The Case For Libertarian Anarchy

It has become the dream of every social democrat to brand himself as a classical liberal. Every such “limited Government” statist is a socialist in disguise, as unaware of it he might be. When he criticizes Central Planning or interventionism, he never really believes his own words. If he does it at all, he doesn’t appreciate it as much as he should. All this is true of Sanjeev Sabhlok-former “Aristocrat of the Bureau” who later found a more comfortable shelter in the Department of Treasury and Finance, Victoria, and is presently nurturing grandiose political ambitions. The emperor of the world’s largest democracy, that is. He even promises to sacrifice his Australian citizenship and return to his motherland if he clearly gets a signal that India badly needs his social engineering.  A laudable act of self abnegation, it would be! His viable solution to India’s mis-governance is critically important for our survival and success, he patronizingly reminds us.

Sanjeev Sabhlok’s critique of libertarian anarchy strengthens my position that every statist criticism of anarchy actually projects all the evils of the state on anarchy.  I was filled with dismay after a casual glance at his ad hominem attacks on innocent anarchists. We are utopian dreamers with no understanding of social contract, red-tapism or the free rider problem and still spend our time conjuring up imaginative schemes. What’s worse? We haven’t ever drawn up any real contract in our life! Is there any good thing to be said of his article? Yes. Finally, the harsh reality has struck him that anarchists are not simpletons who believe that all human beings are angels. And that is it.

His objections will be dealt with one by one.

“The state rests on an implicit social contract.”

In a manner eerily reminiscent of Christian Economist Gary North’s threat, “God will not be mocked”, Sabhlok enlightens us: “The social contract is as real as it gets.”

The simple truth is that there is no such thing as a social contract which binds all the people who live under a particular geographical location. If I walk into your home, it is true that I implicitly consent to play according to your rules. If I have problems with it, I certainly have the option to walk out. One can now see an unwarranted stretch in the “social contract” argument. Is it not true that people have the right to emigrate? If they haven’t, isn’t it obvious that they have consented to the rules and regulations of their native country? So far so good! However, there is one unpleasant fact. You have legitimate ownership over your house. The state, which is, in the words of Hans-Hermann Hoppe-“an institution run by gangs of murderers, plunderers and thieves, surrounded by willing executioners, propagandists, sycophants, crooks, liars, clowns, charlatans, dupes and useful idiots — an institution that dirties and taints everything it touches” -doesn’t have any legitimate jurisdiction over its territory.

Imagine me asking you to promise me that you will live according to a set of rules of that of mine. According to the social contract argument, I have the authority as of your consent and you are supposed to consent as of my authority. The circular argument must be clearer than crystal by now. I expect the argument that the consent of the majority legitimizes my authority. Things are not that simple, however. It would run into the obvious objection that no other person has the right to express his consent for you. If John has the right to consent for himself and Jim, why hasn’t Jim the right to consent for himself at least? Finally, if the Government has legitimate jurisdiction over its territory, why don’t you have legitimate ownership over your own property? Anything more to be said?

The claim that people will topple despotic Governments the moment they stop “ensuring a modicum of security of life and property” doesn’t hold much water. What does “a modicum of security of life and property mean” in any case? If the Soviet system under which generations starved and perished was overthrown in a moment, how long is the moment? I do not understand. I never understood. It is typical of people everywhere in all periods of time to have a strong status quo bias which acts against any violent revolution. The policies of the Government should not just be tyrannical. People should perceive them to be tyrannical. More: The majority should find them oppressive. And more: The majority which would have found it oppressive should decide to revolt against it ignoring the severe threat against their own life. And more: People are expected to ignore the threat to their own life when their chances of affecting the outcome of the revolution are close to zero. The free rider problem under democracy is bad enough. But the ones involved in a revolution are worse. Under democracy almost all free ride as the benefits of educating themselves in politics is far less when compared to its costs. Under a revolution, the cost might as well be death. What more is needed to rein in a revolution?

