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A private defense agency (PDA) is a conceptualized agency that provides personal protection and military defense services voluntarily through the free market. A PDA is not a private contractor of the state and is not subsidised in any way through taxation or immunities, nor does it rely on conscription and other involuntary methods. Instead, such agencies would be financed primarily through insurance companies, which are penalized for losses and damages, and have an incentive through competition to lower costs and maximize service. This method of social order is advocated by anarcho-capitalism.

Contents

Theory of Private Defense

As proponents of free-market anarchism, Benjamin Tucker[1][2] and Gustave de Molinari first explicitly proposed for-profit private defense agencies. The concept later was advanced and expanded upon by anarcho-capitalists and other libertarians who consider the state to be illegitimate, and therefore believe defense is something that should be provided or determined privately by individuals and firms competing in a free market. The Mises Institute published a book of essays entitled The Myth of National Defense: Essays on the Theory and History of Security Production.[3] Murray N. Rothbard in For a New Liberty: The Libertarian Manifesto and David D. Friedman in The Machinery of Freedom expand substantially on the idea. Both hold that a PDA would be part of a privatized system of law, police, courts, insurance companies and arbitration agencies who are responsible for preventing and dealing with aggression. In this environment, victimless crimes and "crimes against the state" would be rendered moot, and the legal realm would be limited to contractual disputes and tort damages, as from assault, burglary, pollution, and all other forms of aggression.[4][5] This concept is similar to Polycentric law. Within economics, discussion of the concept largely has been confined to the Austrian School, as in Hans Hoppe's article "The Private Production of Defense" published by the Mises Institute.[6]

These authors emphasize that PDAs have different motives from existing statist defense agencies. Their survival depends on quality of service leading to a wide customer base, rather than the ability to extract funds via the force of law, as is true of states. Customers and markets would thus dictate that PDAs minimize offensive tendencies and militarization in favor of a pure defense. Anarcho-capitalists believe such privatization and decentralization of defense would eliminate the credibility of, and popular support for, the state.

As a private firm offering individually determined defense, the PDA provides an anarcho-capitalist model for how an entirely private defense would work in practice. Anarcho-capitalists such as John Frederic Kosanke argue that the need for large-scale defense is minimized in direct inverse proportion to the extent of domestic control by the state. Since the greater number of proprietors makes surrender more costly to an aggressor than a relatively authoritarian region, vulnerability to attack is less likely. Furthermore, since individuals minding their own business pose little threat to neighboring regions, official or ideological justification by those neighbors for attacking them is also proportionately diminished.[7]

History of private production of defense

Ancient city-states in Greece and Rome depended on liturgies – contributions made by rich citizens for specific purposes – for defense. A liturgy might be used, for instance, to fund the manning of a warship. Although a certain amount was assessed by magistrates, some citizens paid more than required in order to obtain popularity, influence, and sympathy among jurors in the event they were taken to court. During the Second Punic War, Quintus Maximus Fabius Cunctator used his personal resources to pay for the release of some Roman prisoners. When the son of Scipio Africanus, who at the time was acting as de facto commander-in chief, was captured during the war against Antiochus III the Great in 190 BC, he came up with ransom himself.

As Rome grew wealthier, greater use was made of private money and/or private armed forces, consisting of relatives and clients, to accomplish public objectives. Between 73 and 71 BC, Marcus Licinius Crassus and Gnaeus Pompeius Magnus used their own resources to suppress the armies of Spartacus in the Third Servile War. Julius Caesar made his fortune by vanquishing pirates in the Mediterranean and then by conquering Gaul. The emergence of the modern state caused the members of the upper classes to be disarmed.[8]

Aspects

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Lack of monopoly power

Hoppe points out that there is a contradiction in the beliefs of most philosophers and economists in reference to national defense. They generally hold that any monopoly is "bad" for consumers because, shielded from potential new entrants into his area of production, the price of his product X will be higher and its quality lower than otherwise. Yet they simultaneously hold that security must be undertaken by the government, which is a territorial monopoly of law and order (the ultimate decision maker and enforcer). The two propositions are clearly incompatible.[9] In his essay The Production of Security, Molinari concluded:[10]

If there is one well-established truth in political economy, it is this: That in all cases, for all commodities that serve to provide for the tangible or intangible needs of the consumer, it is in the consumer's best interest that labor and trade remain free, because the freedom of labor and of trade have as their necessary and permanent result the maximum reduction of price. And this: That the interests of the consumer of any commodity whatsoever should always prevail over the interests of the producer. Now in pursuing these principles, one arrives at this rigorous conclusion: That the production of security should, in the interests of the consumers of this intangible commodity, remain subject to the law of free competition. Whence it follows: That no government should have the right to prevent another government from going into competition with it, or to require consumers of security to come exclusively to it for this commodity.

