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CHAOS THEORY

Two Essays On

Market Anarchy

by

Robert P. Murphy

With an Introduction by

Jeremy Sapienza

Illustrations by

Robert Vroman

RJ Communications LLC

New York

All men with honor are kings. But not all kings have

honor.—Liam Neeson, Rob Roy

Copyright © 2002 Robert P. Murphy

All rights reserved.

Published by

RJ Communications LLC

51 East 42

nd

Street, Suite 1202

New York, NY 10017

Acknowledgements

My intellectual debt in anarchist theory belongs, hands down,

to the late great Murray Rothbard (1916-1995). More broadly,

my view of “how the world works” is due primarily to that

fount of wisdom, Ludwig von Mises’ treatise Human Action.

The original idea (and Introduction) for this book came from

Jeremy Sapienza. Robert Vroman provided the wonderful (if

somewhat disturbing) artwork that so mercifully interrupts the

monotony of the text. Matt Pramschufer laid out the cover

design.

Zach Crossen and Pete Johnson reviewed an early draft of this

book. I am grateful for the kind remarks of Lew Rockwell and

Gene Callahan—two modern-day heroes in the war of ideas—

featured on the back cover. I would like to thank the

participants on anti-state’s Forum for their constant (if

sometimes crude) criticism and questioning of my decidedly

unorthodox views. Rachael Anne Fajardo played an

indispensable role in providing constant encouragement and

suggestions.

And finally I must thank Ron Pramschufer, and the rest of the

staff at RJ Communications, for making it look like I’ve

published before.

RPM

April, 2002

7

Introduction

So, Chaos Theory, huh? Yeah, it’s not actually about chaos

theory,

1

but it is a really cool title. And the book itself—may

be the most important to date on anarchist theory and its

possible application to the “real world.”

When I first read the draft of Bob’s book, I was blown away by

the sheer simplicity of his arguments, something I think is

lacking in much of the existing important anarchist literature.

His simple explanations, a smart mixture of common sense and

slimmed-down economic theory, provide a perfect starting

point for the curious non-anarchist, or a fantastic finishing

point for the committed anti-statist who has a few logistical

doubts about the stateless society.

I’ve known Bob for a while now, since “way back” when we

were regular columnists on LewRockwell.com. In May 2001,

he helped me set up anti-state.com, which has grown into the

largest market anarchist site on the Internet (seriously!). He

continues, with this book, his generous contribution to the next

generation of anarchist evolution, which seems to have

stagnated until recent months. The continued expansion of the

philosophy of non-aggression and cooperation hinges on the

ability of its supporters to bring high economic and moral

theory down to the level of the common man.

Bob addresses the most common arguments against the

abolition of the State—and completely obliterates them. “Who

will protect the borders if there’s no State?” Nobody, moron.

There are no borders, except for those of private property. And

that’s defended without the State the same way we do it now

with the State.

I know. “What about a psycho neighboring State that has it in

for the stateless country that vastly outperforms it economically

(and in every other area)?” Well, just because there is no State,

it does not follow that there is no defense. It’s a common tactic

8

of statists to accuse us of wanting to abolish, say, assistance for

poor people, since they think that would be impossible without

the State. But this isn’t true at all: We don’t want the State to

steal our money and give it to those who don’t deserve it. We

want the right to our property, including all our money, and the

right to help out whomever we deem deserves it. This is

consistent with the only rule of libertarianism: the Non-

Aggression Principle.

2

In the first section, Bob explains how a society without

government would still have laws and “regulations.” There

would be no (legal) violations of the rights of property owners.

In market anarchy, justice would be based on restitution, not

retribution, meaning that criminals would have to pay back

their victims rather than be punished by the sadistic State.

In the second section, Bob brilliantly tackles the issue of

private defense. I refuse to ruin it for you—hurry up and read

this intro then get to the first chapter.

To sum up my impression of the book, basically: intelligent;

succinct; and most important of all, written in the language of

the common person, without the haughty academic snobbery so

present in the currently available body of work, which tends to

be a major problem for those of us trying to popularize the

movement.

This is sure to become a fixture in the personal libraries of

countless libertarians and anarchists, and a classic in the realm

of anarchist and Austrian economic theory.

Jeremy Sapienza, Editor

anti-state.com

1 Chaos theory is the “qualitative study of unstable aperiodic behavior in

deterministic nonlinear dynamical systems.” See

http://www.duke.edu/~mjd/chaos/chaos.html.

9

2 The NAP states that “no one has the right, under any circumstances, to

initiate force against another human being, nor to delegate its initiation.”

So simple, you’d think it would catch on more widely. Oh, and having the

State do your dirty work is delegating, so the State, by its very existence,

violates the NAP.

11

Private Law

1

Without question, the legal system is the one facet of society

that supposedly requires State provision. Even such champions

of laissez-faire as Milton Friedman and Ludwig von Mises

believed a government must exist to protect private property

and define the “rules of the game.”

However, their arguments focused on the necessity of law

itself. They simply assumed that the market is incapable of

defining and protecting property rights. They were wrong.

In this essay, I argue that the elimination of the State will not

lead to lawless chaos. Voluntary institutions will emerge to

effectively and peacefully

2

resolve the disputes arising in

everyday life. Not only will market law be more efficient, it

will also be more equitable, than the government alternative.

Just as right-wing hawks embrace the Orwellian notion that

War is Peace, left-wing egalitarians believe that Slavery is

Freedom.

3

The hawks wage endless war to end war, while the

social democrats engage in massive theft—or “taxation” as

they call it—to eliminate crime.

It is high time to abandon such monstrous paradoxes. It took

no king to produce language, money, or science, and it takes no

government to produce a just legal system.

I. CONTRACT

First, we must abandon the idea of a mythical “law of the

land.” There doesn’t need to be a single set of laws binding

everyone. In any event, such a system never existed. The laws

in each of the fifty states are different, and the difference in

legal systems between countries is even more pronounced. Yet

we go about our daily lives, and even visit and do business

with foreign nations, without too much trouble.

12

All actions in a purely free society

4

would be subject to

contract. For example, it is currently a crime to steal, because

the legislature says so. A prospective employer knows that if I

steal from his firm, he can notify the government and it will

punish me.

But in a stateless society there wouldn’t be a legislated body of

laws, nor would there be government courts or police.

Nonetheless, employers would still like some protection from

theft by their employees. So before hiring an applicant, the

employer would make him sign a document

5

that had clauses to

the effect of, “I promise not to steal from the Acme Firm. If I

get caught stealing, as established by Arbitration Agency X,

then I agree to pay whatever restitution that Agency X deems

appropriate.”

We immediately see two things in this contract. First, it is

completely voluntary; any “laws” binding the employee have

been acknowledged by him, beforehand. Second, the existence

of Arbitration Agency X ensures fairness and objectivity in any

disputes.

To see this, suppose that it didn’t. Suppose that a big firm

bribed the arbitrators at Agency X, so that lazy workers (who

were going to be fired anyway) were (falsely) charged by the

employers with embezzlement, while Agency X always ruled

“guilty.” With this scheme, the big firm could bilk thousands

of dollars from its bad employees before terminating them.

And since the hapless employees had agreed beforehand to

abide by the arbitration outcome, they could do nothing about

it.

6

But upon consideration, it’s easy to see that such behavior

would be foolish. Just because an arbitration agency ruled a

certain way, wouldn’t make everyone agree with it, just as

people complain about outrageous court rulings by government

judges. The press would pick up on the unfair rulings, and

people would lose faith in the objectivity of Agency X’s

decisions. Potential employees would think twice before

13

working for the big firm, as long as it required (in its work

contracts) that people submitted to the suspect Agency X.

Other firms would patronize different, more reputable

arbitration agencies, and workers would flock to them. Soon

enough, the corrupt big firm and Arbitration Agency X would

suffer huge financial penalties for their behavior.

Under market anarchy, all aspects of social intercourse would

be “regulated” by voluntary contracts. Specialized firms would

probably provide standardized forms so that new contracts

wouldn’t have to be drawn up every time people did business.

For example, if a customer bought something on installment,

the store would probably have him sign a form that said

something to the effect, “I agree to the provisions of the 2002

edition Standard Deferred Payment Procedures as published by

the Ace legal firm.”

Expertise

Under this system, legal experts would draft the “laws of the

land,” not corrupt and inept politicians. And these experts

would be chosen in open competition with all rivals. Right

now one can buy “definitive” style manuals for writing term

papers, or dictionaries of the English language. The

government doesn’t need to establish the “experts” in these

fields. It would be the same way with private legal contracts.

Everybody knows the “rules” of grammar just like everyone

would know what’s “legal” and what isn’t.

Murder

Of course, one of the most basic stipulations in any contractual

relationship—whether entering a mall or living in a

neighborhood co-op—would be strong prohibitions on murder.

In other words all contracts of this type would have a clause

saying, “If I am found guilty of murder I agree to pay $y

million to the estate of the deceased.” Naturally, no one would

sign such a contract unless he were sure that the trial

14

procedures used to determine his guilt or innocence had a

strong presumption of innocence; nobody would want to be

found guilty of a murder he didn’t commit. But on the other

hand, the procedures would have to be designed so that there

were still a good chance that guilty people would actually be

convicted, since people don’t want to shop in malls where

murder goes unpunished.

And, because all contracts of this sort (except possibly in very

eccentric areas frequented by people who liked to live

dangerously) would contain such clauses, one could say that

“murder is illegal” in the whole anarchist society, even though

the evidentiary rules and penalties might differ from area to

area. But this is no different from our current system,

7

and no

one doubts that “murder is illegal” in the current United States.

Profitability the Standard

The beauty of this system is that the competing desires of

everyone are taken into account. The market solves this

problem everyday, in reference to other goods and services.

For example, it would be very convenient for customers if a

deli were open twenty-four hours a day. But on the other hand,

such long shifts would be very tedious for its workers. So the

market system of profit and loss determines the “correct” hours

of operation.

