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Do “anarchists” really want anarchy?

As Mayday approaches and with it the traditional harbingers of summer, such as the sight of a freshly dug paving brick in flight, with its comet’s tail of dirt particles, tracing an arc towards a McDonalds plate glass window or the contents of a looted Baby Gap whirling in the breeze, blue bibs and striped sleepsuits hanging off street lights, my thoughts turn to that strange creature who has emerged from winter hibernation, the anti-globalisation “anarchist”. This creature represents a conundrum: While he professes to favour anarchy, he is more likely than not to owe his current indolent lifestyle to a most un-anarchical social welfare system. How to reconcile this contradiction?

The first thing I’d like to say is that I am not anarcho-libertarian. I do understand the arguments, I just remain unpersuaded. But my intention here is not to provide a rebuttal of anarcho-libertarianism, rather to compare it with the “anarchism” more prominent in the popular imagination, that of a Mayday protester. If you take such an anarchist at his word and grant that he will be happy to forego the benefits of a redistributive welfare state once his utopia arrives, where does his purported philosophy differ from an anarcho-libertarian or anarcho-capitalist?

It occurs to me that the principal difference lies in the respective attitudes towards private property. The anarcho-capitalist respects private property, his own and others. The “anarchist” considers all property to be theft and asserts a right to expropriate such property as he needs or wants from others. As a welfare state needs a state to sustain itself, the anarchist presumably imagines that the “needy”, in lieu of state handouts, simply steal what they “need” from others. Of course if you are one of those “others” you may not be so keen on this happening. As there would be no state police force, the task of defending property devolves to the individual who may contract it out to private security services. Thus the anarchy favoured by the “anarchist” turns out strikingly similar to that proposed by anarcho-capitalists. Is this really what he wants?

I suggest that what the “anarchist” really wants is short term anarchy. An afternoon or so of mayhem, “for kicks”, and then a return to an un-anarchical world where the welfare state remains to inadvertently subsidise his “alternative” lifestyle.

47 comments to Do “anarchists” really want anarchy?

  • Euan Gray

    Whether anarchist or anarcho-capitalist, the desire is in my view pretty much the same: I want to be able to do whatever the hell I want to do, and I don’t want anyone to be able to stop me. Either way, it’s unworkable, and to me at least it is little more than unfettered selfishness with a very thin veneer of philosophical respectability.

    The anarchist position will not work, because society depends on known ownership of property, whether that is by private persons, the state, the crown or the corporation doesn’t matter so much, provided everyone knows. Quite apart from the fact very few people would actually want to live in such a “society”.

    The anarcho-capitalist position will not work, because the contracted-out security services will need manpower, revenue collection, rules and enforcement thereof – basically, a state with shareholders. It will compete with other states-with-shareholders and ultimately one will prevail and become the new state. Complete waste of time. Even more fundamentally, anarcho-capitalism depends on the mass of the people consistently making rational decisions in their own best interests, which of course they don’t.

    In answer to the topic question, yes some people do want anarchy. But I am quite convinced that if it was ever attempted, in whatever flavour, they’d very quickly change their minds once they figured out what the consequences were.

    I imagine most readers here would accept that the student-lefty-rebel type of anarchy is dumb and doomed. Is not, however, Anarcho-capitalism just a mirror image of Communism, just as Utopian, just as theoretically right, just as doomed to failure?

    EG

  • Euan,

    You read my mind. I think that once an anarchist is exposed to anarchy, his position would be quickly changed when the needy steal from him, and he is powerless to stop them. No matter how limited, some form of government, independent of business, must be maintained to preserve order.

  • The anarcho-capitalist respects private property, his own and others.

    It is more than this. The anarcho-libertarian sees that respect for private property is an essential application of the idea of liberty. Respecting freedom requires that we recognize (justly held) private property.

    These Mayday yobbo’s, though some of them affect to anarchism, really do not know what they are talking about and are grossly ignorant. They are very much like Euan Gray in that respect.

  • alex,

    You must have a very simple mind indeed if Euan is able to read it.

  • Guy Herbert

    We are assured there’ll be no demonstration this year, because it hasn’t been any fun recently. So there’ll just be a picnic in St James’s Park. So Frank’s analysis is probably right, sad to say: no strongly held beliefs to express; a riot’s its own reward.

    A movement that can get terribly worked up against McDonalds and Gap for a few years, yet show no interest in the evils of Blunkettry, probably isn’t anarchist in any meaningful sense. I imagine they don’t care about the form of government, unless it has an American brand-name and a strong retail presence.

  • Ted Schuerzinger

    Guy Herbert wrote:

    A movement that can get terribly worked up against McDonalds and Gap for a few years, yet show no interest in the evils of Blunkettry, probably isn’t anarchist in any meaningful sense.

    It seems to me that the anti-globos aren’t anarchists; they’re simply using “anarchy” (actually, rioting) as a means to an end. What the anti-globos want regarding state intervention (especially regarding the movement of private property, which is all trade really is), is no less statist than either the status quo, or the regulated trade that the WTO is driving at. It’s just statist and interventionist in a different way.

    The tragedy is that the press and media present the WTO crowd and the anti-globos as the only two alternatives, and ignores the libertarian postulate that the problem might be too much intervention in the first place.

  • Ralf Goergens

    Frank,

    no offense, but I think your question misses the point. These “anarchists” don’t wnat anarchy at all. In fact, what they are so vehemently protesting against is an easing , no matter how slight and trivial, in government control of international trade.

    So they aren’t protesting for anarchy, what they really want is all-encompassing repression, provided it is administered in the name of socialism and social justice. Doing it in the garb of anarchists from decades past is nothing more than a fashion statement, as far as they are concerned.

    If their wishes ever come true they’ll literally be the first ones up against the wall. Their inability to understand that shows that nothing they do or say is more than an empty gesture.

  • I say we outsource all of our granola production to a poor, third world country. That’ll piss the anti-globalists off. =)

  • Jacob

    Clasical anarchism is a revolt against private property and the state institutions that protect(ed..) it. It must be remembered that in the 19th century (and to some degree even today) the state protected not only “justly held” property, but also some “unjustly” held, i.e. – it protected the economic interests (privileges ?) of the ruling group.
    Anarchism was a nihilistic movement, seeking destruction, and not offering an alternative order.

  • Well you should just make sure you go out and buy a lot on May Day.

    A-C are not the same as anarchists in any way shape. I find the description of A-Cs as utopian loons as bad as communists disingenous in extremis. Paul’s comments are spot on.

  • Tedd McHenry

    I think Frank is right that “the principal difference lies in the respective attitudes towards private property.” I’ve observed that two pairs of postulates divide humanity. The first pair is “property rights are necessary for civility and freedom” versus “civility and freedom will only exist once property rights cease.” The second pair is the market theory of value versus the labour theory of value.

    Most political debate is probably a waste of time unless everyone involved agrees which postulate from each pair is true.

  • toolkien

    Functionally, people identify Good in the resources that surround them, based on some internal value system, make property out of it, and will defend it with force. Not being a ‘natural law’ advocate, this is close as I come to identifying this process as a ‘certainty’. I observe this pattern in ever person, every day, that I come in contact with. Every politico-philosophical construct proposes how people are going to live with each other. Some ignore the basic pattern and strive for some system of sacrifice in the name of some Universal Good (the root of collectivism and theocracy). Others, identifying the ultimate selfish drive in each individual, propose to construct a State which is spare, allows for individual value judgements to be maximized, and does not require any more sacrifice than is necessary to provide for a function to remove those who do not honor others life or property from free circulation with them. Such constructs satisfy not only selfishness, but also the somewhat contradictory motivation humans seem to have, the motivation to associate. The system allows for free association, so individuals can ride these contradicting motivation into and out of associations with the least amount of force in either direction.