Bryan Caplan writes: “By 1933, despite mass starvation and millions of deaths, private agriculture was virtually eliminated.  There is no reason to think that Soviet public opinion became more favorable to collectivization during the NEP era.  All historical evidence indicates that Stalin’s policy was exceedingly unpopular.  The hostility of Soviet opinion toward collectivization may have moderated with passing decades, but Stalin’s policies cannot be explained away as a short-run aberration. “In the words of Gordon Tullock: “There are undeniably individuals with strong public interest who are willing to take great risks or sacrifice their lives to benefit other people.  This is particularly true if religion can be brought in. It turns out that such people are fairly rare, however. I don’t want to swear that there have been no cases in history in which the people have risen and disposed of a tyrannical leader, but I have never come across a clear-cut case.”

“The endless contractualism implicit in the libertarian anarchy is unduly burdensome.”

One thing could be easily conceded: The social contract doesn’t, and shouldn’t bother an ordinary citizen-in the sense that he has no way to have any impact upon the social contract except by emigrating. It is never endless, but for the fact that life under the state would occasionally mean endless paper work, and that he has to kowtow to ones in power and grovel in front of haughty bureaucrats whenever he is supposed to do so. It is never pleasant, but a price to pay for avoiding endless contractualism, it is argued. The arrogant elitism notwithstanding, all this is nonsense. No one argues that dull masses can’t remember all the groceries they need to buy and hence the “Mommy state” should buy it for them by mulcting them in advance. Truth is far from the statist notions of anarchy. The ordinary citizen doesn’t have to understand the legal codes of various enforcement agencies any more than he should understand the code of a new Operating System he buys. It is hardly necessary.

Pre-existing contracts would ensure that legal codes would be largely similar, as uniformity would reduce transaction costs and red tapism. It all would result in larger profits for enforcement agencies. Contra statists, red-tapism is an argument against bureaucratic management, which is not a characteristic of market institutions.  A private organization could be bureaucratic only to the extent to which it is strangled by Government regulations. Ludwig Von Mises writes in “Bureaucracy”:  “The bureaucrat is not free to aim at improvement. He is bound to obey rules and regulations established by a superior body. He has no right to embark upon innovations if his superiors do not approve of them. His duty and his virtue is to be obedient. For you are appointed, sworn, and paid to enforce the law, not to break it. The worst law is better than bureaucratic tyranny.” This, as one can easily see, is the root cause of red tapism.

It is not at all necessary to draw up contracts every moment one enters an interpersonal dealing. If non-contractual dealings are more profitable, people will rely on it. Registering ones personal information would be sufficient in many cases. In many cases, it would be the case that one needn’t even do that. If that would mean difficulty in hunting down criminals, the same would apply to the state too. There will be pre-existing agreements between law enforcement agencies and customers for what we consider as implicit contracts now, so that they need not have to resort to contractual agreements at every phase in their life. The central point however is that it is far easier to choose a beneficial legal code immediately binding on him than being forced to choose a legal code which is binding upon the whole society. Why deny the choice?

“Anarchy can’t overcome the free rider problem, leaving people defenseless against foreign attacks.”

War is never justified, even in self defense as it is impossible to avoid civilian casualties in modern means of national defense. Certainly, it looks like a “sissy” point of view, way too idealistic and hopelessly out of touch with hard facts of reality. As usual, truth is often more complex than simplistic notions of hawkish warmongers. There is no evidence that even a war in self defense would serve its supposed purpose.

Roderick T Long reminds us: “Nonviolent resistance may sound impractical; yet sustained and widespread nonviolent resistance ultimately drove the British out of India, the French and Belgians out of the Ruhr, the Kapp Putschists out of power in Weimar Germany, and racial segregation out of the United States. Nonviolent resistance — “the secession of the plebs” — was also used effectively in ancient Rome by the plebeians against the Senate; and nonviolent resistance by war protestors in this country played an important role in ending the Vietnam War. Nonviolent resistance also had a significant impact against the British in the early phase of the American Revolution, and more recently against totalitarian governments during the Fall of Communism. Nonviolent resistance often fails, of course, as the blood of Tiananmen should remind us. But violent resistance often fails too. It’s worth considering whether, to what extent, and under what circumstances nonviolent resistance could be an effective tool of national defense.” Bryan Caplan cites historical cases of non-violent resistance: “The nations which nonviolently resisted National Socialist racial persecutions like Norway, Denmark and Belgium saved almost all of their Jews, while Jews in other Nazi-controlled nations were vastly more likely to be placed in concentration camps and killed.”

