Thursday, June 25, 2009

Market Dynamics of Police Protection

I wrote this a few years ago. I'm not really sure why I never posted it.

The Flaw in Anarcho-capitalism

Go here for a really long definition of anarcho-capitalism. Go here for articles from the point of view of anarcho-capitalists.

It has often been said, and I believe, that there can be no monopoly in any industry where government does not create it. Even in products with a network component to their value (those products that become more valuable to the individual consumer when more people use it, like telephone systems and computer operating systems), the constant flux in technology and habits will inevitably wear away at any particular company's market share. AT&T had a monopoly, but only because telecom regulation made it prohibitively difficult for competitors to enter their market. Microsoft seemed to have a monopoly at one time, but challengers to that monopoly crop up every day--we're not far from a Linux distro that can be used by the average person, for example.

It is also recognized that every product and service in a free market is going to have the highest quality and lowest cost any human system can give it. Anything that turns a significant profit is going to attract more labor and investment, the effort of outsiders to that industry to claim a part of those profits. Rising supply meets the demand, prices fall, profits fall, untill some other industry becomes "too" profitable, and everybody who can rushes to meet the need there. Provided there are no artificial barriers to entry into the market for a particular product or service (like requiring government-issued licences to practice everything from law and medicine to hair-styling and pest-control), prices and services must ultimately be reasonable. (You want to know why health-care is so costly? Look no further than the government's entry-fee of fifty-thousand dollars or so for the practice of medicine, and their exclusion of any form of medicine that does not meet current political needs.)

The anarcho-capitalist suggests that police protection would benefit from the same dynamics every other service does in a free market. Current policing is wasteful, inefficient, and corrupt. The belief is that if there was NO entity with an exclusive monopoly on police protection, things would be significantly better. If a particular security organization became corrupt, they would simply loose customers; taxation would not continue to fuel an ineffective and corrupt institution, since there would be no taxation. Thus, police protection would be subject to the same mechanism of economic choice every other service is subject to, which would be good, right? Unfortunately, I belive, so long as men are sinners, such a situation will never exist, not for any length of time. The market dynamics of the use of force and the threat of such use are fundamentally different from every other product and service.

When one produces, when one labors to change one form of matter to one that is useful, one has a number of choices as to what to do with this piece of property: it can be used for immediate personal gain, or it can be exchanged for the fruit of another's labor. For example, a farmer might spend the year ploughing, planting, watering, and finally, harvesting. A subsistance farmer consumes the whole of his produce, and does his own house-building, tool-making, and such besides. A more prosperous farmer specializes in farming, acquiring better tools, using better methods for a particular subset of crops, and then exchanges the produce (which is greater than a farmer who had to spend time and energy on other tasks) for the produce of others: the wheat farmer exchanges wheat for apples with the orchard owner; wheat for beef from the cattle herdsman; wheat for plough maintenance from the blacksmith; wheat for bread from the baker, who bought his flour from the miller, who bought the wheat from the wheat farmer. As wealth increases, that wheat farmer starts to produce so much wheat that he can exchange it for music and arts, research in the art of wheat-growing, or anything else he might desire.

The use of force is no different in that it can be used for immediate satisfaction of desires or in trade with another; however, it is here that the similarities end, because, unlike the subsistance farmer, we perceive a significant moral difference between the use of force for immediate satisfaction of desires, and the use of force in trade.

The use of force for immediate satisfaction of needs and wants is what we call crime. The burgler breaks windows, enters a house, and takes what he wants. The raider sweeps down on the countryside in the company of his fellows and steals the produce of the farmer. The mugger knocks a man down and takes his wallet. The angry man kills the one who "made him angry." The zealot murders in the name of his god (though this might be described as an exchange, between the murderer and the "god"). Standing against them are the "subsistance-fighters" who raise their own weapons in defense of their own property.

Such people are the reason police protection is required. The idea of the anarcho-capitalist is that the second group, those who professionally use violence for money, but only when violence is warrented by the initial violence of the other party. I would argue, however, that in addition to that particularly professional form of violence-on-the-market, there would be a proliferation of many corms.

First, you'd have your basic thief. Whether there would be more or less of those than there currently are, I don't really know. It is possible that, more lucrative occupations existing due to the absence of taxes and regulations, there would be fewer. More effective police services migh reduce their numbers in areas inhabited by people who can afford more effective police services. I don't know, but I suspect that, given the considerably more dangerous nature of petty crime, and more lucrative nature of other kinds of violence, petty crime would, at worse, be no more common than it presently is.

