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Free market protection agencies and the tragedy of the commons

Get into a discussion with any self-described anarcho-capitalist and it is only a matter of time before you are directed to David Friedman for an answer to the conundrum posed. I have generally considered such appeals to authority as tacit admissions of defeat – if an argument is any good, it ought to be easy to summarise and explain. Conversely, it is often the least defensible arguments which require complex exposition (and by a third party to boot!). I was recently referred to Friedman by Scott Scheule during a discussion at my own blog and promised that Friedman would deal with the thorny question of what differentiates the “Free market protection agencies” predicted by anarcho-capitalists under anarchy from the real world “protection agencies” we observe in conditions approximating anarchy such as mafias and warlords. Friedman sketched out this scenario:

I come home one night and find my television set missing. I immediately call my protection agency, Tannahelp Inc., to report the theft. They send an agent. He checks the automatic camera which Tannahelp, as part of their service, installed in my living room and discovers a picture of one Joe Bock lugging the television set out the door. The Tannahelp agent contacts Joe, informs him that Tannahelp has reason to believe he is in possession of my television set, and suggests he return it, along with an extra ten dollars to pay for Tannahelp’s time and trouble in locating Joe. Joe replies that he has never seen my television set in his life and tells the Tannahelp agent to go to hell.

The agent points out that until Tannahelp is convinced there has been a mistake, he must proceed on the assumption that the television set is my property. Six Tannahelp employees, all large and energetic, will be at Joe’s door next morning to collect the set. Joe, in response, informs the agent that he also has a protection agency, Dawn Defense, and that his contract with them undoubtedly requires them to protect him if six goons try to break into his house and steal his television set.

The stage seems set for a nice little war between Tannahelp and Dawn Defense. It is precisely such a possibility that has led some libertarians who are not anarchists, most notably Ayn Rand, to reject the possibility of competing free-market protection agencies.

But wars are very expensive, and Tannahelp and Dawn Defense are both profit-making corporations, more interested in saving money than face. I think the rest of the story would be less violent than Miss Rand supposed.

The Tannahelp agent calls up his opposite number at Dawn Defense. ‘We’ve got a problem. . . .’ After explaining the situation, he points out that if Tannahelp sends six men and Dawn eight, there will be a fight. Someone might even get hurt. Whoever wins, by the time the conflict is over it will be expensive for both sides. They might even have to start paying their employees higher wages to make up for the risk. Then both firms will be forced to raise their rates. If they do, Murbard Ltd., an aggressive new firm which has been trying to get established in the area, will undercut their prices and steal their customers. There must be a better solution.

The man from Tannahelp suggests that the better solution is arbitration. They will take the dispute over my television set to a reputable local arbitration firm. If the arbitrator decides that Joe is innocent, Tannahelp agrees to pay Joe and Dawn Defense an indemnity to make up for their time and trouble. If he is found guilty, Dawn Defense will accept the verdict; since the television set is not Joe’s, they have no obligation to protect him when the men from Tannahelp come to seize it.

What I have described is a very makeshift arrangement. In practice, once anarcho-capitalist institutions were well established, protection agencies would anticipate such difficulties and arrange contracts in advance, before specific conflicts occurred, specifying the arbitrator who would settle them.

The problem I see with this scenario is that little assumption I highlit. It is certainly true that the profit-making corporations Tannahelp and Dawn Defense have an ultimate interest in a stable, peaceful environment where disputes are settled by arbitration. Unfortunately they also have a proximate interest in ripping everyone off and possess the means to do so. Unlike corporations who provide widgets, there is no proximate method for the market to constrain a predatory protection agency. Tannawidget and Dawn widgets may have a proximate interest in ripping everybody off but are prevented from doing so by the possibility of undercutting competitors entering the market. They are not in a position to either coerce their customers or new entrants. Not so for the “free market protection agency”

It occurs to me that this resembles the tragedy of the commons. Under common ownership, everyone shares an ultimate interest in, say, preservation of livestock, but a proximate interest in grabbing everything for oneself, if only to prevent others from doing exactly the same. If you possess the means to coerce people to give you their money – arms and a gang of heavies – you have no particular reason to respect property rights. From your point of view, everything might as well be under common ownership. If you don’t rip people off, other protection agencies will do so. It shouldn’t be a surprise to see this pattern emerge in areas where the ordinary rule of law has broken down, but apparently, for some, it is.

66 comments to Free market protection agencies and the tragedy of the commons

  • “Unfortunately they also have a proximate interest in ripping everyone off and possess the means to do so.”

    Assumes a fact not in evidence.

  • Dale Amon

    I have read that the beginnings of the feudal system came from locals banding together around a local Roman manor house: the local protection agency.

    As feudalism grew and lords competed, we evolved the modern state as the most efficient means of extracting the most money for the longest period from those who actually do productive work.

  • J

    “if an argument is any good, it ought to be easy to summarise and explain”

    This is often true, but not always. In the olden days, I was a supporter of comments such as the above, in an attempt to improve the wordy, difficult, and simply poorly written prose that passed for argument. This prose was often correct, in a formal sense, but very hard to read. Now, thanks to the internet I see a far greater problem in the rise of short, pithy, easy to remember arguments that are actually _not_ formally correct – “but hey”, the authors say, “you know what I mean”.

    “knowing what I mean” may cut the ice in lightweight choir preaching debates on politics and ethics, such as found commonly across the internet. They are completely useless in more subtle disussions.

    Also, you need to be careful about what you call the ‘argument from authority’.

    Alice: Hah. I Bet Fermat’s Theorem is all wrong
    Bob: No it isn’t!
    Alice: Oh, yeah? Prove it?
    Bob: It’s been proved – Andrew Wiles has a proof on this website here.
    Alice: Pathetic. That’s just an argument from authority. Let’s here this so-called proof from your own mouth.

    OK, That’s an extreme example, but I hope you see what I’m getting at. A citation is NOT an argument from authority.

  • Euan Gray

    As feudalism grew and lords competed, we evolved the modern state as the most efficient means of extracting the most money for the longest period from those who actually do productive work

    So, if we adopted anarcho-capitalism and its brand of private protection agencies, would that not in turn develop into feudalism, and subsequently into the state as we know it today? In short, would it not just repeat what we have already done more than once? If not, why not?

    EG

  • Assumes a fact not in evidence.

    Not at all. Ex-hypothesi, a free market protection agency possesses the means of protection which happen to be very useful as means of coercion.

    This is often true, but not always

    True which is why I wrote: “I have generallyconsidered such appeals to authority as tacit admissions of defeat”. An appeal to authority is a fallacious argument, but that doesn’t mean that the authority is wrong. My point is that for many non-technical discussions, if the point is sound, there is usually a simplified way of explaining it, the more complex exposition usually involves a series of, often hidden, assumptions.

    In this particular case Freidman’s argument is not all that complex but does rest on a number of assumptions I believe are invalid, not the least of which is to consider corporations which provide “personal protection” usefully analogous to any other corporation and ignore the means and incentive for such a private protection agency to evolve into a mafia in favour of some hope that everybody will act honourably.

    For example, let’s just say Mr Friedman is fed up with Tannahelp and wants to switch to Dawn Defense, but Tannahelp decide they’d rather continue offering him “protection” and while they’re at it, the fee goes up 25%. The relationship between he and Tannahelp is asymmetrical – by definition they are more heavily armed than he is. Mr Friedman’s scenario relies on the possibility that because it’s in both Dawn’s and Tannahelp’s long term interest that disputes are resolved by arbitration, Dawn will come to his defense and send the matter for arbitration. But Dawn doesn’t really have that much of an incentive. All they would gain is one extra customer who might well prove to be a pain in the ass, switching and changing as he pleases. They may well find themselves co-operating with Tannahelp to the customer’s detriment – “you gouge your customers, we’ll gouge ours”. Now, this may not be in their long-term interest as this would affect the ability to attract future customers. But, as with the tragedy of the commons, you can’t get to that long term interest if the short term interest gets in the way. With “ordinary” products consumers can be fickle, you have to provide what they want to “capture” them. If you are providing “protection” you already have the means to keep your customers “captured”.

  • djerzinsky

    by the way, anything being done about this:

    http://www.tjm.org.uk/wakeup/

    i’d be happy to join a counter-protest of some sort.

  • Bolie Williams IV

    I had the same reaction… private protection agencies are just protection rackets/local toughs/mafioso by another name. How would one protect oneself from the private protection agency? I suppose you could arrange a system where a number of agencies covered the same geographical area, but then you’d have to enforce that as agencies would have an incentive to offer deals to people in a given area to all sign up for the same agency.

    Possibly a better alternative would be a group of citizens banding together and taking turns acting as protection and coming to each other’s defense. But that would probably evolve into a system where special protectors were fed, paid, etc… by the rest, who specialized in growing food, etc…

    Any system that requires a major, forced change to society will probably not work. Society tends to change in an evolutionary fashion and will probably continue to do so. Rather than sitting down and trying to determine the best society in a vacuum (leaving the problem of getting from here to there out of the picture), I would rather see people study our society and figure out how to make it better as that seems like it at least has a chance of being effective.

    Bolie IV

  • Ya know, if I was paying Tannahelp to get my TV back, I wouldn’t be too thrilled that they were holding discussions with the folks who were holding my TV about whether or not it would be too costly for Tannahelp to honor its contract with me by, you know, getting my damn TV back.

