Power and Market, Chapter 1 Section 2

by Adam Alcorn

Power and Market

Power and Market

“Let us, then examine in a little more detail what a free-market defense system might look like.”

Having demonstrated the failures of the governmental (monopolistic) defense forces we call the Justice System, Rothbard follows through with the task of proposing an alternative. I will simply restate the disclaimer that Rothbard provided, he said

“It is, we must realize, impossible to blueprint the exact institutional conditions of any market in advance, just as it would have been impossible 50 years ago to predict the exact structure of the television industry today. However, we can postulate some of the workings of a freely competitive, marketable system of police and judicial services.”

And that is exactly what the remainder of Chapter 1 is about.

Rothbard believes the most likely defense and judicial services would be provided on an “advance subscription basis” with police able to respond immediately. In the way that Adam Smith’s invisible hand directs entrepreneurs, competition would “undoubtedly arise” in this market making the likelihood of monopoly very unlikely. Rothbard also mentions the lack of territorial monopoly that would make it next to impossible for a State to arise out of a purely-free market.

What About the Warlords?

Rothbard notes that it “seems likely” for property insurance agencies to offer police and judicial services because it is “to their direct advantage to reduce the amount of crime as much as possible.”
To refute a common objection, Rothbard theorizes that Defense Agency X representing Client X have a dispute in which both courts rule in opposition to each other. In this instance, due to the law of repeated dealings and the high cost of aggressive violence a “privately competitive Appeals Court of a type that will undoubtedly spring up in abundance on the market to fill the great need for such tribunals.”

“Indeed, in the basic legal code of the free society, there probably would be enshrined some such clause as that the decision of any two courts will be considered binding, i.e., will be the point at which the court will be able to take action against the party adjudged guilty. Every legal system needs some sort of socially-agreed-upon cutoff point, a point at which judicial procedure stops and punishment against the convicted criminal begins.”

This convention would arise through the likelihood of Agency X and Agency Y having a pre-arranged arbiter that they and their clients have agreed to accept as final ruling. All of this of course would be voluntarily agreed upon in the terms of the contract with an insurance agency. It is likely that these competitive courts would have repetitive dealings and it would be mutually beneficial to follow the agreed-upon rules in the contract, or they would quickly lose favor as fair arbiters of justice.
Everything we know about market forces make the idea of competing warlords more unlikely. It is only the State that has nothing to worry about in terms of profit and loss. It is only the State that can maintain a monopoly on force, and it is only the State that can afford to defend such a monopoly.

Checks and Balances

In further refutation of the battling warlords objection Rothbard begins with dispelling a popular rumor:

“It is very generally assumed that those who postulate a stateless society are also naïve enough to believe that, in such a society, all men would be “good.” and no one would wish to aggress against his neighbor. There is no need to assume any such magical chance in human nature. 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. When a State exists, there does exist such a built-in channel, namely the coercive taxation power, and the compulsory monopoly of forcible protection.”

I could not paraphrase the previous paragraph and do it any justice, so I had to quote the man himself.

To support his assertions Rothbard argued that throughout history, it took “State rulers centuries to establishing a functioning State apparatus.”

The supposed checks and balances provided by the United States government “can scarcely be considered checks at all, since every one of these institutions is an agency of the central government and eventually of the ruling party of that government.” Rothbard explains that the profit and loss forces of the purely-free market, in consistency with the other postulation, that violence is the most expensive form of dispute resolution, would provide real checks and balances via the free market, “i.e., the existence of freely competitive police and judicial agencies that could quickly be mobilized to put down any outlaw agency.” If for instance this would fail, as Rothbard notes, the worst possible outcome would be the rise of another State, but the experiment of a stateless society has nothing to lose since the “State is what we have now.”

In summary Rothbard offers this nail in the first coffin of objections to private defense services:

“A truly free market is totally incompatible with the existence of the State, an institution that presumes to “defend” person and property by itself subsisting on the unilateral coercion against private property known as taxation. On the free market, defense against violence would be a service like any other, obtainable from freely competitive private organizations. Whatever problems remain in this area could easily be solved in practice by the market process.”

 – Adam Alcorn



Next Installment: Power and Market, Chapter 2: Fundamentals of Intervention