I've got to tell my favorite U.K. history/highwayman story.

Walking the South Downs Way, I descended from where the route follows the Seven Sisters to a small town where I took a break to look at the church. Like many English churches, it had a long list of the vicars on the wall going back more or less forever.

Vicars tend to be long-lived, so I was somewhat surprised to see one on the list who had served only one year. Sad, I thought. The poor man must have been struck down in his prime. Plague perhaps.

Then I spent 50P on a short history of the church and discovered the vicar in question had been executed for being a highwayman in his spare time.

Posted by Theodopoulos Pherecydes at April 16, 2004 11:30 PM

This, of course, will no doubt attract heaps of criticism, but surely a potential debate on the relative merits of taxation gathering systems needs to be livened up?

A functioning state is necessary, however unappealing the concept may be here. Go visit Nigeria if you want to see what really happens when you get the justice and security you pay for, where rules and regulations are ignored at will. That's anarchy in practice, and it's not pleasant. In fact, it's bloody horrible. All libertarians should spend a year working there. I spent two and a half, and I have enough cynicism for the whole of Western Europe.

I've said it before here, but pure libertarianism is as sensible and practical as Communism - both ideas make fundamentally mistaken assumptions about the nature of human beings. One assumes that they are basically decent and well intentioned, the other that they have essentially identical needs and desires. In reality, people are (en masse) selfish, venal, lazy, greedy and stupid - any political theory which fails to take this into account is itself doomed to failure.

Now, this doesn't mean you can't have a liberal country, but it does mean you need a state of some sort to enforce regulation where it is required (and ideally only where it is necessary). This state has to be funded. Other than some form of levy on the people, it's hard to see how this can be achieved.

The state needs to do certain things that can only realistically be done at that level. Defence, enforcement of the rule of law and the maintenance of public order are the three critical things, because if you don't have these then you are wasting your time trying to do anything else. Assuming you can rely on private organisations to provide these services is, in my view, crass naivete. What will inevitably happen is that corruption will creep in because some people will not e.g. want to go to jail, serve in the military or get a bad record and other people will e.g. oblige them in return for a certain consideration. See above re: humanity, qualities of.

Even if you could use private organisations, they still have to be paid. Where are they going to get their income? For the type of public goods under discussion here, we are essentially talking about organisations with a monopoly of force (the state) or a group of organisations forming an armed oligopoly or, perhaps, a group of armed organisations operating within an armed society. People don't like to pay tax, but they generally realise they need to do it or suffer the consequences - at least here, this isn't much more than a fine or a light jail term. In the more extreme libertarian scenarios, the consequences may involve loss of body parts.

An anarcho-capitalist society is essentially one dominated by the modern equivalent of robber barons. The group with the most money and armed force will become dominant and in time will become a de facto state, and we are back where we started but having passed through a lot of pain and misery in the process. FFS, where do you think the state came from, anyway?

The only rational and workable solution is surely to recognise that the mass of the people are flawed and that the state, being made up of humans, is also flawed. Therefore, some moderate degree of regulation (and hence taxation) is necessary, but this should be kept to a minimum.

About 40-something% of GDP seems a norm in the west for the share of the economy controlled by the state. I think this is excessive, but it can't be reduced to zero. I doubt if it can realistically be reduced below about 20%, and even that comes with the effective abolition of welfare (some form of which is probably necessary, but not the bloated provision we have now).

once a year it reminds the citizens of Jefferson's Republic of just how far they have gone from the modest government ambitions of the Founding Fathers

And 70 years of Communism reminds the Russian people how far they went from the fine ideals of Marx, Engels, et al. Is anarchy necessary as well for people to realise that Utopian socio-economic schemes are never worth the bytes they are stored in?

Less Utopian idealism, more pragmatism, and let's be realistic about the way people are. Whether they call themselves HMG or SecuriCorp Inc., we're stuck with the highway robbers, but we can at least try to minimise their depradations.

End of bilious rant :)

Posted by Euan Gray at April 17, 2004 12:35 AM

The easier we Brits can pay our taxes, the less angry we might be about the taxes in the first place.

... and the less we will notice just how much is being taken. Better that taxpayers notice every penny.

Posted by Peter Cuthbertson at April 17, 2004 01:55 AM

The easier we Brits can pay our taxes, the less angry we might be about the taxes in the first place.

... and the less we will realise just how much is being taken. Better that taxpayers notice every penny.

Posted by Peter Cuthbertson at April 17, 2004 01:56 AM

Euan Gray said:

Less Utopian idealism, more pragmatism, and let's be realistic about the way people are. Whether they call themselves HMG or SecuriCorp Inc., we're stuck with the highway robbers, but we can at least try to minimise their depradations.

Thomas Jefferson said (in his first inagural address, 1801):

"Sometimes it is said that man cannot be trusted with the government of himself. Can he, then, be trusted with the government of others? Or have we found angels in the form of kings to govern him? Let history answer this question."

If people are bad, then why should they be given positions of power over other people? If people are good, then what do they need a government for?

Posted by A. Natmani at April 17, 2004 03:44 AM

Euan, your Nigerian example is a bit of a red herring. Let's be serious here. You're talking about a country where government corruption has been rampant, there have been many many long term episodes of brutal acts by the military, and a total disregard for human dignity and liberty.

It's not surprising that coming from that kind of environment, Nigeria has ended up the way it has. In fact, this is an argument for libertarianism if you're going to include mention of Nigeria, and honestly look at the place and include discussion of it's history. Military's raping and pillaging is not part of the libertarian philosophy. This is exactly what happens when power is centralized - and corruption exists.

That has nothing to do with what libertarians believe, and to use Nigeria as an example is simply dishonest.

Posted by Ian Scott at April 17, 2004 03:55 AM

A Natmani - People aren't good, so they need government. Unfortunately, we only have people and not angels, so there is no option but to give some people power over others. The point is to limit this power, not to think it can be eliminated.

Ian - I'm not talking about Nigerian government, which is corrupt on a mythic scale, but rather about everyday Nigerian society and what happens when there are effectively no rules. In the absence of rules, the strong govern the weak and frequently do so arbitrarily and capriciously. Sadly, that's human nature. Good people tend not to want to dominate others, and those who have the inclination to govern frequently have the inclination to abuse their power. Again, the point is to mistrust and limit government, but not to pretend it can be removed altogether.

Given that certain types of people will always seek advantage over the rest, and given that where there is no state to regulate this tendency, they will at times use unpleasant methods to get this advantage, how do you stop this happening? If we imagine our libertarian state as depending on private organisations for order and justice, who is responsible for limiting the activities of these organisations?

You will have a government. It will either be a de jure state or a de facto corporate government, but there will be a government. So, do you permit a state, limit it through a strict constitution and control it through a qualified democracy, or do you trust corporations to behave themselves if they are responsible for their own regulation, or do you depend on the armed people to control the armed corporations?

Case 1, you will have some abuses but a non-violent means of dealing with the worst of them. Case 2, you will inevitably and quickly get corruption and abuse of power. Case 3, you will have a violent society which wastes its potential on internal struggle.

The history of Nigeria. Hmm, not an edifying tale. For most of its post-independence period it has been under more or less kleptocratic military administration, and the civil governments haven't been much better (in some cases, worse). Interestingly enough, the reason given for the first military coup was the ending of official corruption - in most societies, the military is the last part to degrade. It should be said, though, that the current administration, though not perfect by any means, is one of the best they've ever had, perhaps not unrelated to the fact that it is headed by a former military head of state who was also the first African dictator to voluntarily cede power. Like most African nations, Nigeria flirted with Communism, but unlike many managed to avoid disaster. The basic problem with Nigeria, as with many third world countries, is that the government's writ does not run very far, but is too strong where it does control things. There is much petty regulation in Nigeria, but this can almost always be overcome by the judicious application of dash (i.e. a bribe). If you have money, you only need to follow the laws you agree with and can generally ignore the rest.

I suppose one of the problems with unqualified democracy is that the people will happily tolerate incompetence and abuse as long as they personally profit or think they profit - this is why it is electorally impossible to abolish welfare. With corporations, then as long as the shareholders are doing ok and in the absence of a regulatory framework they will generally permit the board to carry on doing whatever they are doing. Corporations are no better than states in providing government type services. In fact, given that they exist to make a profit, they can be (but aren't necessarily) worse.

One of the reasons for the existence of the modern state is to limit and regulate the powers of the agencies which provide these services. Instead of powerful and unregulated private companies and guilds, you have a government department. Do you trust corporations to regulate themselves in the wider interests of the generality of the people in the absence of any legal compulsion to do so? If they don't do it, who is going to make them do it? A privately run court system where you will inevitably be able to buy the justice you want?

