Private defense agency
Encyclopedia
A private defense agency (PDA) is a conceptualized agency that provides personal protection and military defense
services voluntarily through the free market
. A PDA is not a private contractor
of the state and is not subsidised
in any way through taxation or immunities, nor does it rely on conscription
and other involuntary methods. Instead, such agencies would be financed primarily through insurance
companies, which are penalized for losses and damages, and have an incentive through competition to minimize waste and maximize quality of service. This method of social order is advocated by anarcho-capitalism
and by market-based forms of social anarchism
, such as Mutualism
.
Benjamin Tucker
and Gustave de Molinari
first explicitly proposed for-profit private defense agencies.
The concept later was advanced and expanded upon by anarcho-capitalists
and other libertarian
s who consider the state to be illegitimate, and therefore believe defense is something that should be provided or determined privately by individuals and firms competing in a free market. The Mises Institute published a book of essays entitled The Myth of National Defense: Essays on the Theory and History of Security Production. Murray N. Rothbard in For a New Liberty: The Libertarian Manifesto and David D. Friedman
in The Machinery of Freedom
expand substantially on the idea. Both hold that a PDA would be part of a privatized
system of law
, police
, court
s, insurance companies and arbitration
agencies who are responsible for preventing and dealing with aggression. In this environment, victimless crimes and "crimes against the state" would be rendered moot
, and the legal realm would be limited to contract
ual disputes and tort
damages, as from assault
, burglary
, pollution
, and all other forms of aggression. This concept is similar to Polycentric law
. Within economics
, discussion of the concept largely has been confined to the Austrian School
, as in Hans Hoppe's article "The Private Production of Defense" published by the Mises Institute.
These authors emphasize that PDAs have different motives from existing statist
defense agencies. Their survival depends on quality of service leading to a wide customer base, rather than the ability to extract funds via the force of law, as is true of states
. Customers and markets would thus dictate that PDAs minimize offensive tendencies and militarization
in favor of a pure defense. Anarcho-capitalists believe such privatization and decentralization
of defense would eliminate the credibility of, and popular support for, the state.
As a private firm offering individually determined defense, the PDA provides a model for how an entirely private defense would work in a free market. Libertarian purist John Frederic Kosanke argues that the need for large-scale defense is minimized in direct inverse proportion to the extent of domestic control by the state. Since the greater number of proprietors makes surrender
more costly to an aggressor than a relatively authoritarian region, vulnerability
to attack is less likely. Furthermore, since individuals minding their own business pose little threat to neighboring regions, official or ideological
justification by those neighbors for attacking them is also proportionately diminished.
, Quintus Maximus Fabius Cunctator used his personal resources to pay for the release of some Roman prisoners. When the son of Scipio Africanus
, who at the time was acting as de facto commander-in chief, was captured during the war against Antiochus III the Great
in 190 BC, he came up with ransom himself.
As Rome grew wealthier, greater use was made of private money and/or private armed forces, consisting of relatives and clients, to accomplish public objectives. Between 73 and 71 BC, Marcus Licinius Crassus
and Gnaeus Pompeius Magnus
used their own resources to suppress the armies of Spartacus
in the Third Servile War
. Julius Caesar
made his fortune by vanquishing pirates in the Mediterranean and then by conquering
Gaul
. The emergence of the modern state caused the members of the upper classes to be disarmed.
is "bad" for consumers because, shielded from potential new entrants into his area of production, the price of his product X will be higher and its quality lower than otherwise. Yet they simultaneously hold that security must be undertaken by the government, which is a territorial monopoly of law and order (the ultimate decision maker and enforcer). Hoppe holds that the two propositions are clearly incompatible. In his essay The Production of Security, Molinari concluded:
Tyler Cowen, however, argues that allowing private defense agencies would not necessarily prevent a monopoly on defense services, by positing that a cooperating network of such firms could use aggressive force to enforce the cartel
's market domination. Noting that advocates of PDAs typically argue that abuses would be prevented by the presence of rival agencies acting under the authority of rulings made by arbitrators empowered by inter-agency arbitration agreements, Cowen opines, "The adjudication network is stable only if it can use force to put down outlaw agencies that do not accept its higher-order arbitration decisions. Such a network could also use force to put down firms that do not adhere to the collusive agreement."
Anarcho-capitalists argue that competing defense providers would concentrate on comparatively lower-cost defense and security technology rather than relatively costly offensive weaponry, in order to maintain lower premiums and service charges. A company's offensive capabilities would also be readily exposed by such an aggressor's competitors. State-subsidized militaries, in contrast, are granted a distinct offensive advantage, resulting in a proportionately greater tendency toward monopolization.
s and their prize distributions, Garitee found the average value of one share to be about $150. Since most crewmen earned from two to four shares, this meant that in the typical privateer cruise of three months, a man might earn the equivalent of 18 months' wages, and sometimes more.
argues that "Firms might prey on their competitors' customers, as competing mafia groups do, to show those customers that their current protective firm is not doing the job and thus to induce them to switch protection firms. This action seems to be a profit-maximizing strategy; hence, protection firms that do not prey on noncustomers may not survive." Holcombe states that the mafia
offers protection for a fee, but it also uses its resources for predation; and thus profit-maximizing firms could be expected to employ them in the dual roles of protection and predation. Peter Leeson
and Edward Stringham
rebut this argument by claiming that unless the firm were overwhelmingly more powerful than its prey, it could incur substantial costs and risks in attempting to extract wealth by force. They argue that the potential for even a small state to inflict losses on an aggressor explains why violent confrontations between states are less common than between individuals in New York City
's Central Park
.