Even if we wrongly concede for the sake of an argument that non violent resistance won’t work, it is irrelevant. The market can get around the free rider problem, as it has done in the past. There is a seven hundred year old history of profitable privateering in naval defense which is well documented, and brought to our attention by late Larry Sechrest. : “With a permit issued by his government, the offended party could arm one of his ships and go searching for merchant ships flying the flag of the perpetrator’s nation. If he encountered such a vessel and was able to subdue her, he could then sell the ship and its cargo at auction and pocket the proceeds.” Tannehill’s, Hoppe et al. have proposed private insurance as another means of defending a nation. Walter Block dreams of private defense agencies “issuing signs to its clients, a large plaque for their homes, stores, and factories, and a small lapel version for their persons.” Good enough?

“Excessive duplication arises as well, form the multitude of suppliers trying to provide the same services. All this leads to a terrible waste of scarce resources.”

Each and every word of this argument is wrong. Socialists once objected to Capitalism on the same grounds, and claimed that in their ideal word such duplication would be done away with and efficient allocation of resources would result. Efficient allocation of resources, indeed! The economic calculation problem posed by Ludwig Von Mises has enormous implications. Harold Demsetz and Murray Rothbard, among others had dealt with it adequately several decades back. What matters is not duplication as such, but sub-optimal levels of duplication. The market price system informs us of the opportunity costs of sub-optimal duplication and other forms of overutilization. Overutilization can happen without duplication and duplication doesn’t necessarily mean overutilization. Sub-optimal duplication on a large scale is always a result of Government intervention which interferes with the market price system. Whether a particular locality needs multiple providers of public roads is dependent on whether the profits accrued to the new service provider will justify the additional investment. What should be the objective standard adopted by the planners in a social democratic country in rationally allocating scarce resources? It should be obvious that there are none at all! All they could do is to randomly choose on whim or substitute the voluntary preferences of consumers with that of their own, as they do at present for the large part. In the words of Murray Rothbard, it is an institutional question which is to be answered only in the light of market signals.

Walter Block clearly makes the distinction between ex ante perspective and ex post perspective in an investment. Unprofitable investments can happen in an ex ante sense only when the entrepreneur intends it. As long as it is so, it is an arbitrary preference of grumblers to ignore the psychic profit of the entrepreneur and classify it as a wasteful investment. It is obviously true that unintended wasteful duplication can happen on the market of entrepreneurial errors and can be identified from an ex post perspective. Stating this fact is far from proving that the planners can do better. It is highly doubtful that even an Ex-bureaucrat like Sanjeev Sabhlok would go far enough to claim that Government planners would do a better job in eliminating entrepreneurial mistakes. If that was the case, he could as well become a socialist, if consistency is any virtue.

“Huge Transaction costs are involved in negotiating hundreds of tiny contracts.”

To begin with, it is impossible to eliminate negotiations problems and transaction costs in interpersonal dealings on the market. Government monopolization of so called public goods would only augment transaction costs with much more disastrous management costs, which are much higher under the state than in the market. Contra statists, Private law enforcement would only reduce the transaction costs.

Co-operation is the one of the most significant factors which reduces transaction costs involved in law enforcement under anarchy. Ronald Coase tells us in “The Nature of the Firm” that transaction costs could also be brought down to a large extent by command and control methods, which are not allowed to cross its efficient point by the pressure of competition. Legal costs could be cut down by various experimentations which are unlikely to be done under a public monopoly system which has no financial incentive or objective standard to cut down costs.

Legal diversity under anarchy could mean huge transaction costs in negotiating different law codes between customers of different enforcement agencies. However, this is hardly necessary. It is in the rational self interest of enforcement agencies to decide upon a single law code and arbitration agency. 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. As Roderick T Long points out, 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 as a rule. Imagine the worse-It happens. So what? Most countries or even states have different laws. But it doesn’t lead to irresolvable conflicts with which statists are dissatisfied to the point that they feel like breaking with the system.