The end result of an anarchic system is not a sea of independent human republics cooperating with each other in a free market - it is chaos, corruption, greed and violence. Similarly, the end result of a Communistic system is not a workers' paradise but a dictatorship required to force the sclerotic economy to just about function. Both libertarianism and Communism are wonderful in theory, but deeply flawed and unworkable in practice.

EG

Posted by Euan Gray at April 17, 2004 07:14 AM

Euan - You say that some form of welfare is probably necessary, although not the bloated provision we have now. Singapore has absolutely no welfare. None. Not a penny. If you lose your job, you go out and find another one, even if it's temporarily being an office cleaner while you look for another position on your previous level. Or your family takes you in and feeds you. End of story. The government figures you can take care of yourself, and if you can't, then your family will have to take care of you. Not taxpayers who don't even know you.

Singapore is the polar opposite of Nigeria. Absolutely everthing works, all the time. There is no corruption.

Welfare is a slippery slope and should be abolished. As should the NHS. People should not be looking for the state to assist them in the business of going about their lives.

Posted by Verity at April 17, 2004 09:39 AM

Verity - it would appear that Singapore is not a notably corrupt nation, and according to Transparency International it ranked in 2002 5 places above the UK, 11 above the US and 20 above France. Of course there is corruption there, but from what I gather it is more or less confined to fiscally beneficial nepotistic arrangements within the ruling elite and so generally does not directly impact the bulk of the people.

On the other hand, Singapore has a very strong state which is not shy about interfering in people's lives when and where it feels this is needed. Efficient it may be, but libertarian it most certainly is not.

A limited degree of public welfare is necessary, although whether this should be state provided, charitable, or a mix of the two I'm not entirely sure. I would think that in any transition from the current UK system to a more efficient limited government, state compulsion would be necessary to counter the inherent selfishness of the people and their degree of acclimitisation to a "free" system.

As for the NHS, I am far from convinced that it should be abolished, although it is in dire need of radical reform. On my recent second trip to Texas (yes, I'm back and I came back via a trip to Paris too), Canadians, Britons and Americans moaned about the US system, complaining that it was slow, ineffective, frequently incompetent and expensive. Much the same can be said of the British or Canadian state systems, of course. Two days and just under $1,000 to treat a toddler's stomach bug. One man effectively made much worse by incorrect antibiotic administration. Sure, these things can and do happen anywhere, but I'm not convinced that in practical terms private organisations are any better than the state at providing this type of service.

The state can, and probably has to, subsidise health care for those unable to afford it, those with chronic conditions, etc. Ths doesn't mean it needs to own and manage hospitals, but some form of compulsion is necessary in order to force an equitable degree of care for the worst off. The theoretical advantage of the state is that it does not seek profit, although this advantage is admittedly entirely theoretical and never borne out in practice. The theoretical advantage of the corporation is that it is more efficient since it is subject to commercial pressure to reduce costs.

For the NHS, I think the solution is to have private companies owning and running the hospitals, surgeries, etc., and the state only regulating the insurance side of things. This in itself is a problem whichever way you cut it:

(a) the state can compel people to take out insurance, in which case (as with compulsory motor insurance) the insurer knows he has a captive market and tends to load his premiums;

(b) the state can make paid insurance voluntary, but insufficient people will pay and so the burden of state subsidy remains high;

(c) the state can subsidise premiums for the less well off, in which case there is a temptation to premium loading again because the government will cover the extra;

(d) the state can compel insurers to provide cover for everyone, in which case people will moan because the healthier will pay a lot more for a service they rarely use. People aren't as constantly charitable as many here seem to assume they are;

(e) people can be left to fend for themselves, and families expected to look after their own. This may work in Singapore where the culture of the people is naturally more collective and subservient, but in the more individualist west it's got a plastic bag's chance in Hell of working. Why do you think old people get shunted off into care homes? Because families don't want to have to look after them, they want lives of their own. This is the price of individualism.

(f) charity can be expected to provide. Fine, but does it provide sufficiently for the cost of very expensive long term treatment of what may be terminal conditions? Unlikely.

Welfare and health care subsidies have to be paid, one way or anther and there is no escape from this. Either you pay through taxation, insurance, or restrictions on your flexibility as an individual human, but you have to pay. Here in the UK, it would seem the people are more prepared to pay through taxation than any other way.

Posted by Euan Gray at April 17, 2004 11:59 AM

Firstly can I just mention that the comments on this thread are more intelligent and of a better calibre than the average. (Well until now..)

Euan & Verity mentioned the enigma of Singapore, a strong authoritarian state, illiberal but on most measures successful. I think it shows that economic freedom is the prime imperative in a society's success. Pinochet's Chile was a better place to live than Castro's Cuba is even today. But even Singapore realises that in the networked information age it needs to liberalise. (Incidentally I wonder if perhaps that's part of the reason why they are relaxing the law on chewing gum, the law has a totemic illiberal aspect to it).

Asian cultures tend to be more tolerant of benevolent dictators or pseudo-democracy (as in Singapore, Japan and in a minimal sense Hong Kong) and the Chinese work ethic makes Calvinists look like slackers.

As to Anarcho-Capitalism: it probably could work at the level of a city, like an ancient Greek city state. At the level of a nation state its impractical if not impossible. Nevertheless Anarcho-Capitalism as an ideology is like a diamond cutter to woolly ideologically half baked thinking. As a theoretical tool or starting point it works well. Nozick seemed to me to use it as an ideological benchmark. Maybe Anarchism, Communism, Kibbutzim and Buddhism might work in a city sized unit where culturally like minded people come together. Having said all that I don't see how Anarcho-Capitalism could come about from the initial conditions in which we find ourselves. Therefore after all is said and done whilst temperamentally I am an Anarcho-Capitalist, pragmatically I'm a Libertarian realist, however it still doesn't stop me advocating Anarcho-Capitalism after I've had a few drinks...

Posted by paul d s at April 17, 2004 02:40 PM

Euan, unlike Marx and Engels, the American Founding Fathers laid out in very great detail (read the Federalist Papers by Madison et al), how a society of limited government and under the rule of law would function. These men were hard-headed realists who had seen how government could, when freed of certain constraints, morph into tyranny. To compare the classical liberals to Marxists in this respect just does not make sense.

I am a bit of an agnostic as to whether a state could function without some form of coercive funding. However, Euan, I do not share your fairly contemptuous view of most of our fellow human beings.

Posted by Johnathan Pearce at April 17, 2004 04:13 PM

the American Founding Fathers laid out in very great detail (read the Federalist Papers by Madison et al), how a society of limited government and under the rule of law would function

Rather, how they thought it would function.

Unfortunately, like all idealistic solutions, it did not long survive the passing of the generations that brought it into existence. I wouldn't say they were misguided or plain wrong, but I think optimistic is probably the best word.

To compare the classical liberals to Marxists in this respect just does not make sense

That would be true enough, to an extent, if that's what I was doing. However, it wasn't so it isn't.

It was suggested that the annual taxation pain should remind the American people how far astray the US has gone from the initial intent of the Founding Fathers. My point was that (a) the optimism and idealism of the FF proved misplaced, as the cited suggestion clearly implies, (b) the theory and idealism of Communism proved misplaced as they foundered on the rocks of practical reality with horrendous results, (c) the same fate awaits libertarianism if any given country is unfortunate enough to attempt to translate that particular Utopian theory into practice and finally (d) it would jolly nice if people would learn to be a little less susceptible to idealism and a little more practical in developing socio-politico-economic theory.

agnostic as to whether a state could function without some form of coercive funding

Which was the last one that got by on voluntary contributions from a grateful populace?

I do not share your fairly contemptuous view of most of our fellow human beings

You may call it contemptuous. I prefer realistic. Whatever label is used depends on your personal point of view, but let's just say I don't get disappointed or surprised at the antics of our fellows too often.

If people were basically decent and noble, were not as I assume, would we have grasping states? Would we have out-of-control welfare systems? Would we have gangs of indolent malcontents roaming our inner cities? Would we have penally redistributive taxation systems? Self-interested politicians and self-serving lawyers? Scroungers happy to claim welfare for 50 years and never do a day's work?

Contemptuous or realistic?