Tyler Cowen, however, argues that allowing private defense agencies would not necessarily prevent a monopoly on defense services, by positing that a cooperating network of such firms could use aggressive force to enforce the cartel's market domination. Noting that advocates of PDAs typically argue that abuses would be prevented by the presence of rival agencies acting under the authority of rulings made by arbitrators empowered by inter-agency arbitration agreements, Cowen opines, "The adjudication network is stable only if it can use force to put down outlaw agencies that do not accept its higher-order arbitration decisions. Such a network could also use force to put down firms that do not adhere to the collusive agreement."[11]

Anarcho-capitalists argue that competing defense providers would concentrate on comparatively lower-cost defense and security technology rather than relatively costly offensive weaponry, in order to maintain lower premiums and service charges. A company's offensive capabilities would also be readily exposed by such an aggressor's competitors. State-subsidized militaries, in contrast, are granted a distinct offensive advantage, resulting in a proportionately greater tendency toward monopolization.

Treatment of soldiers

Nathan Larson argues that private defense agencies would likely treat their soldiers better than government militaries do, because given a limited supply of labor, firms would need to compete to offer attractive salary and benefit packages and good working conditions. He notes that there is already competition for workers between the military and other segments of the economy, but that someone wishing to become a soldier in the United States has no other option but the U.S. military (and its contractors, such as Wackenhut and Blackwater). He points to incidents such as the failure of the Army National Guard to pay its reservists in a timely and accurate manner[12] as problems that would not be tolerated by soldiers in a competitive market; the damage to the firm's reputation would lead soldiers to go to other private defense companies; and he further notes that firms arbitrarily sending their soldiers into harm's way unnecessarily would face higher labor costs to compensate for the risk and might have trouble recruiting and retaining servicemen and maintaining high morale. Thus, they would have an incentive to only engage in wars necessary for the defense of their customers.[13]

There is historical evidence that military personnel would likely be paid more under a privatized system. In the early nineteenth century, the typical monthly wage for a merchant seaman was about $30. In a detailed survey of nine different American privateers and their prize distributions, Garitee found the average value of one share to be about $150. Since most crewmen earned from two to four shares, this meant that in the typical privateer cruise of three months, a man might earn the equivalent of 18 months' wages, and sometimes more.[14]

Aggression and abuses by private defense agencies

Randall G. Holcombe argues that "Firms might prey on their competitors' customers, as competing mafia groups do, to show those customers that their current protective firm is not doing the job and thus to induce them to switch protection firms. This action seems to be a profit-maximizing strategy; hence, protection firms that do not prey on noncustomers may not survive." Holcombe states that the mafia offers protection for a fee, but it also uses its resources for predation; and thus profit-maximizing firms could be expected to employ them in the dual roles of protection and predation.[15] Peter Leeson and Edward Stringham rebut this argument by claiming that unless the firm were overwhelmingly more powerful than its prey, it could incur substantial costs and risks in attempting to extract wealth by force. They argue that the potential for even a small state to inflict losses on an aggressor explains why violent confrontations between states are less common than between individuals in New York City's Central Park.[16]

In The Market for Liberty, Linda and Morris Tannehill note that a private defense agency would be unlikely to engage in aggression, as it would not only become a target of retaliatory force, but would become the subject of severe business ostracism. Honest and productive individuals would dissociate themselves from it, fearing that it might use its aggressive force against them in the event of a dispute; or that they might become accidental casualties when retaliatory force is used by one of its other victims; or that their own reputation would suffer due to their ties to it. Moreover, the private defense agency's reputation would suffer and it would be regarded as a poor credit and insurance risk, the latter due to the high risk of claims resulting from its involvement in aggression. The employees and leaders of such an agency as well could face personal civil liability for their involvement, and the agency would not be shielded by sovereign immunity. High-quality employees would presumably be less willing to be involved with such an organization.[17]

