Illiberal Anarchy

Brad Taylor and I (mostly Brad) have been working on a paper arguing that a market-based anarchy could well be rather illiberal. Assume that we're in Caplan's "sweet spot" for a feasible and desirable system of market chosen law: the network coordinating the protection agencies and allowing for dispute resolution amongst them is strong enough to keep out rogue agents but not strong enough to form a cartel. Further, specify that most people have weakly liberal preferences: they're happy for folks to do their own thing so long as there's no cost imposed on others, but it's only a weak preference. Next, specify that there exists a group with strong meddlesome preferences with a real willingness to pay to have those preferences imposed on others. Finally, the group with preferences deplored by the meddlesome minority have a smaller aggregate effective willingness to pay to enjoy their preferred lifestyle than the meddlesome group has to stop them (though their willingness to be paid to stop exceeds the meddlesome group's willingness to pay).

What happens? The meddlesome folks offer to subsidize the purchase of protection agreements that include their preferred meddlesome clauses banning the sanctioned behaviour and, if the meddlesome willingness to pay is high enough and the sanctioned group small enough, banning those protected by non-compliant agencies from entering their properties. The weakly liberal majority take the contracts if the discount is sufficiently large and if the loss in utility from not being able to transact with the sanctioned group is sufficiently low. Nothing in the process violates rights, but the outcome is hardly libertarian.

In states of the world where most folks have weakly liberal preferences but a few folks have strongly meddlesome preferences, majoritarian democracy produces more liberal policies than does market-based anarchy. Markets are better at satisfying dollar-weighted preferences than is politics. Where most folks have weakly meddlesome preferences but a few have strongly libertine preferences, market-based anarchy produces more liberal outcomes than democracy. We then worry that democracy has a tendency to produce broad-based weakly meddlesome preferences (which I think typically runs through fiscal externalities) while a market-based anarchy would promote the creation of public or club groups through churches or sects able equally well to coordinate for the production of public bads like meddlesome activity.

John Humphries Humphreys (sorry!!) has had a go at our paper - excellent!

His first critique: we're using a teleological rather than a deontological norm for judging how free a society is. Guilty! But imagine, as a libertarian with some libertine preferences, weighing up where to move. If you move to Country A, all the laws are perfectly libertarian, but if you engage in some activity you like but they don't, you lose all opportunities for transacting with others. In Country B, there are a lot of stupid laws but there's still more space for you to live your life as you like. Country A is the libertarian monastery where you can do what you want, but if you're not up for vespers at 5 you're shunned; B is the world we're in.

Note that we didn't say that the meddlesome folks would pay the drug users to stop using drugs -- that would be the trivial solution and, in that case, he'd certainly be right: utility rules. Rather, if you're willing to pay $10,000 to defend your right to use drugs but if you'd only be willing to accept $100,000 in exchange for giving up your right to use drugs (ie income effects can matter), then somebody willing to spend $50,000 to make sure your neighbours will have nothing to do with you if you do use drugs makes you worse off and your neighbours better off. Yes, we're invoking a somewhat thicker description of liberty than a pure deontological standard. But would you really move to the libertarian monastery?

Brad notes as well that we need not invoke thicker concepts of liberty in cases where the network's members have sufficient consumer-driven willingness to pay for meddling, in which case libertine agencies simply are declared rogue and their members are treated as criminals. This is a case that Cowen worries about in his initial article, and it is not a case of the network simply becoming the state, though this latter argument may be somewhat semantic. In the Caplan-Cowen debate framework, the network becomes the state when it is strong enough to become a cartel: strong enough to declare any protection agency rogue and strong enough to punish any member that transacts with the rogue agent. In this case, it's still a coordination equilibrium as no member agent wants to deal with the rogue agency because of side payments from the meddlesome group.

Humphries Humphreys is right that folks can conjure up all kinds of scare stories, including the rich jerk buying up all the land around your house and forbidding your exit. That seems a pretty implausible fear. But in the real world, there are lots of folks who seem perfectly willing to expend real resources to make sure that you don't do things in your own house that have no effect on them. I don't think it's crazy to worry that these folks might get more influence under market chosen law. We're not conjuring up completely imaginary boogey-men here. Just hit the "paternalism" keyword on the right hand side of the blog...

Second, Humphries Humphreys worries about realism and how likely this 'worst case' might be. He's certainly right that there's no cause for concern if the minority affected is relatively large. The costs of losing transactions opportunities with a large group are very large indeed. But not so for a relatively small group. In terms of our Figure 3, Humphries Humphreys would be arguing that the region in which democracy dominates anarchy must be smaller. But the logic of the argument is such that there must be a region where democracy dominates. In the part of world-space where we currently live, with lots of folks having low intensity meddlesome preferences, anarchy produces more liberal outcomes. But there are other parts of the space.

Finally, Humphries Humphreys notes Taylor's argument that voluntarism encourages tolerance. Of course, this is true among the majority who currently have weakly meddlesome preferences. In the current paper, we're worried about the high preference intensity illiberal folks and the disproportionate influence they can have under anarchy.

Now, would all this have me refrain from pushing the button that would cause government to disappear after a 5-year delay? Well, I was only about 45% likely to push the button to start with; the worries here push that down to about 40%. [All stated probabilities are purely notional as no such button exists and, if one did, I surely would not be allowed access to it.] My biggest worry is that Caplan's sweet spot seems a pretty narrow space and the historical record isn't exactly replete with stable desirable anarchies. Heck, even outfits that ought to have been able to protect themselves outside the state fared rather poorly absent state protection.