    If Tannahelp breaches its contract with me because it got backed down by a rival agency and wasn’t willing to go to the mattresses over my TV, who am I going to go to to enforce the contract in an an anarcho-capitalist world? The little guy is never going to be able to pay enough to make it worth a protection agency’s while to fully exert itself, so going to another agency doesn’t seem like much of a solution.

  • Wild Pegasus

    Tannawidget and Dawn widgets may have a proximate interest in ripping everybody off but are prevented from doing so by the possibility of undercutting competitors entering the market. They are not in a position to either coerce their customers or new entrants. Not so for the “free market protection agency”

    That depends on whether you make the PDA your only protection. If you turn all of your protection over to the PDA and make yourself helpless in their arms, they’ve got a good opportunity. If the PDA is only one of the ways of protecting yourself (i.e. you’re still armed), the agency’s power is more constrained.

    Of course, say Agency Aleph decides to start coercing its customers. Customers get pissed off, call Agency Bet. Aleph says you can’t do that, now we’re going to coerce you. Bet calls Aleph, says its customers now belong to Bet, and warns Aleph that it has no more revenue stream if it plans to coerce their new customers. Bet might lose money in such a war, but Aleph’s only got what it can steal now, and Aleph’s former customers aren’t going to like paying taxes.

    - Josh

  • Snorre

    Mm, was it not here on Samizdata that I read of the street that had employed a security company, since the coppers didn’t do much for local security, but apparently prefer to stop people and arrest them for carrying swiss army knives? Two different stories.

  • If the PDA is only one of the ways of protecting yourself (i.e. you’re still armed), the agency’s power is more constrained.

    Hardly! It wouldn’t be much of a protection agency worth a damn if you could face them down yourself.

    Of course, say Agency Aleph decides to start coercing its customers. Customers get pissed off, call Agency Bet. Aleph says you can’t do that, now we’re going to coerce you. Bet calls Aleph, says its customers now belong to Bet, and warns Aleph that it has no more revenue stream if it plans to coerce their new customers. Bet might lose money in such a war, but Aleph’s only got what it can steal now

    What’s in it for Bet? You’re guilty of assuming

    a) The standard business model, “customer power” doesn’t really apply in potentially-non-voluntary trade. Nobody’s forcing me to buy a widget, but anyone who can provide me with protection is in a position to force me to accept that protection. Bet doesn’t need to attract new customers or bend over backwards to them the way a competing widget manufacturer would.

    and

    b) That customers would be targetted in one fell swoop, alerting a big bunch of angry people at one time instead of picked off one by one. It might be worthwhile taking all of Alpha’s customers (although these could be “captured” by force by Bet if necessary anyway) but they’re probably not going to bother for just one guy.

  • Harvey

    This is very similar to the way large corporations operate these days – consider it corporate evolution.

    In the long term it turns out it’s just easier to price-fix and do buddy-buddy deals with one’s ‘competitors’ than to actually compete because that means constant innovation, innovation means risks and large entities with demanding stockholders aren’t into risks.

    I see it as an inevitable step in corporate evolution and indeed in society’s evolution. When you’re starting out small, competition is the key, but once you’re big, there’s no incentive, and if you’re big enough, there are no ‘real competitors left and the little guys starting out from scratch lack your economies of scale, etc.

    See Daewoo: a huge korean manufacturer with influence and assets aplenty tries to break into the car manufacturer’s world and just FAILS UTTERLY despite providing a quality product at a reasonable cost.

    Some things are just complete – there is no further development that can take place.

    Back to the original point: once you’re big enough and tough enough, there’s no need to actually do the job you originally set out to do – that’s for ‘small fry.’

  • Snorre, I’m talking about private protection agencies under anarchy. I have no problems with private security firms under ordinary rule of law.

    Harvey, Er, no it’s not. “Big Business” might well be a function of “Big Government” – it’s a lot easier to develop and maintain a quasi-monopoly or cartel if there are regulatory barriers preventing competitors from entering the market. But, nobody’s forcing you to buy Microsoft software, Nike trainers or McDonald’s burgers. If you are an existing customer, exit is not a problem. This isn’t the same when the people who are “protecting” you have the means to keep “protecting” you even if you don’t want to be protected. Plus, smaller niche suppliers can compete with large corporations. Smaller niche protection agencies wouldn’t stand a chance against “Big protection”.

  • Euan Gray

    This is very similar to the way large corporations operate these days – consider it corporate evolution.

    It’s not exactly new, is it? In the 19th century, often held up by libertarians as the closest we have come to a true laissez-faire economy, we got exactly the things you cite – collusion, price fixing and cosy deals. This is why we have anti-trust regulation – not because of unwarranted state lust for power but because in the absence of compulsion to the contrary companies really did EXACTLY what you appear to consider to be a recent innovation.

    EG

  • Harvey

    Good point – perhaps I should say ‘it’s happening again.’

  • You are correct that if the agencies have more firepower than the people they will set up a state. However, even if an agency can outgun any individual they can’t outgun a large mob of angry citizens. Provided those citizens keep and bear arms (of all kinds).
    Obviously, disarmed people can be subjected to any desired level of coercion without recourse. People armed only with rifles and handguns are effectively disarmed. Look how much difference RPGs and Stingers make to an occupation resistance movement.

  • toolkien

    The notion that basic, threadbare protection agencies will eventually evolve into Big Protection is exactly what we have got in the form of the Statism we have around us today.

    Built into the Jeffersonian type model is that revolution is inherent in society. Individuals enter and exit associations constantly. He saw this as a consistent event that it became a principal. He also was convinced that one particular form, the government, should be highly bounded and kept small and manageable, precisely because one day, enough will desire to leave the fold as it constituted, and the means to do so should be within reach of the (presumably downtrodden) individual.

    It is illuminating that people would fear a private protection framework, but have a warm place when it semanitically called the government/state. It is still comprised of fallible individuals prone to self interest. Better that the associations be small and fluid than grand and static. Because the day will inevitably come when a mass rejection will take place and the resulting conflict will be commensurately grand.

    So while being an anarchist/anarcho-capitalist at heart, I am more than willing to accept ‘protection agencies’ in the form of local/county level agencies semantically called a government. But when it is corrupted and rotten, it can be revolted against and endeavor to establish a better form.

    For those who find the notion of conflicting protection agencies wrangling with each other as novel and peculiar obviously haven’t been paying attention to the interplay between municipalities and counties, counties with the States, and the States with the Federal Government, and short cuts between all levels. The unnerving part is that the Federal level has concentrated, and continues to concentrate, powers so far outside its province as decades of bad (usually unconstitutional) law, regulation, and ‘bureaucratic interpretation/precedence’ has been efficacious law and undoable (except by revolution). I can’t but help liking local governments who stand up to the leviathan, even if I don’t perfectly agree with their cause (i.e. left leaning).

  • For those who find the notion of conflicting protection agencies wrangling with each other as novel and peculiar obviously haven’t been paying attention to the interplay between municipalities and counties, counties with the States, and the States with the Federal Government, and short cuts between all levels.

    Nor the interplay between nations at large.

  • Dale Amon

    I have a number of comments.

    Euan: Well, yes. That is exactly what I said. There is a risk that PDA’s in an anarchocapitlist world could initiate a feudal society.

    Snorre: Beside the points made by Frank, there is the additional one that we are somewhat ambivalent on the issue. I think all of us on Samizdata would prefer the anarcho-capitalist world if it could be made to work. None of us is at all certain this is the case, so we are editorially more minarchist in our expression of long term goals. In terms of my ‘three worlds’ hypothesis, I ain’t sure you can get there from here neither.

    Euan: The Robber Barons were in many cases not as bad as they have been painted since; and they were absolutely working with the best government money could buy. Had Abraham Lincoln lived, he would have been an exceedingly wealthy man over his inside deals with the railroads. You see he bought some land in just the right place… that is just a small example of the dishonesty that swept through government when the idea of ‘internal improvements’ won out with the creation of the Republican Party. I suggest reading Tomas DiLorenzo’s “The Real Lincoln” for a good dose of the politics of the early 19th century.

    Gavin: The biggest lesson of Iraq to everyone should be that a modern, well armed, well trained professional military force will make absolute mincemeat of a bunch of irregulars, no matter how much they have at stake. I used to think that if everyone were armed it would be stable against invaders or nascent states. I find that concept no longer tenable. It may have been the case as little as 30-40 years ago… but times and technology change. Perhaps strong nanotech will swing the pendulum back… but I doubt it.

    Bolle: You are right on the money with the ideas in my old three worlds posting.

    The world you are in
    The world you imagine
    The world that is becoming.

    You start from where you are, dream a bit, apply the dream to the present and watch the outcomes and keep correcting. You won’t ever get exactly where you wanted to go, but it is the best you can possibly hope for.

  • Euan Gray

    There is a risk that PDA’s in an anarchocapitlist world could initiate a feudal society

    We might then ponder why feudalism developed into the modern state. Possibly because it is more efficient and effective. So it is hardly beyond the bounds of possibility that an anarcho-capitalist society would tend towards feudalism (because it’s easier than free competition and the rewards for the few are much greater), which in turn would tend towards a state (because it’s more efficient). Back to square one.