In the same way, we saw above how evidentiary rules would be

determined under a system of private law. Because people

would be submitting themselves contractually to the rulings of

a certain arbitration agency, the agency would need a

reputation for objectivity and fairness to defendants. But on

the other hand, the owners of stores, firms, rental cars, etc.

would want some means of restitution in the event of theft, and

so the arbitration agencies couldn’t be too lenient. As with the

hours of a store’s operation, so too would the legal procedures

be decided by the profit and loss test. Maybe there would be

juries, maybe there wouldn’t. We can’t predict this

beforehand, just as we can’t say a priori how many tricycles

15

“should” be made this year; we let the market take care of it,

automatically.

II. INSURANCE

The contractual system described above seems to work well,

except for one nagging problem: How can people afford to pay

these outrageous fines? Granted, someone might sign a piece

of paper, pledging restitution to his employer if he is caught

stealing. But suppose he steals anyway, and is found guilty by

the arbitration agency, but has no money. Then what?

Well, how does our present system of auto damages work?

Right now, if I sideswipe someone, I must pay a stiff penalty.

Or rather, my insurance company does.

It would be the same way with all torts and crimes under the

system I’ve described. An insurance company would act as a

guarantor (or co-signer) of a client’s contracts with various

firms. Just as a bank uses experts to take depositors’ money

and efficiently allocate it to borrowers, so too would the

experts at the insurance company determine the risk of a

certain client (i.e. the likelihood he or she would violate

contracts by stealing or killing) and charge an appropriate

premium. Thus, other firms wouldn’t have to keep tabs on all

of their customers and employees; the firms’ only

responsibility would be to make sure everyone they dealt with

carried a policy with a reputable insurance agency.

Under this system, the victims of a crime are always paid,

immediately. (Contrast this to the government system, where

victims usually get nothing except the satisfaction of seeing the

criminal placed behind bars.) There would also be incentives

for people to behave responsibly. Just as reckless drivers pay

higher premiums for car insurance, so too would repeat

offenders be charged higher premiums for their contract

insurance.

16

And why would the person with criminal proclivities care

about his insurance company? Well, if he stopped paying his

premiums, his coverage would be dropped. With no one to

underwrite his contractual obligations, such a person would

make a very poor customer or employee. People wouldn’t hire

him or trust him to browse through a china shop, since there

would be no “legal” recourse if he did anything “criminal.” In

order to get by in society, it would be extremely useful to keep

one’s insurance coverage by always paying the premiums.

And that means it would be in one’s great interest to refrain

from criminal activity, since that would be the way to keep

premiums down.

Admittedly, such arguments seem fanciful. But they are no

more farfetched than the modern credit card system. People

have huge lines of credit advanced to them, sometimes only by

filling out a form, and it is extremely easy to engage in credit

card fraud. A prodigal may run up a huge bill and simply

refuse to pay it, yet in most cases nothing physical will happen

to him. But most people don’t behave in such an irresponsible

manner, because they don’t want to ruin their credit history. If

they do, they know they’ll forever more be cut off from this

wonderful tool of the capitalist society.

III. PRISON

We have now established that a system of voluntary,

contractual law can be imagined theoretically, and would even

work in a society populated with self-interested but ultimately

rational people.

But what about the really tough cases? What about the

incorrigible bank robber, or the crazed ax murderer? Surely

there will always be deviant, antisocial individuals who,

through malice or ignorance, ignore the incentives and commit

crimes. How would a system of market anarchy deal with such

people?

17

First, keep in mind that wherever someone is standing in a

purely libertarian

8

society, he would be on somebody’s

property. This is the way in which force could be brought to

bear on criminals without violating their natural rights.

For example, the contract

9

of a movie theater would have a

clause to the effect, “If I am judged guilty of a crime by a

reputable arbitration agency [perhaps listed in an Appendix], I

release the theater owner from any liability should armed men

come to remove me from his property.”

So we see that it is not a contradiction to use force to capture

fugitives in a completely voluntary society. All such uses

would have been authorized by the recipients themselves

beforehand.

10

But where would these ne’er-do-wells be taken, once they were

brought into “custody”? Specialized firms would develop,

offering high security analogs to the current jailhouse.

However, the “jails” in market anarchy would compete with

each other to attract criminals.

Consider: No insurance company would vouch for a serial

killer if he applied for a job at the local library, but they would

deal with him if he agreed to live in a secure building under

close scrutiny. The insurance company would make sure that

the “jail” that held him was well-run. After all, if the person

escaped and killed again, the insurance company would be held

liable, since it pledges to make good on any damages its clients

commit.

On the other hand, there would be no undue cruelty for the

prisoners in such a system. Although they would have no

chance of escape (unlike government prisons), they wouldn’t

be beaten by sadistic guards. If they were, they’d simply

switch to a different jail, just as travelers can switch hotels if

they view the staff as discourteous. Again, the insurance

company (which vouches for a violent person) doesn’t care

which jail its client chooses, so long as its inspectors have

18

determined that the jail will not let its client escape into the

general population.

IV. DOUBTS

Although superficially coherent and workable, the proposed

system of market law will certainly engender skepticism. In

the interest of brevity, I will deal with some common (and

valid) concerns.

11

“What about someone who has no insurance?”

If an individual didn’t carry insurance, other people would

have no guaranteed recourse should the individual damage or

steal their property. Such an individual would therefore be

viewed with suspicion, and people would be reluctant to deal

with him except for single transactions involving small sums.

He would probably be unable to get a full-time job, a bank

loan, or a credit card. Many residential and commercial areas

would probably require that all visitors carried valid policies

before allowing them to even enter.

12

So we see that those without insurance would have their

options, including their freedom of movement, greatly

restricted. At the same time, the premiums for basic contract

insurance, at least for people without a criminal history, would

be quite low.

13

So there wouldn’t be very many people

walking around without this type of insurance. It’s true, some

people would still commit crimes and would have no insurance

company to pay damages, but such cases are going to occur

under any legal system.

Furthermore, once someone (without insurance) had

committed a serious crime, he would still be chased by

detectives, just as he would be under the government system.

And if these (far more efficient) private detectives found him at

any time on a normal piece of property, they would have the

full right to arrest him.

14

19

Warring Agencies

Critics often dismiss private law by alleging that disputes

between enforcement agencies would lead to combat—even

though this happens between governments all the time! In

truth, the incentives for peaceful resolution of disputes would

be far greater in market anarchy than the present system.

Combat is very expensive, and private companies take much

better care of their assets than government officials take care of

their subjects’ lives and property.

In any event, those engaging in “warfare” in a free society

would be treated as any other murderers. Unlike government

soldiers, private mercenaries would receive no special

privileges to engage in condoned violence. Those agencies

interpreting the law would not be the same as the firms

enforcing it. There is no intrinsic reason to worry about battles

between private enforcement agencies,

15

any more than battles

between the government army and navy.

“Won’t the Mafia take over?”

It is paradoxical that the fear of rule by organized crime

families causes people to support the State, which is the most

“organized” and criminal association in human history. Even if

it were true that under market anarchy, people had to pay

protection money and occasionally get whacked, this would be

a drop in the bucket compared to the taxation and wartime

deaths caused by governments.

But even this concedes too much. For the mob derives its

strength from government, not the free market. All of the

businesses traditionally associated with organized crime—

gambling, prostitution, loan sharking, drug dealing—are

prohibited or heavily regulated by the State.

16

In market

anarchy, true professionals would drive out such unscrupulous

competitors.

20

“Your insurance companies would become the State!”

On the contrary, the private companies providing legal services

would have far less power under market anarchy than the

government currently possesses. Most obvious, there would be

no power to tax or to monopolize “service.” If a particular

insurance company were reluctant to pay legitimate claims, this

would become quickly known, and people would take this into

account when dealing with clients of this disreputable firm.

17

The fear that (under market anarchy) private individuals would

replace politicians, overlooks the true causes of State mischief.

Unlike feudal monarchs, democratic rulers don’t actually own

the resources (including human) that they control.

Furthermore, the duration of their rule (and hence control of

these resources) is very uncertain. For these reasons,

politicians and other government employees do not exercise

much care in maintaining the (market) value of the property in

their jurisdiction. Shareholders of a private company,

however, have every interest in choosing personnel and

policies to maximize the profitability of the firm.

All the horrors of the State—onerous taxation, police brutality,

total war—are not only monstrous, but they’re also grossly

inefficient. It would never be profitable for anarchist insurance

and legal firms to mimic the policies set by governments.

18

Children

The question of children is one of the most difficult. As a first

pass, let us note that, obviously, concerned parents would only

patronize those schools, and live in those apartments or

housing complexes, where the protection of their children was

of paramount importance to the staff.

Beyond this, the basic “prohibitions” on parental child abuse

and neglect could be stipulated in the marriage contract. In

addition to whatever romance may be entailed, a marriage is

ultimately a partnership between two people, and prudent

21

couples will officially spell out this arrangement, with all of its

benefits and obligations. For example, before abandoning her

career to raise a man’s children, a woman may require a

financial pledge in case of divorce (i.e. dissolving the

partnership). In the same way, a standard clause in marriage

contracts could define and specify penalties for the improper

treatment of children.

19

Another point to consider is the enhanced role of adoption in a

free society. Much as it shocks modern sensibilities, there

would be a fully functioning “baby market,” in which parental

privileges were sold to the highest bidder.

20

Although

seemingly crass, such a market would surely reduce child

abuse. After all, abusive or negligent parents are probably the

ones most likely to offer their children for adoption, when

loving couples are allowed to pay them handsomely for it.

21

The controversial issue of abortion, just as other conflicts in a

private law system, would be handled by competing firms

setting policies to best match the desires of their customers.

Those people sufficiently horrified by the practice could

establish a gated community in which all residents agreed to

refrain from abortion, and to report anyone caught performing

one.

