Utopia: an ideal place or state; any visionary system of political or social perfection.

Anarchy, by which I have in mind “anarcho-capitalism,” is oftentimes considered a utopian political organization, by virtue of the interpretation of anarchist political theory that gives a sense of teleology. To this extent, if you believe in the possibility of anarchism, then you must concede that other supposed social utopias (i.e. communism) are too possible. I admit that one’s position on this topic depends on one’s inclination in economic theory, especially with regards to the socialist calculation debate and the concept of public goods, but I have reason to the believe that the above stance is erroneous, and that while socialism/communism (i.e. the collective ownership of the means of production) is indeed utopian, anarchy not so much. In fact, many anarchist political theorists take off from the belief of human imperfection, whether cognitive or ethical. However, this does not imply that anarchism is anywhere and everywhere possible, just that it could be possible.

I use the term anarchy, rather than anarcho-capitalism, because ultimately the latter necessarily implies the former. The term anarcho-capitalism probably embodies the need to differentiate between a political theory that stresses political stability and order, even in a society without a state, and one of disorder. It also represents an inherent “bias” towards capitalism, in the sense that it’s believed that capitalism would be the primary form of social organization in a stateless society. I agree, but capitalism must take a very broad definition: it cannot be reduced to the pricing process. True, as will be seen below, the most important critique of the socialist vision revolves around the pricing process and role it plays in society — i.e. the socialist calculation debate —, but there is no end state in political theory, so we should be careful to allow for the possibility of better forms of resource allocation, even if we can’t actually fathom them. I admit to be somewhat influenced by Ronald Coase here, whose some of best work is on systems of organization that supersede the pricing process (although the firm is still, admittedly, dependent on the pricing process to decide “optimal” size — see both Coase’s “The Nature of the Firm” [also JSTOR] and Peter G. Klein’s work, reproduced in The Capitalist and the Entrepreneur). For all intents and purposes, though, when I write “anarchy” one should imagine “anarcho-capitalism.”

I should also justify my case of is versus could be possible. But, this is true in the same sense that democracy is not necessarily, but can be, possible. It depends on the existing institutional framework. For example, suppose that tomorrow morning the state ceases to exist without warning. I have no doubt that our society would revert to some form of statist government, whether central or politically chaotic, simply because alternative institutions cannot arise overnight. This hold certain semblance to some of the better insights in Acemoglu’s and Robinson’s Why Nations Fail; institution, and society in general, is path dependent. New institutions, in some variable way, depends on past or existing institutions. Loss of control over existing institutions doesn’t necessarily imply radical change in the existing framework, rather it suggests that either another group will take over existing institutions or separate groups will fight over them (as is the case in several i nternally violent third world nations). It follows that any evolution towards anarchy, if indeed evolution is even taking us in that direction (!), needs to be gradual. In this sense, anarchism could be possible, even if it may not be currently possible.

While I don’t want to slip into the pitfalls of teleology, it’s my belief that we are moving towards anarchism. But, this should be put into the context of my own cognitive limitations. I simply am unable to imagine an alternative social order that I see merit in; so, one should keep in mind that it’s always possible that society will change in alternative directions, but that since anarchism is the only one I recognize then I must necessarily only speak of this form of governance. In any case, I see the above-outlined notion of gradualism working in the following manner. Legal institutions, for instance, need to be gradually replaced by market counterparts — a difficult proposition, I admit, knowing that historically the relationship has been the exact opposite —, as does the provision of other forms of public goods, and publicly provided goods in general (e.g. healthcare). But, legal institutions are probably the most importance, since such crucial agreements as property and contract law unquestionably depend on them.

For institutional change to occur, I think that certain prices have to fall in such a way to induce the development of relevant organizations, which in turn will help develop the necessary institutions over time. In other words, in a world where the government monopolizes the industry, or at least tends to out-price competitors (e.g. at one point or another, education), it has to pay to use (and provide) alternative services. We see this is in private security companies, modern private education (although its status is more controversial), mail delivery (although tightly regulated by parcel size), and elsewhere. Over time, it seems to me that the role of government will diminish in that more and more services will be provided by the private sector, and the only option for the state to retain control over certain industries is tightening regulation (including nationalization), which, in turn, may require a certain culture (of totalitarianism). (It should be mentioned that there are plenty of people who think the long-run trend operates in the opposite direction, including Tyler Cowen in The Great Stagnation).

