Panarchy and Entrepreneurial Cities

Similarities between Panarchy and Private Cities

In 1860, the Belgian economist and botanist Paul Emile de Puydt published the essay Panarchy, originally in French¹, in the periodical Revue Trimestrielle, in which he outlined a political system in which everyone would have the right to choose under which form of government they wanted to live. In other words, Puydt applied the concept of freedom of choice, laissez-faire, laissez-passer, to the system of government (or non-government).

“My panacea, if you will allow this term, is simply free competition in the business of government. Everyone has the right to look after his own welfare as he sees it and to obtain security under his own conditions. On the other hand, this means progress through contest between governments forced to compete for followers. True worldwide liberty is that which is not forced upon anyone, being to each just what he wants of it; it neither suppresses nor deceives, and is always subject to a right of appeal. […] In a nutshell: Freedom of choice, competition. “Laissez faire, laissez passer!” This marvellous motto, inscribed on the banner of economic science, will one day be the principle of the political world too. The expression “political economy” gives some foretaste of it and, interestingly, some people have already tried to change this name, for instance, into “social economy”. The intuitive good sense of the people has disallowed this concession. The science of economics is and always will be the political science par excellence. Was it not the former which created the modern principle of non-intervention and its slogan “laissez faire, laissez passer”?”

Michael S. Rozeff, in the article Why I Am a Panarchist², expresses in other words the concept of Puydt: 

“I personally do not want to live under such a power and such impositions, which is why I am anarchist. But I also recognize that others of you might wish to do so, which is one reason why I am panarchist. I do not want to abolish your government that you may want for yourselves, but I want to have my own means of governance for myself. This too is why I am panarchist”.

Or, briefly, Puydt wrote:

“Freedom should extend to the right not to be free, and should include it.”

Since there are different people with different ideologies and political preferences, why not apply the same rules of voluntary organizations to political entities as well? Everyone would therefore have the freedom to live under the social system they want without affecting others with their choice.

“What is most admirable about this innovation is that it does away, forever, with revolutions, mutinies, and street fighting, down to the last tensions in the political tissue. Are you dissatisfied with your government? Change over to another!  These four words, always associated with horror and bloodshed, words which all courts, high and low, military and special, without exception, unanimously find guilty of inciting to rebellion, these four words become innocent, as if in the mouths of seminarists […].As it affects you alone, I cannot disagree with it. Your change affects no one else – that is its merit; it does not involve a victorious majority or a defeated minority […].”

Just like entrepreneurial cities, panarchy is not opposed to the existence of different models of society, as long as membership is voluntary and individual.

“What, basically, all preconceptions apart, is the function of any government?  As I have indicated above, it is to supply its citizens with security, in the widest sense of the word, under optimum conditions. I am well aware that on this point our ideas are still rather confused. For some people not even an army is protection enough against outside enemies; for some not even a police force, a security force, a royal prosecutor and all the honourable judges suffice to assure internal order and protect rights and property. Some people want a government with its hands full of well-paid positions, impressive titles, striking decorations, with customs at the frontiers to protect industry against the consumers, with legions of public servants to maintain the fine arts, theatres and actresses. I know also that those are empty slogans propagated by governments playing at providence, such as we have mentioned before. Until experimental freedom has done justice to them, I see no harm in letting them continue to the satisfaction of their adherents. I ask one thing only: Freedom of choice.

We should realize though that there do exist, here and there, governments as liberal as human weakness actually permits, and yet everything is far from well in the best of all possible republics. Some say: “This is precisely because there is too much freedom”; the others: “This is because there is still not enough freedom.”

One man needs excitement and struggle – quietness would be deadly to him. Another, a dreamer and philosopher, is aware of the movements of society from a distance – his thoughts are formed only in the most profound peace. One, poor, thoughtful, an unknown artist, needs encouragement and support to create his immortal work, a laboratory for his experiments, a block of marble to sculpt angels. Another, a forceful and impulsive genius, endures no fetters and breaks the arm that would guide him. For one a republic is satisfactory, with its dedication and self-denial; for another an absolute monarchy, with its pomp and splendor. One, an orator, would like a parliament; another, incapable of speaking ten connected words, would have nothing to do with such babblers. There are strong spirits and weak minds, some with insatiable ambitions, and some who are humble – happy with the small share which befalls them.