Then you'd have the armed citizen type. These would own and be practiced in the use of a weapon, but have as their primary occupation something else, using said weapons only in self-defense. Among these would be people who, when angry or drunk, would also use their weapons, but I suspect such people would be weeded out in all but the ares of lowest population density. People who do this might shoot someone, but they tend to get shot themselves, far more often than the average person--particularly when the average person is not prevented from carrying their own weapon by a police force. The lower population-density areas I refer to are such places as the high seas, rural areas, etc.

Then you'd have private police organzations. In exchange for money, they would do the job of defending people's lives and property, generally only of those who could afford to pay. Of course, mercenaries would come in many other forms, as well.

A local olive oil distributor could hire men to intimidate competitors out of the market. A rancher could hire men to protect "his" property--which just happened to be on the OTHER guys ranch a few days ago. An investor could include violent men as part of his attempt to buy someone else out of their business. And finally, a police protection organization could attempt to use their capacity to do violence to force competitors out of an area they claim. The question is, which form would be the most profitable to both provider and customer, and thus predominate?

Let us examine the situation where money is the only concern. The doers of violence can be grouped into three basic types:

a = those who use force solely for direct acquisition of property (thugs)
b = those who provide police protection for a price, and who will take "no" for an answer.
c = those who provide police protection for a price, the payment of which is enforced coercively, competitors being excluded coericively.

We must consider the amount of police protection required by a client, and that amount differs by which type they choose. If they choose the police group "b", they are going to need an amount of protection equal to "a + c", since the group that won't take no for an answer will also be attacking. If they take the protection of group "c", the amount of protection they'll be paying will be equal only to "a", since group "b", as a matter of principle, will not attack. Thus, model c wil predominate, since it will be the most profitable model for both the customer and the provider.

The wildcard in this analysis, of course, is the vast body of armed citizenry. If a community is inhabited by people who are violently opposed to allowing anyone to FORCE them to accept police services, anyone who tried, or even seemed to be trying, might end up strung up by a lynch mob. This assumes, however, that either the capacity to use force is relatively evenly distributed (and it generally isnt in a specialized economy, any more than the ability to produce food or build houses is), or that enough of the people at large are willing to die for a matter of principle, since it would be bloody work for a lynch mob to take down a bunch of well-armed gangsters.

Many anarcho-capitalists wisely focus on education, rather than political action. The State is group c, writ large, the result of natural economic forces. The only thing that will shut down model c is if people generally stop trying to use force for personal economic gain--if group "a" goes away on their own. So long as men are sinners, there will always be government in some form. The only question is the scale.

Thursday, June 18, 2009

The Right to Land, The Right to Exist

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.
Land, Labor and Capital. Freedom. The relationship between the three main factors of production and the ideal of property determine what kind of society we live in. One institution produces a condition of slavery; another allows freedom. Each of these factors are different from the others; none is a "subcategory" of the other. As such, the rules of property are, and rightly ought to be, different with regard to these things.

I think any civilized person can agree that there is a proper limitation to the degree to which "labor" may be considered property. To say that a free man "owns" his labor is just another way of saying that a free man may choose what to do with his time and his abilities. "Labor" just happens to be a subset of those choices that is relevant from an exclusively economic standpoint. To say that a man has no right to purchase another man's claim to his own labor is only to say that a man may not sell himself into slavery. Two people can come to an agreement that one will labor on another's behalf in exchange for something the other can provide, but this condition is by necessity limited, whether that limitation be the six year limitation to the period during which an Israelite under the Law of Moses may hold another Israelite in a condition of slavery, or our own society's notion of "at-will" employment, wherein either party to the transaction may cease unilaterally at any time, for any reason.

Labor is a choice, not a "commodity." A free man is free to keep the fruits of his choices or dispose of them as he sees fit. A free man is also required to suffer the consequences of bad choices. For the most part, this is how our society treats labor, at least outside the tax code. People are not "owned" as objects are.

Capital is nothing more that the fruits of earlier labor which are applied to the efforts of future labor. As such, it (initially) belongs to the laborer that created it as surely as anything else. Any transfer of ownership in capital goods should be regarded as final as any transfer in ownership of any inanimate objects. Capital is a subset of material goods in general, distinct from consumer goods only in the use to which they are put. The very same object can be considered capital in one use, and a consumer good in another use.

