Markets without states?

I say it is impossible. But in a comment on a previous post, Justin Rietz argues not at all.

I read your paper "Feasible Globalization" and I believe the premises and therefore the conclusions of the paper (and hence your post) are flawed.

In your paper, you state that many non-market institutions are needed in order for markets to work effectively. You then provide examples of current non-market institutions that supposedly play this role. First, I would argue that institutions that protect the right to private property are hardly “non-market” and there are many examples of private property being protected without government involvement yet with the agreement of the private citizens involved. Moreover, one may just as well argue that markets have worked in spite of many of these institutions, and that many economic problems blamed on unregulated markets should in fact be blamed on government interference (the Federal Reserve is a prime example, but to be debated at another time).

Moreover, few of the institutions cited could not be replaced with market mechanisms. Consider that court rooms are being unilaterally "privatized", evidenced by the significant growth in private arbitration. Many have found it to be as fair, more efficient, and in the end, less costly than the government legal system.

...

Ultimately, the paper tries to justify the support of protectionist policies by turning the issue on its head. Given the pre-existing conditions we find in much of the world, the move towards global free trade will be long and arduous, mistakes will be made, and those in power will continue to attempt, some times successfully, to shape policies that will benefit their constituents at the expense of others. But isn't this exactly the reason we want free markets - to wrest control of our economic future from inefficient, self-serving, and corrupt governments and instead allow consenting individuals and private parties to engage in mutually beneficial exchange?

And the important bottom line:

We should not denounce free trade because it is incompatible with nation-states, but rather denounce the corrupt, authoritarian, and mercantilist governments that are incompatible with free trade and hence free society.

First. I want to thank Justin for the thoughtful response. He has gone to the source, read my longer article, and written a critique directed straight at my arguments. No smirky one-liner; no cut-and-paste from a post at another blog; no ad hominem. This is the model of what an exchange in the blogosphere should look like. (Paine--I love your verse too!)

Further, Justin's response clarifies where the disagreements lie. The next best thing to coming to agreement in a debate is understanding why we disagree. Justin believes it is possible to envisage a market society where there is no (or minimal) government, and most of what we normally think of as public functions (regulation, stabilization, contract enforcement, property-rights protection, legitimation through social insurance and redistribution) either do not take place (redistribution) or are carried out through private arrangements.

My mind cannot stretch that far. We know from game theory that self-enforcing agreements become impossible to maintain as the number of participants increases and mobility rises--precisely the conditions under which markets deliver the goods. The alternative is third-party enforcement of contracts. And I would rather rely on a democratic state than on the mafia to do the third-party enforcing.

So I see the markets versus the state argument to be pointless. It is markets and the state. Getting the balance right is where the action lies.

UPDATE: Sami B asks for references on the game theoretic approach to institutions. The best single piece, also quite accessible, is by Avinash Dixit of Princeton. It also provides references for further reading. It is here.

UPDATE2: Marius has some really neat and deep things to say about why a democratic state is not the mafia, and should be preferred to it. Read his comments in the thread below.

UPDATE3: I should acknowledge some literature to which Peter Leeson and others have contributed on how social cooperation can be maintained without third-party enforcement even when the standard game-theoretic preconditions do not exist. Here is how Leeson puts it:

Standard folk theorem-type mechanisms, such as reputation, can secure 'good' conduct when populations are small, agents are socially homogeneous, and individuals have roughly equal physical strengths. However, as I have pointed out in previous research, such mechanisms break down when these conditions are violated.

Unlike Rodrik, however, I believe that economic logic and evidence support the contention that anarchy is capable of overcoming both of these obstacles, which would otherwise prevent widespread cooperation without government.

This argument is the focus of my research. "Social Distance and Self-Enforcing Exchange" (forthcoming in the Journal of Legal Studies) deals with how anarchy solves the problem associated with large and socially heterogeneous populations. "Trading with Bandits" (forthcoming in the Journal of Law and Economics) deals with how anarchy solves the problem associated with threat of violence when agents have disparate strengths.