22

Title Registry

In market anarchy, who would define property rights? If

someone hands over the money to purchase a house, what

guarantees does he have?

This is a complex issue, and I won’t be able to give specifics,

since the actual market solution would depend on the

circumstances of the case and would draw on the legal

expertise (far greater than mine) of the entire community.

23

I

can, however, offer some general remarks.

Whatever (if any) the abstract or metaphysical nature of

property law, the purpose of public titles is quite utilitarian;

22

they are necessary to allow individuals to effectively plan and

coordinate their interactions with each other. Specialized firms

(perhaps distinct from arbitration agencies) would keep records

on the property titles, either for a specific area or group of

individuals. Title registry would probably be accomplished

through a complex, hierarchical web of such firms.

24

The fear of rogue agencies, unilaterally declaring themselves

“owner” of everything, is completely unfounded. In market

anarchy, the companies publicizing property rights would not

be the same as the companies enforcing those rights. More

important, competition between firms would provide true

“checks and balances.” If one firm began flouting the

community norms established and codified on the market, it

would go out of business, just as surely as a manufacturer of

dictionaries would go broke if its books contained improper

definitions.

Infinite Regress

A sophisticated critic may charge that my proposal rests upon a

circular argument: How can people use contracts to define

property rights, when a system of property rights is necessary

to determine which contracts are valid? After all, Smith can’t

sell Jones a car for a certain sum of money, unless it is

established beforehand that Smith is the just owner of the car

(and Jones the owner of the sum of money).

25

To see the solution, we must break the problem into two parts.

First, we should ask, “Could the free market provide a

foundation for social interaction?” I believe the previous

sections have demonstrated this. That is, I have shown above

that if we had a system of property titles recognized by

competing firms, then a contractual system governing the

exchange of those titles would form a stable basis for private

law.

Now, it is an entirely different question to ask, “How are these

titles initially defined and allocated?” This is a broad topic,

23

and will be addressed in the next section. But to deal with the

issue as it relates to the alleged infinite regress, let us consider

contract law.

Contract law is a specific branch of law, much as tort law or

constitutional law. It is used, for example, to determine

whether a contract between two parties is legally binding.

Now surely contract law can’t be established in an anarchist

system of contractual law, for wouldn’t this beg the question?

No. The contractual pledges made by individuals would

contain provisions for all of the contingencies handled by

today’s contract law. For example, the insurance company

backing up a customer would be promising, “We will make

good on any debts that our client fails to pay, so long as the

obligations have been spelled out in a valid contract, according

to the terms described in the Standard Contract Law pamphlet

published by the Ace legal firm.”

This pamphlet would perhaps require signatures in black ink,

notarized oversight for large sums, and that the signers to a

contract were of sufficient age and sobriety, and were not

under duress, when the contract was made.

26

As with all

elements of private law, the precise rules governing contract

interpretation would be determined by the (possibly

conflicting) desires of everyone through the profit and loss test.

Finally, keep in mind that the ultimate judge in a given case

is…the judge. No matter how voluminous the law books, or

how obvious the precedents, every case will ultimately depend

on the subjective interpretation of an arbiter or judge who must

deliver the ruling.

27

We must never forget that written statutes as such are

powerless unless used by competent and equitable individuals.

Only in a competitive, voluntary system is there any hope for

judicial excellence.

24

“How do we get there?”

The route to a free society will vary according to the history of

a region, and consequently no single description will do. The

path taken by North Korean market anarchists will no doubt

differ from the course of similarly minded individuals in the

United States. In the former, violent overthrow of unjust

regimes may occur, while in the latter, a gradual and orderly

erosion of the State is a wonderful possibility. The one thing

all such revolutions would share is a commitment by the

overwhelming majority to a total respect of property rights.

All societies, no matter how despotic their rulers, must possess

a basic degree of respect for property rights, even if such

respect is given due to custom rather than intellectual

appreciation. All people know that it is a crime to rape or

murder;

28

even rapists and murderers know this.

Such universal, intuitive notions of justice would constitute the

foundation for a system of private law. This widespread

agreement would allow for more specific, contractually defined

rights to evolve.

29

The process would be continuous, with one

stage of codified property titles and legal rules forming the

basis for the next generation of judges and scholars to

systematize and extend.

Regular people understand the waste and senselessness of

conflict; they will go to great lengths and make great

compromises to achieve consensus. For example, despite the

lack of a formal government, newly arriving miners during the

California gold rushes respected the claims of earlier settlers.

To take a more modern example, even inner city toughs

unthinkingly obey the “rules” in a pickup game of basketball,

despite the lack of a referee.

30

In market anarchy, free individuals, through their patronage of

competing judicial and insurance firms, would foster a humane

and just legal system. Those antisocial individuals who

25

disrupted the process (by blatantly violating obvious property

rights) would be dealt with in the ways described earlier.

Legal Positivism?

Some readers may wonder how I can propose a replacement for

the State’s “justice” system when I haven’t first offered a

rational theory of the source and nature of legitimate property

rights.

The answer is simple: I don’t have such a theory.

Nonetheless, I can still say that a market system of private law

would work far more effectively than the State alternative, and

that the standard objections to anarchy are unfounded.

There is widespread distrust of allowing the market to

“determine” something as crucial as, say, prohibitions on

murder. But “the market” is just shorthand for the totality of

economic interactions of freely acting individuals. To allow

the market to set legal rules really means that no one uses

violence to impose his own vision on everyone else.

31

Murder isn’t wrong merely because it fails the market test; of

course not. But its intrinsic immorality will find expression

through market forces. We can all agree—contractually—to

refrain from murder, and to abide by the decisions made by an

arbiter should we be tried for such a crime. In this way, we

know we are not violating anyone’s rights.

Now, after we have reached such agreement and are secure in

our lives, we can let the philosophers and theologians argue

about why murder is wrong. Legal scholars offering a priori

constructions of just law would certainly have a place in

market anarchy; after all, their tracts might influence the

judges’ decisions. However, in this essay I focus on the market

forces that will shape private law, not on the content of such

law.

32

26

V. APPLICATIONS

So far I have concentrated on the crucial issues in a theoretical

discussion of private law. Now I would like to illustrate the

versatility of such a system in a wide variety of areas, and

contrast its performance with the monopolized government

alternative.

Product Safety

One of the most common charges against pure laissez-faire is

that a completely unregulated market would leave consumers at

the mercy of ruthless businessmen. We are told that without

benevolent government oversight, food would be poisonous,

television sets would explode, and apartment buildings would

collapse.

33

It’s true, such critics might concede, that in the long

run, shady companies would eventually go out of business.

But surely someone who sells a deadly hamburger should be

immediately punished for this, on top of forfeiting future

customers.

As with other areas of law, I believe the market would deal

with these sorts of cases through contractual pledges. When a

consumer bought something, part of the package would be a

guarantee such as, “If this product causes injury, as determined

by a reputable arbitration agency, the customer is entitled to the

standard damages.” And, just as individuals would likely need

to be backed by a large insurance company before anyone

would do business with them, so too would businesses need to

be insured against possible customer lawsuits, if they wanted to

attract customers.

34

We immediately see that this system avoids the nightmare

scenarios cooked up by proponents of government regulation.

Let’s take the case of air travel. The Federal Aviation

Administration “guarantees” that airplanes have had proper

maintenance, pilots are rested, etc. So customers don’t need to

worry about their planes crashing. In contrast, many people

allege, under a free market customers would have to keep

27

statistics on how many crashes each airline had, and they’d

have to be experts in airplane maintenance to see which

companies were best.

But this is nonsense. All a flier needs to do is make sure that

when he buys a plane ticket, part of what he buys is a pledge

(backed by an insurance company) saying, “If you are killed in

a plane crash, our airline will pay your estate $y million.”

Now, since the insurance companies stand to lose millions if

the planes of this airline crash, it is they who will hire trained

inspectors, keep meticulous maintenance logs, etc. They

would say to the airlines: “Yes, we will underwrite your

contractual pledges to customers, but only if you follow our

safety procedures, allow our inspectors to look at your planes,

work out an adequate pilot screening process, etc., and if we

catch you violating your agreement, we will fine you

accordingly.” Since they are out to maximize profits, the

insurance company will gladly pay for preventive efforts if this

will lead to a greater savings in expected payments of claims to

those killed in a crash.

This stands in sharp contrast to the present system. The FAA

too sets up guidelines, but what are its incentives? If there is a

plane crash, the FAA itself will get more funding, since

everyone will say the crash shows how awful the “free market”

in airplanes is. Bloated government agencies always

mismanage their resources, so that there will be too many mid-

level managers and not enough inspectors. Most important,

since there is no competition, there is no benchmark against

which to compare the FAA’s oversight. Some lowly mechanic

might have a great idea to improve airline safety, but the

bureaucratic FAA would take years to implement it.

Professional Licensing

Closely related to the area of product safety is professional

licensing. Let’s use the example of medicine. Without

government regulation, many believe, patients would be at the

mercy of quacks. Ignorant consumers would go to whatever

28

brain surgeon charged the lowest price, and would be

butchered on the operating table. To prevent this, the

benevolent government must establish guidelines—backed up

by guns—to limit those who enter the medical profession.

This of course is nonsense. Voluntary organizations would

probably arise, allowing only qualified doctors into their ranks.

Concerned consumers would then patronize only those doctors

endorsed by reputable associations. Before undergoing risky

procedures or ingesting prescribed drugs, patients would

require contractual pledges for restitution in the event of injury.

In this case, it is again the insurance companies who would

make sure the doctors they were underwriting were in fact

qualified. Since they’d stand to lose millions in malpractice

suits, the insurance companies would be very careful when

setting their standards.

