Chapter 10: Capitalist Production and The Problem of Public Goods

We have tried to demolish socialism on the economic as well as moral fronts. Having reduced it to a phenomenon of exclusively socio-psychological significance, i.e., a phenomenon for whose existence neither good economic nor good moral reasons can be found, its roots were explained in terms of aggression and the corruptive influence that a policy of divide et impera exercises on public opinion. The last chapter returned to economics in order to give the final blows to socialism by engaging in the constructive task of explaining the workings of a capitalist social order as socialism's economically superior rival, ready for adoption at any time. In terms of consumer evaluations, capitalism was indicated as being superior with respect to the allocation of production factors, the quality of the output of goods produced, and the preservation of values embodied in capital over time. The so-called monopoly problem allegedly associated with a pure market system was in fact demonstrated not to constitute any special problem at all. Rather, everything said about the normally more efficient functioning of capitalism is true also with respect to monopolistic producers, as long as they are indeed subject to the control of voluntary purchases or voluntary abstentions from purchases by consumers.

This final chapter will analyze an even more frequently cited special case which allegedly requires one to make qualifying amendments regarding the thesis of the economic superiority of capitalism: the case of the production of so-called public goods. Considered in particular will be the production of security.

If what has been stated in the foregoing chapter regarding the working of a market economy is true, and if monopolies are completely harmless to consumers as long as the consumers have the right to boycott them and freely enter the market of competing producers themselves, then one must draw the conclusion that for economic as well as moral reasons, the production of all goods and services should be left in private hands. And in particular it follows that even the production of law and order, justice and peace—those things that one has come to think of as being the most likely candidates for state-provided goods for reasons explained in Chapter 8—should be provided privately, by a competitive market. This indeed is the conclusion that G. de Molinari, a renowned Belgian economist, formulated as early as 1849—at a time when classical liberalism was still the dominant ideological force, and “economist” and “socialist” were generally (and rightly so) considered to be antonyms:

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 need of the consumer, it is in the consumer’s best interest that labor and trade remain free, because the freedom of labor and 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 interest of 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 require consumers of security to come exclusively to it for this commodity.¹⁷³

And he comments on this argument by saying: “Either this is logical and true, or else the principles on which economic science is based are invalid.”¹⁷⁴

There is apparently only one way out of this unpleasant (for all socialists, that is) conclusion: to argue that there are particular goods to which for some special reasons the above economic reasoning does not apply. It is this that the so-called public goods theorists are determined to prove.¹⁷⁵ However, we will demonstrate that in fact no such special goods or special reasons exist, and that the production of security in particular does not pose any problem different from that of the production of any other good or service, be it houses, cheese, or insurance. In spite of its many followers, the whole public goods theory is faulty, flashy reasoning, ridden with internal inconsistencies, nonsequiturs, appealing to and playing on popular prejudices and assumed beliefs, but with no scientific merit whatsoever.¹⁷⁶

What, then, does the “escape route” that socialist economists have found in order to avoid drawing Molinari’s conclusion look like? Since Molinari’s time it has become increasingly common to answer the question of whether there are goods to which different sorts of economic analyses apply in the affirmative. As a matter of fact, nowadays it is almost impossible to find a single economic textbook that does not make and stress the vital importance of the distinction between private goods, for which the truth of the economic superiority of a capitalist order of production is generally admitted, and public goods, for which it is generally denied.¹⁷⁷ Certain goods or services, and among them, security, are said to have the special characteristic that their enjoyment cannot be restricted to those persons who have actually financed their production. Rather, people who have not participated in their financing can draw benefits from them, too. Such goods are called public goods or services (as opposed to private goods or services, which exclusively benefit those people who actually paid for them). And it is due to this special feature of public goods, it is argued, that markets cannot produce them, or at least not in sufficient quantity or quality, and hence compensatory state action is required.¹⁷⁸ The examples given by different authors for alleged public goods vary widely. Authors often classify the same good or services differently, leaving almost no classification of a particular good undisputed.¹⁷⁹ This clearly foreshadows the illusory character of the whole distinction. Nonetheless, some examples that enjoy particularly popular status as public goods are the fire brigade that stops a neighbor’s house from catching fire, thereby letting him profit from my fire brigade, even though he did not contribute anything to financing it; or the police that by walking around my property scare away potential burglars from my neighbor’s property as well, even if he did not help finance the patrols; or the lighthouse, a particularly dear example to economists,¹⁸⁰ that helps ships find their way, even though they did not contribute a penny to its construction or upkeep.

Before continuing with the presentation and critical examination of the theory of public goods let us investigate how useful the distinction between private and public goods is in helping decide what should be produced privately and what by the state or with state help. Even the most superficial analysis could not fail to point out that using this alleged criterion, rather than presenting a sensible solution, would get one into deep trouble. While at least at first glance it seems that some of the state-provided goods and services might indeed qualify as public goods, it certainly is not obvious how many of the goods and services that are actually produced by states could come under the heading of public goods. Railroads, postal services, telephone, streets, and the like seem to be goods whose usage can be restricted to the persons who actually finance them, and hence appear to be private goods. And the same seems to be the case regarding many aspects of the multidimensional good “security”: everything for which insurance could be taken out would have to qualify as a private good. Yet this does not suffice. Just as a lot of state-provided goods appear to be private goods, so many privately produced goods seem to fit in the category of a public good. Clearly my neighbors would profit from my well-kept rose garden—they could enjoy the sight of it without ever helping me garden. The same is true of all kinds of improvements that I could make on my property that would enhance the value of neighboring property as well. Even those people who do not throw money in his hat could profit from a street musician's performance. Those fellow travellers on the bus who did not help me buy it profit from my deodorant. And everyone who ever comes into contact with me would profit from my efforts, undertaken without their financial support, to turn myself into a most lovable person. Now, do all these goods—rose gardens, property improvements, street music, deodorants, personality improvements—since they clearly seem to possess the characteristics of public goods, then have to be provided by the state or with state assistance?

As these latter examples of privately produced public goods indicate, there is something seriously wrong with the thesis of public goods theorists that these goods cannot be produced privately but instead require state intervention. Clearly they can be provided by markets. Furthermore, historical evidence shows us that all of the alleged public goods which states now provide had at some time in the past actually been provided by private entrepreneurs or even today are so provided in one country or another. For example, the postal service was once private almost everywhere; streets were privately financed and still are sometimes; even the beloved lighthouses were originally the result of private enterprise;¹⁸¹ private police forces, detectives, and arbitrators exist; and help for the sick, the poor, the elderly, orphans, and widows has been a traditional field for private charity organizations. To say, then, that such things cannot be produced by a pure market system is falsified by experience one hundredfold.

Apart from this, other difficulties arise when the public-private goods distinction is used to decide what to leave to the market and what not. What, for instance, if the production of so-called public goods did not have positive but negative consequences for other people, or if the consequences were positive for some and negative for others? What if the neighbor whose house was saved from burning by my fire brigade had wished (perhaps because he was overinsured) that it had burned down, or my neighbors hate roses, or my fellow travellers find the scent of my deodorant disgusting? In addition, changes in the technology can change the character of a given good. For example, with the development of cable TV, a good that was formerly (seemingly) public has become private. And changes in the laws of property—of the appropriation of property—can have the very same effect of changing the public-private character of a good. The lighthouse, for instance, is a public good only insofar as the sea is publicly (not privately) owned. But if it were permitted to acquire pieces of the ocean as private property, as it would be in a purely capitalist social order, then as the lighthouse only shines over a limited territory, it would clearly become possible to exclude nonpayers from the enjoyment of its services.

Leaving this somewhat sketchy level of discussion and looking into the distinction between private and public goods more thoroughly, it turns out to be a completely illusory distinction. A clear-cut dichotomy between private and public goods does not exist, and this is essentially why there can be so many disagreements on how to classify given goods. All goods are more or less private or public and can—and constantly do—change with respect to their degree of privateness/publicness with people's changing values and evaluations, and with changes in the composition of the population. They never fall, once and for all, into either one or the other category. In order to recognize this, one must only recall what makes something a good. For something to be a good it must be realized and treated as scarce by someone. Something is not a good-as-such, that is to say, but goods are goods only in the eyes of the beholder. Nothing is a good without at least one person subjectively evaluating it as such. But then, since goods are never goods—as-such—since no physico-chemical analysis can identify something as an economic good—there is clearly no fixed, objective criterion for classifying goods as either private or public. They can never be private or public goods as such. Their private or public character depends on how few or how many people consider them to be goods, with the degree to which they are private or public changing as these evaluations change, and ranging from one to infinity. Even seemingly completely private things like the interior of my apartment or the color of my underwear thus can become public goods as soon as somebody else starts caring about them.¹⁸² And seemingly public goods, like the exterior of my house or the color of my overalls, can become extremely private goods as soon as other people stop caring about them. Moreover, every good can change its characteristics again and again; it can even turn from a public or private good to a public or private bad and vice versa, depending solely on the changes in this caring or uncaring. However, if this is so, no decision whatsoever can be based on the classification of goods as private or public.¹⁸³ In fact, to do so it would not only become necessary to ask virtually every individual person with respect to every single good whether or not he happened to care about it, positively or negatively and perhaps to what extent, in order to determine who might profit from what and should hence participate in its financing. (And how could one know if they were telling the truth?) It would also become necessary to monitor all changes in such evaluations continually, with the result that no definite decision could ever be made regarding the production of anything, and as a consequence of a nonsensical theory all of us would be long dead.¹⁸⁴

But even if one were to ignore all these difficulties, and were willing to admit for the sake of argument that the private-public good distinction did hold water, even then the argument would not prove what it is supposed to. It neither provides conclusive reasons why public goods—assuming that they exist as a separate category of goods—should be produced at all, nor why the state rather than private enterprises should produce them. This is what the theory of public goods essentially says, having introduced the above-mentioned conceptual distinction: The positive effects of public goods for people who do not contribute anything to their production or financing proves that these goods are desirable. But evidently, they would not be produced, or at least not in sufficient quantity and quality, in a free, competitive market, since not all of those who would profit from their production would also contribute financially to make the production possible. So in order to produce these goods (which are evidently desirable, but would not be produced otherwise), the state must jump in and assist in their production. This sort of reasoning, which can be found in almost every textbook on economics (Nobel laureates not excluded¹⁸⁵) is completely fallacious, and fallacious on two counts.

For one thing, to come to the conclusion that the state has to provide public goods that otherwise would not be produced, one must smuggle a norm into one’s chain of reasoning. Otherwise, from the statement that because of some special characteristics of theirs certain goods would not be produced, one could never reach the conclusion that these goods should be produced. But with a norm required to justify their conclusion, the public goods theorists clearly have left the bounds of economics as a positive, wertfrei science. Instead they have transgressed into the field of morals or ethics, and hence one would expect to be offered a theory of ethics as a cognitive discipline in order for them to legitimately do what they are doing and to justifiably derive the conclusion that they actually derive. But it can hardly be stressed enough that nowhere in the public goods theory literature can there be found anything that even faintly resembles such a cognitive theory of ethics.¹⁸⁶ Thus it must be stated at the outset, that the public goods theorists are misusing whatever prestige they might have as positive economists for pronouncements on matters on which, as their own writings indicate, they have no authority whatsoever. Perhaps, though, they have stumbled on something correct by accident, without supporting it with an elaborate moral theory? It becomes apparent that nothing could be further from the truth as soon as one explicitly formulates the norm that would be needed to arrive at the above-mentioned conclusion about the state's having to assist in the provision of public goods. The norm required to reach the above conclusion is this: whenever it can somehow be proven that the production of a particular good or service has a positive effect on someone but would not be produced at all, or would not be produced in a definite quantity or quality unless others participated in its financing, then the use of aggressive violence against these persons is allowed, either directly or indirectly with the help of the state, and these persons may be forced to share in the necessary financial burden. It does not need much comment to show that chaos would result from implementing this rule, as it amounts to saying that everyone can aggress against everyone else whenever he feels like it. Moreover, it should be sufficiently clear from the discussion of the problem of the justification of normative statements (Chapter 7) that this norm could never be justified as a fair norm. For to argue in that way and to seek agreement for this argument must presuppose, contrary to what the norm says, that everyone’s integrity as a physically independent decision-making unit is assured.

But the public goods theory breaks down not just because of the faulty moral reasoning implied in it. Even the utilitarian, economic reasoning contained in the above argument is blatantly wrong. As the public goods theory states, it might well be that it would be better to have the public goods than not to have them, though it should not be forgotten that no a priori reason exists that this must be so of necessity (which would then end the public goods theorists’ reasoning right here). For it is clearly possible, and indeed known to be a fact, that anarchists exist who so greatly abhor state action that they would prefer not having the so-called public goods at all to having them provided by the state!¹⁸⁷ is In any case, even if the argument is conceded so far, to leap from the statement that the public goods are desirable to the statement that they should therefore be provided by the state is anything but conclusive, as this is by no means the choice with which one is confronted. Since money or other resources must be withdrawn from possible alternative uses to finance the supposedly desirable public goods, the only relevant and appropriate question is whether or not these alternative uses to which the money could be put (that is, the private goods which could have been acquired but now cannot be bought because the money is being spent on public goods instead) are more valuable— more urgent—than the public goods. And the answer to this question is perfectly clear. In terms of consumer evaluations, however high its absolute level might be, the value of the public goods is relatively lower than that of the competing private goods, because if one had left the choice to the consumers (and had not forced one alternative upon them), they evidently would have preferred spending their money differently (otherwise no force would have been necessary). This proves beyond any doubt that the resources used for the provision of public goods are wasted, as they provide consumers with goods or services which at best are only of secondary importance. In short, even if one assumed that public goods which can be distinguished clearly from private goods existed, and even if it were granted that a given public good might be useful, public goods would still compete with private goods. And there is only one method for finding out whether or not they are more urgently desired and to what extent, or, mutatis mutandis, if, and to what extent, their production would take place at the expense of the nonproduction or reduced production of more urgently needed private goods: by having everything provided by freely competing private enterprises. Hence, contrary to the conclusion arrived at by the public goods theorists, logic forces one to accept the result that only a pure market system can safeguard the rationality, from the point of view of the consumers, of a decision to produce a public good. And only under a pure capitalist order could it be ensured that the decision about how much of a public good to produce (provided it should be produced at all) is rational as well.¹⁸⁸ No less than a semantic revolution of truly Orwellian dimensions would be required to come up with a different result. Only if one were willing to interpret someone’s “no” as really meaning “yes,” the “non-buying of something” as meaning that it is really “preferred over that which the nonbuying person does instead of non-buying,” of “force” really meaning “freedom,” of “non-contracting” really meaning “making a contract” and so on, could the public goods theorists’ point be “proven.”¹⁸⁹ But then, how could we be sure that they really mean what they seem to mean when they say what they say, and do not rather mean the exact opposite, or don’t mean anything with a definite content at all, but are simply babbling? We could not! M. Rothbard is thus completely right when he comments on the endeavors of the public goods ideologues to prove the existence of so-called market failures due to the nonproduction or a quantitatively or qualitatively “deficient” production of public goods. He writes, “... such a view completely misconceives the way in which economic science asserts that free-market action is ever optimal. It is optimal, not from the standpoint of the personal ethical views of an economist, but from the standpoint of free, voluntary actions of all participants and in satisfying the freely expressed needs of the consumers. Government interference, therefore, will necessarily and always move away from such an optimum.”¹⁹⁰

Indeed, the arguments supposedly proving market failures are nothing short of being patently absurd. Stripped of their disguise of technical jargon all they prove is this: a market is not perfect, as it is characterized by the nonaggression principle imposed on conditions marked by scarcity, and so certain goods or services which could only be produced and provided if aggression were allowed will not be produced. True enough. But no market theorist would ever dare deny this. Yet, and this is decisive, this “imperfection” of the market can be defended, morally as well as economically, whereas the supposed “perfections” of markets propagated by the public goods theorists cannot.¹⁹¹ It is true enough, too, that a termination of the state's current practice of providing public goods would imply some change in the existing social structure and the distribution of wealth. And such a reshuffling would certainly imply hardship for some people. As a matter of fact, this is precisely why there is widespread public resistance to a policy of privatizing state functions, even though in the long run overall social wealth would be enhanced by this very policy. Surely, however, this fact cannot be accepted as a valid argument demonstrating the failure of markets. If a man had been allowed to hit other people on the head and is now not permitted to continue with this practice, he is certainly hurt. But one would hardly accept that as a valid excuse for upholding the old (hitting) rules. He is harmed, but harming him means substituting a social order in which every consumer has an equal right to determine what and how much of anything is produced, for a system in which some consumers have the right to determine in what respect other consumers are not allowed to buy voluntarily what they want with the means justly acquired by them and at their disposal. And certainly, such a substitution would be preferable from the point of view of all consumers as voluntary consumers.