    If anyone says this would not happen now (despite ample evidence of transitions from the chaos of collapsed states, to feudalism, back to the state), perhaps they would care to explain what it is in human nature that has changed to make this so.

    Had Abraham Lincoln lived, he would have been an exceedingly wealthy man over his inside deals with the railroads

    No doubt, but it is hardly necessary to be a state employee to profit from illicit trades. There are rules against insider trading in today’s market, precisely because people are not exactly scrupulous about taking advantage of confidential information. How would this be stopped in an anarcho-capitalist society? If it wouldn’t be, how is it justified as being acceptable? How do you prevent a small number of well-informed people dominating the market through sheer wealth, gained through inside information?

    Returning to the private security firms competing merrily away, what stops criminals paying large amounts of cash to secure their own security? Since criminals by definition don’t care overly for the rules, what’s to stop them condoning or even encouraging the abuse of the law-abiding through simple market pressure?

    I suppose one of the arguments for anarcho-capitalism is increased liberty. Suppose Tannahelp has no evidence that Joe stole the TV set? No CCTV footage or similar. They just don’t know who it was wot done it. How do they find out? How do they conduct an investigation without intruding on the liberties of others? What stops the others paying more money to defend against such intrusion (whether or not they have anything to hide)?

    EG

  • A well trained military, 150 thousand strong, is holding down 5 or 20 thousand irregulars, at fantastic cost. Who could afford to hold down 1 million irregulars with modern weapons?

  • Euan Gray

    Gavin,

    The “well trained military” is doing what it does under the law, and knows that if it breaches the law there is a defined and undoubted disciplinary process which can lead, in some cases, to execution. The problem with anarcho-capitalism is that it is hard to see how a similar system of discipline could arise, and even if it did how it would be enforced against armed groups except by other armed groups on contract to the enforcer. Furthermore, where does the enforcer get his right to enforce anything, and what is to stop an alternative would-be enforcer hiring his own force to depose him? What, ultimately, stops the armed groups and/or the enforcer from exercising arbitrary power or forgetting all about rules of civilised conduct?

    EG

  • Wild Pegasus

    Hardly! It wouldn’t be much of a protection agency worth a damn if you could face them down yourself.

    You might lose, of course, but knowing that getting out of line and trying to coerce your customers could very well result in a costly skirmish (which would be lousy for PR, q.v. Waco) is yet another discipline. You don’t have to be able to win to make it too costly to fight.

    What’s in it for Bet?

    Aleph’s ex-customers.

    Nobody’s forcing me to buy a widget, but anyone who can provide me with protection is in a position to force me to accept that protection.

    Sure, if they’ve got guns, they could very well force you to do what they want. Welcome to reality. But, again, they’re in business. If they start coercing me, and I make a stink about it to the media or end up having a stand-off, their costs go up. They have to fight, pay their PR people overtime, and try to reassure their other customers that I’m just some irregular nut. Don’t think Agencies Bet and Gimel aren’t running TV advertisements the next day going, “See! See! Switch now! 25% off first 3 months service to Aleph’s ex-customers!” There are only so many fingers to go into the dyke before the dam bursts. This also answers point b.

    - Josh

  • You don’t have to be able to win to make it too costly to fight.

    Hence the porcupine.

  • You might lose, of course, but knowing that getting out of line and trying to coerce your customers could very well result in a costly skirmish (which would be lousy for PR..

    So, the bad news is: you’re dead. The good news is, what? The protection agency gets bad PR? Now there’s a cause worth dying for!

    Aleph’s ex-customers.

    But, they don’t just get Aleph’s customers without defeating Aleph. Customers can voluntarily switch back and forth between Target and Walmart because neither retail outfit has a private army. This isn’t the same for protection agencies. Why should Aleph simply “surrender” its customers? The point is that the incentive to woo customers depends largely on the customers’ allegiance being provisional and voluntary.

    If they start coercing me, and I make a stink about it to the media or end up having a stand-off, their costs go up

    Costs go up how? I’d say that killing you would set a pretty good marker to other potential recalcitrant customers. In the long run, sure they face the problem of attracting new business. But you can’t get from here to the long term without passing through the short term where the most rational course of action is to gouge your customers. If you don’t, your competitors will.

  • D Anghelone

    Joe Bock sure is stupid having that stolen TV in his living room.

    Reminds me of when I was an aircraft loader at JFK and those Customs Agents raided our locker room in search of some items just stolen from an aircraft. They made the members of the two crews that had worked the aircraft open their lockers. Those crew members were of course guilty of the theft (a daily, matter-of-fact thing) but of course did not have the booty in their assigned lockers. As had been the case with all law enforcement, those Customs Agents were stymied. As simply as that.

  • Wild Pegasus

    So, the bad news is: you’re dead. The good news is, what? The protection agency gets bad PR? Now there’s a cause worth dying for!

    Well sure, if the agency is absolutely determined to torpedo its own business and do me harm, they’re probably going to win and kill me. Generally, if anyone is obssessed enough to throw everything away to kill me, they’re probably going to win, no matter who they are. The state doesn’t solve this problem.

    But, they don’t just get Aleph’s customers without defeating Aleph.

    Who says?

    “Hello, Silverberg Gold Repository. Amanda speaking.”
    “Amanda, this is Mr. Holmes, customer number #446771. Please stop payment to Agency Aleph. They’re coercing my neighbours something awful and I’m dropping their coverage.”
    “Yessir.”
    “Please direct payment to Agency Bet, third-troy per month.”
    “Yessir.”

    Agency Bet has a new customer.

    Why should Aleph simply “surrender” its customers?

    It surrendered its customers when it started to coerce them.

    Here was the original problem, as I stated it:

    Of course, say Agency Aleph decides to start coercing its customers. Customers get pissed off, call Agency Bet. Aleph says you can’t do that, now we’re going to coerce you. Bet calls Aleph, says its customers now belong to Bet, and warns Aleph that it has no more revenue stream if it plans to coerce their new customers. Bet might lose money in such a war, but Aleph’s only got what it can steal now.

    I’d say that killing you would set a pretty good marker to other potential recalcitrant customers.

    Doubtful. After all, Aleph’s other customers go on notice: these guys are going to coerce you and are willing to kill you to do it. People are going to make arrangements to defend themselves, including switching providers. Plus, they have to pay danger pay to their enforcers and may face internal dissention from enforcer opposed to killing (After all, an anarchist cop may very well likely be an anarchist himself.). Boycotts, bad publicity, increased costs, internal dissention, customers leaving for other firms, remaining customers becoming wary, other PDAs watching it suspiciously, pissed shareholders – a business that bad could only be propped up by a state.

    In all of this, I don’t see how a state solves any of these potential problems.

    - Josh

  • veryretired

    While I don’t want to get into the details of how such a hypothetical system might operate, I will speculate that the structureof any such free-wheeling society will almost certainly end up as feudal, i.e., a system of interlocking and cross supporting groups which will gradually consolidate control under the direction of the highest powered executive.

    It has long been my belief that a feudal structure is the default arrangement for human social organizations, and one can see the basic outlines in antiquity right up to modern times. There is very little difference between Microsoft, for example, and its relationship to its business partners and suppliers, and the feudal structures found all across Europe and Asia at various times.

    While it was considered progress to move to the nation state from formally structured feudal societies, the attraction for people of a system in which knowing those above and below, whose function is this task or that, who has loyalty to whom, etc., has not diminished. Indeed, the structures of most political parties, from the local to the national, and most governments, from the local organs to the national entity, mirror a feudal arrangement of power and loyalty.

    Given that this structure probably dates back to the clan arrangements of hunting societies in pre-history, it isn’t too surprizing that the basic appeal and strength of the format still survives in various guises today.

  • Jim

    There is a test case for this, and it has been running for centuries, so there is plenty of data. In China before the Revolution public order other than the suppression of rebels and sometimes bandits was not considered the responsibility of government. Clan associations filled this power vacuum. This meant two things – there was no legislative apparatus to make or chhage procedures; everything ran according to generally accepted customs, so the system did not allow for much incremental change. It also meant that strong families or clans trampled on weak ones. Inb the South in commercial centers there was a refinement on the clan model. These were voluntary mutual protection associations of small business owners and even overseas merchants, which were more powerful than any clan organization people like this could ever hope to get together. These organizations are called tongs or triads. Anybody interested?
    And by the way, they don’t go to war much because of the need for concealment – the state is still the top predator in a pitched struggle. But in small matters, the triads always win. They don’t work at all democratically. If you are aligned with one and get out of line or try to switch alleginace, they threaten to kill your parents if you have any and your children if you don’t.

  • Conversely, it is often the least defensible arguments which require complex exposition (and by a third party to boot!).

    Complex problems demand complex expositions, hence the commentary of this post. When one is busy and somebody else has sketched out what he views to be a satisfactory answer to the problem in an easily linked to location, I’d consider it foolish to waste time typing out the same argument again. The beauty of the internet is that neither I, nor David Friedman, has to repeat the same argument ad nauseam–we can simply refer you to a linked exposition.

    Personally, I find a person who infers tacit expressions of defeat to also be a person likely to have a weak argument.

