> 1. Inconsistent laws in a small geographical area.
Having different window tinting laws is a good example of the kind of baseless legal inconsistency that could harm a region's competitiveness. If the states of a region could not come to an agreement on window tinting, it would probably damage their reputation elsewhere.
> In your proposed system you would have all kinds of inconsistent laws.
Although there's little reason to differ on window tinting laws, I can imagine reasonable states having different opinions on, say, engine noise limits. This leads to the same kind of inconvenience, but yet is more understandable. Nonetheless, if the people of a (small) state don't want loud engines (or perhaps they want to ban driving altogether) in their neighborhood, isn't that their right?
> The only solution I see would be for all of the small governments to gather together and agree on some standard set of laws that they will all implement.
Right, so for any matter that calls for it, you would hope that neighboring states would be able to agree to pass identical pieces of legislation. The Australian states do this all the time (when the pre-existing law wasn't federal).
> But than you are more or less back to square one.
No, there's a very significant difference between a collection of autonomous states agreeing to a certain piece of legislation, and a collection of states being forced to abide by a piece of legislation passed by a federal parliament.
In the former, if a company wants to coerce the entire country on some political issue, it has to coerce the politicians of every single state: in a federation, it need only coerce the federal politicians.
If an independent state thinks a law is bad (e.g. wants to legalize marijuana), it can remove it without being beholden to outside forces. If the law was made by a federal parliament, it can only be undone by the federal parliament.
If an independent state thinks a program is bad (e.g. a war, a department, currency devaluation), it can remove itself (personnel/funding) on its own volition.
Regional agreements are very different to regional parliaments.
> This is a problem for automotive laws, food safety, building codes, etc
Buildings don't tend to get up and walk into a different neighborhood. I think that if the people of a state want certain building codes (or none at all!), that's their right. I don't think it's a big ask of construction companies to abide by the codes of the state they're building in: they do that all the time today.
I think regional agreements could be justified for things that are inherently mobile, or that make sense to operate at scale: automotive laws, food safety laws, airport administration, public health insurance, extradition, public broadcaster funding, university funding (maybe), infrastructure (telecoms, roads, train tracks), park administration, military, ...
The difference here is that if some state doesn't want to contribute to a regional health insurance fund, it doesn't have to.
> 2. Large infrastructure projects
Right, this is harder when you have many autonomous states, but they're still certainly doable. If there's an imperative to do something, the states will come to agreement.
States that contribute to interstate highways could sell permits to their citizens as part of their car registration. There could be toll booths to sell temporary permits to non-citizens. This way, if states A, B and C want to build highways between each other, but state D, adjacent to A and B, doesn't want to contribute, then A, B and C can fairly bill the citizens of D that end up using that highway anyway.
> If we were to switch to the township system, than that research would not be sponsored any more.
Why not? Research would only stop being sponsored by a state if the people of that state didn't want to sponsor it. And if they don't want to, they shouldn't be forced to.
If your point is that something like the Cold War would never happen in small-state anarchy, then I concede that. But, for all the merits of the space race, it was not worth the risk of the Cold War.
By the way, check your thens and thans :)
> However, a State system might work. The Federal Government would be responsible for...
Again, it seems like you're confounding the differences between having many independent states, and having a federation of states. My points above stand against federations (as in, federated parliaments). Federations should not exist: they are a remnant of a bygone era of imperialism and war-mongering. If by "federal government" you're referring to agreements between most states to pass some legislation (e.g. open borders), then sure, I'm with you. But if you're talking about having a legally-usurping federal parliament that is in command of the military, then I'm not.
Your post basically makes the point that cooperation is harder when you have more autonomous states. I agree, but I think (1) states will cooperate when there is an imperative to do so, (2) if a state doesn't want to cooperate, then that's their democratic right, and (3) by having the choice of cooperation, states can experiment, and better ideas will flourish.