Introduction to Regulatory Capture Theory

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On the market, in society in general, we expect and accommodate rapidly to change, to the unending marvels and improvements of our civilization. New products, new life styles, new ideas are often embraced eagerly. But in the area of government we follow blindly in the path of centuries, content to believe that whatever has been must be right. In particular, government, in the United States and elsewhere, for centuries and seemingly from time immemorial has been supplying us with certain essential and necessary services, services which nearly everyone concedes are important: defense (including army, police, judicial, and legal), firefighting, streets and roads, water, sewage and garbage disposal, postal service, etc. So identified has the State become in the public mind with the provision of these services that an attack on State financing appears to many people as an attack on the service itself. Thus if one maintains that the State should not supply court services, and that private enterprise on the market could supply such service more efficiently as well as more morally, people tend to think of this as denying the importance of courts themselves.

The libertarian who wants to replace government by private enterprises in the above areas is thus treated in the same way as he would be if the government had, for various reasons, been supplying shoes as a tax-financed monopoly from time immemorial. If the government and only the government had had a monopoly of the shoe manufacturing and retailing business, how would most of the public treat the libertarian who now came along to advocate that the government get out of the shoe business and throw it open to private enterprise? He would undoubtedly be treated as follows: people would cry:

How could you? You are opposed to the public, and to poor people, wearing shoes! And who would supply shoes to the public if the government got out of the business? Tell us that! Be constructive! It's easy to be negative and smart-alecky about government; but tell us who would supply shoes? Which people? How many shoe stores would be available in each city and town? How would the shoe firms be capitalized? How many brands would there be? What material would they use? What lasts? What would be the pricing arrangements for shoes? Wouldn't regulation of the shoe industry be needed to see to it that the product is sound? And who would supply the poor with shoes? Suppose a poor person didn't have the money to buy a pair?

These questions, ridiculous as they seem to be and are with regard to the shoe business, are just as absurd when applied to the libertarian who advocates a free market in fire, police, postal service, or any other government operation.

Similarly, here are three quick quotes.
Frédéric Bastiat said in 1850:

[E]very time we object to a thing being done by government, [defenders of government intervention claim] that we object to its being done at all. We disapprove of education by the state — then we are against education altogether. We object to a state religion — then we would have no religion at all. We object to an equality which is brought about by the state then we are against equality, etc., etc. They might as well accuse us of wishing men not to eat, because we object to the cultivation of corn by the state.

and Herbert Spencer said in 1884:

Each generation is made less familiar with the attainment of desired ends by individual actions or private combinations, and more familiar with the attainment of them by governmental agencies; until, eventually, governmental agencies come to be thought of as the only available agencies.

Lastly, here's Lew Rockwell in 2010:

It would appear that the more liberty we lose, the less people are able to imagine how liberty might work. It's a fascinating thing to behold. ...

The idea of privatizing roads or water supplies sounds outlandish, even though we have a long history of both. People even wonder how anyone would be educated in the absence of public schools, as if markets themselves didn't create in America the world's most literate society in the 18th and 19th centuries.

This list could go on and on. But the problem is that the capacity to imagine freedom — the very source of life for civilization and humanity itself — is being eroded in our society and culture. The less freedom we have, the less people are able to imagine what freedom feels like, and therefore the less they are willing to fight for its restoration.

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by Hans-Hermann Hoppe

Just as in today's complex economy we do not produce our own shoes, suits, and telephones, however, but partake in the advantages of the division of labor, so it is to be expected that we will also do so when it comes to production of security, especially the more property a person owns and the richer a society as a whole. Hence, most security services will without doubt be provided by specialized agencies competing for voluntarily paying clients: by various private police, insurance, and arbitration agencies.

If one wanted to summarize in one word the decisive difference and advantage of a competitive security industry as compared to the current statist practice, it would be this: contract. The state, as ultimate decision maker and judge, operates in a contractless legal vacuum. There exists no contract between the state and its citizens. It is not contractually fixed, what is actually owned by whom, and what, accordingly, is to be protected. It is not fixed, what service the state is to provide, what is to happen if the state fails in its duty, nor what the price is that the "customer" of such "service" must pay.

Rather, the state unilaterally fixes the rules of the game and can change them, per legislation, during the game. Obviously, such behavior is inconceivable for freely financed security providers. Just imagine a security provider, whether police, insurer, or arbitrator, whose offer consisted in something like this:

I will not contractually guarantee you anything. I will not tell you what specific things I will regard as your to-be-protected property, nor will I tell you what I oblige myself to do if, according to your opinion, I do not fulfill my service to you — but in any case, I reserve the right to unilaterally determine the price that you must pay me for such undefined service.

Any such security provider would immediately disappear from the market due to a complete lack of customers. Each private, freely financed security producer instead must offer its prospective clients a contract. And these contracts must, in order to appear acceptable to voluntarily paying consumers, contain clear property descriptions as well as clearly defined mutual services and obligations. Moreover, each party to a contract, for the duration or until the fulfillment of the contract, would be bound by its terms and conditions; and every change of terms or conditions would require the unanimous consent of all parties concerned.

Specifically, in order to appear acceptable to security buyers, these contracts must contain provisions about what will be done in the case of a conflict or dispute between the protector or insurer and his own protected or insured clients as well as in the case of a conflict between different protectors or insurers and their respective clients. And in this regard only one mutually agreeable solution exists: in these cases the conflicting parties contractually agree to arbitration by a mutually trusted but independent third party.

And as for this third party, it too is freely financed and stands in competition with other arbitrators or arbitration agencies. Its clients, i.e., the insurers and the insured, expect of it that it come up with a verdict that is recognized as fair and just by all sides. Only arbitrators capable of forming such judgments will succeed in the arbitration market. Arbitrators incapable of this and viewed as biased or partial will disappear from the market.

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The think tanks are timid. Either that or they are unaware of the essence of the problem — The State and its very nature.

Think tanks do research that analyses the adverse effects of this or that policy and they advocate change. Seldom if ever do they analyse the fundamental issue of the very nature of The State. Instead the think tanks tend to actually legitimise The State by pointing out its failings here and its misdirection there. The think tanks thus become part of the problem.

———>>> Our Reasoning! <<<———

Most political commentators claim to provide full disclosure, yet fail to declare and make easily accessible the reasoning hiding behind their rhetoric, affiliations and avowed beliefs. Instead, as far as they let their audience know, they base their arguments on unplumbed premises. They appear to agree with Wilde, that, “to be intelligible is to be found out.” If they outed themselves and admitted their reasoning, then the world would be less misleading, mistaken and mystifying. At Economics.org.au, we put our reasoning front and centre. In brief, our argument is Gustave de Molinari’s:

I consider economic laws comparable to natural laws, and I have just as much faith in the principle of the division of labor as I have in the universal law of gravitation. I believe that while these principles can be disturbed, they admit of no exceptions.

But, if this is the case, the production of security should not be removed from the jurisdiction of free competition; and if it is removed, society as a whole suffers a loss.

Either this is logical and true, or else the principles on which economic science is based are invalid.
…
Either communistic production is superior to free production, or it is not.

If it is, then it must be for all things, not just for security.

If not, progress requires that it be replaced by free production.

Complete communism or complete liberty: that is the alternative!

(Those who need a more popular authority to be swayed will be relieved to know that Molinari is following Adam Smith here.)

