Coordination Without Consolidation: On Systems of States [pdf]

Isonomia Quarterly 4.2 Summer 2026 Coordination Without Consolidation: How Systems of States Multiply Inward and Integrate Upward by Trent MacDonald Abstract Written for the 250th anniversary of 1776, this essay reconsiders the United States as a “system of states” and asks whether federative and polycentric orders can coordinate at scale without drifting toward centralisation. Classical liberal and polycentric theories rightly emphasise the virtues of decentralised authority: competition, exit, experimentation, local knowledge, and institutional diversity. Yet successful systems of states do not merely coordinate across existing units. They also multiply inward, generating new municipalities, agencies, districts, regulatory bodies, and subordinate jurisdictions. This proliferation deepens polycentricity, but it also creates denser interdependence and greater demands for coordination. The essay argues that centralisation is not simply an 167 Isonomia Quarterly 4.2 Summer 2026 external imposition on decentralised systems, nor merely a failure of constitutional design. It is often an emergent property of successful coordination. As federative systems scale, proliferating units require shared standards and interpretive authority, complex hierarchies with structural integration, and collective capacity in the face of systemic risks. The American experience illustrates this federation paradox: a system designed to preserve decentralisation has become more locally differentiated and more centrally integrated at the same time. Nor can exit fully solve the problem, since integration itself raises the costs of exit and reduces the meaningfulness of jurisdictional alternatives. The challenge for polycentric and interpolity orders is therefore not simply to create decentralised systems, but to sustain meaningful decentralisation as coordination becomes increasingly necessary. The task is coordination without consolidation. Introduction: The Idea of a System of States 1776 is most often remembered as the moment a new nation was born. It marked a decisive break from imperial rule—the assertion of political independence by thirteen colonies that would go on 168 Isonomia Quarterly 4.2 Summer 2026 to form the United States. Yet it can also be understood in a different, and in some ways more revealing, light. What emerged in its aftermath was not simply a new nation-state, but a political architecture for holding many states together without wholly dissolving them into one: a system composed of multiple states, each retaining a degree of autonomy while bound together within a shared framework.

In retrospect, this can be read as an early large-scale experiment in what later theorists would call polycentric governance (Ostrom, Tiebout, and Warren 1961; Ostrom 1973; Ostrom 2010; Aligica and Tarko 2012). Authority was deliberately distributed rather than concentrated. The federal government was assigned limited and enumerated powers, while substantial responsibilities remained with the states. The system was designed to enable coordination—particularly in areas such as defence, trade, and diplomacy—without dissolving the independence of its constituent units. It sought to combine scale with diversity, and unity with plurality. This vision has had a durable afterlife. It continues to shape contemporary thinking about federalism, 169 Isonomia Quarterly 4.2 Summer 2026 decentralisation, and the organisation of political authority more generally. In recent years, it has been revived and extended in libertarian and classical liberal work on interpolity relations, which treats governance not as the domain of a single sovereign, but as a system of interacting polities (Christensen 2021; Christensen 2022; Christensen 2024a; Christensen 2024b; Christensen 2025). In this view, jurisdictions function analogously to firms in a market: they compete, adapt, and specialise, while individuals and organisations move among them in response to differences in policy and performance. Coordination emerges through interaction rather than command, and authority remains distributed across overlapping and interdependent units. Underlying this perspective is a powerful and compelling assumption: that decentralised systems, if properly structured, can scale (Hayek 1939; Eichenberger and Frey 2006; Ostrom 2010). They can expand in size and complexity while preserving their essential character. Multiple jurisdictions can coexist within a larger framework, coordinating where necessary while maintaining autonomy where possible. Diversity need not be sacrificed for integration; centralisation need not be 170 Isonomia Quarterly 4.2 Summer 2026 the price of order. The American experience is often taken as evidence of this possibility. A system that began as a loose confederation of states has grown into one of the largest and most complex political economies in the world, while retaining a formally federal structure.