These papers argue that the breakdown of folk theorem-type mechanisms of cooperation under conditions of large numbers, social distance, and disparate strengths does not prevent individuals from developing alternative (non-folk theorem based), private institutional arrangements to enable cooperation and make exchange agreements self-enforcing in the absence of government.

In addition to these papers, important research by Chris Coyne, Ben Powell, and Ed Stringham also examines the robustness of market anarchy and finds reason for optimism.

 

Comments

[Justin Rietz]

Dani -

Thank you for your response and kind words.

One thing I have learned and come to appreciate about the "blogosphere" is that it is an excellent forum for unabashed, rational critique of ideas, as long as the ad homs and one-liners are avoided. The reason I am a semi-prolific commentor on your blog is because I value the intelligent debate that takes place here - it helps me take a critical look at my own beliefs and make changes or adaptations as needed. There is also the hope that I might influence others to do the same.

I think you hit the nail on the head with the title of your post "Markets without states?". The core of any economic debate, I believe, is one's own philosophical beliefs about humans and human institutions - after all, economics is the study of human interactions. When I get a chance, I'll post some more thoughts on this. Time now for me to put theory into practice and get to work!

[Sami B]

Prof. Rodrik,
Could you please point interested readers to the seminal articles on the underlying game-theoretic arguments alluded to at the end of your posting?
Thanks very much.

[Robert Jennings]

In a previous career I held a number of jobs at the Pacific Stock Exchange (floor trading, listings, product development) It was very clear from numerous conversations with the members - a decidedly libertarian crowd –over a six year span, that they would have found it impossible to trade and enforce contracts without the supervision and enforcement of the exchange.

It was also clear that the exchange could not perform its role without the US government.

When people discuss the “magic of the markets” I am always surprised at their lack of appreciation of the required governmental infrastructure that makes that “magic” possible.

[Allison Christians]

drik
Wednesday, June 20, 2007
11:43 AM

Dani, it seems to me that your conversation with Justin is fundamentally about social contract, no? Justin's view seems to embrace the idea that humans can and will bargain successfully to their mutual advantage without entering into a social contract that imbues central authority to anyone or over any activity--a cosmopolitan view in which a truly "free society" is a single global community, represented by all mankind pursuing their own advantages and achieving order through constant bargaining. Depending on one's view, one could understand this as a call to embrace the concept of world citizenship, in which no person should have any special obligation to any political institution but all people work together for the common good of all; alternatively, one might see this is a call to return to the state of nature that Hobbes referred to as solitary, poor, brutish, nasty and short (in response to which he unfortunately proposed a social contract in which all power be vested in an authoritarian ruler).

Your game theory view on the other hand seems to invoke classical social contract theory in which people enter into societies as a cooperative venture for mutual advantage--i.e., people believe they will fare better together, living according to mutually agreed upon rules, than they can do in the state of nature (or cosmopolis, if you like). In this view, a truly "free society" is the "Well-Ordered" one--it is characterized by groups of people who find strength by pursuing their interests together, and in which order is possible by bargaining up front and then living according to the agreed-upon bargain.

Whether one thinks people should organize in groups (nations) or not (a single global community) going forward may depend then on how one thinks we can or should resolve the friction we now see between the decisions people have made in the past to vest the social contract in nation states while pursuing economic globalization. Since the globe is largely organized by nations, it seems we have to ask, is there a social contract between nations and if so who has agreed upon the mutual advantages being sought in this global society and what are the mutual advantages being sought?

If international regulation is a feature of the social contract between nations, then the mutual advantage might be characterized as regulation for the globally collective good. For example, even though some (perhaps many) may benefit by being unfettered in their pursuit of personal advantage in a single global community, they might impose some of the costs of their pursuit on others (pollution is the classic example but there are of course others), so most people basically want to get together and agree to regulate some things to make life better for everyone. Controlling externalities, third party contract enforcement as you described, and a mechanism for creating the infrastructure that makes the magic possible, as Robert Jennings suggests, are but a few examples of why people might think government and society, organized in nation states which then bargain to their mutual advantage in a global society of states, will foster the achievement of mutual advantage better than individual bargaining in a single global community.

