Law & Order Without Government

Here, I explain how to have law and order without a state.*

The main institutions for providing law and order in our society are the police and the courts. Both of these should be privatized.

Instead of a single, monopolistic police force operating in a given city, we should have multiple, competing protection agencies operating in the same geographical area, like the security guard companies that presently exist, but with more rights to arrest people and turn them over to the courts. Perhaps homeowners’ associations or business owners’ associations would be the main clients hiring protection agencies.

Instead of a single, monopolistic court system, we should have a system of competing arbitration firms. In our current society, many disputes are already resolved by such private arbitration firms. These arbitrators handle disputes in a much more timely and much less expensive way than the government courts. We should expand their use to cover all disputes, including disputes about whether a given individual committed a given crime.

Why might this system be better than the status quo?

There are two main differences between government provision and market provision of a product:

1. Government provision is generally compulsory (you can’t choose not to have the product), while market provision is voluntary.

2. Government is monopolistic, while the market is usually competitive.

Coercive, monopolistic provision of goods is much worse than voluntary, competitive provision. This is why in the communist countries, there were chronic shortages of almost everything and products were of much lower quality than in the capitalist world. If you have a coercive monopoly, you needn’t bother with trying to satisfy consumers. If you do a terrible job, they’ll still have to keep paying you. If the government is the only provider of food, we’re going to have crappy food, with only a few options, and people will starve because there won’t be enough. That is what happened in the communist countries.

The same thing that we observe with every other government-provided product is also true of protection and dispute-resolution services:

• Low supply: for instance, there aren’t enough police patrolling high-crime neighborhoods. Courts are chronically backlogged, leading to multi-year wait times to get disputes resolved. (I’ve learned of a case in which a professor was banned from campus for offensive ideas. He sued in court; after three years, the court has managed to decide not to dismiss the case. Now they can get started.)

• Poor quality: e.g., most crimes go unsolved; indeed, the police don’t even try to solve them. Periodically, they brutalize or kill citizens unnecessarily.

The reasons for this are probably the same as the reasons for low supply and poor quality in all other goods and services provided by government: the providers know that they’ll keep getting paid no matter how bad a job they do.

The competitive system would bring higher quality, greater supply, and lower costs.

The most popular objection to private security is also the most ridiculous. It is that security agencies will constantly be going to war with each other. This would be completely irrational. Warlike agencies would have to pay their employees much more to make up for the risk. Most employees would probably quit anyway, to avoid going to war against another security company. The wars would be incredibly costly and destructive, with employees dying, company property getting destroyed, and so on.

An easy alternative way of resolving disputes is third party arbitration. If a customer of one agency has a dispute with a customer of another agency, both agencies would require their customers to submit to arbitration, which is obviously financially much better than going to war.

As with most objections to anarcho-capitalism, this objection really tells much more strongly against government. Governments sometimes go to war with each other in actual fact; this isn’t just hypothetical. When they do, they commonly kill hundreds of thousands of people. Governments are much more likely to do this because they have a coercive monopoly and can stay in business even while spending huge amounts of money on things that don’t bring in any revenue. The U.S.-Iraq war was estimated to have cost in the neighborhood of $2-3 trillion. No private company would spend money like that on something that only destroys stuff. (Leaving aside AI companies, of course, which are spending trillions of dollars while saying that there’s a pretty good chance their product will kill everyone. That’s a bit of an outlier.)

Why won’t criminals hire protection agencies to protect their “right” to rob and hurt other people?

Economically speaking, “protection against thieves” and “protection for thieves” are both products that there could be a market for. The fact that one of them is immoral isn’t really an economic difference, so it doesn’t explain in economic terms why one product would be better provided than the other.

However, the fact that most people value keeping their own stuff more than they value getting (otherwise similar) stuff belonging to others, is an economically relevant difference. The difference is often pretty extreme—e.g., if you value your car at $10,000, a potential thief might value it at $1000. The difference might be even more extreme for other crimes, e.g., the benefit a criminal gets from punching you is vastly lower than the harm to you of being punched.

Another economically relevant fact is the fact that most people believe that stealing is wrong (along with assault, murder, rape, etc.).

Whether or not stealing is objectively wrong, both of the above facts would lead to there being more money in protecting normal people than there is in protecting thieves. If a thief had the money to pay for protection of his “right” to steal your car, he could instead just use that money to buy a car, since that would be cheaper.

Protection agency contracts would specify that the agency only protects you against certain things that are generally viewed in society as rights-violations; the agencies would not offer to protect you in violating others’ rights, because it would not be profitable to cater to such customers; they would constantly be starting conflicts and costing the agency money.

