Consider purchasing a copy of A Spontaneous Order: The Capitalist Case For A Stateless Society

SCARCITY IS AN immutable characteristic of the physical realm. As humans, we require the consumption of various scarce (aka economic) goods for our sustenance and pleasure. Fortunately, the digital age has produced a superabundance of non-scarce goods for our enjoyment. However, as marvelous as this advent is, it cannot wean us entirely from our dependence on economic goods. The enjoyment of many non-scarce goods may only be enabled by the use of those goods which are scarce, i.e., by servers, microchips, monitors, phones, cell phone towers, satellites, and at the very least the standing room for this equipment, infrastructure, and personnel, etc.

The problem of social order, then, stems from mutually exclusive desires for how to employ such scarce goods. Being scarce, there are a limited number of these goods, and the desire for them exceeds their availability. Thus, over time, there have been innumerable attempts to solve this dilemma through the formulation of various property norms and the erection of various States to create, interpret, and enforce them. Property norms themselves simply refer to the criteria used to determine who has the rightful authority to employ a given scarce good. When conflicts inevitably rise regarding the use of scarce goods, it is such property norms that serve as the philosophical and legal basis for arbitrating between the conflicting parties. Thus, the efficacy of a norm is measured by the degree to which, if followed, it is able to mitigate or eliminate interpersonal conflict.

The thesis put forth regards the Private Property norm as the one best suited for such conflict avoidance and, hence, the optimal production of wealth. This norm will be extended to its fullest to show how it may also be applied towards those functions traditionally assumed by the State. Simultaneously, it will be revealed how the State owes its very existence to the continued violation of the Private Property norm, and must therefore be dissolved for both practical and ethical reasons.

What is the Private Property Norm?

The Private Property norm first and foremost states that every person is the exclusive owner of his/her own body. This is referred to as the principle of self-ownership. For example, only Joe has the exclusive right to employ his body as he sees fit, so long as such employment does not involve uninvited physical interference with the bodies or external property of others. The Private Property norm permits one to acquire ownership over external economic goods only through original appropriation or voluntary exchange. To acquire property via original appropriation, one simply need be the first to mix his labor with an unowned good. This is commonly referred to as the first-user or homesteading rule. A careful examination of this rule should reveal that it is necessarily conflict-free, as being the first user and claimant implies there can be no valid competing claims over said good at the time of its acquisition. Voluntary exchange is the second and only other means by which one may acquire rightful ownership over a good, according to the Private Property norm. This includes any voluntary transfer of title over a given good to someone else. This may take the form of a monetary sale, barter exchange, gift, inheritance, etc. Once again, because such exchange is voluntary, it too is free of conflict and is therefore in accordance with the purpose of norms: conflict avoidance. An important derivative of the Private Property norm is the non-aggression principle (aka the NAP) which states that no one may rightfully commit aggression against the persons or property of others. To clarify, aggression in this context and for the remainder of the book will entail the initiation of uninvited physical interference with the persons or property of others, or threats made thereof.

Finally, what the Free Market refers to is simply the social arrangements that develop in the absence of coerced exchanges, which implies the widespread adoption of the Private Property norm. That is to say, it refers to that environment which is comprised of a myriad of voluntary exchanges and acts of original appropriation. In such an environment, one is only able to increase his wealth through the production of desired goods and services, which are valued more than the sum of their individual separate components. Thus, the self interests of the individual are beautifully harmonized with the interests of greater society. The Free Market, then, is a system which only takes for granted that humans are self interested and that they seek to use means to achieve various ends. Hoppe expounds on the nature of the Private Property norm:

Contrary to the frequently heard claim that the institution of private property is only a convention, it must be categorically stated: a convention serves a purpose, and it is something to which an alternative exists. The Latin alphabet, for instance, serves the purpose of written communication and there exists an alternative to it, the Cyrillic alphabet. That is why it is referred to as a convention. What, however, is the purpose of action norms? If no interpersonal conflict existed — that is: if, due to a prestabilized harmony of all interests, no situation ever arose in which two or more people want to use one and the same good in incompatible ways — then no norms would be needed. It is the purpose of norms to help avoid otherwise unavoidable conflict. A norm that generates conflict rather than helping to avoid it is contrary to the very purpose of norms. It is a dysfunctional norm or a perversion… With regard to the purpose of conflict avoidance, however, the institution of private property is definitely not just a convention, because no alternative to it exists. Only private (exclusive) property makes it possible that all otherwise unavoidable conflicts can be avoided. And only the principle of property acquisition through acts of original appropriation, performed by specific individuals at a specific time and location, makes it possible to avoid conflict from the beginning of mankind onward, because only the first appropriation of some previously unappropriated good can be conflict-free — simply, because — per definitionem — no one else had any previous dealings with the good. [1]

What is the State?

