In response to my blog defending the Ayn Rand Institute against slander, one Objectivist curiously asked me (and others) about how anarcho-capitalism would work. It is refreshing when someone new to the concept of anarcho-capitalism (or propertarianism, or plum-line libertarianism) approaches it with an open mind, as you are doing.
Let me try to succinctly state, then, respond to some concerns Objectivists have.
1. Positive Externalities and Free-Riders
Q: If there is no State, how will protection from crime be funded, since all individuals will benefit when one criminal is captured, not just the person he initiated aggression against?
A:Firstly, almost every action produces externalities which cannot be internalized. If you engage in good hygene, this produces a positive externality for others. Furthermore, we cannot determine whether externalities are good or bad, since value is subjective. If the police irradicate prostitution on the streets, is this a positive externality? For those who don't like prostitutes, it is; for those who do, it isn't, but rather is a negative externality.
Secondly, we have to realize that in an anarcho-capitalistic or propertarian society, roads would be privately owned, either by an individual of group of individuals (shareholders). Likewise, so would all areas that the general public visits, such as stores, malls, gardens, and parks. The owners of these pieces of property would want them to be safe, so as to better compete for customers. Hence, they would be paying for protection from crime.
However, I still think it likely that most individuals would purchase specific protection for themselves. Why? Because of the most likely function that protection elsewhere would serve: prevention. However, individuals also want restitution and retribution. While it is conceivable that street-owners would pay for the services of protection from and retaliation against crime, it is not as likely as them paying for prevention.
References:
- Callahan, Gene. What is an Externality?
- Rothbard, Murray. Economics of Violent Intervention in the Market: APPENDIX B.
- Simpson, Brian. Why Externalities are not a Case of Market Failure.