In The Market for Liberty
, Linda and Morris Tannehill note that a private defense agency would be unlikely to engage in aggression, as it would not only become a target of retaliatory force, but would become the subject of severe business ostracism. Honest and productive individuals would dissociate themselves from it, fearing that it might use its aggressive force against them in the event of a dispute; or that they might become accidental casualties when retaliatory force is used by one of its other victims; or that their own reputation would suffer due to their ties to it. Moreover, the private defense agency's reputation would suffer and it would be regarded as a poor credit and insurance risk, the latter due to the high risk of claims resulting from its involvement in aggression. The employees and leaders of such an agency as well could face personal civil liability for their involvement, and the agency would not be shielded by sovereign immunity
. High-quality employees would presumably be less willing to be involved with such an organization.
They also argue that a defense company would be less likely to abuse its power and impose tyranny, noting that it "couldn't extract taxes from them, as a government does...A market relationship is a free relationship, and if a customer doesn't like a company's service or mistrusts its goals, he is free to take his business elsewhere, or to start his own competitive company, or to do without the service and just provide from himself...The objection that a tyrant might take over is actually a devastating argument against government."
Rothbard makes a similar point, noting, "Of course, some of the private defense agencies will become criminal, just as some people become criminal now. But the point is that in a stateless society there would be no regular, legalized channel for crime and aggression, no government apparatus the control of which provides a secure monopoly for invasion of person and property...To create such an instrument de novo is very difficult, and, indeed, almost impossible; historically, it took State rulers centuries to create a functioning State apparatus."
It has been argued, "If Defense Agency A instead of invading a business decides to invade a more worthwhile target such as a gold warehouse they are left with a much more complicated problem. The gold warehouse is owned by an entrepreneur who has his own defense agency and the gold in the warehouse also have owners that have hired their own respective defense agencies. In essence, Defense Agency A will have to deal with the wrath of the warehouse owner, the warehouse owner's defense agency and the defense agencies of all the owners of the gold in that warehouse."
Robert P. Murphy opines that given the privatization of other services in an anarcho-capitalist society, "We must consider that in such an environment, the law-abiding majority would have all sorts of mechanisms at their disposal, beyond physical confrontation. Once private judges had ruled against a particular rogue agency, the private banks could freeze its assets (up to the amount of fines levied by the arbitrators). In addition, the private utility companies could shut down electricity and water to the agency’s headquarters, in accordance with standard provisions in their contracts."
The argument that customers will be able to hire a competing firm to protect them against a rogue defense agency has been critiqued by Jonathan Bond's essay, The Price of Private Law, which argues, "If two defense firms are engaged in a truly ‘local’ dispute, and the remaining firms are not convinced that either their own interests will be affected or that systemic destabilization will result if the conflict continues, then the costs of intervening and ending the inter-agency war could presumably bar such third parties from stepping into the crossfire." Bond also argues that some firms may not be concerned with the risk of alienating other clients, because their clientele may consist of a small number of, or even only one, enormous multinational corporations. Bond further argues that some PDAs may reduce their risk of retaliation by carrying out anonymous sabotage or terrorist attacks.
Villacampa notes that consumers with large amounts of wealth would likely pay more for private defense, stating "There is no reason for someone void of valuable assets to hire a defense agency that is meant to protect assets other than oneself; but, in an involuntary government payment is demanded for the services regardless of whether they are use or not." He argues an alliance of aggressor private defense agencies would likely be unprofitable: "Chances are high that a mobilization of a mass army of defense agencies will cost more to each individual than his gain from gold, land, and such divided equally amongst themselves. If the region being attacked has large stashes of valuable goods, they will most likely have very effective defense agencies (stronger defense agencies for more valuable assets are logical) and thus the fight against the invading defense agencies will inflict more cost upon the invaders."
i.e., a product that can only be provided by government because of its non-excludability and non-rivalrous consumption. Specifically, the free rider problem
, in which people refuse to pay for defense but instead rely on their neighbors to pay for defending the community, is said to make it inevitable that it be financed by taxes if an equitable allocation of costs is to be achieved. According to anarcho-capitalist theorists, there are many ways by which this problem can be overcome or rendered irrelevant. Rothbard's solution was to simply say "Who cares?" when it comes to the issue of free riders. He points out that free riders are commonplace in other aspects of our economy, asking hypothetically, "Are we to be critical because more than one person benefits from someone's actions?...In short, am I to be taxed for enjoying the view of my neighbor's well-kept garden?" He notes that we are all free riders on the past, as we would be living in a primitive society if it were not for the efforts of our ancestors; and we are free riders on the present, because we benefit from the continuing investment of our fellow men and from their specialized skills on the market. Joseph R. Stromberg notes that the American Revolution
occurred despite the fact that some individuals might have been free riders who benefited from it without funding it; he opines that successful defense of freedom often relies not on precise allocations of cost, but on "nationalism, religion, the desire for freedom, hatred of the enemy, social pressure to do the right thing, and so on," some of which might represent "enlightened self interest."
