Books, Uncategorized

Market Anarchy

Why Anarchy

Almost every major problem mankind faces can be traced back to the state. The state drags innocent people into war. Involuntary unemployment results when a minimum wage law is passed and labor union coercion is sanctioned. Price controls result in shortages. Rent controls are the main cause of slums. State funded education paralyzes the minds of innocent children. Protectionism leads to poverty and wars. High prices and poor quality products result when Government monopolizes certain industries. Taxation prevents capital accumulation. Various government regulations strangulate the economy. Credit expansion leads to inflations and boom-bust cycles. Some extremely conservative estimates say that there were nearly 262 million deaths caused by the Government in the twentieth century. (It is worth noting that most of the deaths due to natural disasters are indirectly caused by the Government. It should also be said that life expectancy is low and infant mortality higher in countries where Government intervention is more. Such estimates are not likely to take into consideration these facts.) In the light of all this, I see no reason for a person who loves humanity to support the state. It should be obvious from the fundamentals of economics that in any sector, monopoly is bad. How do statists get around this fact? In any monopoly, there is an incentive problem. There is no incentive to provide better service at a low cost. It is not just that. There is no way to know whether the service is provided in the cheapest and best possible manner in the absence of competition. The economic calculation problem which a socialist society faces is applicable to law, defense and security in an anarchist society too. There is no rational means of allocation of resources, as the Government lacks profit-loss signals and the necessary information to set prices.

(My Previous Writings on Anarchy: The Case For Libertarian Anarchy, The Objectivism Anarchism Debate Patriotism:An Obituary, Anarchy Defended, Some Arguments Against Anarchy and Answers, Shanu-Sabhlok Debate , Rejoinder On Classical Liberalism)

How Anarchy Would Work

The structure of a future Anarcho-capitalist society which is likely to evolve out of the voluntary interactions of private individuals would be extremely complex and no one can predict it accurately. As Hasnas wrote: “So, what would a free market in legal services be like? I am always tempted to give the honest and accurate response to this challenge, which is that to ask the question is to miss the point. If human beings had the wisdom and knowledge-generating capacity to be able to describe how a free market would work, that would be the strongest argument for central planning.” Yet, it is possible to draw a rough outline through logical reasoning and our knowledge of similar systems in the past and present. It should be noted that this is just a possibility and the exact structure of a future Anarcho-Capitalist society might be different and much more complex. Insurance companies would either sell defense or maintain proximity with Defense Companies. If we both are customers of Reliance Defense Company, and a dispute between us occurs, the dispute would be submitted to the court of Reliance Defense company, or a court patronized by Reliance Defense Company. The decision of the court would be respected. If you are found guilty, the Reliance Defense Company, or its Insurance Company would compensate me for the damages done by you. It will be then the task of Reliance Defense Company to get back their money by putting you in a debtor workhouse (prison) or by garnishing your wages. I, the Defense Company, and the Insurance Company would be in a position of inconvenience due to the damages caused by you. So, it would be in the rational self interest of Defense and Insurance companies to not deal with (Insurance companies might rate their insurance premiums up in some cases) you, or other people with criminal tendencies. If a person doesn’t have insurance, no sane person would deal with him in any manner, as they won’t be able to claim compensation in case a dispute occurs. Almost every one would have Insurance under anarchy, as without Insurance, one can’t get a job, rent a house, buy a car, travel through a private road or get into any other contractual situation.

In the case mentioned above, If I am a customer of Reliance Defense Company, and you are a customer of Tata Defense company, our dispute would first be set for arbitration in the court of the plaintiff (I)-which means: a court of, or patronized by Reliance Defense company. If the defendant (You) is found innocent, the matter has come to an end. If you are found guilty, then the arbitration would run in the Court of Tata Defense Company. If that court too finds you guilty, you will be punished. If it finds you innocent, the arbitration would move to an appeals court. The decision of the appeals court would be respected. If a person (defendant) refuses arbitration, the arbitration would be held in the court of the plaintiff, and the decision would be binding. So, a person who didn’t commit a crime will not refuse arbitration in normal cases. If he disagrees with the decision, he can take the case to his court, or a mutually consented appeals court. It is rational to assume that if the defendant and the plaintiff are customers of different Defense Companies, these Companies together might decide the court in which the arbitration would run. The courts would try to be as honest and objective as possible, as their profits depend on the number of cases they receive for arbitration. People won’t deal with dishonest Insurance companies, or their customers, as no sane person would want to be taken advantage of. So, a dishonest Insurance company would soon find it deserted by almost all its customers. An Insurance company which patronizes poor courts too would be soon deserted by its customers.