Throughout this book, there will be innumerable references to the “State.” This should not be confused with, say, California or North Carolina. Rather, it is interchangeable with what is more commonly referred to as the “government.” However, using the term “government” in place of the “State” can be misleading as it insinuates that a Private Property or Free Market Anarchist society is absent a governing presence in a more general sense. In a Free Market Anarchist society (aka Anarcho-Capitalist or Voluntaryist society), the market is the governing presence and enforceable rules and norms still exist, e.g. the NAP. In the Free Market, no one may rightfully or legally commit aggression against the persons or property of others. In distinct contrast, however, the State is that institution which has the exclusive legal right to commit aggression against others in a geographical area. More specifically, the State is that institution which confers upon itself the status of ultimate arbiter in all conflicts, as well as the exclusive privilege to create, interpret, and enforce law. In addition to these privileges, it also retains the unique power to lay taxes on its citizens, i.e., to make them pay for its “services” or else face fines, imprisonment, or even death if arrest is resisted. Hoppe summarizes the defining characteristics of the State:

First, the state is an agency that exercises a territorial monopoly of ultimate decision making. That is, the state is the ultimate arbiter in every case of conflict, including conflicts involving itself. It allows no appeal above and beyond itself. Second, the state is an agency that exercises a territorial monopoly of taxation. That is, it is an agency that unilaterally fixes the price that private citizens must pay for the state’s service as ultimate judge and enforcer of law and order. [2]

The illegitimacy of the State rests on the fact that it exercises control over resources that its agents never acquired through original appropriation or voluntary exchange, and it does so without the consent of the rightful owners of said resources. This is what separates the so called “social contract” of the State from a restaurant owner who expects a customer to pay after he has enjoyed a meal. In the first place, the restaurant owner offers the good upon the customer’s specific request, and only then asks for payment. In distinct contrast, the State first expropriates or steals wealth from its citizenry in the form of taxes, and we are told this is payment for its services. In the second place, the restaurant owner would have acquired his establishment and the food that he serves through original appropriation or voluntary exchange, and would thus have the legitimate authority to dictate how it is to be run and to expect payment from his customers for services rendered. The State, on the other hand, cannot claim to own the land of an entire country, as it never homesteaded or purchased it from prior owners (at least not with funds generated through original appropriation or voluntary exchange).

Logical and Economic Errors of the State

As normally understood, the primary role the State is charged with is to serve as the authoritative institution in the creation, interpretation, and enforcement of law and to protect the property of its citizens. However, as noted earlier, before it can embark on any task it must first confiscate a portion of its citizens’ property without their genuine consent so that it may have the means to perform the aforementioned services. Thus, the means the State uses to achieve the ends of conflict mitigation and property protection themselves generate conflict and violate the property rights of its citizens from the outset. This logical error associated with State operations explains the inherently destructive economic consequences of this arrangement. Hoppe explains:

First of all, among economists and philosophers two near-universally accepted propositions exist: 1. Every “monopoly” is “bad” from the viewpoint of consumers. Monopoly is here understood in its classic meaning as an exclusive privilege granted to a single producer of a commodity or service, or as the absence of “free entry” into a particular line of production. Only one agency, A, may produce a given good or service, X. Such a monopoly is “bad” for consumers, because, shielded from potential new entrants into a given area of production, the price of the product will be higher and its quality lower than otherwise, under free competition. 2. The production of law and order, i.e., of security, is the primary function of the state (as just defined). Security is here understood in the wide sense adopted in the American Declaration of Independence: as the protection of life, property, and the pursuit of happiness from domestic violence (crime) as well as external (foreign) aggression (war). Both propositions are apparently incompatible with each other. This has rarely caused concern among philosophers and economists, however, and in so far as it has, the typical reaction has been one of taking exception to the first proposition rather than the second. Yet there exist fundamental theoretical reasons (and mountains of empirical evidence) that it is indeed the second proposition that is in error. [3]

