I disagree with the premise here. China doesn't need to agree that shooting nukes at San Fran is bad, they just need to agree that shooting nukes at San Fran is going to cost them Shanghai. That's more like markets and prices than it is appealing to a centralized hierarchy.

One of the best observations about why people in urban areas are more liberal, and rural areas are more conservative, has to do with the idea that when you are around more people, you need more rules to guide how to interact with one another.

This might be true, but if you look at the state of LA, San Fran, Chicago's South Side, Detroit and Baltimore, it's tough to say all those extra rules have kept them stable and prosperous. I'm not saying the answer is necessarily "tear it all down and go DeFi", but it's pretty clear that on a long enough timeline, the regulation fails to punish the bad actors and actually restricts the good actors from fixing problems independently.