Public Goods and Private Goods

It is a well know fact that most Economists believe in the concept of public goods. Public goods are usually defined a goods which are characterized by non rival consumption and non excludability. Such goods, public goods theorists allege, can’t be provided optimally by the market. The public goods theory is the strongest argument against anarchy. But, the theory of public goods is found wanting. The concept of public goods makes invalid the basic principle of economics that monopoly is not in the interest of the consuming public. Hans-Hermann Hoppe hits the nail on the head when he writes “In spite of its many followers, the whole public goods theory is faulty, flashy reasoning, riddled with internal inconsistencies, non sequiturs, appealing to and playing on popular prejudices and assumed beliefs, but with no scientific merit whatsoever. “How ridiculous is it to conclude that some goods can’t be provided well by the market when the market was never free to provide it? People lacking sufficient imagination conclude so, and want to drag every one down to their level of knowledge, imagination and intelligence. According to Walter Block, “Excludability is not an inherent characteristic of goods. Rather, the ability to exclude non-payers from benefits is something that can be learned, that must be learned, if the market is to operate.”

There is one brilliant argument I owe to Larry Sechrest which completely invalidates the theory of public goods. One important requirement the great Economist Carl Menger laid out for a thing to be a good is that “the actor must have sufficient command over the thing that he can actually employ it in satisfying the need”. When Government provides national defense, individual actors lose command over national defense, and hence it ceases being a good. People don’t have any sufficient command over goods produced by the Government even though the Government rests on majority opinion as the decisions in any coercive political system would be made by an elite clique and imposed on others. Even if we grant that the majority decision is respected, what of the minority? How could we then consider it a good, let alone a public good? Rothbard and Block observed that if collectively provided, goods like national defense might even be a liability. There are people who don’t prefer such goods to be provided-absolute pacifists, for instance. Why should such liabilities be imposed on such people at their expense? So, it is obvious that there is something terribly wrong with the whole public goods argument.

To quote Hoppe again: ‘A clear-cut dichotomy between private and public goods does not exist, and this is essentially why there can be so many disagreements on how to classify a given good. All goods are more or less private or public and can—and constantly do—change with respect to their degree of privateness/publicness as people’s values and evaluations change, and as changes occur in the composition of the population. Nothing is

a good unless at least one person subjectively evaluates it as such. But then, when goods are never goods-as-such—when no physico-chemical analysis can identify something as an economic good—there is clearly no fixed, objective criterion for classifying goods as either private or public. They can never be private or public goods as such.”

As Rothbard and Hoppe have pointed out, Goods are not usually produced in a lump. They can be broken into marginal units. Consider the free rider problem in national defense. Even if we assume that such a problem exists (which is not the case) it doesn’t justify state action. First, People are not motivated by economic considerations only. As many Economists noted, free rider incentive is not the only incentive which motivates people, and the existence of a free rider incentive in no way guarantees that people will act on it.  People might contribute to national defense out of a sense of charity, altruism, duty etc. Not for a moment am I saying that such voluntary contributions will be sufficient for national defense. It may or may not be sufficient to provide defense optimally, but it is still a possibility. Second, government provision of such goods will create another free rider problem. The Government rests on public opinion. For democracy to work, and the Government to be restrained, people should do an enormously complex task of educating themselves in political theory and related sciences. Most people would decide to be rationally ignorant, as the opportunity cost of educating themselves might not justify the effort, as their vote is not likely to change the outcome. In short, they become another sort of free riders, who are even more dangerous, and make problems worse. Second, it is not at all evident that is only the Government which can provide public goods. Private individuals can, and have provided these services at many points in history.

The problem of public goods is entirely the creation of Government. There won’t be any such problem in a society where all property is privately owned. Bryan Caplan asks: “If ranchers over-graze the commons, why not privatize the commons? If fishermen over-fish the oceans, why not parcel out large strips of the ocean by longitude and latitude to for profit-making aquaculture? And why is education supposed to create externalities any more than any other sort of investment?”