For example, a drill press in a machine shop is a capital good. A drill press in some dude's garage for his personal use is a consumer good. Bread on the shelf at the store, waiting to be sold, is a capital good. Bread in the pantry, awaiting consumption, is a consumer good. A truck that is used to haul equipment from site to site is a capital good. A truck of the very same model used to haul camping gear into the mountains for a family camping trip, or for mud bogging, or for a trip to Disneyland, or the grocery store, is a consumer good.

It should be apparent that making the distinction between a capital good and a consumer good is an arbitrary process, a matter of subjective perception and not objective fact. Thus, capital goods are (outside the tax code) and ought to be be considered "property" in the same sense as consumer goods. And I think we can all agree that freedom requires ownership in consumer goods; thus, it also requires ownership in capital goods. Unlike a human being, inanimate objects are not "free" in a free society... though the individual is free to produce, purchase, sell, and/or own any kind of object.

Then there is land, the economic category being more properly expressed as "a legal claim to a monopoly over the use of a particular area of physical space." The relationship between the individual, physical space, and the law is of tantamount importance to the issue of individual freedom. Consider the ways in which one may be considered "unfree". One such condition is slavery, in which one person is legally owned by another, and thus required to obey his commands. But another unfree person is the prisoner, whose chief duty is to remain in a particular place, and not to go anywhere else unless he gets permission from someone else.

I will give a ridiculous example. Suppose you are a small landowner, the only such person in a region owned mostly by a large landowner. There are no roads leading from your plot of land to a place outside it. Assuming land ownership is considered absolute (and it is so to an increasing degree in our society), to legally travel from your island to another place you must acquire permission from the big landowner to travel across his land. He may legally demand whatever he wishes in exchange for this permission, or refuse outright.

I doubt there are any but "free market fundamentalists" (by which I mean people who have an unthinking devotion to the status-quo minus government) who would believe a society in such a state to be a free society. Increasing the number of owners can reduce the price of access to land by putting owners in a position where they can be underbid by other owners; however a society in which all land is owned by individuals is still a society in which many, if not all, human activities... even existence itself... occurs only with the permission of one's "betters."

For what is the fate of the landless in such a society? Suppose all the land is owned by someone, and nobody agrees to allow a particular individual access to their land. What is their option, to float through the air, or leap into the sea? We all occupy physical space, and a right to exist necessarily implies a right to occupy physical space.

And this isn't some nebulous threat that doesn't exist in reality. There have been many, many societies in which a few have owned most of the land, while a significant plurality, if not a majority, of the population lived under conditions that closely match that of slavery, even if they were technically not "owned" individually by the great landowners.

The question I want to ask is, where does the right to individual ownership of land come from? Because I can tell you where the fact of individual ownership comes from: conquest. Every land deed in existence today was purchased from someone who purchased it from someone who purchased it from someone, along a chain of buying and selling, until you reach the first person who received title from the government of the State... whether that person was a feudal lord who received his grant from his king in exchange for service, or a speculator who received it from a congress in exchange for money. That person or entity got the "right" to dispense of the land as they saw fit through conquest: the violent subjugation, or even expulsion, of the previous inhabitants.

If the police found your property in the hands of a person who purchased it from a fence, you would want it returned to you, correct? And if people are not pursuing claims to goods stolen generations ago, it is only because, ultimately, capital and consumer goods can be replaced; the reward is not worth the effort.

But land cannot be replaced. Land cannot be produced; land cannot be destroyed. It's utility for certain purposes can be improved through effort, and its utility for certain purposes can be reduced through negligence or destructive action, but physical space does not increase. A population alienated from the land can only migrate to progressively less valuable lands until all the lands are taken... and then they must secure permission from others even to exist.

The right to live requires access to land. Freedom of movement and travel require access to land.

This is not to say that individual monopolies over the use of land are unjust. There are many modes of production which require this to a certain degree. Farming conflicts with herding (lest the animals eat the crops before they can be harvested). Foundries and grocery stores really don't mix.

Friday, June 12, 2009

"Cost Push Inflation"

Something people like to talk about is things like rising oil prices "causing" "inflation". The idea is that there are certain commodities which are used in nearly every productive process, and as a result movements in the price of this commodity can influence the prices of just about every other commodity. Petroleum provides both the energy for many, many productive processes, the vast majority of the energy for transportation of products, and the raw materials for everything from the fertilizer used in growing the food to the plastics they are stored in. Because a rise in the price of oil causes a rise in the price of everything else (debatable, but I don't need to go there this time), it follows that The State is justified in engaging in collective action to keep these prices down. Or, another side goes, the prices being left as they are, a certain amount of the higher prices, inconveniencing people as they do, should be collected for the benefit of the state. Right?