As Diamond and many others have shown us, a market can exist without the political organization of nation states, it is just particularly rough and has lead in the past to lots of suspicion, distrust, and the killing of strangers. We might not reflexively kill strangers anymore but what a move to pure cosmopolitanism might look like is a question for the ages.

[notsneaky]

I just want to follow up the recommendation of Dixit by pointing to this specific book:
http://press.princeton.edu/titles/7729.html
If you look for it used, you can get it for ten bucks.

[terence]

Justin,

Part of the problem with your argument is that markets, whatever else you may say about them, do not guarantee provision. If you have insufficient entitlements you don't get. And for either ethical reasons and/or a feasible social contract (if you take a purely consequentialist view of things) the exclusion generated when you don't guarantee certain goods is unacceptable/unfeasible.

Oh - and two (genuine) questions:

1. Are you a libertarian for deontological(sp?) reasons (procedural fairness say) or consequentialist reasons (more rapid growth less poverty etc)?

2. How do you define freedom?

[Eric Crampton]

There is, of course, the wonderful debate between Bryan Caplan and Tyler Cowen about the feasibility of a desirable libertarian anarchy. Upshot: Caplan provides an existence proof for it, but Cowen worries about the likelihood of that equilibria as compared to others.

[dissent]

Prof Rodrik,
I admire how cordial and respectful you are but I admit I have become impatient at analyses which do not take into account civil society.The Reitz post completely disregards everything we known about the role of civil society. It is profoundly ahistorical, and indeed a pure expression of ideology.

I think I have good reasons for my impatience: Iraq. The ideological neo-cons disregarded and disrespected experts who understood Iraqi society and history and language. They did so because they had a mechanistic (ideological) understanding of society, markets, and history.

Such ideological stances are dangerous. They lead to profound misunderstanding of the problems societies' face and that makes productive solutions impossible. In the case of Iraq, it is no exaggeration to say that hundreds of thousands are dead and a society has been destroyed because of the role this mechanistic (and "free market") ideology had in the making of policy.

[Justin Rietz]

I want to respond to the last comment (by Dissent) first. As a believer in free markets and limited government I am decideldy AGAINST the Iraq war. In many regards, the war is about oil, a war that the U.S. has been involved in for decades. A state forcefully overtaking another for economic gain is not only the antithesis of a free market but is a prime example of a government with too much power and answering to an elite minority. While neocons may cast themselves as the champions of free markets, their actions reveal their true colors. The fact that people view the neocons as representative of believers in free markets is tragic.

Which brings me to Terence's post. I support free markets and limited government both on moral and utilitarian grounds. For now, I will focus on the moral arguments. A free market consists of individuals who voluntary participate in the exchange of goods for their mutual benefit, an exchange that does not require physical force for its completion. Any system that prevents such exchanges or attempts to impose itself on the economy through regulations can ultimately only do so at the point of a gun.

If the U.S. government enacts tariffs on imported steel, some steel transactions that would have occurred previously become financially infeasible due to the higher cost - i.e. two private parties are prevented from making a consenting, beneficial, non-violent exchange. However, if the producer and consumer sidestep the government regulation and complete the transaction anyway, the government will step in and eventually enforce the tariff by physical means if it believes such actions are required to uphold its trade policy. This action may consist of arresting individuals involved in the "illicit" transaction, or blocking these individuals from protecting their property from government expropriation.

It is on this point that I disagree with Dani's comment: "And I would rather rely on a democratic state than on the mafia to do the third-party enforcing". Is not the government a third party to the contract? In fact, the government uses many of the same methods of violent enforcement as the mafia, though cloaked in euphemistic terms. If I am opposed to the war in Iraq, I may decide to withhold a portion of the income tax the government demands of me - say the same percent as the government spends on the military. I may fight the IRS in court, but I will lose, and if I still refuse to pay, the government will forcefully put me in jail. I am coerced, by violent means if deemed necessary, to hand over my property to an institution that wishes to use that property to fund killing.