To spell out some of this: Monopolies tend to produce an inferior quality product at higher cost compared to if they had competition to contend with. If they had competition to contend with, then:

— they would have greater incentive to improve how they cater to customers, for if they did not, they would lose business; and

— they would tend to better cater to customers, since anyone would be allowed to compete by improving the price or quality of the service offered to customers, and to benefit from the increased custom attracted by their superior service.

It follows that monopolies in areas like law and order, money and banking, and education and roads, tend to provide products of inferior quality and higher cost compared to if the free market was allowed to provide those services.

It also follows that a monopolist of law and order, who did not allow free market competition in those areas, would tend to allow itself to get away with crimes and inefficiencies that free market law and order agencies would not.

In the words of Albert Jay Nock:

[T]he State claims and exercises the monopoly of crime … [I]t makes this monopoly as strict as it can … It punishes private theft, but itself lays unscrupulous hands on anything it wants.

In the lively words of Hans-Hermann Hoppe:

To the extent that intellectuals have deemed it necessary to argue in favor of the state at all, their most popular argument, encountered already at kindergarten age, runs like this: Some activities of the state are pointed out: the state builds roads, kindergartens, schools; it delivers the mail and puts the policeman on the street. Imagine, there would be no state. Then we would not have these goods. Thus, the state is necessary.

At the university level, a slightly more sophisticated version of the same argument is presented. It goes like this: True, markets are best at providing many or even most things; but there are other goods markets cannot provide or cannot provide in sufficient quantity or quality. These other, so-called public goods are goods which bestow benefits onto people beyond those actually having produced or paid for them. Foremost among such goods rank typically education and research. Education and research, for instance, it is argued, are extremely valuable goods. They would be under-produced, however, because of free riders, i.e., of cheats, who benefit via so-called neighborhood effects from education and research without paying for it. Thus, the state is necessary to provide otherwise un-produced or under-produced (public) goods such as education and research.

These statist arguments can be refuted by a combination of three fundamental insights: First, as for the kindergarten argument, it does not follow from the fact that the state provides roads and schools that only the state can provide such goods. People have little difficulty recognizing that this is a fallacy. From the fact that monkeys can ride bikes it does not follow that only monkeys can ride bikes. And second, immediately following, it must be recalled that the state is an institution that can legislate and tax; and hence, that state agents have little incentive to produce efficiently. State roads and schools will only be more costly and their quality lower. For there is always a tendency for state agents to use up as many resources as possible doing whatever they do but actually work as little as possible doing it.

Third, as for the more sophisticated statist argument, it involves the same fallacy encountered already at the kindergarten level. For even if one were to grant the rest of the argument, it is still a fallacy to conclude from the fact that states provide public goods that only states can do so.

More importantly, however, it must be pointed out that the entire argument demonstrates a total ignorance of the most fundamental fact of human life: namely scarcity. True, markets will not provide for all desirable things. There are always unsatisfied wants as long as we do not inhabit the Garden of Eden. But to bring such un-produced goods into existence scarce resources must be expended, which consequently can no longer be used to produce other, likewise desirable things. Whether public goods exist next to private ones does not matter in this regard, the fact of scarcity remains unchanged: more public goods can come only at the expense of less private goods. Yet what needs to be demonstrated is that one good is more important and valuable than another one. This is what is meant by economizing. Yet can the state help economize scarce resources? This is the question that must be answered. In fact, however, conclusive proof exists that the state does not and cannot economize: For in order to produce anything, the state must resort to taxation (or legislation) which demonstrates irrefutably that its subjects do not want what the state produces but prefer instead something else as more important. Rather than economize, the state can only re-distribute: it can produce more of what it wants and less of what the people want and, to recall, whatever the state then produces will be produced inefficiently.

Finally, the most sophisticated argument in favor of the state must be briefly examined. From Hobbes on down this argument has been repeated endlessly. It runs like this: In the state of nature before the establishment of a state permanent conflict reigns. Everyone claims a right to everything, and this will result in interminable war. There is no way out of this predicament by means of agreements; for who would enforce these agreements? Whenever the situation appeared advantageous, one or both parties would break the agreement. Hence, people recognize that there is but one solution to the desideratum of peace: the establishment, per agreement, of a state, i.e., a third, independent party as ultimate judge and enforcer.

Yet if this thesis is correct and agreements require an outside enforcer to make them binding, then a state-by-agreement can never come into existence. For in order to enforce the very agreement which is to result in the formation of a state (to make this agreement binding), another outside enforcer, a prior state, would already have to exist. And in order for this state to have come into existence, yet another still earlier state must be postulated, and so on, in infinite regress.

On the other hand, if we accept that states exist (and of course they do), then this very fact contradicts the Hobbesian story. The state itself has come into existence without any outside enforcer. Presumably, at the time of the alleged agreement, no prior state existed. Moreover, once a state-by-agreement is in existence, the resulting social order still remains a self-enforcing one. To be sure, if A and B now agree on something, their agreements are made binding by an external party. However, the state itself is not so bound by any outside enforcer. There exists no external third party insofar as conflicts between state-agents and state-subjects are concerned; and likewise no external third party exists for conflicts between different state-agents or -agencies. Insofar as agreements entered into by the state vis-à-vis its citizens or of one state agency vis-à-vis another are concerned, that is, such agreements can be only self-binding on the State. The state is bound by nothing except its own self-accepted and enforced rules, i.e., the constraints that it imposes on itself. Vis-à-vis itself, so to speak, the state is still in a natural state of anarchy characterized by self-rule and enforcement, because there is no higher state which could bind it.

Further: If we accept the Hobbesian idea that the enforcement of mutually agreed upon rules does require some independent third party, this would actually rule out the establishment of a state. In fact, it would constitute a conclusive argument against the institution of a state, i.e., of a monopolist of ultimate decision-making and arbitration. For then, there must also exist an independent third party to decide in every case of conflict between me (private citizen) and some state agent, and likewise an independent third party must exist for every case of intra-state conflicts (and there must be another independent third party for the case of conflicts between various third parties) yet this means, of course, that such a state (or any independent third party) would be no state as I have defined it at the outset but simply one of many freely competing third-party conflict arbitrators.

Let me conclude then: the intellectual case against the state seems to be easy and straightforward. But that does not mean that it is practically easy. Indeed, almost everyone is convinced that the state is a necessary institution, for the reasons that I have indicated. So it is very doubtful if the battle against statism can be won, as easy as it might seem on the purely theoretical, intellectual level. However, even if that should turn out to be impossible at least let's have some fun at the expense of our statist opponents. And for that I suggest that you always and persistently confront them with the following riddle: Assume a group of people, aware of the possibility of conflicts; and then someone proposes, as a solution to this eternal human problem, that he (someone) be made the ultimate arbiter in any such case of conflict, including those conflicts in which he is involved. I am confident that he will be considered either a joker or mentally unstable and yet this is precisely what all statists propose.

This section contains a brief explanation of Hans-Hermann Hoppe's argumentation ethics (excerpted from this):

Whether or not something is true, false, or undecidable; whether or not it has been justified; what is required in order to justify it; whether I, my opponents, or none of us is right — all of this must be decided in the course of argumentation. This proposition is true a priori, because it cannot be denied without affirming it in the act of denying it. One cannot argue that one cannot argue, and one cannot dispute knowing what it means to raise a validity claim without implicitly claiming at least the negation of this proposition to be true.

