Vertical vs Horizontal Segmentation

Date: Tue Feb 13 2001 - 16:06:28 MST

Business analysists distinguish between vertical and horizontal market
segments. A business with vertical integration attempts to capture
a wide range of products and services for a particular target market.
For example, a business may supply farmers with equipment and seeds and
feed. Horizontal integration would then be an attempt to capture a wide
range of markets with a specific and relatively narrow set of products.

The US government was founded on a principle of separation of powers.
This can be thought of as providing vertical integration with horizontal
separation. The executive branch provides all aspects of law execution
and enforcement, from the Park Service police, to the military, to
the FCC. The judiciary includes a range of federal courts, and the
legislature has its own extensive staff and offices to create new laws.

The idea is that although there is vertical integration, horizontal
competition between the branches will occur. No one branch can become
dominant and so government power is restrained.

A weakness with this model is that there is a limit to the amount of
separation and competition possible. There just aren't that many distinct
vertical market segments into which we can divide government functions.

We occasionally discuss a different concept for dividing the government
to reduce its power, sometimes called "Privately Produced Law" or PPL.
Bruce Benson (in The Enterprise of Law) and David Friedman (in The
Machinery of Freedom) are two authors who have explored this possibility
in detail. It can be thought of as a form of horizontal segmentation of
government. Instead of one police force, there would be many; instead
of one legislature, there would be multiple ones, each creating their
own constellation of laws.

Of course such segmentation already exists in the world, but strictly
along geographic lines. The idea explored by these authors is to
allow competition to exist within a geographic region among multiple
governments. Each person could choose which government's laws to follow,
they would pay whatever taxes that government specified, and they would
then receive whatever protection it was able and willing to provide.

With horizontal segmentation, we could safely allow vertical integration.
There would no longer be a need for a government to have independent
legislature, executive and judiciary. If various governments compete
for citizens, they may choose to organize themselves internally in any
way they desire. Efficiency, rather than limitation of power, would be
the guiding principle.


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