With a $500,000 donation from PayPal founder Peter Thiel, a Google engineer and a former Sun Microsystems programmer have launched The Seasteading Institute, an organization dedicated to creating experimental ocean communities "with diverse social, political, and legal systems."

"Decades from now, those looking back at the start of the century will understand that Seasteading was an obvious step towards encouraging the development of more efficient, practical public-sector models around the world," Thiel said in a statement.

But if the idea turns out to be just crazy enough that it works, Friedman, following in the footsteps of his grandfather, the Nobel Prize-winning economist Milton Friedman, envisions transforming the way that government functions.

"Government is an industry with a really high barrier to entry," he said. "You basically need to win an election or a revolution to try a new one. That's a ridiculous barrier to entry. And it's got enormous customer lock-in. People complain about their cellphone plans that are like two years, but think of the effort that it takes to change your citizenship."