In addition to the State’s monopolistic complacency, the fact that it receives payment through aggressive confiscation and not voluntary sale severely hinders its ability to ascertain which activities are “worth” pursuing. In the market, this would be determined by comparing one’s costs with his revenue. Profits occur when revenue exceeds costs, and losses when costs exceed revenue. One’s productivity in the Free Market is reflected by his degree of profits or losses. Profits and losses are only able to measure productivity because they reflect the purchasing preferences of consumers. If one is profitable, this means he is generally satisfying consumer preferences; if he is, on the other hand, making losses, this means he is transforming the goods at his disposal in such a way that their resulting configuration is worth less to the consumer than the sum value of the individual goods used in the process. Thus, profits equate to a production of wealth, and losses equate to a destruction of wealth. Fortunately, in a Free Market those who destroy wealth or generate losses tend to lose command over ever more resources, freeing them up for more productive use in the market place by more capable market participants. However, no such regulating mechanism exists for the State. Because the revenue the State generates comes from violent confiscation, its resulting profits or losses do not necessarily correspond with the creation or destruction of wealth. Thus, it has no rational means by which to make economic decisions such as where a good should be produced, what materials to produce it with, who should produce it, where it should be allocated, nor how it should be produced. Even if agents of the State could miraculously determine the “correct” answers to these questions at a given point in time, the very next second the answers would become obsolete because consumer preferences continually fluctuate along with the available technology and supplies to satisfy them.

Navigating A Spontaneous Order

Some of the more common criticisms of the Free Market are that it fails to address externalities, the collective-action problem, a lack of uniformity in safety and other quality standards, the free rider problem, and of course that it provides insufficient protection for the common man against the predations of the greedy business man. All of these allegations and many more will be addressed throughout this book.

The book starts off with Chapter 0 covering the epistemological limitations of empiricism in the realm of economics. It is due to such limitations that much of the discussion throughout this book will be based in theory, logical proofs, and analogies as opposed to seeking credibility through the lens of empirical data. Of course, some empirical examples will be utilized, but this should not be misconstrued as an attempt to prove the propositions made throughout this book. They are instead used to help illustrate some of the concepts which will be discussed.

The next few chapters will then be geared towards providing a conceptual foundation for the remainder of the book by providing a rational proof for the Private Property norm, defining the scope and nature of property, examining the characteristics of enforceable contracts, and establishing the economic boundaries and role of insurance in a Free Market.

The remaining chapters will speculate on how various services and social problems may be addressed in a Free Market in contrast with the State. The topics covered will range from: health care, monopolies and cartels, money and banking, road production, law and order, security production, environmentalism, poverty, education, and the corporation. The book will then culminate with a discussion on some effective means one may employ to diminish the power of the State and help usher in a free and voluntary society in its stead.

The Utopian Allegation

The purpose of this work is not to suggest that a society based on free market principles will necessarily be a Utopian one, nor does it require a change in “human nature” in order for such a society to arise and be sustained. Rather, it is to argue that a free market society is both ethically and economically superior to a State managed one, regardless of what form the State may take. For this proposal to be true, it does not require people to become better than they are or to adopt a greater social awareness. It must only assume that they are and forever will be self-interested creatures. This is not to say that all members of such a society will be misers or misanthropes. There will still be crime, and there will still be charity. These too are motivated by self-interest. However, the incentive structure that is created by the Free Market most closely aligns the self-interest of the individual with the interests of the members of greater society, and therefore crime and other anti-social behavior are most effectively dealt with in this environment. When reading through the pages of this book, I encourage you to be skeptical, challenging each proposal that is made, and to be relentless in your pursuit of truth. I would also encourage you to employ this same level of critique to the State itself, and to allow your objectivity to take precedence over the comfort of the familiar.

End the State. Free the Market. Liberate your Mind.

References

[1.] Hans-Hermann Hoppe, “State or Private Law Society?” (lecture presented at Mises Brasil, São Paulo, Brasil, April 9, 2011).

[2.] Hoppe, ibid.

[3.] Hoppe, ibid.