With the a priori of argumentation established as an axiomatic starting point, it follows that anything that must be presupposed in the act of proposition-making cannot be propositionally disputed again. It would be meaningless to ask for a justification of presuppositions which make the production of meaningful propositions possible in the first place. Instead, they must be regarded as ultimately justified by every proposition-maker. And any specific propositional content that disputed their validity could be understood as implying a performative contradiction […], and hence, as ultimately falsified.

The law of contradiction is one such presupposition. One cannot deny this law without presupposing its validity in the act of denying it. But there is another such presupposition. Propositions are not free-floating entities. They require a proposition maker who in order to produce any validity-claiming proposition whatsoever must have exclusive control (property) over some scarce means defined in objective terms and appropriated (brought under control) at definite points in time through homesteading action. Thus, any proposition that would dispute the validity of the homesteading principle of property acquisition, or that would assert the validity of a different, incompatible principle, would be falsified by the act of proposition-making in the same way as the proposition "the law of contradiction is false" would be contradicted by the very fact of asserting it. As the praxeological presupposition of proposition-making, the validity of the homesteading principle cannot be argumentatively disputed without running into a performative contradiction. Any other principle of property acquisition can then be understood — reflectively — by every proposition maker as ultimately incapable of propositional justification.

(Note, in particular, that this includes all proposals which claim it is justified to restrict the range of objects which may be homesteaded. They fail because once the exclusive control over some homesteaded means is admitted as justified, it becomes impossible to justify any restriction in the homesteading process — except for a self-imposed one — without thereby running into a contradiction. For if the proponent of such a restriction were consistent, he could have justified control only over some physical means which he would not be allowed to employ for any additional homesteading. Obviously, he could not interfere with another's extended homesteading, simply because of his own lack of physical means to justifiably do anything about it. But if he did interfere, he would thereby inconsistently extend his ownership claims beyond his own justly homesteaded means. Moreover, in order to justify this extension he would have to invoke a principle of property acquisition incompatible with the homesteading principle whose validity he would already have admitted.)

My entire argument, then, claims to be an impossibility proof. But not […] a proof that means to show the impossibility of certain empirical events so that it could be refuted by empirical evidence. Instead, it is a proof that it is impossible to propositionally justify non-libertarian property principles without falling into contradictions. For whatever such a thing is worth […], it should be clear that empirical evidence has absolutely no bearing on it. So what if there is slavery, the Gulag, taxation? The proof concerns the issue that claiming that such institutions can be justified involves a performative contradiction. It is purely intellectual in nature, like logical, mathematical, or praxeological proofs. Its validity — as theirs — can be established independent of any contingent experiences. Nor is its validity in any way affected […] by whether or not people like, favor, understand, or come to a consensus regarding it, or whether or not they are actually engaged in argumentation. As considerations such as these are irrelevant in order to judge the validity of a mathematical proof, for instance, so are they beside the point here. And in the same way as the validity of a mathematical proof is not restricted to the moment of proving it, so, then, is the validity of the libertarian property theory not limited to instances of argumentation. If correct, the argument demonstrates its universal justification, arguing or not.

Five economics truths are (via here):

1. “Whenever two people A and B engage in a voluntary exchange, they must both expect to profit from it. And they must have reverse preference orders for the goods and services exchanged so that A values what he receives from B more highly than what he gives to him, and B must evaluate the same things the other way around.”

2. “Whenever an exchange is not voluntary but coerced, one party profits at the expense of the other.”

3. “Of two producers, if A is more productive in the production of two types of goods than is B, they can still engage in a mutually beneficial division of labor. This is because overall physical productivity is higher if A specializes in producing one good which he can produce most efficiently, rather than both A and B producing both goods separately and autonomously.”

4. “Whenever minimum wage laws are enforced that require wages to be higher than existing market wages, involuntary unemployment will result.”

5. “Whenever the quantity of money is increased while the demand for money to be held as cash reserve on hand is unchanged, the purchasing power of money will fall.”

Here’s another nice passage from Hoppe.

Government is Criminal!?

by Lysander Spooner

The fact is that the government, like a highwayman, says to a man: “Your money, or your life.” And many, if not most, taxes are paid under the compulsion of that threat.

The government does not, indeed, waylay a man in a lonely place, spring upon him from the roadside, and, holding a pistol to his head, proceed to rifle his pockets. But the robbery is none the less a robbery on that account; and it is far more dastardly and shameful.

The highwayman takes solely upon himself the responsibility, danger, and crime of his own act. He does not pretend that he has any rightful claim to your money, or that he intends to use it for your own benefit. He does not pretend to be anything but a robber. He has not acquired impudence enough to profess to be merely a “protector,” and that he takes men’s money against their will, merely to enable him to “protect” those infatuated travellers, who feel perfectly able to protect themselves, or do not appreciate his peculiar system of protection. He is too sensible a man to make such professions as these. Furthermore, having taken your money, he leaves you, as you wish him to do. He does not persist in following you on the road, against your will; assuming to be your rightful “sovereign,” on account of the “protection” he affords you. He does not keep “protecting” you, by commanding you to bow down and serve him; by requiring you to do this, and forbidding you to do that; by robbing you of more money as often as he finds it for his interest or pleasure to do so; and by branding you as a rebel, a traitor, and an enemy to your country, and shooting you down without mercy, if you dispute his authority, or resist his demands. He is too much of a gentleman to be guilty of such impostures, and insults, and villainies as these. In short, he does not, in addition to robbing you, attempt to make you either his dupe or his slave.

The proceedings of those robbers and murderers, who call themselves “the government,” are directly the opposite of these of the single highwayman.

In the first place, they do not, like him, make themselves individually known; or, consequently, take upon themselves personally the responsibility of their acts. On the contrary, they secretly (by secret ballot) designate some one of their number to commit the robbery in their behalf, while they keep themselves practically concealed. They say to the person thus designated:

Go to A_____ B_____, and say to him that “the government” has need of money to meet the expenses of protecting him and his property. If he presumes to say that he has never contracted with us to protect him, and that he wants none of our protection, say to him that that is our business, and not his; that we choose to protect him, whether he desires us to do so or not; and that we demand pay, too, for protecting him. If he dares to inquire who the individuals are, who have thus taken upon themselves the title of “the government,” and who assume to protect him, and demand payment of him, without his having ever made any contract with them, say to him that that, too, is our business, and not his; that we do not choose to make ourselves individually known to him; that we have secretly (by secret ballot) appointed you our agent to give him notice of our demands, and, if he complies with them, to give him, in our name, a receipt that will protect him against any similar demand for the present year. If he refuses to comply, seize and sell enough of his property to pay not only our demands, but all your own expenses and trouble beside. If he resists the seizure of his property, call upon the bystanders to help you (doubtless some of them will prove to be members of our band.) If, in defending his property, he should kill any of our band who are assisting you, capture him at all hazards; charge him (in one of our courts) with murder; convict him, and hang him. If he should call upon his neighbors, or any others who, like him, may be disposed to resist our demands, and they should come in large numbers to his assistance, cry out that they are all rebels and traitors; that “our country” is in danger; call upon the commander of our hired murderers; tell him to quell the rebellion and “save the country,” cost what it may. Tell him to kill all who resist, though they should be hundreds of thousands; and thus strike terror into all others similarly disposed. See that the work of murder is thoroughly done; that we may have no further trouble of this kind hereafter. When these traitors shall have thus been taught our strength and our determination, they will be good loyal citizens for many years, and pay their taxes without a why or a wherefore.