Linda and Morris Tannehill believe that big businesses will tend to pay the bulk of the defense costs (since they stand to lose the most in the event of an attack); they would then pass on the costs to their customers, and so the costs of defense would be spread out among the whole population. A landowner seeking to establish a community may sell or lease the land with provisions written into the deed or lease agreement, requiring the new owner or tenant to pay for defense on a permanent basis; this same technique has already been in some neighborhoods to ensure that residents pay for private streets shared in common by all of them. As is true for homeowners today, everyone would be responsible for buying or otherwise being covered by aggression insurance
in order to protect themselves against catastrophic loss from foreign attack; in the event of an invasion, a claim would be filed with right of subrogation
, and the insurer would hire a private defense company to collect from the aggressor. An argument against this method of funding is that other aggression insurers who didn't pay for defense would still benefit from the reduced risk of attack on their customers in the same area, in effect becoming free riders who could drive the "altruistic" insurer out of business. However, the private defense agency's activity need not be limited to defensive and retaliatory measures funded by the insurer; It could also go after the aggressor in an effort to obtain restitution (including reasonable collection cost
s), perhaps through ransom or capture of enemy assets, as privateer
s did in the 18th and 19th centuries under letters of marque and reprisal
. Prisoners of war also used to have shadow price
s (ransoms) which were a source of income for victorious forces; this represents another potential alternative to taxation.
Sometimes arguments are made for voluntary funding of defense by way of attacking taxation. Anarcho-capitalists often argue, for instance, that the argument that taxation is needed to fund protection of liberty and property from aggression is a contradiction, because taxation itself requires aggression in order to be enforced. Another argument comes from the fact that, unlike voluntary transactions, no demonstrated preference has been made by the taxpayer; so there is no objective way of showing that he is receiving a service he wants and needs, at a price that is fair.
Military
A military is an organization authorized by its greater society to use lethal force, usually including use of weapons, in defending its country by combating actual or perceived threats. The military may have additional functions of use to its greater society, such as advancing a political agenda e.g...
services voluntarily through the free market
Free market
A free market is a competitive market where prices are determined by supply and demand. However, the term is also commonly used for markets in which economic intervention and regulation by the state is limited to tax collection, and enforcement of private ownership and contracts...
. A PDA is not a private contractor
Private military company
A private military company or provides military and security services. These combatants are commonly known as mercenaries, though modern-day PMCs refer to their staff as security contractors, private military contractors or private security contractors, and refer to themselves as private military...
of the state and is not subsidised
Subsidy
A subsidy is an assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributors in an industry to prevent the decline of that industry or an increase in the prices of its products or simply to encourage it to hire more labor A subsidy (also...
in any way through taxation or immunities, nor does it rely on conscription
Conscription
Conscription is the compulsory enlistment of people in some sort of national service, most often military service. Conscription dates back to antiquity and continues in some countries to the present day under various names...
and other involuntary methods. Instead, such agencies would be financed primarily through insurance
Insurance
In law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
companies, which are penalized for losses and damages, and have an incentive through competition to minimize waste and maximize quality of service. This method of social order is advocated by anarcho-capitalism
Anarcho-capitalism
Anarcho-capitalism is a libertarian and individualist anarchist political philosophy that advocates the elimination of the state in favour of individual sovereignty in a free market...
and by market-based forms of social anarchism
Social anarchism
Social anarchism is a term originally used in 1971 by Giovanni Baldelli as the title of his book where he discusses the organization of an ethical society from an anarchist point of view...
, such as Mutualism
Mutualism (economic theory)
Mutualism is an anarchist school of thought that originates in the writings of Pierre-Joseph Proudhon, who envisioned a society where each person might possess a means of production, either individually or collectively, with trade representing equivalent amounts of labor in the free market...
.
Theory of private defense
As proponents of free-market anarchism,Benjamin Tucker
Benjamin Tucker
Benjamin Ricketson Tucker was a proponent of American individualist anarchism in the 19th century, and editor and publisher of the individualist anarchist periodical Liberty.-Summary:Tucker says that he became an anarchist at the age of 18...
and Gustave de Molinari
Gustave de Molinari
Gustave de Molinari was an economist born in Belgium associated with French laissez-faire liberal economists such as Frédéric Bastiat and Hippolyte Castille. Living in Paris, in the 1840s, he took part in the "Ligue pour la Liberté des Échanges" , animated by Frédéric Bastiat...
first explicitly proposed for-profit private defense agencies.