Anyone with the slightest understanding of Economics can’t trifle with the argument that the Government might provide the optimal amount of public goods. The government has absolutely no way of knowing the optimal amount. And they can’t ask people. People might as well lie. Only profit-loss calculation and incentive system can solve the problem. Moreover, foreign aggression might be a problem only if the foreign aggressor is likely to be more tyrannical. The state doesn’t protect people in other cases. The people protect the state.

Even scholars who are not anarchists, like FA Hayek, Bertrand de Jouvenal, Norman Cantor and Bruno Leoni admit that law is much, much older than legislation. As Osterfeld puts it, “The common criticism of anarchism as inherently lawless is not only based on the non sequitur that where there is no government there is no law, it is also historically false. Law has existed from the earliest of times; legislation only recently.”

Moreover, empirical evidence completely contradicts the public goods theory. There is a 700- year history of privateering in naval defense. Most Light houses were privately owned by packaging the fee with harbor fee. The Government only enforced private property rights in these light houses. In 1820, 34 out of 46 light houses in England in the 19th century were private, and still most economists naively believe that light house is a public good. The Government eliminated public ownership of light houses as ship owners lobbied for nationalization foolishly believing that it would lead to provision of the service at a lower cost.(There would be free riders but it won’t be a problem as long as they don’t coerce others to produce those goods) Most roads were privately owned in the past. Postal service was private in many parts of the world. There is private production of security services in the form of policemen, detectives and arbitrators. Private charity exists. The market produces television and radio broadcast signals profitably, which are by the definition of some economists non excludable and public. Black market private radio broadcasts run profitably even in countries where Government nationalized radio broadcasting. Randall G Holcombe writes: “An example of a public good produced in the private sector is microcomputer software. Once the program is written, additional users can copy the program, making it available to additional users at no cost to existing users, so microcomputer software is Samuelsonian public. Because it is so costly to prevent such copying, it is also non excludable. Yet Bill Gates became one of the richest men in the world in a period of about a decade, selling a public good.” Money was privately produced. There was the law merchant in the past, as Bruce Benson has pointed out. Such a system has worked many parts of the world. There is overwhelming historical evidence to prove that these societies worked wonderfully and had sophisticated legal codes. Crime rates were strikingly low, and this includes the American Wild West which is usually portrayed as a chaotic society. In Celtic Ireland, it lasted for nearly thousand years, and in medieval Iceland, 290 years. Those were civilized, advanced societies as there was no Government administered justice. Even when these societies collapsed, it was not due to extreme anarchy, but due to contradictions in the anarchistic structure. Iceland is a classic example, where chieftains were granted more power, and religious issues led to a civil war.


There are still two major problems (ethical and economical) even if we admit that public goods exist. First, the concept of absolute ethics puts off almost all public goods theorists. If there is no objective ethics, how would it follow that these goods should be provided? It is obvious that such a conclusion won’t follow from Economics. Second, how would a Government decide in the absence of profit-loss signals how much security to provide and in what ways? Apparently, the Government has no objective way to decide. The problem is bewilderingly complex-much more complex than most people imagine. In the words of an economist: “Do we need one policeman and one judge, or 100,000 of each? Should they be paid $100 a month or $10,000? Should the policemen, however many we might have, spend more time patrolling the streets, chasing robbers, and recovering stolen loot, or spying on participants in victimless crimes such as prostitution, drug use, or smuggling? And should the judges spend more time and energy hearing divorce cases, traffic violations, cases of shoplifting, and murder, or antitrust cases? Clearly, all of these questions must be answered somehow because as long as there is scarcity and we do not live in the Garden of Eden, the time and money spent on one thing cannot be spent on another.”

Externalities-Positive and Negative

First of all, I don’t agree to the concept of “externalities”(In education, or in the case of any other good). It is more like an anti-concept. A concept should help us gain a better understanding of reality. In this case, the exact opposite happens. Of course, it is true that actions of individuals have positive or negative effects on others. But, usually, this concept assumes that some Government intervention is necessary to solve the problem, which is far from the truth.

