balaji-land. How do I get out of paying taxes to my county, state, and the U.S. Treasury? Which regulations of my local jurisdiction am I able to jettison?

I do not think that my neighbors will be content to let me say that because my house is in Balaji-land, I do not have to pay taxes to help pay for the playground that my children use, the roads that I drive on, and other local amenities. I do not think that they will want to exempt me from laws forbidding commercial establishments in residential areas, or laws pertaining to drug or alcohol sales.

Such matters have to be negotiated with each legacy government in order for people to switch over to a network state. Otherwise, if all of one’s obligations to the territory in which one resides remain in place, a network state is nothing more than an add-on set of norms and rules. It is an international club or affinity group or corporate loyalty program. However eloquent TNS may be at describing how network states could be feasible if human social arrangements were starting from scratch, it is silent on what I see as important issues pertaining to getting from here to there.

As a non-fiction book, TNS describes the predicament that we are in with the existing state system and the potential superiority of a network state system. The rest of this review will discuss a few of the many insights TNS has to offer on these topics.

Governments justify power by amplifying threats and preying on people’s fears. Srinivasan writes,3

  • Somewhat toned-down versions of the atrocity story are the go-to technique used to justify expansions of political power.
    • • If we don’t force people to take off their shoes at the airport, people will die!
    • • If we don’t stop people from voluntarily taking experimental curative drugs, people will die!
    • • If we don’t set up a disinformation office to stop people from making hostile comments online, people will die!

In order to expand their power, rulers distort history. But there are limits to this, because there is an objective source of truth, which TNS refers to as technology.

  • Technological history is the history of what works; political history is the history of what works to retain power.

TNS argues that encryption is a fundamental revolution in the distribution of power.

  • When there is strong encryption government can’t crack, that means communications states can’t eavesdrop on, transactions they can’t intercept, and digital borders they can’t penetrate. It means nothing less than the ability to organize groups outside state control, and thus a diminution in the power of states to control.4

The state also is weakened by the way that the Internet erodes the importance of physical geography.

  • When the network identity is more salient than the neighbor relationship, it challenges the very premise of the Westphalian state, which is that (a) people who live geographically near each other share values and (b) therefore laws should be based on geographic boundaries. The alternative is that… the laws that govern them should be based on network boundaries.

The distinction between the state and the network seems blurred in America today, because the same faction currently exercises power using both. In a passage that illustrates the flavor of linguistic expression in the book, Srinivasan writes,

  • There are different names for this left-authoritarian network that controls the state from outside by “holding it accountable.” We can call it the Paper Belt (which emphasizes their Rust-Belt-like technological backwardness), we can call it the Cathedral (which emphasizes their holiness), we can call it the regime (which emphasizes their illegitimacy), or we can call it simply the American establishment (which emphasizes their enduring power). Later we will call it NYT/USD, to emphasize their source of truth and digital economy relative to BTC/web3 and CCP/RMB.
  • It’s important to understand that the power of the left-authoritarians comes from getting the officials of the centralized American State and (more recently) the executives of the centralized Big Tech Network to crush their enemies.

But TNS is optimistic that a portion of the political left is inclined toward libertarianism.

  • The left-libertarian subgroup of blues has begun to flirt with decentralized media and web3, because they’re realizing the Network could be more interesting than the declining American State. Could Substack be more remunerative than Sulzberger? Could Satoshi’s community deliver more for them than Bernie’s? If they need to redefine all that as “socialism,” so be it! And if their funding stream is changing, their ideology is slowly shifting too. Yes, they may have started as mere pawns of America’s left-authoritarian establishment, but what they value is increasingly coming from the decentralized global Network rather than the centralized American State. So they are beginning to uncouple. And that’s the emerging Network-vs-State division within blue tribe.

TNS also sees a libertarian faction on the right. He calls them “international capitalists.” He claims that their belief in free markets and global markets will lead them to gravitate toward Bitcoin, and hence toward the Network and away from the State.