    Anarchism is an idealized concept which proposes maximum liberty but ignores the second motivation, the desire to associate. Associations will rise up out of the masses, some of which will not, as its basic raison d’etre, honor others life and property, so the rest of the population have a motivation to associate, even if they wouldn’t have had a motivation before. This energizes the establisment of a State, to provide enough security to handle miscreant associations or individuals and remove them from circulation.

    Unfortunately, pessimist that I am, EVERY ASSOCIATION, FOUNDED ON FORCE, IS ULTIMATELY PRONE TOWARD TYRANNY. This basic ‘truism’ invested itself in the thought processes of the Founders of the US, particularly Jefferson. He felt, simplistically out, that tyranny was an inevitability, and revolution was too. Nothing I have read in history alters this assessment as far as I am concerned. The unfortunately reality is that man will, with his contradicting motivations, create and destroy associations and institutions. It is the ones invested with Force that are the hardest, and bloodiest, to break from.

    But pure anarchy is an ideal. It will never fully exist as long as two people decide to associate for ‘destructive’ purposes (i.e. not honor life or property). There will always be a need, or demand, an authority to process such people. Our job is to monitor that it not work outside the task of whisking the malfeasant from circulation. When it presumes to dictate value judgements over others, by the very Force allocated to it to preserve property existing under an individual’s value system, tyranny exists, and revolution is necessary.

  • Euan Gray

    A-C are not the same as anarchists in any way shape

    Anarchists believe there should be no state and no such thing as private property, and that the mass of the people will rationally share things equitably between themselves without external restraint.

    A-Cs believe there should be no state, respect the right to private property and believe that the mass of the people will rationally respect this right since it will be enforced by security corporations.

    Other than that, what, exactly, is the practical difference? Come to that, what exactly is the difference between rival security corporations and rival petty states?

    description of A-Cs as utopian loons as bad as communists disingenous in extremis

    I equated the theory of A-C with the theory of Communism. They are both Utopian, because they are both grounded in a set of theoretical assumptions about how people ought to behave – regardless of centuries of experience of how people actually behave. This is not the same thing.

    In practice, Communism results in an all-powerful centralised state and for basic economic reasons doesn’t work. Even Lenin realised this, hence the short-lived “New Economic Policy” which was essentially small-scale capitalism. What, in practice, is anarcho-capitalism going to result in? A sea of independent one-person republics operating in an unregulated free market, or a free-for-all until the most determined guy(s) win out and institute what is effectively a state all over again?

    It’s not a case of “Utopian loons”, more a case of ignoring the reality of human nature, whether one considers Communism, Anarchism or Anarcho-Capitalism.

    EG

  • Euan:

    It will compete with other states-with-shareholders and ultimately one will prevail and become the new state.

    You made this confident statement here a couple of weeks ago. As we argued then, whether it is true or not depends on there being significant economies of scale in the protection business. When pressed, you failed to identify any significant fixed costs, or declining marginal costs, which would give rise to such economies of scale.

    I don’t think I’ve got the energy to take part in another 70-odd post discussion, but if you can identify the economies of scale, please do so.

    Even more fundamentally, anarcho-capitalism depends on the mass of the people consistently making rational decisions in their own best interests, which of course they don’t.

    I don’t find this terribly plausible.

    Firstly, the analysis of anarcho-capitalism makes exactly the same assumptions about rationality as the analysis of any other economic model. For instance, the argument that economies of scale leads to monopoly or oligopoly (when applied to the protection industry, this is your argument against A-C) depend on people making rational decisions in their own interests. If occasional or persistent irrational behaviour invalidates the arguments for A-C, then it also invalidates the most persuasive argument that you’ve made against A-C.

    Secondy, I think an assumption of rational behaviour is a reasonable one, even if it is not universally applicable. Of all the choices that you can make with your life, many of them would quickly kill you. The fact that most people survive well into adulthood and old age is indicative of consistent rational behaviour, even if many choices made are not the best possible.

  • Euan Gray

    depends on there being significant economies of scale in the protection business

    And I gave the examples of small scale production (a restaurant) and large-scale production (mass market cars), showing where the limits existed. I also explained where economies of scale exist in such a business as security, and stated that the economy doesn’t need to be large (or even exist) to make it attractive. There is no economic reason why a large security outfit cannot operate more efficiently and cheaply than a series of small ones. Equally, there is no purely economic reason why a security corporation must become large. But, since there isn’t really anything to stop it becoming large, and since human nature is such that some people always want an advantage over others, there is no plausible reason why a security company could not grow to dominate or even monopolise the market. Furthermore, in the case of A-C security corporations, a loose grouping of independent companies is not going to be able to defend a society against a professional and determined external threat, and since such threats are going to exist, there will be a natural incentive to rationalise and in time get down to one monopoly supplier, just for survival reasons and irrespective of the theoretical economic “correctness” of the practice.

    People do not run businesses in accordance with academic theory. They run them to make money and to achieve other, possibly non-economic, objectives. If a group of determined people set up a security company with the intention of achieving monopoly and becoming a de facto state, if they actually WANT to do this, and don’t mind being unscrupulous in the process, what is there in anarcho-capitalism that makes it impossible?

    The market? Perhaps our bad guys don’t mind intimidating the competition out of town. Arbitrators? They’re only human, and everyone has a price (not necessarily a monetary price) – our guys might well have something “persuasive” for the arbitrators. On the other hand, they might just ignore them, and who’s going to jail them? Lack of business from upset customers? Hey, we’re the only show in town, you’ve got to buy from us – by the way, lovely house, wouldn’t it be a shame if it burned down? Active opposition from another company, spurred on by the angry populace? Well, that’s not going to work if our guys have waited until they have enough cash and guns to see off anyone who really tried it on. The point is, if a group of would-be governors really want to do this kind of thing, there is nothing in an anarcho-capitalist society that can stop them – not economics, not people, not markets.

    If you think these things are impossible, then you must believe that all people are noble, decent, honest, truthful and reliable. Many are, but enough are not. And the guys who are not are frequently the ones with the drive and ambition to control the others. How do you think the modern state came to be?

    EG

  • Euan,

    Anarcho-libertarian society is not in the lesat utopian. It is, on the contrary, the best possible practical solution to all plausible social problems that could ever exist. It is a pity that more people do not as yet see this, but there we are.

    However your first step on the road to enlightenment would be to reflect on how absolutely piss poor your criticisms are. If anarcho-libertarianism is such a bad idea it is amazing that your arguments against it are so completely futile. To take your most basic objection that is is unrealistic and utopian and does not reflect reality. The same would be said about modern day liberal democracy if it were presented as an idea in the 17th century. Indeed Hobbes though exactly that. He was wrong and his argument that the choice was either absolute monarchy or brutal chaos was false. We can have freedom, a lot more freedom, even unto anarchy and society will get stronger and richer if we are wise enough to progress towards it.

  • I also explained where economies of scale exist in such a business as security

    You tried to, but you didn’t succeed. I asked you to show where the fixed costs, or declining marginal costs were, but you didn’t show any. You identified some costs, but didn’t show that they were fixed, or that the marginal costs were declining.

    Here is the link to my reply to your attempt. Unfortunately, the thread fell into the archives before you could reply.

    There is no economic reason why a large security outfit cannot operate more efficiently and cheaply than a series of small ones.

    There is at least one, which I pointed out in the original thread. In a large firm, the management are more remote from both the customers and the shareholders than in a small one. They will therefore tend to make more mistakes than the management of a small firm, which implies that this contribution to the marginal costs is increasing with increasing output.

    If you read again the comments I made in the original thread, you will see that I made this point at least twice. The problem in this instance, however, is the public good problem of voluntarily funded defence, which I think is more fundamental than any problems associated with monopolies or oligopolies.