My point is that externalities (Whether positive or negative) are a highly arbitrary concept, just like the concept of public goods-which they cite as examples of positive externalities. The problem is that we can extent it to almost everything. Everything we do influences other people-positively or negatively. It is not restricted to a few special cases, which economists have highlighted. One should either admit this obvious fact or reject the whole concept.

Walter Block asks “It surely cannot be denied that a lack of food and shelter will create all sorts of negative externalities. Were a population to be deprived of these necessities, disease, famine, and death would soon appear, commerce would grind to a halt, and the economy, indeed the very society, out of which all external benefits flow, would soon end. How can it be, then, that an increase in population does not create the need for government takeovers of the farming and housing industries, to mention only two?” Hans-Hermann Hoppe makes a similar argument: “Clearly my neighbors would profit from my well kept rose garden—they could enjoy the sight of it without ever helping me garden. The same is true of all kinds of improvements that I could make on my property that would enhance the value of neighboring property as well. Even those people who do not throw money in his hat can profit from a street musician’s performance. Those fellow passengers on the bus who did not help me buy it profit from my deodorant. And everyone who ever meets me would profit from my efforts, undertaken without their financial support, to turn myself into a most lovable person. Now, do all these goods—rose gardens, property improvements, street music, deodorants, personal improvements—since they clearly seem to possess the characteristics of public goods, then have to be provided by the state or with state assistance?”

Take the case of something which is often cited as a negative externality, pollution (Due to automobiles, for instance). At present, it is impossible to deal with it. The Government can’t fine thousands of individual automobiles. It is impossible to know whether doing it is costly or beneficial. It might even be a disastrous policy, imposing more costs than benefits. But, if roads were privately owned(It can be done, and there is no other solution to this problem to the best of my understanding), people would be free to sue the private road owner, who ensures that the road is not polluted-By imposing anti-pollution regulations, based on profit-loss calculations. Here it is obvious that it is the Government which creates the problem of negative externalities. In a free society, there is no such problem.

The problem of positive externalities too would be solved efficiently by the market. For instance, one example often brought to our attention is that of the lighthouse. In the past, lighthouse fees were packaged with the harbor fees. It was done in the past, and it could be done in the future. The same could be said of the case of street lights. Even if roads were public, street lights could be provided through voluntary contributions (This is one possibility.) The whole problem goes away when the road is private. The private road owners would have every incentive to provide street lights.

Wouldn’t Defense Companies battle?

Battles could be ruled out for two reasons. 1) Wars are costly and would result in high Insurance premiums. Most customers would desert Insurance Companies with high premiums. 2) People won’t deal with the customers of warring defense agencies as they would lose in any case. As of it, the customers of the warring agency would be forced to patronize another Insurance company, if they want to get into contracts with other people. A court too should be honest if they want more cases handed over to them. What if a rich person bribes the court of Insurance company? If that is the case, most people won’t use those courts and Insurance companies. Nothing like that happens in the case of Government courts. People are forced to use them, even if they don’t trust them.

Fraud under Anarchy

Fraud would be kept at minimum as Defense Companies would lose their profits if they don’t. If a defense company engages in fraud, most of its customers would desert it, as people won’t deal with the customers of such a defense company, as they don’t have a legal recourse in case of crimes.

Poor under Anarchy

It is often argued that poor will be defenseless under Anarcho-Capitalism. However, the argument completely lacks sense-For several reasons.

1)     It is very unlikely-nearly impossible that there would be extreme poverty as we see now under anarchy.

2)     Under the present system, a rich person can easily bribe a bureaucrat or a judge and get his things done as bureaucrats and judges are not risking their own funds. A private judge is risking his own funds and profits, and he would lose his income or profits if he isn’t honest or objective. It is very unlikely that bribery is going to work.

3)     Customers would desert courts which have a poor reputation.

4)     Insurance companies selling defense wouldn’t patronize corrupt courts as, if they do, their customers would patronize another Insurance company. Such a court would be soon out of business. Nothing like this happens under statism.

5)     One might argue that public courts can work with proper regulation. It will inevitably founder upon these questions-Who regulates the regulators? What is the incentive? How does such a system make profit and loss calculations? Without profit-loss calculations, how does one know whether job is being performed well or not?