As I stated in my previous post, a "democratic" government does not inherently protect citizens from government tyranny - in a pure democracy, 51% of the citizens can enslave 49% of the citizens. This "tyranny of the majority" is exactly why the architects of the U.S. constitution included limitations on a democratically elected government, limitations such as the Bill of Rights and the requirement of a 2/3 majority to pass constitutional amendments.

To those who argue that a government is needed to "regulate" free markets, why do we expect the government to do any better? The government consists of, and is run by, people subject to the same flaws as any one else. Yet for some reason we believe that this small minority can understand, predict, and control something as large and dynamic as a national (and now international) economy. Furthermore, we grant these individuals the power to make what amount to moral decisions on our behalf, such as deciding which businesses and workers should be protected by tariffs and which should not, and at what cost to consumers.

I am not suggesting that we immediately and completely remove all government involvement in the market and in our lives, as "shock economics" has shown the fallacies of doing so. Nor do I necessarily believe there is no role for government (though I admit that I frequently entertain the idea). Rather, while Dani would like to find the right mix of government regulation and free markets, I would prefer to find how little government regulation is actually needed.

[dissent]

Justin Reitz
You avoid the issue when you fail to address or acknowledge the issue of ideology in the catastrophic failure in Iraq. In particular the neo-con ideology failed to grapple with civil society - as you do. They thought an ordered society could spring simply from the removal of repressive regulation - as you do. Iraq is a case you should study, not to practice flinging rhetoric & ideas which are detached from historical circumstance, but actually study, history and culture. Read. There are many, many reasons why order in Iraq did not spring from disorder. You fundamentally fail to grapple with what the military calls 'the reality on the ground'. This is what your argument shows: a lack of realism infects these libertarian ideas like a fever and renders them not only useless but sick.

[terence]

thanks justin.

It's bedtime here in New Zealand so I'll be quick:
market failures (in everything, so to speak), markets failing to guarantee provision of key goods; and markets perpetuating historical injustices. You need to be able to explain to me how you get round these problems without a state or with a substantially smaller state then we have at present.

If you're interested in proper explanation of my beef with libertarianism have a look at:
http://laanta.blogspot.com/2006/11/whats-matter-with-libertarianism.html

Oh and, as I see it, the difference between the government and the mafia (one of the differences) is the government is tempered by the vote. When was the last time you got to vote for your local godfather?

[terence]

oh, and one other thing, you argument against coercion is actually an argument for anarchism not anarcho-capitalism. Fancy a world with no private property?

[Marius]

[i]It is on this point that I disagree with Dani's comment: "And I would rather rely on a democratic state than on the mafia to do the third-party enforcing". Is not the government a third party to the contract? In fact, the government uses many of the same methods of violent enforcement as the mafia, though cloaked in euphemistic terms.
[/i]
I guess this is Weber's definition of a state as 'a monopoly on the legitimate use of physical force'. I agree with the idea that a state is in some respects similar to a powerful Mafia, and indeed some states (North Korea, Birma?) are hard to distinguish from a racketeering organization.

The point is that most states, and democratic ones in particular, are ‘tamed’ and made generally benevolent (which means they want to do good, not per se that they achieve this). This is done through checks and balances in their organization, but also because they derive their legitamacy from being a public servant.

At the basic level of violence and security I don’t think states are a concious choice. They come ito existence through complicated historical processes, and once they exist they are almost impossible to dissolve in a peaceful way. But a state can be repressive or not, and that is an important difference.

It is important to realize that even the most minimalistic nightwatch state imaginable is already by definition the most powerful organization in its reach, with the potential to hurt freedoms in almost anyway possible. So, when one is trying to increase freedom, the first step is not to minimalize the power of the state, but to make sure the state itself is under control.

