Democracy Does Not Scale Well

Arnold Kling quotes an argument by Terry Anderson and Peter Hill that democracy does not scale well:

"It is always costly to ensure that agents [government officials] act on behalf of the citizens and that they do not use their power to extract rents from their constituents...  The costs of monitoring agents increase not only with the geographic size of the collective but also with the number of people in the collective. This is because in a larger collective each member captures a smaller share of the [benefit] created by collective enforcement and therefore has less incentive to monitor the agent...With the stake in the collective inversely related to group size, we can expect less monitoring and more rent seeking and rent extraction as group size increases."

In 1790, the largest state in the union, Virginia, had a population of under 700,000. Today, Montgomery County has a population of over 900,000. Our nine-member County Council answers to about the same number of registered voters as the entire House of Representatives of the United States at the time of the founding of the Republic. We cannot have an accountable democracy with such large political units.

He goes on to propose a hypothetical reform in which we 1) increase the membership of Congress to decrease the number of voters each member represents, and 2) have the members be chosen by state legislatures.

It's an interesting thought experiment, but if granted a single Constitutional wish it wouldn't be my choice. Instead, I'd enshrine two principles about the scope and purpose of each level of government. The first is that no level of government should do something that can be done by a more-local level of government. The second is that no level of government should do something that can be done by private markets, as determined by the standard textbook analysis of rivalry and excludability.