To quote Bryan Caplan: “In the medieval society, canon law, royal law, feudal law, manorial law, mercantile law, and urban law co-existed; none was automatically supreme over the others. Naturally, there were jurisdictional conflicts. But this system of concurrent jurisdiction overlapped with a period of economic and political growth, not a period of chaos and impoverishment.”

The Law merchant evolved in the middle ages and early renaissance when conflicts ensued as there was no uniform law code binding merchants in different countries. They went on to have their own system which was uniform and predictable, ignoring the states across nations, which by itself proves that only market law can meet the needs of all people concerned. The market provides what customers want. Even if it provides diversity in legal codes, it doesn’t prove anything. If the customers need diversity, they deserve to get it too.

As David Friedman argues, though internalization the welfare of customers won’t be perfect in a word with information and transaction costs as of non-discriminatory pricing and negotiation costs, the set of legal rules will tend towards efficiency under libertarian anarchy. Law enforcement agencies would do a job which is not always perfect in optimizing its strategy. So what? It doesn’t mean anything when we have nothing better to replace it.

Commercially feasible electronic sensing devices/automated vehicle identification systems can vastly reduce transaction costs in the case of private roads. Magnetically encoded stickers can be pasted on vehicles and their passage could be tracked with the help of machines or sensors, and monthly bills could be sent out.

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. They were all run on profits. There were societies which were really close to Anarcho-Capitalism. There was privately produced law in the ancient Ireland and medieval Iceland to a large extent, for instance, and there is immense evidence that these were advanced with sophisticated law codes.  Such a system worked in “Iceland, Celtic Ireland, American old west, British colonies in North America, Rhode Island, Albemarle, and Pennsylvania.”

“McGuire and Olson’s Stationary Bandit”

Sabhlok, following the lines of McGuire and Olson, argues that “A secure autocrat has an encompassing interest in his domain that leads him to provide a peaceful order and other public goods that increase productivity”, and hence, even a dictator is preferable to anarchy. The problem with it is not so hard to see. Bryan Caplan contends: “First, a ruler’s expected tenure could easily go down as his nation’s prosperity goes up.  A more prosperous nation is likely to have more contact with the outside world, undermining not only the loyalty of the public, but, more importantly, the loyalty of the military and other elites.  Second, the ruler of even a poor country is likely to be so rich that his marginal utility of additional wealth is low.  Other motivations – like ideological purity, or ordinary vanity – could easily take precedence over dictators’ desire for greater riches.”

“Human beings should evolve to an advanced stage for anarchy to work.”

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 or evolution is required. However, there is a kernel of truth in this argument and it is this: Achieving anarchy requires the appreciation of complex issues on the part of the masses at least on a broad level, and it can be safely said that it will not happen in our lifetime.


Randy Barnett-Restoring the Lost Constitution

David Friedman-Law’s Order

Lysander Spooner-No Treason-The Constitution of No Authority

Murray N Rothbard-Man, Economy, And State

Hoppe-The Myth Of National Defense

Roderick T Long And Tibor Machan(Ed.)-Anarchism/Minarchism

Ludwig Von Mises-Economic Calculation In The Socialist Commonwealth

Ludwig Von Mises – Omnipotent Government

Ludwig Von Mises-Profit And Loss

Reisman-Government Against Economy

Etienne de La Boetie-The Politics Of Obedience

Hoppe-Democracy, the god that failed

Morris & Linda Tannehill-The Market for Liberty

Walter Block-The Privatization Of Roads And Highways

Roderick T Long-Defending a Free Nation

John Sampson-Limited Government, An Impossible Dream

Nicholas Dykes-Mrs Logic And The Law

Hummell-Defense, Disarmament And Public Goods

Roderick T Long-Why Objective Law Requires Anarchy

David Friedman-Anarchy and Efficient Law

Roderick T Long-Libertarian Anarchism: Responses to Ten Objections

Bryan Caplan-Mises’Democracy-Dictatorship Equivalence Theorem: A Critique

Bryan Caplan-Rational Ignorance vs. Rational Irrationality

Bryan Caplan-Mises, Bastiat, Public Opinion, and Public Choice

Bryan Caplan-The Economics Of Non State Legal Systems

Bryan Caplan-The Literature of Nonviolent Resistance and Civilian-Based Defense

Hoppe- The Property And Freedom Society — Reflections After Five Years

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