Modern democracies are very much the result of this process: they have big, strong states that influence every part of life. Still their people might be the most free around. This is partially because their systems give people influence, forcing the state to keep a benevolent ethic. But the freedom also lies just as much in the laws that forbid the state to act arbitrarely. The fact that 51% of the people cannot do everything they want to the rest is just as much part of the system.

This seems to me the error in the ‘moral’ arguments of libertarians who claim that a smaller state means more freedom. They ignore that most freedom is derived from power over the state itself. The mere fact they can imagine ways to make the state smaller is because they can imagine influencing it.

One of the reasons to use the state for oversight on say, building safety or the stock exchange is that in a way the state is beyond misuse of that power. It already has the power to rob us blind at gunpoint ( as Jusitn points out, it is doing exactly that), and we have already mechanisms to keep that power in check. This gives states a unique position as 'trusted third party'.

Now, this doesn't mean the state should be involved in every actio. But it is an argument to involve the government in situations where abuse is a possibility,and there are lots of them.

[Justin Rietz]

As to the anarhcy vs. anarcho-capitalism question, private property does not require coercion. In "The Mystery of Capital" Hernando de Soto gives a convincing argument that in many historical cases, such as during the 19th century western expansion in the United States, individuals reach agreements with each other and establish rules to protect private property amongst themselves without requiring government participation. "Legal" recognition of private property usually follows this informal establishment of such boundaries.

Of course, when individuals come together to establish a common set of rules which they all agree to follow, we start to move towards a quasi-democratic state, the key differences being a) an individual may withdraw from the agreement at any time, and b) because of this, those who follow the rules established by the agreement do so of their own consent, i.e. the "laws" have a 100% majority.

As to the concerns that free markets do not adequately, if at all, deal with historical injustices, economic inequality, and social welfare, in many instances I would agree (depending upon our definitions of these terms). Yet why do we need government regulation and wealth distribution programs to solve these problems? Americans, as a percent of GDP, give five times as much to charity as do the French (The Economist, "Bring Back the Victorians" Feb 5, 2007), which suggests that people not subject to high taxes are willing to consensually give money and time to help others. Isn't it reasonable to expect private charities to fill the role of social benefactor, and if not, why? (I don't ask this rhetorically - I am interested in hearing what others have to say).

There is also a moral argument to be made against the state being involved in wealth distribution and social programs. State involvement in social welfare requires the government to make decisions regarding who will receive money and support, and how much. If the government provides funding for medical research directed towards finding cures for deadly diseases, it (the government) must decide how to apportion out limited funds among a wide number of potential recipients. In doing so, it must place a value on each program it is aware of that it could possibly fund.

As a hypothetical (yet I believe realistic) example, let's say that my daughter has a rare, terminal disease that relatively few people in the country are afflicted with. I don't believe anyone will disagree that the amount of funding the government would give to research for fighting this disease would be much less than what is given to fight cancer. The moral issue is that I, as a tax payer, am coerced into giving my money to the government, a portion of which will be spent on cancer research. However, I would much prefer (adamantly so) to give my money to research that is looking for a cure for my child's disease. The government, in fact, has de facto made a moral judgment for me, deciding that a portion of my money (my private property) is better spent on fighting cancer than helping my daughter. Given that we live in a world with limited resources, this conflict is impossible to avoid when a state enacts policies and laws that benefit only a portion of its citizens.

I can't say with 100% certainty that a minimalist government would result in the best economic outcomes in all situations (though I would lean towards this position). But I find it interesting to note that it is those political systems that fought the hardest for equality against what they saw as the injustices of free markets were only able to do so through repressive and totalitarian regimes.

[Gabriel M.]

Perhaps it's worth it to point out that the State does nothing, prefers nothing and it has no intentions. It's bureaucrats and politicians which do. So, saying that "the State is benevolent" is a problematic metaphor, which falls under Prof. Rodrik's recent warning against metaphors.

[Jean-Francois]

Gunpoint argument: Here is something I don't quite understand. In a self-organised contract, it is not true that individuals agree with 100% of the terms. They simply believe that the contract in question, including the terms they disagree with, is more beneficial than their other options. Similarly, if you choose to live in the US, it is because you believe that the contract offered by the state is better than the one offered by an stateless island in the pacific. You might not agree with 100% of the terms, but you can hardly say it is forced upon you at gunpoint.