It is under such compulsion as this that taxes, so called, are paid.

On the same topic, here's Saint Augustine, The City of God Against the Pagans, ed. and trans. R.W. Dyson (Cambridge: Cambridge University Press, 2002), bk. IV, ch. 4, pp. 147-48:

Justice removed, then, what are kingdoms but great bands of robbers? What are bands of robbers themselves but little kingdoms? The band itself is made up of men; it is governed by the authority of a ruler; it is bound together by a pact of association; and the loot is divided according to an agreed law. If, by the constant addition of desperate men, this scourge grows to such a size that it acquires territory, establishes a seat of government, occupies cities and subjugates people, it assumes the name of kingdom more openly. For this name is now manifestly conferred upon it not by the removal of greed, but by the addition of impunity. It was a pertinent and true answer that was made to Alexander the Great by a pirate whom he had seized. When the king asked him what he meant by infesting the sea, the pirate defiantly replied: "The same as you do when you infest the whole world; but because I do it with a little ship I am called a robber, and because you do it with a great fleet, you are an emperor."

And here's Hans-Hermann Hoppe:

Taxes are never, at no level of taxation, consistent with individual freedom and property rights. Taxes are theft. The thieves — the state and its agents and allies — try their very best to conceal this fact, of course, but there is simply no way around it. Obviously, taxes are not normal, voluntary payments for goods and services, because you are not allowed to stop such payments if you are not satisfied with the product. You are not punished if you do no longer buy Renault cars or Chanel perfume, but you are thrown into jail if you stop paying for government schools or universities or for Mr. Sarkozy and his pomp. Nor is it possible to construe taxes as normal rent-payments, as they are made by a renter to his landlord. Because the French state is not the landlord of all of France and all Frenchmen. To be the landlord, the French state would have to be able to prove two things: first, that the state, and no one else, owns every inch of France, and second, that it has a rental contract with every single Frenchman concerning the use, and the price for this use, of its property. No state — not the French, not the German, not the US-American or any other state — can prove this. They have no documents to this effect and they cannot present any rental contract. Thus, there is only one conclusion: taxation is theft and robbery by which one segment of the population, the ruling class, enriches itself at the expense of another, the ruled.

Why Supporters of Government For Defence are Impractical Utopians

Murray Rothbard said:

[Defenders of government usually say] freedom of the market should be upheld and that property rights must not be invaded. Nevertheless, they strongly believe that defense service cannot be supplied by the market and that defense against invasion of property must therefore be supplied outside the free market, by the coercive force of the government. In arguing thus, they are caught in an insoluble contradiction, for they sanction and advocate massive invasion of property by the very agency (government) that is supposed to defend people against invasion! [...]

The [defender of government] assumes that there must be a single compulsory monopoly of coercion and decision-making in society, that there must, for example, be one Supreme Court to hand down final and unquestioned decisions. But he fails to recognize that the world has lived quite well throughout its existence without a single, ultimate decision-maker over its whole inhabited surface. The Argentinian, for example, lives in a state of “anarchy,” of nongovernment, in relation to the citizen of Uruguay — or of Ceylon. And yet the private citizens of these and other countries live and trade together without getting into insoluble legal conflicts, despite the absence of a common governmental ruler. The Argentinian who believes he has been aggressed upon by a Ceylonese, for example, takes his grievance to an Argentinian court, and its decision is recognized by the Ceylonese courts — and vice versa if the Ceylonese is the aggrieved party. Although it is true that the separate nation-States have warred interminably against each other, the private citizens of the various countries, despite widely differing legal systems, have managed to live together in harmony without having a single government over them. If the citizens of northern Montana and of Saskatchewan across the border can live and trade together in harmony without a common government, so can the citizens of northern and of southern Montana. In short, the present-day boundaries of nations are purely historical and arbitrary, and there is no more need for a monopoly government over the citizens of one country than there is for one between the citizens of two different nations.

It is all the more curious, incidentally, that while [defenders of government] should by the logic of their position, be ardent believers in a single, unified world government, so that no one will live in a state of “anarchy” in relation to anyone else, they almost never are. And once one concedes that a single world government is not necessary, then where does one logically stop at the permissibility of separate states? If Canada and the United States can be separate nations without being denounced as being in a state of impermissible “anarchy,” why may not the South secede from the United States? New York State from the Union? New York City from the state? Why may not Manhattan secede? Each neighborhood? Each block? Each house? Each person? But, of course, if each person may secede from government, we have virtually arrived at the purely free society, where defense is supplied along with all other services by the free market and where the invasive State has ceased to exist.

The role of freely competitive judiciaries has, in fact, been far more important in the history of the West than is often recognized. The law merchant, admiralty law, and much of the common law began to be developed by privately competitive judges, who were sought out by litigants for their expertise in understanding the legal areas involved. The fairs of Champagne and the great marts of international trade in the Middle Ages enjoyed freely competitive courts, and people could patronize those that they deemed most accurate and efficient.

Let us, then, examine in a little more detail what a free-market defense system might look like. 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. Most likely, such services would be sold on an advance subscription basis, with premiums paid regularly and services to be supplied on call. Many competitors would undoubtedly arise, each attempting, by earning a reputation for efficiency and probity, to win a consumer market for its services. Of course, it is possible that in some areas a single agency would outcompete all others, but this does not seem likely when we realize that there is no territorial monopoly and that efficient firms would be able to open branches in other geographical areas. It seems likely, also, that supplies of police and judicial service would be provided by insurance companies, because it would be to their direct advantage to reduce the amount of crime as much as possible.

One common objection to the feasibility of marketable protection (its desirability is not the problem here) runs as follows: Suppose that Jones subscribes to Defense Agency X and Smith subscribes to Defense Agency Y. (We will assume for convenience that the defense agency includes a police force and a court or courts, although in practice these two functions might well be performed by separate firms.) Smith alleges that he has been assaulted, or robbed, by Jones; Jones denies the charge. How, then, is justice to be dispensed?

Clearly, Smith will file charges against Jones and institute suit or trial proceedings in the Y court system. Jones is invited to defend himself against the charges, although there can be no subpoena power, since any sort of force used against a man not yet convicted of a crime is itself an invasive and criminal act that could not be consonant with the free society we have been postulating. If Jones is declared innocent, or if he is declared guilty and consents to the finding, then there if no problem on this level, and the Y courts then institute suitable measures of punishment. But what if Jones challenges the finding? In that case, he can either take the case to his X court system, or take it directly to 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. Probably there will be just a few Appeals Court systems, far fewer than the number of primary courts, and each of the lower courts will boast to its customers about being members of those Appeals Court systems noted for their efficiency and probity. The Appeals Court decision can then be taken by the society as binding. 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. But a single monopoly court of ultimate decision-making need not be imposed and of course cannot be in a free society; and a libertarian legal code might well have a two-court cutoff point, since there are always two contesting parties, the plaintiff and the defendant.

Another common objection to the workability of free-market defense wonders: May not one or more of the defense agencies turn its coercive power to criminal uses? In short, may not a private police agency use its force to aggress against others, or may not a private court collude to make fraudulent decisions and thus aggress against its subscribers and victims? It is very generally assumed that those who postulate a stateless society are also naive 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 or miraculous change 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.

