the future of the state

[Metric]

This is another one of those speculative threads. I'm starting with the assumption that democratic states will attempt to function in the same capacity that they have been functioning for as long as any of us have been alive (no major revolutions cause any discontinuous change in government).

Now -- what are the ramifications of the fact that technology is increasing exponentially with time? Here are a couple scenarios.

The AC scenario: Exponential techology increase means that there will be an "intelligence explosion" at some point in the 21st century. Humans will be able to engineer themselves in ways that eliminate the stupidity that results in much criminal behavior and poverty. With "enhanced humans," the phrase "If men were angels, no government would be necessary" becomes practically realized and government becomes manifestly unnecessary and asymptotically approaches being dismantled completely as time and technology progress.

The massive state scenario: Exponentially increasing technology means an exponentially increasing power of the individual. Since some individuals will choose bad behavior, we need tighter and tighter control of people to ensure that nothing REALLY bad can happen (i.e. more world trade center type events spawn more and more "department of homeland security" type organizations and associated laws). Asymptotically, all behavior is monitored by the state, because a single slip-up has the potential to cause so much damage.

Obviously, these two scenarios are polar opposites, and we've not seen one of these win out yet. Our current system is dominated by compromise on individual issues, with the pendulum swinging back and forth. But this can't always be the case -- due to the power of exponential growth, it seems to me that one trend will eventually come to dominate the other -- probably sooner than most people think (some might argue that the "massive state" scenario is already beginning to win).

So -- what will the role of government be in the distant technological future (which may not be too distant in the real-time future)? Which trend must win out?