Finally, there are as many needs as different personalities. How could all these be reconciled by a single form of government?”

Both in the literature on entrepreneurial cities and in panarchy, the benefit that arises from the competition in the governmental branch is recognized.

“[…] from the moment when forms of government are subject to experimentation and free competition, they are bound to progress and perfect themselves; that is the law of nature.

No more hypocrisy, no more apparent profundities which contain merely a void. No more machinations passing for diplomatic subtlety. No more cowardly moves or impropriety camouflaged as State policy. No more court or military intrigues deceitfully described as being honorable or in the national interest. In short, no more lies regarding the nature and the quality of the government’s actions. Everything is open to scrutiny. The subjects make and compare observations, and the rulers finally see this economic and political truth, that in this world there is only one condition for a solid, lasting success, and that is, to govern better and more efficiently than others.

[…] due to the law of competition, each government would necessarily endeavor to become as simple and economical as possible. The government departments, which cost us, God knows! our very eyes, would reduce themselves to bare necessities; and superfluous office-holders would have to give up their positions and take on productive work. […].Too many governments would constitute an evil and give rise to excessive expense, if not confusion. However, once one notices this evil, the remedy is at hand. The common sense of the people would not stand for any excesses, and soon only workable governments would be able to carry on. The others would starve to death. You see, freedom is the answer to everything. 

[…] under the reign of competition, which government would allow itself to be overtaken by the others in the race for progress? What improvements available to one’s happy neighbour would one refuse to introduce in one’s own house? Such constant competition would work wonders. 

Panarchy, as well as entrepreneurial cities, proposes the primacy of individual self-determination, and that is its only flag. That is, the possibility of responding to declining organizations, in this case government organizations, not only through ‘voice’ as is customary in current systems (voting, protest, petition, etc.), but also through ‘exit’³. In Puydt’s words, the exit principle is formulated as follows: “Change over to another!”. It is worth noting that the ‘exit’ referred to here is the possibility of withdrawing from a given institutional system, not necessarily having to leave the jurisdictional territory of that institutional system. This includes, for example, creating a special zone within the jurisdiction of a state, however, the zone would no longer have to operate under the general regime of institutions that applies to the rest of the territory.

[…]To bring about such a liberty, there would be no need to give up either national traditions or family ties, no need to learn to think in a new language, no need at all to cross rivers or seas, carrying the bones of one’s ancestors.”

Panarchy does not require the destruction of systems, but allows the simultaneous existence and gradual evolution by competition between the new and the old. Thus, both panarchy and entrepreneurial cities share a good combination of prudence and innovation, conciliating permanence and change in the flow of transformation from old to new institutional forms. In other words, the new forms of social organization can coexist with today’s institutional edifice, since they are not mutually exclusive, leading to the advent of more responsive institutions of governance4 that bring, instead of ruptures (revolutions), gradual change through competition.

“The laws of nature alone are immutable; all legislation must be based on them, for they alone have the strength to support the structure of society; but the structure itself is the work of mankind.

Each generation is like a new tenant who, before moving in, changes things around, cleans up the facade, and adds or pulls down an annex, according to his own needs. From time to time some generation, more vigorous or shortsighted than its predecessors, pulls down the whole building, sleeping out in the open until it is rebuilt. When, after a thousand privations and with enormous efforts, they have managed to rebuild it to a new plan, they are crestfallen to find it is not much more comfortable than the old one. It is true that those who drew up the plans are set up in good apartments, well situated, warm in winter and cool in summer; but the others, who had no choice, are relegated to the garrets, the basements or the lofts. 

