Hi WillMagic.
Thanks for starting this thread. I’ve long held a somewhat abstract interest in anarcho-capitalism but I’ve never had the opportunity to speak to one in person. While I appreciate you may have your hands full answering all the questions posed in this thread, I would be much indebted if you could take the time to help me clarify my understanding of AC.
I contend that a great many services essential to the smooth running of a modern society simply cannot be provided on the free market, at least not in a way which guarantees a utilitarian net benefit for that society. For instance, the supplantation of a tax funded police force with competing private security companies would leave the poorest and most vulnerable members of society either unprotected or dependant on the benevolence of his neighbour for protection. My first question is, if security in an anarcho-capitalistic society is provided entirely by private entities, who would investigate the murder of a citizen who was unable to subscribe?
Secondly, how would the free market ensure that no one private security company became too powerful? Imagine an island, let’s call it Ancapistan, where security (and everything else) is provided privately. Over time, two companies have risen to dominate the market: Pete’s Patrol Group and Dave’s Detectives. Pete’s company is the more successful, possessing a 51% market share while Dave owns 49%. It stands to reason that more of Pete’s disputes will be intrajurisdictional (as in, between one or more of Pete’s clients) because Pete has more subscribers than Dave. The same reasoning leads us to conclude that Dave’s company will have to liase with Pete’s more often than Pete’s will have to liase with Dave’s. It also stands to reason that an intrajurisdictional dispute will cost less to resolve than an interjurisdictional dispute.
All this means that, if both companies are maximally efficient, Pete’s overheads will be lower than Dave’s. If this is so, Pete can pass these savings on to the consumers, tempting them away from Dave and further increasing the inequality between them. Pete’s overheads decrease for every customer he gains and, if he invests these savings in price deals and special offers, it will stand to reason that the more customers he gains today, the more customers he’ll be able to gain tomorrow. After a while, Pete’s market share would increase to such an extent that the savings he’d be able to offer would trigger a hypertransfer of clients away from Dave’s, leading to the inevitable collapse of Dave’s company. Even if we hypothesis a perfect balance between the two, the relationship would be very unstable. Like a pencil balanced on its point, any advantage gained by one company over the other would be self-reinforcing.
We would thus end up with one company holding a monopoly on security. This company could utilise all manner of dirty tricks to stifle potential competition. They could use violence to suppress upstart companies (after all, to whom would these minnow’s appeal for redress?) and if that didn’t work they could exploit their size, employing economies of scale to undercut any fledgling rival. A society that privatises everything including security runs the risk of ending up a de facto city state. Moreover it would be a city state which, given the importance of security to pretty much everything, would have more power to extort money from the populace than stable representative Government does now.
The wholescale privatisation of roads would also pose a serious problem for an anarcho-capitalistic society. They’re already under a governmental monopoly but they could easily be monopolised by private companies. If I owned a section of important roads in an anarcho-capitalistic society and charged prohibitive tolls, the only way for another company to compete with me would be to build new roads. It is accepted in economics that potential competition will keep a single producer’s prices at a competitive level, but only if sunk costs are nil or trivial. Building roads costs a lot of money and time. If the monopolist temporarily slashed his prices, the demand for the new road would evaporate and any costs spent on the new road would be wasted. Once the competition was eliminated, the monopolist would have nothing to lose by raising prices again.
Thirdly, how would national defence be provided on the free market? National defense is a Public Good. By this I mean that national defense, once established, protects payers and non-payers equally. My enjoyment of national defence is not impacted by the introduction of any number of illegal immigrants into my nation. In other words, once national defence has been set up, it costs as much to defend a nation of five million people as it does to defend a nation of four million people. This is because the extent to which a country needs to be defended is mostly contingent on its geography and not on the number of people residing therein.
Now, in Ancapistan, citizens would have the choice to pay for national defence. They’d have to, otherwise it wouldn’t be a free market. Since, as we’ve established, I’d have nothing to lose by not paying, I have no incentive to contribute. But if no-one contributed, Ancapistan wouldn’t have a national defence force at all. Moreover, even if a proportion of people all agreed to pay a national defence tariff, the pricing scheme would be terribly unstable. It wouldn’t take many people to drop out to force the company responsible to raise the cost, which would then incline yet more people to drop out, exacerbating the problem.
In summation, then, I’d be very interested to know how you envision the private provision of security, transport, and national defence. Thanks in advance.