Such a system would be far preferable to the present one. As it

is, the American Medical Association is little more than a

glorified union, which requires immense schooling and training

to artificially restrict the number of doctors in order to drive up

their salaries (and health care costs in general). Without its

monopoly, the AMA would be unable to check the growth in

“alternative” therapies, such as herbal, that sidestep the current

cozy alliance of big pharmaceutical companies, hospitals, and

the government.

One must also realize that the incentives of the Food and Drug

Administration render it far too conservative: If people die

because of a new drug that the FDA has approved, the FDA

will be blamed. But if people die because the FDA has not

approved a new drug, it won’t be held accountable; the

sickness itself will be blamed. Consequently, many potentially

life-saving drugs are currently being withheld from dying

patients. In a purely free market, patients would be allowed to

take whatever drugs they wanted.

29

Gun Control

I realize that many libertarians find certain aspects of my

system a bit unnerving. Without unconditional guarantees of

abstract rights, it seems there would always be a danger of

smuggling the State in through the back door.

Rather than dance around such issues, I’ll give the best

example I can think of to demonstrate the difference between

the conventional libertarian approach and my own: gun control.

As we’ll see, I don’t think my approach is inconsistent with the

libertarian creed, but I do think it will (at least initially) make

many libertarians uncomfortable.

The standard arguments over gun control go like this:

Opponents say gun control will render people defenseless

against criminals and leave citizens at the mercy of their

government rulers; only when someone has actually used his

gun against innocents can the law rightfully step in.

Proponents of gun control, however, argue that this position is

too dogmatic; surely some preventive measures are justified in

the public interest.

As with most debates held within the context of a government

legal system, I think both sides have legitimate points.

Certainly we cannot trust the government to protect us once it

has disarmed us. But on the other hand, I feel a bit silly

arguing that people should be able to stockpile atomic weapons

in their basement. (A strict interpretation of many libertarian

arguments would mean just that.) Fortunately, the system of

private law that I’ve described allows us to sidestep this

apparent “tradeoff.”

Recall that the penalties for injury and murder would be

established by contractual pledges, underwritten by insurance

companies. People allow Joe Smith onto their property

because they know if he hurts someone, either he will directly

pay the damages or his insurance company will. The insurance

company makes its money by charging appropriate premiums,

30

tailored to the individual client. If Joe Smith has been deemed

guilty in the past of violent behavior, his insurance premiums

will be accordingly higher.

But there are other factors that an insurance company would

take into account when setting premiums, besides past

behavior. And one of these factors would undoubtedly be:

What sort of weapons does this client keep around the house?

After all, if the insurance company is going to agree to pay,

say, $10 million to the estate of anyone Joe Smith kills, the

company will be very interested to know whether Smith keeps

sawed off shotguns—let alone atomic weapons—in his

basement. Someone who keeps such weapons is much more

likely to harm others, as far as the insurance company is

concerned, and so his premiums will be that much higher. In

fact, the risk of a client who kept nuclear (or chemical,

biological, etc.) weapons would be so great that probably no

policy would be offered.

This approach is superior to the governmental one. Truly

dangerous weapons would be restricted to individuals willing

to pay the high premiums associated with their ownership; kids

couldn’t buy bazookas at the local K-Mart. On the other hand,

there wouldn’t be the slippery slope that there is now with all

government gun control. We would never fear that all

handguns would be banned, since the insurance companies

would be out strictly to make profit, and it would be far more

profitable to allow people to keep handguns and pay slightly

higher premiums.

35

As with all contracts under my system, those “regulating” guns

would be completely voluntary, involving no violation of

libertarian rights. The insurance company is not forcing people

to give up their bazookas. All it is saying is this: If you want

us to guarantee your contracts with others, you can’t own a

bazooka. The insurance companies are the just owners of their

money, and it is thus perfectly within their rights to make such

a request.

36

31

This is far preferable to the government system, which has no

accountability. If politicians ban guns and cause thousands of

people to be victimized by crime, nothing happens to them.

But if an insurance company makes unreasonable demands of

its clients, they will switch to a different company and it will

quickly go out of business.

Dangerous Criminals

The supposed tradeoff between individual liberty and public

safety is also exemplified in the debates over legal

“technicalities.” Conservatives like to complain about cases

where a known murderer is set free by a bleeding heart judge,

simply because the police coerced a confession or forgot to

read the suspect his rights. Liberals (such as Alan Dershowitz)

respond that although such cases are unfortunate, they are

necessary to keep the police in line.

As with gun control, I am sympathetic to both sides in this

debate, and again I think my system can avoid both sorts of

absurdities. To see this, let’s suppose that through some quirk,

a clearly “guilty” murderer has technically not violated any

contractual provisions. Or, suppose an arbiter—who would

only be hearing murder cases because of past excellence in his

rulings—for some reason makes an outrageous ruling, and

finds someone innocent of murder despite overwhelming

evidence to the contrary.

37

Because he was technically acquitted, the murderer would not

have to pay damages to the estate of his victim. However, the

rules governing this episode would be quickly revised to

prevent its recurrence; private companies would be under much

greater pressure than monopoly governments in the face of

such bad publicity.

There is another difference. Under a government system,

someone acquitted on a technicality gets off scot-free. But

under the private law system I’ve described, the killer’s

insurance company could still increase the premiums they

32

charged. It wouldn’t matter whether their client had been

actually convicted of a crime; their only concern would be the

likelihood that he would be convicted (of a different crime) in

the future, because then they’d have to pay the damages.

38

This analysis also resolves the issue of parole. Although most

crimes would involve financial restitution, rather than

imprisonment, there would still be individuals who were too

dangerous to be allowed loose. The insurance companies

would determine this threshold. As long as a company were

willing to pay for any damages a criminal might commit in the

future, people would offer him work, let him rent a room, etc.

Rehabilitation would thus be in the great financial interest of

the companies, in order to increase their pool of paying

customers.

On the other hand, truly dangerous individuals would not be

“paroled.” Right now, the government has psychologists and

other “experts” decide when sex offenders and murderers

should be let back on the streets. Since they have no

accountability, these ivory tower intellectuals often test out

their theories on the hapless victims of recidivist criminals.

39

VI. CONCLUSION

This essay has outlined the mechanics of purely voluntary,

market law. The main theme running throughout is that

competition and accountability would force true experts to

handle the important decisions that must be made in any legal

system. It is a statist myth that justice must be produced by a

monopoly institution of organized violence.

The arguments of this essay are admittedly incomplete; surely

more thought is needed before a move to market anarchy

becomes feasible. However, I ask that the reader resist the

temptation to dismiss my ideas as “unworkable,” without first

specifying in what sense the government legal system “works.”

33

1 This essay is based on three articles originally featured on anti-state.com.

2 More accurately, disputes will be handled relatively peacefully; force may

occasionally be required. Although market anarchism is thus not pacifism,

we note that true pacifism—the refusal to engage in violence—implies

anarchism, since all State action is based on (the threat of) violence.

3 In the original, “FREEDOM IS SLAVERY.” George Orwell, 1984 (New

York: Signet Classics, 1984), p. 7.

4 A free society is one in which property rights are (generally) respected.

The existence of a State—an institution that uses force to place itself above

property rights—thus precludes freedom as we shall use the term.

5 I hasten to note that the system of market law that I describe is not entirely

congruent with the vision of some other anarcho-capitalist writers. They

believe the “just” system of property rights is deducible axiomatically, and

that objectively valid law will be discovered and enforced by private firms.

For an excellent introduction, see Linda and Morris Tannehill, The Market

for Liberty (New York: Laissez-Faire Books, 1984); and Murray N.

Rothbard, For a New Liberty (New York: Collier, 1978).

6 An appeals process might be included in the arbitration procedure, but

then the big firm could just bribe those judges, too.

7 For example, only some states have the death penalty.

8 In this context, libertarian implies a respect for “natural” rights. The

libertarian’s ultimate credo is the non-aggression axiom, namely that it is

illegitimate to initiate force. Although market anarchy (as I will describe it)

does not rest upon libertarianism, I will argue that it is (largely) consistent

with this philosophy. Divergences between the two are, I believe, points of

weakness in the libertarian position.

9 Even if it weren’t literally signed every visit, the agreement would be

understood implicit ly.

10 Of course, if someone tried to simply barge onto another’s property,

without agreeing to any contractual obligations, then the owner would be

perfectly justified in using force to repel him. Although this default may

seem unilateral, it would at least be codified and publicized. Later sections

will deal with the problem of initially drawing up property boundaries.

11 Many of these points were inspired by fruitful discussion with Matt

Lasley, David Pinholster, Chris Redwood, Stephen Carville, Stephan

Kinsella, and Dan Mahoney. However, the objections do not necessarily

reflect the views of these thinkers.

12 Such a statement brings to mind the horrors of identification papers and

checkpoints. However, State abuses should not discredit the valid concerns

of property owners. As argued most notably by Hans Hermann Hoppe,

individuals do not possess an inherent “freedom of movement.” If owners

wish to restrict the people who travel on their roads, that is entirely their

prerogative. On the other hand, in an established anarchist society,

customers wouldn’t show ID every time they entered most stores, just as in

34

our present society people don’t draw up labor contracts every time they

hire the neighbor’s kid to mow the lawn.

13 To repeat: under this system everybody would buy homicide insurance,

just as right now surgeons buy medical malpractice insurance; the insurance

company is pledging to compensate the estate of anyone killed by its

clients. Because the probability of an individual (with no prior record)

being convicted of murder in the next year is very small, his premium

would also be small. If the company’s actuaries estimate that a potential

client has, say, only a one in a million chance of killing in the next year, and

the standard damages for murder are, say, $10 million, then the company

would only need to charge roughly $10 per year to break even.

14 As explained in section III, most property would have a clause in which

all guests agreed to submit to arrest if the guests were “wanted” by a

reputable arbitration agency.

