At PorcFest last week there were quite a few people who subscribe to the political beliefs of anarcho-capitalism. Basically it boils down to the belief that in the absence of government, free markets would better organize society, and take the place of every “essential” service provided by the government. David Friedman gave the first talk I heard on anarcho-capitalism, to which I was previously only marginally acquainted. He talked about how agencies would rise out of demand for previously government provided services such as law enforcement in a free market with no government. The following is written by David Friedman on the same subject.
Imagine a society with no government. Individuals purchase law enforcement from private firms. Each such firm faces possible conflicts with other firms. Private policemen working for the enforcement agency that I employ may track down the burglar who stole my property only to discover, when they try to arrest him, that he too employs an enforcement agency.
There are three ways in which such conflicts might be dealt with. The most obvious and least likely is direct violence-a mini-war between my agency, attempting to arrest the burglar, and his agency attempting to defend him from arrest. A somewhat more plausible scenario is negotiation. Since warfare is expensive, agencies might include in the contracts they offer their customers a provision under which they are not obliged to defend customers against legitimate punishment for their actual crimes. When a conflict occured, it would then be up to the two agencies to determine whether the accused customer of one would or would not be deemed guilty and turned over to the other.
As businesses, these agencies would care most about turning a profit, and it would therefore not be in their best interest to participate in mini-wars–they are costly and would turn away customers seeking peace. Since these agencies would be behaving as businesses, they would probably have “advance contracting between agencies” according to Friedman. This would allow most disputes to be settled relatively easily without violence, and in the event that these preexisting agreements cannot decide a particular case, agencies would employ a third party “arbitration agency”. In order for both agencies to agree to use an arbitration agency, it would have to be legitimate and fair in order to build a reputation and therefore a customer base. Likewise agencies investigative proficiency would need to be up to par in order to attract customers. Agencies would still be avoiding “mini-war” with other agencies at all cost, because it would prove destructive to at least one party and possibly both. Engaging in “criminal” actions as an agency would also invite a coalition of other agencies, working for the best interests of their customers, to squelch the “rogue agency”.
Under these circumstances, both law enforcement and law are private goods produced on a private market. Law enforcement is produced by enforcement agencies and sold directly to their customers. Law is produced by arbitration agencies and sold to the enforcement agencies, who resell it to their customers as one characteristic of the bundle of services they provide.
Even if an agency loses their dispute during arbitration, they have still avoided the destruction of their company, and have a reason to back up why their service cannot continue to advocate in that particular circumstance. Obviously market forces would still be at work; if one agency always lost otherwise open and shut cases, consumers would stop buying their product and buy from more effective agencies. Since the risk of the agency having to use resources to defend any one particular person is low, this would end up being an insurance type scenario where law enforcement would not cost individuals that much money.
The resulting legal system might contain many different law codes. The rules governing a particular conflict will depend on the arbitration agency that the enforcement agencies employed by the parties to the conflict have agreed on. While there will be some market pressure for uniformity, it is logically possible for every pair of enforcement agencies to agree on a different arbitration agency with a different set of legal rules.
Indeed, one could have more diversity than that. Suppose there is some small group within the population with specialized legal requirements. An example might be members of a religious sect that forbade the taking of oaths, in a society where conventional legal procedure required such oaths. Such a group might have its own enforcement agency and let that agency negotiate appropriate legal rules on its behalf. Alternatively, an agency might produce a specialized product for members of the group by negotiating agreements under which those customers, if involved in litigation, were not required to swear the usual oaths.
Another benefit is that you would not have to live in a particular geographic area in order to buy from a particular agency, reducing the risk that one agency becomes too powerful and can in essence form its own government. Other agencies would be happy to take customers who do not wish to see any one agency rule an area, and therefore instead of becoming serfs unable to rise up against a government, people are consumers who kill a would be oppressor with the market, simply by patronizing a rival agency.
The same principal could be applied to other things that government provides such as welfare and retirement benefits (for instance unemployment insurance and retirement planning), or highway subscriptions and toll roads. In the end the total percentage of one’s income going to provide these government-like services would be less than the current amount of income paid in taxes, due to competition driving down the costs of the products.
There is so much more discussion that needs to go into the concept of anarcho-capitalism that is not appropriate for merely one blog post. I will be returning to this subject in relation to current affairs to further illustrate its potential effectiveness as a system. When discussing new systems of government (or a system lacking government) I have often heard, “we just need to try something new, that hasn’t been tried before”. Well how about an organized society absent of government? It is certainly an intriguing concept.