Why Supporters of Parliamentary Democracy are Impractical Utopians

Murray Rothbard said:

[P]roponents of government intervention are trapped in a fatal contradiction: they assume that individuals are not competent to run their own affairs or to hire experts to advise them. And yet they also assume that these same individuals are equipped to vote for these same experts at the ballot box. We have seen that, on the contrary, while most people have a direct idea and a direct test of their own personal interests on the market, they cannot understand the complex chains of praxeological and philosophical reasoning necessary for a choice of rulers or political policies. Yet this political sphere of open demagogy is precisely the only one where the mass of individuals are deemed to be competent!

Ludwig von Mises said:

[I]t is not easy to silence the voices of those who ask whether it is not paradoxical to entrust the nation’s welfare to the decisions of voters whom the law itself considers incapable of managing their own affairs; whether it is not absurd to make those people supreme in the conduct of government who are manifestly in need of a guardian to prevent them from spending their own income foolishly. Is it reasonable to assign to wards the right to elect their guardians?

Edmund Burke said:

Observe, my Lord, I pray you, that grand Error upon which all artificial legislative Power is founded. It was observed, that Men had ungovernable Passions, which made it necessary to guard against the Violence they might offer to each other. They appointed Governors over them for this Reason; but a worse and more perplexing Difficulty arises, how to be defended against the Governors? Quis custodiet ipsos custodes? [Juvenal's who will govern the governors?] In vain they change from a single Person to a few. These few have the Passions of the one, and they unite to strengthen themselves, and to secure the Gratification of their lawless Passions at the Expence of the general Good. In vain do we fly to the Many. The Case is worse; their Passions are less under the Government of Reason, they are augmented by the Contagion, and defended against all Attacks by their Multitude.

David Hume said:

The same interest … which causes us to submit to magistracy, makes us renounce itself in the choice of our magistrates.

John Locke said:

As if when Men quitting the State of Nature entered into Society, they agreed that all of them but one, should be under the restraint of Laws, but that he should still attain all the Liberty of the State of Nature, increased with Power, and made licentious by Impunity. This is to think that Men are so foolish that they take care to avoid what Mischiefs may be done them by Pole-Cats, or Foxes, but are content, nay think it Safety, to be devoured by Lions.

Why Supporters of Constitutional Government are Impractical Utopians

Murray Rothbard said:

The libertarian is realistic because he understands that government tends to expand. The “limited government realist” is the utopian, learning nothing from the failure of the 1789 constitution to restrain government. He who puts all the guns and decision-making power into the hands of government and then says, “Limit yourself”; it is he who is the impractical utopian. [paraphrased]

Ludwig von Mises said:

The bureaucrat is not only a government employee. He is, under a democratic constitution, at the same time a voter and as such a part of the sovereign, his employer. He is in a peculiar position: he is both employer and employee. And his pecuniary interest as employee towers above his interest as employer, as he gets much more from the public funds than he contributes to them … This double relationship becomes more important as the people on the government’s payroll increase. The bureaucrat as voter is more eager to get a raise than to keep the budget balanced. His main concern is to swell the payroll … This is one of the antinomies inherent in present-day constitutional issues. It has made many people despair of the future of democracy. As they became convinced that the trend toward more government interference with business, toward more offices with more employees, toward more doles and subsidies is inevitable, they could not help losing confidence in government by the people.

Lysander Spooner said:

Inasmuch as the Constitution was never signed, nor agreed to, by anybody, as a contract, and therefore never bound anybody, and is now binding upon nobody; and is, moreover, such an one as no people can ever hereafter be expected to consent to, except as they may be forced to do so at the point of the bayonet, it is perhaps of no importance what its true legal meaning, as a contract, is. Nevertheless, the writer thinks it proper to say that, in his opinion, the Constitution is no such instrument as it has generally been assumed to be; but that by false interpretations, and naked usurpations, the government has been made in practice a very widely, and almost wholly, different thing from what the Constitution itself purports to authorize. He has heretofore written much, and could write much more, to prove that such is the truth. But whether the Constitution really be one thing, or another, this much is certain — that it has either authorized such a government as we have had, or has been powerless to prevent it. In either case, it is unfit to exist.

But government is ok, at least at “X”

Lysander Spooner counters:

If any considerable number of the people believe the Constitution to be good, why do they not sign it themselves, and make laws for, and administer them upon, each other; leaving all other persons (who do not interfere with them) in peace? Until they have tried the experiment for themselves, how can they have the face to impose the Constitution upon, or even to recommend it to, others?

Frédéric Bastiat continues:

You must observe that I am not contending against their right to invent social combinations, to propagate them, to recommend them, and to try them upon themselves, at their own expense and risk; but I do dispute their right to impose them upon us through the medium of the law, that is, by force and by public taxes.

I would not insist upon the Cabetists, the Fourierists, the Proudhonians, the Academics, and the Protectionists renouncing their own particular ideas; I would only have them renounce that idea which is common to them all, — viz., that of subjecting us by force to their own groups and series to their social workshops, to their gratuitous bank, to their Greco-Roman morality, and to their commercial restrictions. I would ask them to allow us the faculty of judging of their plans, and not to oblige us to adopt them, if we find that they hurt our interests or are repugnant to our consciences.

To presume to have recourse to power and taxation, besides being oppressive and unjust, implies further, the injurious supposition that the organized is infallible, and mankind incompetent.

And if mankind is not competent to judge for itself, why do they talk so much about universal suffrage?

What about freeloaders, free riders, externalities, the public goods problem and the necessities of life and markets?

Bert Kelly said:

Bill listened to Fred’s case more than I expected in a young man. “But what about the freeloaders, Dad?” he asked at the end. “It surely isn’t fair that they should get the advantages we pay for.” I thought that this had Fred cornered, but he replied, “Well, what about the freeloaders? I suppose that about half the people that parsons bury are freeloaders, people who have not gone to church for years and have not paid a cent towards the church’s upkeep. Do you think we ought to have a compulsory levy to sustain churches so that there will be no freeloading there?”

Murray Rothbard said:

[S]ome services can be financed only “jointly,” and will serve many people jointly. Therefore, [it is argued] that individuals on the market cannot provide these services. This is a curious position indeed. For all large-scale businesses are “jointly” financed with huge aggregations of capital, and they also serve many consumers, often jointly. No one maintains that private enterprise cannot supply steel or automobiles or insurance because they are “jointly” financed. As for joint consumption, in one sense no consumption can be joint, for only individuals exist and can satisfy their wants, and therefore everyone must consume separately. In another sense, almost all consumption is “joint.” Baumol, for example, asserts that parks are an example of “collective wants” jointly consumed, since many individuals must consume them. Therefore, the government must supply this service. But going to a theater is even more joint, for all must go at the same time. Must all theaters therefore be nationalized and run by the government? Furthermore, in a broad view, all modern consumption depends on mass production methods for a wide market. There are no grounds by which Baumol can separate certain services and dub them “examples of interdependence” or “external economies.” What individuals could buy steel or automobiles or frozen foods, or almost anything else, if enough other individuals did not exist to demand them and make their mass-production methods worthwhile? …

These services (protection, transportation, and so on) are so basic, it is alleged, that they permeate market affairs and are a prior necessary condition for its existence. But this argument proves far too much. It was the fallacy of the classical economists that they considered goods in terms of large classes, rather than in terms of marginal units. All actions on the market are marginal, and this is precisely the reason that valuation and imputation of value-productivity to factors can be effected. If we start dealing with whole classes rather than marginal units, we can discover all sorts of activities which are necessary prerequisites of, and vital to, all market activity; land, room, food, clothing, shelter, power, and so on — and even paper! Must all of these be supplied by the State and the State only?