    People do not run businesses in accordance with academic theory. They run them to make money and to achieve other, possibly non-economic, objectives.

    All this does is show that you have never read any academic theory. Your second statement is one of the assumptions of economics.

    If a group of determined people set up a security company with the intention of achieving monopoly and becoming a de facto state, if they actually WANT to do this, and don’t mind being unscrupulous in the process, what is there in anarcho-capitalism that makes it impossible?

    The market? Perhaps our bad guys don’t mind intimidating the competition out of town.

    As I have been arguing, there ability to do this depends on there being significant economies of scale. If economies of scale are not significant, the bad guys will have put themselves out of business by the time they’ve got to, say, the fifth firm, when there are twenty still to go.

    If you think these things are impossible, then you must believe that all people are noble, decent, honest, truthful and reliable.

    I neither think these things are impossible, nor believe that all people are noble, decent, ….

    As I keep saying, if you want to convince me that they are likely, you have to show me where the significant economies of scale are in the protection business.

  • I think this article points out the dangers of turning a blind eye to corruption. The Russian mafia is a serious threat to the integrity of the Russian economy as a whole.

  • Paul Marks

    The post was a good one. It shows the “anarchists” for what they are.

    As for whether anarchocapitalism could work (whether people could defend their property without a state), this depends on how people act (which partly depends on what they believe).

    We must also keep in mind that whether government can be limited also depends on how people act. Did the United States Constitution keep the federal government limited – no.

    The Constitution was under pressure long before 1933 – and then F.D.R. ripped much of what was left of the limitations on the government to bits. And the people? Well they reelected F.D.R. by 60% in 1936.

    Perhaps limited government is “utopian”.

    A more important question might be “can an anarcho capitalist society defend itself against attack from governments?”

    After all there is a bit of a difference between people in a town cooperating to defend themselves from criminal and that town standing up to a tank division launched by a nation state.

  • I’ve just checked my comment above, and there’s a bit missing. The missing bit should be:

    Furthermore, in the case of A-C security corporations, a loose grouping of independent companies is not going to be able to defend a society against a professional and determined external threat

    If you read again the comments I made in the original thread, you will see that I made this point at least twice. The problem in this instance, however, is the public good problem of voluntarily funded defence, which I think is more fundamental than any problems associated with monopolies or oligopolies.

  • I’m going to resist the temptation to wade into the debate on the merits of anarcho-capitalism per se but I just wanted to clarify to Ted and Ralf two points:

    1) Of course, not all antiglobos describe themselves as anarchists. The most prominent of them are unthinkingly marxist and it is correct to label them in favour of a central authoritarian interventionist state. But: some of the protesters do describe themselves as “anarchists”. It is this bunch I have in mind, rather than the Kleins and Moronbiots. I suggest that they haven’t thought through the implications of their “anarchism”.

    2) My point is that, although “anarchists” and anarcho-libertarians have differing aims, that should “anarchists” succeed, they are more likely to get some form of anarcho-capitalism such as contemporary Somalia, than any kind of egalitarian utopia.

  • A. Natmani

    Euan said:

    Whether anarchist or anarcho-capitalist, the desire is in my view pretty much the same: I want to be able to do whatever the hell I want to do, and I don’t want anyone to be able to stop me. Either way, it’s unworkable, and to me at least it is little more than unfettered selfishness with a very thin veneer of philosophical respectability.

    ACs do not want to do whatever the hell they want to do, they only want to do whatever the hell they want to do within the free and equal context of the reciprocal whatever the hell of others. Reciprocal liberty empowers people; it does not take away anything from them save the sanction to harm others. If you actually think that selfishness is defined by wanting to live in a society which agrees that only the initiation of violence, theft, and fraud is wrong, then you are seriously mistaken. “A very thin veneer of philosophical respectability”? Please read more.

    The anarchist position will not work, because society depends on known ownership of property, whether that is by private persons, the state, the crown or the corporation doesn’t matter so much, provided everyone knows. Quite apart from the fact very few people would actually want to live in such a “society”.

    Society depends on known ownership. Free society depends on known (and actively acknowledged) self-ownership. It may not matter so much to you who owns what since you are a welfare-statist, but it does matter to people who value themselves and their property and understand that the acknowledgement of someone else’s right to self-ownership and property ownership is the cornerstone of mutual respect and civility.

    Socialist Anarchy differs vastly from Anarcho-Capitalist philosophy, and I’m pretty sure you understand this. It is intellectually dishonest to try to contaminate the two with each other for the benefit of your argument.

    The anarcho-capitalist position will not work, because the contracted-out security services will need manpower, revenue collection, rules and enforcement thereof – basically, a state with shareholders. It will compete with other states-with-shareholders and ultimately one will prevail and become the new state. Complete waste of time. Even more fundamentally, anarcho-capitalism depends on the mass of the people consistently making rational decisions in their own best interests, which of course they don’t.

    You are correct in that security services will need resources. However, you are incorrect in assuming that just because a service needs resources it can not work unless it is an function of the state. In the statist model, personal choice is subjugated to the desires of the government. In the free society model, personal choice is a sign of respect for personal rights and personal choice itself.

    Market competition increases consumer choice and efficiency and decreases price. Force monopolies decrease choice and efficiency and increase price. Do not confuse the two. If you support the formation of a government (a force monopoly) to prevent market competitors from morphing into force monopolies, you have already created what you seek to prevent and need to read some more.

    In answer to the topic question, yes some people do want anarchy. But I am quite convinced that if it was ever attempted, in whatever flavour, they’d very quickly change their minds once they figured out what the consequences were.

    No offense to people who own shoes made of cork, but the Berkeley-Birkenstock style of anarchy is nothing more than the rage of the ignorant against the wrong system. ACs (or whatever you want to call them) desire a society composed of people who govern themselves in which there is no monopoly of force to take away that right and responsibility. I think many rioting leftists feel the same impetus but simply do not know enough about society, history, and civilization to know what to do. They react in the wrong way from the wrong premises. There are now several generations of people all around the world who have spent their lives being ‘educated’ in state institutions being told that corporations are bad and create ruin of all sorts and you can’t really expect most of them to have an objective view of the world, now can you?

    Government education makes youth who have spent their lives being controlled ‘for their own safety’ ripe for collectivist movements which encourage violence and rage. Finally, after all these years of being straight-jacketed by their governments, parents and cultures (each one ravaged, sometimes controlled, by fear of change and the unknown), they get rewarded for being dangerous.

    I imagine most readers here would accept that the student-lefty-rebel type of anarchy is dumb and doomed. Is not, however, Anarcho-capitalism just a mirror image of Communism, just as Utopian, just as theoretically right, just as doomed to failure?

    Euan, Communism ignores human nature, and thus it is a failure. Anarcho-Capitalism is nothing more than a reinterpretation of human nature within the context of civilization. It is thus no more utopian or doomed to failure as human nature + the specific culture of a specific civilization, which will always and solely consist of specific individuals.

    Your words and mine influence the direction of culture by some very small measure. You defend the state. I defend the individual. Who wins? Let the marketplace of mind decide, not government compulsion.

  • I equated the theory of A-C with the theory of Communism. They are both Utopian, because they are both grounded in a set of theoretical assumptions about how people ought to behave

    This is just plain wrong, as reading The Machinery of Freedom and other works of David Friedman will make clear to you, if you ever get round to it.

  • During the Democratic Convention in Los Angeles a few years back, the LA Times ran a story on the “anarchists” who had shown up to protest. They didn’t have any sort of political beliefs or philosophy, they were just a bunch of middle-class kids in their early 20’s who had realized that they would be expected to work for a living after college, and were very angry at the idea.

