Expecting to have a government (or a series of governments) work like a &quot;free market&quot; is problematic, because there is no reason to expect that market to be efficient. In particular, no one should expect a free market to be efficient when transaction costs are high. Consider transactions one would have with a regional government: a family moving from one state to another is expensive, paying a lawyer for your small business to ensure compliance with a new jurisdiction is expensive... even just getting a real conversation with your state-level representative (let alone lobbying for a tax break) is kind of a big deal: has anyone here done it recently?<p>As a result, you would expect concentrations of power to emerge in the form of special interest groups and corporations who can pay those transaction costs more readily.<p>(This is intro-to-Econ level stuff, if you ever care to study the field.)