Stripped of its many fallacies, the whole “collective wants” thesis boils down to this: certain people on the market will receive benefits from the action of others without paying for them. This is the long and short of the criticism of the market, and this is the only relevant “external economy” problem. A and B decide to pay for the building of a dam for their uses; C benefits though he did not pay. A and B educate themselves at their expense and C benefits by being able to deal with educated people, and so on. This is the problem of the Free Rider. Yet it is difficult to understand what the hullabaloo is all about. Am I to be specially taxed because I enjoy the sight of my neighbor’s garden without paying for it? A’s and B’s purchase of a good reveals that they are willing to pay for it; if it indirectly benefits C as well, no one is the loser. If C feels that he would be deprived of the benefit if only A and B paid, then he is free to contribute too. In any case, all the individuals consult their own preferences in the matter.

In fact, we are all free riders on the investment, and the technological development, of our ancestors. Must we wear sackcloth and ashes, or submit ourselves to State dictation, because of this happy fact?

Rothbard again:

Those economists and others who espouse the philosophy of [minarchism] believe that the freedom of the market should be upheld and that property rights must not be invaded. Nevertheless, they strongly believe that defense service cannot be supplied by the market and that defense against invasion of property must therefore be supplied outside the free market, by the coercive force of the government. In arguing thus, they are caught in an insoluble contradiction, for they sanction and advocate massive invasion of property by the very agency (government) that is supposed to defend people against invasion! For a [minarchist] government would necessarily have to seize its revenues by the invasion of property called taxation and would arrogate to itself a compulsory monopoly of defense services over some arbitrarily designated territorial area.

The [minarchist] theorists (who are here joined by almost all other writers) attempt to redeem their position from this glaring contradiction by asserting that a purely free-market defense service could not exist and that therefore those who value highly a forcible defense against violence would have to fall back on the State (despite its black historical record as the great engine of invasive violence) as a necessary evil for the protection of person and property. [They believe] that defense must be supplied by the State because of the unique status of defense as a necessary precondition of market activity, as a function without which a market economy could not exist. Yet this argument is a non sequitur that proves far too much. It was the fallacy of the classical economists to consider goods and services in terms of large classes; instead, modern economics demonstrates that services must be considered in terms of marginal units. For all actions on the market are marginal.

If we begin to treat whole classes instead of marginal units, we can discover a great myriad of necessary, indispensable goods and services all of which might be considered as "preconditions" of market activity. Is not land room vital, or food for each participant, or clothing, or shelter? Can a market long exist without them? And what of paper, which has become a basic requisite of market activity in the complex modern economy? Must all these goods and services therefore be supplied by the State and the State only?

The [minarchist] also assumes that there must be a single compulsory monopoly of coercion and decision-making in society, that there must, for example, be one Supreme Court to hand down final and unquestioned decisions. But he fails to recognize that the world has lived quite well throughout its existence without a single, ultimate decision-maker over its whole inhabited surface.

Hans-Hermann Hoppe said:

Now, it is certainly correct that a market presupposes the recognition and enforcement of those rules that underlie its operation. But from this it does not follow that this task must be entrusted to a monopolistic agency. In fact, a common language or sign-system is also presupposed by the market; but one would hardly think it convincing to conclude that hence the government must ensure the observance of the rules of language. Just as the system of language then, the rules of market behavior emerge spontaneously and can be enforced by the “invisible hand” of self-interest. Without the observance of common rules of speech people could not enjoy the advantages that communication offers, and without the observance of common rules of conduct, people could not enjoy the benefits of the higher productivity of an exchange economy based on the division of labor.

What about drugs, gambling, etc?

by Ludwig von Mises

[O]nce the principle is admitted that it is the duty of government to protect the individual against his own foolishness, no serious objections can be advanced against further encroachments. A good case could be made out in favor of the prohibition of alcohol and nicotine. And why limit the government’s benevolent providence to the protection of the individual’s body only? Is not the harm a man can inflict on his mind and soul even more disastrous than any bodily evils? Why not prevent him from reading bad books and seeing bad plays, from looking at bad paintings and statues and from hearing bad music? The mischief done by bad ideologies, surely, is much more pernicious, both for the individual and for the whole society, than that done by narcotic drugs … If one abolishes man’s freedom to determine his own consumption, one takes all freedoms away. The naive advocates of government interference with consumption delude themselves when they neglect what they disdainfully call the philosophical aspect of the problem. They unwittingly support the case of censorship, inquisition, religious intolerance, and the persecution of dissenters.

If you don’t like it, why don’t you leave?

Answer #1: This is an attempt to paint libertarians as hypocrites for staying under the self-proclaimed jurisdiction of a government we never consented to. One can flip this around and accuse the government of agreeing with and endorsing libertarians, since the government does not shut down Economics.org.au. If they don't like it, why don't they ban/censor/expel it?

Answer #2: Why should libertarians leave, and not statists? So libertarian views are unpopular at the moment, but the status quo has been known to change occasionally, and there’s no contradiction in libertarians staying in the country trying to effect change, or, as the case may be, staying in the country doing other things and hoping that others effect change.

Answer #3: We are not able to leave the country with all our property. Even if we sell it, the government will then confiscate part of the proceeds. Moreover, there are similarly criminal organisations called government in most other countries. And preferring one criminal to another does not make the preferable criminal not a criminal at all, which is precisely what the if-you-don't-like-it-then-leave argument entails.

Answer #4: Staying within this government’s borders no more means we approve of or consent to government's domestic fiscal, monetary, environment, education, healthcare and workplace policies than leaving the country would mean we approve of their foreign aid, trade and military intervention policies, which, by virtue of us being out of Australian territory, we would be subject to, and according to your logic, because we do not leave the area where Australia applies its foreign policies, we therefore approve of and consent to them, because we could always return to within Australia’s borders where its foreign policy does not apply. But what if we oppose both Australia’s domestic and foreign policies; are we meant to leave the planet? So leaving the country does not mean we’ll cease to be subject to the policies of this country’s government. What staying in the country may well mean is that we prefer a government’s domestic policy to its foreign policy.

Answer #5: Libertarians staying in the country and obeying this government’s laws does not prove consent. What it proves is that we take their threats seriously, respect their shows of force and do not want to risk having them restrict more of our liberties and confiscate more of our property. Acquiescence, via, say, paying taxes we never consented to pay and being threatened with fines and imprisonment if we evade paying, no more proves consent than paying a ransom to a kidnapper transforms the kidnapping into mere babysitting.

All this and more can be found here.

But anarchism will never be accepted!

Stephan Kinsella (here also) responds:

[C]riticism of anarchy on the grounds that it won’t "work" or is not "practical" is just confused. Anarchists don’t (necessarily) predict anarchy will be achieved — I for one don’t think it will. But that does not mean states are justified.

Consider an analogy. Conservatives and libertarians all agree that private crime (murder, robbery, rape) is unjustified, and "should" not occur. Yet no matter how good most men become, there will always be at least some small element who will resort to crime. Crime will always be with us. Yet we still condemn crime and work to reduce it.

