Posted on 02/20/2006 6:24:40 AM PST by Shalom Israel
In a recent article, Carl Milsted uses Rothbard to argue it would be permissible to use force to make people pay for a service of which their benefit is at least double its cost. His conclusion is that it is reasonable, and even preferable, to establish a minimalist state if it is to people's advantage.
As has already been argued by N. Stephan Kinsella, he totally misses Rothbard's point. Furthermore, he fails to show why people would not choose to voluntarily pay for services which would benefit them double, as has been pointed out by Bob Kaercher.
Even so, I wish to offer another analysis of Milsted's reasoning. His article is a good example of why statists always seem to get it wrong — and why they always fail to understand what we're talking about. The bottom line is that they fail to realize the costs of force due to their unwillingness to see the state for what it is. I will therefore use Milsted's own example to shed light on his fundamental mistake.
Milsted takes the case of national defense, which is commonly considered an institution that would face the free rider problem if supplied on the market. Argues Milsted: "suppose the majority assesses a tax on everyone to spread the burden of supporting the new defense system. This is theft of the minority. However, suppose that the economies of scale are such that this tax is less than half of what people would have had to pay for defense on their own."
That's the argument, plain and simple. If it is morally permissible to steal when the victim is compensated double, the equation seems to fit. Well, let's look into this in more detail and see if it really does.
First, consider a situation where everybody benefits, say, $10,000 on a yearly basis from being protected by a national defense. That would mean, if the premise is correct, that it would be morally permissible to force costs of no more than $5,000 on everybody.
Were it a company supplying a service worth $10,000 to each of its customers paying only $5,000 for it, this would be easy. Anyone willing to pay the $5,000 would get the service, and the costs associated with administration and so forth would have to be covered by the $5,000 paid. But Milsted argues the $5,000 should be taxed, and that makes it much more difficult.
First of all, we know state-run businesses and authorities (especially if they are monopolies) tend to be much less efficient than private enterprises. That means people in Milstedistan would get less than they would in a free market society. But even so, there is still the cost of coercion totally neglected by Milsted in his article.
Forcing people to pay for a service means there will always be someone who tries to avoid paying or even refuses to pay. So "we" (i.e., the state) need to invest in collection services to get the money. Now, let's say Murray, who is one of the people we're trying to coerce, goes out to buy a rifle and then declares that he's "anti-government, so get the hell off my property." Perhaps he even threatens to kill the collection agents. Dealing with him would take a whole lot more out of the budget, meaning there is even less to provide for the defense (which is the reason we're in business in the first place).
But that's not all. Let's say Murray won't give us the money no matter how much we ask or threaten him. We will simply have to take it by force, so we need to invest in the necessary tools and we go out to hire a dozen brutes to do the forcing. (More money down the drain … ) It is already pretty obvious we're in a very expensive business; there will not be much defense left if there are a lot of Murrays in our society.
Now imagine our hired brutes go down the street to Murray's house and knock on his door. He sticks his rifle out the window and shouts something about having the right to his property and that he will shoot to kill. Anyway, the brutes try to open his door only to find it is locked and barred. They will have to break in to finally get their hands on Murray's cash.
Our small army goes back to their van to get their tools, then returns to break down Murray's door. Going inside, they manage to avoid all the bullets Murray is firing and they tie him up and put him in the closet. They eventually find that he does not have any valuables and that he keeps his cash in a locked safe. So they have to break it to get the money.
Now we have a problem. To make this operation morally permissible, the benefit to Murray, which we know is $10,000, must be at least double the cost forced on him. The cost is now a whole lot more than the cost of the national defense; it includes administration and collection costs, hiring the brutes and their tools, as well as the broken door and safe, and the time and suffering (and perhaps medical expenses) Murray has lost while we were stealing from him. How much do you think is left from the original $5,000 to invest in a national defense? Not much.
What if Murray suffers from paranoia and therefore had invested $1,500 in an advanced special security door and $2,000 in an extra security safe? Then the total cost of simply getting into Murray's safe would probably exceed the $5,000 we are "allowed" to steal. What then? Should we break in anyway since it is a mandatory tax, only to give him a check to cover what's above the $5,000 mark? That doesn't sound right.
But on the other hand, if we just let him be, more people would do the same as Murray only to get off, and we would have a huge problem on our hands. This is a typical state dilemma: it costs too much to force money from some people, but it would probably be much more "expensive" in the long run not to. It's a lose-lose situation.