6)     As Roderick Long has pointed out, “any court that got the reputation of discriminating in favor of millionaires against poor people would also presumably have the reputation of discriminating for billionaires against millionaires. So, the millionaires would not want to deal with it all of the time.”

7)     Under anarchy, the media won’t have to spend most of its space on politics. They would divert more of their energy to exposing corrupt institutions and extraordinary achievements of men. People won’t deal with customers of dishonest defense companies, and these customers will be forced to move to another Defense company.

8)     A rich person who commits a crime would suffer from boycott by his clients and customers when insurance companies reject him. Such a boycott affects the rich more than the poor.

9)     Even if a poor person can’t afford to file a case, he can sell that claim, or part of that claim to a rich person. Such a system existed in Iceland. That would make sure that eventually, all sorts of criminals are punished. One can’t commit a crime against a poor person and go unpunished. If someone murders a poor person, the person who has homesteaded the estate of that poor person can file a case and get compensation.

Do Anarchists assume a change in human nature?

No change in human nature is assumed here. We, libertarians don’t take a rosy view of human nature. We see human nature rightly, and admit all its flaws. Three things have to be pointed out-1) If you believe human nature is flawed, you have to admit that the politicians and bureaucrats chosen by these flawed creatures too would be of that sort, and there would be no excuse for state action. 2) A change in human nature is not necessary for libertarian anarchy to work.


3) People with power lust are more likely to rise to the top under statism. The state attracts all kinds of rascals.

What libertarian anarchy does is that it leads to a system in which criminal acts are hard to perform. It also punishes those who resort to such acts in a just manner. Under the present system, a judge has no financial incentive to be honest and objective. He has only a moral incentive. Under anarchy, he would have both financial and moral incentive. Ask yourself which system will deal with criminals better.

Isn’t voluntary taxation better?

Voluntary taxation is a contradiction in terms. Taxation implies that money is collected at the muzzle of a gun. How could it be voluntary? How could it be certain that money collected in this manner would be sufficient to provide defense and security? Moreover, the problem with monarchy isn’t just that state collects its revenues using coercion. State prevents anyone from competing with it.

Why do minarchists make an exception for defense, law and police? Some minarchists believe in the Non Aggression Principle. Why don’t they apply it to the case of Security? How monstrous is it to forcefully extort money from a person maintaining the pretense of protecting him? It could be argued that these are public goods and can’t be provided privately. But, this argument was refuted several times. In the past, most of the roads and lighthouses were privately owned. By 1800 there were over 60 private road companies in the United States and by 1830 they had built over 400 private “turnpikes” (highways). Out of 46 Lighthouses in England in 1830, 36 were privately owned. There was privately produced law in the ancient Ireland and medieval Iceland, for instance. And several thinkers have envisioned how libertarian anarchy would work- and it sounds perfect.

Why do I want to impose anarchy on people against it?
Some argue if people don’t want Anarcho-Capitalism, imposing it over them would be violating their freedom. If you tell a thief to not rob from your house, will you be imposing your views on him? If someone takes your money by force, gives you stale food, forbidding you from buying food from anyone else, is that right or wrong? If you tell that person to not do it, will you be imposing your views on him? Will you be violating his freedom? That precisely is what Government does. It forcefully takes money, gives poor quality defense, and forbid us from buying the service from private organizations.

Minarchy isn’t sustainable

There is no empirical or theoretical evidence to prove that a constitutionally limited government is sustainable. Government power has increased steadily in countries like United States and Britain. Tax experts like Irwin Schiff has pointed out that according to the law and constitution of United States, taxation is illegal. He is in jail now, and his book “Federal Mafia” is banned. That’s not an aberration, but the result of a limited Government. I admit that Anarcho-Capitalism was not the dominant form of social organization for the large part of human existence. But so wasn’t democracy or a limited Government. These are recent developments. The limited Government in United States broke down after 8 decades as of a civil war-But it took 1000 years for the near Anarcho-capitalistic system to break down in Celtic Ireland, and 290 years in Iceland. Who do minarchists support democracy and a limited Government then, when it is obvious that anarchy is far more workable?

How can one support Anarcho-Capitalism when it was never practiced anywhere?