Is it logically possible that there could be no crime? Sure. Everyone could voluntarily choose to respect others’ rights. Then there would be no crime. It’s easy to imagine. But given our experience with human nature and interaction, it is safe to say that there will always be crime. Nevertheless, we still proclaim crime to be evil and unjustified, in the face of the inevitability of its recurrence. So to my claim that crime is immoral, it would just be stupid and/or insincere to reply, "but that’s an impractical view" or "but that won’t work," "since there will always be crime." The fact that there will always be crime — that not everyone will voluntarily respect others’ rights — does not mean that it’s "impractical" to oppose it; nor does it mean that crime is justified. It does not mean there is some "flaw" in the proposition that crime is wrong.

Likewise, to my claim that the state and its aggression is unjustified, it is disingenuous and/or confused to reply, "anarchy won’t work" or is "impractical" or "unlikely to ever occur." The view that the state is unjustified is a normative or ethical position. The fact that not enough people are willing to respect their neighbors’ rights to allow anarchy to emerge, i.e., the fact that enough people (erroneously) support the legitimacy of the state to permit it to exist, does not mean that the state, and its aggression, are justified.

In other words, it just won’t do ... to attack anarcho-libertarianism by arguing we haven’t shown that "a fully-fledged free-market private property based social order can be realised and maintained without [whatever]". In fact, since anarcho-libertarianism just means stringent opposition to aggression, to attack anti-aggressionism just is to defend aggression. And you can’t justify aggression by alleging that libertarians have not proved that a private property order can "work." What kind of argument is that? "Sir, why are you robbing me? Why are you entitled to do this?" "Why, because you haven’t proved that a private property order can work, that’s why!"

Individual rights explored and answer to whether libertarianism is a cult

by Auberon Herbert

And now let us look a little more closely into the rights of the individual. I claim that he is by right the master of himself and of his own faculties and energies. If he is not, who is? Let us suppose that A having no rights over himself, B and C, being in a majority, have rights over him. But we must assume an equality in these matters, and if A has no rights over himself, neither can B and C have any rights over themselves. To what a ridiculous position are we then brought! B and C having no rights over themselves, have absolute rights over A; and we should have to suppose in this most topsy-turvy of worlds that men were walking about, not owning themselves, as any simple-minded person would naturally conclude that they did, but owning some other of their fellow-men; and presently in their turn perhaps to be themselves owned by some other. Look at it from another point of view. You tell me a majority has a right to decide as they like for their fellow-men. What majority? 21 to 20? 20 to 5? 20 to 1? But why any majority? What is there in numbers that can possibly make any opinion or decision better or more valid, or which can transfer the body and mind of one man into the keeping of another man? Five men are in a room. Because three men take one view and two another, have the three men any moral right to enforce their view on the other two men? What magical power comes over the three men that because they are one more in number than the two men, therefore they suddenly become possessors of the minds and bodies of these others? As long as they were two to two, so long we may suppose each man remained master of his own mind and body; but from the moment that another man, acting Heaven only knows from what motives, has joined himself to one party or the other, that party has become straightway possessed of the souls and bodies of the other party. Was there ever such a degrading and indefensible superstition? Is it not the true lineal descendant of the old superstitions about emperors and high priests and their authority over the souls and bodies of men?

Let us look again at it from another point of view. You say a majority has a right to decide all questions. You perhaps do not like my words when I say, “to own the souls and bodies” of all who are outside that majority, but that is what is really meant; for once accept the doctrine that the bigger crowd is supreme over the smaller crowd, and you will find, as I have already said, that it is impossible to draw a line to limit the authority which you thus confer. But, now, let me ask this question. If the fact of being in a majority, if the fact of the larger number carries this extraordinary virtue with it, does a bigger nation possess the right to decide by a vote the destiny of a smaller nation? Such an exceedingly artificial matter as an invisible boundary line between two countries cannot suddenly deprive numbers of the sacred authority with which you have clothed them. Inside a country the bigger crowd is possessed of all rights, the smaller crowd is disfranchised of all rights; why not also outside a country? They are queer rights these, which appear and disappear, after the fashion of the supple articles which a conjurer orders into and out of existence.

Let us follow this same consideration a little further. … You deny the rights of the individual to regulate and direct himself. But you suddenly acknowledge and exaggerate these rights as soon as you have thrown the individual into that mass which you call the majority. Then you suddenly discover that men have not only rights to own themselves, but also to own their fellow-men. But where have these rights come from? By what hocus-pocus, by what magic have they been brought into existence? A man who makes one of the exactly equal half of a crowd has no rights, either as regards himself or as regards others; if he makes one in that part of the crowd which is larger by the tenth or the hundredth or the thousandth part, then he is clothed with absolute powers over himself and others. Did Central Africa ever produce a more absurd superstition?

Moreover, here’s Tom Woods:

Libertarianism is “cultish,” say the sophisticates. Of course, there’s nothing cultish at all about allegiance to the state, with its flags, its songs, its mass murders, its little children saluting and paying homage to pictures of their dear leaders on the wall, etc.

And here’s Thomas DiLorenzo:

Not to mention, Tom, the black-robed deities of the “supreme” court dressed in black capes, surrounded by a giant mural of Moses receiving the Ten Commandments; a national capital littered with statues of all the state’s former henchmen on horseback, its political bloviators in full bloviation; the Temple to Zeus (er, I mean, Lincoln), complete with fasces inscripted on the front; and of course the Roman-style “motorcades” for our emperors whenever they step out for an ice cream cone after dinner.

Lastly, here’s Murray Rothbard:

In the private sector, a firm’s productivity is gauged by how much the consumers voluntarily spend on its product. But in the public sector, the government’s “productivity” is measured – mirabile dictum – by how much it spends! Early in their construction of national-product statistics, the statisticians were confronted with the fact that the government, unique among individuals and firms, could not have its activities gauged by the voluntary payments of the public – because there were little or none of such payments. Assuming, without any proof, that government must be as productive as anything else, they then settled upon its expenditures as a gauge of its productivity. In this way, not only are government expenditures just as useful as private, but all the government need to do in order to increase its “productivity” is to add a large chunk to its bureaucracy. Hire more bureaucrats, and see the productivity of the public sector rise! Here, indeed, is an easy and happy form of social magic for our bemused citizens.

MinimumWage=CompulsoryUnemployment

by Murray Rothbard

[T]here is only one way to regard a minimum wage law: it is compulsory unemployment, period. The law says: it is illegal, and therefore criminal, for anyone to hire anyone else below the level of X dollars an hour. This means, plainly and simply, that a large number of free and voluntary wage contracts are now outlawed and hence that there will be a large amount of unemployment. Remember that the minimum wage law provides no jobs; it only outlaws them; and outlawed jobs are the inevitable result.

All demand curves are falling, and the demand for hiring labor is no exception. Hence, laws that prohibit employment at any wage that is relevant to the market (a minimum wage of 10 cents an hour would have little or no impact) must result in outlawing employment and hence causing unemployment.

If the minimum wage is, in short, raised from $3.35 to $4.55 an hour, the consequence is to disemploy, permanently, those who would have been hired at rates in between these two rates. Since the demand curve for any sort of labor (as for any factor of production) is set by the perceived marginal productivity of that labor, this means that the people who will be disemployed and devastated by this prohibition will be precisely the "marginal" (lowest wage) workers, e.g. blacks and teenagers, the very workers whom the advocates of the minimum wage are claiming to foster and protect.