By force of logical reasoning, then, one must accept Molinari’s above-cited conclusion that for the sake of consumers, all goods and services be provided by markets.¹⁹² It is not only false that clearly distinguishable categories of goods exist, which would render special amendments to the general thesis of capitalism's economic superiority necessary; even if they did exist, no special reason could be found why these supposedly special public goods should not also be produced by private enterprises since they invariably stand in competition with private goods. In fact, in spite of all the propaganda from the side of the public goods theorists, the greater efficiency of markets as compared with the state has been realized with respect to more and more of the alleged public goods. Confronted daily with experience, hardly anyone seriously studying these matters could deny that nowadays markets could produce postal services, railroads, electricity, telephone, education, money, roads and so on more effectively, i.e., more to the liking of the consumers, than the state. Yet people generally shy away from accepting in one particular sector what logic forces upon them: in the field of the production of security. Hence, the rest of this chapter will explain the superior functioning of a capitalist economy in this particular area—a superiority whose logical case has already been made, but which shall be rendered more persuasive once some empirical material is added to the analysis and it is studied as a problem in its own right.¹⁹³

How would a system of nonmonopolistic, competing producers of security work? It should be clear from the outset that in answering this question one is leaving the realm of purely logical analysis and hence the answers must necessarily lack the certainty, the apodictic character of pronouncements on the validity of the public goods theory. The problem faced is precisely analogous to that of asking how a market would solve the problem of hamburger production, especially if up to this point hamburgers had been produced exclusively by the state, and hence no one could draw on past experience. Only tentative answers could be formulated. No one could possibly know the exact structure of the hamburger industry—how many competing companies would come into existence, what importance this industry might have compared to others, what the hamburgers would look like, how many different sorts of hamburgers would appear on the market and perhaps disappear again because of a lack of demand, and so on. No one could know all of the circumstances and the changes which would influence the very structure of the hamburger industry that would take place over time—changes in demand of various consumer groups, changes in technology, changes in the prices of various goods that affect the industry directly or indirectly, and so on. It must be stressed that all this is no different when it comes to the question of the private production of security. But this by no means implies that nothing definitive can be said on the matter. Assuming certain general conditions of demand for security services which are known to be more or less realistic by looking at the world as it presently is, what can and will be said is how different social orders of security production, characterized by different structural constraints under which they have to operate, will respond differently.¹⁹⁴ Let us first analyze the specifics of monopolistic, state-run security production, as at least in this case one can draw on ample evidence regarding the validity of the conclusions reached, and then turn to comparing this with what could be expected if such a system were replaced by a nonmonopolistic one.

Even if security is considered to be a public good, in the allocation of scarce resources it must compete with other goods. What is spent on security can no longer be spent on other goods that also might increase consumer satisfaction. Moreover, security is not a single, homogeneous good, but rather consists of numerous components and aspects. There is not only prevention, detection, and enforcement but there is also security from robbers, rapists, polluters, natural disasters, and so on. Moreover, security is not produced in a “lump,” but can be supplied in marginal units. In addition, different people attach different importance to security as a whole and also to different aspects of the whole thing, depending on their personal characteristics, their past experiences with various factors of insecurity, and the time and place in which they happen to live.¹⁹⁵ Now, and here we return to the fundamental economic problem of allocating scarce resources to competing uses, how can the state—an organization which is not financed exclusively by voluntary contributions and the sales of its products, but rather partially or even wholly by taxes—decide how much security to produce, how much of each of its countless aspects, to whom and where to provide how much of what? The answer is that it has no rational way to decide this question. From the point of view of the consumers its response to their security demands must thus be considered arbitrary. Do we need one policeman and one judge, or 100,000 of each? Should they be paid $100 a month, or $10,000? Should the policemen, however many we might have, spend more time patrolling the streets, chasing robbers, recovering stolen loot, or spying on participants in victimless crimes such as prostitution, drug use, or smuggling? And should the judges spend more time and energy hearing divorce cases, traffic violations, cases of shoplifting, murder, or antitrust cases? Clearly, all of these questions must be answered somehow because as long as there is scarcity and we do not live in the Garden of Eden, the time and money spent on one thing cannot be spent on another. The state must answer these questions, too, but whatever it does, it does it without being subject to the profit-and-loss criterion. Hence, its action is arbitrary and thus necessarily involves countless wasteful misallocations from the consumer’s viewpoint.¹⁹⁶ Independent to a large degree of consumer wants, the state-employed security producers instead do, as everyone knows, what they like. They hang around instead of doing anything, and if they do work they prefer doing what is easiest or work where they can wield power rather than serve consumers. Police officers drive around a lot in cars, hassle petty traffic violators, and spend huge amounts of money investigating victimless crimes which a lot of people (i.e., nonparticipants) do not like, but which few would be willing to spend their money on to fight, as they are not immediately affected by it. Yet with respect to the one thing that consumers want most urgently—the prevention of hard-core crime (i.e., crimes with victims), the detection and effective punishment of hard-core criminals, the recovery of loot, and the securement of compensation to victims of crimes from the aggressors—they are notoriously inefficient, in spite of ever higher budget allocations.

Further, and here I return to the problem of a lowered quality of output (with given allocations), whatever state-employed police or judges happen to do (arbitrary as it must be), since their income is more or less independent of the consumers’ evaluations of their respective services, they will tend to do poorly. Thus one observes police arbitrariness and brutality and the slowness in the judicial process. Moreover, it is remarkable that neither the police nor the judicial system offers consumers anything even faintly resembling a service contract in which it is laid down in unambiguous terms what procedure the consumer can expect to be set in motion in a specific situation. Rather, both operate in a contractual void which over time allows them to change their rules of procedure arbitrarily, and which explains the truly ridiculous fact that the settlement of disputes between police and judges on the one hand and private citizens on the other is not assigned to an independent third party, but to another police or judge who shares employers with one party—the government—in the dispute.

Third, anyone who has seen state-run police stations and courts, not to mention prisons, knows how true it is that the factors of production used to provide us with such security are overused, badly maintained, and filthy. There is no reason for them to satisfy the consumers who provide their income. And if, in an exceptional case, this happens not to be so, then it has only been possible at costs that are comparatively much higher than those of any similar private business.¹⁹⁷

Without a doubt, all of these problems inherent in a system of monopolistic security production would be solved relatively quickly once a given demand for security services was met by a competitive market with its entirely different incentive structure for producers. This is not to say that a “perfect” solution to the problem of security would be found. There would still be robberies and murders; and not all loot would be recovered nor all murderers caught. But in terms of consumer evaluations the situation would improve to the extent that the nature of man would allow this. First, as long as there is a competitive system, i.e., as long as the producers of security services depend on voluntary purchases, most of which probably take the form of service and insurance contracts agreed to in advance of any actual “occurrence” of insecurity or aggression, no producer could increase its in come without improving services or quality of product as perceived by the consumers. Furthermore, all security producers taken together could not bolster the importance of their particular industry unless, for whatever reason, consumers indeed started evaluating security more highly than other goods, thus ensuring that the production of security would never and nowhere take place at the expense of the non- or reduced production of, let us say, cheese, as a competing private good. In addition, the producers of security services would have to diversify their offerings to a considerable degree because a highly diversified demand for security products among millions and millions of consumers exists. Directly dependent on voluntary consumer support, they would immediately be hurt financially if they did not appropriately respond to the consumers’ various wants or changes in wants. Thus, every consumer would have a direct influence, albeit small, on the output of goods appearing on or disappearing from the security market. Instead of offering a uniform “security packet” to everyone, as is characteristic of state production policy, a multitude of service packages would appear on the market. They would be tailored to the different security needs of different people, taking account of different occupations, different risk-taking behavior, different things to be protected and insured, and different geographical locations and time constraints.

But that is far from all. Besides diversification, the content and quality of the products would improve, too. Not only would the treatment of consumers by the employees of security enterprises improve immediately, the “I could care less” attitude, the arbitrariness and even brutality, the negligence and tardiness of the present police and judicial systems would ultimately disappear. Since they then would be dependent on voluntary consumer support, any maltreatment, impoliteness, or ineptitude could cost them their jobs. Further, the above-mentioned peculiarity—that the settlement of disputes between a client and his service provider is invariably entrusted to the latter’s judgment—would almost certainly disappear from the books, and conflict arbitration by independent parties would become the standard deal offered by producers of security. Most importantly though, in order to attract and retain customers the producers of such services would have to offer contracts which would allow the consumer to know what he was buying and enable him to raise a valid, intersubjectively ascertainable complaint if the actual performance of the security producer did not live up to its obligations. And more specifically, insofar as they are not individualized service contracts where payment is made by the customers for covering their own risks exclusively, but rather insurance contracts proper which involve pooling one’s own risks with those of other people, contrary to the present statist practice, these contracts most certainly would no longer contain any deliberately built-in redistributive scheme favoring one group of people at the expense of another. Otherwise, if anyone had the feeling that the contract offered to him involved his paying for other people’s peculiar needs and risks—factors of possible insecurity, that is, that he did not perceive as applicable to his own case—he would simply reject signing it or discontinue his payments.

Yet when all this is said, the question will inevitably surface, “Wouldn’t a competitive system of security production still necessarily result in permanent social conflict, in chaos and anarchy?” There are several points to be made regarding this alleged criticism. First, it should be noted that such an impression would by no means be in accordance with historical, empirical evidence. Systems of competing courts have existed at various places, such as in ancient Ireland or at the time of the Hanseatic league, before the arrival of the modern nation state, and as far as we know they worked well.¹⁹⁸ Judged by the then existent crime rate (crime per capita), the private police in the Wild West (which incidentally was not as wild as some movies insinuate) was relatively more successful than today’s state-supported police.¹⁹⁹ And turning to contemporary experience and examples, millions and millions of international contacts exist even now—contacts of trade and travel—and it certainly seems to be an exaggeration to say, for instance, that there is more fraud, more crime, more breach of contract there than in domestic relations. And this is so, it should be noted, without there being one big monopolistic security producer and law-maker. Finally it is not to be forgotten that even now in a great number of countries there are various private security producers alongside to the state: private investigators, insurance detectives, and private arbitrators. Regarding their work, the impression seems to confirm the thesis that they are more, not less, successful in resolving social conflicts than their public counterparts.

However, this historical evidence is greatly subject to dispute, in particular regarding whether any general information can be derived from it. Yet there are systematic reasons, too, why the fear expressed in the above criticism is not well-founded. Paradoxical as it may seem at first, this is because establishing a competitive system of security producers implies erecting an institutionalized incentive structure to produce an order of law and law-enforcement that embodies the highest possible degree of consensus regarding the question of conflict resolution, and hence will tend to generate less rather than more social unrest and conflict than under monopolistic auspices!²⁰⁰ In order to understand this it is necessary to take a closer look at the only typical situation that concerns the skeptic and allows him to believe in the superior virtue of a monopolistically organized order of security production. This is the situation when a conflict arises between A and B, both are insured by different companies and the companies cannot come to an immediate agreement regarding the validity of the conflicting claims brought forward by their respective clients. (No problem would exist if such an agreement were reached, or if both clients were insured by one and the same company—at least the problem then would not be different in any way from that emerging under a statist monopoly!) Wouldn’t such a situation always result in an armed confrontation? This is highly unlikely. First, any violent battle between companies would be costly and risky, in particular if these companies had reached a respectable size which would be important for them to have in order to appear as effective guarantors of security to their prospective clients in the first place. More importantly though, under a competitive system with each company dependent on the continuation of voluntary consumer payments, any battle would have to be deliberately supported by each and every client of both companies. If there were only one person who withdrew his payments because he was not convinced the battle was necessary in the particular conflict at hand, there would be immediate economic pressure on the company to look for a peaceful solution to the conflict.²⁰¹ Hence, any competitive producer of security would be extremely cautious about his dedication to engaging in violent measures in order to resolve conflicts. Instead, to the extent that it is peaceful conflict-resolution that consumers want, each and every security producer would go to great lengths to provide such measures to its clients and to establish in advance, for everyone to know, to what arbitration process it would be willing to submit itself and its clients in case of a disagreement over the evaluation of conflicting claims. And as such a scheme could only appear to the clients of different firms to be really working if there were agreement among them regarding such arbitrational measures, a system of law governing relations between companies which would be universally acceptable to the clients of all of the competing security producers would naturally evolve. Moreover, the economic pressure to generate rules representing consensus on how conflicts should be handled is even more far-reaching. Under a competitive system the independent arbitrators who would be entrusted with the task of finding peaceful solutions to conflicts would be dependent on the continued support of the two disagreeing companies insofar as they could and would select different judges if either one of them were sufficiently dissatisfied with the outcome of their arbitration work. Thus, these judges would be under pressure to find solutions to the problems handed over to them which, this time not with respect to the procedural aspects of law, but its content, would be acceptable to all of the clients of the firms involved in a given case as a fair and just solution.²⁰² Otherwise one or all of the companies might lose some of their customers, thus inducing those firms to turn to a different arbitrator the next time they were in need of one.²⁰³