It is true that pure Anarcho-Capitalism was never put into practice anywhere. However, that can’t be an argument against anarchy. A person who invents an electric bulb doesn’t have to prove that there were electric bulbs in the past. A new invention, innovation or theory is something which crushes all existing conceptions. It is unprecedented. I think this should be obvious and it makes no sense to argue against it.

Further Empirical Evidence: Present day Somalia

Somalia hadn’t a central Government since 1991. Yet, it has an efficient telephone system and mobile phone network, which is far better than that of its neighboring countries. The same is true of the electricity system. The situation is Somalia is much more peaceful than it was under the Government, and hence it is easier to do business there. There is a clan system which enforces contracts, though there isn’t a monopoly Government to enforce law. There was an improvement in 14 out of 18 development indicators after the collapse of the state in Somalia. One indicator was the same, and the other one, GDP, was blown up by the Government during its rule. Peter Leeson points out that “Under statelessness life expectancy in Somalia has grown, access to health facilities has increased, infant mortality has dropped, civil liberties have expanded, and extreme poverty has plummeted. In many parts of the country even security has improved. In these areas citizens are safer than they’ve been in three decades.” Even World Bank Economists like Tatiana Nenova and Tim Harford admit that things are getting better in Somalia. These Economists aren’t anarchists by any stretch of imagination.

Can law be placed under competition?

Why can’t it be placed under competition? We are not placing the concept of rights under competition. We are placing the laws derived from the concept of rights under competition. For objective law to emerge there should be competition. One argument quoted (Of Isabel Paterson) in Ayn Rand’s “Capitalism” is that for Objective truth to win in education, it should be put under competition. That’s true of law too. No single person or body should decide on a particular set of laws and force it on people. This argument is similar to the statist argument that education is too important to be subject to the vagaries of competition. If there is objective truth in education, why should be it subject to competition? Why can’t it be provided by an agreed up body? The answer is: To reach the objective truth, competition is necessary in education, as in law. As FA Hayek (who was not an anarchist) wrote, “The most dangerous person on earth is the arrogant intellectual who lacks the humility necessary to see that society needs no masters and cannot be planned from the top down. The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

Won’t Competition lead to contradictions in law?
The laws will be the same for all private defense agencies. Or there will be a tendency towards a common, agreed upon law. You just have to look at the present world to come to such a conclusion. All floppy disks and CD ROM’s fit into the existing systems. The same is true of ATM cards. There is no law prescribing that this should be so. But, if someone producers an incompatible CD ROM, he will be soon out of business. That’s true of incompatible law and “contradictory interpretations”. It simply won’t happen. Imagine the worse-It happens. So what? Most countries or even states have different laws. But it doesn’t lead to irresolvable conflicts.

Isn’t the Government a neutral body and is more likely to be objective?

Government is not a neutral body. Everyone has biases and prejudices, and Government judges are not exceptions. They are likely to be biased in favor of the Government. It is easier to bribe a Government judge, politician or bureaucrat and get ones things done. They have nothing to lose. They don’t have incentives. There is no strong reward and punishment mechanism in the system. There are no profit-loss calculations. But, a private judge loses his reputation, profits and eventually his job if he is not honest or Objective.

Will not objective law prevents the Government from initiating force?

A Government should begin by initiating force, in any case. Let’s assume a Government which never punishes an innocent person-How does the Government get its revenues from? By taxing people-coercion! There is no other way. What If I don’t wish to live under a Government? Won’t I be coerced? What if I wish to compete against it? Won’t I be coerced? People can’t rely on re-elections or “democracy” to mend the system. Deciding policies require extremely complex thought, and even the most intelligent and educated people are not in a position of voting on them-As there are no market signals for voters.

What happens to a customer of the Bloods gang, when he gets into a dispute with somebody from the Crips gang? Does he receive equal, fair and just treatment? Not bloody likely.

If this is true, who would deal with a customer of the Crips gang? No sane person. So, there is a strong financial incentive for the Crips PDA to be fair with someone from Bloods PDA. Otherwise, who would deal with it customers? If no one would deal with its customers, won’t its customers desert the PDA? So, won’t it be soon out of business? If this can be as easily refuted as this, we won’t be holding such an absurd notion. This was an argument of Ayn Rand and her followers who have never bothered to read anarchist literature.

Won’t Anarchy lead to gang warfare?