    The article didn’t say why they had taken to calling themselves anarchists, but I suspect they probably just like the way the words sounded. Rather like the teenage skateboard punks who used to go around saying “anarchy, dude” without showing the least understanding of what either word meant.

  • steph

    First I agree that the socialist anarchists are in for rude surprise.

    As for the charictorisation of A-C as communist that is mistaken. The proper compairison is with Feudalism, which I believe it would evolve into.

    My reason for this conclution is two fold, one historical and the other theoretical.

    Historically, when the Roman empire died in the sixth century AD, what evolved out of the anarchy was the fuedal system. Towns, Cities, Land Owners, and Army Comanders used their power to protect themselves and or to prey on their weaker neighbors. The whole system tended to be contractual in nature. A land owner (knight) would have his workers tied to him by oath. He would have diferent agreements with his miller, baker, brewer, carpender, serfs, etc. these agreement spesified how much labor and goods was owed to the land owner and gave the worker what amounted to police and military protection plus a court to resolve disputes and some protection in the event of hard times. The land owner would in turn be contractualy bound to his lord who would agree to provide military protection and courts for the land owner to use with his neighbors in return for military service and sometimes money. This whole system went up through the ranks of the aristocracy to the King or other soveriegn. The whole system was based on landed property and oath, or to use the modern terms property and contract.

    Theoretically the reason that a state will evolve out of the compeating governments for at least two reasons.

    First, even under ideal circumstances, there will be a need for arbitration between the compeating governments. These desitions will have to be enforcable. This will require a force to inforce it. What I would venture to ask will this supreme court with an army be, but the state.

    Second there is almost certaintly an economy of scale in providing for military defense. Consider that the area of a teritory increases roughly at the rate of R to R sqaured.

    This shows, first, that their is a real economy to seperate teritorys each a monopoly or cooperative monopoly supplier of exterior defense services. Other wise the whole teritory instead of the borders will have to be deffended.

    Second it implies that the cost of defending a larger teritory will be smaller per unit of volume than the cost of defending a smaller one.

    Suppose that the compeating governments in an area decide to cooperate to provide exterior defence. They will compeate internaly to provide police and basic court services, but will band together to protect the area from external agresion. What you have is a federation of sorts.

    Now consider that the logical boundry for such a deffensive zone would be the area which uses the same local supreme court with army. This is because these compeating governments will a) be used to working together and b) will be able to realize further savings because the supreme court army will be able to be used to defend against external agression in addition to enforcing the courts orders. This is definately a federation. It is in fact the state. But a state that is not democratic and constitutional, but at best highly aristocratic and constitutional. More likely it will be oligarchic and some what constitutional.

    The problem is that the A-Cs forgot the part of The Wealth of Nations where Smith wrote that producers hardly ever meet for any reason however inocent with out the conversation turning to ways to fleace the public. The A-Cs forget that their will be no state to stop the compeating governments from uniting to supress future competition and raise prices.

  • Euan Gray

    Andy – I am not prepared to go through the same debate again. However, I would point out that in my company fixed costs are a very small part of our overall cost base, the vast majority being variable costs of production. This in no sense whatsoever prevented the company achieving in a short time a position of overwhelming market dominance – and it’s not a tiny market, either. Your argument about (or even obssession with) increasing marginal costs may be valid in theory but that does not mean it is necessarily valid in practice. In the case of my company, in your theory it should not exist in its present form, and yet it does. Go, as they say, figure.

    A Natmani – You are reading into my words what you want to read. I did not say who owns property is irrelevant, I said the fact that the ownership is known is more important. I do not assume, and nowhere stated, that a service has to be a branch of the state to function. I am not a welfare statist, but I do support the concept of the state, because, from pure pragmatism, it works. I do think the contemporary western state interferes and regulates far too much, and this can be and should be limited.

    steph – I’m not sure it would necessarily evolve into feudalism, although it might, but otherwise I’d pretty much agree.

    A-C isn’t flawed because it is theoretically unsound (it isn’t) or because capitalism doesn’t work (it does), but because (a) it has an optimistically (and in my opinion unjustifiedly) rosy view of humanity, (b) it assumes corporations want a free and fair market, when they actually don’t and (c) it assumes a society made solely of rational individuals when it is actually made up of numerous frequently irrational groups (people naturally associate – look at sewing circles, model railway clubs, golf clubs, village cricket teams, etc). In consequence, (a) less charming people will seek and obtain advantage, (b) corporations will seek monopoly and oligopoly even if it is economically inefficient, and (c) the groupings with the advantages in resources and influence will naturally dominate. Pointless snide comments about the world being taken over by the Chingford Model Railway Society (Urban Warfare Branch) will be ignored.

    Look, all you’re going to get by abolishing the state is another state plus an intervening period of pain.

    EG

  • Euan, if I understood your comparison of A-C to communism correctly, they are similar in the fact that they assume that all humans tend to do good, but they differ in how to deal with this assumption (government control vs. individual liberty). However, this does not always happen. Another man forgotten by anarchists is James Madison. He explained why there is a need for the state by saying, “If all men were angels, there would be no need for government.” We need to balance property rights with the control of the unjust.

  • I was visiting Dublin recently and I was very surprised by the trepidation and fear over the upcomg protests, even among liberals, and in the pages of the Irish Times (which is just like the Guardian, except without the balance).

    I don’t take these protestors very seriously. Like English soccer hooligans, they seem to only riot in comparatively liberal places, where they can take a holiday in the sun or a short break in a picturesque European city. Try Tel Aviv, Istanbul, Seoul or Shanghai if you really want to be a martyr.

  • Euan,

    I’m sorry that you’ve chosen to evade, rather than answer my question.

    My question is not an obsession with increasing marginal costs. I merely happen to know some economics, and I understand what conditions are necessary for a market to supplied by a monopoly or oligopoly. If you think that your company does not obey those rules, then perhaps you could show me the cost curves of your firm (and I mean the actual numbers) and we can analyse it from there.

    As for your other remarks:

    (a) it has an optimistically (and in my opinion unjustifiedly) rosy view of humanity, (b) it assumes corporations want a free and fair market, when they actually don’t and (c) it assumes a society made solely of rational individuals when it is actually made up of numerous frequently irrational groups (people naturally associate – look at sewing circles, model railway clubs, golf clubs, village cricket teams, etc).

    As has been pointed out to you several times, this is all nonsense. If you would only take the trouble to actually read The Machinery of Freedom (the whole book, not just what’s been webbed), you might appreciate this. None of the assumptions that you state above are made.

    David Friedman’s analysis makes exactly the same assumptions about human behaviour as any other economic analysis. He assumes that people are prone to corruption, that they will try to steal from each other, that they will try to murder each other, that some of them will want to become tyrants, that if a firm can eliminate its competition it will do so.

    Every time you tell us that A-C is utopian and that it assumes a rosy view of humanity, you are not pointing out some flaw in the reasoning. You are showing off your ignorance of the literature.

    Apologies for the petulance.

  • Euan Gray

    Andy – No apology necessary, and I wondered if I should have made one.

    The basic problem I have with A-C is that there isn’t a meaningful working restraint on the activities of the people and corporations. The scope for corruption in society is great, as can be seen in countries which have high levels of it – what is it that makes Britain, say, relatively non-corrupt and Russia relatively corrupt? Much corruption is unseen by the mass of the people – it’s not so much bribing a cop as bribing the legal system.

    Imagine a series of private security corporations which are the sole enforcement agencies in A-C, under the judgement of a series of private arbitration courts. Are these companies going to keep enforcing judgements against each other, or are they more likely to reach an informal agreement with each other to marginalise the courts – however illegal, immoral or inefficient this is? Companies in real life do collude and predate a great deal, even if it isn’t economically efficient, sensible or legal, so what’s to stop them in A-C?