The continued existence of state governments, local jurisdictions, and layered authority appears to demonstrate that decentralisation can endure even as systems expand. And yet this interpretation sits uneasily alongside another, equally familiar observation: the gradual but persistent expansion of central authority. Over time, the federal government has assumed a more prominent role in economic regulation, fiscal coordination, and legal interpretation. Institutions originally conceived as limited have taken on broader responsibilities. The system has become more integrated, more standardised, and, in important respects, more centralised. This tension points to a more fundamental question. Is this trajectory a deviation from the original design—a consequence of political choices, institutional drift, or historical contingency? Or does it reflect something more systematic about 171 Isonomia Quarterly 4.2 Summer 2026 how decentralised systems evolve as they scale? Put differently: can a system of states remain fundamentally decentralised as it grows, or do the very processes that enable its expansion generate pressures toward centralisation? This essay takes up that question directly. It argues that centralisation is not merely an external imposition on polycentric systems, nor simply the result of institutional failure. Rather, it emerges as a property of successful coordination. The danger is not always immediate consolidation into a single state, but the quieter centralisation of the authority needed to coordinate a system of states. As systems expand—through both increasing interaction among existing units and the internal proliferation of new units such as municipalities, agencies, and subordinate jurisdictions—the mechanisms that enable coordination generate pressures toward standardisation, hierarchy, and integration. The very capacities that allow such systems to function at scale may also become the channels through which their decentralised character is transformed. Over time, these pressures reshape the distribution of authority, often in ways that favour central institutions. 172 Isonomia Quarterly 4.2 Summer 2026 The argument unfolds in four steps. Section 2 reconstructs the case for polycentric governance, highlighting its advantages in terms of competition, diversity, and adaptability. Section 3 develops the core theoretical claim, showing how the scaling of polycentric systems generates coordination pressures that tend toward centralisation. Section 4 applies this framework to the evolution of federal systems, with particular attention to the United States as a system of states. Section 5 examines the limits of exit and competition as mechanisms for constraining authority in large, integrated systems.

The conclusion returns to the meaning of 1776 for contemporary debates about federalism, interpolity order, and proposals for ever-larger federative systems. The Promise of Polycentric Order The appeal of polycentric governance, especially from a classical liberal perspective, lies in its promise to reconcile coordination with liberty: to sustain cooperation across large and complex societies without placing decisive authority in a single political centre. Rather than concentrating power, polycentric systems distribute decision-making across multiple, formally 173 Isonomia Quarterly 4.2 Summer 2026 independent units that interact within a shared institutional framework. This arrangement offers a vision of governance that is both decentralised and ordered—capable of supporting large-scale cooperation without collapsing into uniformity, monopoly, or central control (Polanyi 1951; Ostrom, Tiebout, and Warren 1961; Aligica and Tarko 2012). In the work of Vincent Ostrom and Elinor Ostrom, polycentricity is not understood as fragmentation or disorder, nor simply as the multiplication of governing units. It refers to a structured system of overlapping and interdependent authorities, in which multiple centres of decision-making operate with a degree of autonomy while remaining capable of mutual adjustment within a broader order of rules (Ostrom, Tiebout, and Warren 1961; Ostrom 1973; Aligica and Boettke 2009; Ostrom 2010; McGinnis and Ostrom 2012). These units coordinate through shared norms, institutionalised channels of interaction, and mechanisms for resolving conflict. The result is a system that combines independence with interdependence—a form of governance in which authority is neither fully centralised nor entirely dispersed. 174 Isonomia Quarterly 4.2 Summer 2026 A central mechanism underpinning this vision is the role of competition and exit. Tiebout’s famous account of individuals “voting with their feet” captures one formal version of a broader classical liberal claim: dispersed political authority becomes more accountable when individuals, firms, capital, and associations can move among jurisdictions (Tiebout 1956; Buchanan 1965). Polycentric systems are therefore often likened to markets in which governance units compete for residents, resources, and legitimacy.