A classic case of such anarchy (and gang warfare) cited was Iraq, but such arguments do not hold much water. Don’t forget the US presence in the case of Iraq. The same was said of Sicily. But Italian Government has an influence there. Such arguments are as valid as saying that violence will happen in drug and liquor industries –which obviously are a result of Government coercion and interference. Gang warfare and takeover of mafia (Ayn Rand raised such an argument) can happen only if there is a coercive atmosphere. A more cooperative system is in Somalia, which is stateless. There is much order there after the collapse of state, and it showed great improvement in almost all development indicators. It is not an utopia, but people are better off without a state.

Is there any guarantee that PDA’s won’t initiate force?

It is true that the Government or a private defense agency can initiate force. But, a Government has to initiate force. There is no other way. But, a private defense agency, by necessity, doesn’t have to initiate force. And more importantly, a PDA can’t externalize the cost of aggression onto citizens-But, the Government can externalize the cost in the form of taxes. Moreover, under Government coercion is guaranteed. In the case of a PDA, coercion is only a possibility!

Is there any empirical evidence to support the viability of Anarcho Capitalism?

Firstly, this argument is invalid as economics and political science are not empirical sciences. Anarcho capitalism was not practiced in most parts of the world for most of the human history. However, there were societies which were really close to Anarcho-Capitalism.. Such a system has worked in Iceland, Celtic Ireland, American old west, British colonies in North America, Rhode Island, Albemarle, and Pennsylvania.

If you want to reject anarchy as it was never practice everywhere, you will have to reject minarchy too. Absolute minarchy was never practiced anywhere. Minarchists believe in a free banking system and gold standard. They will have to reject both as there was never a fully consistent gold standard or absolutely free banking in the past. I have asked this quesion to several minarchists. They were not willing to be consistent in their positions. What matters is logic, not empirical evidence. In Economics, facts don’t prove or disprove a theory.

If PDA’s are a viable model, who don’t PDA’s emerge despite of the Government?

PDA’s will find it impossible to act in a non-coercive manner under a Government even if it were allowed to function Imagine I am a customer of Bloods PDA and you are a customer of Cribs PDA. Both these PDA’s, let’s assume, runs Insurance companies. You rob me. I take the case to a common arbitration agency. The arbitration agency finds you guilty. Now, Cribs PDA will have to compensate me, and make arrangements to garnish your wages. This will work alright only in the absence of a Government. If a Government exists, why should you cooperate when Cribs garnish your wage? You would have to fear Cribs only if Cribs initiates force. A business boycott can’t work, as people will continue to deal with you as long as the Government exists-because they have a change of legal recourse in case you commit a crime. And why should Cribs pay you? People will deal with its customers as long as the Government exists. In the absence of Government, Cribs won’t have to initiate force against you. It just has to tell you that no one will deal with you if you don’t pay half your wages, for instance, to compensate me. If Cribs doesn’t do it, no one will deal with the customers of Cribs and Cribs will soon be out of business. So, if a Government exists, PDA’s have only one option-To fight it out, as long as they can get away with it! This is what statists have in mind when they liken PDA’s to mafias and gang warfare. They are completely mistaken.  Ayn Rand repeatedly pointed out that statists blame Capitalism for the faults of Government intervention. This exactly is what you are doing in this case.

PDA’s will become a state.

If you fear the possibility that a PDA will become a state, by what logic do you support the state? You are in the position of someone who supports a Government monopoly in the fear that a private firm is likely to become a monopoly. This again, was something refuted many times. You always have the option of stop patronizing such a PDA.

PDA’s have an option of inititating force which they might use against its customers.

It is, of course, true that there are two ways in which PDA’s can settle disputes. One is through force. The other is through mutual cooperation. So, why do I think that they will not resort to force? Firstly, I don’t think they will never resort to force. That’s a remote possibility. But, there is too much evidence, that if left to themselves, people will find ways to resolve their disputes peacefully, as they tried to do in many historical cases in the past. There is even a book “Order without Law’, which explains how people settle their disputes peacefully without resorting to law. What anarchy does is to make co-operation and respect of law profitable. There are of course, irrational people who don’t care for long term profits. But, such people will exist even in a Government run society. The difference is that under Government, they profit financially from their irrationality and corruption. Under anarchy, they lose. There are several reasons why under anarchy, PDA’s are not likely to resort to force 1) Force is non-productive and costly. 2) It will alienate customers, who find that no one wants to enter into a contract with them. 3) Using force will result in high insurance premiums for customers, which will further alienate them. 4) One can always look at the present world. Legal conflicts between ordinary individual citizens usually don’t result in wars between nations even though Governments can externalize their cost of aggression. So, how likely is it that PDA’s will do it when they have no way of externalizing their costs?