Since people have to pay for protection, doesn’t this mean that only the rich will be protected? What about the poor?

Unbeknownst to today’s progressives, poor people in today’s society generally have a lot of goods and services, and not only ones provided by the government. Most of them have electricity in their houses. Most own things like microwave ovens, refrigerators, TV’s, and even cars. Most products provided by the market come in affordable versions for low-income customers; indeed, there are usually more businesses aimed at low-income customers than at high-income customers. E.g., there are more Walmarts than Bloomingdales.

Of course, the affordable version of any product is going to be lower quality than the high-end version. Otherwise, there would be no point in being rich. So predictably, the poor will be less well protected than the rich, in a competitive system.

However, note that this is also true in our current system. In the status quo, poor people are roughly 3.5 times more likely to become crime victims than rich people. It’s not clear whether the inequality would be greater or lesser in a free market system than in the governmental system. In any case, there would probably be much less crime overall, for the reasons given above (sec. 2).

Criminal organizations are not going away, under any system. But they would probably be weaker under anarcho-capitalism, because they would be deprived of their main source of income, which is vice crimes, especially drugs. In a libertarian society, recreational drugs would be legalized, and criminal organizations would lose that income stream.

Why won’t protection agencies just become extortion agencies that extort money from their erstwhile clients without doing anything to protect them?

The basic answer is competition. If an agency started acting like that, no new customers would go to them; new customers would instead go to their competitors. Their past customers would also then sign up with their competitors.

This doesn’t work with government, however. If the government starts acting like an extortion agency, people have no one else to turn to, because the government has a monopoly.

That might explain the current situation we’re in. The government keeps wanting more money, they do very little by way of investigating most crimes, and they fail to solve the vast majority of crimes.

Many people think that capitalism naturally leads to monopoly, so the protection industry will be monopolized, leading us back to a governmental situation, only perhaps with a worse government.

In fact, it is nearly impossible to monopolize most industries via normal free-market competition. Once you gain an advantage that you think will get you market share, your competitors very quickly figure out what you’re doing and imitate it. In most cases, the only feasible way to get a monopoly is in fact to lobby the government.

There are possible exceptions, in which the most efficient size for a firm is so large that a single firm of such size can supply the entire market. However, in general, larger companies (after a certain point) become less efficient. The most efficient size for a firm in an industry depends on the fixed costs of that industry (costs you have to take to enter the industry, but that don’t increase with your size once you’ve entered).

In the case of the protection industry, fixed costs are minimal, so the most efficient size is probably very small, so there would probably be many protection agencies in any given city.

I would expect local homeowners’ associations (HOA’s) to hire security agencies to protect their members, just as they might hire garbage and sewer services. You might then ask: why would reliance on HOA’s be better than reliance on traditional government? (You might also wonder whether HOA’s should be considered a kind of government. That’s a semantic question that we needn’t worry about.)

First, HOA’s are more voluntary than government. You literally sign a contract, when buying property, that makes you an HOA member. This contrasts with the “social contract” that you supposedly have with the government, where the terms of the contract are all imputed by theorists, without you ever actually agreeing.

Second and more importantly, there is more meaningful competition among HOAs. Competitiveness is a matter of degree. To some degree, different governments are in competition, because citizens of one government can sometimes move and become subject to a different government. But such moves tend to be extremely costly and are often prohibited.

HOA’s are also in competition, in that people who don’t like their HOA can sell their property and move elsewhere. This is also costly, but not nearly as costly as changing your government. You don’t have to leave behind your culture, your family and friends, etc. Thus, there is more competition among HOA’s than among governments, and thus HOA’s can be expected to abuse their members less than traditional governments do.

If you don’t support capitalism in general, then of course you wouldn’t support privatizing the police and the courts. But since you’re reading my blog, you probably know why capitalism is better than socialism. Those same reasons apply to protection and dispute-resolution just as they apply to all other goods and services. The same reason why you don’t want a government monopoly on food is why you shouldn’t want a government monopoly on protection. You can see this theoretically—the government has little incentive to provide high quality or affordable protection, since they have a coercive monopoly. You can also see it empirically—empirically, the government’s protection is expensive and unreliable.

Most of the objections to privatizing protection are things that apply more to government protection than to private protection. E.g., governments are more likely to go to war, they do very badly at protecting the poor, they act like extortionists, and they are monopolists.

[ *Based on: The Problem of Political Authority (2013), Ch. 10. ]