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Source link: http://archive.mises.org/2390/protection-and-the-market-for-security-lecture-28-of-32/

Protection and the Market for Security (lecture 28 of 32)

August 23, 2004 by


These notes are from the lecture Protection and the Market for Security, given at the Mises University. Any errors are mine, feel free to point them out so that I can correct them. This lecture was given by Prof. Hoppe.



Hobbesian Mythology


  • State of nature — war of all against all: one man is another man’s wolf.


  • To get out of this predicament, we have to create the State.


  • The State is Sovereign:


    • Ultimate judge in every conflict.
    • Ultimate judge in conflicts that involve itself.
    • Territorial monopoly of taxing power: it charges a price for protection services without having anyone’s agreement.


  • Immediate problems:


    1. Whoever it is who is elevated to the level of the STate, he himself must also be a wolf. This immediately sheds doubt on the
      plausibility of this scenario.
    2. If we construct a group small enough — two individuals — neither can ever cooperate with eachother, so one must be the master, the
      other the serf. Yet, we see that all around the world, small groups of people cooperate. Why should it be different for a large group of people, which is just a multitude of bilateral relations?
    3. What can we expect of this institution?
      • Order/peace between citizens
      • If not suppress private crime, would have nothing to tax.
      • But, you’d also expect such of a protection racket — protection rackets create Hobbesian war.
      • Suppress other protection rackets — or non-aggressive competitors — to maximize profit.

    4. Once we have the State established, the problem that gave rise to the State occurs on an international level: the war of States against
      other State. Hobbes must propose a world-wide State.
      • Isn’t this just a big protection racket?
      • How is this convincing? This would be world-wide tyranny.





Empirical Evidence Against The State


  • The view of the Founding Fathers was the the State provides protection against internal and external violence.


  • The US has done something very different from that.


  • 40% of the money we earn is taxed away (stolen).


  • Inflation: purchasing power of $1 today is less than that of $0.01 when the Federal Reserve was created.


  • Growing body of laws: thousands, tens of thousands, of laws are created yearly:


    • Make things that were legal yesterday illegal today.
    • Make things that were illegal yesterday legal today.
    • How can you know what is or isn’t your property, or what you can or can’t do, under a system where the rules are arbitrarily changed on a constant basis?


  • Wars, foreign policy:


    • 600,000 died in the Civil War.
    • The US is the most imperialist country since 1879:
      • Spanish Civil War
      • World War I
      • World War II

    • Meddled in foreign affairs: China, Korea, Indonesia, Cuba, Quantico, Peru, Vietnam, Cambodia, Yugoslovia, Grenada, Libia, Nicaragua,
      Panama, Iraq, Bosnia, Afghanistan.
    • There hasn’t been a single year in which we haven’t attacked other countries in some manner.



Reaction


  • Can’t deny facts.


  • But you can attempt to immunize your hypothesis: “the Constitution was great, but various things went wrong.” In other words, despite all the problems, it was not the problem with the Constitution, and various other excuses.


  • They don’t say that there’s something structurally wrong with a Constitutional government via a State; instead, they make a bunch of excuses:


    • Some other Presidents.
    • Few Amendments.
    • Various details of the Constitution and implementation.



Argument Against the Constitution


  • It is impossible to use a State to obtain protection.


  • The State is a geographical monopoly on taxes, that is supposed to protect property.


  • There is an inherant contradiction: The State is supposed to protect propery, yet it necessarily expropriates property. How can an institution which is always the judge possible by just? There is a permanent perversion of justice in favor of the State.


    • Constitutional courts are part of the institution of the State.
    • Inherently, the State will expand its own power.


  • How many resources does the State need to produce its “services”?


    • On private markets, consumers direct resources.
    • The State will use more rather than fewer resources.
    • As soon as the consumers do not determine this, the answer will always be the same — more resources to produce security, while the
      quality of the work (security) decreases, because the State can tax.




Alternative: Free-Market Protection


  • Competing insurance companies:


    • Police
    • Courts
    • Detectives
    • Prisons
    • Etc, all either joined or separate


  • All would be voluntary, being able to exchange one thing for another.


  • In contrast to the State, the tendency would be for prices to protect property would fall. Prices, the premium we’d have to pay for protection, would tend to fall.


  • No over-production. Whatever is spent on one thing can not be spent on another. Consuemrs determine how many resources to allocate to security vs. other things.


  • Insurance companies indemnify you if they haven’t fulfilled their obligations. Does the government do that? No. Why should they.


  • Prevention:


    • What is the incentive of the government to prevent crime? Very little to none: lots of crime, yet the State can always ask for (take)
      more money.
    • Insurance companies want to prevent crime, so as not to have to pay out.
    • Insurance companies also want to prevent crime to compete for customers.


  • Compensation — want to be compensated for any wrong done against you


  • Catch criminal:


    • Try to catch the criminal. Usually, the State doesn’t even find the criminal.
    • Do they force the criminal to compensate the individual? No.
    • Private insurance companie have a motive to do that.
    • Instead, the State puts criminals in prison with luxeries (paid for by the taxpayers, which includes the victim).
    • Private agencies would put criminals to work to pay their victims.


  • Stability:


    • State changes laws yearly, all year round.
    • Private agencies would have constant rules, to compete with one-another.


  • De-arment:


    • States de-arm you, so they’re a protection racket.
    • Insurance companies would encourage weapon ownership, encourage competence, and charge lower rates for it.


