The people who live in border towns often have closer relations with people across their immediate borders than with people in the same country as them. Despite how intertwined these border communities often are, neither community can access the governmental institutions of the nation on the other side. Why are the citizens of neighboring regions that lie across an international border often subject to very different governance systems? More broadly, why can't public services be bought piecemeal, on an a-la-carte basis, with governments competing to provide higher quality services at the lowest cost in a marketplace for government services? These questions lie at the heart of modern International Relations.In The Cartel System of States, Avidit Acharya and Alexander Lee provide a powerful and field-shaping theory to address a fundamental issue in world politics: the character of the territorial nation-state. They contend that the modern territorial state system works as an economic cartel in which states have local, bounded monopolies in governing their citizens. States refuse to violate each other's monopolies, even when they could do so easily. Acharya and Lee examine what makes this system stable, when and how it emerged, how it spread, how it has been challenged, and what led it to be so resilient over time. Drawing from the centuries long process of modern state formation, The Cartel System of States explains both how the present system of territorial states--by no means a foregone conclusion in retrospect--took over the world and how it might change in the future.