EG

Posted by Euan Gray at April 17, 2004 06:13 PM

Euan

[i]Given that certain types of people will always seek advantage over the rest, and given that where there is no state to regulate this tendency, they will at times use unpleasant methods to get this advantage, how do you stop this happening?[/i]

Just last week we had an example of a London neighbourhood hiring private security to patrol their streets. There is already a well developed, private industry for protecting person and property. As the state reveals itself to be more and more inefficient at supplying this, along with all other resources, and yet a division of labour is still required for protection, hiring private security firms, private detectives, and insuring against types of aggression will steadily become more common place.

[i]If we imagine our libertarian state as depending on private organisations for order and justice, who is responsible for limiting the activities of these organisations?[/i]

The same people or organisations that are responsible for limiting the actions of individuals to what is just: I can simply hire protection.

But suppose we reverse the question, it we are to have a minimal, limited government, what is to ensure the rule of law and constrain the government? As Norman Barry pointed out one time, the very idea of limited government assumes that the law and government are two distinct things, since, in order for the government to be constrained by legal limits, the law must be above government. Hence government cannot be the sole source of law.

Neither can government be its sole guardian. If it is suspected that a government has exceded its legal limts, then what? Surely a trial must occur, but who hires the judges, who supplies the courts? With government, or anybody else having a monopoly over such things, along with a monopoly on deciding what is in accordance with the law and what is not, we get the situation in which one party to a dispute judges in its own cases, and writes the rules for itself.

And what of enforcement of the law? If only the government is to provide law enforcement, then who will enforce the law against the government?

You see, the very notion of limited government implies independent rules, and independent agencies, distinct and seperate from the government, able to enforce them. But when we get this, we cease to have any sovereign authority, any agency with a sole right to determine, apply, and enforce the law. We cease to have a monopoly on legitimate force, and end up with market anarchy.

[/i]You will have a government. It will either be a de jure state or a de facto corporate government, but there will be a government. So, do you permit a state, limit it through a strict constitution and control it through a qualified democracy, or do you trust corporations to behave themselves if they are responsible for their own regulation, or do you depend on the armed people to control the armed corporations?

Case 1, you will have some abuses but a non-violent means of dealing with the worst of them. Case 2, you will inevitably and quickly get corruption and abuse of power. Case 3, you will have a violent society which wastes its potential on internal struggle.[/i]

Many would say that corruption and abuse of power are the inevitable consequence of having a government, not of having no government. Moreover, in case three, you point out that violence is costly. However, if that is true, and if most of the costs are internalised, then surely that would create an incentive to resolve conflicts peacefully? Perhaps through private courts hired by arbitrators?

Posted by Richard Garner at April 17, 2004 06:46 PM

Euan:

If we imagine our libertarian state as depending on private organisations for order and justice, who is responsible for limiting the activities of these organisations?

Have you read The Machinery of Freedom, in particular chapter 29, which describes how such organisations might work and chapter 30 on the stability problem? If so, what's your answer to it? It answers your question above.

Paul:

As to Anarcho-Capitalism: it probably could work at the level of a city, like an ancient Greek city state. At the level of a nation state its impractical if not impossible.

Can you explain? I'm having trouble understanding why.

Suppose we implemented some constitutional reform so that power was completely devolved to the level of the city and the central goverment was abolished. The nation would now be composed of a collection of independent city states, like ancient Greece.

Suppose further, that each of the city states reforms its institutions so that it becomes an anarcho-capitalist society. Now you say that anarcho-capitalism could work at the level of the city, so it works for each of those cities. But if it works for each of the cities, then isn't it also working for the nation as a whole.

So, isn't it likely that if anarcho-capitalism can work at the level of a city, then it can also work at the level of a nation, but if it fails at the level of a nation, then it will fail at the level of a city?

Posted by Andy Wood at April 17, 2004 06:58 PM

Commenting from Singapore(though I'm supposed to be studying!). To say that the government does not provide any welfare at all is a bit of an extreme. It does provide a very basic welfare for the really poor. Enough for a small rented flat and 3 meals a day, but not much more than that. The government recognises very well the incentives for people to work!
Click here(Link)

Back in my time working in the detention barracks, a high proportion of AWOL folks did so because they had to earn some odd jobs to support their families. Indeed, I heard from a few of my NCO and officer friends from other units that many of these stories were true. Some families are really too poor. There's a demographic trend as well, though I'll only mention in passing that most of these are large muslim families with more children than they can afford.

I'm beginning to suspect the only reason we've been able to stay relatively liberal economically is EXACTLY because of the more authoritarian political and social systems in place. It is no doubt very distressing to consider the probability that economic liberty is opposed to political and perhaps social liberty.

And even then, the government budget/expenditure is still about 15-20% of the GDP, much of it going to education and defense. Call us paranoid, but like I've said before, we aren't going to hand our security over to commercial mercs and two platoons of volunteer infantry!

Oh, and chewing gum? The misconception is that it's banned. It's not. Just that the SALE of it is banned. Quite a difference, and one reason why people returning to Singapore from overseas tend to have one or two packs of chewing gum for personal enjoyment! :D

The Wobbly Guy

Posted by The Wobbly Guy at April 17, 2004 07:10 PM

Many would say that corruption and abuse of power are the inevitable consequence of having a government, not of having no government. Moreover, in case three, you point out that violence is costly. However, if that is true, and if most of the costs are internalised, then surely that would create an incentive to resolve conflicts peacefully? Perhaps through private courts hired by arbitrators?

Uhm, you're assuming people are rational all the time. And then you just need one SOB to get lucky, and then we're back under the iron paw of Genghis Khan/Alezander/Hitler/whatever.

Posted by The Wobbly Guy at April 17, 2004 07:19 PM

As a US citizen now residing in the UK, I have consistently noticed how much more pleasant the Inland Revenue employees are, as compared to their US counterparts.

Next time I'm on the phone with one of them, I'll be sure to snarl and spit: "Stop being so pleasant - I know all about your insidious knavery!"

Thanks, Samizdata!

Posted by Scott Burgess at April 17, 2004 09:15 PM

Uhm, you're assuming people are rational all the time. And then you just need one SOB to get lucky, and then we're back under the iron paw of Genghis Khan/Alezander/Hitler/whatever.

Funny that the SOB's were all examples of just how bad governments can be. However, are you suggesting that since people are rational, we ought to grant some of these occasionally irrational people the sole right to decide what the law is, how it applies in certain case, and to control its enforcement? Is it really the best option to grant these sometimes irrational people this kind of monopoly?

Posted by Richard Garner at April 17, 2004 11:59 PM

Richard - The point is not that private corporations cannot provide such services - they can - but that if they are relied upon to do so in the absence of a regulatory authority then problems are likely. In a democracy, the government can be ejected by the people if it exceeds its authority (that doesn't mean it necessarily will be ejected, just that it can be), whether that democracy is qualified or not. There is a clearly defined mechanism for this. This is not the case in a libertarian nation with no state. The democratic state is answerable to the electorate, the corporation only to its shareholders who are likely to be a much smaller number with a vested pecuniary interest. This is not a sound basis for a society. Private security companies today are constrained by laws not enacted by them in what they can and cannot do. Libertarianism would remove that constraint.

I can simply hire protection

And so you end up in Case 3 of my scenarios. Well done, you have replaced a flawed but basically functional system of independent jurisprudence with reliance on naked force. I find it hard to see this as progress.

Limited government in no sense necessarily implies independent agencies separate from government. It realistically means a state much as we have now but doing far less. Sovereign authority remains vested in the people or in the Crown (depending on whether you like kings or not). Where the rule of law exists, the state is subservient to the law, otherwise there is no rule of law (obviously).

Philosophically, you can argue that the law in a conventional state is the codified will of the majority of the people. This derives from basic morality being what is and is not acceptable to the majority of people in a more primitive stage of that society. In a democracy, the representatives of the people enact law on their behalf, but are subservient to it themselves (with minor exceptions). Measures are put in place to ensure, insofar as is possible, that reasonably decent and honourable people make judgements under this law. It's not perfect, but it does more or less work most of the time.

Many would say that corruption and abuse of power are the inevitable consequence of having a government, not of having no government

Many people are also somewhat naive.

create an incentive to resolve conflicts peacefully? Perhaps through private courts hired by arbitrators?

And what standard are they resolving this conflict against? Set by whom? Enforced by whom if the parties don't want to agree? Who stops the decision going to the highest bidder? Who stops someone paying to change the standard?

EG

Posted by Euan Gray at April 18, 2004 12:25 AM

Is it really the best option to grant these sometimes irrational people this kind of monopoly?

Yes. You limit the time they have this monopoly, restrict exactly what they can do with it, and ask the people to judge how well they have or have not done every so often.