The concept later was advanced and expanded upon by anarcho-capitalists
Anarcho-capitalism
Anarcho-capitalism is a libertarian and individualist anarchist political philosophy that advocates the elimination of the state in favour of individual sovereignty in a free market...
and other libertarian
Libertarianism
Libertarianism, in the strictest sense, is the political philosophy that holds individual liberty as the basic moral principle of society. In the broadest sense, it is any political philosophy which approximates this view...
s who consider the state to be illegitimate, and therefore believe defense is something that should be provided or determined privately by individuals and firms competing in a free market. The Mises Institute published a book of essays entitled The Myth of National Defense: Essays on the Theory and History of Security Production. Murray N. Rothbard in For a New Liberty: The Libertarian Manifesto and David D. Friedman
David D. Friedman
David Director Friedman is an American economist, author, and Right-libertarian theorist. He is known as a leader in anarcho-capitalist political theory, which is the subject of his most popular book, The Machinery of Freedom...
in The Machinery of Freedom
The Machinery of Freedom
The Machinery of Freedom is a 1973 nonfiction book by libertarian economist David D. Friedman outlining the means by which an anarcho-capitalist society could operate...
expand substantially on the idea. Both hold that a PDA would be part of a privatized
Privatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...
system of law
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
, police
Police
The police is a personification of the state designated to put in practice the enforced law, protect property and reduce civil disorder in civilian matters. Their powers include the legitimized use of force...
, court
Court
A court is a form of tribunal, often a governmental institution, with the authority to adjudicate legal disputes between parties and carry out the administration of justice in civil, criminal, and administrative matters in accordance with the rule of law...
s, insurance companies and arbitration
Arbitration
Arbitration, a form of alternative dispute resolution , is a legal technique for the resolution of disputes outside the courts, where the parties to a dispute refer it to one or more persons , by whose decision they agree to be bound...
agencies who are responsible for preventing and dealing with aggression. In this environment, victimless crimes and "crimes against the state" would be rendered moot
Mootness
In American law, a matter is moot if further legal proceedings with regard to it can have no effect, or events have placed it beyond the reach of the law...
, and the legal realm would be limited to contract
Contract
A contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
ual disputes and tort
Tort
A tort, in common law jurisdictions, is a wrong that involves a breach of a civil duty owed to someone else. It is differentiated from a crime, which involves a breach of a duty owed to society in general...
damages, as from assault
Assault
In law, assault is a crime causing a victim to fear violence. The term is often confused with battery, which involves physical contact. The specific meaning of assault varies between countries, but can refer to an act that causes another to apprehend immediate and personal violence, or in the more...
, burglary
Burglary
Burglary is a crime, the essence of which is illicit entry into a building for the purposes of committing an offense. Usually that offense will be theft, but most jurisdictions specify others which fall within the ambit of burglary...
, pollution
Pollution
Pollution is the introduction of contaminants into a natural environment that causes instability, disorder, harm or discomfort to the ecosystem i.e. physical systems or living organisms. Pollution can take the form of chemical substances or energy, such as noise, heat or light...
, and all other forms of aggression. This concept is similar to Polycentric law
Polycentric law
Polycentric law is a legal structure in which providers of legal systems compete or overlap in a given jurisdiction, as opposed to monopolistic statutory law according to which there is a sole provider of law for each jurisdiction. Devolution of this monopoly occurs by the principle of...
. Within economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
, discussion of the concept largely has been confined to the Austrian School
Austrian School
The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...
, as in Hans Hoppe's article "The Private Production of Defense" published by the Mises Institute.
These authors emphasize that PDAs have different motives from existing statist
Statism
Statism is a term usually describing a political philosophy, whether of the right or the left, that emphasises the role of the state in politics or supports the use of the state to achieve economic, military or social goals...
defense agencies. Their survival depends on quality of service leading to a wide customer base, rather than the ability to extract funds via the force of law, as is true of states
Sovereign state
A sovereign state, or simply, state, is a state with a defined territory on which it exercises internal and external sovereignty, a permanent population, a government, and the capacity to enter into relations with other sovereign states. It is also normally understood to be a state which is neither...
. Customers and markets would thus dictate that PDAs minimize offensive tendencies and militarization
Militarism
Militarism is defined as: the belief or desire of a government or people that a country should maintain a strong military capability and be prepared to use it aggressively to defend or promote national interests....
in favor of a pure defense. Anarcho-capitalists believe such privatization and decentralization
Decentralization
__FORCETOC__Decentralization or decentralisation is the process of dispersing decision-making governance closer to the people and/or citizens. It includes the dispersal of administration or governance in sectors or areas like engineering, management science, political science, political economy,...
of defense would eliminate the credibility of, and popular support for, the state.
