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Wednesday, December 11, 2013

If You Like Your Governance, You Can Keep It

You might be an anarcho-capitalist if you consider this case

People often recoil when I mention the very idea of anarcho-capitalism. It has both the A word and the C word—connected by a hyphen. That’s some heavy baggage. After all, shouldn’t that mean ruthless robber barons getting rich amid social chaos? 
Not exactly. 
Some great scholars have blazed a trail out of those bad connotations. For example, Don Boudreaux wrote a fantastic essay in which he asks whether the State must supply and enforce law. More recently, Benjamin Powell put forth an excellent case in which he argues that the proper question is whether or not anarchy is better than feasible government arrangements a given country faces. Peter Leeson and Claudia Williamson point out that anarchy may be the best that failed or weak states can achieve. And Leeson, along with Daniel Smith, discusses how anarchy once “governed” international trade in the eleventh century—in fact, it still largely does today.
This is all well and good. But people will have to feel that such a worldview works to the benefit of the least advantaged around the globe—that is, if they can get past the connotations. What about proposing anarcho-capitalism in the developed world?
In my experience, putting forth anarcho-capitalism as a solution to policy problems is usually dismissed out of hand—even among economists who are otherwise pro-market. This has always puzzled me. Anarcho-capitalism seems like a logical extension of already existing arguments for market arrangements in other contexts. For example, it’s no mystery why cable companies routinely provide poor service at high cost. They enjoy a geographic monopoly on the provision of their services despite technological advances making the stated reasons for their monopoly status obsolete. Why can’t the same be said about governments? 
Properly understood, anarcho-capitalism is not some crazy theory that “there should be no rules!” As far as what anarcho-capitalism actually is, let’s start with a very basic thought experiment.

You Might Be an Anarcho-Capitalist If . . .

Suppose that there is a household on the border between the United States and Canada. Currently, this household is a part of the United States and is thus subject to all of its laws, regulations, and tax obligations. After years of being subject to U.S. law, this household is finally fed up (perhaps as a result of some recent policy initiative that passed through Congress). Rather than simply accepting the fact that they must live under a new regime they do not like, they phone up the Canadian government and inquire about the costs and benefits of being subject to Canadian law instead. After careful deliberation, this household decides that it would be much happier as a Canadian household than as an American household. And after similarly careful consideration, the Canadian government decides that they would rather have this household as a citizen of Canada than not. As a result, this household purchases its governance from Canada instead of the United States. This much, at least, should not be terribly contentious: Governments sell governance and citizens purchase this governance in the form of paying taxes. All that is different in this case is that the border between the United States and Canada is not exogenously defined and, instead, is determined by people shopping for their government without having to move. If this doesn’t sound contentious, then you might be an anarcho-capitalist.

Pizza in Virginia

The next step would be to consider a household in, say, Virginia. We can imagine this household similarly getting fed up with U.S. policy and wanting to purchase governance from Canada as well. However, it would be unlikely that the Canadian government would agree to sell governance to this household: The cost of providing the services would be entirely too high. Imagine providing national defense or a police force for a small household that is geographically separate from the rest of your customers. And in fact, this is not all that difficult to imagine. For example, in college I spent many a Friday night eating Hungry Howie’s pizza with friends. In Virginia, however, there is no Hungry Howie’s. If I were to call the Hungry Howie’s in Hillsdale, Michigan, and ask them to deliver a pizza to Fairfax, Virginia, they would (correctly) deny me service. Why? The cost of getting the pizza to me is entirely too high to be worth their effort at a price that I would be willing to pay. Governments, like pizza shops, would not have an obligation to provide governance to anyone. Only to those who pay the requisite price would receive the service. 
What this household in Virginia could do then is to start their own government that is completely separate from the U.S. government. This household would be free to offer governance to nearby households as well, and if those other households found the terms agreeable, they would be free to join this new country. This is no different from saying that the household in Virginia is free to set up their own pizza company and sell their pizza to the locals.


So, to recap: Anarcho-capitalism is not a radical idea that there should be no rules at all. Instead, it’s a system where man is free to choose the provider of the rules under which he lives. Discussion of anarcho-capitalism in this light is nothing new. In fact, this discussion was inspired directly by rereading Mises’s Liberalism (1929), where he says: 
The right of self-determination in regard to the question of membership in a state thus means: whenever the inhabitants of a particular territory, whether it be a single village, a whole district, or a series of adjacent districts, make it known, by a freely conducted plebiscite, that they no longer wish to remain united to the state to which they belong at the time, but wish either to form an independent state or to attach themselves to some other state, their wishes are to be respected and complied with.
Obviously the explanation of anarcho-capitalism put forth here is simple and leaves much to be discussed (provision of public goods, interaction between governments, etc.). I won’t pretend to have all of the answers to these questions or solutions to these problems. That’s not evidence that anything I’ve said up to this point is wrong, though. In fact, economics—properly understood—is a practice in which one acknowledges the fact that one person can’t have solutions to certain kinds of complex problems, which is the job of markets made up of millions of entrepreneurs and arbitrageurs. Adam Smith wrote in 1776 about how a woolen coat gets made. Bastiat recognized that Paris gets fed daily without any one person being in charge. And Leonard Read regaled us with his classic “I, Pencil.” That one person cannot answer a question of “well how would X be provided or accomplished?” is by no means an admission that government should try to accomplish it by default. (An excellent place to start thinking about these problems is David Friedman’s Machinery of Freedom, available for free in its entirety here.)

You Can Have Whatever You Like

Instead, beyond what I have shown, all I want to advocate for here is the consistent and persistent application of economic thinking to the world around us. Rules, laws and other forms of governance are economic goods. And as economics teaches us, the provision of economic goods is best left to the market. Properly understood, anarcho-capitalism is simply the belief that individuals know what’s best for them regarding the provision of governance. As such, they should be able to purchase whatever governance they like just as they can purchase pizza from whatever pizza company they like. 

  • David Hebert is an Assistant Professor of Economics at Ferris State University. His interests include public finance and property rights.