It's called the democratic state.

EG

Posted by Euan Gray at April 18, 2004 12:38 AM

Euan,

I was with you most of the way, but that last post was just too much.

The democratic state is answerable to the electorate, In your last but one comment, - now that was funny....

Then in your next comment, you do it again,

It's called the democratic state, such humour, such naivety, .......

I don't think you have been paying much attention to events in Europe lately.....

Posted by ernest young at April 18, 2004 01:52 AM

Euan-

If you truly believe that people are as bad as you say, then how do you expect them to choose a leader to lord over them who is not equally as bad? The quality of a nation's leadership in a democratic state reflects the quality of the culture that elects the leadership.

People are not inherently bad, but they can not choose to be good if statists and tyrants take away their right to choose in the name of whatever vaguely defined and supported utilitarianism results from their mistrust of other people.

Look at the history of the "divine state" during the last 100 years and you will see how it is more of a threat to people than any business monopoly.

The totalitarian state is nothing but a monopoly of pure power, and centralized democratic states are no better because of their tendency to make the majority the tyrant and every minority, including the smallest one - the individual - the subject of that evil.

Even if you are right in thinking that states are required to prevent monopolies, remember that the free market never made a death camp. Only states have reasons to kill the masses, as you say "en masse".

Posted by A. Natmani at April 18, 2004 03:54 AM

Andy:

Suppose we implemented some constitutional reform so that power was completely devolved to the level of the city and the central goverment was abolished. The nation would now be composed of a collection of independent city states, like ancient Greece.

Suppose further, that each of the city states reforms its institutions so that it becomes an anarcho-capitalist society. Now you say that anarcho-capitalism could work at the level of the city, so it works for each of those cities. But if it works for each of the cities, then isn't it also working for the nation as a whole.

So, isn't it likely that if anarcho-capitalism can work at the level of a city, then it can also work at the level of a nation, but if it fails at the level of a nation, then it will fail at the level of a city?

I said it might work at the level of a city. At the level of a nation state it requires national defence. I don't know if that is possible in practise - I know the theory but...

I remember reading somewhere that if London seceded from the UK it could afford to cut taxes to 10% and pay for the national defence entirely. Just so long as we didn't have to pay for the rest of the national welfare state. London might have to boost up its border defences against the defunded Northern welfare dependents mind you.

Like I said earlier regarding anarcho-capitalism, in my heart I am one, in my guts I know its nuts. The fact that it has never successfully existed at the level of a city or otherwise IS relevant.

Hong Kong is about as good as it gets in terms of free markets in the real world...

Posted by paul d s at April 18, 2004 11:31 AM

Euan:

The point is not that private corporations cannot provide such services - they can - but that if they are relied upon to do so in the absence of a regulatory authority then problems are likely.

I've already asked you if you've read The Machinery of Freedom which addresses your objections to the market provision of law and order, but you don't seem to have noticed.

Have you, and if so, what's your response to it?

Posted by Andy Wood at April 18, 2004 11:34 AM

PauL:

I said it might work at the level of a city. At the level of a nation state it requires national defence.

But a city would have to defend itself as well. If an anarcho-capitalist nation cannot defend itself against a hostile neighbour, then surely an anarcho-capitalist city can't either?

Wouldn't the problem of defence in anarcho-capitalism get easier as the total population living under anarcho-capitalsim gets larger? After all, one of the arguments for anarcho-capitalism is that an anarcho-capitalist society would likely be much less aggressive than a statist one. If all the world were anarcho-capitalist, then the problem of defence would essentially disappear.

The fact that it has never successfully existed at the level of a city or otherwise IS relevant.

I'm not so sure that it is. As far as I'm aware, it has never existed at all, successfully or otherwise. That means that there is no empircal evidence as to whether it would be successful, but it also means that there is no empircal evidence as to whether it would be a failure.

We could have a similar discussion about liberal democracy if we were living two hundred years ago.

Posted by Andy Wood at April 18, 2004 11:58 AM

Ernest:

I was with you most of the way, but that last post was just too much.

Well, that's what I get for posting after midnight :(

I think it's true enough that peoples tend to get the governments they deserve, and that the electorate frequently is reluctant to remove a government as long as they, the voters, perceive themselves to be doing well enough out of it. I think I alluded to that in an earlier post, and I believe it is an inherent defect in unqualified democracy. I'm reasonably confident that this would be less of a problem if the franchise was restricted to those who contribute to society (i.e. by working, owning sufficient property, etc).

Ultimately, though, the democratic state is answerable to the electorate. Any European country can vote to secede from the union, and at least in current circumstances I find it hard to believe that there would be any desire or ability to compel it to remain by means of military force. Whether anyone chooses to vote this way is, of course, another matter. I also do not think the EU will long survive in its current form.

For a start, there has never been a successful polyglot confederation in history, and the nearest you get is the Soviet Union which was held together only by naked force. The Russian Empire was different in its structure (what were nominally separate republics under the USSR were integral provinces within the Empire, and this, as Lenin failed to realise, really does make a big difference). Even so, in both cases we are considering territory acquired by conquest rather than voluntary accession and maintained in Imperial times by aggressive Russification and colonisation.

Secondly, the democratic deficit within the EU's internal structure will, sooner or later, cause serious problems. Already the Eastern states are becoming aware of the burdens as well as the benefits of EU membership, and there is in the west not inconsiderable disquiet about the proposed constitution. I think the referendum results will be interesting.

Thirdly, the poor economic performance and the huge unfunded welfare liabilities are going to compel economic reform.

It is quite possible to hold together the EU even if the member states are unwilling. However, this requires force and I cannot imagine there is the political will to do this. It is also possible that enough of the people will accept that the EU is the way to go. I'm not at all sure they will, but it's possible.

A Natmani:

I don't think people are inherently bad or evil. I do think, though, that, taken as a whole, and irrespective of the outstanding qualities of many individuals, they are rather selfish and lazy and make dumb decisions.

If you institute a system of widespread social welfare funded through taxation and ensure that sufficient numbers of voters are entitled to benefit from it, then it is not unexpected that people will keep this system in operation. You appeal to their laziness by giving them money for nothing. You appeal to their selfishness and jealousy by telling them the rich are paying for this. You exploit their capacity for stupidity by stating in emotional and simplisitic terms that this is "fair", "equitable" and "socially just". People swallow all this and they vote for its continuation all over the western world.

Given that this actually happens a lot, are my basic assumptions that wide of the mark? They may be unpleasant and, as one said, contemptuous, but they do seem to be borne out by the facts.

In theory, democracy is not necessarily a good idea. Then again, in theory Communism is a great idea, as is anarcho-capitalist libertarianism. In practice, they are both crazy and horrible, but democracy in practice just about works most of the time. I think the only thing to do is restrict the franchise a little and ensure strict limits in constitutional law as to how much the state can spend and on what.

Andy:

No, I haven't read it and I did miss your question the first time around. Perhaps you'd care to summarise? Feel free to do it by email if it's already well known to everyone else here. However, the essential point I'm making is that I cannot conceive of a workable and practical method of preventing justice and legal decision going to the highest bidder if there is nothing higher in the land than commercial organisations.

On National Defence:

one of the arguments for anarcho-capitalism is that an anarcho-capitalist society would likely be much less aggressive than a statist one. If all the world were anarcho-capitalist, then the problem of defence would essentially disappear

One can also argue, albeit with slightly less justification, that if the whole world were Communist the problem of defence would also disappear.

The problem not considered here is what happens if there are only a handful of A-C nations? Defence has little to do with how aggressive your own nation is, but a lot to do with how aggressive others are.

I can accept that A-C societies would be less externally aggressive than others at least in theory, but I think they would inevitably be much more internally violent. This might, and probably would, in turn result in the purchase of external force for the resolution of internal conflict.

I think you would inevitably get the A-C city states buying each other out or otherwise taking each other over, and you would just repeat the experience of English history in the 9th and 10th century - you will return to the concept of the unitary centralised state. Perhaps, to paraphrase Marx, libertarianism contains within itself the seeds of its own destruction?

EG

Posted by Euan Gray at April 18, 2004 01:56 PM

Richard - The point is not that private corporations cannot provide such services - they can - but that if they are relied upon to do so in the absence of a regulatory authority then problems are likely.

But, as I have said, anarchism provides this regulatory authority, in the form or any other person or group of people equally able to utilise legitimate force.

In a democracy, the government can be ejected by the people if it exceeds its authority (that doesn't mean it necessarily will be ejected, just that it can be), whether that democracy is qualified or not. There is a clearly defined mechanism for this.

