Monday, January 11, 2010

Seasteading

(artist conception from Seasteading Institute website)


"Even if we live within sight of the sea, it is easy to forget that our world is an ocean world. The open ocean---that vast expanse of international waters---begins just a few miles out and spreads across three fourths of the globe. It is a place of storms and danger, both natural and man-made. At a time when every last patch of land is claimed by one government or another, it is also a place that remains radically free... Forty-three thousand gargantuan ships ply the open ocean, carrying nearly all the raw materials and products on which our lives are built. Many are owned or managed by one-ship companies so ghostly that they exist only on paper. They are the embodiment of modern global capital, and the most independent objects on earth---many of them without allegiances of any kind, changing identity and nationality at will. Here is free enterprise at its freest, opportunity taken to extremes..."

-William Langewiesche, The Outlaw Sea



The mission of the Seasteading Institute (http://seasteading.org/) is "to further the establishment and growth of permanent, autonomous ocean communities, enabling innovation with new political and social systems." Funded by a Bay Area global macro hedge fund manager with a libertarian bent, SI's initial designs for these communities look like offshore oil platforms on which various concessions to aesthetics and long-term livability have been made: sitting high above the sea on massive concrete pylons so that they can avoid being swamped by storms, a seastead community has a main platform on which various options---hotel facilities, office complexes, parks, hospitals, condos---can be constructed (there are some conceptual pictures on the Institute's website).

The founders of the Seasteading Institute have demysticized the state, which I believe is a very good intellectual exercise to begin with, and view government essentially as a service-provider, like a phone company. They believe that this approach allows for an objective, unemotional discussion of why many federal programs fail: governments can become obese and apathetic because they enjoy monopoly conditions per standard industrial organization frameworks---there are very high barriers to new entry (starting a new government is extremely expensive), and the threat of substitute products is very low, since "voting with your feet" and renouncing your citizenship is, similarly, very expensive. The Seasteading view is a libertarian one of an essentially parasitic state, imposing a continuous and capricious harassment on its subjects (who are viewed as useful economic contributors, something akin to domesticated animals). The Institute's plan is to help foster a competitive market for government, in which high-tech, man-made island city-states compete with each other to deliver the highest quality goods at the lowest cost.

Philosophical Underpinnings

Lofty goals, to be sure. Before turning to issues of logistics, I should note that the late, lamented Harvard philosopher Robert Nozick suggested something very similar to this "market for governments" in his seminal Anarchy, State, and Utopia.

(Bob Nozick)


In his meditation on the relationship between individuals and the state, Nozick describes a situation in which the returns to organized, industrial violence become low enough that smaller, more nuanced experiments in government forms can be attempted (by the way, there is an interesting game theoretical argument that nuclear proliferation would actually help to make this world of experimental city-states possible, but let's turn to that some other time). Nozick's vision would see these niche communities creating a market for options in government, with various city-state political, legal, and economic frameworks differentiating themselves to try to attract potential residents: for instance, one place might try to run itself according to hardcore Communist central planning principles, a la North Korea, while another might attempt to outdo Hong Kong as a haven for high-octane capitalism. Some of Nozick's experiments might allow, even encourage, the use of recreational drugs, while others might prohibit even alcohol. Over time, new city-states---mutations---would be generated from the successful experiments, with success being dictated by the selection pressure of the market.

A book that had a major influence on me as I was transitioning back to civilian life from the Navy was The Sovereign Individual, by James Dale Davidson and Lord William Rees-Mogg (according to Lord John Taylor, my dynamic new friend in the House of Lords, Rees-Mogg is known in Parliament for his rather high rate of absenteeism, as well as his sharp analytical intelligence). In this cyber-libertarian polemic---it is a bit dated, but I still would highly recommend The Sovereign Individual to those who can at least tolerate the types of insouciant political and economic views expressed on this blog---and history of political systems, the authors discuss the interesting historical model of the march territories, frontiers of unclear sovereignty that were found in the border areas of Europe during the Middle Ages.