They also argue that a defense company would be less likely to abuse its power and impose tyranny, noting that it "couldn't extract taxes from them, as a government does...A market relationship is a free relationship, and if a customer doesn't like a company's service or mistrusts its goals, he is free to take his business elsewhere, or to start his own competitive company, or to do without the service and just provide from himself...The objection that a tyrant might take over is actually a devastating argument against government."[18]

Rothbard makes a similar point, noting, "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...To create such an instrument de novo is very difficult, and, indeed, almost impossible; historically, it took State rulers centuries to create a functioning State apparatus."[19]

It has been argued, "If Defense Agency A instead of invading a business decides to invade a more worthwhile target such as a gold warehouse they are left with a much more complicated problem. The gold warehouse is owned by an entrepreneur who has his own defense agency and the gold in the warehouse also have owners that have hired their own respective defense agencies. In essence, Defense Agency A will have to deal with the wrath of the warehouse owner, the warehouse owner's defense agency and the defense agencies of all the owners of the gold in that warehouse."[20]

Robert P. Murphy opines that given the privatization of other services in an anarcho-capitalist society, "We must consider that in such an environment, the law-abiding majority would have all sorts of mechanisms at their disposal, beyond physical confrontation. Once private judges had ruled against a particular rogue agency, the private banks could freeze its assets (up to the amount of fines levied by the arbitrators). In addition, the private utility companies could shut down electricity and water to the agency’s headquarters, in accordance with standard provisions in their contracts."[21]

Financing of private defense agencies

Defense is often viewed as an archetypical public good – i.e., a product that can only be provided by government because of its non-excludability and non-rivalrous consumption. Specifically, the free rider problem, in which people refuse to pay for defense but instead rely on their neighbors to pay for defending the community, is said to make it inevitable that it be financed by taxes if an equitable allocation of costs is to be achieved. According to anarcho-capitalist theorists, there are many ways by which this problem can be overcome or rendered irrelevant. Rothbard's solution was to simply say "Who cares?" when it comes to the issue of free riders. He points out that free riders are commonplace in other aspects of our economy, asking hypothetically, "Are we to be critical because more than one person benefits from someone's actions?...In short, am I to be taxed for enjoying the view of my neighbor's well-kept garden?" He notes that we are all free riders on the past, as we would be living in a primitive society if it were not for the efforts of our ancestors; and we are free riders on the present, because we benefit from the continuing investment of our fellow men and from their specialized skills on the market.[22] Joseph R. Stromberg notes that the American Revolution occurred despite the fact that some individuals might have been free riders who benefited from it without funding it; he opins that successful defense of freedom often relies not on precise allocations of cost, but on "nationalism, religion, the desire for freedom, hatred of the enemy, social pressure to do the right thing, and so on," some of which might represent "enlightened self interest."[23]

Linda and Morris Tannehill believe that big businesses will tend to pay the bulk of the defense costs (since they stand to lose the most in the event of an attack); they would then pass on the costs to their customers, and so the costs of defense would be spread out among the whole population.[24] A landowner seeking to establish a community may sell or lease the land with provisions written into the deed or lease agreement, requiring the new owner or tenant to pay for defense on a permanent basis; this same technique has already been in some neighborhoods to ensure that residents pay for private streets shared in common by all of them. As is true for homeowners today, everyone would be responsible for buying or otherwise being covered by aggression insurance in order to protect themselves against catastrophic loss from foreign attack; in the event of an invasion, a claim would be filed with right of subrogation, and the insurer would hire a private defense company to collect from the aggressor. An argument against this method of funding is that other aggression insurers who didn't pay for defense would still benefit from the reduced risk of attack on their customers in the same area, in effect becoming free riders who could drive the "altruistic" insurer out of business.[25] However, the private defense agency's activity need not be limited to defensive and retaliatory measures funded by the insurer; It could also go after the aggressor in an effort to obtain restitution (including reasonable collection costs), perhaps through ransom or capture of enemy assets, as privateers did in the 18th and 19th centuries under letters of marque and reprisal.[26] Prisoners of war also used to have shadow prices (ransoms) which were a source of income for victorious forces; this represents another potential alternative to taxation.[27]

Sometimes arguments are made for voluntary funding of defense by way of attacking taxation. Anarcho-capitalists often argue, for instance, that the argument that taxation is needed to fund protection of liberty and property from aggression is a contradiction, because taxation itself requires aggression in order to be enforced. Another argument comes from the fact that, unlike voluntary transactions, no demonstrated preference has been made[28] by the taxpayer; so there is no objective way of showing that he is receiving a service he wants and needs, at a price that is fair.

