But are there limits to the power of decentralization? One indication that there are such limits comes from the way corporations operate. Drawing on the work of Nobel Prize winning economist Ronald Coase’s famous 1937 article “The Nature of the Firm,” Palda writes, “Corporations do not rely on decentralized bargaining over property rights among their employees to get things done, but rather on vertical lines of command and cooperation.” It would simply be too time-consuming, and hence too expensive, to have to negotiate every single transaction individually, and so some centralization of property rights is advantageous.

          Importantly, the centralization that happens in a firm is voluntary. Employees agree to hand over their labour to someone else’s control for prescribed periods of time and for a certain set of purposes. If employees feel their employers or managers are overstepping their bounds, or if they simply wish to pursue greener pastures, they are free to terminate their agreements and retake control over their labour, subject only to whatever restrictions they agreed upon when negotiating their employment.

          Does this mean that all decision-making can be decentralized, or at least that any advantageous centralization can be voluntary? In other words, is there any need in Pareto’s Republic for a government that exercises coercive power for purposes other than the protection of life, liberty, and property? Palda thinks there is such a need: “In the case of society, just as in the case of firms, sometimes property rights are too costly to pay for and a hierarchical solution to conflicts is required.” Government intervention is justified, he elaborates, in order “to resolve disputes where property rights cannot be established and exchanged in a private market.” These “market failures,” as they are commonly called, come in two flavours: public goods and tragedies of the commons.

          As an example of a public good, Palda discusses the example of street lamps, which provide a service to passersby. But it is not easy to imagine how to charge these passersby for this service in a non-cumbersome manner (in the jargon, the service is non-excludable), which is why government has to step in and provide the service, paying for it with the proceeds from coerced taxation.

          It is interesting that Palda chooses an example so similar to the classic example of a public good, namely the lighthouse, but does not mention Ronald Coase’s other famous article, “The Lighthouse in Economics.” In this article, Coase argues that contrary to popular belief, private lighthouses did in fact exist in England at one point, surviving by charging fees at nearby ports. Though controversial, Coase’s observations at least suggest that we need to be careful about assigning something the status of a public good, and Palda, a professor of economics and a Senior Fellow with the Fraser Institute, is surely aware of this take on the issue. Indeed, libertarians often argue that roads themselves need not be treated as public goods, which obviates the need to treat their lighting as a public good either.

          To his credit, with regard to market failures, Palda does acknowledge that technological advances can provide ways of turning public goods into private goods and of resolving tragedies of the commons (like overfishing) by finding new ways of establishing clear, secure, manageable property rights. “When such an advance occurs,” he writes, “government should abandon its stewardship of the resource in question.” The rub, of course, is that generally speaking, politicians and government bureaucrats are loathe to relinquish any of their accumulated powers. Also, their “stewardship” may itself delay the discovery of the very technologies that would allow for the development of stable private property rights.

          Also worth considering is the fact that governments may make market failures worse rather than better, as the Canadian government did with its mismanagement of the Atlantic cod fisheries. Furthermore, as Palda writes, “most of government spending by the end of the 20th century was devoted to redistributing money rather than spending that money on building bridges and funding other forms of infrastructure.” Getting to Pareto’s Republic, it seems, is no easy task.

          About his book, Palda writes, “No prerequisites are needed to understand it except a curiosity about a principle that might one day become humanity’s salvation.” I can attest that readers need not possess a degree in economics to find much that is worthwhile in Pareto’s Republic, even if I think the author is not skeptical enough about how helpful government can be in bringing about a peaceful society. But this book was not written with a reader like me in mind. It was not written to convince a libertarian to be a little bit more mainstream; it was written to convince the mainstream to become considerably more libertarian. As such, I can recommend it with few reservations and confidently assert that readers will find much valuable food for thought, and will enjoy thinking about it, if they read Pareto’s Republic. And yes, humanity’s salvation really does hang in the balance. Peace out.