  • The problem I see with this scenario is that little assumption I highlit. It is certainly true that the profit-making corporations Tannahelp and Dawn Defense have an ultimate interest in a stable, peaceful environment where disputes are settled by arbitration. Unfortunately they also have a proximate interest in ripping everyone off and possess the means to do so. Unlike corporations who provide widgets, there is no proximate method for the market to constrain a predatory protection agency. Tannawidget and Dawn widgets may have a proximate interest in ripping everybody off but are prevented from doing so by the possibility of undercutting competitors entering the market. They are not in a position to either coerce their customers or new entrants. Not so for the “free market protection agency”

    Hate to break it to ya, Frank, but David Friedman did respond to this argument by pretty much agreeing with it (he also didso in his book). He wrote,

    Economies of scale in law enforcement have to be small enough so that the market equilibrium produces enough enforcement agencies so that an enforcement agency cartel designed to reinvent government for its members’ profit is unstable.

    There was debate on Samizdata some time ago as to what the economies of scale for private protection agencies would be. My question to you is, under circumstances like these – low economies of scale, so a great number of small firms (Friedman says if there were more than 10,000 in the US he’d be happy), how would your coercive cartel be maintained? Sure, existing companies would be in a better position to use force than new entrants, and so may be able to shut them out. But what would stop existing companies and members of the cartl from under cutting each other with price gouging and chiselling? If the price of protection rises as a result of this cartel, then wouldn’t members have an incentive to “offer their customer’s deals”? The cartel could impose quotas, but members would have a constant incentive to try to excede their quotas.

    If you possess the means to coerce people to give you their money – arms and a gang of heavies – you have no particular reason to respect property rights. From your point of view, everything might as well be under common ownership. If you don’t rip people off, other protection agencies will do so. It shouldn’t be a surprise to see this pattern emerge in areas where the ordinary rule of law has broken down, but apparently, for some, it is.

    True, but how is government a solution to this problem? Once we have an institution able to intervene in the economy for the benefit of special interests, we get a situation in which special interests will lobby for favours from that institution. We know that the world would be a vastly better place if the government didn’t rob Peter to pay Paul, but there is a free-rider problem in maintaining that world, because there are higher payoffs available in being able to rob whilst nobody else does. So having a government seems to involve precisely the situation you are describing. I’d much rather some sort of constitutional arrangement where power is checked by competing agencies and courts than such a dog eat dog world, even though I know it won’t be perfect.

    I would also like to know how, given that you prefer a government, you get one without it being able to do what you don’t want theives or criminals to do? Someone above described anarcho-capitalist firms as being like protection rackets, forgetting that a protection racket is an organisation that forces you to pay for protection that you haven’t asked for and may wll not want. Well, that is what government is. Taxation is fairly indistinguishable from theft – I know that if I did it, I’d be arrested, anyway!

  • Sorry for multiple posts! Server is playing up!

  • My question to you is, under circumstances like these – low economies of scale, so a great number of small firms (Friedman says if there were more than 10,000 in the US he’d be happy), how would your coercive cartel be maintained? Sure, existing companies would be in a better position to use force than new entrants, and so may be able to shut them out.

    You’re missing the point about the unequal relationship between customers and protection rackets, er sorry, I mean agencies. If you have the firepower, you don’t really need to tout or compete for business. I mean, it’s not as if there aren’t hundreds of real world examples of this type of action. Just look at Sicily, Somalia, parts of Belfast The cartel works the other way. You need a cartel for your “stable” hypothesis to work. You beg the question you ask of me. Sure, if there were thousands of firms competing and they were all tiny the problem might not be so great, but so what?The question is whether some goldilocks equilibrium like this, to the benefit of the consumer, will obtain under the market and my point is that the difference between proximate interests and ultimate interests in this situation resembles the tragedy of the commons. These work in the opposite direction to the market for ordinary consumer products. If the protection agencies could only see the long term benefit of maintaining a minimum number and maximum size, they could all agree to do this. But this would be a cartel, albeit for the benefit of the consumer, and would be no more stable than any other cartel. The rewards for defection greatly exceed the incentive to maintain the cartel as the payoff would be long term.

    But what would stop existing companies and members of the cartl from under cutting each other with price gouging and chiselling?If the price of protection rises as a result of this cartel, then wouldn’t members have an incentive to “offer their customer’s deals”? The cartel could impose quotas, but members would have a constant incentive to try to excede their quotas.

    Sure, if they were selling widgets but these would be fully fledged armies with, ex-hypothesi, powers of investigation and advanced surveillance equipment, in your home. Do you seriously maintain that “exit” from the protection agency is the same as driving past Walmart and turning into Target? What do you do when they blackmail you on the basis of that surveillance footage, designed to catch Joe Block but presumably running 24/7? Or when the agency sends a gang of heavies to your house seeking an explanation of why their monthly payment has been stopped. Why bother “cutting a deal” when a finger or two would suffice?

    True, but how is government a solution to this problem? Once we have an institution able to intervene in the economy for the benefit of special interests, we get a situation in which special interests will lobby for favours from that institution.

    Ah, the old “my theory predicts..” fallacy. Look, I hate to break it to you but we’ve already got a government. Your theory might predict that a democratic government should be worse than rule by mafia or feudal warlords but guess what? Bad as it is, (and it is bad) it ain’t. It would be different if we were sitting here in libertopian anarchocapitalistan shooting the breeze, sipping frappachinos and I was trying to persuade you that what we really need is a government. Then it might make some sort of sense to expound on your theory of why a government wouldn’t solve the problem. But we are not in anarchocapitalistan so we can know what a government is like from first hand knowledge instead of theory and we don’t actually have the problem of competing protection agencies to worry about.

  • Aleph’s other customers go on notice: these guys are going to coerce you and are willing to kill you to do it. People are going to make arrangements to defend themselves, including switching providers

    So you think that the rational response to a death threat by protection agencies is to rock the boat? Ever heard of “omerta”?, been following recent events in Belfast? A protection agency who kills a recaltricant customer sends a message to it’s existing customers – “we mean business”. Sure, you might get a few foolhardy individuals who take a stand against them but most people would keep their heads down. There is, an “acceptable level of violence” in lawless areas which tends to exceed what would be acceptable in areas under ordinary rule of law.

    Further, why would the alternative provider take on the new business if it meant going to war with the previous agency? It’s hard to see how one extra customer is worth it, particularly so if he is an awkward customer. Ordinarily the customer is always right, in the business of protection, it’s the guy with the gun(s) who is always right.

  • When one is busy and somebody else has sketched out what he views to be a satisfactory answer to the problem in an easily linked to location, I’d consider it foolish to waste time typing out the same argument again.

    That’s fair enough up to a point but the suspicion lingers that this device is often used by those who are unable to paraphrase the argument or, once convinced of it, have simply internalised the conclusion and forgotten the train of logic leading up to that conclusion. Simply linking to the argument without paraphrasing makes it more likely that hidden assumptions or non-sequiturs they may have glossed over on first reading are missed.

  • I don’t know about you guys but I would never do business with a protection agency that wasn’t bonded. So you put up a $500,000 bond to honor your contracts and no coercion on a customer whose lifetime income stream is worth, lets say $200,000. You fail to enforce the contract? You lose your bond. The first documented case of coercion? You lose your bond. The bonding company’s holding tens of millions of $$ in bonds so your protection agency’s bond is not worth ruining the bonding agency’s reputation. This keeps the bonding agency honest. If the TV recovery becomes too expensive, the cheap solution for the protection agency is to actually buy you a new TV with an apology for not being able to recover it, and not to risk your bond, sign NDAs all around to minimize the reputational damage. If such losses become too common the agency will send a message by not paying off but rather by going to “war” and killing or otherwise punishing criminals.

    Frankly, I wouldn’t want to be signed with a protection agency that is sheltering criminals and if such agencies exist would anonymously contribute to the fund for their elimination. You can bet such a fund would exist. The existence of a criminal protection agency would lower my property value, raise my insurance, and generally motivate me to get rid of the problem.

    In short (I know, too late) the idea of short term gains of ripping people off has long ago been solved via the use of bonding agencies and protecting criminals will absolutely be on nobody’s list of things to do because you’re likely to end up with a price on your head, anonymously donated. Who the heck needs that trouble?

  • I forgot to mention that I don’t think that the anarchocapitalists have solved the problems related to free markets in protection with no state but I think that this particular set of problems is not the killer. Rather it’s how do get from here to there in some reasonable way without some intervening nuclear war or other society destroying cataclysm.

  • podraza

    Catallarchs,

    Is Frank commiting the turtles fallacy here? Doesn’t the state also have a proximate interest in “ripping everybody off?”

    I wish some of the anarchy bashers here would redirect their efforts towards suggesting an alternative way to constrain the power of the state, if they have one.

  • podraza

    If, for the sake of argument, Frank has succesfully refuted anarcho-capitalism then what’s next?

    We have a monopoly state. How do we constrain its powers to those thought by libertarians to be proper, defense of life, liberty, property?

    The American constitutional system has thus far proven to fail in this regard. How might we improve on it? How can we do so while avoiding all of the problems we encounter when discussing anarchy?

  • Euan Gray

    a great number of small firms (Friedman says if there were more than 10,000 in the US he’d be happy)

    So how do you ensure that you actually get this number? What makes you think the economy of scale is necessarily small enough in this case to prevent cartel? What is to stop security companies intimidating their potential rivals by raising the bar to market entry (just as mafiosi do in the real world)? What evidence do you have that security companies would not expand (even if it costs them money in the short term) in pursuit of long term goals such as market dominance?