Human nature is flawed and is not consonant with anarchy.

State is a relatively new institution. Mankind has lived hundreds of thousands of years without a state. If so, is it true that human nature is not inclined to live under a state? How come we are living under a state then? Slavery and serfdom existed for a long time. Doesn’t that mean slavery is consonant with human nature? If so, how men got out of it? Obviously, when people realized the advantages of co-operation, people shifted to the present system. When people realize the advantages of anarchy, they would move into such a system. No change in human nature is required. Blaming human nature for being flawed doesn’t make any sense. People are mostly corrupt under the present system as people respond to incentives. Under statism, men have every incentive to be corrupt. To say that anarchy won’t work as human nature is flawed is tantamount to saying that capitalism won’t work as most people are poor. A person who makes such an argument fails to understand that it is precisely the lack of Capitalism which made the people poor.

It is irrelevant whether human nature is good or evil (rational or irrational). I have never thought of anarchy this way, and I don’t know any individualist anarchist philosopher  who made such an assumption. There is no need at all to imagine such a miraculous transformation of human nature. Some people are of course, irrational and evil. Under statism 1) Such people get to power as power attracts people who enjoy wielding power 2) Politicians always have to make promises, which are usually evil and requires force in its implementation. If most people are evil, more evil will be the promises they have to make. Politicians who rise to power in this manner are likely to be much, much more evil than PDA staff. 3) Even if the person who gets into power is reasonably good, he will be continually tempted to be evil. Power corrupts! PDA’s don’t really have any serious power. There are necessary checks and balances under anarchy. They have to bear the consequences of their irrationality. Politicians don’t.

Second, when one says many people are irrational and evil, they reach that conclusion by looking at the present world. It is as if someone is looking at Nazi Germany or Soviet Russia, and concluding that concentration camps and forced labor camps are the lot of mankind, and these things are here to stay-which is far from the truth. The problem is that at present we have a system which rewards the evil and irrational. Don’t blame human nature for the evils of statism!

How do profit loss calculations lead to order in security production?

To take some concrete cases, to demonstrate how profit-loss calculations work in law enforcement:

1)     If an insurance company sets its level of compensation extremely high, it won’t have many customers. If it sets it extremely low, no one will deal with its customers-and hence it will not have many customers. So, profit loss calculations lead to a reasonable amount of compensation-which means: justice.

2) If a private court is not honest and objective, it won’t make profits. So, profit-loss calculations lead to honest, objective decisions-justice. Even if a Government judge wants to be objective, he won’t know what means an objective decision, because he doesn’t have profit-loss signals. If a court hands out severe punishments, most people won’t agree to avail the services of the court. If the punishments are too mild, then too most people won’t make use of its services.

3) If a policeman in jail turns sadistic, customers will switch jails, and jail owner will lose profits. Here profit-loss calculations will lead to just, human treatment of prisoners.

4) If a law breaker knows that he will have to compensate his victims by an amount higher than what he hopes to gain, it will be a deterrent.

5) If a defense agency uses force against people who are not its customers, as I have been telling repeatedly, no one will deal with its customers. Hence, here profit-loss calculations lead to peaceful interactions between customers of different PDA’s.

I could go one and on, because each and every decision of a PDA is based upon such calculations and these calculations bring order in the market

Isn’t the fallacy of anarchy apparent when we look at how a road would be if there is no traffic police?

No one ever said that there shouldn’t be traffic police in road. Here too profit-loss calculations come into play. A private road owner will decide whether to employ policemen based on these calculations. If the road rules are too strict, most people will not use the road. If they are too lenient, it will lead to more accidents, and hence, then too, people will not use the road. So, these calculations lead to just, reasonable rules on the road.

Leave a Comment

Your email address will not be published. Required fields are marked *