    How does A-C stop a group of determined people who want to take over and create what is effectively a state? Bear in mind they aren’t going to stick to the rules, and bear in mind that if someone else can buy force then so can they.

    Consider the Great October Socialist Disaster in Russia – this wasn’t a popular revolution, it was a coup by a very small number of extremely determined and ruthless people. The only way to remove them was massive military action, and even after three or four years of civil war this failed. Given that people will fight and die for trivial as well as important reasons, what’s A-C’s solution to this problem?

    alex – I’m not saying Communism and A-C are equivalent, but that I think they are equally built on shaky foundations. In general, though, I think some form of state is essential, for Madison’s reason. I just don’t see how leaving it to competing corporations can work.

    EG

  • Euan Gray

    perhaps you could show me the cost curves of your firm (and I mean the actual numbers)

    I’m sure you’ll understand if I say I’m not going to broadcast my company’s cost base around the internet, or indeed to anyone who has no need to know it :)

    The point is not whether such things are economically desirable, or efficient, or sensible or even rational, but whether or not companies will do it even if it costs them money – and the answer is yes, they will do it. Moreover, they do do it, and on a regular basis. Companies in general don’t want a free and fair market, and in general and to the extent they can they will tend to dominate and abuse the market, even if it costs them money. The “rules” don’t always hold.

    They will therefore tend to make more mistakes than the management of a small firm, which implies that this contribution to the marginal costs is increasing with increasing output

    So? How does this stop them achieving their aims? You could say the same thing about Sainsbury’s or Wal-Mart. It may well be that corporations get more remote from the end user as they grow, but this doesn’t seem to stop them growing – I don’t see this as any real objection to expansion.

    David Friedman’s analysis makes exactly the same assumptions about human behaviour as any other economic analysis

    And he also says that the wider you try to spread market assumptions into society, the more caveats, qualifications and restrictions you are going to run into.

    Others have said the the so-called free market is only possible because of the existence of a regulating and controlling government, and that without this state you will end up in a semi-feudal plutocracy.

    Whether that would happen or not, how does A-C treat the poor, those unable to pay for private services? What if in response to loading premiums for the well-off to subsidise the poor, the well-off decide in large numbers to insure with a company that doesn’t care about the poor? How can you enforce subsidy? What if the corporations don’t want to do it? If you force them by some means or other even if they all dissent, how is this different from having a state?

    This last question in particular has been asked several times in different ways and by different people on this blog, and convincing answers seem thin on the ground. What is the essential difference between compelling conformance in A-C and doing the same thing in a state?

    you have to show me where the significant economies of scale are in the protection business

    There are economies to be made, just as there are in any other expanding corporation (rationalisation of head offices, training bases, centralised planning, etc. – this is the way companies work, after all), even if the vast preponderence of cost is variable. I said before, even if you only save a penny a widget (or security man) it’s still an advantage. But in the end there does not need to be saving, companies can, will and do expand in this way even if it isn’t theoretically right or even economical.

    You are showing off your ignorance of the literature

    With respect, that’s exactly what Communists, creationists and other zealots say. It doesn’t make them right, and I have to say that adherence to a bible (whether political, social, economic or religious) doesn’t in itself make anyone right.

    What the book says people do is less important than what people actually do.

    EG

  • “To the average American or Englishman the very name anarchy causes a shudder, because it invariably conjures up a picture of a land terrorized by low-browed assassins with matted beards, carrying bombs in one hand and mugs of beer in the other. But as a matter of fact, there is no reason whatever to believe that, if all laws were abolished tomorrow, such swine would survive the day. They are incompetents under our present paternalism and they would be incompetents under dionysian anarchy. The only difference between the two states is that the former, by its laws, protects men of this sort, whereas the latter would work their speedy annihilation. In a word, the dionysian state would see the triumph, not of drunken loafers, but of the very men whose efforts are making progress today: those strong, free, self-reliant, resourceful men whose capacities are so much great than the mob’s that they are often able to force their ideas upon it, despite its theoretical right to rule them and its actual endeavor to do so. Nietzschean anarchy would create an aristocracy of efficiency.”

    (H.L. Mencken: “Friedrich Nietzsche”, 1908, ch. X, “Government”)

  • Euan Gray

    the dionysian state would see the triumph, not of drunken loafers, but of the very men whose efforts are making progress today: those strong, free, self-reliant, resourceful men

    What about the other 98% of humanity?

    So the uebermeschen can “force their ideas upon” the mob, can they? Perhaps someone could explain how this is better the state regulating the mass of the people.

    EG

  • I’m sure you’ll understand if I say I’m not going to broadcast my company’s cost base around the internet, or indeed to anyone who has no need to know it :)

    Fair enough, but you asked me to go figure. I cannot go figure unless you give me the figures to go figure with.

    The point is not whether such things are economically desirable, or efficient, or sensible or even rational, but whether or not companies will do it even if it costs them money – and the answer is yes, they will do it. Moreover, they do do it, and on a regular basis. Companies in general don’t want a free and fair market, and in general and to the extent they can they will tend to dominate and abuse the market, even if it costs them money. The “rules” don’t always hold.

    But firms that persistently do things that cost them money, will find that their prices are undercut by firms that seek to minimise costs, and so they will either change their behaviour or go out of business. This selection effect means that the firms which we observe staying in business for a long time are also those ones which try to minimise costs. The argument is not that every firm always seeks to minimise costs. The argument is that the firms that stay in business for a long time try to minimise their costs.

    If you wish to analyse the stability of some economic system, isn’t it more sensible to focus attention on the firms that stay in business than on the ones that don’t?

    And you’ve implicitly made that false accusation again. The arguments for A-C do not assume that companies want “a free and fair market”. The risk that a firm or firms will try to monopolise or cartelise the protection business is precisely the question that David Friedman deals with in chapter 30 of The Machinery of Freedom, which I gather you still haven’t read.

    So? How does this stop them achieving their aims? You could say the same thing about Sainsbury’s or Wal-Mart. It may well be that corporations get more remote from the end user as they grow, but this doesn’t seem to stop them growing – I don’t see this as any real objection to expansion.

    If marginal costs are increasing, there will be some level of output at which the marginal cost exceeds the price. Below that level, a firm can increase its profits by expanding its output. Above that level, it has to decrease its output to increase its profits. In the case of a firm with market power, you have to account for its ability to cause the price to increase by restricting its output, and it will maximise its profits at some level below that implied in the previous sentence.

    So with increasing marginal costs, it is not possible for a firm to grow without limit. It will be possible up to some point above the optimal level of production to continue to make a reduced profit, but if the firm expands too far, it will eventually put itself out of business.

    I will make a prediction. If you can cite any examples of a firm charging less than than the marginal cost per unit, the firm will either be going out of business, or it will be a temporary situation which the firm will take measures to correct.

    I also think you have misunderstood the point I made. It was in reply to your assertion that “There is no economic reason why a large security outfit cannot operate more efficiently and cheaply than a series of small ones.” I was providing you with a counterexample. I’m not claiming that there are no other effects which might outweigh the one I pointed out. It’s just that your claim is too strong.

    And he also says that the wider you try to spread market assumptions into society, the more caveats, qualifications and restrictions you are going to run into.

    Others have said the the so-called free market is only possible because of the existence of a regulating and controlling government, and that without this state you will end up in a semi-feudal plutocracy.

    Your wandering off the point here. That’s a different argument. My point, which you were replying to, was that your statement about his assumptions is wrong.

    Whether that would happen or not, how does A-C treat the poor, those unable to pay for private services?

    The short answer is to look at what happens when other products are sometimes produced by the market and other times produced by the state. Food for example. In which countries are the poor better fed? In those where food is produced by the market, or where food is produced by the state?