    Once we have an institution able to intervene in the economy for the benefit of special interests, we get a situation in which special interests will lobby for favours from that institution

    Why do you think this is impossible in an anarcho-capitalist society?

    the idea of short term gains of ripping people off has long ago been solved via the use of bonding agencies and protecting criminals will absolutely be on nobody’s list of things to do because you’re likely to end up with a price on your head, anonymously donated. Who the heck needs that trouble?

    Unfortunately, this completely ignores the reality of what happens when you do have unaccountable agencies (IRA, mafia, local warlords, etc) providing “protection” in the real world.

    EG

  • So you put up a $500,000 bond to honor your contracts and no coercion on a customer whose lifetime income stream is worth, lets say $200,000. You fail to enforce the contract? You lose your bond. The first documented case of coercion? You lose your bond.

    Who is committing the turtles fallacy here? Who enforces the contract – I assume you’re not suggesting that the protection guys actually lodge a half a mil for the privilege of getting a couple of hundred grand over 30 years or so – between the bonding agency and the protection agency? a super-protection agency, or perhaps a super-bonding agency?

    What everyone seems to forget about the attractiveness of arbitration for settling disputes in the real world is that there is always the possibility of referring the dispute to the courts in the real world. Arbitration works best with soluble disputes and willing participants. But some disputes aren’t easily soluble, often at least one of the participants isn’t willing and arbitration does break down. How do such disputes get solved in anarchocapitalistan? Refer it up to super-arbitration? How do you stop the infinite regress without some sort of last resort?

  • Euan Gray

    How do you stop the infinite regress without some sort of last resort?

    And how is this different from a state?

    EG

  • Andrew Duffin

    “If you possess the means to coerce people to give you their money – arms and a gang of heavies – you have no particular reason to respect property rights. From your point of view, everything might as well be under common ownership.”

    An almost exact description of the philosophy of Mr. Gordon Brown.

  • Euan Gray

    An almost exact description of the philosophy of Mr. Gordon Brown

    Perhaps so, but this doesn’t explain why the same thing wouldn’t happen under anarcho-capitalism.

    EG

  • “Ex-hypothesi, a free market protection agency possesses the means of protection which happen to be very useful as means of coercion.”

    So what? If your neighbors aren’t home and you’ve got a crowbar, then you “possess the means” to break into his house and take his property, but nothing about that necessarily means that you’ll actually do it.

  • That’s fair enough up to a point but the suspicion lingers that this device is often used by those who are unable to paraphrase the argument or, once convinced of it, have simply internalised the conclusion and forgotten the train of logic leading up to that conclusion. Simply linking to the argument without paraphrasing makes it more likely that hidden assumptions or non-sequiturs they may have glossed over on first reading are missed.

    And simply dismissing a citation as a tacit admission of defeat makes it more likely that someone is unable to address an argument on its merits. Not your behavior in this case, but–by your own admission–what you generally do.

  • Sure, there’s only so much time in the day and if someone is too lazy to paraphrase their argument and instead issues a reading assignment, I’m inclined to dismiss it more often than not. I run the risk of missing out on the odd rare startling insight, but that’s a risk I’m prepared to take given the sheer volume of wishful-thinking-masquerading-as-argument out there. I took it upon myself to read Freidman’s attempt to explain why protection agencies won’t evolve into mafias and, as you can probably tell from this post, I was not persuaded.

  • So what? If your neighbors aren’t home and you’ve got a crowbar, then you “possess the means” to break into his house and take his property, but nothing about that necessarily means that you’ll actually do it.

    Lovely, so you’re betting your life on that old socialist standby: “people tend to be nice”. I hate to break it to you but that bet is a surefire loser. Your confidence that I won’t break into the house next door is unwarranted. As it happens, I won’t but there are reasons why I won’t:

    1) My vanity is flattered by the notion that I have such a highly developed sense of right and wrong that I just wouldn’t do it, no matter what. But we can safely rule out the assumption that people will invariably choose the moral course of action. Better to assume that people generally act in their own interests and for a lot of the time that dovetails with the moral course of action because…

    2) It’s not worth it for me. Given the likelihood of getting caught, arrested and sent to jail, that “cost” couldn’t justify the benefit to me of an old TV. But..

    3) If circumstances were different, the risk of imprisonment might be worth the benefit. For example, if my children were kidnapped and the ransom was precisely my neighbour’s TV.

    If you want to predict the course of action for a protection agency in the absence of ordinary rule of law, look at the incentives. Once you possess the means of coercion and there is no realistic prospect of punishment, the rational course of action is to gouge because if you won’t, the other guy will. Sure, if you and your competitors could reach a truce and agree not to gouge, it might be better for you both in the long run, but as with the tragedy of the commons you can’t get to that long run.

  • I guess the argument from history and experience probably wins out here: we have experience with protection agencies, and it hasn’t been good, even when those protection agencies were constrained by a state.

    Why would anyone think that the removal of the constraining state will change protection agencies from predators (as history has shown them to be) to something more civic?

    I don’t think you can argue that competition from other protection agencies will do much good – again, we have experience with competition (the Families in New York City) and it hasn’t helped.

    I don’t think you can argue that your contract with the agency will protect you – who will enforce the contract?

    What am I missing here, anarcho-capitalists?

  • Frank Gahon:

    What’s the problem?

    In a society in which property and allied contractual rights are respected, protection agents would operate within a known legal framework, just like everybody else.

    Of course anarcho-capitalism would not work in a society in which such rights are not respected, but so what?

    Julius

  • Sorry. “McGahon”. Apologies.

  • Euan Gray

    In a society in which property and allied contractual rights are respected, protection agents would operate within a known legal framework, just like everybody else.

    But who enforces this legal framework, from where to they derive their authority, and what ultimate sanction do they have over armed organisations that disagree?

    EG

  • Of course anarcho-capitalism would not work in a society in which such rights are not respected, but so what?

    Of course my planned business venture to provide unicorn rides would not work in a world where unicorns don’t exist, but so what?

    Unless you are just interested in anarcho-capitalism as some sort of platonic hermetically sealed thought experiment, it matters what people actually do in the real world and there is no reason to believe that people will just voluntarily choose to respect property and contractual rights within a legal framework, particularly so when that “respect” cuts against their own self-interest and there is nobody enforcing that legal framework. This is the exact “always wear a bikini” fallacy identified by Micha Ghertner at Catallarchy the other day.

  • Wild Pegasus

    So you think that the rational response to a death threat by protection agencies is to rock the boat? Ever heard of “omerta”?, been following recent events in Belfast?

    I don’t care about Belfast, and I’ve never heard of omerta. But then again, we’re talking businesses, not mafia or gangs. Mafia and gangs make a significant amount of their revenue through theft and violence. Businesses presumably do not. If these “protection agencies” do, we’re not talking anarchism any more.

    As I understand it, the discussion has been about a protection business that decides to being coercing as opposed to something akin to a mafia which coerces constantly. The latter example isn’t anarchism, although it could be an end result of anarchism.

    Having cleared my throat for two paragraphs, generally these agencies are businesses and not mafia, and so are under normal market constraints: shareholders, customers, competition, etc. In this anarchist society, anarchism is likely to be popular among shareholders and customers. A report that someone is being coerced or threatened with death is likely to anger all the people who shouldn’t be angered in a market: customers and shareholders. The public outcry and the threat of massive boycott or loss of investment can serve as a constraint on agency action, just like it often does for states.

    This, of course, isn’t an absolute. Like I said, if someone is prepared to throw away everything to harm me, they’re probably going to get it done. States don’t solve this problem. The question is how many institutional obstacles can be placed in the way of this sort of problem. Market agencies have more institutional checks than the state does, and so I would expect fewer, not more, problems of this sort.

    Further, why would the alternative provider take on the new business if it meant going to war with the previous agency? It’s hard to see how one extra customer is worth it, particularly so if he is an awkward customer.

    Considering possible public outcry, Bet is likely to gain not only me but many other customers, and perhaps investment from disgusted shareholders.

    - Josh

  • “Lovely, so you’re betting your life on that old socialist standby: ‘people tend to be nice’.”

    Sez you.

    Look: you can just turn your pretty head and walk away pretending that nobody will notice when someone points out the fallacy that you posted, but you might at least have the decency to do it without trying to put words in my editor.

    However, this has been profitable to the point of knowing that I’d better keep a sidearm handy whenever I see you coming, and I now know the root of your problem. You think everybody else’s soul is exactly as shit-filled as yours is.

    I get it.

  • I don’t care about Belfast,

    Good for you, so you have no interest in a real world experiment in non-state law enforcement?

    and I’ve never heard of omerta

    I’m tempted to direct you here but instead I offer you this for your edification. Omerta is the code of silence which permits the Sicilian mafia to, literally, get away with murder.

    Mafia and gangs make a significant amount of their revenue through theft and violence. Businesses presumably do not

    Ok, this is what’s called “begging the question”. The germane issue is what is to prevent a heavily armed protection agency from resembling a mafia?. Your answer appears to be “But, they’re not mafias, they’re businesses!”

    In this anarchist society, anarchism is likely to be popular among shareholders and customers. A report that someone is being coerced or threatened with death is likely to anger all the people who shouldn’t be angered in a market: customers and shareholders. The public outcry and the threat of massive boycott or loss of investment can serve as a constraint on agency action, just like it often does for states.