Now, what if Murray is very poor and doesn't have the $5,000? Then we would have to take whatever he's got and make him work off the rest. We need to get the $5,000 to cover our expenses of the national defense, and we have the right to take that amount from him. It could, of course, be argued he couldn't possibly benefit $10,000 from a national defense if he has no money and no property. If we trust Austrian economics, that might very well be correct; the benefit of national defense would, like any other product or service, be valued subjectively and thus the benefit would be different for each and every individual.
If this is true, it means we have an even greater problem: the state can rightfully levy costs of a maximum of half the subjective benefit enjoyed. Well, that's a task that would keep an army of Nobel Prize winners busy for a while. If possible, I wonder how much that would cost in the end.
This is the problem statists face on an everyday basis when discussing philosophy and politics. It is easy to make nice equations and formulas, and theorize on great systems and cheap solutions neatly enforced by the state. But when consistently failing to realize the costs of coercion it makes their reasoning fundamentally flawed. Just scratching the surface reveals they really have no clue whatsoever.
Per Bylund works as a business consultant in Sweden, in preparation for PhD studies. He is the founder of Anarchism.net. Send him mail. Visit his website. Comment on the blog.
"in a voluntary manner, with the US Government?"
It's not voluntary by any stretch of the imagination. This contract is forced on us by those good folks believe they know whats best for us. Under penalty of death, if need be.
Excellent! You raise an important and valid issue. Some would contend that this inevitably results in rival warlords: the "Pinkertons" versus "Securitas," for example.
However, there is an answer to this dilemma. It's worth pointing out that our respective police forces don't actually want to get into a shooting war over my dog digging in your petunias. There are various ways they can avoid a shooting war, so I don't know which one they would pick. One is for the two to agree upon a third judge, and inform you and me that they will drop us as customers unless we agree to enter arbitration with the third judge. If he says you're in the right, then my agency will drop me as a customer unless I pay for your petunias--which, of course, leaves me defenseless against your agency.
There's a separate consideration also. Each of us going to separate judges is pretty unproductive in the first place, and we knew that already. In most cases, therefore, we'll make stipulations in our original contract as to which judges we would consider acceptable in the event of a dispute. If we have no contractual relationship--for example, we're involved in a random car accident--then we would presumably pick the arbitration agency with the best reputation for fair judgments. An arbitator who always decides for his client will soon have no customers.
Oh, so there is a place for some sort of institutional defense, then? Your whole position is now rubble about your feet.
Your arguments are delusional. They really are. If you're not ignorant of history, you're simply ignoring it in order to make your point.
That interpretation is inconsistent with the founders' own statements on the subject. They were very clear in their opposition to a standing army. But in any case, the weapons cache at Concord was assembled voluntarily. Nobody was robbed to pay for it, and nobody was forced either to contribute to it or to defend it. In other words, it's a perfectly good example of voluntary defense. It's not a good argument in favor of compulsory taxation or conscription for defense.
I'm sure your historical studies will also have reminded you that the Minute Men were so-named because they were training as an organized military body...
Where did you get the idea that I'm against training? I'm all for it! What I'm against is theft, slavery and other forms of coercion.
Now you're just being tedious. "Institutional" doesn't mean the same thing as "Government-mandated," but you're pretending it is. I believe in instutional insurance--I have plenty of it--but I don't believe in government-mandated insurance, such as my car insurance or national health insurance. Similarly, I'm quite sure that many institutions will spring up for defensive purposes, and I'm all for it... as long as they don't try to stick me up for dough, or shanghai me into serving in their ranks.
Is that the author's error, or Milsted's? The author addressed what he perceived to be errors in Milsted's reasoning, and the example Milsted used was national defense and made generalizations based on the example.
But since you bring that up, libertarians from the Von Mises Institute like to argue that all functions of government can be better performed by the private sector quite commonly pointing to the use of privitized police and courts. I have similar problems with those arguments as well.
Do they really argue that all government functions could be better performed by the private sector, or just some of them that you agree with?
You started off by implying that a disorganized force was not only as good as, but actually better than the trained British military. As it happens, the voluntary forces were badly defeated both at Lexington and Concorde, and the Continental Army was recognized at the time to be sorely inferior to the British troops.
They were very clear in their opposition to a standing army.
And they had valid reasons for saying so. But they were also not fools -- which is why they ended up creating a standing army very soon after independence. See here for an excellent discussion of the matter.
