Because Nation-States are constructed of genetically related, extended families and extended tribes, with shared language, culture, mythology, rituals, values, status signals, where competition for political power is ‘in the family’ and will not disrupt the existing order. Humans are notoriously antagonized by redistributions outside of their value-status system, and by disruptions to the existing order. Our data so far suggests that small homogenous nation states whose members are highly related, are highly redistributive, and highly trusting of one another, and if combined with low corruption and good rule of law produce the ‘scandinavian model’. The general argument is that the only reason for large states is to fund warfare, and that appears to be true. Larger states require higher authoritarianism and less freedom, and complex political contrivances in order to deny others power using both political and extra-political competition.
Furthermore large states can borrow disproportionately and create extraordinary economic leverage, and as such can use trade policy to give populations a competitive advantage.
But in general, small is beautiful so to speak, and we would be less able to make war and more happy and peaceful if we lived in either city states or nation states.