As a private firm offering individually determined defense, the PDA provides a model for how an entirely private defense would work in a free market. Libertarian purist John Frederic Kosanke argues that the need for large-scale defense is minimized in direct inverse proportion to the extent of domestic control by the state. Since the greater number of proprietors makes surrender
Surrender (military)
Surrender is when soldiers, nations or other combatants stop fighting and eventually become prisoners of war, either as individuals or when ordered to by their officers. A white flag is a common symbol of surrender, as is the gesture of raising one's hands empty and open above one's head.When the...
more costly to an aggressor than a relatively authoritarian region, vulnerability
Vulnerability
Vulnerability refer to the susceptibility of a person, group, society, sex or system to physical or emotional injury or attack. The term can also refer to a person who lets their guard down, leaving themselves open to censure or criticism...
to attack is less likely. Furthermore, since individuals minding their own business pose little threat to neighboring regions, official or ideological
Ideology
An ideology is a set of ideas that constitutes one's goals, expectations, and actions. An ideology can be thought of as a comprehensive vision, as a way of looking at things , as in common sense and several philosophical tendencies , or a set of ideas proposed by the dominant class of a society to...
justification by those neighbors for attacking them is also proportionately diminished.
History of private production of defense
Ancient city-states in Greece and Rome depended on liturgies contributions made by rich citizens for specific purposes for defense. A liturgy might be used, for instance, to fund the manning of a warship. Although a certain amount was assessed by magistrates, some citizens paid more than required in order to obtain popularity, influence, and sympathy among jurors in the event they were taken to court. During the Second Punic WarSecond Punic War
The Second Punic War, also referred to as The Hannibalic War and The War Against Hannibal, lasted from 218 to 201 BC and involved combatants in the western and eastern Mediterranean. This was the second major war between Carthage and the Roman Republic, with the participation of the Berbers on...
, Quintus Maximus Fabius Cunctator used his personal resources to pay for the release of some Roman prisoners. When the son of Scipio Africanus
Scipio Africanus
Publius Cornelius Scipio Africanus , also known as Scipio Africanus and Scipio the Elder, was a general in the Second Punic War and statesman of the Roman Republic...
, who at the time was acting as de facto commander-in chief, was captured during the war against Antiochus III the Great
Antiochus III the Great
Antiochus III the Great Seleucid Greek king who became the 6th ruler of the Seleucid Empire as a youth of about eighteen in 223 BC. Antiochus was an ambitious ruler who ruled over Greater Syria and western Asia towards the end of the 3rd century BC...
in 190 BC, he came up with ransom himself.
As Rome grew wealthier, greater use was made of private money and/or private armed forces, consisting of relatives and clients, to accomplish public objectives. Between 73 and 71 BC, Marcus Licinius Crassus
Marcus Licinius Crassus
Marcus Licinius Crassus was a Roman general and politician who commanded the right wing of Sulla's army at the Battle of the Colline Gate, suppressed the slave revolt led by Spartacus, provided political and financial support to Julius Caesar and entered into the political alliance known as the...
and Gnaeus Pompeius Magnus
Pompey
Gnaeus Pompeius Magnus, also known as Pompey or Pompey the Great , was a military and political leader of the late Roman Republic...
used their own resources to suppress the armies of Spartacus
Spartacus
Spartacus was a famous leader of the slaves in the Third Servile War, a major slave uprising against the Roman Republic. Little is known about Spartacus beyond the events of the war, and surviving historical accounts are sometimes contradictory and may not always be reliable...
in the Third Servile War
Third Servile War
The Third Servile War , also called the Gladiator War and the War of Spartacus by Plutarch, was the last of a series of unrelated and unsuccessful slave rebellions against the Roman Republic, known collectively as the Roman Servile Wars...
. Julius Caesar
Julius Caesar
Gaius Julius Caesar was a Roman general and statesman and a distinguished writer of Latin prose. He played a critical role in the gradual transformation of the Roman Republic into the Roman Empire....
made his fortune by vanquishing pirates in the Mediterranean and then by conquering
Gallic Wars
The Gallic Wars were a series of military campaigns waged by the Roman proconsul Julius Caesar against several Gallic tribes. They lasted from 58 BC to 51 BC. The Gallic Wars culminated in the decisive Battle of Alesia in 52 BC, in which a complete Roman victory resulted in the expansion of the...
Gaul
Gaul
Gaul was a region of Western Europe during the Iron Age and Roman era, encompassing present day France, Luxembourg and Belgium, most of Switzerland, the western part of Northern Italy, as well as the parts of the Netherlands and Germany on the left bank of the Rhine. The Gauls were the speakers of...
. The emergence of the modern state caused the members of the upper classes to be disarmed.
Lack of monopoly power
Hoppe points out that there is a contradiction in the beliefs of most philosophers and economists in reference to national defense. They generally hold that any monopolyMonopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...
is "bad" for consumers because, shielded from potential new entrants into his area of production, the price of his product X will be higher and its quality lower than otherwise. Yet they simultaneously hold that security must be undertaken by the government, which is a territorial monopoly of law and order (the ultimate decision maker and enforcer). Hoppe holds that the two propositions are clearly incompatible. In his essay The Production of Security, Molinari concluded:
Tyler Cowen, however, argues that allowing private defense agencies would not necessarily prevent a monopoly on defense services, by positing that a cooperating network of such firms could use aggressive force to enforce the cartel
Cartel
A cartel is a formal agreement among competing firms. It is a formal organization of producers and manufacturers that agree to fix prices, marketing, and production. Cartels usually occur in an oligopolistic industry, where there is a small number of sellers and usually involve homogeneous products...