I am, of course, referring to subsidies to the oil industry (up to and including war on the industry's behalf) on the one hand, and special taxation of the industry on the other. In addition, I am playing devils advocate here, for the sake of another argument. Certainly, subsidization of the oil industry (or any other) to bring prices down doesn't make sense because the money still has to come from somewhere; ie. taxes. In addition, seeking to reduce the profitability of a commodity will discourage the development of new sources of that commodity, keeping prices up in the long run. However, there is one other thing, an entire category, one of the factors of production, the price of which drives all other prices even more surely than the price of petroleum, but which is not subject to the same market dynamics of petroleum.

I am referring to land. Access to physical space is necessary for existence itself, let alone to the productive processes that support existence. Thus, the costs involved in occupying this physical space must be accounted for in the costs of production. This is true whether you're dealing with a business that is paying rent to an owner, a mortgage to a financial institution, the costs of physical security in a land where the State does not assume this burden, or even if the business owner is also the landowner and is simply paying out market norms for all the other factors, while keeping the surplus (including the rent) for himself. And even if one has found a way to make a living in a place neither tethered to ownable land nor threatened by criminal violence, one is only making use of marginal land... and if it is profitable, this land will not be marginal for long, as others move to imitate.

As an economy grows, the price of a given unit of land relative to the price of a unit of just about anything else grows. For while increasing economic efficiency enables people to get more out of smaller and smaller quantities of any given input, including land , the result is larger available quantities of every other input... but not land. One can squeeze more and more productivity out of a given area of land, which is good for those who own the land, since they can claim an ever larger quantity of goods and services in exchange for the use of their land.

And this increasing cost of access to land must ultimately come out in the prices of goods and services for production to be profitable. These price increases, furthermore, enter the cost of production at a multitude of points.

The minimum price of labor must account for land prices increases, since they affect the price of living space. This minimum price is also affected by food prices, which are affected by rising land prices. The price of everything the laborer must use is affected by land prices. This doesn't necessarily mean all these prices are rising in an absolute sense, but compare what prices are when efficiency increases are opposed by rises in land prices to what they could be if the cost of physical space were somehow magically removed, and you get an idea what I'm talking about here.

Then there's the price of capital goods: machines, facilities, goods on the shelf. All of those who produced these had to pay for access to land; therefore rising land prices affect the prices of these thigns, as well. And the inputs that went into producing the capital goods ALSO were impacted by rising land prices in the previous cycle.

All of this is in addition to the compensation for the landholder for permitting the land to be used by one individual rather than another. Clearly, land prices (or actually, the rental value of land, which impacts, but does not exclusively determine, the purchase prices of land titles) affect prices economy-wide to a degree equal to or greater than the price of oil. IF you happen to believe that goods with this degre of influence over other prices (like oil) fall under the purview of government regulation, taxation, and subsidy (and I admit, I do not share that belief, but work with me here), certainly land falls into this category.

When does this fact become most obvious? When domsetic producers are displaced by producers located in developing regions, the land in which has lower rental values due to things like a lower or less educated population, more frequent violence, less capital development, and overall factors that produced a lower historical degree of interest in developing in those lands. This will not last forever, since this disequlibrium of rental values will eventually stabilize... which is to say, eventually, developing country will become developed country, and what was once marginal land will be pulled into production.

Attempting to legislate rental values down would be foolish, since it is those prices that ensure that land, when it changes hands, goes into the hands of those most capable of making use of it. All you would end up doing is pushing rents into a black market. Because land, by definition, cannot be created, an attempt to stimulate production of land (increase supply) through subsidies is clearly not going to succeed. However, this same fact makes taxation of landholdings unable to reduce the availability of land; thus, unlike special oil taxes, land taxes cannot discourage future production.

For those of you who do not think this is enough to justify regulation and taxation, I will attempt, once again, to present the moral argument next week.

Thursday, June 04, 2009

A Better Pledge for America

Huh, I left this in my drafts folder so long I don't even remember how I came up with it. I was having some kind of a dream, and I think the scenario arose from it that someone in authority was trying to force someone in their charge to recite the Pledge of Allegiance. I awoke with a fragmentary version of what was said instead, which after spending a few days working over it in my head, this is what I came up with:

I pledge myself to no idol,
of cloth or wood or stone.
I pledge myself in war no more,
than I must to defend my own.

I pledge myself to no empire,
of land or air or sea.
I pledge myself to God alone, and
His handmaiden, Liberty.