NewsMacroData Centers and the Open Access Order

Data Centers and the Open Access Order

Author: Marginal Revolution·

Key Takeaways

  • The article says data centers should be treated like any other business that follows general legal and market rules.
  • It argues that rezoning, special permits, and community benefits agreements turn access to economic activity into political bargaining.
  • The piece contrasts open-access orders with limited access orders, which restrict valuable activities to those with political influence.
  • It says subsidies and moratoriums aimed specifically at data centers replace neutral rules with industry-specific judgments.
  • The article presents data centers as a current test of whether impersonal rules or case-by-case permission will govern development.
Data Centers and the Open Access Order

The U.S. debate over data centers is depressing. Data centers do not use much water, they produce very useful outputs, and they are not a blight on the landscape. All of that is obvious, but the larger problem is not the usual list of complaints.

What is most troubling is the assumption that this should be, or even can be, a collective decision. It should not. There is a simple set of rules that everyone must follow: you buy land from someone willing to sell it, you contract for electricity, and you hire workers who want the job. Your obligations to local neighbors arise from the same laws that govern everyone else. No one asks what the land, electricity, or labor is for. If you follow the rules, that is nobody’s business.

This is the distinction North, Wallis, and Weingast make in Violence and Social Orders between limited access orders, or the natural state, and open-access orders. For most of recorded history, large-scale economic activity depended on access to political power. In the natural state, “people outside the coalition have only limited access to organizations, privileges, and valuable resources and activities.” The dominant coalition controlled entry into valuable activities and created rents by granting privileges.

An open-access order works through general criteria. Organizational formation is “open to everyone who meets a set of minimal and impersonal criteria.” In economic life, the transition entails “the ability to create economic organizations at will, open entry and competition in many markets.”

The key word is impersonal. The same conditions apply regardless of who wants to build or whether public officials admire the proposed use. The state is not necessarily laissez-faire, but its role ends once the impersonal rules have been satisfied.

Now consider how a data center is actually built. There is rezoning, special use permits, comprehensive plan amendments, a negotiated “community benefits agreement” involving school donations, fiber, soccer fields, and payments in lieu of taxes, followed by public comment and then more public comment. These are not general rules. They are terms of admission negotiated with whoever holds the veto. Calling them community benefits does not change the structure. Access to economic activity becomes something that must be bargained for, argued for in the collective sphere, and paid for, with the amount depending on political access. The natural state returns.

That is also why data centers have become such a prominent test case. Their scale makes them visible, and their need for electricity, land, and permits makes them easy to turn into a political bargaining chip. But visibility should not be confused with a legitimate reason to abandon neutral rules.

The same mistake appears in subsidies. A sales tax exemption written for data centers and a county moratorium aimed at data centers both replace a general rule with a judgment about whether this industry deserves to exist. An open-access order offers neither special favors nor special burdens. It offers a rule.

Opponents often say communities deserve more of a say. No, they do not. You did not vote on the bakery, and the baker did not vote on you. That is the deal.

Data centers happen to be where this is most visible today. Their size and novelty make them easy targets for vilification and rent extraction. But the larger issue is not data centers. It is whether building depends on impersonal rules or on securing permission case by case from those who control access. The natural state was the human default for ten thousand years. The open-access order that displaced it is the foundation of prosperity and political strength, and it is younger and more fragile than people like to think.