So you say that the two differences are : "a) an individual may withdraw from the agreement at any time, and b) because of this, those who follow the rules established by the agreement do so of their own consent, i.e. the "laws" have a 100% majority."

While a) is still true with a government (you can move), b) is simply wrong. In other words, there is absolutely no substantive differences. In fact, there is much literature on trust and other mechanisms which sustain informal arrangements and in general they are sustained only because there is a credible retaliation measure in the case of defection (created by network closure for example (Coleman)). The gunpoint argument is relevant in any arrangement - even when both benefit from the final situation. For example, if we bargain for price, the only reason I accept a certain price is because I believe that at a different price you will refuse the exchange. We both have a gunpoint at each other head. The gunpoint argument is the one I hear most about when discussing with libertarian and I am always puzzled by it...

[Marius]

Gabriel M. says : "Perhaps it's worth it to point out that the State does nothing, prefers nothing and it has no intentions. It's bureaucrats and politicians which do. So, saying that "the State is benevolent" is a problematic metaphor, which falls under Prof. Rodrik's recent warning against metaphors."

While I agree that etaphores can be risky, I also believe they can be useful to convey ides. In this case, I really mean that it is the organization that is benevolent, not per se the individuals. The system should work in a way that people can simply do their job, or even purely pursue their selfish interests, and still end up serving the common good. It is far from obvious how to achieve this, but democracies appear to do pretty well. Part of the answer is selction of bureaucrats and politicians that have good intentions, but another part is to mix these people in a way that cancels out their errors and selfish interests. Just as markets can be efficient in a way no indivual could foresee, organizations can have a stronger ethic than their participants.

[terence]

Hi Justin,

You wrote_____________________________

As to the anarhcy vs. anarcho-capitalism question, private property does not require coercion. In "The Mystery of Capital" Hernando de Soto gives a convincing argument that in many historical cases, such as during the 19th century western expansion in the United States, individuals reach agreements with each other and establish rules to protect private property amongst themselves without requiring government participation. "Legal" recognition of private property usually follows this informal establishment of such boundaries.

Of course, when individuals come together to establish a common set of rules which they all agree to follow, we start to move towards a quasi-democratic state, the key differences being a) an individual may withdraw from the agreement at any time, and b) because of this, those who follow the rules established by the agreement do so of their own consent, i.e. the "laws" have a 100% majority.
______________________________________

I’m willing to concede a small point here, my critique of an inconsistent approach to non-interference is probably, in a theoretical sense, better levelled at mini-archists (if that’s how it’s spelt) than anarcho-capitalists. However, there are still considerable problems with your argument. Firstly, your historical analogy is simply not transferable to this day and age. Secondly – and most important – it assumes no transactional costs in changing from one social contract to another (moving, in other words). This is clearly not the case in the real world and so, in practice, means that individuals will still endure coercion in your ‘utopia’. Moreover, it will be coercion based on means. If changing the social contract you have requires X amount of wealth (enough to move) those without sufficient means will be considerably less free to change the social contract that they live under than they would be in a well-functioning democracy (don’t move – move the government).

Oh – and while we’re at it – why do you think it was called the Wild West?

You wrote______________________________
As to the concerns that free markets do not adequately, if at all, deal with historical injustices, economic inequality, and social welfare, in many instances I would agree (depending upon our definitions of these terms). Yet why do we need government regulation and wealth distribution programs to solve these problems? Americans, as a percent of GDP, give five times as much to charity as do the French (The Economist, "Bring Back the Victorians" Feb 5, 2007), which suggests that people not subject to high taxes are willing to consensually give money and time to help others. Isn't it reasonable to expect private charities to fill the role of social benefactor, and if not, why? (I don't ask this rhetorically - I am interested in hearing what others have to say).
_______________________________________

First up, the United States is not a low tax economy. It has lower taxes than most European states simply because it doesn’t have a state funded health-care system. Given that health insurance is hardly a discretionary cost I think it unlikely that Americans give more simply because their discretionary incomes are higher thanks to paying lower taxes. In reality I suspect you’ll find that voluntary giving is higher in the US than France for two reasons: religiosity (much of the difference I suspect is tithes and charity to their local church) and foundations (Gates, Buffet et al).