So there are always enough dissenters and troublemakers, of whom some miss the old building, whilst some of the more enterprising already dream of another demolition. For the few who are satisfied there is an innumerable mass of disgruntled ones.

We must remember however that some are satisfied. The new edifice is indeed not faultless, but it has advantages; why pull it down tomorrow, later, indeed ever, as long as it shelters enough tenants to keep it going?

I myself detest the wreckers as much as the tyrants. If you feel your apartment is inadequate or too small or unhealthy, then change it – that is all I ask. Choose another place, move out quietly; but for heaven’s sake don’t blow up the whole house as you go. What you found unsuitable might delight your neighbor. Do you understand my metaphor?”

Entrepreneurial cities, in the same way as Puydt’s panarchy, give rise to the institutional evolution of society, but with caution, preserving the edifice of institutions that is at our disposal today, imperfect as they might be. In addition, institutional innovations are experienced by groups of pioneers who voluntarily seek them out. Entrepreneurial cities and panarchy share a sense of prudence when trying something new and not fully known, as well as the flexibility to do so without having to “tear down the building”. Moreover, it is always important to contextualize the changes, because not only are the institutions new, but each historical moment is unique (and therefore new!), which requires from us maximum discernment and wisdom.

The institutions of society are constantly evolving and new institutional forms are emerging at every moment. Why should we run the risk of applying social innovations to an entire population, as is traditionally done in politics? Entrepreneurial cities and other startup zones, in turn, allow social systems to evolve “on demand,” that is, new institutional forms only directly affect their adepts, as well as prosper only on the basis of their interests.

At another point in the text, Puydt makes a very contemporary observation. On that occasion, he referred to the role of the press, which in his time had the relevance that, today, is increasingly centered on social networks.

“My idea is merely a seed in the wind. Will it fall on fertile ground or on the cobbled road? I can have no say in this. I propose nothing Everything is just a matter of time. Who, a century ago, believed in freedom of conscience, and who, these days, would dare question it? Is it so very long since people scoffed at the idea of the Press being a power within the State? Yet now statesmen too bow before it. Did you foresee this new force of public opinion, whose birth we have all witnessed, which, although still in its infancy, imposes its verdict on empires? It is of utmost importance even in the decisions of despots. Would you not have laughed in the face of anyone daring to predict its rise?”

An important distinction

A distinction between panarchy and entrepreneurial cities lies in the fact that the concept of Puydt is ‘extraterritorial’, i.e. it does not limit the choice of government to geographical boundaries.

“It is not a matter of emigration. A man does not carry his native land on the soles of his shoes. Moreover, such colossal expatriation is and always will be impracticable. The expense involved could not be met by all the wealth in the world. I have no intention of resettling the population according to its convictions[…]

For instance, you are a republican. […]Monarchy does not suit you – the air is too stifling for your lungs and your body does not have the free play and action your constitution demands. According to your present frame of mind, you are inclined to tear down this edifice, you and your friends, and to build your own in its place. But to do that you would come up against all the monarchists who cling to their beliefs, and in general all those who do not share your convictions. Do better: assemble, declare your program, draw up your budget, open membership lists, take stock of yourself; and if numerous enough to bear the costs, establish your republic.

My method differs from unjust and tyrannical procedures followed in the past in that I have no intention to do anyone violence. Does anybody want to carry out a political schism? He should be able to do so but on one condition, namely, that he will do it within his own group, affecting neither the rights nor the creed of others. To achieve this, it is absolutely not necessary to subdivide the territory of the State into so many parts as there are known and approved forms of government. As before, I leave everyone and everything in its place.”

A modern application of the Belgian author’s ideas is being carried out by the Bitnation initiative. In short, it is a virtual platform that makes it possible to create or join decentralized, borderless and voluntary jurisdictions. Such virtual jurisdictions do not need to correspond to political borders/currencies and are free to join, i.e., one is only part of them if one wants to. It is possible to be a “citizen” of several “nations” at the same time, or even not at all, providing self-determination for people to choose under which laws they want to live. In this way, it is possible to foster a global free market for voluntary governance services without the traditional territorial restrictions. Everyone can live under the system of their choice without imposing their system on others. In short, it is panarchy in a technologically updated version, with modern digital tools in place of the agencies of political affiliation proposed by Puydt.