15 This statement does not hold for the systems of private law (elaborated by

other anarcho-capitalists) in which agencies unilaterally punish anyone

harming their clients. In such a system, the lack of a monopolist would

create an additional theoretical problem for the advocate of private defense

agencies. However, even here the incentives for a peaceful resolution of

legitimate disputes are tremendous.

16 The mob is also strengthened by unions, which (in their modern form) are

anything but voluntary organizations.

17 It may be true that currently, insurance companies are bureaucratic and

overbearing. But I think this has more to do with their close relationship

with the government legal system, rather than with their nature as such.

Yes, insurance companies don’t like paying damages, but people don’t like

going to work everyday, either. This doesn’t mean the free labor market

isn’t a viable system; if people are lazy, they get fired. And if an insurance

company doesn’t pay its claims, it will eventually go out of business.

18 For the sake of argument, let us suppose (quite implausibly) that everyone

agreed to sell his or her land to a single individual, who then became

landlord of the entire population, and that as part of the lease, everyone

agreed to give the landlord the power to “tax” earnings. Even so, this

landlord would never set the tax rate above the “Laffer point,” i.e. the point

that maximized revenues. Because it is influenced by non-pecuniary

motives, however, the modern State doesn’t respect even this sensible rule.

19 This device only works, of course, if at least one of the partners is

concerned for the welfare of future children. Yet this should be sufficient

for most cases, since surely very few couples dream of becoming abusive

parents.

20 I am purposefully skirting the question of whether parents would legally

“own” their children. So long as a child voluntarily remained with his

parents, “living under their roof,” they could of course set any rules they

wished. The only problem arises when a child runs away, and does not

wish to return. I personally am sympathetic to the notion that so long as a

35

child can support him or herself, parents can’t force the child to return

home.

21 These voluntary solutions would be far preferable to the government

approach, in which ill-informed and often self-righteous “social workers”

rip families apart and place children in the horrible foster care system.

22 This would not prevent others from forming a community in which

abortion were legal, of course.

23 My stance may appear slippery, but imagine that a Cuban economist

advises Castro to abolish socialism and allow a free market to develop.

Must the economist predict beforehand whether and how many shopping

malls will exist under his proposal?

24 For example, one firm might issue land titles for an entire city, but

actually delegate the delimitation of the respective rights of two neighbors

to a different firm specializing in residential affairs.

25 The knowledgeable reader may notice that this objection—and its

solution—are similar to the alleged infinite regress involved in a marginal

utility explanation of money demand.

26 The purist might object that this remedy is insufficient. After all, I am

simply assuming that people know what the concept of a contract is. To

this charge I plead guilty. As mentioned in the Foreword, my purpose in

this essay is not to “prove” the ethical superiority of market law. Despite

the occasional normative statement, I am really just describing the world I

envision under market anarchy. And in such a world, I do not predict that

people will have trouble adopting the convention of contracts (even without

a proper philosophical definition and justification), just as I don’t predict

they will need to be versed in economic theory before using money.

27 In a private legal system, there still would be publicized laws and

adherence to precedent, for this would allow greater predictability in rulings

and hence appeal to customers.

28 Of course, the major hurdle of anarchism is to convince people that

murder is wrong even when duly elected “representatives” order it.

29 To illustrate: Suppose that the distribution of this book causes every U.S.

citizen to endorse market anarchism. Private firms would arise to codify the

property titles that were previously regulated by government agencies. It

would be “obvious” that people retained ownership of their homes (and

mortgages), cars, etc. This basic framework of property would then allow

for a voluntary, contractual solution to the more difficult problems, such as

assigning titles to government housing projects (since both tenants and

taxpayers might claim rightful ownership).

30 The reader may consider this a poor example, since after all fouling is

more flagrant in outdoor courts than in, say, an NBA game. But this is the

point: There still is such a thing as a foul (and other rules) recognized by

the transgressor in a pickup game; he will simply deny that he committed

one. (For a different example, no player would claim that his shot should

be awarded ten points.)

36

Now, the market solution to such ambiguity and bias, for games

deemed important enough to warrant the extra cost and hassle, is to appoint

official referees to apply the “law” (which they too unthinkingly respect).

Notice that at no point is a violent monopoly needed to achieve this orderly

outcome.

31 Because I am not advocating pacifism, this accusation of violence may

seem hypocritical. However, the State requires the threat of violence on

admittedly innocent people. If a person (whom everyone agrees is not a

criminal) started a legal or insurance firm that infringed on the State’s

monopoly, it would punish him.

32 An analogy may be useful: For a variety of reasons, I oppose public

schooling and advocate its immediate abolition. I am quite confident that

private schools would provide excellent education for all children, rich and

poor. Now, I say this even though I cannot construct an a priori theory of a

proper education. Nonetheless, I am confident that the market system will

be better than the State’s approach, even though I cannot list the necessary

and sufficient conditions of goodness (in this context). And of course,

nothing guarantees that the market solution will be optimal; after all, if the

parents in a certain town were evil or stupid, then market incentives would

lead to (what we would consider) horrible curricula.

33 I point out in passing that television sets did explode in the Soviet Union,

and many apartment buildings did collapse in statist Turkey after a mild

earthquake.

34 If an individual liked to live dangerously, he’d be perfectly free to buy a

computer from a firm that did not carry insurance. But if something went

wrong, it would be much more difficult for him to get his money back. It

would thus be in the great interest of most people to only do business with

companies that had their contracts backed by large, reputable insurance

companies.

35 In fact, households with conventional firearms might enjoy lower

premiums, if the insurance company thinks this will reduce the incidence of

crime in the area enough to justify the incentive.

36 To charge higher premiums to those who wish to own multiple weapons

is no more unjust than the present practice of offering discounts to drivers

for taking a driving safety class, or to homeowners for installing an alarm

system. If a particular insurance company is staffed by people who fear

guns, then gun owners will shop around for a different insurance company.

37 I stress that cases like this are going to happen under any system. I am

not conceding anything by admitting such possibilities; rather, I am trying

to show the strength of my approach by explaining its response to such

cases.

38 Again, this process does not involve a violation of anyone’s rights. It no

more discriminates against clients than the present practice of charging

young males higher car insurance premiums, even if their driving record is

snow white. We don’t need to fear a roundup of all mentally handicapped

37

people, or all young black males, because such practices would not be

profitable. If a certain individual were truly being charged a premium

higher than he “deserved,” he could shop around for a different insurance

company.

39 When I watch America’s Most Wanted or read books explaining how the

FBI catches serial killers, I am shocked by how many current murderers and

rapists commit their crimes while on parole.

39

Private Defense

Virtually everyone agrees that a government is needed to

provide the essential service of military defense. People with

an open mind may be genuinely sympathetic to the arguments

for a free society. Yet they regard all the clever blueprints for

an anarchist social order as hopelessly naïve, because a

community based on voluntary relations would apparently be

helpless in the face of neighboring States.

This essay claims that such a view, though widespread, is

completely false. There is nothing intrinsic to military defense

that requires State provision. The free market can provide

defense more cheaply and more effectively than the

government can. It is foolish and reckless to entrust the State

with the protection of civilian lives and property. Private

defense forces would enjoy a tremendous advantage, and in all

but the most lopsided contests would slaughter their

government adversaries.

I. INSURANCE

In an anarchist society committed to the sanctity of private

property and contract, insurance companies would most likely

oversee defense services.

1

To see how this market would

operate, an analogy will be useful.

Imagine a large city located on a major fault line. Every so

often, the residents endure a severe earthquake, which kills

dozens of people and causes billions of dollars in property

damage. To cope with the risk of such disasters, people

purchase insurance for their lives and property. Policyholders

pay a fixed premium, while the insurance agencies pledge to

indemnify the estates of anyone who suffers bodily or financial

harm during an earthquake, according to the precise terms

specified in the contract.

40

The force of competition keeps the price of such insurance

reasonable. Actuaries can estimate the expected costs per

period of providing certain levels of coverage, and thus

calculate the minimum premiums that would allow the insurer

(all things considered) to break even in the long run. If the

market rates exceed these minimum prices, new firms will have

an incentive to enter the insurance market to reap the profits.

Their entry would drive insurance premiums down towards the

actuarially fair rates.

It is crucial to realize that the behavior of the residents greatly

influences the city’s vulnerability to earthquakes, and thus the

total bill paid out by insurance companies following each

disaster. Buildings, roads, and bridges can be designed with

varying degrees of structural integrity and construction costs;

the better the design, the greater its expense. Through their

premium structure, insurance companies provide incentives for

safer designs, thus defraying their higher costs. Profit-hungry

businesses will thereby produce buildings and infrastructure

exhibiting the optimal combination of durability and price,

2

without any need for government codes and inspectors.

In addition to encouraging sturdier designs, insurance

companies could use other means to reduce their exposure.

They might employ teams of seismologists to forecast

earthquakes and publicize these findings as a service to their

customers. For those clients too poor to afford housing in

quake-proof buildings, the insurance companies can construct

shelters, and require that these policyholders evacuate their

buildings and retire to the shelters in an emergency.

3

In

general, an insurance company will gladly spend funds to

protect its clients and their property, so long as the expected

reduction in liability claims is sufficient to justify the

expenditure.

Just as the free market can provide the optimal response to

dangerous earthquakes, so too can it provide the best protection

from foreign militaries. Like natural disasters, wars bring

widespread death and destruction. In market anarchy,

41

insurance companies would provide coverage for these losses

too, and would thus have a great financial interest in deterring

and repelling military attacks.

II. FINANCING

It is easy enough to imagine a system of private mail delivery

or even highway construction. In contrast, free market defense

presents a conceptual hurdle, since it is not clear what would be

the voluntary analogs to government taxation and military

spending.

Defense from foreign aggression is a classic “public good” and

as such seems the perfect candidate for government provision.

4

Without the ability to extort revenues from all citizens, how

could private firms raise the funds required by modern

militaries? (After all, any individual citizen could refuse to

buy the “product,” yet still enjoy the security made possible by

his neighbors’ contributions.) On a practical level, hundreds of

small, decentralized armies would surely be wiped out by a

consolidated attack from a neighboring State.