Second, the stats on aid giving (the field I am familiar with – so the proviso here is that this may not transfer to domestic charity) show that while the US gives much more, per person, per gdp, voluntarily than most other OECD countries it does not give enough to compensate for its low state giving.

Which leads to my main point – the reason that states have gotten involved in health care, education, and social insurance, is simply that historically charity has not been sufficient to smooth the ugliest outcomes of a market economy. What makes you think that now will be any different?

Finally, the there are two technical problems with voluntary giving – collective action dilemmas and the free-rider problem. These wouldn’t be issues if the sole reasons for charitable giving were moral ones. But they aren’t – enlightened self-interest is important too.

Ok – I gotta get to work.

[Bogdan]

"One of the reasons to use the state for oversight on say, building safety or the stock exchange is that in a way the state is beyond misuse of that power."

Well, this is really funny Marius, considering that most great and sophisticated scams as well as unsafe buildings are possible only with the complicity of state officials while the natural vigilance of the market place would make such things virtually impossible.

[Justin Rietz]

I think there me be come confusion regarding my use of the phrase "at the point of a gun". Just to be clear, I mean it in its most literal sense. If, as in my example, I refuse to send a check to the IRS for the full amount which they demand of me because I don't want the money I earned (i.e. my private property) used to fund a war that I am morally against, quite literally the police will eventually come to my home and take me to prison at gunpoint.

If a person knowingly chooses to enter into a contract that contains consequences for breaching that contract - for example they will forfeit a monetary deposit - they have consciously recognized the risk of breach and accepted it because they believe the benefits they will receive outweigh the risk. It is this initial choice to knowingly enter into a contract that differentiates private agreements from government enforced regulations.

Jean-Francois, I agree that a person is free to "country shop" if her or she does not like the laws and regulations of their current government. I initially perceived this as the main weakness in my arguments for more limited government. Again, the answer centers around choice. If I am born in the United States, I did not make a choice to be a U.S. citizen. To then require me to move elsewhere because the government unjustly, and ultimately through the use of violence, expropriates my private property is not a choice. It would be similar to saying that if I live in a high crime area and am mugged, the thief is justified because I had the choice to move to another neighborhood.

Terence, you state:

"...the reason that states have gotten involved in health care, education, and social insurance, is simply that historically charity has not been sufficient to smooth the ugliest outcomes of a market economy. What makes you think that now will be any different?"

Why hasn't charity been sufficient? While I think your later points about collective action dilemmas and the free-rider problem may address this issue, it still doesn't justify the state's action when this action entails taking property from those who do not wish to give it. We may think it is selfish and wrong that someone is unwilling to help others, but forcefully taking this person's property against their will and giving it to someone else is hardly just.

[Justin Rietz]

I think there me be come confusion regarding my use of the phrase "at the point of a gun". Just to be clear, I mean it in its most literal sense. If, as in my example, I refuse to send a check to the IRS for the full amount which they demand of me because I don't want the money I earned (i.e. my private property) used to fund a war that I am morally against, quite literally the police will eventually come to my home and take me to prison at gunpoint.

If a person knowingly chooses to enter into a contract that contains consequences for breaching that contract - for example they will forfeit a monetary deposit - they have consciously recognized the risk of breach and accepted it because they believe the benefits they will receive outweigh the risk. It is this initial choice to knowingly enter into a contract that differentiates private agreements from government enforced regulations.