    I presume that you’re also aware of the arguments that much of today’s poor are in their situation as a consequence of the welfare state, where welfare recipients often pay very high effective marginal tax rates. Furthermore, I presume you’re also aware of research that suggests that voluntary contributions to charity declined sharply when state welfare was introduced.

    In addition, although it is a very common belief, why do you believe that the net effect of government activity is to transfer resources to the poor? Lots of things the government does transfers resources away from the poor, such as subsidies for higher education. In the 1950s or 60s, Milton Friedman analysed the effects of the US Social Security system, introduced by Roosevelt, ostensibly to help the poor. His conclusion was that it did the opposite, it transfered resources from the poor to the rich.

    There are economies to be made, just as there are in any other expanding corporation (rationalisation of head offices, training bases, centralised planning, etc. – this is the way companies work, after all),

    Unless you can actually quote figures for the specific case of the protection business, this is just hand-waving. Rationalisation of head offices, training bases and centralised planning (presumably following a merger) are not guaranteed to make savings if the consequences are that the management make more mistakes.

    I said before, even if you only save a penny a widget (or security man) it’s still an advantage.

    You are stating one of the assumptions of the arguments for A-C.

    With respect, that’s exactly what Communists, creationists and other zealots say. It doesn’t make them right, and I have to say that adherence to a bible (whether political, social, economic or religious) doesn’t in itself make anyone right.
    What the book says people do is less important than what people actually do.

    You’ve utterly missed the point of my (somewhat petulant) comment.

    You made a statement about what anarcho-capitalists believe, namely that they have an unduly rosy view of human nature. That statement is false. You can show that that statement is false by actually reading what anarcho-capitalists have written. You may find other mistakes in their arguments, but not the one you keep claiming.

    Your claim was analogous to a creationist making the similarly false statement that “Darwinists believe that evolution proceeds by random chance”. If a biologist responds that the creationist can correct his mistaken belief by actually reading The Origin of Species or The Blind Watchmaker, is he not being entirely reasonable?

    Making false claims about someone elses beliefs is a demonstration of ignorance, not of insight.

  • Euan Gray

    argument is that the firms that stay in business for a long time try to minimise their costs

    But that doesn’t mean they can’t take a course of action which increases their costs, does it? It also doesn’t mean that such a course of action is unwise, although of course it may be. Corporations don’t last long anyway – about 40-50 years on the average before being bought out, fragmenting or simply failing.

    I’m not claiming that there are no other effects which might outweigh the one I pointed out. It’s just that your claim is too strong

    My claim is that, in principle, there is no reason why you CANNOT have a large and dominant security firm. Whether you do is another question, but my point is that there is nothing which actually makes it impossible. I would say that I think your claim, although important, is not the most important factor and in fact would tend to be outweighed by others. However, until we actually have an A-C society with 100% private security we won’t know, will we?

    look at what happens when other products are sometimes produced by the market and other times produced by the state

    With respect, that doesn’t answer the question at all. The question was, what mechanism is there in A-C that would ensure the poor are protected, fed, have medicine, etc., that is better than the admittedly imperfect state subsidy? I’m not suggesting corporations cannot do things better than the state, but in the absence of a compelling regulating state, what ensures that such provision WILL be made?

    you’re also aware of the arguments that much of today’s poor are in their situation as a consequence of the welfare state

    Yes, I am aware of this (the welfare trap), and it is the basic reason why I object to widespread unrestricted welfare. I think the ultimate answer is a combination of charity, thrift, personal prudence and some degree of subsidy, but not the complete privatisation of the whole thing.

    why do you believe that the net effect of government activity is to transfer resources to the poor?

    I don’t. I never said I did. I don’t agree that it transfers to the rich, either – the largest beneficiaries tend to be the educated middle classes, who not only understand how the system works, they also are the people who design and run it. But having said that, when it comes right down to it there is no need for anyone in the UK to be homeless and starving since mechanisms (however flawed, inefficient and misguided) do exist to enable people to survive. What is the equivalent in A-C, why is it better and how will it be enforced?

    not guaranteed to make savings if the consequences are that the management make more mistakes

    But equally it is not guaranteed that the management will make more mistakes, nor is it guaranteed that the cost of these mistakes (if any) will necessarily exceed the savings from rationalisation, nor for that matter is it guaranteed that mistakes made by the managers of smaller firms will be less important – in fact, given a smaller revenue base and fewer customers, a mistake that might be relatively unimportant in a big company could be fatally catastrophic to a small one.

    You are stating one of the assumptions of the arguments for A-C

    But aren’t you just asserting that this assumption is invalid in the case of security corporations?

    I accept that A-Cs understand the failings of humanity. But given the human propensity to stupidity, greed, corruption and irrational selfishness, is it not if anything less likely that unregulated market mechanisms are going to make for a better society?

    Also, what about the question of how compulsion in A-C is different from and better than compulsion in a state?

    EG

  • Shawn

    This Site has three very good articles about the contradictions inherent in Anarcho-Capitalism: A fatal Instability In Anarcho-Capitalism?, Is Anarcho_Capitalism Possible?, and why Anarcho-Capitalism Dissolves Into City States.

    This argument has been thrashed enough and it is of no interest to me to do it all again. Suffice to repeat that Libertarianism is a system government based on the universally enforced rights of all citizens to life, liberty and property, and Anarchism is a system of perpetual conflict based on might makes right. If you want an example of libertarianism then we have the early American Republic. If you want an example of Anarcho-Capitalism, visit the ganglands of Los Angeles. But dont go without a heavily armed escort.

  • Euan Gray

    On the lifespan of companies, I should have amplified that 40-50 years seems to be the average for big, wealthy corporations. The overall average is much less – apparently in Japan and Europe the overall average regardless of size is some 12 years. It seems that 1/3 of all Fortune 500 companies listed in 1970 did not exist in 1983.

    EG

  • Shawn:

    If you want an example of Anarcho-Capitalism, visit the ganglands of Los Angeles

    A better example is the one I mentioned earlier: contemporary Somalia

  • Euan Gray

    Frank – Maybe Somalia is the best example. Googling “somalia” brings up a paid placement ad:

    Somalia For Sale
    Bargain Somalia
    Items On Sale at eBay UK!

    :)

    EG

  • You appear to have conceded my points with these statements:

    However, until we actually have an A-C society with 100% private security we won’t know, will we?

    (my point being that whether the protection business will be competitve or monopolistic will depend on the circumstances. I will be interested to see, if this comes up again in future, you make the claim that one security firm will definitely dominate the market, or if you only say that it’s a risk.)
    And:

    I accept that A-Cs understand the failings of humanity.

    Other than that:

    I said before, even if you only save a penny a widget (or security man) it’s still an advantage.

    You are stating one of the assumptions of the arguments for A-C.

    But aren’t you just asserting that this assumption is invalid in the case of security corporations?

    No. You appear to have misunderstood the argument about increasing marginal costs.

    The assumption is that a firm will try to maximise profits, so if it can take some measure which will save it a penny a widget it will do so. Whether that means that it should increase or decrease production depends on whether it sells its widgets at a price greater or less than the marginal cost.

    Suppose the price is £10/widget and the marginal cost is £5/widget. If the firm increases its production by one more widget, it will receive an extra £10 in income, but its costs will increase by £5, so it makes a net increase in profits of £5. So, in this instance the firm should expand its output to increase its profits.

    Suppose, on the other hand, that the marginal cost is £15/widget. This time, if the firm increases its production by one widget, it will gain £10 in income, but lose £15 in reduced costs, giving a net decrease in profits of £5. In this case, the firm should contract to increase its profits.

    The firm earns its maximum profits when the price equals the marginal cost, provided that its effect on the price is negligible. If it has market power, then it can raise the price, and hence its profits, by reducing its output still further.

