Wednesday, February 17, 2010


Economist, legal scholar, philosopher David D. Freidman, son of the late Milton Friedman, Nobel laureate in economics, argues (very logically and ably) for an anarcho-capitalist society. His main point is that society would not break apart (and anarchy is not a bad word), but – just like the free competitive market delivers light bulbs and hair cuts more efficiently than a centralized monopoly would, the free competitive market would deliver services such as legal protection and arbitration more efficiently than a centralized monopoly (i.e. the government) would.

A sample of his writing can be found here:

The arguments are brilliant and logical (and more importantly, easy to follow).

However, I can think of a counterargument to his entire thesis: I would argue that we now DO live in an anarcho-capitalist society. Or rather, we are a result of an anarcho-capitalist society, we evolved from one. Our ancestors lived in that state, in caves and jungles. Eventually they developed more intricate mechanisms of protection and arbitration, whether through iron weapons, walled cities, empires, or national governments based on a common language, religion, and tribal identity.

Where Friedman calls for private protection agencies instead of a police force, we have national governments (which compete with other governments; sometimes they settle disagreements through a commonly-chosen arbitrator, sometimes by compromise, sometimes by force). Consumers have a choice of changing the protection agency (i.e. moving to a different country), but the costs are high (learning a new language, escaping illegally from the original country, waiting years for a visa, living illegally in the new country, etc). These private protection agencies (which we refer to as national governments) offer protection, but in return hold the monopoly on force in their own area.

If we put Friedman’s ideas into practice, and started anew, abolishing governments and following an anarcho-capitalist system, what guarantees do we have that in a few hundred/thousand years we would not evolve again into a system similar to the current one, of powerful “private protection agencies” with limitless power in their own realms?

I am wondering if it is a human trait to seek like ones, band together based on tribal identity, and collectively give up individual liberties in return for protection. I am beginning to think that this is the case indeed.


  1. The thesis sounds appealing, if you believe in the "economic man" as Friedman does. That is to say, he holds the belief that humanity expresses itself primarily through trade and commerce. This naturally leads him to think that governments, who hold the monopoly of force, could enforce law and contracts more "efficiently" as a host of private entities. I don't think anyone has to think very hard to consider the havoc and eventual tyranny this would unleash, as private security companies - untethered from any ideology save pure capitalism - compete ruthlessly, and no doubt efficiently, to control the world's resources.

    Anyone with even a passing familiarity with DC understands this is not exactly far-fetched. The only thing that keeps Blackwater, Raytheon, et. al. from openly declaring themselves to be independent powers is the fact that it's still so damn easy to just suck up huge DOD contracts and deal with the bureacracy that goes with it. They still "need" the government to justify their existence. This goes to the heart of what I believe is the fundamental flaw in Friedman's argument - the belief that social goods can be privatized efficiently, and that law can be enforced in a just manner by private institutions. In reality, the first virtually assures the impossibility of the second.

    We needn't go into exhaustive detail about the massive amounts of graft, corruption, and lawlessness that are consistent features in the operation of private security firms to prove how backwards and dysfunctional pure anarcho-capitalism would be. We just need a thought exercise. Say I'm ACME Protection Inc. I provide law enforcement services to a cluster of neighborhoods in a high-crime urban area of a major city. The residents pay us to protect them. This does not mean we protect everybody. Indeed, some people pay XYZ Inc. to protect them. Others can't afford protection, so they have to fend for themselves. Now, it goes without saying that our revenue comes from the fees we charge for protection. Our profit comes from our revenue minus our expenses, which include equipment, staffing, etc. All the usual things. But our biggest expense comes from responding to calls. All the rest are sunk costs. This is our major "variable" cost. Most of the time we try not respond to calls unless absolutely necessary. To do otherwise would be wasteful! So, we have call screeners to pick out the most urgent and/or affordable situations, and we dispatch a unit immediately. Now, in certain emergencies, like an attempted murder, a lot of times it is better to simply let the caller be killed. We have found in our research that there is little upside to sending out a unit. In the rare instances that we are able to prevent the murder, the would-be victim is usually found elsewhere and killed eventually. This provides us perhaps another week or two, average, of fees. This is hardly worth the expense of putting one of our employees at risk.

    Get the idea? The US health care system should be the ultimate argument against anarcho-capitalism. Much like our security example, our private health care system has every incentive (much like any large Communist bureacracy) to be inefficient and unresponsive, thus yeilding higher profits.

    Privatization of social goods - health, security, law, and government proper - would result in a barbaric, lawless superstate controlled by only the most ruthless and powerful. Kind of like now, only without even the pretenses of concepts like "sovereignty", "citizenship", "democracy", and several others that would lose all of their authority when the game becomes an "efficient" scramble to collect the most money.

  2. Sean, my argument was (going against Friedman) that there is no difference between "public" entities like governments and "private" ones like Blackwater, the mafia etc. Both types offer protection in return for a price, both types rely on force, and they both operate as monopolies in the territory they claim. They both have to fight turf wars (or territorial wars) to maintain supremacy in their geographical areas. What tribute they ask for those whom they protect (whether protection taxes or other types of taxes) depends on their cost-benefit calculations over time, and the culture of their "clients" - hence a protection firm can operate as a Western democracy or like communist China or like the warlord dominated area of Somalia - depending on how much crap their populations are willing to take, societal and tribal structures, and so on.