    Well that’s ok then. This is just another circular argument. “In a world where unicorns exist, unicorn rides are likely to be popular among customers” – maybe I should dust off that http://www.unicornrides.com IPO after all!

  • Frank McGahon:

    “Of course my planned business venture to provide unicorn rides would not work in a world where unicorns don’t exist, but so what?”

    Because I like to think that a world in which property and allied rights are respected is more likely than a world inhabited by unicorns.

  • EG:

    “But who enforces this legal framework”

    Same as now (Courts, arbitrators, bailiffs etc) but greater variety and choice

    “from where to they derive their authority”

    The law, as generally respected and recognised by the society in which the courts operate

    “and what ultimate sanction do they have over armed organisations that disagree?”

    The usual sanctions that apply to criminals – from polite warnings to deadly force; and perhaps some more imaginative ones that we have yet to think of

  • Jim

    Mafia and gangs make a significant amount of their revenue through theft and violence. Businesses presumably do not

    Ok, this is what’s called “begging the question”. The germane issue is what is to prevent a heavily armed protection agency from resembling a mafia?. Your answer appears to be “But, they’re not mafias, they’re businesses!”

    Point of fact here – mafias make most of their money from business dealings. Albanian and Russian gangs run most of the prostitutes in Europe – what is that if not a business. Of course they use viloence and coercion to keep the women in line, Those are normal security measures to protect their assets. Mafias run most alien smuggling and huamn trafficjing and drug trafficking. Aren’t these busineeses. What principled difference is there between a Mafia and any other kind of corporation. The triads are seamlessly integrated into the whole financial structure of the overseas Chinese community in Southeast Asia.

    Ah, of course: “Because I like to think that a world in which property and allied rights are respected is more likely than a world inhabited by unicorns.” This gives the impression that you believe that respect for laws (which apparently arise out of nothing on their own without any government to enact them) and for other people is some kind of default setting for human nature.

  • Jack Maturin

    My apologies for joining this debate, probably too late, as I’ve been away from the Internet for a while, but it would seem Frank McGahon is essentially advocating the imposition of a World State. Because it is only under a world state that a supreme coercive body could be created to maintain stable worldwide law, under Frank’s legal model.

    Let me expand the original example to explain. Let’s say I’m an Irish farmer, called Bob, in County Cork, with a five hundred head of cattle, and Joe Bock is an Argentinean meat merchant. Bob comes home one day, after watching the rugby in Dublin, and off the coast he sees one of Joe Bock’s meat freighters heading south towards South America. Bob then heads home to find a hundred cattle are missing. He calls his local protection agency, the Irish State Garda, who come round and find Joe Bock’s fingerprints all over Bob’s cattle shed — they have an arrangement with the US Department of Homeland Security to swap such print records.

    Being utterly useless, as all government agencies are, the Garda say they’ll contact Joe’s protection agency, the Argentinean government, via the embassy in Dublin, but essentially they don’t bother and Bob is down one hundred cattle. Under Frank’s model, the only way around this situation would appear to be the creation of a worldwide state, so that when Joe reaches the River Plate, he’s met by the World Police, who supply all the protection in Argentina, and who also supply all the protection in Ireland, in the new world order, under the new World State.

    Fortunately, Farmer Bob follows another strategy to get justice, which gets around the need for a World State. He instead contacts his local Irish court, who invoke the international Law Merchant. This was originally a body of anarcho-capitalist law which unfortunately became subsumed into most national state laws.

    Using the Law Merchant, Bob proves his case to the arbitration court that Joe Bock stole his hundred head of cattle — Joe Bock, still on board his ship, is invited to attend the hearing, via a satellite phone conference, at the cost of the court, an invitation he declines. The court then finds for Farmer Bob, and informs Joe Bock that he has ten days to recompense Farmer Bob at 150% of the Cork market value of the stolen cattle, the day the cattle were stolen; with a further 2% added every day he delays, up to 30 days, plus Farmer Bob’s costs in calling up the Law Merchant, otherwise they will call for a worldwide trade boycott against Joe Bock.

    After 40 days Joe Bock still hasn’t paid up. The Argentinean court system, an opposing law enforcement provider remember, stands aside from protecting Joe, and refuses to take action against anyone following the Law Merchant boycott order imposed from Ireland against Joe, until he settles his case with the Irish law enforcement provider. Nobody now trades with Joe, nobody pays any debts they owe to Joe, and nobody buys Joe’s meat; he is basically persona non grata, a trade outlaw, as far as national and international trade goes.

    After 90 days of ducking and dodging his fuel suppliers, his freighter crews, and his farm workers, who all demand what he owes them, with no cash flow Joe’s in big financial trouble. He caves in and pays the $560,000 dollars, of which the Irish court passes on $520,000 dollars to Farmer Bob. On the plus side, Joe is up $200,000 dollars from the money he made from the stolen beef cattle. But added up altogether, his thieving costs him $360,000 dollars.

    Nobody forces him to do anything. He simply decides to stop being a thief because it doesn’t pay, and he can make more money playing it straight.

    And this was achieved without the need for the single monopolistic legal system advocated by Frank McGahon, and occurred between two opposing law enforcement agencies representing their two opposing citizen members.

    Yes it was done via state courts, but you would’ve thought the court in Argentina would protect their citizen, rather than side with Farmer Bob, someone belonging to an opposing law enforcement organisation, ie. the Irish government. But if Mr McGahon wants real-world rather than utopian perfection, this is real-world.

    If you just want to get a little bit more anarcho-capitalist, rather than relying on the anarcho-capitalist legal system buried within the Law Merchant buried within most state law, just try out the arbitration services of the International Chamber of Commerce, to get a similar (and probably more rapid and cheaper) effect:

    http://www.iccwbo.org/

    The Argentinean courts, in the first statist situation, would support the opposing Irish court’s jurisdiction over Joe Bock, even with Joe back on the Pampas, as this would be less expensive, in the long run, than having a trade war with Ireland.

    This doesn’t justify the need for states, it simply makes clear the power of Friedman’s original argument that arrangements are and will be made between opposing law enforcement providers.

    And ostracism will be the main weapon, rather than force, just as the worst thing you could do to a man in Anglo-Saxon England wasn’t to send a band of men after him with spears, but simply to make him an outlaw. All the other violent scum out there soon dealt with him, knowing that his family, tribe, and tribal grouping, were going to look the other way, as they robbed the outlaw of his gold and then killed him or sold him into slavery.

    Or if he was lucky, he would starve to death in the mountains.

    (I’m more of a Bruce Benson man myself, BTW, rather than David Friedman — there’s a good review of my favourite Bensonian book, The Enterprise of Law, here: http://folk.uio.no/thomas/po/enterprise-of-law.html)

    Fortunately, the existence of such anarcho-capitalist law around the world enables the existence of international trade. Without this anarcho-capitalist law, we would be restricted to only ever trading inside national boundaries. If you want smaller examples which demonstrate the lack of a need for a monopolistic legal system, just swap round some of the people above for Joe Bock, car thief, from Spain, stealing a Porsche 911 from Farmer Bob, an upstanding citizen of Andorra, or Joe Bock, computer thief from Malaysia, stealing Farmer Bob’s laptop from Singapore — he’d be lucky to get off the island alive, as would any French thief trying to get out of Monaco. If these offenders did escape the law enforcement agencies in Singapore or Monaco, the law enforcement agencies in Malaysia or France would quickly hand them back again to avoid possible inter-state repercussions, rather than go to war over it, to protect their customer (or citizen).

    We already live in a world of competing law providers. It’s not something that might happen one day in lah-lah land. The problem is that within a given territory they operate a force-backed monopoly, thereby producing over-priced and less-effective law enforcement than a competitive legal system would produce. But law and legal redress can still occur across these territorial boundaries, just as they would in an anarcho-capitalist territory, where the boundaries would be the property lines of individuals, rather than the property lines of states.

    Obviously, it is a long road to go from the authoritarian territorial-monopoly franchised legal systems that most of us currently enjoy, under our modern mafiosi states, to the private customary law situation we non-parasites could all live with, but we are definitely heading that way. With gated estates, private surveillance car patrols, private arbitration courts for business disputes, and local watch associations all increasing, with an rapid growth in the use of burglar alarms, safes, secured windows, secured fences, private security guard police, and other defensive paraphernalia, plus a rapid decline in the effectiveness of state police forces, state courts, and state detention facilities, those anti-state libertarians who still defend the need for the state in terms of collectivist argument are going to have their work cut out over the next few years maintaining their paradoxical pro-state positions.

    Yes, the idea of the state is heavily entrenched in the large states of the western world, particularly in the minds of many minarchist libertarians, and it probably won’t be from within these states that anarcho-capitalism will emerge. It will probably instead come from tiny territories, or edge-of-the-world territories, such as Andorra, San Marino, Monaco, Singapore, Dubai, Somalia, or other weird and wonderful places such as those tax-free Indian reservations tucked between the US and Canada. It will also probably be heavily family based, and tribally based, as much of the law was in the early Roman republic, or city-based, as much of the law was in the early Greek kingdoms and republics.

    (You’ll notice the first thing any aspiring state does is to try to destroy extended family linkages and the independence of individual cities.)