But wouldn’t it be possible under a competitive system for a security-producing firm to become an outlaw company—a firm, that is, which, supported by its own clients, started to aggress against others? There is certainly no way to deny that this might be possible, though again it must be emphasized that here one is in the realm of empirical social science and no one could know such a thing with certainty. And yet the tacit insinuation that the possibility of a security firm becoming an outlaw company would somehow indicate a severe deficiency in the philosophy and economics of a pure capitalist social order is fallacious.²⁰⁴ First, it should be recalled that any social system, a statist-socialist order no less than a pure market economy, is dependent for its continued existence on public opinion, and that a given state of public opinion at all times delimits what can or cannot occur, or what is more or less likely to occur in a given society. The current state of public opinion in West Germany, for instance, makes it highly unlikely or even impossible that a statist-socialist system of the present-day Russian type could be imposed on the West German public. The lack of public support for such a system would doom it to failure and make it collapse. And it would be even more unlikely that any such attempt to impose a Russian-type order could ever hope to succeed among Americans, given American public opinion. Hence, in order to see the problem of outlaw companies correctly, the above question should be phrased as follows: How likely is it that any such event would occur in a given society with its specific state of public opinion? Formulated in this way, it is clear that the answer would have to be different for different societies. For some, characterized by socialist ideas deeply entrenched in the public, there would be a greater likelihood of the reemergence of aggressor companies, and for other societies there would be a much smaller chance of this happening. But then, would the prospect of a competitive system of security production in any given case be better or worse than that of the continuation of a statist system? Let us look, for instance, at the present-day United States. Assume that by a legislative act the state had abolished its right to provide security with tax funds, and a competitive system of security production were introduced. Given the state of public opinion, how likely would it then be that outlaw producers would spring up, and what if they did? Evidently, the answer would depend on the reactions of the public to this changed situation. Thus, the first reply to those challenging the idea of a private market for security would have to be: what about you? What would your reaction be? Does your fear of outlaw companies mean that you would then go out and engage in trade with a security producer that aggressed against other people and their property, and would you continue supporting it if it did? Certainly the critic would be much muted by this counterattack. But more important than this is the systematic challenge implied in this personal counterattack. Evidently, the described change in the situation would imply a change in the cost-benefit structure that everyone would face once he had to make his decisions. Before the introduction of a competitive system of security production it had been legal to participate in and support (state) aggression. Now such an activity would be an illegal activity. Hence, given one’s conscience, which makes each of one’s own decisions appear more or less costly, i.e., more or less in harmony with one’s own principles of correct behavior, support for a firm engaging in the exploitation of people unwilling to deliberately support its actions would be more costly now than before. Given this fact, it must be assumed that the number of people—among them even those who otherwise would have readily lent their support to the state—who would now spend their money to support a firm committed to honest business would rise, and would rise everywhere this social experiment was tried. In contrast, the number of people still committed to a policy of exploitation, of gaining at the expense of others, would fall. How drastic this effect would be would, of course, depend on the state of public opinion. In the example at hand—the United States, where the natural theory of property is extremely widespread and accepted as a private ethic, the libertarian philosophy being essentially the ideology on which the country was founded and that let it develop to the height it reached²⁰⁵—the above-mentioned effect would naturally be particularly pronounced. Accordingly, security-producing firms committed to the philosophy of protecting and enforcing libertarian law would attract the greatest bulk of public support and financial assistance. And while it may be true that some people, and among them especially those who had profited from the old order, might continue their support of a policy of aggression, it is very unlikely that they would be sufficient in number and financial strength to succeed in doing so. Rather, the likely outcome would be that the honest companies would develop the strength needed—alone or in a combined effort and supported in this effort by their own voluntary customers—to check any such emergence of outlaw producers and destroy them wherever and whenever they came into existence.²⁰⁶ And if against all odds the honest security producers should lose their fight to retain a free market in the production of security and an outlaw monopoly reemerged, one would simply have a state again.²⁰⁷

In any case, implementing a pure capitalist social system with private producers of security—a system permitting freedom of choice—would necessarily be better than what one has now. Even if such an order should then collapse because too many people were still committed to a policy of aggression against and exploitation of others, mankind would at least have experienced a glorious interlude. And should this order survive, which would seem to be the more likely outcome, it would be the beginning of a system of justice and unheard-of economic prosperity.

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¹ To avoid any misunderstanding from the outset: the thesis presented here is that any given society’s overall wealth will be relatively increased, i.e., will grow more than it otherwise would, if the overall degree of socialism is decreased and vice versa. The United States, for instance, would improve their standards of living by adopting more capitalism (above the level that would be attained otherwise), and so would Germany, etc. It is a somewhat different task, though, to explain the relative position (as regards overall wealth) of different societies at any given time because then, of course, the “ceteris” are no longer necessarily “paribus,” while, of course, other things, in addition to an existing degree of socialism, undoubtedly affect a society’s overall wealth. A given society’s history, for instance, has a tremendous effect on its present wealth. Every society is rich or poor not only because of present but also past conditions; because of capital having been accumulated or destroyed in the past by our fathers and forefathers. So it can easily happen that a society which is presently more capitalist can still be significantly poorer than a more socialist one. And the same, only seemingly paradoxical result can emerge because societies can (and do) differ with respect to other formerly or presently operating factors affecting the production of wealth. There can and do exist, for instance, differences in the work ethic and/or in prevalent world-views and habits among societies and these can and do account for divergencies (or similarities) in the production of wealth of societies alike or different with respect to their present degree of socialism. Thus, the most straightforward and best way to illustrate the validity of the thesis that the degree of socialism is inversely related to a society’s wealth in any comparative social analysis, would be to compare societies which, except for differences in their degree of socialism, are paribus with respect to their history and the present socio- psychological characteristics of their people, or are at least very similar, like, for instance, West and East Germany: and here the predicted effect indeed shows in the most dramatic way, as will be dealt with in the following.

² Incidentally, “socialism” in the United States is called “liberalism” and the socialist, or social democrat there, who calls himself “liberal” would generally detest being called “socialist.”

³ Recall the repeated pronouncements in the early days of Soviet-Russian communism, up to the days of Khrushchev, that the capitalist world would soon be economically surpassed!

⁴ Cf. D. Hume, A Treatise of Human Nature (ed. Selby-Bigge), Oxford, 1968, esp. 3, 2, p.484; and, “Enquiry Concerning the Principles of Morals,” in: Hume, Enquiries (ed. Selby-Bigge), Oxford, 1970; cf. also: L. Robbins, Political Economy: Past and Present, London, 1977, esp. pp. 29-33.

⁵ Incidentally, the normative character of the concept of property also makes the sufficient precondition for its emergence as a concept clear: Besides scarcity “rationality of agents” must exist, i.e., the agents must be capable of communicating, discussing, arguing, and in particular, they must be able to engage in an argumentation of normative problems. If there were no such capability of communication, normative concepts simply would not be of any use. We do not, for instance, try to avoid clashes over the use of a given scarce resource with, let us say, an elephant, by defining property rights, for we cannot argue with the elephant and hence arrive at an agreement on rights of ownership. The avoidance of future clashes in such a case is exclusively a technical (as opposed to a normative) problem.

⁶ It should be noted that a person cannot intentionally not act, as even the attempt not to act, i.e., one’s decision not to do anything and instead remain in some previously occupied position or state would itself qualify as an action, thus rendering this statement aprioristically true, i.e., a statement that cannot be challenged by experience, as anyone who would try to disprove it thereby would have to choose and put his body willy-nilly to some specific use.

⁷ Cf. L. v. Mises, Human Action, Chicago, 1966, esp. part 1; M. N. Rothbard, Man, Economy and State, Los Angeles, 1970; also: L. Robbins, Nature and Significance of Economic Science, London, 1935.

⁸ On the concept of cost cf. in particular, M. Buchanan, Cost and Choice, Chicago, 1969; L.S.E. Essays on Cost (ed. Buchanan and Thirlby), Indianapolis, 1981.

⁹ It is worth mentioning here that the validity of all of what follows, of course, in no way depends on the correctness of the description of the natural position as “natural.” Even if someone would only be willing to grant the so-called natural position the status of an arbitrary starting point, our analysis assumes validity. Terms don’t matter; what counts is what the natural position really is and implies as such. The following analyses are concerned exclusively with this problem.

¹⁰ Note again that the term “aggression” is used here without evaluative connotations. Only later in this treatise will I demonstrate that aggression as defined above is indeed morally indefensible. Names are empty; what alone is important is what it really is that is called aggression.

¹¹ When I discuss the problem of moral justification in Chapter 7, I will return to the importance of the distinction just made of aggression as an invasion of the physical integrity of someone and, on the other hand, an invasion of the integrity of someone’s value system, which is not classified as aggression. Here it suffices to notice that it is some sort of technical necessity for any theory of property (not just the natural position described here) that the delimitation of the property rights of one person against those of another be formulated in physical, objective, intersubjectively ascertainable terms. Otherwise it would be impossible for an actor to determine ex ante if any particular action of his were an aggression or not, and so the social function of property norms (any property norms), i.e., to make a conflict—free interaction possible, could not be fulfilled simply for technical reasons.

¹² It is worth mentioning that the ownership right stemming from production finds its natural limitation only when, as in the case of children, the thing produced is itself another actor- producer. According to the natural theory of property, a child, once born, is just as much the owner of his own body as anyone else. Hence, not only can a child expect not to be physically aggressed against but as the owner of his body a child has the right, in particular, to abandon his parents once he is physically able to run away from them and say “no” to their possible attempts to recapture him. Parents only have special rights regarding their child—stemming from their unique status as the child’s producers—insofar as they (and no one else) can rightfully claim to be the child’s trustee as long as the child is physically unable to run away and say “no.”

¹³ On the disutility of work and waiting cf. the theory of time-preference as espoused by L. v. Mises, Human Action, Chicago, 1966, chapters 5, 18, 21; the same, Socialism, Indianapolis, 1981, chapter 8;

M. N. Rothbard, Man, Economy and State, Los Angeles, 1970, chapters 6, 9; also: E.v. Boehm-Bawerk, Kapital und Kapitalzins. Positive Theory des Kapitals, Meisenheim, 1967; F. Fetter, Capital, Interest and Rent, Kansas City, 1976.

On a critical assessment of the term “human capital,” in particular of the absurd treatment that this concept has had at the hands of some Chicago-economists (notably G. Becker, Human Capital, New York, 1975), cf. A. Rubner, The Three Sacred Cows of Economics, New York, 1970.

¹⁴ On the theory of original appropriation cf. J. Locke, Two Treatises of Government (ed. Laslett), Cambridge, 1960, esp. 2,

¹⁵ On the distinction, flowing naturally from the unique character of a person’s body as contrasted with all other scarce goods, between “inalienable” and “alienable” property titles cf. W. Evers, “Toward a Reformation of a Law of Contracts,” in: Journal of Libertarian Studies, 1977.

¹⁶ The superimposition of public on private law has tainted and compromised the latter to some extent everywhere. Nonetheless, it is not difficult to disentangle existing private law systems and find what is here called the natural position as constituting its central elements—a fact which once again underlines the “naturalness” of this property theory. Cf. also Chapter 8, n. 13.

¹⁷ On Marxism and its development cf. L. Kolakowski, Main Currents of Marxism, 3 vols., Oxford, 1978; W. Leonhard, Sovietideologie. Die politischen Lehren, Frankfurt/M., 1963.

¹⁸ When one speaks of socialism Russian style it is evident that one abstracts from the multitude of concrete data which characterize any social system and with respect to which societies may differ. Russian style socialism is what has been termed by M. Weber an “ideal type.” It “is arrived at through the one-sided intensification of one or several aspects and through integration into an immanently consistent conceptual representation of a multiplicity of scattered and discrete individual phenomena” (M. Weber, Gesammelte Aufsaetze zur Wissenschaftslehre, Tuebingen, 1922, p.191). But to stress the abstract character of the concept by no means implies any deficiency in it. On the contrary, it is the very purpose of constructing ideal types to bring out those features which the acting individuals themselves regard as constituting relevant resemblances or differences in meaning, and to disregard those which they themselves consider to be of little or no importance in understanding either one’s own or another person’s actions. More specifically, describing Russian style socialism on the level of abstraction chosen here and developing a typology of various forms of socialism later on should be understood as the attempt to reconstruct those conceptual distinctions which people use to attach themselves ideologically to various political parties or social movements, hence enabling an understanding of the ideological forces that in fact shape present-day societies. On ideal types as prerequisites for historico-sociologic al research cf. L. v. Mises, Epistemological Problems of Economics, New York, 1981, esp. pp.75ff; the same, Human Action, Chicago, 1966, esp. pp.59ff. On the methodology of “meaning reconstruction” of empirical social research cf. H. H. Hoppe, Kritik der kausalwis- senschaftlichen Sozialforschung, Opladen, 1983, chapter 3, esp. pp.33ff.

¹⁹ For the following cf. in particular L. v. Mises, Socialism, Indianapolis, 1981.

²⁰ Of course, this complete outlawing of private investment, as stated under (2) only applies strictly to a fully socialized economy. If next to a socialized part of the economy a private part also exists, then private investment would only become curtailed and hampered to the degree to which the economy is socialized.

²¹ The related, crucial difference between capitalism and socialism is that under the former, the voluntary actions of consumers ultimately determine the structure and process of production, whereas it is the producer-caretakers who do so under socialism. Cf. in particular Chapter 9 below.

²² Writes Mises, “The essential mark of socialism is that one will alone acts. It is immaterial whose will it is. The director may be anointed king or a dictator, ruling by virtue of his charisma, he may be a Fuehrer or a board of Fuehrers appointed by the vote of the people. The main thing is that the employment of all factors of production is directed by one agency only’ (L. v. Mises, Human Action, Chicago, 1966, p.695).

²³ Cf. L. v. Mises, Socialism, Indianapolis, 1981, esp. part 2; also Human Action, Chicago, 1966, esp. Chapters 25, 26.

²⁴ On the following cf. also F. A. Hayek (ed.), Collectivist Economic Planning, London, 1935; Journal of Libertarian Studies 5, 1, 1981 (An Economic Critique of Socialism).

²⁵ On the free market as the necessary prerequisite for economic calculation and rational resource allocation cf. also Chapters 9, 10 below.

²⁶ Incidentally, this proves that a socialized economy will be even less productive than a slave economy. In a slave economy, which of course also suffers from a relatively lower incentive to work on the part of the slaves, the slaveholder, who can sell the slave and capture his market value privately, would not have a comparable interest in extracting from his slave an amount of work which reduces the slave’s value below the value of his marginal product. For a caretaker of labor no such disincentive exists. Cf. also G. Reisman, Government Against the Economy, New York, 1979.

²⁷ Cf. H. H. Hoppe, Eigentum, Anarchie und Staat, Opladen, 1987, esp. Chapter 5, 3.2.

²⁸ To be sure, Russia was a poor country to begin with, with little accumulated capital to be drawn on and consumed in an “emergency.” On the socio-economic history of Soviet Russia cf. B. Brutzkus, Economic Planning in Soviet Russia, London, 1935; also, e.g., A. Nove, Economic History of the USSR, Harmondsworth, 1969; also S. Wellisz, The Economies of the Soviet Bloc, New York, 1964.

²⁹ On the economic system of the Soviet-dominated East bloc cf. T. Rakowska-Harmstone (ed)., Communism in Eastern Europe, Bloomington, 1984; H. H. Hohmann, M. Kaser, and K. Thalheim (eds.), The New Economic Systems of Eastern Europe, London, 1975; C.M. Cipolla (ed.), Economic History of Europe. Contemporary Economies, vol 2, Glasgow, 1976.

³⁰ On everyday life in Russia cf., e.g., H. Smith, The Russians, New York, 1983; D.K. Willis, Klass. How Russians Really Live, New York, 1985; S. Pejovich, Life in the Soviet Union, Dallas, 1979; M. Miller, Rise of the Russian Consumer, London, 1965.

³¹ Cf. L. Erhard, the initiator and major political exponent of post-war economic policy, Prosperity through Competition, New York, 1958; and The Economics of Success, London, 1968. For theoreticians of the German “soziale Marktwirtschaft” cf. W. Eucken, Grundsaetze der Wirtschaftspolitik, Hamburg, 1967; W. Roepke, A Humane Economy, Chicago, 1960; the same, Economics of a Free Society, Chicago, 1963. For a critique of the West German economic policy as insufficiently capitalist and ridden with inconsistencies which would lead to increasingly socialist interventions in the course of time cf. the prophetic observations by L. v. Mises, Human Action, Chicago, 1966, p.723.

³² For comparative studies on the two Germanys cf. E. Jesse (ed.), BRD und DDR, Berlin, 1982; H. v. Hamel (ed.), BRD-DDR. Die Wirtschaftssysteme, Muenchen, 1983; also K. Thalheim, Die wirtschaftliche Entwicklung der beiden Staaten in Deutschland, Opladen, 1978.

An honest but naive empirically minded comparative study which illustrates that at best, economic statistics has very little to do with reality as perceived by acting persons is P. R. Gregory and R.C. Stuart, Comparative Economic Systems, Boston, 1985, Chapter 13 (East and West Germany). For a valuable critique of economic statistics cf. O. Morgenstern, National Income Statistics: A Critique of Macroeconomic Aggregation, San Francisco, 1979. For an even more fundamental criticism cf. L. v. Mises, Theory of Money and Credit, Irvington, 1971, part II, Chapter 5.

³³ On life in East Germany cf. E. Windmoeller and T. Hoepker, Leben in der DDR, Hamburg, 1976.