“Go to the Bureau for Political Membership, cap in hand, and ask politely for your name to be transferred to any list you please. The Commissioner will put on his glasses, open the register, enter your decision, and give you a receipt. You take your leave, and the revolution is accomplished without spilling any more than a drop of ink.”

With the new technologies, voluntary extraterritorial governance is given a reach never imagined by Puydt, as the author glimpsed his ideas being applied in affiliations close to the municipal level, while the scope of Bitnation is global.

After the presentation of the concept of extraterritoriality, as well as the illustrative case of Bitnation, let’s go into detail on the existing distinction between panarchy and the territorial concept of governance of entrepreneurial cities.

Presumably, the mechanism of panarchy will work elegantly for non-territorial goods, that is, for those goods whose benefit that can be obtained from their consumption is not related to their location. The benefit provided by a chocolate bar, for example, is identical, whether the bar is savored in the center of a metropolis or on its periphery, whether it is provided by one supplier or by countless competitors in the same area. Similarly, a healthcare plan works just as well. That is why we see them competing on a daily basis in the same territory, instead of having only one provider of medical services for a given territory.

However, there are so-called “territorial goods” or “locational goods”, that is, goods that are offered to people only indirectly and whose benefits people can extract from being in those specific locations. This is explained in detail in Spencer H. MacCallum’s book The Art Of Community5.

Zoning is an example of a territorial good. Imagine that someone wants to enjoy the locality of their residence, close to small neighborhood retail stores, but distant from certain types of industries. Let’s say that this person wants to live in a neighborhood of houses, where a low density of land use predominates, without buildings. This situation may occur without any kind of zoning, but there is no guarantee that it will last. Minimal zoning, not ostensive, can help reduce negative externalities and preserve the potential of economic use of residential, commercial, industrial and recreational sites, among others. That is, it can generate value and be an object of demand. Well, now imagine the situation of a city where there are 10 voluntary political entities, with scattered and mixed members along the length of the city, and that they will have to reach a conclusion about which zoning will be implemented. As it is not possible to apply all zoning plans simultaneously, some will have to prevail, affecting third parties who did not agree with such parameters of land use, which contradicts the panarchist proposal of not interfering in other people’s social systems.

Streets and highways are another example of territorial goods. The benefits that can be extracted from these structures depend directly on the location. For each person, within the same city, there are streets that are used daily and streets that will never be transited throughout a lifetime. In other words, the benefit that can be drawn from 1 m2 of asphalting differs significantly between people depending on the location. This means that for this type of good it makes more sense for people to associate with neighbors to provide construction than with people on the other side of the city, which highlights the territorial aspect of this type of governance.

Finally, Puydt applies the concept of extraterritoriality to legal systems as well.

“[…]You would obey your own leaders, your own laws, and your own regulations. You would pay neither more nor less, but morally it would be a completely different situation. Ultimately, everyone would live in his own individual political community, quite as if there were not another, nay, ten other, political communities nearby, each having its own contributors too.”

The author offers the following solution for interpersonal conflicts involving different legal systems:

“If a disagreement came about between subjects of different governments, or between one government and a subject of another, it would simply be a matter of observing the principles hitherto observed between neighbouring peaceful States; and if a gap were found, it could be filled without difficulties by human rights and all other possible rights. Anything else would be the business of ordinary courts of justice.”

However, the existence of multiple agencies providing different laws in the same geographical area could lead to a significant increase in transaction costs, given the need to decide in each case which law should be applied. As Titus Gebel noted in his recent book6 Free Private Cities: Making Governments Compete for You: “There are rules established in the event of a conflict of laws, what we call private international law. However, in applying these rules in practice, it is unpredictable and often unexpected which law will ultimately be applied.

If such complexity and cost occur, certainly the development of the market environment will be hampered.