I have doubts about these libertarian cadres on the left and the right, particularly the latter. Capitalism depends on strong property rights, and so far these seem to be better protected by government than by software algorithms. Commerce today is facilitated by banks, which are adjacent to government. Bitcoin and other cryptocurrencies are adjacent to criminal activity. The prospects for changing this, which I never thought were very good, have only fallen with the various hacks, frauds, and collapses that took place in early 2022 in the crypto world. In fact, Srinivasan says,

  • … crypto made progressives more libertarian and libertarians more progressive. Progressives discovered that you can build stateless money. Libertarians discovered that you then need to rebuild something much like a state: identity, reputation, anti-fraud, custody, trust, community, and the like.5
“TNS foresees a conflict between people who turn to the Network to solve problems through innovation and people who turn to the state to solve problems through legislation.”

In any event, TNS foresees a conflict between people who turn to the Network to solve problems through innovation and people who turn to the state to solve problems through legislation. In this regard, TNS reminded me of the distinction between dynamists and stasists drawn by Virginia Postrel in The Future and its Enemies:

  • Both outside and inside the US, there’s the sense that the US-dominated postwar order is either on its last legs or already over, and that the ancient legislators and endless remakes reflect a fading culture trying to hang on by its fingernails to prevent what comes next.6

To wield its power, TNS argues, the state must spin a narrative that distorts the truth. But now these distortions are being exposed.

  • Why do we know about these distortions of the present? It’s again because of a collision of Leviathans, because the Network routed information around the State, giving people actual rather than ostensible freedom of speech.

TNS makes the case for Network states as a means to promote moral innovation. As with technological innovations, moral innovations should be tested experimentally and evaluated by the people who are affected by them.

  • Backers can fund startup societies using the mechanisms of tech, out in the open, with explicit contracts, and consent by all citizens. But they can also achieve the moral innovation desired by the political revolutionaries. And if these startup societies are built out on the frontier, whether digital or physical, then the moral innovations are no longer imposed top-down, but adopted bottom-up by the people who opt in. That gives a better way to achieve the goals of ambitious young political reformers.

For more on these topics, see

TNS says that we should envision a future of many new Network states, with each state based on a single moral innovation that is a single principle to which all members adhere but which differs in some way from the social morality that prevails elsewhere. As these states rise and fall, we can hope for moral progress, just as we enjoy economic progress from the process of creative destruction among firms.

TNS hopes that this will lead to

  • … the Recentralized Center: a circle of startup societies and network states built by pragmatic founders, a group of high-trust communities architected as intentional alternatives to failed states and surveillance states alike.7

In short, TNS offers a rich set of ideas. Even if its vision for the future is merely fictional, it is still an important thought-experiment.

*Arnold Kling has a Ph.D. in economics from the Massachusetts Institute of Technology. He is the author of several books, including Crisis of Abundance: Rethinking How We Pay for Health Care; Invisible Wealth: The Hidden Story of How Markets Work; Unchecked and Unbalanced: How the Discrepancy Between Knowledge and Power Caused the Financial Crisis and Threatens Democracy; and Specialization and Trade: A Re-introduction to Economics. He contributed to EconLog from January 2003 through August 2012.

Read more of what Arnold Kling’s been reading. For more book reviews and articles by Arnold Kling, see the Archive.

As an Amazon Associate, Econlib earns from qualifying purchases.



7 Undervalued REITs to Buy in August

The U.S. inflation rate has surged to levels not seen since the early 1980s. This has had profound ramifications for investors. Sectors such as technology…

Continue Reading

India Using Asian Currencies Instead of Dollar to Buy Russia’s Coal

The West’s campaign in choking Russia’s economy from the rest of the world appears to be backfiring. In fact, Washington’s
The post India Using Asian…

Continue Reading

Joint Review Panel delivers EA Report on Generation Mining’s Marathon project

Generation Mining (GENM.TO) confirmed the Joint Review Panel has released its report on the Marathon PGM project. The report sets out recommendations for…

Continue Reading