's market domination. Noting that advocates of PDAs typically argue that abuses would be prevented by the presence of rival agencies acting under the authority of rulings made by arbitrators empowered by inter-agency arbitration agreements, Cowen opines, "The adjudication network is stable only if it can use force to put down outlaw agencies that do not accept its higher-order arbitration decisions. Such a network could also use force to put down firms that do not adhere to the collusive agreement."
Anarcho-capitalists argue that competing defense providers would concentrate on comparatively lower-cost defense and security technology rather than relatively costly offensive weaponry, in order to maintain lower premiums and service charges. A company's offensive capabilities would also be readily exposed by such an aggressor's competitors. State-subsidized militaries, in contrast, are granted a distinct offensive advantage, resulting in a proportionately greater tendency toward monopolization.
Treatment of soldiers
There is historical evidence that military personnel would likely be paid more under a privatized system. In the early nineteenth century, the typical monthly wage for a merchant seaman was about $30. In a detailed survey of nine different American privateerPrivateer
A privateer is a private person or ship authorized by a government by letters of marque to attack foreign shipping during wartime. Privateering was a way of mobilizing armed ships and sailors without having to spend public money or commit naval officers...
s and their prize distributions, Garitee found the average value of one share to be about $150. Since most crewmen earned from two to four shares, this meant that in the typical privateer cruise of three months, a man might earn the equivalent of 18 months' wages, and sometimes more.
Aggression and abuses by private defense agencies
Randall G. HolcombeRandall G. Holcombe
Randall Gregory Holcombe is an American economist, the DeVoe Moore Professor of Economics at Florida State University. He argued that private defense agencies could form cartels and oppress people without fear of competition.-References:...
argues that "Firms might prey on their competitors' customers, as competing mafia groups do, to show those customers that their current protective firm is not doing the job and thus to induce them to switch protection firms. This action seems to be a profit-maximizing strategy; hence, protection firms that do not prey on noncustomers may not survive." Holcombe states that the mafia
Mafia
The Mafia is a criminal syndicate that emerged in the mid-nineteenth century in Sicily, Italy. It is a loose association of criminal groups that share a common organizational structure and code of conduct, and whose common enterprise is protection racketeering...
offers protection for a fee, but it also uses its resources for predation; and thus profit-maximizing firms could be expected to employ them in the dual roles of protection and predation. Peter Leeson
Peter Leeson
Peter T. Leeson is BB&T Professor for the Study of Capitalism at the Mercatus Center, George Mason University He authored The Invisible Hook: The Hidden Economics of Pirates, a book in which he uses rational choice theory to examine the economic conditions and incentives that influenced pirate...
and Edward Stringham
Edward Stringham
Edward Peter Stringham is the L.V. Hackley Endowed Professor for the Study of Capitalism and Free Enterprise at Fayetteville State University.He received a B.A. in economics from College of the Holy Cross and his Ph.D...
rebut this argument by claiming that unless the firm were overwhelmingly more powerful than its prey, it could incur substantial costs and risks in attempting to extract wealth by force. They argue that the potential for even a small state to inflict losses on an aggressor explains why violent confrontations between states are less common than between individuals in New York City
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
's Central Park
Central Park
Central Park is a public park in the center of Manhattan in New York City, United States. The park initially opened in 1857, on of city-owned land. In 1858, Frederick Law Olmsted and Calvert Vaux won a design competition to improve and expand the park with a plan they entitled the Greensward Plan...
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In The Market for Liberty
The Market for Liberty
The Market for Liberty is an anarcho-capitalist book written by Linda and Morris Tannehill, which according to Karl Hess has become "something of a classic." It was preceded by the self-published Liberty via the Market in 1969. Mary Ruwart credits the Tannehills and their book with winning her over...
, Linda and Morris Tannehill note that a private defense agency would be unlikely to engage in aggression, as it would not only become a target of retaliatory force, but would become the subject of severe business ostracism. Honest and productive individuals would dissociate themselves from it, fearing that it might use its aggressive force against them in the event of a dispute; or that they might become accidental casualties when retaliatory force is used by one of its other victims; or that their own reputation would suffer due to their ties to it. Moreover, the private defense agency's reputation would suffer and it would be regarded as a poor credit and insurance risk, the latter due to the high risk of claims resulting from its involvement in aggression. The employees and leaders of such an agency as well could face personal civil liability for their involvement, and the agency would not be shielded by sovereign immunity
Sovereign immunity
Sovereign immunity, or crown immunity, is a legal doctrine by which the sovereign or state cannot commit a legal wrong and is immune from civil suit or criminal prosecution....
. High-quality employees would presumably be less willing to be involved with such an organization.