    It does also seem odd to me that Minarchists defend the pro-state position, as one would expect them to believe in the right of the individual to both protect themselves and to hire whomever they want to, to extend this protection, rather than be robbed at will by the state of most of their wealth, on an annual basis, and then provided with a bunch of useless yellow-jacketed buffoons who won’t come out for burglaries, whether by Joe Bock or anybody else, and who prefer to harass the taxpayers instead with speed cameras rather than risk themselves protecting their tax victims from violent criminals. But there you go.

    It’s also not a choice, currently, between whether we live with warring mafiosi bands or state governments. Most of us already live under the control of warring mafiosi bands, it’s just that they’ve gone ‘respectable’, and they’ve been calling themselves ‘states’ for the last few hundred years. States are just mafiosi by another name, and if anyone could define the difference between a long-established highly-successful mafia gang and a modern state, I’d be glad to see it.

    If you could link in a sub-thesis on how the IRA has gone from Irish Mafia terrorist gang, to successful state-supported political party, and then back again, that would get bonus marks for style.

  • Let me unearth the one nugget of (unintentional) sense in all of this:

    We already live in a world of competing law providers. It’s not something that might happen one day in lah-lah land. The problem is that within a given territory they operate a force-backed monopoly,

    Indeed, so we don’t actually have competing law providers after all, unless you are suggesting I could opt to have my trial for GBH heard in Argentina instead of Ireland.

  • Jack Maturin

    Well, I tried to be civil, but obviously the courtesy doesn’t extend back the other way.

    Of course Frank, we don’t have competing law providers within a given territory, for non-business disputes, which is exactly why we have all the problems we have, with the production of security.

    And which is why you’re much more likely to suffer an attack of GBH on the public streets of Britain, than on the private streets of a privately secured and gated community.

    But let’s go further.

    If you had cared to check out the link to the International Chamber of Commerce, and then googled for similar organisations, you would have found many different private organisations competing for legal arbitration services, mainly in the sphere of international business, though increasingly also within the sphere of national business.

    Private courts to settle business disputes are cheaper than public courts, and reach their decisions quicker, because of the forces of competition.

    Yes, currently these courts are limited to business disputes, and mainly international disputes, because public courts are very jealous of their own national powers, which it took most states many centuries to acquire.

    But the principle is already established, with these private courts, that there can be legal competition between different arbitration courts within the same territory, especially for those national cases which they cover. And these courts work, with many thousands of satisfied customers, including the losers, who don’t have to run up such expensive defences as they’re forced to in the public system, or wait such a long time for decisions, which in itself can be crippling to a business.

    As public law and security becomes more expensive over time than it should be, and takes longer to implement than it should, because of the removal of competition, I predict that more and more business disputes are going to be satisfied in competitive private arbitration courts.

    And at some point, people will probably start using such private courts to decide upon personal matters too, particularly business people who are used to working with these private courts. I’m not going to predict when. It may already be happening on a small informal scale, with respected family members deciding on intra-family disputes, or respected religious leaders deciding on intra-church disputes, or business people settling non-business disputes informally via the arbitrators of such courts.

    However, the state will be right to guard its legal privileges closely, because the life of the state depends on its control of the legal system. Everything the state now has comes from this legal monopoly, which is why this monopoly must be removed.

    Taxation, the welfare state, the warfare state, the propping up of the Guardianista class, and all the other arms of the state draw all of their strength from this legal monopoly, because in the final analysis the state judge will always decide for the state, if only to keep himself in a job, and always decide that you owe the state money, if only to pay his wages.

    This is why it is so sad that a professed libertarian such as yourself supports the state’s ‘right’ to this legal monopoly. Because as long as you support it, you will continue to get all the other odious things that flow from it, and nothing else you do will have any real effect upon the Leviathan. Yes, you might get the occasional political party which promises to spend a measly 98% of what the opposing political party wants to spend, of your money, and raise its spending plans 1% slower, over a decade, than the other party, but that will be about the limit of it.

    What exactly do you want, Frank? A classical liberal state in the mould of Lord Acton? That is a Utopia that is just not going to happen.

    How about a liberal government bound by a constitution? Just like the one they have in the United States, you mean, that model of liberality.

    It’s a terrible dilemma, I’ll admit, for you Minarchists. You want all the same secessionist things we anarchists want, except for that big sugar daddy in the sky, the state’s right to a territorial legal monopoly. But it’s that sugar daddy which is the problem, and until you let it go, you may as well become a socialist for all the good your ideas are going to achieve.

    The other, purely practical concern, is just what is it exactly that you have to lose by giving up the state monopoly of law? Should you go out tonight and suffer an attack of GBH, what are the chances of the state actually catching and punishing the offender?

    Close to zero, I would say. Or at least as close as makes no difference, let’s say 1%.

    And how much is the state gouging you for this ‘service’? Probably about 50% of your income, if you live anywhere in the western world.

    So 50% of your income gets you a security service able to give you a protection level of about 1%.

    You may wish to defend this system, which is your choice, of course. But I’ll take my chances with competitive law. Well, I would, if the state and its supporters would let me.

  • Euan Gray

    The remedy for dealing with the international cattle thief exists and is called extradition. This works because of unforced agreements between states.

    The Law Merchant approach assumes that a simple call for a trade boycott will be universally heeded. What happens if it isn’t? How is the boycott enforced if some people decide to ignore it? Can anything be done to compel people to observe it? If so, how is it “no initiation of force” to compel an uninvolved party to refrain from trading with the cattle thief? If compulsion is permitted, how is it done and how is it any different from state compulsion?

    A world government is not necessary for the implementation of international law. This is a frequent error made by libertarians, especially of the anarcho-capitalist bent. In an anarcho-capitalist world, it is asserted, there will be law though without government. The laws will be mutually agreed or whatever. If a community doesn’t agree any more, it sets up its own law. Basically the same thing happens between states. So the thing anarcho-capitalists say is impossible is a fundamental assumption of their world model. You cannot have it both ways.

    The state judge will not always find for the state. If you pay the slightest attention to the legal world in the UK you will see that the British government is regularly judged against by government-employed judges. The same thing happens in the US. The reason this happens is because of the concept of the rule of law, which entails that states must obey the law just as their citizens/subjects must.

    Private arbitration today is not universally successful. The parties know that if they cannot agree resort will be made to a court of law. This happens quite a lot.

    Private courts (arbitrators) are cheaper largely because they do not involve extremely expensive judges (paid highly to prevent corruption) and do not require tight legal argument (needing expensively well trained legal practitioners).

    The principal reason for slow and expensive law enforcement is the legislative burden on the enforcement agencies, particularly assorted human rights laws, and bureaucratic administrative procedures necessitated by law. It has nothing to do with lack of competition – there is no certainty that private enforcement companies operating under the same legal constraints and obligations would be any faster or cheaper.

    Gated communities are a sub-optimal solution to problems of crime. I have lived and worked in places where these things exist, and the two major problems are that (a) at some point you have to venture outside, and (b) you abdicate any control or responsibility for what happens outside.

    EG

  • Jack Maturin

    The remedy for dealing with the international cattle thief exists and is called extradition. This works because of unforced agreements between states.

    Yes, that’s right, two competing suppliers of law come to an arrangement to avoid conflict. And your point was…?

    The Law Merchant approach assumes that a simple call for a trade boycott will be universally heeded…Can anything be done to compel people to observe it?

    Well, it appears to have worked for several hundred years, and people do still trade over international boundaries, despite having to then deal with two competing state legal systems in each country, and despite the risks of these two legal systems being incompatible, so something must be working right. Frank wanted real-world. A system that works in the real world despite, in your eyes, a theoretical flaw, does the trick for me.

    If so, how is it “no initiation of force” to compel an uninvolved party to refrain from trading with the cattle thief? If compulsion is permitted, how is it done and how is it any different from state compulsion?

    As far as I’m aware with the Law Merchant, no compulsion is ever used. Yet it works. It must be a kind of magic. Or perhaps it’s because if you have a bad name in business, and you’ve been cited by the Law Merchant as a bad risk to do business with, it is impossible to take part in profitable trade. Perhaps that’s got something to do with it.

    Maybe that’s why being declared an outlaw in Anglo-Saxon England did the trick so well, until the wretched thieving Normans came along.

    A world government is not necessary for the implementation of international law.

    Yes, you’re absolutely right. And a national government is not necessary for the implementation of local law.

    I was speaking from what I considered was Frank McGahon’s position that some supervisory agency was always required to sort out disputes between two agents, within a given national territory. If you extend his position, from the national situation to the international situation, this would automatically imply that two agents in different countries would also need a similar, though wider scale, supervisory agency, such as the UN perhaps, or some other fledgling world state such as the EU, or the American Empire, to ensure ‘fair play’ between the two parties.

    Whereas it is my contention, as you say yourself, that if you don’t need such an international supervisory agency for the wider scale, you also do not need a national supervisory agency for the smaller scale.

    You cannot have it both ways.

    Precisely.

    In case my earlier post was unclear, please read my lips. We do not need governments to supervise legal systems. Neither world governments nor national governments. All government is unnecessary.

    But if you support the need for national governments, to supervise law, you implicitly support the need for world government to supervise international law.

    Thank you for making my case for me.

    The state judge will not always find for the state. If you pay the slightest attention to the legal world in the UK you will see that the British government is regularly judged against by government-employed judges.