    Does that makes things clear? That if marginal costs are increasing there comes a point at which further expansion causes the firm to make losses?

    As for the poor:

    With respect, that doesn’t answer the question at all.

    I made those points to try to put some ideas in your head so that you might be able to think of some possible answers for yourself.

    With the elimination of government activity which transfers resources away from the poor (such as higher education subsidies, agricultural subsidies etc.), the elimination of the poverty traps of state welfare and the elimination of government regulations and taxes which suppress business productivity, society will be richer and there will be fewer people in need of help. For those who remain in need of help, the substitute for state welfare is private charity.

    You ask:

    …in the absence of a compelling regulating state, what ensures that such provision WILL be made?

    I have no way of guaranteeing that people will voluntarily fund private charities. However, I notice that they do, even in the absence of compulsion. I also think it’s likely that voluntary donations to charity would increase as the welfare state declines. That was why I mentioned the research that suggested that donations to charity declined when state welfare was introduced.

    Furthermore, although the state does provide welfare for the poor in the present system (regardless of whether it compensates the harm done by other state activities), there is nothing compelling it to do so. If you think that the absence of compulsion would be a serious problem for charities when there is no state, why isn’t it also a problem today?

    But given the human propensity to stupidity, greed, corruption and irrational selfishness, is it not if anything less likely that unregulated market mechanisms are going to make for a better society?

    It all depends. If Nazi Germany, or Soviet Russia are across the border, an A-C society probably couldn’t defend itself adequately. And if there are significant economies of scale in the protection industry, government might simply re-emerge. Stupidity, greed, corruption and irrational selfishness have to be accounted for when analysing the behaviour of governments as well. Government agents are as stupid, greedy, corrupt and selfish as anyone else. Observing that people can be stupid, greedy, corrupt and selfish does not imply that government must be the solution.

    Also, what about the question of how compulsion in A-C is different from and better than compulsion in a state?

    What compulsion?

  • But given the human propensity to stupidity, greed, corruption and irrational selfishness, is it not if anything less likely that unregulated market mechanisms are going to make for a better society?

    I forgot to mention. Read this essay(Link) by David Friedman. He discusses the reasons why he expects A-C law would be an improvement, and also mentions a couple of ways in which it might fail.

  • Euan Gray

    Andy – I don’t concede your point at all, but I think we are unlikely ever to agree. We both know there is a point at which a company cannot sensibly expand further – I say in the case of security there is no reason why it cannot expand to monopoly, and I can think of some economic and more non-economic reasons why it not only could but likely would, whereas you insist all security companies would remain relatively small and could never monopolise.

    Perhaps the root of this is an assumption that corporations will follow economic rules – you say they will, I say they might but won’t necessarily. Remember, in the A-C society we’re talking about there are no rules governing corporate conduct other than those the corporations decide to accept, and more importantly there is no final authority to require acceptance of any rule on anything. It’s not implausible that a security company can sustain significant loss and indulge in highly dubious conduct in an attempt to attain (possibly by force) a monopoly, at which time it can do whatever it wants because it effectively is the state.

    All the same, I see no reason why a security company cannot gain monopoly while still being profitable. If the costs are such that it cannot expand beyond a point well short this, then obviously it won’t. But there is no reason that I can see that the costs will necessarily increase so much so quickly as to preclude monopoly. All you’re saying is that they can – fine, I know they can, but WILL they in this case? If so, why? Remote management, reduced customer sensitivity and hence inevitably increasing marginal costs seem to be your arguments, but many large companies do that now and it doesn’t hinder them – in fact, it cuts costs. The more easily people can communicate, the less necessary is local management and control, and the more money you can save by rationalising. Why is security any different?

    If you think that the absence of compulsion would be a serious problem for charities when there is no state, why isn’t it also a problem today?

    Because there IS a state, and there IS compulsion. Obviously.

    EG

  • Perhaps the root of this is an assumption that corporations will follow economic rules – you say they will, I say they might but won’t necessarily. Remember, in the A-C society we’re talking about there are no rules governing corporate conduct other than those the corporations decide to accept, and more importantly there is no final authority to require acceptance of any rule on anything.

    You seem to have a very different idea from me about what I mean by economic rules. I’m not talking about rules imposed by some authority. I’m talking about more straighforward things, such as if a firm’s costs exceed its income it will lose money. That’s just mathematics and requires no authority to enforce it. Similarly, you don’t need to invoke any authority if you want to consider the consequences of profit maximising behaviour.

    This sentence:

    I don’t concede your point at all…

    is contradicted by this:

    If the costs are such that it cannot expand beyond a point well short this, then obviously it won’t. But there is no reason that I can see that the costs will necessarily increase so much so quickly as to preclude monopoly. All you’re saying is that they can – fine, I know they can…

    You have now changed your position slightly. You started off arguing that a monopoly protection agency was inevitable. The position I have been arguing for all along is that what you say is possible, but if you are to be certain you need much more detailed analysis. It depends on empirical data. You now seem to aknowledging this point and as such I think I have achieved my objective.

    You also said:

    I accept that A-Cs understand the failings of humanity

    where before you were claiming that A-Cs held unduly rosy assumptions about human nature.

    Remote management, reduced customer sensitivity and hence inevitably increasing marginal costs seem to be your arguments

    Remote management and reduced customer sensitivity are merely examples of the sort of things which contribute to increasing marginal costs. There will be other effects as well, and there may be effects which go in the opposite direction. And if marginal costs are increasing, there has to be significant fixed costs if the market is going to be dominated by a small number of firms. I think I’ve repeated that often enough.

    Why is security any different?

    It is a fact, as far as I am aware, that most economic activity takes place in small firms. Large firms, as I understand it, account for a surprisingly small fraction of the economy. (It would take me some time to find figures to support this.) The impression that most people have to the contrary is a result of selection bias in the media – a big factory employing 200 people opening up is much more newsworthy than an estate agent which employs 20. Not being an expert in the security industry, I have no way of knowing for certain which category it falls into. Unless there is some obvious source of fixed costs, such as heavy machinery or whatever, I’d be inclined to put my money on it being a small business rather than a large one. “Rationalisation of head offices” isn’t convincing enough. My first guess is that most of the employees would not be managers, but would be security guards who have to look after property or patrol the streets. That doesn’t seem like a cost that can be cut by merging two small companies into one larger one.

    For empirical evidence, it might be worth considering the case of Somalia, which Frank linked to earlier:

    There is still no proper central government but, where once there was only a handful of warlords, there are now at least 24, and that is only the serious ones. With smaller fiefs to pillage, few can now afford the $100,000 or more that it costs to wage a six-hour battle, so such battles are less common.

    I don’t know how well Somalia conforms to the model of A-C in other respects, but that anecdote is at least indicative that protection agencies will be competitive, rather than monopolistic.

    However, my goal was not to convince you that a competitive market was inevitable. It was merely to persuade you that if you wish to claim that a monopoly is inevitable, you need more justification than what you have so far provided.

    Because there IS a state, and there IS compulsion. Obviously.

    You ignored the point I made. I said:

    Furthermore, although the state does provide welfare for the poor in the present system …, there is nothing compelling it to do so.

    The state is was what does the compelling, but there is nothing compelling the state. Why aren’t you worried that the state will decide to halt welfare payments. There’s nothing compelling it make them.

  • Euan Gray

    Andy,

    The “rules” I meant are the rules of legal corporate behaviour, not economic rules. The rules of economics don’t change under A-C, but there is no-one to enforce any rule of ethical or legal behaviour other than whomsoever you choose to buy your arbitration from.

    As for conceding your point on costs, I don’t. I meant that if a company cannot expand, it cannot expand – admittedly a redundant comment. That doesn’t mean I accept your assertion that it is necessarily impossible for it to do so.