³⁴ Cf. L. Kolakowski, Main Currents of Marxism, 3 vols., Oxford, 1978; also W. Leonhard, Sovietideologie heute. Die politischen Lehren, Frankfurt/M., 1963.

³⁵ Cf. note 49 below on the assessment of the somewhat different practice.

³⁶ Cf. E. Bernstein, Die Voraussetzungen des Sozialismus und die Aufgaben der Sozialdemokratie, Bonn, 1975, as a major expositor of the reformist-revisionist course; K. Kautsky, Bernstein und das sozialdemokratische Programm, Bonn, 1976, as exponent of the Marxist orthodoxy.

³⁷ On the idea of a “market-socialism” cf. one of its leading representatives, O. Lange, “On the Economic Theory of Socialism,” in M. I. Goldman (ed.), Comparative Economic Systems, New York, 1971.

³⁸ On the ideology of the German Social Democrats cf. T. Meyer (ed.), Demokratischer Sozialismus, Muenchen, 1980; G. Schwan (ed.), Demokratischer Sozialismus fuer Industriegesellschaften, Frankfurt/M., 1979.

³⁹ Indicators for the social-democratization of the socialist movement are the rise of the socialist party and the corresponding decline of the orthodox communist party in France; the emergence of a social-democratic party as a rival to the more orthodox labour party in Great Britain; the moderation of the communists in Italy as the only remaining powerful communist party in Western Europe toward an increasingly social-democratic policy; and the growth of the socialist-social-democratic parties in Spain and Portugal under Gonzales and Soares, both with close ties to the German SPD. Furthermore, the socialist parties of Scandinavia, which traditionally had closely followed the German path and which later provided safe haven to a number of prominent socialists during the Nazi persecution (most notably W. Brandt and B. Kreisky), have long given credence to the revisionist beliefs.

⁴⁰ On the social-democratic position regarding the North-South conflict cf. North-South: A Programme for Survival, Independent Commission on International Development Issues (Chair: W. Brandt), 1980.

⁴¹ Note again that this characterization of social-democratic socialism has the status of an “ideal type” (cf. Chapter 3, n. 2). It is not to be taken as a description of the policy or ideology of any actual party. Rather, it should be understood as the attempt to reconstruct what has become the essence of modern social-democratic style socialism, underlying a much more diverse reality of programs and policies of various parties or movements of different names as the ideologically unifying core.

⁴² On the following cf. L. v. Mises, Socialism, Indianapolis, 1981, esp. part V; Human Action, Chicago, 1966, esp. part 6.

⁴³ Cf. M. N. Rothbard, Power and Market, Kansas City, 1977.

⁴⁴ In addition, it should not be overlooked that even if it led to increased work by those taxed, a higher degree of taxation would in any case reduce the amount of leisure available to them and thereby reduce their standard of living. Cf. M.N. Roth-bard, Power and Market, Kansas City, 1977, pp. 95f.

⁴⁵ A fictional account of the implementation of such a policy, supervised by “The unceasing vigilance of agents of the United States Handicapper General” has been given by K. Vonnegut in “Harrison Bergeron,” in: K. Vonnegut, Welcome to the Monkey House, New York, 1970.

⁴⁶ On the phenomenon of politicalization cf. also K. S. Templeton (ed.), The Politicalization of Society, Indianapolis, 1977.

⁴⁷ On the concern of orthodox and social-democratic socialism for equality cf. S. Lukes, “Socialism and Equality,” in: L. Kolakowski and S. Hampshire (eds.), The Socialist Idea, New York, 1974; also B. Williams, “The Idea of Equality,” in P. Laslett and W. G. Runciman (eds.), Philosophy, Politics, and Society, 2nd series, Oxford, 1962. For a critique of the socialist concept of equality cf. M. N. Rothbard, “Freedom, Inequality, Primitivism and the Division of Labor,” in K. S. Templeton (ed.), The Politicalization of Society, Indianapolis, 1977; and Egalitarianism as a Revolt Against Nature, (title essay), Washington, 1974; H. Schoeck, Envy, New York, 1966; and 1st Leistung unanstaendig? Osnabrueck, 1971; A. Flew, The Politics of Procrustes, London, 1980; and Sociology, Equality and Education, New York, 1976.

⁴⁸ Traditionally, this approach has been favored, at least in theory, by orthodox Marxist socialism—in line with Marx’ famous dictum in his “Critique of the Gotha Programme,” (K. Marx, Selected Works, vol. 2, London, 1942, p.566), ‘from each according to his ability, to each according to his needs.” Economic reality, however, has forced the Russian-style countries to make considerable concessions in practice. Generally speaking, an effort has indeed been made to equalize the (assumedly highly visible) monetary income for various occupations, but in order to keep the economy going, considerable difference in (assumedly less visible) nonmonetary rewards (such as special privileges regarding travel, education, housing, shopping, etc.) have had to be introduced.

Surveying the literature, P. Gregory and R. Stuart (Comparative Economic Systems, Boston, 1985), state: “... earnings are more equally distributed in Eastern Europe, Yugoslavia and the Soviet Union than in the United States. For the USSR, this appears to be a relatively new phenomenon, for as late as 1957, Soviet earnings were more unequal than the United States.” However, in Soviet-style countries “a relatively larger volume of resources ... is provided on an extra market bases ...” (p.502). In conclusion: “Income is distributed more unequally in the capitalist countries in which the state plays a relatively minor redistributive role ... (United States, Italy, Canada). Yet even where the state plays a major redistributive role (United Kingdom, Sweden), the distribution of incomes appears to be slightly more unequal than in the planned socialist countries (Hungary, Czechoslovakia, Bulgaria). The Soviet Union in 1966 appears to have a less egalitarian distribution of income than its East European counterparts” (p.504). Cf. also, F. Parkin, Class Inequality and Political Order, New York, 1971, esp. Chapter 6.

⁴⁹ This approach is traditionally most typical for social-democratic socialism. In recent years it has been given much publicized support—from the side of the economics profession—by M. Friedman with his proposal for a “negative income tax” (Friedman, Capitalism and Freedom, Chicago, 1962, Chapter 12); and by J. Rawls— from the philosophical side—with his “difference principle” (Rawls, A Theory of Justice, Cambridge, 1971, pp. 60, 75ff, 83). Accordingly, both authors have received much attention from social-democratic party intellectuals. Generally, Friedman was only found “guilty” of not wanting to set the minimum income high enough—but then, he had no principled criterion for setting it at any specific point anyway. Rawls, who wants to coerce the “most advantaged person” into letting the “least advantaged one” share in his fortune whenever he happens to improve his own position, was at times even found to have gone too far with his egalitarianism. Cf. G. Schwan, Sozialismus in der Demokratie. Theorie eine konsequent sozialdemokratischen Politik, Stuttgart, 1982, Chapter 3. D.

⁵⁰ A representative example of social-democratically inclined research on equality of opportunity, in particular regarding education, is C. Jencks, and others, Inequality, London, 1973; the increasing prominence of the idea of equalizing opportunity also explains the flood of sociological studies on “quality of life” and “social indicators” that has appeared since the late 1960s. Cf., for instance, A. Szalai and F. Andrews (eds.), The Quality of Life, London, 1980.

⁵¹ On the following cf. also R. Merklein, Griff in die eigene Tasche, Hamburg, 1980; and Die Deutschen werden aermer, Hamburg, 1982.

⁵² Cf. as a representative example, W. Zapf (ed.), Lebensbedingungen in der Bundes-republik, Frankfurt/M., 1978.

⁵³ Cf. on this A. Alchian, “The Economic and Social Impact of Free Tuition” in: A. Alchian, Economic Forces at Work, Indianapolis, 1977.

⁵⁴ On the following cf. in particular M. N. Rothbard’s brilliant essay ‘Left and Right: The Prospects for Liberty’ in the same, Egalitarianism as a Revolt Against Nature, Washington, 1974.

⁵⁵ On the social structure of feudalism cf. M. Bloch, Feudal Society, Chicago, 1961; P. Anderson, Passages from Antiquity to Feudalism, London, 1974; R. Hilton (ed.), The Transition from Feudalism to Capitalism, London, 1978.

⁵⁶ Cf. H. Pirenne, Medieval Cities. Their Origins and the Revival of Trade, Princeton, 1974, Chapter 5, esp. pp. 126ff; also cf. M.

⁵⁷ It is worth stressing that contrary to what various nationalist historians have taught, the revival of trade and industry was caused by the weakness of central states, by the essentially anarchistic character of the feudal system. This insight has been emphasized by J. Baechler in The Origins of Capitalism, New York, 1976, esp. Chapter 7. He writes: “The constant expansion of the market, both in extensiveness and in intensity, was the result of an absence of a political order extending over the whole of Western Europe.” (p.73) “The expansion of capitalism owes its origin and raison d’eetre to political anarchy ... . Collectivism and State management have only succeeded in school text-books (look, for example, at the constantly favourable judgement they give to Colbertism).” (p.77) “All power tends toward the absolute. If it is not absolute, this is because some kind of limitations have come into play ... those in positions of power at the centre ceaselessly tried to erode these limitations. They never succeeded, and for a reason that also seems to me to be tied to the international system: a limitation of power to act externally and the constant threat of foreign assault (the two characteristics of a multi-polar system) imply that power is also limited internally and must rely on autonomous centres of decision making and so may use them only sparingly.” (p.78)

On the role of ecological and reproductive pressures for the emergence of capitalism cf. M. Harris, Cannibals and Kings, New York, 1978, Chapter 14.

⁵⁸ Cf. on this the rather enthusiastic account given by H. Pirenne, Medieval Cities, Princeton, 1974, pp.208ff.

⁵⁹ On this coalition cf. H. Pirenne, Medieval Cities, Princeton, 1974. “The clear interest of the monarchy was to support the adversaries of high feudalism. Naturally, help was given whenever it was possible to do so without becoming obligated to these middle classes who in arising against their lords fought, to all intents and purposes, in the interests of royal prerogatives. To accept the king as arbitrator of their quarrel was, for the parties in conflict, to recognize his sovereignty ... It was impossible that royalty should not take count of this and seize every chance to show its goodwill to the communes which, without intending to do so, labored so usefully in its behalf” (p.179-80; cf. also pp.227f).

⁶⁰ Cf. P. Anderson, Lineages of Absolutism, London, 1974.

⁶¹ Cf. L. Tigar and M. Levy, Law and the Rise of Capitalism, New York, 1977.

⁶² Cf. L. v. Mises, Liberalismus, Jena, 1929; also E. K. Bramsted and K. J. Melhuish (eds.), Western Liberalism, London, 1978.

⁶³ Cf. F. A. Hayek (ed.), Capitalism and the Historians, Chicago, 1963.

⁶⁴ On the social dynamics of capitalism as well as the resentment caused by it cf. D. Mc. C. Wright, Democracy and Progress, New York, 1948; and Capitalism, New York, 1951.

⁶⁵ In spite of their generally progressive attitude, the socialist left is not entirely free of such conservative glorifications of the feudal past, either. In their contempt for the “alienation” of the producer from his product, which of course is the normal consequence of any market system based on division of labor, they have frequently presented the economically self-sufficient feudal manor as a cozy, wholesome social model. Cf., for instance, K. Polanyi, The Great Transformation, New York, 1944.

⁶⁶ Cf. R. Nisbet, “Conservatism,” in: R. Nisbet and T. Bottomore, History of Sociological Analysis, New York, 1978; also G. K. Kaltenbrunner (ed.), Rekonstruktion des Konservatismus, Bern, 1978; on the relationship between liberalism and conservatism cf. F. A. Hayek, The Constitution of Liberty, Chicago, 1960 (Postscript).

⁶⁷ On the inconsistencies of liberalism cf. Chapter 10, n. 21.

⁶⁸ Normally, peoples’ attitudes toward change are ambivalent: on the one hand, in their role as consumers people see change as a positive phenomenon since it brings about a greater variety of choice. On the other hand, in their role as producers people tend to embrace the ideal of stability, as this would save them from the need to continually adapt their productive efforts to changed circumstances. It is, then, largely in their capacity as producers that people lend support to the various socialist stabilization schemes and promises, only to thereby harm themselves as consumers. Writes D. Mc. C. Wright in Democracy and Progress, New York, 1948, p.81: “From freedom and science came rapid growth and change. From rapid growth and change came insecurity. From insecurity came demands which ended growth and change. Ending growth and change ended science and freedom.”

⁶⁹ On liberalism, its decline, and the rise of socialism cf. A. V. Dicey, Lectures on the Relation Between Law and Public Opinion in England during the Nineteenth Century, London, 1914; W. H. Greenleaf, The British Political Tradition, 2 vols., London, 1983.

⁷⁰ I might again mention that the characterization of conservatism, too, has the status of an ideal-type (cf. Chapter 3, n. 2; Chapter 4, n. 8). It is the attempt to reconstruct those ideas which people either consciously or unconsciously accept or reject in attaching or detaching themselves to or from certain social policies or movements. The idea of a conservative policy as described here and in the following can also be said to be a fair reconstruction of the underlying, unifying ideological force of what is indeed labeled “conservative” in Europe. However, the term “conservative” is used differently in the United States. Here, quite frequently, everyone who is not a left-liberal-(social)-democrat is labeled a conservative. As compared with this terminology, our usage of the term conservative is much narrower, but also much more in line with ideological reality. Labeling everything that is not “liberal” (in the American sense) “conservative” glosses over the fundamental ideological differences that—despite some partial agreement regarding their opposition to “liberalism”—exist in the United States between libertarians, as advocates of a pure capitalist order based on the natural theory of property, and conservatives proper, who, from W. Buckley to I. Kristol, nominally hail the institution of private property, only to disregard private owners’ rights whenever it is deemed necessary in order to protect established economic and political powers from eroding in the process of peaceful competition. And in the field of foreign affairs they exhibit the same disrespect for private property rights through their advocacy of a policy of aggressive interventionism. On the polar difference between libertarianism and conservatism cf. G. W. Carey (ed.), Freedom and Virtue. The Conservative/Libertarian Debate, Lanham, 1984.

⁷¹ D. Mc. C. Wright (Capitalism, New York, 1951, p.198) correctly describes that both—left-liberalism, or rather social democracy, and conservatism—imply a partial expropriation of producers/contractors. He then misinterprets the difference, though, when he sees it as a disagreement over the question of how far this expropriation should go. In fact, there is disagreement about this among social-democrats and conservatives. Both groups have their “radicals” and “moderates.” What makes them social-democrats or conservatives is a different idea about which groups are to be favored at the expense of others.

⁷² Note the interesting relationship between our sociological typology of socialist policies and the logical typology of market interventions as developed by M. N. Rothbard. Rothbard (Power and Market, Kansas City, 1977, pp. 10ff) distinguishes between “autistic intervention” where ‘the intervener may command an individual subject to do or not to do certain things when these actions directly involve the individual’s person or property a/one ... (i.e.) when exchange is not involved”; “binary intervention” where ‘the intervener may enforce a coerced exchange between the individual subject and himself’; and ‘triangular intervention” where ‘the intervener may either compel or prohibit an exchange between a pair of subjects” (p. 10). In terms of this distinction, the characteristic mark of conservatism then is its preference for “triangular intervention”—and as will be seen later in this Chapter, “autistic intervention” insofar as autistic actions also have natural repercussions on the pattern of inter-individual exchanges—for such interventions are uniquely suited, in accordance with the social psychology of conservatism, to helping “freeze” a given pattern of social exchanges. As compared with this, egalitarian socialism, in line with its described “progressive” psychology, exhibits a preference for “binary interventions” (taxation). Note, however, that the actual policies of socialist and social-democratic parties do not always coincide precisely with our ideal-typical description of socialism social-democratic style. While they generally do, the socialist parties—most notably under the influence of labor unions—have also adopted typically conservative policies to a certain extent and are by no means totally opposed to any form of triangular intervention.