It must be observed that, among the concept that millions of people must be under the same legislation, as it occurs in the legislations of national scope, and, in the other extreme, the concept that “each is his own country”, there can be a middle ground that preserves the competitive force between legal systems, without, however, making too complex the system of social coexistence. Puydt, in a way, recognizes this point through his imaginary interlocutor:

“This is a new gold mine for legal arguments, which would bring all lawyers on to your side.”

I must point out that nothing in this section intends to demonstrate the impossibility of panarchy as imagined by Puydt, this only highlights some possible difficulties and costs that could arise from such a configuration. Like Puydt, I say: Let this be tried by its adepts! We’ll see if it works.


“So, free competition in the business of government as in all other cases.

Imagine, after your initial surprise, the picture of a country exposed to governmental competition – that is to say, simultaneously possessing as many regularly competing governments as have ever been conceived and will ever be invented.

Under the present conditions a government exists only by the exclusion of all the others, and one party can rule only after smashing its opponents; a majority is always harassed by a minority which is impatient to govern. Under such conditions it is quite inevitable that the parties hate each other and live, if not at war, at least in a state of armed peace. Who is surprised to see that minorities intrigue and agitate, and that governments put down by force any aspiration to a different political form which would be similarly exclusive? So society ends up composed of ambitious resentful men, waiting for vengeance, and ambitious power-sated men, sitting complacently on the edge of a precipice. Erroneous principles never bring about just consequences, and coercion never leads to right or truth.

Then imagine that all compulsion ceases; that every adult citizen is, and remains, free to select from among the possible offered governments the one which conforms to his will and satisfies his personal needs; free not only on the day following some bloody revolution, but always, everywhere, free to select, but not to force his choice on others. At that point all disorder comes to an end, all fruitless struggle becomes impossible.”

In short, what differentiates panarchy from most political theories is the non-imposition of social models. There is no social model to be implemented, only a principle, self-determination, which serves as a structure for the creation of social models.

“‘I see!’ – the reader might say. ‘You are one of those utopians who would construct out of many pieces a system wherein society would be enclosed, by force or consent. Nothing will do the way it is, and your panacea alone will save mankind. Your Magic Solution!’

You are wrong! I have no magic solution other than everybody’s solutions. I do not differ from all the others except on one point, namely, that I am open to any persuasion whatsoever. In other words, I allow any of the forms of government – at least all those that have some adherents.”

Puydt’s panarchy and entrepreneurial cities are consistent pro-individual approaches, which take the concept of self-determination to its limits, since they propose that everyone should live in the system they want, even if it is a non-free system.

Perhaps it might be possible to combine the renewal/rescue of the social system with ethical normality, proposed by the intellectual matrix that advocates respect for natural rights, with the pragmatism/realism of conservatism, which opposes the dismantling of the institutions that have brought us to where we are? Maybe we can go down the path of the achievable, doing at each historical moment the best we can, with prudence, trying to make viable the improvement of social institutions by means of small groups of pioneers?

Click here to read Panarchy (1860) by Paul Emile de Puydt, in English.


1 By Puydt, P. E. Panarchie, 1860. Term coined by Puydt which means something like “all governments”. From the Greek pás, pasá, pán, “all, fully”; from the Latin archia, from the Greek arkhia, “rule, government”.

2 Text available at:

3 Albert Hirschman. Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States, 1970.

4 Capacity to give a quick and adequate answer to a given situation. To resolve a situation as is expected. In the management field, it can designate disposition or readiness in customer service.

5 MacCallum, S. H. (1970). The Art of Community. Menlo Park: Institute for Humane Studies.

6 Gebel, Titus (2018). Free Private Cities: Making Governments Compete for You.


Pedro Dias is an economist, scholar of the Austrian School of Economics and an entrepreneurial cities enthusiast. In 2018, created the website Cidades Empresariais as a repository for content related to private governance and other correlated themes.

Translated from Portuguese by Marcelo Soruco

Reviewed by Francisco Litvay

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