Countries like Monaco, Lichtenstein, and Luxembourg clearly produce a lot of value for their residents.

They wouldn't be insanely expensive to live in if they didn't. They wouldn't be so expensive to live in if there weren't strong underlying factors supporting those prices. Living in that space has to offer real value and better outcomes that other places can't offer to justify that price. They must have better political structures or policies in order to support these outcomes.

But one problem with these better political structures is they tend to not be war-like. While that can be one of the benefits for the residents of the country, it means they aren't expansionary and never will be. This creates a race to the bottom situation for the world's competing political structures. Governments whose structures invite power hungry people into power will be less resourceful with what a country has, and it will envy resources beyond its borders. Another attribute that expansionary countries have is they also lack the diplomatic approach to trade voluntarily for the external resources they want. Last, they are generally morally bankrupt enough to see war as a positive. These are the attributes of countries that are expansionary. And it is a reflection of their leadership, which is a reflection of the political structures they use to organize their government.

But nations with better political systems, and thus leaders that have better morals, and thus who aren't grabby, have the same tendencies domestically which leads to maximum human development and happiness. For whatever reason the structure of their political system doesn't produce the same Machiavellian dynamics that tend to reward individuals in most governments to grab more and more power for that government.

So how do we multiply good and reduce bad? These countries need to grow. And there reasonably should be, and can be measured to be, a market pressure for them to grow. There just isn't a sufficient political pressure.

A while ago I was looking at real-estate prices around Monaco. Monaco, if you don't know, is the most expensive country in the world per square foot. A square meter in Monaco costs about 50,000 euros. Me being the curious person I am, I wanted to know what the gradient in price looks like in the surrounding area. I found an apartment one block away from the boarder in France for rent at $900 a month. That is half of the price floor in my area. What is the gradient? It is instant. A one minute walk past the border and you have a very cheap area next to the world's most expensive area. If you go to the next town over, East along the coast, you can get a near waterfront apartment for a little less than $800 a month. But if you head West along the coast toward Nice it get's more expensive. So the price gradient in the French Rivera seems to ignore Monaco, even up to the boarder. It really is dependent on distance from Nice.

To me it seems like there would be a huge market pressure to expand these countries. But how could we justify that? If we adopted the old school original American concept that sovereignty and assignment of sovereignty should be based on the will of the people, the land owners in the surrounding country have a lot of reason to want to join. Maybe they should be allowed to make this adjustment. The problem is the Machiavellian dynamics of a larger country like France makes ego a very important currency in their system. The idea of ceding land, even though it doesn't impact them personally, becomes an issue.

We see this problem in Spain. Catalonia has been wanting to separate from Spain for quite a long time but Spain will not allow it. Politically, Catalonia leans further left than the rest of Spain, while the national government leans toward center-right. If Spain were to let Catalonia go, it would significantly improve the certainty of their electoral prospects. But the problem is this hurts their ego. Also it loses them some taxes. But mostly I would argue it hurts their ego, because if those in power were to lose their position that would be the same as losing all of Spain's taxes from their perspective.

Maybe the Spanish feel very secure in their future elections and would rather control more than less but this isn't the case everywhere. If it weren't for ego you would see more support for separation movements by the exact opposite political alignment all over the world. But the intense desire for control that leads politicians into office in the first place prevents that kind of thinking. This is exactly the backwards thinking that makes these countries expansionary and explains their current size. And it is this backwards thinking by the people at the top that leads to comparatively worse outcomes in human development for their citizens compared to what micro-nations can achieve.