The thing is that in the sort of capitalism today, where an individual interacts on a daily basis with such a huge variety of people, transaction costs mount so quickly that a state that can monopolize the policing business will be more efficient than a market of competing police and courts systems. Case in point: What about international business transactions? How would you get a foreign client to pick, let alone trust, one of many private court systems?
Sorry, pal, but the realities are that national defense is a government game. You can pretend otherwise, but only if you assume that there's no government out there capable of beating the hell out of a disorganized rabble.
History suggests that that to assume this is not only wrong, but insanely stupid.
If Shalom Israel is representative of their mindset, that's precisely what "they" are saying.
In a sense that's true; the ragtag continentals never compared favorably to the regulars.
However, you appear to be distorting that into a claim that, somehow, disorganized fighting is better. The issue isn't organized vs. disorganized; it's coercive versus non-coercive. The claim under dispute is that defense is impossible without forcibly extorted tax dollars and absolute government control of the military.
And they had valid reasons for saying so. But they were also not fools -- which is why they ended up creating a standing army very soon after independence.
Don't let Washington fool you. He was a proponent of the standing army since before the revolution was won. His scorn for the continentals' lack of training and discipline makes perfect sense when you remember that he fought in the British army in the French and Indian war. One of his first acts as president was to provoke the Whiskey rebellion, and then use that standing army of his to cow Pittsburgh into submission.
"Actually not--but it sounded like it, because I referred to a "Contractor". My point was to argue that defense is both excludable and rivalrous, and hence doesn't meet the definition of a public good. For the sake of that argument, there has to be a hypothetical provider, which I referred to as a contractor. I did not intend to imply that the ideal national defense would involve rival "private army" companies, for example."
My mistake. But in my defense, those from the Von Mises Institute, and I thought you were familiar with their writings, argue that defense should be privitized. If you feel the need for defense, then you should pay for it is a common argument from them and you seem to be making that argument in the rest of your post.
My argument with this is not theoretical in the sense of 'public good'. Nor does it involve such terms as "excludable and rivalrous". My argument is much more pragmatic (as are almost all my arguments against libertarians) is that it simply doesn't work.
" but Lexington and Concord were fought by all volunteers, who trained voluntarily, and whose unit of organization was local rather than central. "
And, quite frankly, we got our butts kicked there as we did at almost all the early battles in the Revolutionary war. It was not until we trained a professional army (Monmouth and later) that we had some successes.
"If we posit a well-armed militia with no commanders, and no other defense measures, we still get a surprisingly robust picture: any would-be invader faces the reality that victory will be incomplete until the last man is killed. This raises the cost of invasion prohibitively high in any rational scenario."
No, this not a 'robust picture' in any sense of the word. It is only a recipe for defeat. A very bloody and complete defeat. No matter how well trained the individual, individuals lose when they face well trained units performing in concert under a centralized plan.
But, just for the sake of argument, what constitutes a well trained and well armed individual? Who determines how the individual will be trained and what level of training is sufficient? How is discipline enforced?
"Not that private armament is all we would have. Your critique of the libertarian position assumes that we're dealing with armies, and the only interesting question is who commands them."
No, the only interesting questions are which army will win and what is the best way to organize that army in order to win.
"Under privatization, aspects of defense would become separate specialties with their own markets. Rather than taxing Illinoisans to protect the shoreline from air-raids, for example, some sort of early-warning system would be maintained and paid for by those defended."
So each area would have it's own separate air defense system? Coordinated how? This is a critical issue. Concentration is another principle of war allowing where the large concentrations of force are focused upon an isolated segment of the opposing force leading to it's quick defeat. The system you just described would be rapidly and decisively overwhelmed by a coordinated attack. Even if you have 500 men and I have only 100, I will defeat all 500 if you allow me to concentrate my 100 upon your 500 ten men at a time.
"It would probably have dual-use, and raise some revenue by subcontracting to meteorologists, for example."
Such arguments quickly lead to a force optimized to produce revenue rather than win battles.
"Anti-terrorist measures would be handled less by the military and more by domestic security agencies.
Contractors?
"For example, today many utilities are vulnerable to attack. A combination of insurance carriers and security contractors would mitigate those risks for their own purposes, and the results would be better than today."
That the results would be better is an assumption and has not been proven.
"Airport security would be very different than today, and 9/11 style attacks would be considerably less likely. Various "military" functions would be assumed instead by plain-old security guards, insurance companies, and other providers."
