Private Cities, the Metaverse and the Future of Non-Territorial Governance

Abstract

This paper investigates the potential of non-territorial governance, specifically virtual jurisdictions enabled by the metaverse, for lowering transaction costs of institutional experimentation. It is separated into two parts: in the first one, the author argues that more competition is needed in the sphere of governance and that emergence of cities-as-firms could accelerate evolution in governance. The paper establishes the Coasian case for private cities and provides real-life examples of “almost private” cities demonstrating that the idea of private governance is gaining momentum. The paper then outlines three types of obstacles–economic, regulatory, and political–that undermine the development of private and semi-private cities today, slowing down the quest for more optimal governance models. The second part is dedicated to non-territorial governance as a shortcut that private cities can use to circumvent the above- mentioned obstacles. Finally, the author explains how the metaverse–an emerging virtual realm that enables the peaceful coexistence of multiple societies–can act as a platform for unconstrained testing of new rules, strategies, and technologies. The paper ends by discussing the instruments that the metaverse grants to institutional entrepreneurs and the possible directions of the sector’s evolution in the coming years.