I liked this old article by Alex Tabarrok, Arguments for Federalism. Tabarrok’s arguments are
- Districts form laboratories of democracy, where relatively low cost experiments can be run
- Districts can adopt different policies for diverse preferences
- Districts that most closely match an “area of effect” for some political decision are better because they reduce political externalities while still allowing for economies of scale
- Open borders between districts will preserve liberty through competition
Numbers 1 and 4 strike me as much stronger arguments than 2 or 3, but 4 needs to be more general. Districts with open borders compete on the overall quality of governance, not just liberty. Inter-district competition will pressure district governments to be relatively efficient and adopt productive policies. Indeed, I would think that they compete least of all on the issue of liberty, because liberty is usually most important a small minority.