From Davidson and Rees-Mogg: "When the reach of lords and kings was weak, and the claims of one or more groups overlapped at the frontier, it frequently happened that neither could decisively dominate the other. In the Middle Ages, there were numerous frontier or 'march' regions where sovereignties blended together. These violent frontiers persisted for decades or even centuries on the border areas of Europe. There were marches between Celtic and English control of Ireland; between Wales and England, Scotland and England, Italy and France, France and Spain, Germany and the Slav frontiers of Central Europe, and between the Christian kingdoms of Spain and the Islamic kingdom of Granada. Such march regions developed distinct institutional and legal forms of a kind that we are likely to see again in the next millennium. Because of the competitive position of the two authorities, residents of march regions seldom paid tax. What is more, they usually had a choice in deciding whose laws they were to obey, a choice that was exercised through such legal concepts as 'avowal' and 'distraint' that have all but vanished. We expect such concepts to become a prominent feature of the law of Information Societies."

Logistics

(the Hibernia offshore oil platform, currently the world's largest)

I think that four of the most obvious, major issues that the Seasteading team confronts are those related to location, unique selling point (USP), safety, and, of course, cost.

In terms of location, the initial plan seems to be to construct an oceanic community about 20 miles off the coast of the United States, with an eventual goal of having seasteads out beyond the 200-nautical-mile Exclusive Economic Zone (EEZ) that is defined in the U.N.'s Law of the Sea. The EEZ is primarily important for states in term of exercising resource extraction rights---oil exploration, fishing, perhaps subsea mining at some point. As seasteading communities began to get involved in more provocative activities, they would wisely seek to locate themselves outside of even the EEZ regions and into the true "high seas".

Initially one of these seastead communities would apparently fly a "flag of convenience"---45-55% of the world's shipping tonnage currently does this, so it is a buyer's market. Eventually there would might be some kind of more formal protection/fee arrangement made with a host government.

The political/philosophical argument for seasteading is quite compelling, at least to those of us who believe in "free minds and free markets", but obviously there needs to be an immediate and tangible economic rationale. The SI team frames the discussion in terms of a "government tax" and an "ocean tax", with the government tax being familiar to all of us, while the ocean tax represents the premium that must be paid, economically and psychologically, for conducting activities in the hazardous and austere high-seas environment. Cases where the government tax is less than the ocean tax would see no comparative advantage going to a seasteading community. On the other hand, there may be areas of activity in which the government tax exceeds the ocean tax, and in this case a seasteading community can present an economically attractive option.

I think there are at least four, highly-regulated/taxed areas that immediately spring to mind: 1) controversial medical treatments; 2) hardcore partying and recreation; 3) offshore financial activities; and 4) data havens. In the case of medical options, drugs and treatments that are currently restricted or even prohibited under FDA guidelines (an example given is the use of MDMA---Ecstasy---to help treat PTSD, which is currently being done in some pilot programs) may be available at a seastead hospital facility.

The hardcore partying vision of a seastead would probably also feature MDMA, as well as other legalized drugs, prostitution, gambling, and so on. This "floating playground" variation would be built on more of a turbo-charged version of the Vegas/Amsterdam "anything goes" model, with cruise ships and amphibious aircraft possibly pulling up to a particularly lavish seastead resort. Dubai's Palm Island projects might represent a coastal variant on this theme, although who knows how the hell those are going after the 2008 crunch:

(Palm Islands project in Dubai)

Offshore finance, particularly private banking, strategic investment, and asset protection services, might be another logical niche for one of these man-made islands. There is a whole industry on the asset protection side alone, with jurisdictions such as the Cayman and Cook Islands competing to offer the most secure offshore trusts and other legal structures. Neal Stephenson's novel Cryptonomicon describes a small team's plan to build a data haven and anonymous banking (e-gold secured transactions) on a fictional island sultanate located in the Sulu Sea near Borneo. Much of the investment thesis for such a place is described in that book.

Clearly another major concern for a seastead community is safety. The record of offshore gas and oil platforms (GOPLATs), which appear to provide the foundational models for the seasteads, is fairly good, but that didn't prevent the world's largest platform---Petrobras 36---from sinking off of Brazil a few years ago. Some of the safety concerns with GOPLATs that involve heightened risks of fire and explosion are amplified by the peculiar, high-risk nature of the petroleum business, but others---such as the risk of being utterly swamped by a huge wave---would be concerns for a seastead community, too. Statistical techniques such as Extreme Value Theory would be used for determining the engineering specs that a seastead would need to meet in order to be hardened against severe storms, but the equivalent of Taleb's Black Swan might lurk in the darkness.

