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Wednesday, March 25, 2015

The Silk Road Back to Leviathan?

Does Dread Pirate Roberts’s fate destroy the dream of justice without the state?

“The Silk Road might have started as a libertarian experiment,” writes Henry Farrell in Aeon magazine, “but it was doomed to end as a fiefdom run by pirate kings.”

Ross Ulbricht was recently convicted on seven charges related to being “Dread Pirate Roberts” (DPR), the mastermind behind Silk Road. The charges in his New York trial consisted of drug trafficking, money laundering, and other activities that most libertarians not only consider “victimless crimes” but, at least in the case of the Silk Road, possibly even a positive service to society.

Much more problematic for libertarians are the murder-for-hire plots, for which Ulbricht is facing charges in Baltimore. Indeed, George Washington University political science professor Henry Farrell wrote a provocative essay claiming that this aspect of the Silk Road case destroys the libertarian dream of justice without the state. Farrell’s conclusion is overblown: as disturbing as DPR’s downfall is, he handled himself far more ethically than the typical head of state.

Farrell’s charges

Farrell’s piece, “Dark Leviathan,” is well-crafted and knowledgeable; I can understand why Paul Krugman — no fan of libertarians, or of bitcoin, for that matter — described Farrell’s essay as “truly brilliant.” Farrell makes what seems to be a compelling case that the fall of Silk Road showcases the necessity of state law enforcement. As Farrell writes:

No entrepreneur of trust was more successful than the Texan Ross Ulbricht, who, under his “Dread Pirate Roberts” pseudonym, founded and ran the notorious Silk Road marketplace for drugs and other contraband. And no-one better exemplifies how the libertarian dream of freedom from the state turned sour.

Ulbricht built the Silk Road marketplace from nothing, pursuing both a political dream and his own self-interest. However, in making a market he found himself building a micro-state, with increasing levels of bureaucracy and rule-enforcement and, eventually, the threat of violence against the most dangerous rule-breakers. Trying to build Galt’s Gulch, he ended up reconstructing Hobbes’s Leviathan; he became the very thing he was trying to escape. But this should not have been a surprise.

In contrast to some writers who erect straw men out of libertarianism, Farrell has every right to view Silk Road as an experiment in stateless order. Farrell shows that Ulbricht himself explicitly cited Murray Rothbard:

When Ulbricht began to grow hallucinogenic mushrooms and sell them on the internet in 2010, he didn’t see himself either as a Mafioso or a state builder. Instead, it appears that he was driven by enthusiasm for the libertarian thinker Murray Rothbard. On his LinkedIn profile, Ulbricht declared his intention to use “economic theory as a means to abolish the use of coercion and aggression amongst mankind,” and to build an “economic simulation” that would let people see what it was like to live in a world without the “systemic use of force.”

Despite Ulbricht’s best intentions, his dream of a coercion-free environment was stymied when people began to rip off Silk Road’s users and to blackmail DPR (who the defense team claims was not Ulbricht by this point). As this fascinating yet disturbing message log shows, whoever DPR was, he definitely thought he was paying hundreds of thousands of dollars to have multiple people killed. This is why Farrell concludes that Ulbricht’s dream of freedom had deteriorated into a fiefdom.

Comparing Silk Road to the state

Do Farrell’s charges stick? Did DPR turn into just another political ruler?

The most obvious problem with Farrell’s essay is that we’re only having this debate because the state outlaws peaceful markets in marijuana, heroin, cocaine, and other such drugs. Furthermore, the state also prohibits competing, professional agencies for the private production of defense services — this is why DPR thought he had to deal with such unsavory characters. DPR didn’t have the option of, say, taking his case to a reputable private-sector judge and getting a verdict levied against the people attacking Silk Road, because the state renders everything in the Rothbardian vision illegal. Thus, the Silk Road murder-for-hire episode shows what happens when the state interferes in the markets for drugs and law enforcement. In this respect, Farrell’s argument is akin to watching Luke’s tauntaun die on the ice planet Hoth, and then remarking, “This just shows why the galaxy needs an emperor.”

Even taking the comparison of Silk Road versus the state at face value, we can see several crucial differences. First of all, there’s a good chance that DPR was hoodwinked, and that nobody was actually killed. So it’s interesting that the free-market tyrant that Farrell (and Krugman) are gleefully pointing out has zero confirmed homicide victims to date. This toll stands in contrast to the thousands or millions of state-imposed deaths, depending on the timeframe we use.