Related topics

References

  1. ^ Tucker, Benjamin,The Relation of the State to the Individual, 1890
  2. ^ Tucker, Benjamin. "Liberty and Taxation". Liberty.  
  3. ^ The Mises Review (Vol. 10, No. 1; Spring 2004) A summary is given in a review by David Gordon [1].
  4. ^ Rothbard, Murray N. (January 1975). "Society without a State". The Libertarian Forum 7 (1). http://www.lewrockwell.com/rothbard/rothbard133.html.  
  5. ^ David Friedman, Police, Courts, and Laws---on the Market, David Friedman home page.
  6. ^ Hoppe, Hans. (PDF)Journal of Libertarian Studies. http://www.mises.org/journals/jls/14_1/14_1_2.pdf "The Private Production of Defense.  
  7. ^ John Frederic Kosanke, "Civilization 101 - Elements of Security"
  8. ^ van Creveld, Martin (1999). The Rise and Decline of the State. Cambridge University Press. pp. 32–33, 207. ISBN 0-521-65629-X.  
  9. ^ Hoppe, Hans-Hermann (2003). "Introduction". The Myth of National Defense. Auburn, Ala.: Ludwig von Mises Inst.. pp. 3–4. ISBN 0-945466-37-4.  
  10. ^ The Production of Security
  11. ^ Cowen, Tyler, Rejoinder to David Friedman on the Economics of Anarchy  
  12. ^ FOXNews.com - GAO Reports Reservist, Guardsmen Payroll Bugs - Politics | Republican Party | Democratic Party | Political Spectrum
  13. ^ http://larson2008.com/wiki/index.php5?title=Defense
  14. ^ Garitee, Republic's Private Navy, pp. 127  
  15. ^ Holcombe, Randall G., Government: Unnecessary but Inevitable  
  16. ^ Leeson, Peter and Stringham, Edward P., Is Government Inevitable? Comment on Holcombe's Analysis  
  17. ^ Tannehill, Linda and Morris (1993). "Warring Defense Agencies and Organized Crime". The Market for Liberty. San Francisco: Fox & Wilkes. pp. 109–111. ISBN 0-930073-08-8.  
  18. ^ Tannehill, Linda and Morris (1993). "Warring Defense Agencies and Organized Crime". The Market for Liberty. San Francisco: Fox & Wilkes. p. 115. ISBN 0-930073-08-8.  
  19. ^ Rothbard, Murray N. (2004). Man, Economy and State with Power and Market. Auburn, Ala.: Ludwig von Mises Institute. p. 1054. ISBN 0-945466-30-7.  
  20. ^ anarchysliberty: Please let me know what you think
  21. ^ http://mises.org/story/1855
  22. ^ Rothbard, Murray N. (2004). Man, Economy and State. Auburn, Ala.: Ludwig von Mises Institute. p. 1037. ISBN 0-945466-30-7.  
  23. ^ Stromberg, Joseph R. (2003). "Mercenaries, Militias, Guerrillas, and the Defense of Minimal States and Free Societies". The Myth of National Defense. Auburn, Ala.: Ludwig von Mises Inst.. pp. 237–238. ISBN 0-945466-37-4.  
  24. ^ Tannehill, Morris and Linda (1993). "Foreign Aggression". The Market for Liberty. San Francisco: Fox & Wilkes. p. 131. ISBN 0-930073-08-8.  
  25. ^ No Treason » 2001 » June
  26. ^ Sechrest, Larry J. (2003). "Privateering and National Defense: Naval Warfare for Private Profit". The Myth of National Defense. Auburn, Ala.: Ludwig von Mises Inst.. p. 258. ISBN 0-945466-37-4.  
  27. ^ Radnitzky, Gerard (2003). "Is Democracy More Peaceful than Other Forms of Government?". The Myth of National Defense. Auburn, Ala.: Ludwig von Mises Inst.. p. 147. ISBN 0-945466-37-4.  
  28. ^ Block, Walter (2003). "National Defense and the Theory of Externalities, Public Goods, and Clubs". The Myth of National Defense. Auburn, Ala.: Ludwig von Mises Inst.. p. 310. ISBN 0-945466-37-4.  

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