    Oh dear, they’ve really got you all ends up, haven’t they! You’ll have me believing next that British judges are not part of the British state, or that the British government is not part of the British state. Which is it EG? Who employs and pays the British judges? Is it the British state or someone else? Who collects the money to pay the judges? Is it the British state or someone else? Who do they all work for, these politicians, these judges, and these civil servants? Do they all work for the British state or for someone else?

    That they have fooled us for so long into believing that they somehow are separate entities, is to their credit as master charlatans. That we still remain so fooled, despite all the available evidence right there in front of our eyes, is to our shame.

    Private arbitration today is not universally successful. The parties know that if they cannot agree resort will be made to a court of law. This happens quite a lot.

    So, some people are untrustworthy scum, who cannot honour their own word. Tell me something I don’t already know. I’ve got contracts currently crossing about three international borders. And I only deal with people I can trust, after being burned by such scum. Not that I’m bitter, or anything.

    Private courts (arbitrators) are cheaper largely because they do not involve extremely expensive judges (paid highly to prevent corruption) and do not require tight legal argument (needing expensively well trained legal practitioners).

    Oh please EG, stop. You might split my operation stitches. If these judges are so incorruptible, why do they have to be paid so much? Surely if they were incorruptible, they would work for free, and take Wal-Mart jobs at the weekend to make ends meet. What this need for high payment tells me is that they are highly corruptible, and therefore work for the highest bidder, the state.

    Also, you can take tight legal argument and stick it in the bin along with the 10,000 new authoritarian law regulations which most parliaments in the world spew out every year. Legal systems have become so dense, so expensive, so cumbersome, so slow, and so incomprehensible to ordinary intelligent people, because they have operated under state monopolies for several hundred years, with endless laws pumped out each year by the state, to suit the state, and to suit the franchised legal profession who claw it all in via these laws, and to create unending legal hazards for the rest of us, and trials lasting years, so they can all make a mint, like in that recent collapsed fraud trial.

    I probably break about 20 to 30 state laws every day, and I’m probably unaware of breaking about 15 to 20 of these. Most of us break authoritarian statist laws every day, mostly without even being aware of it.

    I personally follow two legal codes. One is based upon what I consider ancient customary law, that I do not physically harm any other man, which I think most of us can understand, and most of us naturally follow, except the criminals among us. The other is based upon trying to avoid being fined or imprisoned or arrested by the state, so I’ll obey their stupid laws if to fail to do so would seriously impede my life.

    The principal reason for slow and expensive law enforcement is the legislative burden on the enforcement agencies, particularly assorted human rights laws, and bureaucratic administrative procedures necessitated by law.

    And who brought all this nonsense in. Yes, that’s right, the state, the very same institution you’re trying to defend, often to bump up the incomes of all those statist lawyers within the state-franchised legal system, such as Cherie Booth QC, one of the most expensive legal talents in London, and who just happens to be the wife of the man, another leftie lawyer, who brought in all these new laws in the first place, which have made her a fortune from her stake in the Matrix Chambers legal firm.

    It must all be a remarkable coincidence. And I’m a wombat.

    It has nothing to do with lack of competition – there is no certainty that private enforcement companies operating under the same legal constraints and obligations would be any faster or cheaper.

    So you don’t believe that free competition can deliver better services than state monopolies? That’s interesting EG. I can recommend a really good book on this, ‘Man, Economy, & State’, by Murray Rothbard. Or ‘Economics in One Lesson’ by Henry Hazlitt. Or any other basic primer economics book you could mention, really.

    Gated communities are a sub-optimal solution to problems of crime.

    Do you have any optimal ones on offer? Let’s discuss them.

    I have lived and worked in places where these things exist, and the two major problems are that (a) at some point you have to venture outside, and (b) you abdicate any control or responsibility for what happens outside.

    Nice while you’re in them, though, eh? Personally I don’t want any control over what happens outside of the spaces in which I live and work in. I just want to be left alone, and I want to leave other people alone. I believe this can best be done within a world free of the state, with free legal systems, and total private ownership everywhere.

    One thing I certainly do not want to do is to have the state tax other people to provide my protection. And I do not want the state to have the right to tax me any amount it considers fair, to provide protection for other people.

    This is basic problem with minarchism, even of the ultra-minimal Nozickian variety. If you believe in the state, even an ultra-minimal one, you believe in the state’s right to tax whatever amount it decides is right, and the state’s right to judge everyone and every situation, within a given territory, including those situations involving itself. I do not believe the state possesses these two rights. You do, or at least you appear to.

    It’s my contention that if you do believe in these two rights, you have to accept everything else that the state becomes, based upon these two incredibly important foundation stones. Trying to stop the state while believing in these two rights, is like being poor old Winston Smith, before he gets the bullet in the back of the neck, trying to make two plus two equal five.

    You must either love Big Brother or hate him. It’s all about believing either in the market or believing in the government. There is no middle ground.

    However, it has been interesting, although I’ll have to leave it there. A trip to Sweden and Gothenberg awaits. Oh yes, the social democratic über-land which makes even Tony Blair’s Britain look like a Nozickian paradise. But they do serve remarkably good ales. Skol!

  • two competing suppliers of law come to an arrangement to avoid conflict. And your point was…?

    The point was that neither is truly “competing” for (each other’s) customers or new business. It is not possible for “customers” or criminals to “choose” their “supplier of law” without emigrating. This means that individuals don’t have the option of ignoring whatever arrangements apply.

    that some supervisory agency was always required to sort out disputes between two agents, within a given national territory.

    Not precisely, more accurately: methods of voluntary arbitration only work if there is some final resort to which the dispute may be referred and that final resort commands some sort of widely accepted authority. Now this is true, even if no disputes are ever referred because the option to “settle once and for all” games the arbitration in a way that an infinite regression of arbitrations doesn’t.

    If you extend his position, from the national situation to the international situation,

    This the flaw in your argument, see above. The problem is precisely to do with competing legal arrangements in the one territory and the consequent option for anyone to choose the legal arrangement which suits himself best.

    Let’s say I have some land, we enter into a verbal arrangement to build 500 houses on it, as this in anarchocapitalistan we don’t have to get planning permission, but you agree to pay an architect to draw up plans for the entire development, you will build the houses and give me a cut on the sale to the approximate value of the site. Now, let’s say I decide that I don’t want to proceed with this arrangement but would rather sell outright. You obtain a ruling from court A that I must fulfill our verbal agreement, I obtain A ruling from court C that the verbal arrangement isn’t worth a damn and one prospective purchaser who has already paid a deposit on a house obtains a ruling from court D obliging you to fulfil your contract to him. If we can choose to ignore the rulings of any given court, the dispute remains unresolved.

  • Euan Gray

    people do still trade over international boundaries, despite having to then deal with two competing state legal systems in each country, and despite the risks of these two legal systems being incompatible, so something must be working right

    They aren’t competing, as Frank said. People trading over international boundaries don’t get to choose which set of law they will observe – they actually have to observe BOTH sets, or at least the provisions of each that apply.

    This has nothing to do with Law Merchant (or lex mercatoria – “Law Merchant” in antique English, in the same way you might say “law maritime”). LM is irrelevant today, since it is incorporated in the statute (and, where appropriate, common) law of nations. Furthermore, it is unwise to assume that a feudal concept valid in small non-interlinked communities and adopted principally because there was no reasonable alternative will necessarily work in a connected global context. This is another common failing in libertarian argument – taking a specific and making it general.

    Or perhaps it’s because if you have a bad name in business, and you’ve been cited by the Law Merchant as a bad risk to do business with, it is impossible to take part in profitable trade

    This works where pretty much everyone knows everyone else. Not necessarily in a global economy, however. Further, it is by no means impossible to make profitable trade if you are a bad risk – there is always someone prepared to buy and sell with the worst of traders.

    We do not need governments to supervise legal systems

    You DO need someone to enforce them, though. You have to be able to haul somebody in and detain him against his will, and (provided you have observed things like due process of law, habeas corpus, etc) you need to be able to do this without the person getting off because he doesn’t subscribe to your system of law.

    Who employs and pays the British judges?

    British judges are state employees. They are paid by the state. The state collects the money to pay them. Although British judges are employed by the state, they nevertheless judge against the state when the state breaches the law – their first duty is NOT to the state, but to the law.

    If these judges are so incorruptible, why do they have to be paid so much?

    Nobody said they were incorruptible – every man has his price, and it is not necessarily monetary. They are paid so much to make them less susceptible to corruption. Obviously.

    So you don’t believe that free competition can deliver better services than state monopolies?

    Yes, of course it can – but not in every case. In any case, we are talking about law, not markets vs states in general.

    Do you have any optimal ones on offer? Let’s discuss them

    The most effective methods for reducing crime are, as they have always been:

    effective, efficient and non-corrupt policing;

    rapid and equitable administration of justice;

    assurance of the rule of law;

    meaningfully deterrent punishment.

    Nice while you’re in them, though, eh?

    Not really. I don’t like the ever-present insecurity and mistrust they engender. Neither, in my experience, do most people who live in them.

    The basic problem with anarcho-libertarianism is that we simply don’t live in a simple world with a small agrarian population. A-C might work in those cases, although I doubt it would be pleasant. It certainly won’t work in highly interconnected and urbanised societies.

    EG