There is no such mechanism for this, as is clearly proven by the case of Hitler - he simply got voted in and then abolished elections.

Secondly, any mechanism you think there exists is surely limited by majority rule. You only get to remove government from power if you are in the largest section of the electorate.

This is not the case in a libertarian nation with no state. The democratic state is answerable to the electorate, the corporation only to its shareholders

Nope, Security is Us unlimited is answerable to SafinBed Protection Ltd, and Stronginthearm and sons, co. and any other company out there in the market, should Security is Us ULtd try to aggress against them.

who are likely to be a much smaller number with a vested pecuniary interest. This is not a sound basis for a society. Private security companies today are constrained by laws not enacted by them in what they can and cannot do. Libertarianism would remove that constraint.

No, it would widen it, by allowing countless other protection agency to enact laws against each other.

I can simply hire protection

And so you end up in Case 3 of my scenarios. Well done, you have replaced a flawed but basically functional system of independent jurisprudence with reliance on naked force. I find it hard to see this as progress.

This is again evidence that you are criticising anarcho-capitalism without actually knowing it. The oldest answer to this criticism I know of came from Benjamin Tucker in 1887. But first, let's point out that the same criticism can be made of the position you defend. Suppose that a citizen of the State of Paraguay aggressed against a citizen, or citizens of the UK? What then? Would there be open war? Would their be violent conflict? No, because nation states generally have treaties to work out this sort of thing.

In expecting the question of what would occur should a citizen of one voluntarily funded, non-monopolistic "state" felt that the citizen of another similarly arranged "state" had violated his rights, Tucker responded

Anticipation of such conflicts would probably result exactly those treaties between "states" Which Mr. Read looks upon as so desirable, and even in the establishment of federal tribunals, as courts of last resort, by the co-operation of the various "states," on the same voluntary principle in accordance to which the "states" themselves were organised.

You have to remember that protection companies are profit seeking firms. As such, they have an incentive to use the cheaper means of satisfying their customers, or else they will lose business to firms that do whilst they don't. War between protection companies is very costly, meaning that firms need to pay their employees enough to risk being shot at, guarantee investors a return large enough to get them to risk the gfact that their stock might literally be blown up! In addition, it is expensive because of the risk of dragging thrid, or fourth, etc. parties and their protection agencies in. On top of this, a company which has a reputation of resolving all its differences with others through the barrel of a gun is not a company that people will often try to do business with.

For this reason, if cheaper alternatives to war are available, firms will adopt them. Arbitration is one such alternative - and so the system of courts and treaties that Tucker observed.

In fact, this is even more likely to be an attractive alternative to war for protection firms than it is for states. After all, states don't need to be so greatly concerned about the expenses of war, since they don't have to rely on voluntary payment or contribution for the "services" they provide.

Limited government in no sense necessarily implies independent agencies separate from government. It realistically means a state much as we have now but doing far less. Sovereign authority remains vested in the people or in the Crown (depending on whether you like kings or not).

Wrong. A state doing less than it does now is not a limited state, but a smaller state. There is no limit to its size, so it is not limited. There is no limit to what it may do beyond what it is doing, so it is not limited. It is the difference between a state that simply observes freedom of speech and a state that is legally obliged not to restrict freedom of speech. Limited states, by definition, are limited by something. Other wise they are simply states with a small number of powers that may grow at any time the state chooses.

But for government to be limited, there needs to be an organisation that is not the government that is able to prevent the government exceding its limitations. It needs to be authorised to adjudicate grievances against the government, and enforce the law against the government - including the crown. But if this is the case, neither organisation would have sovereignty, and there would be anarchy.

Where the rule of law exists, the state is subservient to the law, otherwise there is no rule of law (obviously).

But there would be no guarantee that the law would be neutral, that the law would be certain and that people would be equal before it. In fact, we know that it wouldn't be. As Bryan Caplan wrote,

The core components of the rule of law, then, are equality before the law, neutrality, and certainty. The rule of law is a normative ideal for what the law should be, not a description of the law that is.... ...State law can never be neutral, because the state judges its own case; can never give equality before the law, because one class of humans - legislators and state-appointed judges - have special law-making powers denied to the rest of mankind; and can never be certain because legislation is always amenable to unprincipled, politically motivated changes... ....even if the State were perfectly neutral in judging legal disputes between itself and private citizens, what does it matter if someone impartially applies rules to cases if the same person creates those rules in the first place? Anemic "neutrality" of this kind cannot be reconciled with the rule of law. Neither can equality before the law exist in a state monopoly legal system. Why? A state monopoly divides humanity into two artificial classes: the rulers with the sole power to make law, and the ruled who must obey this law. To be sure, all societies have legal experts with unusual influence upon the law. But in a market-based legal system, all qualified people may participate, not just state employees. Quoting Bruno Leoni, "the appointment of judges is not such a special problem as would be, for example, that of 'appointing' physicists or doctors or other kinds of learned and experienced people." Equality before the law truly exists only when the law makes no artificial, unearned distinctions, including the state's monopoly over the law. Legislation is the primary enemy of the certainty of the law, especially long-run certainty. Legislation can concern nearly anything, and its historical pattern has been endless proliferation. And the substance of legislation can and does change frequently and sharply. The common law, in contrast, changes gradually. Its scope is severely limited because it concerns itself only with private wrongs. A system of common law evolves only slowly. But it creates a framework in which non-legal forces can do their best to deal with change. In such a framework, Richard Epstein explains, "The rules of the game have been worked out with sufficient clarity that the private parties can take these changes into account in the way in which they manipulate the rights in self and other things (protected by the law of torts) through voluntary exchanges (sanctioned by the law of contracts)." In a word, a stable body of judge-made law makes it easier for private actors to change the world without changing the law. Legislation not only fails to provide such a framework, but is so erratic that the law itself becomes the primary type of change to which individuals must adjust. The state law monopoly, then, not a plural legal system, should be criticized for its deviations from the rule of law. Lysander Spooner summed things up well when he wrote that "All legislation whatsoever is an absurdity,a usurpation, and a crime."

So the rule of law is incompatible with government.

Philosophically, you can argue that the law in a conventional state is the codified will of the majority of the people. This derives from basic morality being what is and is not acceptable to the majority of people in a more primitive stage of that society.

And this is supposed to provide an objective standard for law? The subjective whims of most people at a given time?

Besides, laws do not derive from the majority of people. Legislation derives from the opinions of some minority who have been elected to legislate. Whether those that have elected them approve of the legislation is another matter. They probably offered a bundle of propsed pieces of legislation as a reason as to why they ought to be elected, which means that even though people elected them to pass certain pieces of legislation, those that voted for them may not have voted for them to pass other pieces.

Nor did a majority elect them. A lerge portion of the population can't vote. Other portions didn't vote, and others voted for the guys that lost.

And on top of this, legistlation isn't the only soucre of law - we also have judge made law, which is where we get much of our civil law, and the roots of the common law tradition.

Many would say that corruption and abuse of power are the inevitable consequence of having a government, not of having no government

Many people are also somewhat naive.

How is this an answer to my point? Reading Samizdata for some time certainly helps one build the opinion that it is a reasonable view of the world.

create an incentive to resolve conflicts peacefully? Perhaps through private courts hired by arbitrators?

And what standard are they resolving this conflict against?

Well, we all believe that the law ought to be just, and, as libertarians, we all have a view of what just law looks like, namely that is protects people's ability to do as they choose with their person and property, and punishes those that interfere with this ability.

Whether we get libertarian law, though, is another matter. There are strong reasons to believe that market-made law will be libertarian, though.

Set by whom?

The law will probably be produced the same way that law has been produced privately in the past - like the Law Merchant, or the Common Law.

Enforced by whom if the parties don't want to agree?

If they don't agree, they will fight. But that is no different to what we get with states. In the end, we should root for the guy with justice behind him.

Who stops the decision going to the highest bidder?

Bidder for what? Why would anybody agree to an arbitration company that is likely to give the judgement according to whoever is able to pay the most?

Posted by Richard Garner at April 18, 2004 02:04 PM

I think most of the criticisms of the state can be levelled against an anarcho-capitalist society with equal justification. Furthermore, I think that the mechanisms of constraint present (or capable of being present) in a state are not necessarily present in A-C society, or are present only in a weaker form.

The state is made up of people, but is an entity greater than the sum of the people who comprise it. This is also true of a corporation. People are fallible, and are in my view en masse not necessarily reliable. The same defects that are therefore present in the attitude of the state can be present in the attitude of the corporation, since both are constituted of and controlled by people.