    I do think that, even though A-Cs seem to understand the flaws in human nature, they still seem to have too optimistic a view of how this will affect their proposed society. Remember that there are legal restraints and compulsions on people in current society, which would be absent or avoidable under A-C. See also below.

    Indeed, most economic activity is by small companies. What does that prove? Of course most security employees will be guards, etc., but why does that mean costs will necessarily and inevitably increase as a proprtion of revenue (assuming the same sell price and small reductions in the small fixed costs) as the company expands? Why is it more expensive for one company to hire out 100 guards at £10/hour than for two companies to hire out 50 each at the same price? If two equal security companies merge, and sell as one company the same services at the same price with the same number of officers from the same number of stations as they previously did separately, where is the cost increase?

    I think monopoly security would at least highly probable, if not inevitable, because there is no economic reason to prevent it, and there are many non-economic reasons to promote it. Consider (again) restaurants. There are lots of small ones, hardly any really big ones, and several very large chains. There is no reason why one could not expand buy buying a second restaurant and put it under the same management and central control, but in most cases there’s very little money in the business and no political reward, so it doesn’t happen too often. Worked for MacDonalds, Burger King, KFC, etc, however. However, you do observe that when a restaurant does very well indeed (which isn’t often) it is not unknown for the owner to branch out into another one. With security in an A-C society, the potential political reward of monopoly is enormous – you can become a de facto state, or on a personal level, de facto head of state – and a great many people with ambition and a desire for power over their fellow man would really like that. Don’t you think that might just, possibly, maybe tempt someone? Don’t you think someone, somewhere, might just be tempted to bankroll someone to do exactly that in the expectation of future reward/influence/power? Possibly even corporations grouping to achieve precisely this end? And don’t you think a certain amount of underhand behaviour might just creep in, with that sort of reward? If there’s no economic reason that makes it impossible, don’t you think these factors make it not only possible but highly likely?

    As for state welfare, in a democracy the only thing that compels the state to provide is the resistance of the electorate to any idea of it stopping such provision, or where it doesn’t exist the desire of the people for what they see as “free” money and services. This is a fairly serious compulsion in unqualified democracies. In a dictatorship, there is no actual compulsion to provide, but many reasons why the dictator could see it as prudent and in his own best interests to do so.

    EG

  • The rules of economics don’t change under A-C, but there is no-one to enforce any rule of ethical or legal behaviour other than whomsoever you choose to buy your arbitration from.

    But the arguments for A-C account for this. If you ever get round to reading the book, you will find that at no point is it ever assumed that people will behave ethically simply because it is ethical to do so. The arguments consider under what circumstances it is possible for people to profit by behaving badly, and when will they make a loss. You might even like to read another book by David Friedman, Law’s Order, which is about economic analysis of the law, not anarcho-capitalism. It’s a very interesting book, and the entire book is webbed this time.

    Incidentally, under A-C, the law is not enforced by arbitration firms. The arbitrators provide legal rulings, it’s the protection agencies that enforce the law.

    As for conceding your point on costs, I don’t. I meant that if a company cannot expand, it cannot expand – admittedly a redundant comment. That doesn’t mean I accept your assertion that it is necessarily impossible for it to do so.

    So do you believe that if a company expands to the point where it loses £1 billion a year, then it expands further and starts losing £2 billion a year, and further still it loses £3 billion a year, that it can continue expanding like this indefinitely? If marginal costs are increasing, that’s the implication of your apparent belief that it’s always possible to expand.

    And I don’t believe I ever said that it’s necessarily impossible for a company to expand. If I did, then please quote my own words to me. I have only ever been arguing that increasing marginal costs will place a limit on how far a company can expand. A considerably weaker assertion than the one you have imputed to me. If marginal costs are decreasing, then the limit comes from the size of the market, and the firm will be a monopoly.

    On a more trivial point, it is obviously impossible for a company to expand without limit, for physical, never mind economic reasons.

    I do think that, even though A-Cs seem to understand the flaws in human nature, they still seem to have too optimistic a view of how this will affect their proposed society. Remember that there are legal restraints and compulsions on people in current society, which would be absent or avoidable under A-C.

    You’re not offering any new insight here. In the chapter on the Stability Problem, David Friedman considers whether a private policman is more or less likely than a state one to accept a bribe from a criminal to destroy evidence of his crimes. I invite you to guess how his argument proceeds.

    It’s certainly true that some of the legal restraints in current society would be absent under A-C. I don’t think it’s true of all of them. Only someone with unlimited resources would be able to do as he pleased without regard for the consequences.

    Indeed, most economic activity is by small companies. What does that prove?

    In the absence of more detailed information about how security firms operate, it is useful information about where to place your bets on whether the market will be competitive or not. Proofs one way or the other are in short supply. Had you succeeded in identifying significant fixed costs, or declining marginal costs in the security industry, that would not have been proof of your position, but I would have been content to regard it as evidence.

    Why is it more expensive for one company to hire out 100 guards at £10/hour than for two companies to hire out 50 each at the same price? If two equal security companies merge, and sell as one company the same services at the same price with the same number of officers from the same number of stations as they previously did separately, where is the cost increase?

    I understand that managing 100 people is more than twice as expensive as managing 50. Firms of more than about 150 people require considerable devolution of responsibility to be managed effectively. The cost increase comes from less effective management. Again, I don’t know whether that might be balanced by other effects, but your attempts to identify them have, so far, been unconvincing.

    Don’t you think that might just, possibly, maybe tempt someone? Don’t you think someone, somewhere, might just be tempted to bankroll someone to do exactly that in the expectation of future reward/influence/power? Possibly even corporations grouping to achieve precisely this end? And don’t you think a certain amount of underhand behaviour might just creep in, with that sort of reward? If there’s no economic reason that makes it impossible, don’t you think these factors make it not only possible but highly likely?

    I get the feeling that you haven’t really been paying attention to me. If you go back and read my previous comments, you should realise that I think those things are possible, but whether they are likely, I think depends on the circumstances. And I don’t think those factors are sufficient to make a re-emergence of the state highly likely. As I have kept repeating, if it is to be highly likely, you need significant economies of scale in the security industry. Despite your repeated protestations to the contrary, you have failed to show that this is the case. Indeed, the reference to Somalia suggests that the opposite might be true. In the decade or so since the collapse of its government, the number of factions has increased, not decreased.

    A confident assertion that something is highly likely requires justification, which, so far, has been rather weak.

    As for state welfare, in a democracy the only thing that compels the state to provide is the resistance of the electorate to any idea of it stopping such provision, or where it doesn’t exist the desire of the people for what they see as “free” money and services. This is a fairly serious compulsion in unqualified democracies.

    And if you had bothered to think a little further, you would have realised that there is nothing compelling the electorate to vote for state welfare. Why aren’t you worried that the electorate might vote in a government which will abolish the welfare state? There’s nothing compelling it not to.

  • Euan Gray

    I understand that managing 100 people is more than twice as expensive as managing 50

    That’s not my understanding or experience – and before you ask, I have run a site (in Nigeria of all places, before I did this costing stuff) employing over 400 people on a 24-hour 6 day basis. Hence, basically, my position.

    Why aren’t you worried that the electorate might vote in a government which will abolish the welfare state? There’s nothing compelling it not to.

    Greed and stupidity. Perhaps the two most important motivating factors in human history?

    EG

  • Liz

    I did my bit on May Day – bought a Gap t-shirt and dined (if one can dignify the experience with such a term!) at McDonalds during the course of a large shopping trip in Newcastle. I don’t often eat McDonalds, but I felt compelled to, as a kind of celebration of the cancellation of the usual May Day violence/vandalism-fest in London.

    My parents were very proud.