They also argue that a defense company would be less likely to abuse its power and impose tyranny, noting that it "couldn't extract taxes from them, as a government does...A market relationship is a free relationship, and if a customer doesn't like a company's service or mistrusts its goals, he is free to take his business elsewhere, or to start his own competitive company, or to do without the service and just provide from himself...The objection that a tyrant might take over is actually a devastating argument against government."
Rothbard makes a similar point, noting, "Of course, some of the private defense agencies will become criminal, just as some people become criminal now. But the point is that in a stateless society there would be no regular, legalized channel for crime and aggression, no government apparatus the control of which provides a secure monopoly for invasion of person and property...To create such an instrument de novo is very difficult, and, indeed, almost impossible; historically, it took State rulers centuries to create a functioning State apparatus."
It has been argued, "If Defense Agency A instead of invading a business decides to invade a more worthwhile target such as a gold warehouse they are left with a much more complicated problem. The gold warehouse is owned by an entrepreneur who has his own defense agency and the gold in the warehouse also have owners that have hired their own respective defense agencies. In essence, Defense Agency A will have to deal with the wrath of the warehouse owner, the warehouse owner's defense agency and the defense agencies of all the owners of the gold in that warehouse."
Robert P. Murphy opines that given the privatization of other services in an anarcho-capitalist society, "We must consider that in such an environment, the law-abiding majority would have all sorts of mechanisms at their disposal, beyond physical confrontation. Once private judges had ruled against a particular rogue agency, the private banks could freeze its assets (up to the amount of fines levied by the arbitrators). In addition, the private utility companies could shut down electricity and water to the agency’s headquarters, in accordance with standard provisions in their contracts."
The argument that customers will be able to hire a competing firm to protect them against a rogue defense agency has been critiqued by Jonathan Bond's essay, The Price of Private Law, which argues, "If two defense firms are engaged in a truly ‘local’ dispute, and the remaining firms are not convinced that either their own interests will be affected or that systemic destabilization will result if the conflict continues, then the costs of intervening and ending the inter-agency war could presumably bar such third parties from stepping into the crossfire." Bond also argues that some firms may not be concerned with the risk of alienating other clients, because their clientele may consist of a small number of, or even only one, enormous multinational corporations. Bond further argues that some PDAs may reduce their risk of retaliation by carrying out anonymous sabotage or terrorist attacks.
Villacampa notes that consumers with large amounts of wealth would likely pay more for private defense, stating "There is no reason for someone void of valuable assets to hire a defense agency that is meant to protect assets other than oneself; but, in an involuntary government payment is demanded for the services regardless of whether they are use or not." He argues an alliance of aggressor private defense agencies would likely be unprofitable: "Chances are high that a mobilization of a mass army of defense agencies will cost more to each individual than his gain from gold, land, and such divided equally amongst themselves. If the region being attacked has large stashes of valuable goods, they will most likely have very effective defense agencies (stronger defense agencies for more valuable assets are logical) and thus the fight against the invading defense agencies will inflict more cost upon the invaders."
Financing of private defense agencies
Defense is often viewed as an archetypical public goodPublic good
In economics, a public good is a good that is non-rival and non-excludable. Non-rivalry means that consumption of the good by one individual does not reduce availability of the good for consumption by others; and non-excludability means that no one can be effectively excluded from using the good...
i.e., a product that can only be provided by government because of its non-excludability and non-rivalrous consumption. Specifically, the free rider problem
Free rider problem
In economics, collective bargaining, psychology, and political science, a free rider is someone who consumes a resource without paying for it, or pays less than the full cost. The free rider problem is the question of how to limit free riding...
, in which people refuse to pay for defense but instead rely on their neighbors to pay for defending the community, is said to make it inevitable that it be financed by taxes if an equitable allocation of costs is to be achieved. According to anarcho-capitalist theorists, there are many ways by which this problem can be overcome or rendered irrelevant. Rothbard's solution was to simply say "Who cares?" when it comes to the issue of free riders. He points out that free riders are commonplace in other aspects of our economy, asking hypothetically, "Are we to be critical because more than one person benefits from someone's actions?...In short, am I to be taxed for enjoying the view of my neighbor's well-kept garden?" He notes that we are all free riders on the past, as we would be living in a primitive society if it were not for the efforts of our ancestors; and we are free riders on the present, because we benefit from the continuing investment of our fellow men and from their specialized skills on the market. Joseph R. Stromberg notes that the American Revolution
American Revolution
The American Revolution was the political upheaval during the last half of the 18th century in which thirteen colonies in North America joined together to break free from the British Empire, combining to become the United States of America...
occurred despite the fact that some individuals might have been free riders who benefited from it without funding it; he opines that successful defense of freedom often relies not on precise allocations of cost, but on "nationalism, religion, the desire for freedom, hatred of the enemy, social pressure to do the right thing, and so on," some of which might represent "enlightened self interest."