It is argued that the state will seek a monopoly position in the exercise of force, enforcement of the law and administration of justice. Unrestrained, there is no reason why a corporation would not seek the same thing. I think in each case there is a restraint, however.

In the case of the state, it can ultimately only exist on the sufferance of the people. The rulers of the state can be ejected by defeat at an election, by legal reverse in the courts if they respect the rule of law, by (and this is the case in Britain anyway) armed force if they decide to grossly ignore the constitutional provisions, or ultimately by popular revolt. There are many examples in history of all of these things happening.

The corporation is restrained by the will of the shareholders and/or in the A-C scenario by the effects of other corporations acting in the marketplace or the armed resistance of the people. The problem I see, though, is that this restraint is much weaker than the restraints on the state.

A-C seems to assume that corporations want to operate in a free market. Do they, though? From a corporate point of view, it is easier and potentially more profitable to operate in an oligopoly or monopoly position. How much better if Secure-Corp and Cops-R-Us can reach an agreement to split the market between themselves and shut down or take over the competition? How easier is it not to have to bother about competing, to have a captive and guaranteed market? Under a western democratic state, generally speaking, companies are not permitted to do this, or may do so only to a severely limited extent. In an A-C society, there is nothing to stop them doing this.

It will be argued that a third company can come along and offer the same services cheaper, thus preventing the two big boys from doing this. However, what is to stop the big boys removing the competition either through purchase, intimidation or outright violence? Well, it is argued, the third company can hire a court of arbitrators to seek a judgement against the others. Fair enough, but since people are not immune to venality, what is to stop the big companies inducing the arbitrators to decide in an “appropriate” manner? It is argued that nobody would want to use a corrupt court – but the big companies would, and since they would have large amounts of force, money and (realistically) patronage at their disposal, corruption will inevitably ensue.

Well, if all that doesn’t work, the third company can assert its right through hiring protection. I utterly fail to see how resorting to naked violence is any improvement over what we already have. If they don’t agree, they will fight, it was stated – how, FFS, is this in any way whatsoever progress?

It is argued that money, force and patronage is also available to the state and that it can and will use it in the same way. Yes, it’s available, and yes, it does sometimes get used, particularly in undemocratic states but also to a lesser extent in democratic states. But it is, at least in functioning democratic states, subject to law.

In summary, I think A-C society is no more than the law of the jungle. It would in my view inevitably be violent and corrupt and I cannot see for the life of me how it would constitute progress over the state. In fact, I am convinced that in time (and probably not very much time) the biggest and baddest corporations will seek and obtain a position of monopoly or near monopoly and will, inevitably, become a de facto state.

The modern unitary state evolved from the unification of rival petty kingdoms. This is exactly analogous in my view to the process that would inevitably take place between rival corporations if they were providing the same kind of services – defence, order, security. I am absolutely convinced that the creation of an A-C society would result only in a period of violence and then a rapid return to the existence of a monopoly unitary state. It would in the long term achieve nothing other than unnecessary bloodshed and a pointless repetition of a process that has already taken place in history.

EG

Posted by Euan Gray at April 18, 2004 03:46 PM

anarchism provides this regulatory authority, in the form or any other person or group of people equally able to utilise legitimate force

So they fight over it and the strongest/richest/least scrupulous guy wins & dominates the rest. Alternatively you have a balance of fear. Please, this is no way to build a society. Perhaps you could explain exactly how this differs from the competing petty kings and robber barons who were out-evolved by the unitary state?

Just as a single unitary state is more effective and efficient than rival petty kingdoms, so is a single corporation more efficient than a host of competing smaller ones - same revenue, no duplication of overheads = greater profit. The number of competing companies in this field, without meaningful external restraint, will dwindle to one, which will essentially be a state.

the case of Hitler - he simply got voted in and then abolished elections

The NSDAP formed a minority government under the leadership of a charismatic demagogue in the circumstances of a ruined economy (ironically enough, thanks largely to naive American ideas of justice at Versailles). This is a danger in democracy, albeit one that doesn't arise all that often. However, it is one of the reasons why many people accept some restriction on their ability to act completely freely.

You only get to remove government from power if you are in the largest section of the electorate

Yes, that is essentially the point of democracy. Otherwise you have the tyranny of minorities. Extremists like Hitler, or like our own NF, BNP, Communists, etc., attract tiny votes in normal circumstances and the mechanism for keeping them out of government is to have an electoral system that favours the majority, and only over a certain threshold. The UK system is pretty good at this.

if cheaper alternatives to war are available, firms will adopt them

Will? Necessarily will? What makes the corporation so much more constantly rational than people? Money isn't the answer, because corporations frequently make dumb decisions that cost them fortunes - they are, after all, run by people, just as states are. If you're going to say that, then you can say with equal validity that states will necessarily choose less expensive means than war. Indeed, democratic states generally do, which kind of undermines the argument that states necessarily resort to violence.

A state doing less than it does now is not a limited state, but a smaller state

You have completely missed the point. The constitutional form of a limited state is one that is indeed limited by, for example, constitutional restrictions on how much it can spend, prohibitions from doing certain things, constitutional subservience to a supreme court, separation of powers, etc. The structural organisation of such a state need be no different than for example the US or (with some modifications) the UK. This does not mean that independent agencies are needed to carry out the duties of the state, although that is one way of doing it.

But if this is the case, neither organisation would have sovereignty, and there would be anarchy

Separation of powers, not anarchy.

So the rule of law is incompatible with government

Rubbish. The state recognises and accepts that it is subject to the law. This is why, for example, you can take the state to court. Although the judges are appointed by the state and the courts funded by the state, in a healthy democratic system which accepts the rule of law the judge will generally consider the case on its merits. If the contrary were the case, the state would never lose in court - and would you care to consider the UK state's current track record in court? I mean, we're not considering the USSR where the verdict and sentence were agreed in advance.

It's not perfect, and it seems that it shouldn't work in theory, but in fact the type of court system we have in the UK and in the US (which is in concept not that different) actually works surprisingly well virtually all the time. It basically depends on having decent and honourable judges who accept that the law is greater than any person and greater than the state which created it, and who further have the intellectual ability to take a disinterested and reasonable view of it.

And this is supposed to provide an objective standard for law? The subjective whims of most people at a given time?

Pretty much, yes. Outside of religion, there is no absolute objective standard of what is right and wrong. Some things, like murder and theft, are generally considered at almost all times to be immoral and wrong, but even that's not an absolute.

Reading Samizdata for some time certainly helps one build the opinion that it is a reasonable view of the world

Reasonable among a small group of like minded people, yes. However, you cannot extend the opinion of the Samizdatists to cover the bulk of humanity. There are undoubtedly corrupt governments, no-one is going to argue with that. There are also corrupt corporations. There are parts of the world where corporations that effectively are the goverment are also corrupt. I think that government by corporation is more likely to be corrupt than state government, because of the profit motive.

The profit motive and market competition make corporations more efficient than the state in manufacturing and in providing (some) services. The ethos of discipline and honour makes soldiers good at fighting wars and generally the last part of society to go bad. However, armies don't make good governments, however decent and disciplined they are, and there is no reason to suspect that corporations would, however efficient they are.

we all have a view of what just law looks like, namely that is protects people's ability to do as they choose with their person and property

Insofar as their actions do not prejudice others, of course.

Why would anybody agree to an arbitration company that is likely to give the judgement according to whoever is able to pay the most?

The guy with lots of money would probably agree to it, don't you think? I don't mean that the two parties approach the bench with competing sacks of cash. I mean that, where the court is essentially available for hire and where there is no higher court, the probability of considerations being exchanged for appropriate decisions is rather high.

There is NO ideal society or perfect political philosophy. There is NO absolute moral or ethical standard. There are only human beings, who basically want to rub along together reasonably comfortably and with the prospect of doing reasonably well in life. The question is, what is the least flawed way of enabling this to happen? There has to be order and some degree of social discipline. Most people agree that the weak and helpless need some assistance, whether they believe this through Christian charity or basic humane decency. Most people agree that they don't want the French, I mean other nasty people, treading all over their society.

In order to achieve these ends, REALISTICALLY you need a state, even if it is not theoretically pure or efficient. This state should be controlled and limited, and within certain bounds responsive to the wishes of the people, but it needs to be able to act where it is competent. Therefore, it needs funds. Therefore, the people need to fund it, and there has to be a degree of coercion in this because nobody really wants to pay tax.

