Would small States work in a society where social "shame" is not common?

I've been reading Jam's post "Imagining the Future" (read about it here) - which raises the question of what the world might look like if we challenged some of our assumptions and shrank the state.

The imagining looks at shifting responsibility for much outside law enforcement and civil defence away from the state. So responsibility for social provision and shared amenities is passed to local communities. These would operate effectively as co-operatives on areas of common interest (refuse collection, street lighting, street maintenance, hospital care,...). 

I like the analogy of flat owners who share the freehold. Some will opt out of decisions taken, they'll refuse to pay for the new roof even though they benefit. however, in general most people will go along with the decisions of the group (because otherwise the embarrassment of meeting in the lift would be too much to bear).

While not buying into the imagined picture necessarily it raises some interesting questions. One key question for me is: what (in the small state system) are the driving forces that will lead (self-interest) individuals to behave in "desirable" ways? Why would they ever allocate their resources and relational capital in ways that are preferable to the current state-sponsored arrangements.

The new forces will need to be the "carrot" of (common) self-interest and the "big stick" of shame. The big change that comes with shrinking the state is that the stick changes from legislative enforcement (taxation at source, fines, bailiffs, imprisonment) to the social shame of non-compliance. 

For the new stick to work, it requires that a selfish individual finds bumping into their fellow freeholder in the lift so unbearable without having paid for the new roof that they feel compelled to do so. 

How can shame be effective to motivate compliance?

What constitutes shame for an person depends upon the cultural and community context of the individual (what is shameful in London and Tokyo are very different). To feel ashamed under the gaze of the community I have "wronged" I need to 

- care what they think of me and my actions, and/or 

- agree with their assessment. 

That requires a degree of relational connectedness (for me to care emotionally what other members of the community thinks, or fear the sanction that comes from wronging the community), and/or a degree of cultural/ethical agreement (I share the view of the community that something is right (or wrong) and therefore do (or don't) do it).

Without those, in a whole variety of cases the rewards for co-operation at the level of the individual will tend to be less than the rewards for taking advantage of the community. In other words, no one would rationally co-operate (e.g. Why would you cough up to fix the roof unless you live on the top floor?).

For co-operative social provision to work in a world of selfish individuals, and for it to be stable long term, then the contraction of the State would need to go hand-in-hand with the creation of communities that are sufficiently relationally, functionally and ethically connected for shame to have power as a "big stick" to enforce acknowledged social goods.

So your culture can no longer be transient, pluralist and individualistic. To change that will take more than legislation.

(Note: Robert Axelrod's "Evolution of Co-operation" is interesting in this area. How ought individuals in community to rationally play repeated games of the Prisoner's Dilemna).