Linda and Morris Tannehill believe that big businesses will tend to pay the bulk of the defense costs (since they stand to lose the most in the event of an attack); they would then pass on the costs to their customers, and so the costs of defense would be spread out among the whole population. A landowner seeking to establish a community may sell or lease the land with provisions written into the deed or lease agreement, requiring the new owner or tenant to pay for defense on a permanent basis; this same technique has already been in some neighborhoods to ensure that residents pay for private streets shared in common by all of them. As is true for homeowners today, everyone would be responsible for buying or otherwise being covered by aggression insurance
Aggression insurance
Aggression insurance is a concept in anarcho-capitalism under which, rather than having a civil authority provide security of life, liberty, and property, individuals would buy insurance to cover damage caused by others' aggression...
in order to protect themselves against catastrophic loss from foreign attack; in the event of an invasion, a claim would be filed with right of subrogation
Subrogation
Subrogation in its most common usage refers to circumstances in which an insurance company tries to recoup expenses for a claim it paid out when another party should have been responsible for paying at least a portion of that claim....
, and the insurer would hire a private defense company to collect from the aggressor. An argument against this method of funding is that other aggression insurers who didn't pay for defense would still benefit from the reduced risk of attack on their customers in the same area, in effect becoming free riders who could drive the "altruistic" insurer out of business. However, the private defense agency's activity need not be limited to defensive and retaliatory measures funded by the insurer; It could also go after the aggressor in an effort to obtain restitution (including reasonable collection cost
Collection cost
A collection cost is incurred to collect debt that is owed. This could include expenditures for hiring a collection agency. Some contracts and regulations prescribe liquidated damages for collection costs. When collection costs occur, the debtor has pay off debt to get the collector out of...
s), perhaps through ransom or capture of enemy assets, as privateer
Privateer
A privateer is a private person or ship authorized by a government by letters of marque to attack foreign shipping during wartime. Privateering was a way of mobilizing armed ships and sailors without having to spend public money or commit naval officers...
s did in the 18th and 19th centuries under letters of marque and reprisal
Letter of marque
In the days of fighting sail, a Letter of Marque and Reprisal was a government licence authorizing a person to attack and capture enemy vessels, and bring them before admiralty courts for condemnation and sale...
. Prisoners of war also used to have shadow price
Shadow price
In constrained optimization in economics, the shadow price is the instantaneous change per unit of the constraint in the objective value of the optimal solution of an optimization problem obtained by relaxing the constraint...
s (ransoms) which were a source of income for victorious forces; this represents another potential alternative to taxation.
Sometimes arguments are made for voluntary funding of defense by way of attacking taxation. Anarcho-capitalists often argue, for instance, that the argument that taxation is needed to fund protection of liberty and property from aggression is a contradiction, because taxation itself requires aggression in order to be enforced. Another argument comes from the fact that, unlike voluntary transactions, no demonstrated preference has been made by the taxpayer; so there is no objective way of showing that he is receiving a service he wants and needs, at a price that is fair.
Related topics
- Dispute resolution organizationDispute resolution organizationA dispute resolution organization, or DRO, is a conceptualized organization providing services such as mediation and arbitration through the private sector. It is an important aspect of anarcho-capitalist theory.-Enforceability of verdicts:...
- MercenaryMercenaryA mercenary, is a person who takes part in an armed conflict based on the promise of material compensation rather than having a direct interest in, or a legal obligation to, the conflict itself. A non-conscript professional member of a regular army is not considered to be a mercenary although he...
- InsuranceInsuranceIn law and economics, insurance is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss. Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for payment. An insurer is a company selling the...
- LibertarianismLibertarianismLibertarianism, in the strictest sense, is the political philosophy that holds individual liberty as the basic moral principle of society. In the broadest sense, it is any political philosophy which approximates this view...
- PanarchismPanarchismPanarchism is a political philosophy emphasizing each individual's right to freely join and leave the jurisdiction of any governments they choose, without being forced to move from their current locale. The word "panarchy" was invented and the concept proposed by a Belgian political economist, Paul...
- Polycentric lawPolycentric lawPolycentric law is a legal structure in which providers of legal systems compete or overlap in a given jurisdiction, as opposed to monopolistic statutory law according to which there is a sole provider of law for each jurisdiction. Devolution of this monopoly occurs by the principle of...
- Private GovernancePrivate GovernancePrivate Governance occurs when non-governmental entities, including private organizations, dispute resolution organizations, or other third party groups, make rules and/or standards which have a binding effect on the "quality of life and opportunities of the larger public." Simply put, private—not...
- Private military companyPrivate military companyA private military company or provides military and security services. These combatants are commonly known as mercenaries, though modern-day PMCs refer to their staff as security contractors, private military contractors or private security contractors, and refer to themselves as private military...
- Security guardSecurity guardA security guard is a person who is paid to protect property, assets, or people. Security guards are usually privately and formally employed personnel...
External links
- Las Portadas (underwriting, arbitration, and government interface)
- Restitution Transfer and Recoupment
- Stateless Defense
- Private Security Transnational Enterprises in Colombia
- Human Rights First; Private Security Contractors at War: Ending the Culture of Impunity (2008)
- Is Government Inevitable? Comment on Holcombe's Analysis