⁷³ Cf. on the following M. N. Rothbard, Power and Market, Kansas City, 1977, pp.24ff.

⁷⁴ While in order to stabilize social positions, price-freezing is needed and price-freezing can result in maximum or minimum prices, conservatives distinctly favor minimum price controls to the extent that it is commonly considered even more urgent that one’s absolute—rather than one’s relative—wealth position be prevented from eroding.

⁷⁵ To be sure, conservatives are by no means always actually willing to go quite as far. But they recurringly do so—the last time in the United States being during the Nixon presidency. Moreover, conservatives have always exhibited a more or less open admiration for the great unifying social spirit brought about by a war-economy which is typically characterized precisely by full-scale price controls.

⁷⁶ Cf. G. Reisman, Government Against the Economy, New York, 1979. For an apologetic treatment of price-controls cf. J. K. Galbraith, A Theory of Price Control, Cambridge, 1952.

⁷⁷ G. Reisman, Government Against the Economy, New York, 1979, p.141.

⁷⁸ On the politics and economics of regulation cf. G. Stigler, The Citizen and the State. Essays on Regulation, Chicago, 1975; M. N. Rothbard, Power and Market, Kansas City, 1977, Chapter 3.3; on licenses cf. also M. Friedman, Capitalism and Freedom, Chicago, 1962, Chapter 9.

⁷⁹ Cf. also B. Badie and P. Birnbaum, The Sociology of the State, Chicago, 1983, esp. pp.107f.

⁸⁰ Cf. on this R. Radosh and M. N. Rothbard (eds.), A New History of Leviathan, New York, 1972.

⁸¹ Cf. Badie and Birnbaum, The Sociology of the State, Chicago, 1983.

⁸² Cf. L. v. Mises, Omnipotent Government, New Haven, 1944; F. A. Hayek, The Road to Serfdom, Chicago, 1956; W. Hock, Deutscher Antikapitalismus, Frankfurt/ M, 1960.

⁸³ Cf. one of the foremost representatives of the German “Historical School,” the “Kathedersozialisr’ and naziapologist: W. Sombart, Deutscher Sozialimus, Berlin, 1934.

⁸⁴ Cf. W. Fischer, Die Wirtschaftspolitik Deutschlands 1918-45, Hannover, 1961; W. Treue, Wirtschaftsgeschichte der Neuzeit, vol. 2, Stuttgart, 1973; R. A. Brady, “Modernized Cameralism in the Third Reich: The Case of the National Industry Group,” in: M. I. Goldman (ed.), Comparative Economic Systems, New York, 1971.

⁸⁵ The average gross income of employed persons in Germany in 1938 (last figure available) was (in absolute terms, i.e., not taking inflation into account!) still lower than that of 1927. Hitler then started the war and resources were increasingly shifted from civilian to non-civilian uses, so that it can safely be assumed that the standard of living decreased even further and more drastically from 1939 on. Cf. Statistisches Jahrbuch fuer die BRD, 1960, p.542; cf. also V. Trivanovitch, Economic Development of Germany Under National Socialism, New York, 1937, p.44.

⁸⁶ Of. on the classical positivist position A.J. Ayer, Language, Truth and Logic, New York, 1950; on critical rationalism K. R. Popper, Logic of Scientific Discovery, London, 1959; Conjectures and Refutations, London, 1969; and Objective Knowledge, Oxford, 1973; on representative statements of empiricism-positivism as the appropriate methodology of economics cf. e.g. M. Blaug, The Methodology of Economics, Cambridge, 1980; T. W. Hutchinson, The Significance and Basic Postulates of Economic Theory, London, 1938; and Positive Economics and Policy Objectives, London, 1964; and Politics and Philosophy of Economics, New York, 1981; also M. Friedman, “The Methodology of Positive Economics,” in: M. Friedman, Essays in Positive Economics, Chicago, 1953; H. Albert, Marktsoziologie und Entscheidungslogik, Neuwied, 1967.

⁸⁷ On piecemeal social engineering cf. K. R. Popper, The Poverty of Historicism, London, 1957.

⁸⁸ Cf. G. Luehrs (ed.), Kritischer Rationalismus und Sozialdemokratie, 2 vols., Bonn, 1975-76.

⁸⁹ On the following cf. M. Hollis and E. Nell, Rational Economic Man, Cambridge, 1975, pp.3ff.

⁹⁰ Cf. D. Hume, A Treatise of Human Nature and Enquiry Concerning Human Understanding, in Selby-Bigge (ed.), Hume’s Enquiries, Oxford, 1970; also H. H. Hoppe, Handeln und Erkennen, Bern, 1976

⁹¹ Cf. I. Lakatos, “Falsification and the Methodology of Scientific Research Programmes,” in: Lakatos and Musgrave (eds.), Criticism and the Growth of Knowledge, Cambridge, 1970.

⁹² All of this has been brought home to Popperianism, mainly by T. S. Kuhn, The Structure of Scientific Revolutions, Chicago, 1964; and it was then P. Feyerabend who drew the most radical conclusion: to throw out science’s claim to rationality altogether, and to embrace nihilism under the banner “everything goes” (P. Feyerabend, Against Method, London, 1978; and Science in a Free Society, London, 1978). For a critique of this unfounded conclusion cf. note 105 below.

⁹³ Cf. on this and the following A. Pap, Semantics and Necessary Truth, New Haven, 1958; M. Hollis and E. Nell, Rational Economic Man, Cambridge, 1975; B. Blanshard, Reason and Analysis, La Salle, 1964.

⁹⁴ Cf. on this W. Kamlah and P. Lorenzen, Logische Propaedeutik, Mannheim, 1967.

⁹⁵ Cf. L. v. Mises, The Ultimate Foundation of Economic Science, Kansas City, 1978, p.5: “The essence of logical positivism is to deny the cognitive value of a priori knowledge by pointing out that all a priori propositions are merely analytic. They do not provide new information, but are merely verbal or tautological ... Only experience can lead to synthetic propositions. There is an obvious objection against this doctrine, viz., that this proposition is in itself a—as the present writer thinks, false—synthetic a priori proposition, for it can manifestly not be established by experience.”

⁹⁶ M. Hollis and E. Nell remark: “Since every significant statement is, for a positivist, analytic or synthetic and none is both, we can ask for a classification ... . We know of no positivist who has tried to produce empirical evidence for statements of (the sort in question). Nor can we see how to do so, unless by arguing that this is a matter of fact how people use terms ... which would prompt us to ask simply ‘So what’?” (M. Hollis and E. Nell, Rational Economic Man, Cambridge, 1975, p. 110).

⁹⁷ Cf. on this H. H. Hoppe, Kritik der kausalwissenschaftlichen Sozial-forschung, Opladen, 1983; and “Is Research Based on Causal Scientific Principles Possible in the Social Sciences,” in Ratio, XXV, 1, 1983.

⁹⁸ Cf. I. Kant, Kritik der reinen Vernunft, in Kant, Werke (ed. Weischedel), Wiesbaden, 1956, vol. II, p.45.

⁹⁹ This, of course, is a Kantian idea, expressed in Kant’s dictum that “reason can only understand what it has itself produced according to its own design” (Kritik der reinen Vernunft, in: Kant, Werke (ed. Weischedel), Wiesbaden, 1956, vol. II, p.23).

¹⁰⁰ Cf. on this P. Lorenzen, “Wie ist Objektivitaet in der Physik moeglich”; “Das Begruendungsproblem der Geometrie als Wissenschaft der raeumlichen Ordnung,” in: Methodisches Denken, Frankfurt/M., 1968; and Normative Logic and Ethics, Mannheim, 1969; F. Kambartel, Erfahrung und Struktur, Frankfurt/M., 1968, Kap. 3; also H. Dingier, Die Ergreifung des Wirklichen, Muenchen, 1955; P. Janich, Protophysik der Zeit, Mannheim, 1969.

¹⁰¹ On the problem of real vs. conventional or stipulated definitions cf. M. Hollis and E. Nell, Rational Economic Man, Cambridge, 1975, pp.177ff. “Honest definitions are, from an empiricist point of view, of two sorts, lexical and stipulative.” (p.177) But “when it comes to justifying (this) view, we are presumably being offered a definition of ‘definition’. Whichever category of definition the definition ... falls in, we need not accept it as of any epistemological worth. Indeed, it would not be even a possible epistemological thesis, unless it were neither lexical nor stipulative. The view is both inconvenient and self-refuting. A contrary opinion with a long pedigree is that there are ‘real’ definitions, which capture the essence of the thing defined” (p.178); cf. also B. Blanshard, Reason and Analysis, La Salle, 1964, pp.268f.

¹⁰² Cf. A. v. Melsen, Philosophy of Nature, Pittsburgh, 1953, esp. Chapters 1, 4.

¹⁰³ Cf. also H. H. Hoppe. Kritik der kausalwissenschaftlichen Sozialforschung, Opladen, 1983; and “Is Research Based on Causal Scientific Principles Possible in the Social Sciences” in Ratio XXV, 1, 1983. Here the argument is summed up thus (p.37): “(1) I and—as possible opponents in an argument—other people are able to learn. (This statement cannot be challenged without implicitly admitting that it is correct. Above all, it must be assumed by anyone undertaking research into causes. To this extent, proposition (1) is valid a priori.) (2) If it is possible to learn, one cannot know at any given time what one will know at any later time and how one will act on the basis of this knowledge. (If one did know at any given time what one will come to know at some later time, it would be impossible ever to learn anything—but see proposition (1) on this point.) (3) The assertion that it is possible to predict the future state of one’s own and/or another’s knowledge and the corresponding actions manifesting that knowledge (i.e. find the variables which can be interpreted as the causes) involves a contradiction. If the subject of a given state of knowledge or of an intentional act can learn, then there are no causes for this; however, if there are causes, then the subject cannot learn—but see again proposition (1).”

¹⁰⁴ M. Singer, Generalization in Ethics, London, 1863; P. Lorenzen, Normative Logic and Ethics, Mannheim, 1969; S. Toulmin, The Place of Reason in Ethics, Cambridge, 1970; F. Kambartel (ed.), Praktische Philosophie und konstruktive Wissenschaftstheorie, Frankfurt/M, 1974; A. Gewirth, Reason and Morality, Chicago, 1978.

¹⁰⁵ Causality, then, is not a contingent feature of physical reality, but rather a category of action, and as such, a logically necessary trait of the physical world. This fact explains why in spite of the possibility explained above of immunizing any hypothesis against possible refutations by postulating ever new uncontrolled variables, no nihilistic consequences regarding the undertaking of causal scientific research follow (cf. note 7 above). For if it is understood that natural science is not a contemplative enterprise but ultimately an instrument of action (cf. on this also J. Habermas, Knowledge and Human Interests, Boston, 1971, esp. Chapter 6), then neither the fact that hypotheses can be immunized nor that a selection between rival theories may not always seem possible (because theories are, admittedly, under- determined by data) ever affects the permanent existence of the rationality criterion of “instrumental success.” Neither immunizing hypotheses nor referring to paradigmatic differences makes anyone less subject to this criterion in whose light every theory ultimately proves commensurable. It is the inexorability of the rationality criterion of instrumental success which explains why—not withstanding Kuhn, Feyerabend et al.—the development of the natural sciences could bring about an ultimately undeniable, constant technological progress.

On the other hand, in the field of human action, where, as has been demonstrated above, no causal scientific research is possible, where predictive knowledge can never attain the status of empirically testable scientific hypotheses but rather only that of informed, not-systematically teachable foresight, and where in principle the criterion of instrumental success is thus inapplicable, the spectre of nihilism would seem indeed to be real, if one were to take the empiricist methodological prescriptions seriously. However, not only are these prescriptions inapplicable to the social sciences as empirical sciences (cf. on this H. H. Hoppe, Kritik der kausalwissenschaftlichen Sozialforschung, Opladen, 1983, esp. Chapter 2); as I show here, contrary to the empiricist doctrine according to which everything must be tried out before its outcome can be known, a priori knowledge regarding action exists, and apodictically true predictions regarding the social world can be made based on this a priori knowledge. It is this, then, that proves all nihilistic temptations unfounded.

¹⁰⁶ Cf. also, H. H. Hoppe, Handeln und Erkennen, Bern, 1976, pp.62f.

¹⁰⁷ Cf. also L. v. Mises, Human Action, Chicago, 1966; Epistemological Problems of Economics, New York, 1981; and The Ultimate Foundation of Economic Science, Kansas City, 1978.

¹⁰⁸ The aprioristic character of the concept of action—i.e., the impossibility of disproving the proposition that man acts and acting involves the categories explained above, because even the attempt to disprove it would itself be an action—has its complement in the field of epistemology, in the law of contradiction and the unthinkability of its denial. Regarding this law B. Blanshard writes: “To deny the law means to say that it is false rather than true, that its being false excludes its being true. But this is the very thing that is supposedly denied. One cannot deny the law of contradiction without presupposing its validity in the act of denying it” (B. Blanshard, Reason and Analysis, La Salle, 1964, p.276).

In fact, as L v. Mises indicates, the law of contradiction is implied in the epistemologically more fundamental “axioms of action.” (L v. Mises, The Ultimate Foundation of Economic Science, Kansas City, 1978, p.35). On the relation between praxeology and epistemology cf. also Chapter 7, n. 5.

¹⁰⁹ On the effects of minimum wages cf. also Y. Brozen and M. Friedman, The Minimum Wage: Who Pays?, Washington, 1966.

¹¹⁰ On the effects of rent control cf. also C. Baird, Rent Control: The Perennial Folly, San Francisco, 1980; F. A. Hayek et al., Rent Control: A Popular Paradox, Vancouver, 1975.

¹¹¹ Cf. also L. v. Mises, A Critique of Interventionism, New Rochelle, 1977.

¹¹² For such a position cf. A. J. Ayer, Language, Truth and Logic, New York, 1950.

¹¹³ On the emotivist position cf. C. L. Stevenson, Facts and Values, New Haven, 1963; and Ethics and Language, London, 1945; cf. also the instructive discussion by G. Harman, The Nature of Morality, New York, 1977; the classical exposition of the idea that “reason is and can be no more than the slave of the passions” is to be found in D. Hume, Treatise on Human Nature, (ed. Selby-Bigge), Oxford, 1970.

¹¹⁴ Cf. also Chapter 6 above.

¹¹⁵ For various “cognitivist” approaches toward ethics cf. K. Baier, The Moral Point of View, Ithaca, 1958;M. Singer, Generalization in Ethics, London, 1863; P. Lorenzen, Normative Logic and Ethics, Mannheim, 1969; S. Toulmin, The Place of Reason in Ethics, Cambridge, 1970; F. Kambartel (ed.), Praktische Philosophie und konstruktive Wissenschaftstheorie, Frankfurt/M., 1974; A. Gewirth, Reason and Morality, Chicago, 1978.

Another cognitivist tradition is represented by various “natural rights” theorists. Cf. J. Wild, Plato’s Modern Enemies and the Theory of Natural Law, Chicago, 1953; H. Veatch, Rational Man. A Modern Interpretation of Aristotelian Ethics, Bloomington, 1962; and For An Ontology of Morals. A Critique of Contemporary Ethical Theory, Evanston, 1968; and Human Rights. Fact or Fancy?, Baton Rouge, 1985; L. Strauss, Natural Right and History, Chicago, 1970.

¹¹⁶ Cf. K. O. Apel, Transformation der Philosophie, Vol. 2, Frankfurt/M, 1973, in particular the essay “Das Apriori der Kommunikationsgemeinschaft und die Grundlagen der Ethik”; also J. Habermas, “Wahrheitstheorien,” in: H. Fahrenbach (ed.), Wirklichkeit und Reflexion, Pfullingen, 1974; Theorie des kommunikativen Handelns, Vol. 1, Frankfurt/M, 1981, pp.44ff; and Moralbewusstsein und kommunikatives Handeln, Frankfurt/M., 1983.