  • Wealth-redistribution:


    • No geographical wealth-redistribution under insurance.
    • Pay more dpending on the region and desire for safety.
    • State forces one group of people to support another group of people.


  • Insurance agencies would encourage peaceful behaviour, so they wouldn’t have to pay out.


  • Victimless crimes — insurance agencies wouldn’t waste resources on victimless crimes.




Alternatives: Courts


  • If the conflicting parties have the same agency, then they’d go to that agency.


  • If the conflicting parties had different agencies:


    • Companies agree — verdict enforced.
    • Companies disagree: provisions offered:
      • Independent arbitrators.
      • The independent arbitrators incentive would be to come up with a judgement that insures they’ll be selected for appeal again.
      • Won’t b e chosen again if their judgements aren’t considered fair.
      • Incentive is to come up with a universally accepted set of principles of judgement guiding the situation.
      • As unrealistic as this may sound, it already exists and works on the international level between citizens.




Alternatives: How do these free, Stateless territories defend themselves against States?


  • They’d be much wealthier than States.


  • Heavily armed.


  • Whenver a State attacks somebody it needs a justification for invading — soldiers might not follow orders:


    • No provocation from free territories.
    • Incentive to repress crazies.
    • Very difficult to persuade a nation to attack an area that has done nothing; so, no public support, and need public support all the way down to soldiers.


  • If the State invades, it would be a guerilla war.


  • Anarcho-capitalistic societies would have an incentive to specifically kill the aggressors — the politicians. Anarcho-capitalistic societies would have precise technologies.

{ 2 comments }

Mark Humphrey August 24, 2004 at 3:28 pm

The issue of a mini-state versus market justice is difficult to sort out, because nearly all of human experience–of which I am aware–involves states, or other coercive institutions. (I’m also aware of examples of anarchism–including the gold camps of the American West.)Scant historical example does not refute market anarchism, but does make the inquiry more reliant on theory, with not very much grounding in historical experience.

A Randian blog raises this objection (among others) to market justice: because individuals and subcultures embrace differing ethical perspectives–abortion versus lifers, for example-
violent retribution and feuding would become the rule, which violence must be subjugated by “the rule of law”.

However, I suspect that this conclusion overlooks the fact that incentives for quarreling under statehood are very different from the incentives that would prevail under a purely market order. Today, people have incentives to actively pursue aggression against other sorts of people whom they dislike, (sometimes because of differing ethical outlooks), because the costs of aggression are socialized by the state. The winner in the contest for the state’s sanction gets to destroy the losers. Moreover, these waring factions have no incentive to back off and chill out, because any faction that backs off will still face the prospect of other factions seeking state intervention against its rivals. So, what we see today, in some ways, seems to approximate Hobbes’ view of the state of nature.

On the other hand, in a private law order, perhaps the incentives to engage in blood feuds with rival ethical tribes would go way down. The cost of feuding would necessarily be borne, not by all people across society, but rather by the feuders themselves. These costs would not only include having to cough up considerable cash for the purpose of waging acts of piracy or Holy Wars, but would also include very substantial commerical opportunity costs. A pretty good example, here in the USA, of such opportunity costs imposed on those who resort to piracy are American Indians. A non tribal individual who conducts business with a tribal member on the reservation, and who winds up in a dispute with that Indian, must attempt to defend his rights in a tribal court, which does not exist to dispense justice according to private property rights. Some Indians are honest and reliable. But virtually all Indians–especially those who remain on reservations–suffer lost opportunities
because of the risks non-tribal members perceive in commerical dealings with tribal members.

I’m not clear or resolved about anarchy versus a mini state, because I haven’t thought it through carefully. However, it does seem obvious that a private law order would soon deteriorate into antagonistic, geographically-centered encampments, just as a mini-state would soon deteriorate into ever bigger and more oppresive government, in the absence of one, central, cultural requirement. That requirement is the embrace of reason–as opposed to religious faith or epistemoligical skepticism–by the cultures in question. If this claim sounds far-fetched, please take 10 minutes to read Ayn Rand’s “The Roots of War”.

Ike Hall August 28, 2004 at 9:34 pm

Mark,

If it were true that the private production of defense were to immediately create an escalating conflict of all against all, I would be fighting pitched battles every day just to get home, since there are surely many people in my area who own guns. Individual ownership of a means of defense is the same as private defense, writ small. The fact that there are more private security guards than police in the US also disproves the argument. Mall security protects the mall, bank security protects the bank. Both groups are armed. Neither pays any attention to the other or to the property the other guards, even if they work for different companies.

The situation would be identical in an area where the production of defense is private. Homeowners can, singly or multiply (for group discounts), contract for protection services. Insurance companies would likely insist that you had some form of protection, or they could provide it themselves.

Would there be free riders in a neighborhood where most of the owners have private protection services? Oh, sure. Criminals would be extremely leery about breaking into a house in a neighborhood where effective private security existed. (Understandably, criminals mostly choose neighborhoods that are patrolled–or not–by government police.) Unless they had to have a private protection service by covenant, there may be some people who decide to forgo the expense. But no one would offer free riders indemnification on the off chance that a criminal did break into the house. I’m pretty sure the neighbors would just shake their heads.

Contrast this with a monopoly police force that does not have to please the customers in order to get paid. One need only look at the police departments of major cities to see the results: graft, corruption, fraud, bribery, brutality.

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