Sunday, September 05, 2004

The Market of Corporate Force

Don Boudreaux wrote at Cafe Hayek today about a WSJ article which asked the following question of Noble Prize economists: "In what sphere of life, if any, do you think it most important to limit the influence of market forces?"

Most of them talked about dispersing wealth: limiting the inequalities of income. That's a silly thing and worth an entire article's attention to refute. Instead, I want to focus on the answer of Dr. Boudreaux's colleague, Vernon Smith, who said, "None, because 'markets' are about recognizing that information is dispersed in all social systems, and that the problem of society is to find, devise and discover institutions that incentivize and enable people to make the right decisions without anyone having to tell them what to do. The idea that market forces should be limited stems from a fundamental error in beliefs about markets. This is the wrong question." Dr. Boudreaux fully endorses this reasoning.

And for the first time I see myself disagreeing with him, both of them. I'll agree, that's the point of the market--an institution that creates the most efficient distribution of resources. But I refuse to believe that markets are the best thing in absolutely every sphere of life.

Number one on my very short list of places I don't want the market to go is force. I don't think companies should have a license to kill. That tends to encourage socialism, oppression and economic destitution. Every industrial monopoly is subject to some unknown, new form of competition (such as the once powerful IBM bowing to Microsoft) but the moment society says it's ok to use the sword, that kind of genuine uncertainty (which keep the economy vibrant) ends. IBM kills Microsoft (and with it my Freecell).

A great example is the Catholic Church. The Church was once a mere religious organization until it grew an army. Then it did everything from start wars (the Crusades) to force Medieval peasants to pay to use the Church's mill (just like a noble would). If they decided to use their own mill or grind the grain themselves, then they would have to pay a fine (if lucky). If not, they would be hauled off to jail and probably killed. Giving companies the power of the sword isn't akin to free market activity. It's civil war.

4 comments:

Constant said...

"A great example is the Catholic Church."

But a great example of what? The Church became like a state. This is how states are formed. Some group of people, armed, takes over, and you have a state. And the misbehavior that you attribute to the Church is the typical misbehavior of a state. If you want to argue specifically against markets in force, as opposed to arguing against states, you need to clarify what you think is the difference, and you need to avoid making criticisms that apply more to states than to markets in force, because otherwise you end up arguing the opposite of what you intend.

"Then it did everything from start wars (the Crusades)"

States do that. A lot.

"to force Medieval peasants to pay to use the Church's mill (just like a noble would). If they decided to use their own mill or grind the grain themselves, then they would have to pay a fine (if lucky)."

Good example of a state monopoly, and I'm sure you can come up with a few additional examples of state-protected monopolies, like state lotteries, and also the US Post Office.

I recommend reading up on anarcho-capitalism a bit if you want to attack it. You need to know what they're saying if you want to respond persuasively.

Here are a couple of sites.

David D. Friedman has possibly done the most among economists to develop a theory of the workings of and anarcho-capitalist society. Not everything by him is webbed, but here's one page:

Anarchy and Efficient Law
Here's a historical case that David Friedman argues anticipates anarcho-capitalism in many respects. It is not wholly anarchy.

PRIVATE CREATION AND ENFORCEMENT OF LAW: A HISTORICAL CASEBryan Caplan is another economist who argues for anarcho-capitalism. There's a section on it in his anarchist theory FAQ:

How would anarcho-capitalism work? (See section 10)The FAQ is long and deals with other varieties of anarchism and also with various criticisms of anarchism.

One other economist who has investigated private creation and enforcement of law is Bruce L. Benson, who has a couple of books out on the topic. I haven't really found much webbed by him on the topic, but here's something that I have pointed out in the past to others:

Can a Stateless Society Survive?If you're interested in his books, one is called "The Enterprise of Law: Justice Without the State".

David said...

You just made my point for me, though I guess it doesn't hurt for it to be elaborated. When private organizations gain the legal use of force, they resemble states more than their supposed institutions. That's why I compared an implementation of anarcho-capitalism to civil war.

Constant said...

"You just made my point for me, though I guess it doesn't hurt for it to be elaborated. When private organizations gain the legal use of force, they resemble states more than their supposed institutions."

Even if it were true, that would be no worse than the current situation. We have states now. We would have states then. No change. You might want to argue that the new states would be worse than the old, but you have not made that argument.

But moreover it is false that private organizations would become states, and also (unsurprisingly) not warranted by the example. Where states arise, they generally arise from groups of people who were not states before, i.e., private groups. One exception is where states are formed by other states. Another exception is when people form a group and a state at the same moment. But I think that in general states arise from private groups. So we can say that every state, or most every state, was once a private group. But the opposite claim is not warranted logically, nor is it true. Not every private group that is armed and that uses force becomes a state. Perhaps you have forgotten that Americans already live in a country where private individuals and groups do already have the right to own and use weapons. Private groups already have the legal use of force. In fact there is already a market in it. Do you think government protects everything? No, it does not. Do you think only the state has guns? No, it does not. Private companies hire private companies to protect their assets.

"That's why I compared an implementation of anarcho-capitalism to civil war."

But a state is not the same as civil war. So even if private groups armed became states, that would not mean that civil war would result. Neither of your two inferences is justified.

David said...

Be very careful when you say that private individuals have the power of force because they really don't. For example, Disneyland has it's own police force, but they don't have a license to kill. Only government officers can kill without being arrested (though the paperwork they have to fill out is sometimes worse than jail).

Similarly, while private citzens have guns, they just can't use them willy-nilly. Even if it is a matter of self-defense, there's still a trial and the state oversees it all (as with judges). It's not just a question of who gets to own guns. Legitmate force is more powerful than that.

Granted, my civil war comparison was poor as it would be closer to feudalism, which is far worse. While in theory, all of these companies would be beholden to each other under a commonly agreed practice of law, in practice these companies with legitmate force would be more like states that run companies. Using force is a powerful thing. That's why libertarians are so suspicious of the state.

You said lending states the right to force "would be no worse than the current situation. We have states now. We would have states then. No change." If all that we cared about was the existence of states, then I would agree with you, but there's more than that: the number of states. Ceteris paribus, fewer states are prefered to more. More states mean more laws, more barriers, more opportunities to restrict movement. The states become more efficent at controlling lives because they rule over a smaller area. They become easier to centralize. Now imagine a single world government (and for the sake of argument, a democracy). Not only would it be impossible to implement tariffs (because there are no imports or exports, unless it's regional), the deadlock would be overwhelming. No laws could be passed and just to get day to day stuff done, the government would have to pass it off to the private sector.

Now imagine that for every company out there (and there are millions of them), they had the legitmate power of the sword. We have crossed the road from competition to war. Corporations already bend the law at the expense of others to compete (like Enron), what happens if we say it's alright to start, literaly, killing your competitor. I've read anarcho-capitalism before but I have yet to be convinced that it won't devolve into a constant state of war, as was in the Middle Ages.