Before moving on to discussing the status of socialism, it’s important to underscore the fact that anarchy does not imply societal perfection — this is also contained in the idea that even under stateless governance institutional change is bound to continue. In fact, many anarchist theorists assume quite the opposite. That is, anarchy is preferred precisely because of human imperfection. Whether it be due to a superior allocation of resources through a competitive, decentralized market process, or the provision of flexible institutions of law that can change over time and as needed, it is the rigidity of statist governance that turns off anarchist scholars. All of this also implies that there may be states of societal governance after anarchy or, as I noted above, alternatives to anarchy which simply haven’t been considered yet (whether adequately or at all).

Why does socialism (defined rigidly as the collective ownership of the means of production; i.e. the abolition of private property) fall under the category of utopia, while anarchism doesn’t? As above-mentioned, one’s opinion on the viability of socialism may fall on one’s position in the socialist calculation debate. Mises’ insight (see Socialism and “Economic Calculation in the Socialist Commonwealth“) is that without a pricing process society cannot rationally plan the allocation of resources. No less, a pricing process requires private ownership of the means of production, because only with private ownership can there be a competitive bidding process for goods — read: price formation. While for a while the calculation debate was mostly confined to the European continent, in the mid-1930s economists such as Oskar Lange and Abba Lerner conceded Mises’ argument, but posed that prices could be calculated by a planning board, or something similar, on the basis of marginal price theory. Hayek’s contribution to the debate was to make clear that the information necessary to calculate equilibrium prices isn’t necessarily available to any one person — you can’t assume equilibrium input prices as given —, reaffirming the necessity for a competitive, heterogeneous market to coordinate market activity, however imperfectly (although, I don’t think Hayek emphasized the importance of profit and loss as much as Mises did, and I consider this an unfortunate oversight on Hayek’s park).

In a sense, socialism is possible, but only a form which would inevitably lead to the misallocation of resources and the impoverishment of society. Therefore, if individuals’ valued retrogression, then maybe socialism is not as utopian as one may deduce. But, I don’t think such an assumption is very applicable, and this is evidenced by the emergent demand for better and new products. This leads to many people preferring alternative institutions, which is probably why socialist projects usually take a totalitarian turn — the only method of maintaining the system is forcing people to abide by it on a wholesale level.

Nevertheless, and I have pointed this out before, there may be some “socialist” “microcosms” that develop on a free market. The firm comes as a relatively close substitute in that it supersedes the pricing process within the firm, although most socialists would probably deny the relationship on account that most firms operate through the establishment of hierarchy and there remains strong elements of private property. An alternative example, but also a form of a firm (that differs in organization and management), is the cooperative. I think that most socialists would be disheartened if they actually involved themselves in successful cooperates — I myself, through my family in general, belong to a winery that calls itself a cooperate —, because all of those I am aware of find it difficult to not implement some form of hierarchy, including the contracting of labor. However, I think that the cooperative management system is in development, and the remnants of hierarchy may be gradually replaced. This wouldn’t be inconsistent with the capitalist vision of anarchy, and if one prefers not to call it capitalistic then the alternative would be to agree that varying systems of resource allocation can co-exist (as they already do: the Coasian firm versus the pricing process).

As a general system of resource allocation I see socialism as being utopian, even though it may be viable to some degree and/or at some level. I don’t see anarchism as suffering from the same problems. Neither do I see anarchism as being utopian in the sense of perfection, since an anarchic society would still be imperfect. This is implicit in the fact that even anarchic societies would be developing in some way, and institutions would continue to change. As such, it’s important to remember that anarchy is not an ultimate end. No less important, it may not even be a stage in societal change at all! It is a question of how the institutional framework will develop over time. Finally, this emphasis on institutional change should make it clear that anarchism, if possible, is only possible given that the prerequisite institutions are in place.