Jean-Francois, I agree that a person is free to "country shop" if her or she does not like the laws and regulations of their current government. I initially perceived this as the main weakness in my arguments for more limited government. Again, the answer centers around choice. If I am born in the United States, I did not make a choice to be a U.S. citizen. To then require me to move elsewhere because the government unjustly, and ultimately through the use of violence, expropriates my private property is not a choice. It would be similar to saying that if I live in a high crime area and am mugged, the thief is justified because I had the choice to move to another neighborhood.

Terence, you state:

"...the reason that states have gotten involved in health care, education, and social insurance, is simply that historically charity has not been sufficient to smooth the ugliest outcomes of a market economy. What makes you think that now will be any different?"

Why hasn't charity been sufficient? While I think your later points about collective action dilemmas and the free-rider problem may address this issue, it still doesn't justify the state's action when this action entails taking property from those who do not wish to give it. We may think it is selfish and wrong that someone is unwilling to help others, but forcefully taking this person's property against their will and giving it to someone else is hardly just.

[Justin Rietz]

Sorry for the double post...

[terence]

Justin,

I think diminishing returns are setting in, so I'll be brief. To convince me that "We may think it is selfish and wrong that someone is unwilling to help others, but forcefully taking this person's property against their will and giving it to someone else is hardly just" you'll need to, at the very least, convince me of there things:

1. That current distributions of property are themselves just.
2. That any individual's contribution to their current set of entitlements is close enough to 100% (vis a vis societies contributions) to afford them absolute rights to it.
and
3. That one person's absolute rights to property ought to be afforded priority over another other person's right to life.

For the sake of philosophical tidiness, seeing as you are arguing on deontological grounds at present (absolute rights) please try to avoid appealing to consequentialism if you can .

Cheers and thanks for your thoughts.

Terence

[Marius]

"I think there me be come confusion regarding my use of the phrase "at the point of a gun". Just to be clear, I mean it in its most literal sense."

I totally agree that states use their overwhelming power to extract money. My point is that in the real world, there appears to be always someone running a 'protection racket', and democratic governments are aguable the most benign protection rackets in existence ( they actually use your money for useful things! Most rackets just keep it)
Just think about the present world, and try to think of a single place without either a tax-demanding government or extortiating gangs.

[Justin Rietz]

Agreed that we have hit the point of diminishing returns. I enjoyed the debate - we managed to avoid the trolls ;-)

I'm planning on writing some longer, in-depth articles on my blog addressing some of the issues we have discussed. If you are interested, I can let you know when they are posted.

Cheers!

Justin

[terence]

sure justin,

i'll be interested to read them - let me know

[Mike Huben]

However dignified and polite Justin has been, he has simply been reciting standard libertarian arguments. Everything that has been discussed here has been treated at my Critiques Of Libertarianism web site: http://world.std.com/~mhuben/libindex.html.

In particular, "having to move" arguments are treated in my A Non-Libertarian FAQ: http://world.std.com/~mhuben/faq.html.

The much more basic arguments about states and coercion are pretty much covered by Stephen Holmes' The Liberal Idea and What Russia Teaches Us Now: How Weak States Threaten Freedom, linked at my site.
http://www.prospect.org/cs/articles?article=the_liberal_idea
http://www.prospect.org/cs/articles?article=what_russia_teaches_us_now

In general, when you encounter libertarian arguments, my site is your one-stop source for rebuttals.

[c&d]

Justin Rietz's example that "court rooms are being unilaterally "privatized", evidenced by the significant growth in private arbitration" is not persuasive.

Arbitration is enforced through the courts (courts determine when an arbitration clause is enforceable and enter judgment on the award), arbitration rulings are made using court-made interpretations of the law, many arbitration agreements are generally less than consensual (they are included in small print in many non-negotiable transactions and in some industries it is difficult to get a service without an arbitration agreement [e.g., credit cards]), arbitration agreements are often written to favor the more powerful party to a transaction, and arbitration is generally inapplicable for tort injuries.

An arbitration agreement is just another private contract that courts enforce.

Arbitration is not a replacement for the court system and government enforcement: it is another means of applying government force.

On a separate note, I doubt that the percentage of cases going to arbitration has increased much in the past decade.

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