'Chaos Prevailing on Every Continent': Towards a New Theory of Decentralized Decision-Making in Complex Systems

Abstract

Cyberspace represents a domain of human interaction that is as divorced from considerations of physical geography as any in human history. As we spend more and more of our time there, it will begin to stimulate new questions about, and insights into, the very fundamental role played by physical space, physical proximity, and physical power in legal and other rule-making systems. We have chosen to explore these questions through the lens of the theory of "complex systems." We discuss one efficient method of finding optimal configurations of complex systems--what Stuart Kauffman calls "patching," the division of a system into non-overlapping but coupled self-optimizing parts--and show that the efficiency of this problem-solving algorithm appears to depend crucially on the relationship between within-patch and between-patch spillover effects. Decentralized decision-making processes in socio-legal systems--systems of "competitive federalism"--may represent examples of this patching algorithm at work in the complex system of human rule-making institutions. We discuss the normative implications of this view for the design of such institutions where existing "patch boundaries" are being substantially perturbed (as is the case for interactions among geographically separated but newly connected individuals in cyberspace).

JEL Classification: C4, C6, K0, K4