The advocates of the minimum wage and its periodic boosting reply that all this is scare talk and that minimum wage rates do not and never have caused any unemployment. The proper riposte is to raise them one better; all right, if the minimum wage is such a wonderful anti-poverty measure, and can have no unemployment-raising effects, why are you such pikers? Why you are helping the working poor by such piddling amounts? Why stop at $4.55 an hour? Why not $10 an hour? $100? $1,000?

It is obvious that the minimum wage advocates do not pursue their own logic, because if they push it to such heights, virtually the entire labor force will be disemployed. In short, you can have as much unemployment as you want, simply by pushing the legally minimum wage high enough.

It is conventional among economists to be polite, to assume that economic fallacy is solely the result of intellectual error. But there are times when decorousness is seriously misleading, or, as Oscar Wilde once wrote, "when speaking one's mind becomes more than a duty; it becomes a positive pleasure." For if proponents of the higher minimum wage were simply wrongheaded people of good will, they would not stop at $3 or $4 an hour, but indeed would pursue their dimwit logic into the stratosphere.

The fact is that they have always been shrewd enough to stop their minimum wage demands at the point where only marginal workers are affected, and where there is no danger of disemploying, for example, white adult male workers with union seniority.

and here's John Hyde:

Many government programs, such as the Australian Traineeship System (ATS), by subsidising the employer to take on ATS employees, recognise the value of on-the-job training and admit that the young, very unskilled employee is overpriced.

Why isn’t a young person permitted to gain experience by accepting any wage an employer will pay? This freedom should replace the anomalous situation whereby it is legal to give a kid unpaid work experience, but illegal to pay him/her less than an award set by an industrial tribunal which is dominated by unions.

The unions are, in turn, dominated by adults who do not want their salaries pulled down by a ready supply of up-and-coming employees ...

Far from preventing exploitation, these minimums are the instrument by which adult workers, who do not wish to face competition, exploit the young.

This conspiracy against the young is, arguably, the strongest single indictment of the way we run Australia.

Here's all that in a cool video. And here is Bob Day with a brilliant short speech on the unemployment prison that is government legislation.

Without government, won’t warlords take over? Just look at Somalia!

by Robert Murphy

For the warlord objection to work, the statist would need to argue that a given community would remain lawful under a government, but that the same community would break down into continuous warfare if all legal and military services were privatized ... It is true that Rothbardians should be somewhat disturbed that the respect for non-aggression is apparently too rare in Somalia to foster the spontaneous emergence of a totally free market community. But by the same token, the respect for "the law" was also too weak to allow the original Somali government to maintain order.

See also this history of foreign government intervention into Somalia.

Doesn’t business need government?

“I believe that any system which places enterprise in leading strings, in order that it may become bold and adventurous, which represses commerce in order that it may thrive, which tears Industry in its infancy from the generous breast of Nature to suckle it on duties of Customs, and compels it in youth to lean on crutches that it may become strong in mature age, is as disastrous in its consequences as it is contradictory in its principles.”
~ G.H. Reid, Five Free Trade Essays (Melbourne: Gordon and Gotch, 1875), p. 3.

“Now, it is certainly correct that a market presupposes the recognition and enforcement of those rules that underlie its operation. But from this it does not follow that this task must be entrusted to a monopolistic agency. In fact, a common language or sign-system is also presupposed by the market; but one would hardly think it convincing to conclude that hence the government must ensure the observance of the rules of language. Just as the system of language then, the rules of market behavior emerge spontaneously and can be enforced by the ‘invisible hand’ of self-interest. Without the observance of common rules of speech people could not enjoy the advantages that communication offers, and without the observance of common rules of conduct, people could not enjoy the benefits of the higher productivity of an exchange economy based on the division of labor.”
~ Hans-Hermann Hoppe

“To the extent that the new spending causes a spending response from investors and consumers, this is more evidence of an uneconomic use of scarce resources. If the money is used to prop up failing companies, that’s particularly bad since it is an attempt to override market realities, an attempt that is about as successful as trying to repeal gravity by throwing things up in the air.”
~ Lew Rockwell

“The boom produces impoverishment. But still more disastrous are its moral ravages. It makes people despondent and dispirited. The more optimistic they were under the illusory prosperity of the boom, the greater is their despair and their feeling of frustration. The individual is always ready to ascribe his good luck to his own efficiency and to take it as a well-deserved reward for his talent, application, and probity. But reverses of fortune he always charges to other people, and most of all to the absurdity of social and political institutions. He does not blame the authorities for having fostered the boom. He reviles them for the inevitable collapse. In the opinion of the public, more inflation and more credit expansion are the only remedy against the evils which inflation and credit expansion have brought about.”
~ Ludwig von Mises

Why do you call yourselves Misesians when Mises wasn’t an anarchist?

The arguments Mises used to defend government conflict with the arguments he used to defend the market. As Mises himself said:

"The issue is always the same: the government or the market. There is no third solution."
[Mises, Socialism (Indianapolis: Liberty Fund, 1981), p. 492, or here.]

"It is inconsistent to support a policy of low trade barriers. Either trade barriers are useful, then they cannot be high enough; or they are harmful, then they have to disappear completely."
[Mises, Money, Method, and the Market Process, ed. Richard M. Ebeling (Norwell, Mass.: Kluwer Academic Publishers, 1990), p. 135-36.]

"Whatever some people may consider as just and fair, the only relevant question is always the same. What alone matters is which system of social organization is better suited to attain those ends for which people are ready to expend toil and trouble. The question is market economy, or socialism? There is no third solution. The notion of a market economy with nonmarket prices is absurd. The very idea of cost prices is unrealizable. Even if the cost price formula is applied only to entrepreneurial profits, it paralyzes the market. If commodities and services are to be sold below the price the market would have determined for them, supply always lags behind demand. Then the market can neither determine what should or should not be produced, nor to whom the commodities and services should go. Chaos results."
[Mises, Human Action (Auburn, Ala.: Ludwig von Mises Institute, 1998), pp. 393-94.]

"[O]nce the principle is admitted that it is the duty of government to protect the individual against his own foolishness, no serious objections can be advanced against further encroachments. A good case could be made out in favor of the prohibition of alcohol and nicotine. And why limit the government's benevolent providence to the protection of the individual's body only? Is not the harm a man can inflict on his mind and soul even more disastrous than any bodily evils? Why not prevent him from reading bad books and seeing bad plays, from looking at bad paintings and statues and from hearing bad music? The mischief done by bad ideologies, surely, is much more pernicious, both for the individual and for the whole society, than that done by narcotic drugs … If one abolishes man's freedom to determine his own consumption, one takes all freedoms away. The naive advocates of government interference with consumption delude themselves when they neglect what they disdainfully call the philosophical aspect of the problem. They unwittingly support the case of censorship, inquisition, religious intolerance, and the persecution of dissenters."
[Ibid., pp. 728-29.]

"People can consume only what has been produced. The great problem of our age is precisely this: Who should determine what is to be produced and consumed, the people or the State, the consumers themselves or a paternal government? If one decides in favor of the consumers, one chooses the market economy. If one decides in favor of the government, one chooses socialism. There is no third solution."
[Mises, Economic Freedom and Interventionism, ed. Bettina Bien Greaves (New York: Foundation for Economic Education, 1990), p. 47.]

So, if we are wrong to call ourselves Misesians, you can blame Mises. See this also.

Economics.org.au

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