But some will say the (probable) lack of actual bodies is hardly the issue here; what’s important is that DPR thought he was hiring real hit men. Even here, there is a crucial difference: when the state decides to eliminate its enemies, it uses funds confiscated from innocent people to bankroll the killers. In contrast, DPR used his own money to pay the (purported) hit men. He didn’t even levy a “security fee” on future Silk Road transactions — which would have been voluntary if people continued to use the site — let alone did he extract money from users without their permission.

The question of who funds the dirty work may strike a skeptic as sophistry, but a third distinction between Silk Road and the Leviathan state cuts to the heart of the matter: DPR was going after thieves and after people threatening his clients with bodily harm.

It’s important not to frame the issue as DPR trying to kill a blackmailer. Many libertarians consider blackmail to be a peaceful and therefore legitimate activity. (See, for example, Walter Block’s chapter on blackmail in the seminal libertarian book Defending the Undefendable.) If Joe discovers that Dave is cheating on his wife, Joe might be a jerk if he demands money from Dave to keep quiet, but he’s not violating anyone’s rights if he does so.

But the Silk Road user “FriendlyChemist” was threatening to expose the identities of 24 Silk Road drug dealers and thousands of buyers if DPR didn’t pay him $700,000. This threat isn’t akin to publicizing photos of an affair, or even threatening a restaurant to reveal the ingredients of its secret sauce. In addition to ruining Silk Road as a business, FriendlyChemist threatened to expose thousands of peaceful people to potential arrest.

There is a wide range of views among libertarians on the acceptable use of violence. I am a pacifist, for example. But libertarian theory, even in its most radical, anti-state formulations, does not require pacifism; people in a free, stateless society can hire other people to use violence in defense of property. Things get a bit murky when — according to the message logs — it seems that DPR became seduced by the ability to take out his enemies and tried to have mere thieves killed. This behavior would be a bridge too far, according to standard libertarian theory: you can’t kill someone just because he stole money from you. Yet, in contrast to the thousands of innocent people that the state locks up (and sometimes even kills) year in and year out, DPR at his worst tried to order a punishment that exceeded the crime, at least in terms of the Rothbardian legal theory he claimed to follow.

Finally, a crucial difference between DPR and the state is that DPR wanted to err on the side of not hurting an innocent person. Here is the specific excerpt from the message log:

Dread Pirate Roberts 4/5/2013 18:49: I’ve received the picture and deleted it. Thank you again for your swift action.

I would like to go after Andrew, though it is important to me to make sure he is who Blake said he is. I would rather miss the chance to take him out, than hit an innocent person. If he is our man, then he likely has substantial assets to be recovered. Perhaps we can hold him and question him?

These exchanges between DPR and his would-be commander of assassins don’t exactly read like those of Nixon and his advisors discussing options for Indochina. In case you’re unfamiliar with this episode, let me quote from Daniel Ellsberg’s Secrets: A Memoir of Vietnam and the Pentagon Papers. The following dialog is a 1972 Oval Office exchange that made it onto Nixon’s infamous tapes and was released decades later:

President Nixon: We’ve got to quit thinking in terms of a three-day strike [in the Hanoi-Haiphong area]. We’ve got to be thinking in terms of an all-out bombing attack — which will continue until they — Now by all-out bombing attack, I am thinking about things that go far beyond… I’m thinking of the dikes, I’m thinking of the railroad, I’m thinking, of course, the docks…

Kissinger: …I agree with you.

President Nixon: …we’ve got to use massive force…

Two hours later, H. R. Haldeman and Ron Ziegler joined Kissinger and Nixon:

President: How many did we kill in Laos?

Ziegler: Maybe ten thousand — fifteen?

Kissinger: In the Laotian thing, we killed about ten, fifteen…

President: See, the attack in the North that we have in mind … power plants, whatever’s left — POL [petroleum], the docks… And, I still think we ought to take the dikes out now. Will that drown people?

Kissinger: About two hundred thousand people.

President: No, no, no…I’d rather use the nuclear bomb. Have you got that, Henry?

Kissinger: That, I think, would just be too much.

President: The nuclear bomb, does that bother you? …I just want you to think big, Henry, for Christsakes. (Ellsberg, p. 418, ellipses original)

Now that’s a state in action. If we have to choose between the democratically elected head of state Richard Nixon, or the market-ascendant DPR, I’ll go for DPR any day of the week. He made very bad decisions — which were also immoral according to my value code — but they were nothing compared to what leaders of modern states do every day.

The author thanks John Bush, who covered the Silk Road trial, for information used in this article.

  • Robert P. Murphy is senior economist at the Independent Energy Institute, a research assistant professor with the Free Market Institute at Texas Tech University, and a Research Fellow at the Independent Institute.