In the end, it comes down to pragmatism. Let's accept we need a state, but let's limit what it can do and minimise the burden of regulation, interference and taxation, starting from a presumption of liberty and working backwards from there.

Flogging it all off to the highest bidder is not going to work, any more than a soviet of workers' and peasants' deputies is going to work.

EG

Posted by Euan Gray at April 18, 2004 06:58 PM

No, I haven't read it and I did miss your question the first time around. Perhaps you'd care to summarise?

Chapter 29 summarises how law and order could be produced on the market. Unfortunately, chapter 30, which discusses the stability problem isn't webbed but I think, after skimming through Richard's comments, that he's been touching on some of the arguments. I must confess, however, that the comments in this discussion are longer than my the patience to read them properly, so apologies if I miss anything.

One can also argue, albeit with slightly less justification, that if the whole world were Communist the problem of defence would also disappear.

I don't see how you could argue that. Communist states have tended to be rather aggressive, even towards each other.

But in any case, I don't remember any of the objections to communism being that a communist state couldn't raise taxes to pay for defence, but it is probably the most fundamental objection to anarcho-capitalism.

Indeed, David Friedman entitled the chapter on defence "National Defence: The Hard Problem" and concludes that it might be prudent to wait for the collapse of the Soviet Union before implementing full-blown anarcho-capitalism in the US.

The problem not considered here is what happens if there are only a handful of A-C nations? Defence has little to do with how aggressive your own nation is, but a lot to do with how aggressive others are.

Actually, I did consider that problem if you read my comment again:

But a city would have to defend itself as well. If an anarcho-capitalist nation cannot defend itself against a hostile neighbour, then surely an anarcho-capitalist city can't either?
Wouldn't the problem of defence in anarcho-capitalism get easier as the total population living under anarcho-capitalsim gets larger?

I already said that defence against aggresive states is harder for small A-C societies than for large ones. Or in other words, I considered precisely the problem that you claim I didn't.

Skimming through your later comment, on the stability problem, you say:

A-C seems to assume that corporations want to operate in a free market.

Wrong. The arguments for anarcho-capitalism assume no such thing. The problem of preventing a market being taken over by a monopoly or cartel is explicitly considered in The Machinery of Freedom. See chapters 6, 7 and 31.

You continue:

From a corporate point of view, it is easier and potentially more profitable to operate in an oligopoly or monopoly position. How much better if Secure-Corp and Cops-R-Us can reach an agreement to split the market between themselves and shut down or take over the competition? How easier is it not to have to bother about competing, to have a captive and guaranteed market? Under a western democratic state, generally speaking, companies are not permitted to do this, or may do so only to a severely limited extent. In an A-C society, there is nothing to stop them doing this.

It will be argued that a third company can come along and offer the same services cheaper, thus preventing the two big boys from doing this. However, what is to stop the big boys removing the competition either through purchase, intimidation or outright violence?
If you have a look at David Friedman's home page, you'll see that he lists some conditions for anarcho-capitalism to work. The second one is relevant to your point above:

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. My guess is that this condition is already met.

Whether or not the situation you describe will be a problem depends on the costs curve for the production of protection services. If it is such that large companies tend to have a lower average cost than small ones, so that the market will consist of a few large firms, then the cartel you describe might be quite likely.

However, if the cost curve is such that small companies operate more cheaply than large ones, then the problem disappears. If the market, in that situation, initially consists of a few large firms, then the firms will tend to break up into smaller ones to cut their costs. You won't see "the big boys removing the competition either through purchase, intimidation or outright violence" in that situation: when a firm takes over its first rival, it has to accept a cut in profits; when it takes over its fifth, it's now making losses; by the time it takes over its tenth, it's used up all its resources and has nothing left wth which to take over its eleventh.

The usual pattern for cost curves is that economies of scale are significant at low levels of production and diseconomies of scale are significant at high levels of production. So monopoly or oligopoly more likely to occur if there are a small number of customers. For this reason I take the opposite view of Paul, I think anarcho-capitalism is more likely to work at the level of a nation than at the level of a city. A cartel of protection agencies reistating government might be likely in a single town, but becomes less likely if those protection agencies can export services outside the city and, in turn, have to compete with protection services imported from outside.

In summary, I think A-C society is no more than the law of the jungle. It would in my view inevitably be violent and corrupt and I cannot see for the life of me how it would constitute progress over the state.

In that case, you should read The Machinery of Freedom.

In fact, I am convinced that in time (and probably not very much time) the biggest and baddest corporations will seek and obtain a position of monopoly or near monopoly and will, inevitably, become a de facto state.

But as I argued above, whether that will be a problem depends on the cost curve of the production of protection services. If you really are convinced, then you must have some persuasive evidence that there are significant economies of scale, that large firms can operate more cheaply than small ones. Do you have any such evidence?

a single corporation [is] more efficient than a host of competing smaller ones - same revenue, no duplication of overheads = greater profit.

This is simply wrong. For most industries, as I've argued above, economies of scale are only significant at low levels of production. At larger levels, with increasing marginal costs, any advantage to be gained by eliminating the duplication of overheads is outweighed by the increase in variable costs.

After complaining about the length of everyone else's comments, I seem to have written a rather long comment myself.

Posted by Andy Wood at April 18, 2004 08:56 PM

if cheaper alternatives to war are available, firms will adopt them

Will? Necessarily will? What makes the corporation so much more constantly rational than people? Money isn't the answer, because corporations frequently make dumb decisions that cost them fortunes - they are, after all, run by people, just as states are. If you're going to say that, then you can say with equal validity that states will necessarily choose less expensive means than war.

Actually, you can't say that with equal validity. The shareholders of a corporation have secure property rights in their shares. If they make a decision which is likely to be disasterous for the company ten years later, they will pay for it themselves. Politicians typically stay in office for only a few years. If a politician makes a decision which will cause disaster ten years later, his successor will pay for it. What penalty did Ramsey McDonald and Stanley Baldwin pay for the part they played in disarming Britain in the 1930s?

Indeed, democratic states generally do, which kind of undermines the argument that states necessarily resort to violence.

If you think that, then I recommend reading The Future of Freedom by Fareed Zakaria. A couple of quotes:

As the scholar David Spiro has pointed out, given the small number of both democracies and wars over the last two hundred years, sheer chance might explain the absence of war between democracies.

and

Immanuel Kant, the original proponent of the democratic peace, contended that in democracies, those who pay for wars - that is, the public - make the decisions, so they are understandably cautious. But that claim suggests that democracies are more pacific than other states, when in fact, they are more warlike, going to war more often and with greater intensity than most other states. It is only with other democracies that the peace holds. When divining the cause behind this correlation, one thing becomes clear: the democratic peace is actually the liberal peace.

Posted by Andy Wood at April 18, 2004 09:15 PM

The coercive power of a mercenary cartel out to expand themselves is already greater than one which relies purely on market forces for pay. Thus, they can attain larger amounts of equipment and manpower more easily by taxing the people under their control, hereby making it easier to smash other such organizations into the dirt, even if they might be less efficient.

Note: It doesn't matter how efficient they are, just that how much strength they have in absolute terms. You might be efficient with 2 companies of leg infantry, but a regiment of mechanized infantry, which may cost many, many times more, will still make sure you're very, very dead.

You might even say they are no longer a bunch of contractors then, but rather land grabbing thugs themselves. Like any other in history. To believe they can be stopped by other private contractors makes me want to laugh. They will either destroy their competitors, or the competition will cut their losses and run. Money is worthless if you're dead, after all.

Assuming that they are unstable due to diseconomies of scale is not a sure thing. Like conquerors throughout history, such an unit might discover a voracious appetite for more land, more populace to tax. It'll increase and increase in size until somebody opposes it with equal force. Either way, you have to have some mechanism for people to pool their resources to afford tanks, aircraft, all the tools of industrial war. But then, that's a de facto state already. And brings us back to square one.

In fact, the rise of nation states in Europe and taxation could be considered as being part of the requirements for building military forces. Guns and cannon were expensive. Before that, there was less tax, I believe.

Also, how did the first rulers in history come about? Simple, they set themselves up as heads of various 'protection militias', and worked from there. It may have been swords and horses then, and you could argue the disparity in tech levels wasn't so big. Now though, even if you equip the entire populace with machine guns, a single B-52 bomber will still shatter them.

Could a group of people afford to purchase a B-52 or a company that employs such a vehicle? Perhaps, but they'll have to pay for it, and perhaps pay a great deal. And again, how's that different from taxation?