The framework described in the first section avoids these

apparent difficulties. In a free society, it is not the average

person, but rather the insurance companies, that would

purchase defense services. Every dollar in damage caused by

foreign aggression would be fully compensated, and thus

insurers would seek to protect their customers’ property as if it

were their own.

5

Because of economies of scale, coverage for

large geographical regions would likely be handled through a

few dominant firms, ensuring standardized pricing and a

coordinated defense.

It will be useful to elaborate on this hypothetical consolidation.

Suppose we start in an initial anarchist society with no defense

services at all. Imagine that the one serious military threat is

invasion and conquest by a certain mercurial neighbor. The

residents of this free society take out insurance policies on their

42

lives and all major property, such that the total claims that

would follow an invasion are estimated at one trillion dollars.

6

The insurance agencies hire geopolitical consultants and

believe that the annual risk of attack is ten percent. They must

therefore collect roughly $100 billion per year in premiums to

cover themselves. If the society is composed of ten million

people, the per capita expenditure on insurance from foreign

aggression is $10,000. On top of this hefty expense, the

residents remain completely vulnerable.

In this bleak situation, an executive at the Ace insurance

company has a brilliant idea. He can undercut his rivals and

offer the same level of coverage for only, say, $5,000 per

person—half the price charged by his competitors. He can

afford to do this by spending some of his revenues on military

defenses, and thereby lower the probability of foreign

conquest. For example, he might pay private defense agencies

$40 billion per year to maintain helicopters, tanks, trained

personnel, etc. and be on the constant alert to repel any attacks.

If these preparations reduced the chance of foreign invasion to

only, say, one-half of one percent per year, then they would

“pay for themselves.” The innovative insurance executive

would reap huge profits and capture the market for military

liability, while the residents would enjoy increased security and

lower premiums. With property safe from foreign

expropriation, investment and population growth would be

stimulated, allowing greater economies of scale and further rate

cuts.

Free Riders

Does the above system really avoid the perennial problem of

private defense? That is, can it overcome the “free rider”

problem? After Ace Insurance entered into long-term contracts

with defense agencies, what would stop a rival firm, such as

Moocher Insurance, from undercutting Ace? After all, the

likelihood of property damage would be the same for

Moocher’s clients as for Ace’s, yet Moocher wouldn’t spend a

dime on military expenditures.

43

This reasoning is perfectly valid, yet the case for private

defense remains strong. In the first place, the clients of the

insurance companies are not homogeneous, and consequently

the market for defense is far more “lumpy” than assumed in

standard economic models. Although above we discussed per

capita premiums, this was only to give the reader a rough idea

of the expenses involved. In reality, large firms would provide

the bulk of revenue for the insurance industry. The policies

taken out on apartment complexes, shopping malls,

manufacturing plants, banks, and skyscrapers would dwarf

those taken out by individuals.

Consequently, there wouldn’t be the nightmarish bargaining

problem that so worries the skeptics of private defense. The

brilliant executive at Ace Insurance would be perfectly aware

of the above considerations. If necessary, he would write only

long-term contracts, and would make them conditional on the

acceptance of a minimum threshold of clients. In other words,

he would offer a package deal to the major companies, but the

special, low rates would only apply if a sufficient number of

these policies were sold.

It is true that this suggested remedy is rather vague. There are

many interesting issues (studied in cooperative game theory)

concerning the bargaining process of these large firms, and

how the costs of defense would be split among them. But

make no mistake, military defense would be adequately funded,

for the simple reason that shareholders of rich companies are

anything but reckless when it comes to money. Because of

their size, the biggest companies couldn’t ignore the effect of

their own behavior on military preparedness.

7

Furthermore, certain types of property—airports, bridges,

highways, power plants, and of course, military equipment—

would be far likelier targets of foreign attack, and their owners

would thus constitute an even smaller group to benefit

disproportionately from defense expenditures. This

heterogeneity would weaken further the “spillover” character

of defense services, making an efficient arrangement all the

44

easier to achieve. Those companies that ended up paying the

most might perceive the arrangement as unfair, but there would

nevertheless always be an arrangement.

8

The highest

contributors might even advertise this fact, much as large

corporations make ostentatious donations to charity in order to

curry goodwill.

Thus we see that the “lumpiness” of a realistic defense industry

mitigates the impact of the positive externalities (spillover

effects) of military spending. Because a few critical industries

will pay for a basic level of defense regardless of contributions

from others, the only possible harm of free riding would be an

“unfair” burden placed on certain corporations. In any event, it

isn’t obvious that there would even be widespread free riding.

As we shall now argue, defense services can largely be

restricted to paying customers, after all.

In the earlier discussion, we treated a foreign invasion as an all-

or-nothing proposition; the neighboring State either quickly

conquered the anarchist society or was effectively deterred

from attacking. In reality, wars can remain in stalemate for

many years. During such protracted struggles, insurance

companies would certainly be able to deploy their military

forces so as to limit gratuitous protection for non-clients.

Most obvious, naval escorts would only protect convoys of

paying customers. All other shipping would be at the mercy of

foreign fleets. Antiaircraft and missile defenses would only

protect those regions in which paying customers owned

property. And of course, the owners of real estate on the

border would always pay for its protection, lest the defense

agencies pull their tanks and troops back to a more defensible

position.

9

Government vs. Private Military Expenditures

The above considerations show that people living in market

anarchy could overcome the free rider problem and raise funds

adequate for their defense. Yet there is a symmetric

45

counterargument that is generally overlooked. It is true that

coercive taxation allows governments to acquire immense

military budgets. But this advantage is more than offset by the

tendency of governments to squander their resources. For any

meaningful comparison between government and private

defense budgets, the latter needs to be multiplied severalfold,

since private agencies can purchase equivalent military

hardware at only a fraction of the prices paid by governments.

Everyone knows that governments are profligate with their

money, and that military budgets are always a huge component

of total spending. Since their operations are often conducted in

foreign lands and shrouded in secrecy, a military can spend its

funding with virtually no accountability. Taxpayers were

shocked when an audit revealed that the U.S. Pentagon had

spent $600 per toilet seat. What few people realize is that this

example is typical. Because of the government’s monopoly, no

one has any idea how much an F-14 Tomcat “should” cost, and

so its $38 million price tag shocks no one.

This last point is important, so I want to stress that it is caused

by the very nature of government, not merely the accidents of

history. If a government raises its funds through taxation, then

it must justify this theft by spending the money on “the public

good.” Except in the most despotic regimes, the rulers can’t

simply pocket the money. Consequently, not a single official

in the entire government has any personal incentive to identify

and eliminate wasteful spending.

10

In market anarchy, on the other hand, defense services would

be sold in the open market. Fierce competition among

suppliers and cost consciousness among the buyers would keep

the prices of toilet seats as well as fighter jets as low as

possible.

46

III. ECONOMIC CALCULATION

The first two sections demonstrated that military defense, like

any other service, can be provided on the free market. To

appreciate the tremendous advantage that this gives to the

anarchist society, it will be useful to first explore the peacetime

superiority of private industry versus government planning. To

this end, we will review the critique of socialism.

The traditional opponents of socialism argued that it had

insufficient incentives for the average worker; without tying

pay to performance, people would shirk and output would be

far lower than in a capitalist economy. Only if a new “Socialist

Man” evolved, who enjoyed working for his comrades as much

as for himself, could a socialist system succeed. Although

valid, this criticism misses the essence of the problem. It took

Ludwig von Mises to explain,

11

in a 1920 paper, the true flaw

with socialism: Without market prices for the means of

production, government planners cannot engage in economic

calculation, and so literally have no idea if they are using

society’s resources efficiently. Consequently, socialism suffers

not only from a problem of incentives, but also from a problem

of knowledge.

12

To match the performance of a market

economy, socialist planners would not need to be merely

angels, committed to the commonweal—they would also need

to be gods, capable of superhuman calculations.

At any time, there is only a limited supply of labor, raw

materials, and capital resources that can be combined in

various ways to create output goods. A primary function of an

economic system is to determine which goods should be

produced, in what quantities and in what manner, from these

limited resources. The market economy solves this problem

through the institution of private property, which implies free

enterprise and freely floating prices.

The owners of labor, capital, and natural resources—the

“means of production”—are free to sell their property to the

highest bidder. The entrepreneurs are free to produce and sell

47

whatever goods they wish. The ultimate test of profit and loss

imposes order on this seeming chaos: If a producer

consistently spends more on his inputs than he earns from

selling his output, he will go bankrupt and no longer have any

influence on the manner in which society’s resources are used.

On the other hand, the successful producer creates value for

consumers, by purchasing resources at a certain price and

transforming them into goods that fetch a higher price. In the

market economy, such behavior is rewarded with profits, which

allow the producer in question to have a greater say in the use

of society’s scarce resources.

None of this is true in the socialist state. Even if they truly

intended the happiness of their subjects, the government

planners would squander the resources at their disposal. With

no test of profit and loss, the planners would have no feedback

and would thus be operating in the dark.

13

A decision to

produce more shoes and fewer shirts, or vice versa, would be

largely arbitrary. Furthermore, the individuals to ultimately

decide the fate of society’s resources would be selected

through the political process, not through the meritocracy of

the market.

IV. PRIVATE vs. GOVERNMENT DEFENSE

The general advantages of private industry over government

planning operate just as well in the field of military defense.

Because the military derives its funding in a coercive manner,

the link between output and consumer satisfaction is severed.

Because of their monopoly, a State’s armed forces can bumble

along indefinitely, with no benchmark of comparison. Even in

a limited State, whose subjects enjoy a large degree of

economic freedom, the armed forces constitute an island of

socialism.

