Spontaneous Order

Here's a good blog post: Spontaneous Order on the Road

At the town center, in a crowded four-way intersection called the Laweiplein, Monderman removed not only the traffic lights but virtually every other traffic control. Instead of a space cluttered with poles, lights, "traffic islands," and restrictive arrows, Monderman installed a radical kind of roundabout (a "squareabout," in his words, because it really seemed more a town square than a traditional roundabout), marked only by a raised circle of grass in the middle, several fountains, and some very discreet indicators of the direction of traffic, which were required by law.

...

A year after the change, the results of this "extreme makeover" were striking: Not only had congestion decreased in the intersection—buses spent less time waiting to get through, for example—but there were half as many accidents, even though total car traffic was up by a third.

And from the New York Times article it linked to:

Mr. Monderman drove him to a small country road with cows in every direction. Their presence was unnecessarily reinforced by a large, standard-issue European traffic sign with a picture of a cow on it.

"He said: 'What do you expect to find here? Wallabies?' " Mr. Hamilton-Baillie recalled. " 'They're treating you like you're a complete idiot, and if people treat you like a complete idiot, you'll act like one.'

Most of economics deals with questions of spontaneous order, and how it compares to central planning.  In most cases, having people think for themselves works much better than having a bureaucrat tell them what to do.  Our society is over-regulated. 

But one important caveat is that there are a few things, such as the legal and criminal justice system, where spontaneous order delivers far worse results than a centralized authority.  Civilization itself is only possible because the spontaneous order of small tribes was replaced with larger, centrally controlled nations.  Given that anarchy is so devastating, it is easy to understand why people err on the side of over-regulating.  Finding the right mix of regulation and spontaneous order requires a lot of experimentation, but we have to be cautious about it because the costs of a failed experiment can be quite high.

This is why it is good for political units to be small.  I would not want an entire nation to experiment with a new way of handling traffic.  That could easily be a disaster.  But when a few small towns in The Netherlands or Great Britian start experimenting, we gain a lot of useful data for a very low cost.  And if their experiemnt failed, the negative consequences would be limited to a small area.

When you have multiple independent jurisdictions with the ability to set their own policy, you can gather a lot of data about what works and what does not.  Then the things that work can be adopted more widely, and everyone slowly works their way to better governance.  This is known as 'the laboratory of federalism'.