Note the structural resemblance of the “a priori of argumentation” to the “a priori of action,” i.e., the fact, as explained in Chapter 6 above, that there is no way of disproving the statement that everyone knows what it means to act, since the attempt to disprove this statement would presuppose one’s knowledge of how to perform certain activities. Indeed, the indisputability of the knowledge of the meaning of validity claims and action are intimately related. On the one hand, actions are more fundamental than argumentation with whose existence the idea of validity emerges, as argumentation is clearly only a subclass of action. On the other hand, to say what has just been said about action and argumentation and their relation to each other already requires argumentation and so in this sense—epistemologically, that is—argumentation must be considered to be more fundamental than nonargumentative action. But then, as it is epistemology, too, which reveals the insight that although it might not be known to be so prior to any argumentation, in fact the development of argumentation presupposes action in that validity claims can only be explicitly discussed in an argument if the persons doing so already know what it means to have knowledge implied in actions; both, the meaning of action in general and argumentation in particular, must be thought of as logically necessary interwoven strands of a priori knowledge.

¹¹⁷ Methodologically, our approach exhibits a close resemblance to what A. Gewirth has described as the “dialectically necessary method” (Reason and Morality, Chicago, 1978, p.42-47)—a method of a priori reasoning modeled after the Kantian idea of transcendental deductions. Unfortunately, though, in his important study Gewirth chooses the wrong starting point for his analyses. He attempts to derive an ethical system not from the concept of argumentation, but from that of action. However, this surely cannot work, because from the correctly stated fact that in action an agent must, by necessity, presuppose the existence of certain values or goods, it does not follow that such goods then are universalizable and should thus be respected by others as the agent's goods by right. (On the requirement of normative statements to be universalizable cf. the following discussion in the text.) Rather, the idea of truth, or regarding morals, of universalizable rights or goods only emerges with argumentation as a special subclass of actions but not with action as such, as is clearly revealed by the fact that Gewirth, too, is not engaged simply in action, but more specifically in argumentation when he tries to convince us of the necessary truth of his ethical system. However, with argumentation recognized as the one and only appropriate starting point for the dialectically necessary method, a capitalist (i.e., non-Gewirthian) ethic follows, as will be seen. On the faultiness of Gewirth’s attempt to derive universalizable rights from the notion of action cf. also the perceptive remarks by M. MacIntyre, After Virtue, Notre Dame, 1981, pp.6465; J. Habermas, Moralbewusstsein und kommunikatives Handeln, Frankfurt/M., 1983, pp.110-111; and H. Veatch, Human Rights, Baton Rouge, 1985, pp. 159-160.

¹¹⁸ The relationship between our approach and a “natural rights” approach can now be described in some detail, too. The natural law or natural rights tradition of philosophic thought holds that universally valid norms can be discerned by means of reason as grounded in the very nature of man. It has been a common quarrel with this position, even on the part of sympathetic readers, that the concept of human nature is far “too diffuse and varied to provide a determinate set of contents of natural law” (A. Gewirth, “Law, Action, and Morality” in: Georgetown Symposium on Ethics. Essays in Honor of H. Veatch (ed. R. Porreco), New York, 1984, p.73). Furthermore, its description of rationality is equally ambiguous in that it does not seem to distinguish between the role of reason in establishing empirical laws of nature on the one hand, and normative laws of human conduct on the other. (Cf., for instance, the discussion in H. Veatch, Human Rights, Baton Rouge, 1985, p.62-67.)

In recognizing the narrower concept of argumentation (instead of the wider one of human nature) as the necessary starting point in deriving an ethic, and in assigning to moral reasoning the status of a priori reasoning, clearly to be distinguished from the role of reason performed in empirical research, our approach not only claims to avoid these difficulties from the outset, but claims thereby to be at once more straightforward and rigorous. Still, to thus dissociate myself from the natural rights tradition is not to say that I could not agree with its critical assessment of most of contemporary ethical theory; indeed I do agree with H. Veatch’s complementary refutation of all desire (teleological, utilitarian) ethics as well as all duty (deontological) ethics (see Human Rights, Baton Rouge, 1985, Chapter 1). Nor do I claim that it is impossible to interpret my approach as falling in a “rightly conceived” natural rights tradition after all. What I claim, though, is that the following approach is clearly out of line with what the natural rights approach has actually come to be, and that it owes nothing to this tradition as it stands.

¹¹⁹ The universalization principle figures prominently indeed among all cognitivist approaches to morals. For the classical exposition cf. I. Kant, “Grundlegung zur Metaphysik der Sitten” and “Kritik der praktischen Vernunft” in: Kant, Werke (ed. Weischedel), vol. IV, Wiesbaden, 1956.

¹²⁰ It might be noted here that only because scarcity exists is there even a problem of formulating moral laws; insofar as goods are superabundant (“free” goods) no conflict over the use of goods is possible and no action-coordination is needed. Hence, it follows that any ethic, correctly conceived, must be formulated as a theory of property, i.e., a theory of the assignment of rights of exclusive control over scarce means. Because only then does it become possible to avoid otherwise inescapable and unresolvable conflict. Unfortunately, moral philosophers, in their widespread ignorance of economics, have hardly ever seen this clearly enough. Rather, like H. Veatch (Human Rights, Baton Rouge, 1985, p. 170), for instance, they seem to think that they can do without a precise definition of property and property rights only to then necessarily wind up in a sea of vagueness and adhoceries. On human rights as property rights cf. also M. N. Rothbard, The Ethics of Liberty, Atlantic Highlands, 1982, Chapter 15.

¹²¹ Cf. J. Locke, Two Treatises on Government (ed. P. Laslett), Cambridge, 1970, esp. 2, 5.

¹²² On the nonaggression principle and the principle of original appropriation cf. also M. N. Rothbard, For A New Liberty, New York, 1978, Chapter 2; and The Ethics of Liberty, Atlantic Highlands, 1982, Chapters 6-8.

¹²³ This, for instance, is the position taken by J. J. Rousseau, when he asks us to resist attempts to privately appropriate nature given resources by, for example, fencing them in. In his famous dictum, he says, “Beware of listening to this impostor; you are undone if you once forget that the fruits of the earth belong to us all, and the earth itself to nobody” (“Discourse upon the Origin and Foundation of Inequality among Mankind” in: J. J. Rousseau, The Social Contract and Discourses (ed. G. Cole), New York, 1950, p.235). However, it is only possible to argue so if it is assumed that property claims can be justified by decree. Because how else could “all” (i.e., even those who never did anything with the resources in question) or “nobody” (i.e., not even those who actually made use of it) own something—unless property claims were founded by mere decree?!

¹²⁴ On the problem of the deriveability of “ought” from “is” statements cf. W. D. Hudson (ed.), The Is-Ought Question, London, 1969; for the view that the fact-value dichotomy is an ill-conceived idea cf. the natural rights literature cited in note 115 above.

¹²⁵ Writes M. N. Rothbard in The Ethics of Liberty, Atlantic Highlands, 1982, p.32: “Now, any person participating in any sort of discussion, including one on values, is, by virtue of so participating, alive and affirming life. For if he were really opposed to life he would have no business in such a discussion, indeed he would have no business continuing to be alive. Hence, the supposed opponent of life is really affirming it in the very process of discussion, and hence the preservation and furtherance of one’s life takes on the stature of an incontestable axiom.” Cf. also D. Osterfeld, “the Natural Rights Debate” in: Journal of Libertarian Studies, VII, I, 1983, pp.106f.

¹²⁶ Cf. also M. N. Rothbard, The Ethics of Liberty, Atlantic Highlands, 1982, p.45.

¹²⁷ On the importance of the definition of aggression as physical aggression cf. also M. N. Rothbard, The Ethics of Liberty, Atlantic Highlands, 1982, Chapters 8-9; the same, “Law, Property Rights and Pollution,” in: Cato Journal, Spring 1982, esp. pp. 60-63.

¹²⁸ On the idea of structural violence as distinct from physical violence cf. D. Seng-haas (ed.), Imperialismus und strukturelle Gewalt, Frankfurt/M., 1972.

The idea of defining aggression as an invasion of property values also underlies the theories of justice of both J. Rawls and R. Nozick, however different these two authors may have appeared to be to many commentators. For how could he think of his so-called difference-principle—“Social and economic inequalities are to be arranged so that they are ... reasonably expected to be to everyone’s—including the least advantaged one’s—advantage or benefit” (J. Rawls, A Theory of Justice, Cambridge, 1971, pp. 60-83; see also pp.75ff)—as justified unless Rawls believes that simply by increasing his relative wealth a more fortunate person commits an aggression, and a less fortunate one then has a valid claim against the more fortunate person only because the former’s relative position in terms of value has deteriorated?! And how could Nozick claim it to be justifiable for a “dominant protection agency” to outlaw competitors, regardless of what their actions would have been like (R. Nozick, Anarchy, State and Utopia, New York, 1974, pp.55f)? Or how could he believe it to be morally correct to outlaw so-called nonproductive exchanges, i.e., exchanges where one party would be better off if the other one did not exist at all, or at least had nothing to do with it (as, for instance, in the case of a blackmailee and a blackmailer), regardless of whether or not such an exchange involved physical invasion of any kind (ibid., pp. 83-86), unless he thought that the right existed to have the integrity of one’s property values (rather than its physical integrity) preserved?! For a devastating critique of Nozick’s theory in particular cf. M. N. Rothbard, The Ethics of Liberty, Atlantic Highlands, 1982, Chapter 29; on the fallacious use of the indifference curve analysis, employed both by Rawls and Nozick, cf. the same, “Toward a Reconstruction of Utility and Welfare Economics,” Center for Libertarian Studies, Occasional Paper No. 3, New York, 1977.

¹²⁹ Cf. also M. N. Rothbard, The Ethics of Liberty, Atlantic Highlands, 1982, p.46.

¹³⁰ For an awkward philosophical attempt to justify a late-comer ethic cf. J. Rawls, A Theory of Justice, Cambridge, 1971, pp.284ff; J. Sterba, The Demands of Justice, Notre Dame, 1980, esp. pp.58ff, pp.137ff; On the absurdity of such an ethic cf. M. N. Rothbard, Man, Economy and State, Los Angeles, 1972, p.427.

¹³¹ It should be noted here, too, that only if property rights are conceptualized as private property rights originating in time, does it then become possible to make contracts. Clearly enough, contracts are agreements between enumerable physically independent units which are based on the mutual recognition of each contractor’s private ownership claims to things acquired prior to the agreement, and which then concern the transfer of property titles to definite things from a specific prior to a specific later owner. No such thing as contracts could conceivably exist in the framework of a late-comer ethic!

¹³² On the difference between institutional aggression committed by the state as the very incorporation of socialism and common, criminal action cf. L. Spooner, No Treason, Colorado Springs, 1973, pp. 19-20.: .”..the government, like a highwayman, says to a man: “Your money, or your life.” And many, if not most, taxes are paid under the compulsion of that threat. The government does not, indeed, waylay a man in a lonely place, spring upon him from the roadside, and, holding a pistol to his head, proceed to rifle his pockets. But the robbery is none the less a robbery on that account; and it is far more dastardly and shameful. The highwayman takes solely upon himself the responsibility, danger, and crime of his own act. He does not pretend that he has any rightful claim to your money, or that he intends to use it for your own benefit. He does not pretend to be anything but a robber. He has not acquired impudence enough to profess to be merely a “protector,” and that he takes men’s money against their will, merely to enable him to “protect” those infatuated travellers, who feel perfectly able to protect themselves, or do not appreciate his peculiar system of protection. He is too sensible a man to make such professions as these. Furthermore, having taken your money, he leaves you, as you wish him to do. He does not persist in following you on the road, against your will; assuming to. be your rightful “sovereign,” on account of the “protection” he affords you. He does not keep “protecting” you, by commanding you to bow down and serve him; by requiring you to do this, and forbidding you to do that; by robbing you of more money as often as he finds it for his interest or pleasure to do so; and by brandishing you as a rebel, a traitor, and an enemy to your country, and shooting you down without mercy, if you dispute his authority or resist his demands. He is too much of a gentleman to be guilty of such impostures and insults and villainies as these. In short, he does not, in addition to robbing you, attempt to make you either his dupe or his slave. The proceedings of those robbers and murderers, who call themselves “the government,” are directly the opposite of these of the “single highwayman.”

¹³³ On the theory of the state cf. M. N. Rothbard, “The Anatomy of the State,” in: the same, Egalitarianism As A Revolt Against Nature, Washington, 1974; For A New Liberty, New York, 1978; and The Ethics of Liberty, Atlantic Highlands, 1982; H. H. Hoppe, Eigentum, Anarchie und Staat, Opladen, 1987; cf. also A. Herbert, The Right and Wrong of Compulsion by the State (ed. E. Mack), Indianapolis, 1978; H. Spencer, Social Statics, London, 1851; F. Oppenheimer, The State, New York, 1926; A. J. Nock, Our Enemy, the State, Delevan, 1983; cf. also J. Schumpeter’s remark directed against then as now prevalent views, notably among economists, that “the theory which construes taxes on the analogy of club dues or the purchase of a service of, say, a doctor only proves how far removed this part of the social sciences is from scientific habits of minds” (J. Schumpeter, Capitalism, Socialism and Democracy, New York, 1942, p. 198).

¹³⁴ In addition, the use of at least some weaponry, such as atomic bombs, against one’s subjects would be prohibitive, since the rulers could hardly prevent that they themselves would be hurt or killed by it, too.

¹³⁵ D. Hume, Essays, Moral, Political and Literary, Oxford, 1971, p.19; cf. also E. de La Boetie, The Politics of Obedience: The Discourse of Voluntary Servitude, New York, 1975.

¹³⁶ The classical exposition of the idea that in the “state of nature” no distinction between “just” and “unjust” can be made and that only the state creates justice is to be found in T. Hobbes, Leviathan, Oxford, 1946. That this “positivistic” theory of law is untenable has been implicitly demonstrated in Chapter 7 above. In addition, it should be noted that such a theory does not even succeed in doing what it is supposed to do: in justifying the state. Because the transition from the state of nature to a statist system can of course only be called justified (as opposed to arbitrary) if natural (pre- statist) norms exist that are the justificatory basis for this very transition.

For modern positivists cf. G. Jellinek, Allgemeine Staatslehre, Bad Homburg, 1966; H. Kelsen, Reine Rechtslehre, Wien, 1976; for a critique of legal positivism cf. F. A. Hayek, Law, Legislation and Liberty, 3 vols., Chicago, 1973-79.

¹³⁷ For the classical exposition of this view of politics cf. N. Machiavelli, The Prince, Harmondsworth, 1961; cf. also Q. Skinner, The Foundations of Modern Political Thought, Cambridge, 1978.

¹³⁸ Cf. on this and the following, M. N. Rothbard, Power and Market, Kansas City, 1977, pp. 182f.

¹³⁹ On the role of the intellectuals and teachers as advocates of socialism and statism cf. B. de Jouvenel, “The Treatment of Capitalism by Continental Intellectuals,” in: F.A. Hayek, Capitalism and the Historians, Chicago, 1954; L. v. Mises, The Anti-Capitalist Mentality, South Holland, 1972.

¹⁴⁰ On a free market monetary system and the effects of government intervention on this system cf. R. Paul and L. Lehrman, The Case For Gold, San Francisco, 1983, Chapters 2, 3; M. N. Rothbard, What Has Government Done to Our Money?, Novato, 1973.

¹⁴¹ On the problem of a free market production of law and order cf. Chapter 10 below.

¹⁴² Cf. on this also Chapter 5, n. 4.

¹⁴³ On this point cf. also Chapter 10 below.

