The history of normative political philosophy consists to a large extent of attempts to discover or design the best states. Still, though all states must satisfy certain basic necessary requirements like protection against force, collection and disposal of funds, and adjudication of disputes, there is no one and only “best state” model that fulfills all these functions optimally under different circumstances and further meets the requirements of people with different needs, values, ideas, and tastes. There are many best states depending on historical contexts, personal circumstances, needs, and values (Nozick 1974, 309-312). There seems to be a greater consensus in hindsight on which states were the worst than on characterizing the best state. Divergent views stem partly from the limitations of theoretical discourse. The ultimate test of states is practical. Historicalpolitical experiences change values and views. A state model that seemed best for good theoretical reasons may be found wanting after experiencing it in practice. The very idea of a design of a state that can be implemented from the top down is self-defeating. The attempts of political powers to impose utopian designs against the very human creative plurality of conflicting views, ideas, interests, and values necessitated the use of coercive force, which undermined the utopian designs themselves (Nozick 1974, 313-314; Narveson 1988, 139-140; Tucker et al. 2004). Instead of designing a “best state,” normative political philosophy may explicate then the conditions under which personal and institutional choices are most likely to result in the emergence of what many would consider the best states for them. Politics may resemble economics in this respect. There is no design of a best firm that fits all economic agents and circumstances. It is only possible to formulate necessary conditions for their spontaneous emergence and selection. For example, Nozick developed what he called a “framework for utopia,” conditions of free competition that allow the best “utopian” political communities to emerge and develop creatively and voluntarily (Nozick 1974, 302). Panarchy suggests that an optimal framework for the emergence of the best states is that of free competition between states. In Panarchy, people and states negotiate the relationships between them, as sellers and buyers and formalize them in explicit social contracts. Different states may offer varying levels of services in areas such as health, education, and social security for different

prices. Low costs for consumer mobility from state to state are necessary for competition. These can be optimized by non-territorial states that offer services to citizens instead of rule a territory and compete over customers in a political market. The right of such states to coerce their clients differentiates them from mere protective associations, and is founded on explicit social contracts (law codes) rather than on monopoly over territory – sovereignty. First, I explicate the unique properties of Panarchy, non-territorial states, and explicit social contracts. Then, following the theories of Douglass North (1986) and Albert Hirschman (1970) I explain why Panarchy appears to be an appropriate framework for avoiding political monopolies and increasing political competitiveness and efficiency through cheap exit mechanisms. Then, I consider possible challenges to Panarchy: Panarchy may be utopian if the state is a natural monopoly; Panarchy does not advocate any political utopia but it may reify the utopian element to the meta-political level, to the preconditions for the emergence of the best states. If non-territorial states are inconsistent with human nature, they may be utopian. I also consider possible ethical objections to Panarchy. I argue that: The territorial sovereign state is not a natural monopoly. A free market in non-territorial states does not have to assume a coercive monopoly regulatory “super-state.” The territoriality of the state is not natural. Though there are valid ethical criticisms of Panarchy, from a utilitarian perspective, they are outweighed by ethical arguments that support it. Finally, I argue that several recent technological innovations have rendered the sovereign nation-state increasingly obsolete, while facilitating and reducing the costs of establishing Panarchy and running non-territorial states.