To get a sense of the problems involved, imagine the situation

faced by Josef Stalin during World War II. As absolute

dictator, Stalin had at his disposal every resource—including

48

human—in the Soviet Union. Stalin needed to use these

resources to achieve his goals, the foremost of which (we shall

assume) was the preservation and expansion of his political

rule.

Some of Stalin’s choices were obvious enough. Clearly he

needed to overthrow the Nazi regime. And clearly this

required (before their surrender) defeat of the German armies

besieging Stalingrad.

As we become more specific, however, Stalin’s choices

become less clear. Yes, he should use all available steel for the

production of military equipment; there is no need for new

tractors at the moment. But how much of this steel should be

devoted to planes? to tanks (and which models)? to mortars? to

bombs? or to railroads (needed to move materiel to the front)?

Yes, all civilians—young and old, sick and healthy—should

devote their lives to repelling the Huns. But precisely how

many people should engage the enemy? work in tank factories?

dig trenches around the city? or forage for food (to ensure

survival through the winter)?

Even those tactical and strategic decisions normally made by

military commanders have the same flavor. Yes, a

sharpshooter such as Vasily Zaitsev should be used as a sniper,

rather than as bomber pilot or factory worker. But how best to

exploit Vasily? Should he be ordered to kill as many Germans

as quickly as possible? Surely not, for with every shot he

reveals his position. But it would also be far too conservative

to have him wait months in the hopes of getting one clear shot

at a general.

It is evident that Stalin (or his subordinates) must make all of

these decisions and thousands more just like them largely

through arbitrary guesswork. The wartime goal of expelling

the enemy is no different from the peacetime problem of food

production. In both cases, Stalin’s actions led to the deaths of

millions of his own people. Just as a free market in agriculture

49

would have prevented famine, a free market in defense would

have prevented such monstrous casualties.

Private Defense

Economic calculation allows entrepreneurs to judge whether a

plan has been profitable. It allows successful ventures to

expand and causes failed operations to disband. The market

constantly readjusts itself to the changing data: conditions of

supply, consumer demand, technical knowledge.

Now that we understand the manner in which insurance

companies could objectively and quantitatively appraise

military success, it is easy to see the advantages of private

defense. In a situation comparable to the Battle of Stalingrad,

the anarchist community would respond in the most efficient

manner humanly possible. Insurance companies would

determine the relative value of various military targets, and

place bounties on them (for capture or elimination).

Individuals left to their own spontaneous devices would try

various techniques to produce this “service.” Some might buy

tanks and hire men to attack the Germans head-on; others

might hire sharpshooters to snipe at them from afar. Some

might buy mortars and shell them. Some might hire

propagandists and offer bribes to lure defectors.

Over time, only the best defense firms would survive. They

would expand their operations, increasing the overall efficiency

of the war effort. Because they would be operating in a system

of property rights, they would need to purchase all of their

resources, including labor. This would ensure that the

resources were being used as effectively as possible. (For

example, those areas on the front in urgent need of soldiers or

ammunition would bid up their wages or prices, avoiding the

arbitrariness of government troop deployment and supply.)

Even if—to reduce transaction costs and maximize response

time—a single firm monopolized the defense of a region, the

firm could still engage in internal cost accounting and calculate

the profitability of its various branches.

50

Perhaps more important, free competition would ensure that

technological and strategic advances were rewarded and

quickly implemented. In contrast, a government military must

rely on a bureaucratic chain of command where innovation,

especially from outsiders, is stifled. In a very real sense, a

military confrontation between a statist and a free society

would be a war of a few minds versus millions.

Apples and Oranges

This theoretical discussion is sure to provoke the cynic to

remark, “I’d like to see what your insurance companies would

do if they met a Panzer division.”

But such a question misses the point. We have demonstrated

that a private defense system is the most effective, not that it is

invulnerable. Yes, a small society of anarchists would be

unable to repel the total might of Nazi Germany. But a small

society of statists would fare even worse—and in fact, plenty

of government militaries were obliterated by Hitler’s armies.

Expertise

One might wonder whether private individuals would be as

knowledgeable about military affairs as government

professionals. Surely Colin Powell makes a better general than

Bill Gates.

This fact rests on the monopoly status of the U.S. military. If

private individuals were allowed to compete with Pentagon

generals, the incompetence of the latter would be manifest.

The average stockholder is no expert in professional sports or

foreign cuisine, yet private ownership still yields excellent

baseball clubs and French restaurants. Savvy executives hire

others to identify talented individuals.

51

Intelligence

Even if a military bound by property rights and contract would

have fared well in wars of an earlier era, what of modern

warfare, with its sophisticated espionage? Could there be

anarchist spies?

Private defense agencies would gather research just as any

company does. They would hire analysts and collect

information in any way legally possible. Presumably the most

powerful computers and smartest code breakers would reside in

an anarchist society. Whatever (if any) the loss caused by

prohibitions on wiretaps and torture, it would be more than

recovered in efficiency.

14

On this topic, we note that counterintelligence would probably

be quite limited. Defense agencies would have (possibly)

several major buyers and would be operating in an open

market. Consequently, they would need to advertise the

capabilities of their products. This openness, however, is a

virtue: What better way to avoid military defeat than by

showing potential enemies how advanced their anarchist foe

would be? The defense agencies in a free society would have

nothing to hide from governments.

15

“Do or Die”

The nature of military defense makes it less amenable to the

trial and error correction mechanism of the free market. A

nation can spend years in preparation for an attack, without

receiving any feedback on the quality of its efforts. A sudden

invasion could then wipe out the private defenders before they

had a chance to adapt. This situation is different from the

typical industry, in which repeated transactions day in and day

out allow experimentation with various techniques and the

weeding out of inefficiencies.

To meet this objection, we must remember that private defense

agencies, unlike their government counterparts, need not be

52

limited to regional clients. A multinational defense agency

16

could provide, say, fighter jet services to several insurance

companies in various areas of the world. Although inadequate

strategies or training

17

might remain hidden until a sudden

disaster, at most only one of the agency’s “franchises” would

be lost. The others would study the incident and learn to avoid

it.

In such an environment, military strategists from all over the

world would collaborate in the new art of defense. While

government planners guarded their precious secrets and

protocols, anarchist agencies would hire the best and brightest

minds. Expert personnel would be rotated from region to

region, providing training in the latest tactics and equipment.

18

High-tech weapons would be stockpiled in central locations,

and loaned out to anarchist societies under imminent threat of

attack. This sharing—unthinkable among government

militaries except in the direst circumstances—would further

reduce the costs of private defense.

Nuclear Weapons

The case for private defense must deal with the possibility of

nuclear blackmail. In modern warfare, it would seem that only

a nation that can credibly threaten to obliterate its opponents is

safe from a first strike.

The anarchist society would probably not develop or even own

nuclear weapons. In the first place, the term defense has been

adopted consciously in this essay, and is not the euphemism as

used in government propaganda. Because they would gain

nothing from foreign conquest—since this would constitute

theft and would be fully prosecuted within the anarchist

courts—the owners of defense agencies would have no reason

to spend money on weapons that were ill-suited to tactical

defense.

19

Precision of weaponry would be of paramount

importance, since battles would be fought near or amidst a

defense agency’s customers.

20

53

Another, perhaps more significant, consideration is that

defense agencies would most likely be legally prohibited from

owning “weapons of mass destruction.” The anarchist legal

system would operate on the same principles of voluntary

contract that underlay the defense industry. Insurance

companies would vouch for individuals and pledge to

compensate anyone victimized by their clients. In an effort to

limit their liability, insurers would require certain concessions

from their customers. It is hard to imagine that an insurance

agency would pledge, say, $1 million for any (innocent) person

killed by Defense Firm X, when Firm X held a stockpile of

hydrogen bombs.

Despite its probable lack of nuclear weapons, the anarchist

society remains a viable option. Most obvious, there are statist

societies that currently survive without nuclear devices. By its

very nature, the anarchist society would be a completely

harmless neighbor.

21

No State would ever fear attack from an

anarchist military, and so there would be no need to

preemptively strike it (unlike the Japanese on Pearl Harbor).

With no taxation, regulation, tariffs, or immigration quotas, the

anarchist society would be of tremendous value to all major

governments.

22

They would surely act to protect it from

intimidation by a rival nuclear power.

23

V. LESSONS FROM HISTORY

The historical record supports our theoretical discussion.

Government military campaigns are characterized by gross

blunders that would be comical if not so tragic.

24

The only

reason certain powers, such as the United States, maintain their

aura of dominance is that they only fight other governments.

25

So far we have restricted attention to government militaries per

se. In reality, of course, a State hampers all of its operations

with wartime controls, further weakening its military

effectiveness. Price controls cause not only consumer

vexation—through ration cards and “Meatless Tuesdays”—but

54

also reduce output.

26

Modern wars are won with materiel. It is

no accident that the freest nations usually win their wars.

It is a statist myth that abuse of rights must be met in kind.

Bertrand de Jouvenal in his classic On Power argues that the

other European countries had no choice but to institute

conscription in response to Napoleon.

27

Yet this example only

proves the dismal imagination of government planners. Surely

a resilient anarchist society would have used its superior

technology and industrial capacity to furnish voluntary

armies

28

with forts, cannons, horses, and protective armor,

sufficient to repel more numerous yet ill-equipped and poorly

trained conscripts.

2930

The analogy of France fighting other European powers is

inappropriate. If a government army ever attacked an anarchist

society, the situation would be akin to the Vietnam War with

the technological roles reversed. There would be a clash of

cultures similar to the encounter between Pizarro and the Incan

emperor Atahuallpa.

31

The advantages of private property are as manifest in the

production of defense services as with any other. There is

nothing magical about government military forces; if they have

fewer tanks and planes and an inferior organization, they will

lose to their anarchist opponents. A tiny country such as

Taiwan can outperform communist China in the economic

arena. It could defend itself just as efficiently if its residents

would only abandon their faith in government police and

armies, and embrace total freedom.