¹⁴⁴ F. Oppenheimer, System der Soziologie, VoL II, Der Staat, Stuttgart, 1964. Oppenheimer sums up the peculiar, discriminatory character of state-provided goods, in particular of its production of law and order, in this way (pp.322-323): ‘the basic norm of the state is power. That is, seen from the side of its origin: violence transformed into might. Violence is one of the most powerful forces shaping society, but is not itself a form of social interaction. It must become law in the positive sense of this term, that is, sociologically speaking, it must permit the development of a system of ‘subjective reciprocity’: and this is only possible through a system of self- imposed restrictions on the use of violence and the assumption of certain obligations in exchange for its arrogated rights. In this way violence is turned into might, and a relationship of domination emerges which is accepted not only by the rulers, but under not too severely oppressive circumstances by their subjects as well, as expressing a ‘just reciprocity.’ Out of this basic norm secondary and tertiary norms now emerge as implied in it: norms of private law, of inheritance, criminal, obligational, and constitutional law, which all bear the mark of the basic norm of power and domination, and which are all designed to influence the structure of the state in such a way as to increase economic exploitation to the maximum level which is compatible with the continuation of legally regulated domination.” The insight is fundamental that “law grows out of two essentially different roots (...): on the one hand, out of the law of the association of equals, which can be called a ‘natural’ right, even if it is no ‘natural right,’ and on the other hand, out of the law of violence transformed into regulated might, the law of unequals.”

¹⁴⁵ Only the fact that democracy has become a sacred cow in modern politics can explain why the extent to which the idea of majority rule is ridden with inner contradictions is almost generally overlooked: first, and this is already decisive, if one accepts democracy as justified, then one would also have to accept a democratic abolishment of democracy and a substitution of either an autocracy or a libertarian capitalism for democracy—and this would demonstrate that democracy as such cannot be regarded as a moral value. In the same way it would have to be accepted as justified if majorities decided to eliminate minorities until the point at which there were only two people, the last majority, left, for which majority rule could no longer be applied, for logico-arithmetic reasons. This would prove once again that democracy cannot in itself be regarded as justifiable. Or, if one did not want to accept these consequences and instead adopted the idea of a constitutionally limited, liberal democracy, one would at the same time have to admit that the principles from which these limitations are derived must then be logically more fundamental than the majority rule—and this again would point to the fact that there can be nothing of particular moral value in democracy. Second, by accepting majority rule it is not automatically clear what the population is to which it should be applied. (The majority of which population is to decide?) Here there are exactly three possibilities. Either one applies the democratic principle once again with regard to this question, and decides to opt for the idea that greater majorities should always prevail over smaller ones—but then, of course, there would be no way of saving the idea of national or regional democracy, as one would have to choose the total, global population as one’s group of reference. Or, one decides that determining the population is an arbitrary matter—but in this case, one would have to accept the possibility of increasingly smaller minorities seceding from larger ones, with every individual being his own self-determining majority, as the logical end point of such a process of secession—and once again the unjustifiability of democracy as such would have been demonstrated. Third, one could adopt the idea that selecting the population to which the majority principle is applied is neither done democratically nor arbitrarily, but somehow differently—but then again, one would have to admit that whatever this different principle that would justify such a decision might be, it must be more fundamental than the majority rule itself, and majority rule in itself must be classified as completely arbitrary. Cf. on this M. N. Rothbard Power and Market, Kansas City, 1977, pp. 189ff, H. H. Hoppe, Eigentum, Anarchie und Staat, Opladen, 1987, Chapter 5.

¹⁴⁶ B. de Jouvenel, On Power, New York, 1949, pp. 9-10; on the social psychology of democracy cf. also the same, On Sovereignty, Cambridge, 1957; G. Mosca, The Ruling Class, New York, 1939; H. A. Mencken, Notes on Democracy, New York, 1926; on the tendency of democratic rule to “degenerate” to oligarchic rule cf. R. Michels, Zur Soziologie des Parteiwesens in der modernen Demokratie, Stuttgart, 1957.

¹⁴⁷ Cf. on this process, R. Bendix, Kings or People, Berkeley, 1978.

¹⁴⁸ On the fundamental difference between private business organizations and the state cf. L. v. Mises, Bureaucracy, New Haven, 1944.

¹⁴⁹ L. Spooner describes the supporters of the state as falling into two categories: “1. Knaves, a numerous and active class, who see in the government an instrument which they can use for their own aggrandizement or wealth. 2. Dupes—a large class, no doubt—each of whom, because he is allowed one voice out of millions in deciding what he may do with his own person and his own property, and because he is permitted to have the same voice in robbing, enslaving, and murdering others, that others have in robbing, enslaving and murdering himself, is stupid enough to imagine that he is a ‘free man,’ a ‘sovereign,’ that this is a ‘free government,’ ‘the best government on earth,’ and such like absurdities” (L Spooner, No Treason. The Constitution of No Authority, Colorado Springs, 1973, p. 18).

¹⁵⁰ Writes E. de la Boetie (The Politics of Obedience: The Discourse of Voluntary Servitude, New York, 1975, pp. 52-53): “He who domineers over you ... has indeed nothing more than the power that you confer upon him to destroy you ... . Resolve to serve no more, and you are at once freed. I do not ask that you place hands upon the tyrant to topple him over, but simply that you support him no longer; then you will behold him, like a great Colossus whose pedestal has been pulled away, fall of his own weight and break into pieces.”

¹⁵¹ On a strategy for liberty, and in particular on the importance of a libertarian movement for the achievement of these goals, cf. M. N. Rothbard, For A New Liberty, New York, 1978, Chapter 15; and The Ethics of Liberty, Atlantic Highlands, 1982, part 5.

¹⁵² Cf. on this also Chapter 3 above and Chapter 10 below.

¹⁵³ On the function of profit and loss cf. L. v. Mises, Human Action, Chicago, 1966, Chapter 15; and “Profit and Loss,” in: the same, Planning for Freedom, South Holland, 1974; M. N. Rothbard, Man, Economy and State, Los Angeles, 1970, Chapter 8.

¹⁵⁴ On the economics of government cf., esp. M. N. Rothbard, Power and Market, Kansas City, 1977, Chapter 5.

¹⁵⁵ Regarding democratically controlled allocations, various deficiencies have become quite evident. For instance J. Buchanan and R. Wagner write (The Consequences of Mr. Keynes, London, 1978, p. 19), “Market competition is continuous; at each purchase, a buyer is able to select among competing sellers. Political competition is intermittent; a decision is binding generally for a fixed number of years. Market competition allows several competitors to survive simultaneously ... . Political competition leads to an all-or-nothing outcome ... . in market competition the buyer can be reasonably certain as to just what it is that he will receive from his purchase. In political competition, the buyer is in effect purchasing the services of an agent, whom he cannot bind ... . Moreover, because a politician needs to secure the cooperation of a majority of politicians, the meaning of a vote for a politician is less clear than that of a ‘vote’ for a private firm.” (Cf. on this also J. Buchanan, “Individual Choice in Voting and the Market,” in: the same, Fiscal Theory and Political Economy, Chapel Hill, 1962; for a more general treatment of the problem J. Buchanan and G. Tullock, The Calculus of Consent, Ann Arbor, 1962.)

What has commonly been overlooked, though—especially by those who try to make a virtue of the fact that a democracy gives equal voting power to everyone, whereas consumer sovereignty allows for unequal “votes”—is the most important deficiency of all: that under a system of consumer sovereignty people might cast unequal votes but, in any case, they exercise control exclusively over things which they acquired through original appropriation or contract and hence are forced to act morally. Under a democracy of production everyone is assumed to have something to say regarding things one did not so acquire, and hence one is permanently invited thereby not only to create legal instability with all its negative effects on the process of capital formation, but, moreover, to act immorally. Cf. on this also L. v. Mises, Socialism, Indianapolis, 1981, Chapter 31; also cf. Chapter 8 above.

¹⁵⁶ M. N. Rothbard, Power and Market, Kansas City, 1977, p. 176.

¹⁵⁷ This is a very generous assumption, to be sure, as it is fairly certain that the so-called public sector of production attracts a different type of person from the very outset and boasts an unusually high number of inefficient, lazy, and incompetent people.

¹⁵⁸ Cf. L. v. Mises, Bureaucracy, New Haven, 1944; Rothbard, Power and Market, Kansas City, 1977, pp. 172ff; and For A New Liberty New York, 1978, Chapter 10; also M. and R. Friedman, The Tyranny of the Status Quo, New York, 1984, pp. 35-51.

¹⁵⁹ On the following cf. L. v. Mises, Human Action, Chicago, 1966, Chapter 23.6; M.N. Rothbard, Man Economy and State, Los Angeles, 1970, Chapter 7, esp. 7.4-6;

“Conservation in the Free Market,” in: Egalitarianism As A Revolt Against Nature, Washington, 1974; and For A New Liberty, New York, 1978, Chapter 13.

¹⁶⁰ On this and the following cf. L. v. Mises, Socialism, Indianapolis, 1981, part 3.2.

¹⁶¹ Thus states J. W. McGuire, Business and Society, New York, 1963, pp. 38-39: “From 1865 to 1897, declining prices year after year made it difficult for businessmen to plan for the future. In many areas new railroad links had resulted in a nationalization of the market east of the Mississippi, and even small concerns in small towns were forced to compete with other, often larger firms located at a distance. At the same time there were remarkable advances in technology and productivity. In short it was a wonderful era for the consumer and a frightful age for the producers especially as competition became more and more severe.”

¹⁶² Cf. on this G. Kolko, The Triumph of Conservatism, Chicago, 1967; and Railroads and Regulation, Princeton, 1965; J. Weinstein, The Corporate Ideal in the Liberal State, Boston, 1968; M. N. Rothbard and R. Radosh (eds.), A New History of Leviathan, New York, 1972.

¹⁶³ G. Kolko, The Triumph of Conservatism, Chicago, 1967, pp.4-5; cf. also the investigations of M. Olson, The Logic of Collective Action, Cambridge, 1965, to the effect that mass organizations (in particular labor unions), too, are not market phenomena but owe their existence to legislative action.

¹⁶⁴ On the following cf. L. v. Mises, Socialism, Indianapolis, 1981, part 3.2; and Human Action, Chicago, 1966, Chapters 25-26; M. N. Rothbard, Man, Economy and State, Los Angeles, 1970, pp.544ff; pp.585ff; and “Ludwig von Mises and Economic Calculation under Socialism,” in: L. Moss (ed.), The Economics of Ludwig von Mises, Kansas City, 1976, pp. 75-76.

¹⁶⁵ Cf. F. A. Hayek, Individualism and Economic Order, Chicago, 1948, esp. Chapter 9; I. Kirzner, Competition and Entrepreneurship, Chicago, 1973.

¹⁶⁶ Regarding large-scale ownership, in particular of land, Mises observes that it is normally only brought about and upheld by nonmarket forces: by coercive violence and a state-enforced legal system outlawing or hampering the selling of land. “Nowhere and at no time has the large scale ownership of land come into being through the working of economic forces in the market. Founded by violence, it has been upheld by violence and that alone. As soon as the latifundia are drawn into the sphere of market transactions they begin to crumble, until at last they disappear completely ... . That in a market economy it is difficult even now to uphold the latifundia, is shown by the endeavors to create legislation institutions like the ‘Fideikommiss’ and related legal institutions such as the English ‘entail’ ... . Never was the ownership of the means of production more closely concentrated than at the time of Pliny, when half the province of Africa was owned by six people, or in the day of the Merovingian, when the church possessed the greater part of all French soil. And in no part of the world is there less large-scale land ownership than in capitalist North America,” Socialism, Indianapolis, 1981, pp.325–326.

¹⁶⁷ Cf. on the following in M. N. Rothbard, Man, Economy and State, Los Angeles, 1970, Chapter 10, esp. pp.586ff; also W. Block, “Austrian Monopoly Theory. A Critique,” in: Journal of Libertarian Studies, 1977.

¹⁶⁸ L.v. Mises, Human Action, Chicago, 1966, p.359; cf. also any current textbook, such as P. Samuelson, Economics, New York, 1976, p.500.

¹⁶⁹ Cf. M. N. Rothbard, Man, Economy and State, Los Angeles, 1970, Chapter 10, esp. pp.604-614.

¹⁷⁰ M. N. Rothbard, Man, Economy and State, Los Angeles, 1970, p.607.

¹⁷¹ L.v. Mises, “Profit and Loss,” in: Planning for Freedom, South Holland, 1974, p.116.

¹⁷² In fact, historically, governmental anti-trust policy has almost exclusively been a practice of providing less successful competitors with the legal tools needed to hamper the operation of their more successful rivals. For an impressive assembly of case studies to this effect cf. D. Armentano, Antitrust and Monopoly, New York, 1982; also Y. Brozen, Is Government the Source of Monopoly? And Other Essays, San Francisco, 1980.

¹⁷³ G. de Molinari, “The Production of Security,” Center for Libertarian Studies, Occasional Paper No. 2, New York, 1977, p.3.

¹⁷⁴ Ibid., p.4.

¹⁷⁵ For various approaches of public goods theorists cf. J. Buchanan and G. Tullock, The Calculus of Consent, Ann Arbor, 1962; J. Buchanan, The Public Finances, Homewood, 1970; and The Limits of Liberty, Chicago, 1975; G. Tullock, Private Wants, Public Means, New York, 1970; M. Olson, The Logic of Collective Action, New York, 1965; W. Baumol, Welfare Economics and the Theory of the State, Cambridge, 1952.

¹⁷⁶ Cf. on the following M. N. Rothbard, Man, Economy and State, Los Angeles, 1970, pp. 883ff; and “The Myth of Neutral Taxation,” in: Cato Journal, 1981; W. Block, “Free Market Transportation: Denationalizing the Roads,” in: Journal of Libertarian Studies, 1979; and “Public Goods and Externalities: The Case of Roads,” in: Journal of Libertarian Studies, 1983.

¹⁷⁷ Cf. for instance, W. Baumol and A. Blinder, Economics, Principles and Policy, New York, 1979, Chapter 31.

¹⁷⁸ Another frequently used criterion for public goods is that of “non-rivalrous consumption.” Generally, both criteria seem to coincide: when free riders cannot be excluded, nonrivalrous consumption is possible; and when they can be excluded, consumption becomes rivalrous, or so it seems. However, as public goods theorists argue, this coincidence is not perfect. It is, they say, conceivable that while the exclusion of free riders might be possible, their inclusion might not be connected with any additional cost (the marginal cost of admitting free riders is zero, that is), and that the consumption of the good in question by the additionally admitted free rider will not necessarily lead to a subtraction in the consumption of the good available to others. Such a good would be a public good, too. And since exclusion would be practiced on the free market and the good would not become available for nonrivalrous consumption to everyone it otherwise could—even though this would require no additional costs—this, according to statist- socialist logic, would prove a market failure, i.e., a suboptimal level of consumption. Hence, the state would have to take over the provision of such goods. (A movie theater, for instance, might only be half-full, so it might be “costless” to admit additional viewers free of charge, and their watching the movie also might not affect the paying viewers; hence the movie would qualify as a public good. Since, however, the owner of the theater would be engaging in exclusion, instead of letting free riders enjoy a “costless” performance, movie theaters would be ripe for nationalization.) On the numerous fallacies involved in defining public goods in terms of nonrivalrous consumption cf. notes 12 and 16 below.

¹⁷⁹ Cf. on this W. Block, “Public Goods and Externalities,” in: Journal of Libertarian Studies, 1983.

¹⁸⁰ Cf. for instance, J. Buchanan, The Public Finances, Homewood, 1970, p.23; P. Samuelson, Economics, New York, 1976, p.160.

¹⁸¹ Cf. R. Coase, “The Lighthouse in Economics,” in: Journal of Law and Economics, 1974.