Posted by The Wobbly Guy at April 18, 2004 10:02 PM

Andy:

I'm not an economist, but part of my job is calculating sell prices and cost bases for my company in a whole range of actual and hypothetical cases. I do know something about economies of scale, site fixed, variable and corporate overhead costs, and the effects of competition.

Basically, the premise of anarcho-capitalism as you delineate it is valid if, and only if, economies of scale only apply to low levels of production. This is not true, however. If it was true, it is unlikely that General Motors (or any other large corporation) would exist. How much does a mass market car built in a production run of say half a million cost? And how much a low volume hand made car? Of course larger companies can work more cheaply than smaller ones.

It is not really relevant whether you produce cars, widgets or police services. The basic economic facts still apply:

You have variable costs of operation which will not significantly change whatever the scale of your operation (assuming you produce in the same manner - going from hand finishing to automated mass production will redcue them). Normally, these are the majority of your costs (e.g. raw materials, per capita training cost, etc). The gross total of your variable costs is not as important as the total per product i.e. if you need twice the raw materials to produce twice the product, your material cost per unit is unchanged. Some variable costs will of course reduce per product with increased scale - more efficient use of transport and storage, better purchasing power, etc.

You have site fixed costs, which are related to the cost of your operational base, plant or office - things like rent. Many of these would increase if you expand, but would reduce as a proportion of your total expense if your output also expands in line. For example, to double the land area you rent, your per hectare rent cost may actually decrease slightly.

You have overhead costs, such as corporate financing costs, management salaries, head office costs, etc. Again, these can rise as you expand, but not as linearly as your site fixed costs - you don't need twice the office space or twice the managers if you double your site space, for example.

Now, suppose Cops-R-Us takes over Secure-Corp, and assume their sizes are identical, they pay the same, etc.

The new company has twice the costs, as well as twice the sales. It will also have the financing cost of buying Secure-Corp. Given sensible direction, it will fire chunks of duplicate management, probably close one head office, rationalise operational and training bases and quite probably reduce the number of operational security personnel it has. All categories of costs go down, and it can sell the same degree of service at a lower price from a reduced cost base and probably still make the same cash profit as the two companies could separately (less the cost of the takeover, of course).

It doesn't necessarily matter that the cash advantage is small. The new company now has a much larger market share and is in better shape to increase further. In our example, instead of two comapnies training 6,000 recruits in two separate facilities, the new company may be able to process the same number through a single, larger facility at consequently reduced per trainee cost, which would obviously have been impossible before.

Obviously, I am not prepared to divulge details, but the company I work for has reduced combined overhead and fixed costs by buying up smaller competing companies over the years. It can now make more of the same product for less cost than the separate companies combined, and is the largest (by far) player in its marketplace.

I believe what I do not through academic theory but by real experience of how such things actually work.

I read Chs. 29 and 33. I think it reinforces my belief that A-C is idealistic, theoretically attractive but hopelessly impractical in reality. Why bother having competing brands of justice? Competing enforcement services? Apart from anything else, it's wasteful and the scope for creating a violent and corrupt society is greater than where you have a settled democratic state. I have actually seen societies where you basically get the justice you choose depending on what you pay to whom - it doesn't work. Furthermore, you only need to look at the comparative histories of Scotland and England to see the relative strengths of the unitary state versus the competing fiefdoms - England united into a single state, Scotland didn't and now Scotland is in all but name an English protectorate.

EG

Posted by Euan Gray at April 18, 2004 10:09 PM

Oh, and before I forget, there's a well known expression for forces in battle. Some law or some such that argues that larger units are more effective in battle. Ah yes, I believe it was called the n-squared law.

So if we're talking about combat effectiveness, a larger combat unit would be more efficient compared to smaller formations.

Okay, let's use a hypothetical. Let's say a company operates 4 tanks at say... a total of 400K a month. Another company, some thugs, operate 12 tanks at not 1200K, but 1600K a month(using your hypothesis of diseconomies of scale). So, they require 4 times the pay to have thrice the force. Does that mean they are less efficient?

Not always. The n-squared law indicates that the 12 tanks, all other things being equal, will beat the 4 tanks with losses of less than 4 tanks, and can probably take on a few groups of 4 tanks one by one. Their actual combat efficiency may be more than that of 4 seperate groups of 4 tanks each. Anybody who has played an RTS game will know this in their gut.

Throw in the fact that they can exort whatever they want from their 'employers'(eg. the poor saps under their thumbs), and this is not even an issue. This is also why national armies rose to the fore; there was no other way to oppose such a formation.

Posted by The Wobbly Guy at April 18, 2004 10:19 PM

The shareholders of a corporation have secure property rights in their shares. If they make a decision which is likely to be disasterous for the company ten years later, they will pay for it themselves

Not if they sell the shares 9 years later, though. In any case, I was thinking more of the managers of the corporation, who are quite capable of making insane decisions without the blessing of the shareholders - I know, I've seen it (in other companies, of course, not mine).

The corporation is no more or less reliable in this sense than the state. Because the state generally has bigger issues to deal with, like macroeconomic policy, should we declare war on the French (again), and so on, the potential consequences of an error are that much greater. The flawed decisions of corporate managers and directors are not likely to start a war (although, under A-C they might) or destroy the global economy, but that doesn't mean they are magically less likely to screw up just because they aren't civil servants or MPs.

I think this idea of assuming corporations are inherently more benign and effective than states is just as daft as thinking the workers would be better at running factories than professional managers. It would be funny, if some folks didn't actually believe it.

Libertarianism seems to me like Communism in a mirror, and those who propose it are, I'm sure, nice folks - but wrong.

EG

Posted by Euan Gray at April 18, 2004 10:31 PM

A-C seems to assume that corporations want to operate in a free market. Do they, though? From a corporate point of view, it is easier and potentially more profitable to operate in an oligopoly or monopoly position.

It is true that corporations do not want free markets. On the other hand, the existence of only one, or only a group of firms in an industry does not mean that there is no longer a free market. Moreover, it doesn't even imply a monopoly, since a monopoly is absence of competition, whilst a single form that dominates an industry still faces potential and indirect competition. The only way you can get a monopoly is by using or threatening to use force against any who would enter an industry.

How much better if Secure-Corp and Cops-R-Us can reach an agreement to split the market between themselves and shut down or take over the competition? How easier is it not to have to bother about competing, to have a captive and guaranteed market? Under a western democratic state, generally speaking, companies are not permitted to do this, or may do so only to a severely limited extent. In an A-C society, there is nothing to stop them doing this.

Sure there is. Why would company A agree to let company B control that portion of the market - especially when demand for protection against company B would go unsatisfied should B become aggressive. In typical cartel fashion, each member would have an incentive to go behind the backs of the others, chisel their share, and the monopoly would collapse.

Posted by Richard Garner at April 18, 2004 10:53 PM

doesn't even imply a monopoly, since a monopoly is absence of competition, whilst a single form that dominates an industry still faces potential and indirect competition

Then it's a monopoly at the time we are considering it, but it may not always be so. For this purpose, it's still a monopoly. Are we at war because, although we are not actually fighting anyone, we face a potential conflict? Of course not.

The only way you can get a monopoly is by using or threatening to use force against any who would enter an industry

No, that's one way of preserving a monopoly. You can achieve monopoly honestly by selling your product in such numbers and at such a low price no other outfit can stay in the market.

Why would company A agree to let company B control that portion of the market

Because Company B drove a truckload of cash to the doorsteps of Company A's shareholders? Because B has a more efficient structure, and A's shareholders think it would be better deal for them to sell? For, basically, these and any other reasons one company takes over another. It happens all the time and is a natural part of the capitalist market.

EG

Posted by Euan Gray at April 18, 2004 11:09 PM

Richard - Sorry, wasn't thinking about cartels when I wrote that.

Anyway, companies frequently enter into cartel agreements where this suits their overall strategy. This is generally illegal, but it doesn't stop them doing it.

It is easier to do business in a cartel, because you don't have to worry so much about going out to win work. This is especially the case where you are supplying a more or less essential good or service - consider the oil or plastics industries, for example, which are largely run by cartels, whatever government commissions might find when they "investigate" them.

What works for one, works for the other in a cartel. It makes life easy and secures income. In an A-C society, there is nothing I can see that would deter or prevent the formation of cartels.

EG

Posted by Euan Gray at April 18, 2004 11:38 PM

You can achieve monopoly honestly by selling your product in such numbers and at such a low price no other outfit can stay in the market.

This presumes that the commodity or good is a natural monopoly in the first place