Airport security was provided by contractors prior to 9/11 so how is it likely that 9/11 style attacks would be made less 'likely' by reverting to the system in place at that time?
"The one thing we almost certainly wouldn't have, though, is an expeditionary force. Kind of a shame, really; we'd have difficulty invading foreign nations without an expeditionary force..."
So you think we'd be more safe at home if we fought all our wars within our own homeland. Funny, I prefer to fight in the other guys back yard. Collateral damage is a bitch.
"As I illustrated above, a football team is a bad analogy."
No, you haven't demonstrated any thing remotely like that.
'We aren't dealing with such a monoculture. More realistically, we'll have many separate industries: one providing protection from lone gunmen or suicide bombers; another protecting from fire (and incidentally, incendiary attacks); another selling arms to citizens; another providing personnel screening; etc."
And exactly how is this different from my analogy where one contractor provides a defensive safety and another a linebacker?
"It's unclear to me who would handle heavy-lifting such as aircraft or missiles, but that's for the market to figure out--I'm not in charge."
The market has decided. Those things are best done at the national level.
"The likeliest scenario I can see is that many security companies will pool their resources to hire a missile-defense company, in exactly the same way that most insurance companies today actually insure their insurance policies with reinsurers."
And many other companies would select a different company and there's that nasty issue of coordination again. BTW, who authorizes one of these companies to open fire? Are the subscribers liable? Who would sign up for such a policy with such unlimited liability?
Should be easy enough to find out, they post their writings on the internet, you just have to go read them.
Rational-choice theory shows exactly why defense can't be privatized; in a market of many private companies, no particular company will gain more then it'd have to spend on a strategic nuclear deterrent, nor will any company be willing to spend the costs of organizing everybody else. Nuclear submarines are very expensive and not very profitable...
In the vast majority of interactions, nobody sues anybody. Why does a monopoly make the thing more efficient? In any example ever found in history, a monopoly has resulted in worse services at higher prices.
Case in point: What about international business transactions? How would you get a foreign client to pick, let alone trust, one of many private court systems?
Multi-national corporations are essentially anarchistic already. They operate in countries in which practically anything goes, or in which bribery is a part of doing business. They employ experts in various local laws, but as long as they're careful where and how they do things, they can do practically anything they want.
Not that I'm entirely in favor of that. But to suggest that government somehow makes international business easier, cleaner or more orderly, is almost funny.
"However, there is an answer to this dilemma. It's worth pointing out that our respective police forces don't actually want to get into a shooting war over my dog digging in your petunias. There are various ways they can avoid a shooting war, so I don't know which one they would pick. One is for the two to agree upon a third judge, and inform you and me that they will drop us as customers unless we agree to enter arbitration with the third judge. If he says you're in the right, then my agency will drop me as a customer unless I pay for your petunias--which, of course, leaves me defenseless against your agency."
So compulsion enters it's ugly head. Just exactly how is this different from us 'agreeing' that there is a need for a power capable of impossing it's decisions upon us in matters of law enforcement and the judiciary?
"There's a separate consideration also. Each of us going to separate judges is pretty unproductive in the first place, and we knew that already. In most cases, therefore, we'll make stipulations in our original contract as to which judges we would consider acceptable in the event of a dispute. If we have no contractual relationship--for example, we're involved in a random car accident--then we would presumably pick the arbitration agency with the best reputation for fair judgments. An arbitator who always decides for his client will soon have no customers."
Excellent arguments, in theory and the Libertarian philosophy is great in theory. The problem is the real world with real people and real emotions. My in-laws are in such a property dispute. I suggested they get a surveyor acceptable to both of them. Nope, they each hired their own surveyor and I'm sure you can guess what happened. Now they each have their own lawyers and are headed to court. Just imagine how fun it would be if they could each hire their own judge. BTW, a judge who relies upon individuals to pay his fee, won't have many fees unless he remember who is paying him.
"Do they really argue that all government functions could be better performed by the private sector, or just some of them that you agree with?"
They have a web site. I subscribe to their daily email and while it is always dangerous to generalize, in general, they generally agree that government is incapable of performing any function as well as private industry and is a bigger threat to personal freedom than any other. But feel free to find a contrary example on their site.
Great article as per usual from the finest economic minds at Mises.org.
A true source of economic reality BOTH sides of the aisle would do well to avail themselves of.
After all, Armey and Kemp have.
"Nuclear submarines are very expensive and not very profitable..."
No dual-use? See post #56 about using defense systems for other purposes.
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