One thing a lot of people don't realize about the modern concept of the "social contract" is that it depends on the capacity to exit, which requires the existence of the frontier. John Locke's idea of government wasn't just influential to the development of the United States, it was openly influenced by the existence of America; he wrote a lot about how the "state of nature" that exists independent of government was the American frontier (he didn't care much for/about Native Americans.) Now, the idea that a government is a social contract between citizens and rulers is universal, but we've eliminated its original foundation: an empty space citizens can settle when they decide their government is worse than nothing.

There's no easy solution to this problem. We're out of unclaimed land (seasteading and Mars colonization wouldn't really resolve it, even if they were more plausible.) I don't think Srinivasan has a great concept of why nations work; the problem with a Silicon Valley exit is less that Silicon Valley doesn't have aircraft carriers, and more that it doesn't have, you know, farmland, and I don't think the opt-in society would be allowed: Silicon Valley is rich and prosperous because of the large pool of mainly American consumers it sells to, and it is protected by the auspices of the US government. If they really wanted to leave, they wouldn't be able to take the money-making with them, as the US has no incentive to protect the businesses of a foreign power. I actually think that instead of getting more and more small countries as time goes on, we'll get increasing large blocs caring for things like defense and very general welfare, and increasingly small, atomized communities, either geographically or online, caring for other needs. If we have a large United States government that takes care of the nuclear weapons stockpile, coordinates response to natural disasters, and makes sure people don't die for arbitrary reasons, smaller communities can tax, spend, negotiate as they will. And I expect these communities will increasingly go online; online, Locke's dream can be realized, as there really is infinite space to colonize (if you don't like your current forum, go found a new one.) As long as people have a basic level of security, they'll be free to self-organize and explore new models of society in a virtual world. I can't tell if this vision of the future is utopian or dystopian.