1 This is the standard view among anarcho-capitalist writers. See for

example Linda and Morris Tannehill, The Market for Liberty (New York:

Laissez-Faire Books, 1984); Murray N. Rothbard, For a New Liberty (New

York: Collier, 1978); and Hans-Hermann Hoppe, “The Private Production

of Defense,” Journal of Libertarian Studies 14:1 (Winter 1998-1999), esp.

pp. 35-42. Even though these thinkers have outlined a feasible mechanism

55

for private defense, insurance companies may not be the vehicle actually

used in a real anarchist society: there could exist an even better market

solution, yet to be imagined.

2 Suppose there are two construction firms, Shady and Reliable, and that

there is one major earthquake per year. A bridge designed by Shady costs

only $10 million, but in the event of an earthquake will collapse 10% of the

time. A bridge designed by Reliable, on the other hand, costs $15 million

but during an earthquake has only a 1% chance of collapsing. (Assume the

bridges are identical in all other relevant respects.) The annual policy

ensuring a Shady bridge would be priced at roughly $1 million, while the

premium for a Reliable bridge would be roughly $150,000. So long as the

interest rate is no higher than approximately 20%, the savings on insurance

premiums justify purchasing the safer (yet more expensive) Reliable bridge.

(For simplicity, we have ignored depreciation of aging bridges, the time it

takes to rebuild a collapsed bridge, and the liability claims from killed

customers.) Note that this preference for the safer design has nothing to do

with altruism on the part of bridge owners, who are merely trying to

minimize their costs.

3 The precise arrangement would be specified contractually. For example,

an insurance policy might require that clients tune in to a certain TV or

radio station during an emergency, and follow the instructions. Of course,

the clients would be free to disregard these warnings and remain in their

(relatively unsafe) homes, but would thereby forfeit any compensation

should they suffer personal injury during the quake.

4 In mainstream economic literature, a public good is both non-excludable

and non-rival in consumption. In other words, the seller of a public good

can’t limit it to paying customers, and one person can consume the good

without reducing its availability to another. Clean air is a prototypical

public good.

5 In economist jargon, the insurance agencies would internalize the positive

externalities (among their customers) of defense spending.

6 Such a scenario raises an interesting question: Why would people buy

insurance from foreign conquest? What good is it to receive a check for

damaged property if it too would be confiscated? One possible market

response would be to diffuse ownership over large areas. For example, real

estate agencies would own property in every major city, rather than

concentrating it in one area. Investment firms would consider a financial

asset’s “location” when assembling their diversified portfolios. In this way,

even if a free society fell entirely to a State, the (multinational) insurance

companies would still need to indemnify the absentee owners of much of

the seized property.

7 Even Moocher Insurance would recognize the dangers of luring too many

of these big customers from Ace, since Moocher’s premiums would be

based on the accustomed level of security provided by Ace’s defense

spending.

56

8 The typical economist who explains why the free rider problem renders

private defense impractical also argues that cartels are inherently unstable

because of incentives for cheating. Yet the countries of OPEC always

manage to reach an agreement to limit output and distribute the gains.

9 In the extreme, we can even imagine defense agencies providing explicit

intelligence to foreign enemies, specifying which neighborhoods could be

bombed without reprisal. The statist commanders—perhaps after verifying

that such reports didn’t constitute a trap—would be delighted to adjust their

attacks, since this would allow them to achieve their objective, i.e. carnage,

with less resistance.

10 The use of audits only pushes the problem back one step. Government

auditors are under far less pressure than private sector ones, since their

employers—the legislators—do not desire frugality, but only the

appearance of frugality to the taxpayers.

11 For a fuller discussion, see Ludwig von Mises, Socialism: An Economic

and Sociological Analysis (Liberty Fund, 1981).

12 Strictly speaking, the “knowledge problem” (stressed by Friedrich Hayek)

is not quite the same as the more general calculation problem, but the

difference lies outside the scope of this essay.

13 An example may illustrate the problem: Everyone knows that it would be

incredibly “wasteful” to construct a bridge out of solid gold. Yet the vast

majority of the planners’ decisions—not only of what to make but how to

make it—are not so obvious.

14 The CIA, despite its sweeping powers and immense budgets, failed to

predict the collapse of the Soviet Union, harbored a mole for years, caused

the accidental bombing of the Chinese Embassy, and failed to prevent the

9/11 attacks (despite the discovery of similar terrorist plans as early as

1995).

15 Certain precautions would obviously be taken. For example, a factory

owner wouldn’t hire an enemy diplomat for fear of sabotage. But as factory

owner such a policy is perfectly within his rights; he wouldn’t need any

special “wartime powe rs.”

16 Hoppe writes, “[A]ll insurance companies are connected through a

network of contractual agreements of mutual assistance and arbitration as

well as a system of international reinsurance agencies, representing a

combined economic power which dwarfs that of most if not all existing

governments” (p. 36).

17 Warren Earl Tilson II has proposed that private defense forces could

maintain their edge by engaging in televised competition, a suggestion that

would also ameliorate the funding problem. We note that (like professional

sports) these contests would be fair, in sharp contrast to, say, the Pentagon’s

rigged ABM tests, on which billions of dollars of pork depend.

18 It is true that government military officers engage in the same types of

behavior, but on a far smaller scale than would be the case in a free market.

57

19 For example, would George W. Bush be spending $1 billion per month

bombing caves in Afghanistan if it were his money?

20 These considerations also show why an anarchist society need not fear a

foreign government using their own (advanced) weaponry against them.

Private defense firms would likely sell their wares to foreign buyers

(depending on the legal status of governments in the anarchist courts), but

these would be designed for defensive use. There would likely be no

aircraft carriers, long-range bombers or subs capable of transoceanic

voyages.

21 This of course implies that a world of anarchist societies would be free

from war.

22 The cynic may believe that major governments would perceive a

successful anarchist society as a threat. Although this would be true to

some extent, politicians aren’t stupid; they rarely destroy lucrative trading

partners, especially ones with the ability to defend themselves.

23 This argument is admittedly an odd one; it seems to acknowledge the

benefit of some coercive apparatus. But note how the critique has changed.

Usually the critic of private defense says that it may work in theory but not

practice. Now the critic complains that private defense may work in

practice but not theory.

24 General Washington’s troops at Valley Forge were absurdly ill-equipped,

many lacking shoes. During the Civil War, Union generals delayed the

introduction of a newer rifle for fear their men would waste ammunition.

Proponents of air power were ridiculed in the first World War. British

admirals stubbornly refused to convoy their ships in response to German U-

boats, until their U.S. allies convinced them otherwise. Maginot’s Line

proved to be a bad joke. The Polish army used cavalry against the

blitzkrieging Germans, after telling its men the tanks were made of

cardboard. The intelligence failures surrounding Pearl Harbor were so

monumental as to lend credibility to conspiracy theorists. Silent Service

captains learned in the early stages of World War II that, due to a problem

in the pin mechanism, direct hits would fail to explode their torpedoes, and

so they purposely aimed for glancing shots. The manufacturer managed to

deny the problem for years before finally correcting it. Examples abound of

military blunders.

25 The inability of a coalition of the world’s strongest governments to

eliminate a single man—Osama bin Laden—after months of “resolve”

underscores the limits of State power.

26 Price controls are particularly disastrous for countries enduring a

blockade. Without lucrative profits, why would smugglers risk confiscation

or even death?

27 Bertrand de Jouvenel, On Power: The Natural History of Its Growth

(Indianapolis: Liberty Fund, 1993), p. 164.

58

28 The use of paid soldiers, who viewed their work as just an occupational

choice, would also avoid the dangers posed by standing armies, which

governments inevitably use against their own subjects.

29 Conscription, far from being a valuable tool of governments, only allows

them to squander their most precious resource. On paper, the Southern

states should have easily survived Northern attacks. But their

commanders—trained at West Point—eschewed ungentlemanly guerrilla

tactics and instead rounded up their able-bodied men and marched them into

Union guns. See Jeffrey Rogers Hummel, Emancipating Slaves, Enslaving

Free Men (Chicago: Open Court, 1996), pp. 178-179.

30 We also note the relative difficulty Napoleon would face in conquering an

anarchist (versus statist) neighbor. With no centralized government, there is

no institution with the authority to surrender to a foreign power (see Hoppe

p. 49). By creating a coercive apparatus of taxation and control over their

subjects, the other European states made Napoleon’s task that much easier.

In contrast, it took the British years to subdue Ireland, with its decentralized

institutions.

31 In one of the most lopsided military victories in history, “Pizarro, leading

a ragtag group of 168 Spanish soldiers, was in unfamiliar terrain, ignorant

of the local inhabitants, completely out of touch with the nearest

Spaniards…and far beyond the reach of timely reinforcements. Atahuallpa

was in the middle of his own empire of millions of subjects and

immediately surrounded by his army of 80,000 soldiers….Nevertheless,

Pizarro captured Atahuallpa within a few minutes after the two leaders first

set eyes on each other.” See Jared Diamond, Guns, Germs, and Steel (New

York: W. W. Norton & Co., 1999), p. 68.

59

About the Anarchists

Robert P. Murphy is a Ph.D. candidate in economics at New

York University, where he is working on a dissertation on

monetary and interest theory. He is Senior Editor of anti-

state.com, a regular columnist for LewRockwell.com, and a

frequent contributor to Mises.org. He has a personal website,

BobMurphy.net.

Jeremy Sapienza is a web developer in Miami Beach. He is

founder and Editor of anti-state.com, assistant webmaster for

antiwar.com, and a regular columnist for LewRockwell.com.

He runs a free email service for anarchists at anarchomail.com.

Robert Vroman is an economics student at St. Louis

University. He is on the committee of the St. Louis Libertarian

Party and an organizer of the Free State Project. His personal

websites are EndAuthority.com and Anti-Marx.com.