In 2004, satellites from the European Space Agency were finally able to confirm the existence of a monster of legend: the rogue wave. Rogue waves, which seem to be a natural, emergent property of ocean dynamics (much as Taleb's giant directional price moves in financial markets are an intrinsic property of markets themselves), can have face heights exceeding 30 meters and have violently taken ships under, even destroyed low-flying helicopters. A permanent seastead community would need to be particularly prepared for such a freak event, as a sinking caused by a rogue wave would be far more serious than would a similar accident with a GOPLAT: a seastead is intended to serve as a secure location, not as an unavoidably-risky commercial petroleum activity, and a single catastrophic loss could cause many otherwise-interested residents to calculate that the "ocean tax" was potentially too high. It appears that SI looks to mitigate this risk by being able to move the seasteads in a migratory pattern that can avoid the worst storm seasons, as well as by locating them from the beginning in relatively calm areas.

On the safety dimension, both community-level and personal self-defense technologies might have to be available in order to prevent a seafaring version of Blade Runner from ever taking place. Perhaps a combination of private military corporation contractors and a libertarian attitude towards individual firearms ownership would suffice to prevent the most likely predators---pirates---from attempting to hit a seastead facility. A more bitter and intransigent problem would be that presented by terrestrial governments who do not appreciate the losses of tax revenue and who then manufacture reasons to target "pirate haven" seastead facilities.

I have no idea how the cost structure of such a facility would work out---it appears to be something on the order of $300-$500 per square foot, which is certainly quite expensive. There are large advantages to capital-intensive, high-fixed-cost scale economies that could be captured if the idea were to really take off, as modular engineering and construction options could create a few, best-practice-type basic designs that everyone could work from.

There is no question that many will view this as a "pie-in-the-sky" dream project, but I think that we can look at petroleum economics for a practical analogy: when the barrel price of crude oil reaches certain thresholds, expensive "unconventional" sources such as shale, tar sands, and deep-water drilling start to be able to earn good risk-adjusted returns. Should SI's government tax vs. ocean tax model shift towards increasing regulation, value destruction, huge tax rates necessary for funded and unfunded liabilities, and disincentives for entrepreneurial activity on the part of traditional governments, seastead projects may become very attractive. The analogy also works for cultural impositions and rules: should social mores make a dramatic shift to the left or right sides of the political spectrum, seastead communities might allow for private individuals to continue to practice behaviors that would be otherwise illegal, or to restrict activities that they found distasteful. The interesting thing to me is how many different socioeconomic and political organization models could be attempted, each one a little experiment.

The "free state" movement in the U.S. proposes something like this: a rural state with a relatively small indigenous population and attractive natural amenities is targeted by a group of libertarians (the Free State Project founded by Jason Sorens, a Yale PhD, has targeted "Live Free or Die" New Hampshire, although other, similar movements have advocated Wyoming, Montana, and Idaho). The libertarians form a critical mass---a wide floodlight beam is cast to gather interested people, and then that interest is focused into a laser when the libertarians go operational and move to said state. They then form a voting bloc that will allow them to take control of the state government. In the extreme version, the state then secedes from the United States and declares itself a sovereign country. The Seasteading Institute people have no doubt looked at the free state movement and considered it problematic, perhaps because control of state government would not save the state from federal rules and regulations, which are usually far more onerous, and secession would be, shall we say, discouraged by Washington.

Ultimately, there is just something very cool about a company with an executive director who lists "active participation in festivals like Burning Man and Pennsic" on his bio sketch information. I really like these guys and feel that they bring a certain swashbuckling elan to the political sphere. Let's wish them the best of luck.

2 comments:

  1. Compare and contrast "Pirate Utopias" by Peter Lamborn Wilson. Wilson is an extreme-leftist anarchist and general nutcase, but it is interesting to see the (an)(min)archist fringes displaying interest in utopian experiments at sea.

    ReplyDelete
  2. And just to be a contrarian bastard:

    http://www.inthesetimes.com/article/3328/

    ReplyDelete