¹⁸² Cf. for instance, the ironic case that W. Block makes for socks being public goods in “Public Goods and Externalities,” in: Journal of Libertarian Studies, 1983.

¹⁸³ To avoid any misunderstanding here, every single producer and every association of producers making joint decisions can, at any time, decide whether or not to produce a good based on an evaluation of the privateness or publicness of the good. In fact, decisions on whether or not to produce public goods privately are constantly made within the framework of a market economy. What is impossible is to decide whether or not to ignore the outcome of the operation of a free market based on the assessment of the degree of privateness or publicness of a good.

¹⁸⁴ In fact, then, the introduction of the distinction between private and public goods is a relapse into the presubjectivist era of economics. From the point of view of subjectivist economics no good exists that can be categorized objectively as private or public. This, essentially, is why the second proposed criterion for public goods, i.e., permitting nonrivalrous consumption (cf. note 6 above), breaks down, too. For how could any outside observer determine whether or not the admittance of an additional free rider at no charge would not indeed lead to a reduction in the enjoyment of a good by others?! Clearly, there is no way that he could objectively do so. In fact, it might well be that one’s enjoyment of a movie or driving on a road would be considerably reduced if more people were allowed in the theater or on the road. Again, to find out whether or not this is the case one would have to ask every individual— and not everyone might agree. (What then?) Furthermore, since even a good that allows nonrivalrous consumption is not a free good, as a consequence of admitting additional free riders “crowding” would eventually occur, and hence everyone would have to be asked about the appropriate “margin.” In addition, my consumption may or may not be affected, depending on who it is that is admitted free of charge, so I would have to be asked about this, too. And finally, everyone might change his opinion on all of these questions over time. It is thus in the same way impossible to decide whether or not a good is a candidate for state (rather than private) production based on the criterion of nonrivalrous consumption as on that of nonexcludability. (Cf. also note 16 below).

¹⁸⁵ Cf. P. Samuelson, “The Pure Theory of Public Expenditure,” in: Review of Economics and Statistics, 1954; and Economics, New York, 1976, Chapter 8; M. Friedman, Capitalism and Freedom, Chicago, 1962, Chapter 2; F. A. Hayek, Law, Legislation and Liberty, vol. 3, Chicago, 1979, Chapter 14.

¹⁸⁶ In recent years economists, in particular of the so-called Chicago-school, have been increasingly concerned with the analysis of property rights (cf. H. Demsetz, “The Exchange and Enforcement of Property Rights,” in: Journal of Law and Economics, 1964; and “Toward a Theory of Property Rights,” in: American Economic Review, 1967; R. Coase, ‘The Problem of Social Cost,” in: Journal of Law and Economics, 1960; A. Alchian, Economic Forces at Work, Indianapolis, 1977, part 2; R. Posner, Economic Analysis of Law, Boston, 1977). Such analyses, however, have nothing to do with ethics. On the contrary, they represent attempts to substitute economic efficiency considerations for the establishment of justifiable ethical principles (on the critique of such endeavors cf. M. N. Rothbard, The Ethics of Liberty, Atlantic Highlands 1982, Chapter 26; W. Block, “Coase and Demsetz on Private Property Rights,” in: Journal of Libertarian Studies, 1977; R. Dworkin, “Is Wealth a Value,” in: Journal of Legal Studies, 1980; M. N. Rothbard, “The Myth of Efficiency” in: M. Rizzo (ed.), Time, Uncertainty, and Disequilibrium, Lexington, 1979). Ultimately, all efficiency arguments are irrelevant because there simply exists no nonarbitrary way of measuring, weighing, and aggregating individual utilities or disutilities that result from some given allocation of property rights. Hence, any attempt to recommend some particular system of assigning property rights in terms of its alleged maximization of “social welfare” is pseudo-scientific humbug (see in particular, M. N. Rothbard, ‘Toward a Reconstruction of Utility and Welfare Economics,” Center for Libertarian Studies, Occasional Paper No. 3, New York, 1977; also, L. Robbins, “Economics and Political Economy,” in: American Economic Review, 1981).

The “Unanimity Principle” which J. Buchanan and G. Tullock, following K. Wicksell (Finanztheoretische Untersuchungen, Jena, 1896), have repeatedly proposed as a guide for economic policy is also not to be confused with an ethical principle proper. According to this principle only such policy changes should be enacted which can find unanimous consent—and that surely sounds attractive; but then, mutatis mutandis, it also determines that the status quo be preserved if there is less than unanimous agreement on any proposal of change—and that sounds far less attractive because it implies that any given, present state of affairs regarding the allocation of property rights must be legitimate either as a point of departure or as a to-be-continued state. However, the public choice theorists offer no justification in terms of a normative theory of property rights for this daring claim as would be required. Hence, the unanimity principle is ultimately without ethical foundation. In fact, because it would legitimize any conceivable status quo, the Buchananites most favored principle is no less than outrightly absurd as a moral criterion (cf. on this also M. N. Rothbard, The Ethics of Liberty, Atlantic Highlands, 1982, Chapter 26; and “The Myth of Neutral Taxation,” in: Cato Journal, 1981, pp.549f).

Whatever might still be left for the unanimity principle, Buchanan and Tullock, following the lead of Wicksell again, then give away by reducing it in effect to one of “relative” or “quasi” unanimity.

¹⁸⁷ Cf. on this argument M. N. Rothbard, “The Myth of Neutral Taxation,” in: Cato Journal, 1981, p.533. Incidentally, the existence of one single anarchist also invalidates all references to Paretooptimality as a criterion for economically legitimate state action.

¹⁸⁸ Essentially the same reasoning that leads one to reject the socialist-statist theory built on the allegedly unique character of public goods as defined by the criterion of nonexcludability, also applies when instead, such goods are defined by means of the criterion of nonrivalrous consumption (cf. notes 6 and 12 above). For one thing, in order to derive the normative statement that they should be so offered from the statement of fact that goods which allow nonrivalrous consumption would not be offered on the free market to as many consumers as could be, this theory would face exactly the same problem of requiring a justifiable ethics. Moreover, the utilitarian reasoning is blatantly wrong, too. To reason, as the public goods theorists do, that the free-market practice of excluding free riders from the enjoyment of goods which would permit nonrivalrous consumption at zero marginal costs would indicate a suboptimal level of social welfare and hence would require compensatory state action is faulty on two related counts. First, cost is a subjective category and can never be objectively measured by any outside observer. Hence, to say that additional free riders could be admitted at no cost is totally inadmissible. In fact, if the subjective costs of admitting more consumers at no charge were indeed zero, the private owner-producer of the good in question would do so. If he does not do so, this reveals that to the contrary, the costs for him are not zero. The reason for this may be his belief that to do so would reduce the satisfaction available to the other consumers and so would tend to depress the price for his product; or it may simply be his dislike for uninvited free riders as, for instance, when I object to the proposal that I turn over my less-than-capacity-filled living room to various self- inviting guests for nonrivalrous consumption. In any case, since for whatever reason the cost cannot be assumed to be zero, it is then fallacious to speak of a market failure when certain goods are not handed out free of charge. On the other hand, welfare losses would indeed become unavoidable if one accepted the public goods theorists’ recommendation of letting goods that allegedly allow for nonrivalrous consumption to be provided free of charge by the state. Besides the insurmountable task of determining what fulfills this criterion, the state, independent of voluntary consumer purchases as it is, would first face the equally insoluble problem of rationally determining how much of the public good to provide. Clearly, since even public goods are not free goods but are subject to “crowding” at some level of use, there is no stopping point for the state, because at any level of supply there would still be users who would have to be excluded and who, with a larger supply, could enjoy a free ride. But even if this problem could be solved miraculously, in any case the (necessarily inflated) cost of production and operation of the public goods distributed free of charge for nonrivalrous consumption would have to be paid for by taxes. And this then, i.e., the fact that consumers would have been coerced into enjoying their free rides, again proves beyond any doubt that from the consumers’ point of view these public goods, too, are inferior in value to the competing private goods that they now no longer can acquire.

¹⁸⁹ The most prominent modern champions of Orwellian double talk are J. Buchanan and G. Tullock (cf. their works cited in note 3 above). They claim that government is founded by a “constitutional contract” in which everyone “conceptually agrees” to submit to the coercive powers of government with the understanding that everyone else is subject to it, too. Hence, government is only seemingly coercive but really voluntary. There are several evident objections to this curious argument. First, there is no empirical evidence whatsoever for the contention that any constitution has ever been voluntarily accepted by everyone concerned. Worse, the very idea of all people voluntarily coercing themselves is simply inconceivable, much in the same way that it is inconceivable to deny the law of contradiction. For if the voluntarily accepted coercion is voluntary, then it would have to be possible to revoke one’s subjection to the constitution and the state would be no more than a voluntarily joined club. If, however, one does not have the “right to ignore the state”— and that one does not have this right is, of course, the characteristic mark of a state as compared to a club—then it would be logically inadmissible to claim that one’s acceptance of state coercion is voluntary. Furthermore, even if all this were possible, the constitutional contract could still not claim to bind anyone except the original signers of the constitution.

How can Buchanan and Tullock come up with such absurd ideas? By a semantic trick. What was “inconceivable” and “no agreement” in pre- Orwellian talk is for them “conceptually possible” and a “conceptual agreement.” For a most instructive short exercise in this sort of reasoning in leaps and bounds cf. J. Buchanan, “A Contractarian Perspective on Anarchy,” in: Freedom in Constitutional Contract, College Station, 1977. Here we learn (p. 17) that even the acceptance of the 55 m.p.h, speed limit is possibly voluntary (Buchanan is not quite sure), since it ultimately rests on all of us conceptually agreeing on the constitution, and that Buchanan is not really a statist, but in truth an anarchist (p. 11).

¹⁹⁰ M. N. Rothbard, Man, Economy and State, Los Angeles, 1970, p.887.

¹⁹¹ This, first of all, should be kept in mind whenever one has to assess the validity of statist-interventionist arguments such as the following, by J. M. Keynes (“The End of Laissez Faire,” in: J. M. Keynes, Collected Writings, London 1972, vol. 9, p.291): “The most important Agenda of the state relate not to those activities which private individuals are already fulfilling but to those functions which fall outside the sphere of the individual, to those decisions which are made by no one if the state does not make them. The important thing for government is not to do things which individuals are doing already and to do them a little better or a little worse: but to do those things which are not done at all.” This reasoning not only appears phony, it truly is.

¹⁹² Some libertarian minarchists object that the existence of a market presupposes the recognition and enforcement of a common body of law, and hence a government as a monopolistic judge and enforcement agency.(Cf., for instance, J. Hospers, Libertarianism, Los Angeles, 1971; T. Machan, Human Rights and Human Liberties, Chicago, 1975.) Now, it is certainly correct that a market presupposes the recognition and enforcement of those rules that underlie its operation. But from this it does not follow that this task must be entrusted to a monopolistic agency. In fact, a common language or sign-system is also presupposed by the market; but one would hardly think it convincing to conclude that hence the government must ensure the observance of the rules of language. Just as the system of language then, the rules of market behavior emerge spontaneously and can be enforced by the “invisible hand” of self-interest. Without the observance of common rules of speech people could not reap the advantages that communication offers, and without the observance of common rules of conduct, people could not enjoy the benefits of the higher productivity of an exchange economy based on the division of labor. In addition, as I have demonstrated in Chapter 7, independent of any government, the rules of the market can be defended a priori as just. Moreover, as I will argue in the conclusion of this Chapter, it is precisely a competitive system of law administration and law enforcement that generates the greatest possible pressure to elaborate and enact rules of conduct that incorporate the highest degree of consensus conceivable. And, of course, the very rules that do just this are those that a priori reasoning establishes as the logically necessary presupposition of argumentation and argumentative agreement.

¹⁹³ Incidentally, the same logic that would force one to accept the idea of the production of security by private business as economically the best solution to the problem of consumer satisfaction also forces one, as far as moral-ideological positions are concerned, to abandon the political theory of classical liberalism and take the small but nevertheless decisive step (from there) to the theory of libertarianism, or private property anarchism. Classical liberalism, with L. v. Mises as its foremost representative in this century, advocates a social system based on the fundamental rules of the natural theory of property. And these are also the rules that libertarianism advocates. But classical liberalism then wants to have these laws enforced by a monopolistic agency (the government, the state)—an organization, that is, which is not exclusively dependent on voluntary, contractual support by the consumers of its respective services, but instead has the right to unilaterally determine its own income, i.e., the taxes to be imposed on consumers in order to do its job in the area of security production. Now, however plausible this might sound, it should be clear that it is inconsistent. Either the principles of the natural property theory are valid, in which case the state as a privileged monopolist is immoral, or business built on and around aggression—the use of force and of noncontractual means of acquiring resources—is valid, in which case one must toss out the first theory. It is impossible to sustain both contentions and not be inconsistent unless, of course, one could provide a principle that is more fundamental than both the natural theory of property and the state's right to aggressive violence and from which both, with the respective limitations regarding the domains in which they are valid, can be logically derived. However, liberalism never provided any such principle, nor will it ever be able to do so, since, as I demonstrated in Chapter 7, to argue in favor of anything presupposes one’s right to be free of aggression. Given the fact then that the principles of the natural theory of property cannot be argumentatively contested as morally valid principles without implicitly acknowledging their validity, by force of logic one is committed to abandoning liberalism and accepting instead its more radical child: libertarianism, the philosophy of pure capitalism, which demands that the production of security be undertaken by private business, too.

¹⁹⁴ Cf. on the problem of competitive security production G. de Molinari, “The Production of Security” Center for Libertarian Studies, Occasional Paper No. 2, New York, 1977; M. N. Rothbard, Power and Market, Kansas City, 1977, Chapter 1; and For A New Liberty, New York, 1978, Chapter 12; also: W.C. Wooldridge, Uncle Sam the Monopoly Man, New Rochelle, 1970, Chapters 5-6; M. and L. Tannehill, The Market for Liberty, New York, 1984, part 2.

¹⁹⁵ Cf. M. Murck, Soziologie der oeffentlichen Sicherheit, Frankfurt/M., 1980.

¹⁹⁶ On the deficiencies of democratically controlled allocation decisions cf. above, Chapter 9, n. 4.

¹⁹⁷ Sums up Molinari (“Production of Security,” Center for Libertarian Studies, Occasional Paper No. 2, New York, 1977, pp. 13-14): “If ... the consumer is not free to buy security wherever he pleases, you forthwith see open up a large profession dedicated to arbitrariness and bad management. Justice becomes slow and costly, the police vexatious, individual liberty is no longer respected, the price of security is abusively inflated and inequitably apportioned, according to the power and influence of this or that class of consumers.”

¹⁹⁸ Cf. the literature cited in note 21 above; also: B. Leoni, Freedom and the Law, Princeton, 1961; J. Peden, “Property Rights in Celtic Irish Law,” in: Journal of Libertarian Studies, 1977.

¹⁹⁹ Cf. T. Anderson and P. J. Hill, “The American Experiment in Anarcho-Capitalism: The Not So Wild, Wild West,” in: Journal of Libertarian Studies, 1980.

²⁰⁰ Cf. on the following H. H. Hoppe, Eigentum, Anarchie und Staat, Opladen, 1987, Chapter 5.

²⁰¹ Contrast this with the state’s policy of engaging in battles without having everyone’s deliberate support because it has the right to tax people; and ask yourself if the risk of war would be lower or higher if one had the right to stop paying taxes as soon as one had the feeling that the state’s handling of foreign affairs was not to one’s liking!

²⁰² And it may be noted here again that norms that incorporate the highest possible degree of consensus are, of course, those that are presupposed by argumentation and whose acceptance makes consensus on anything at all possible, as shown in Chapter 7.

²⁰³ Again, contrast this with state-employed judges who, because they are paid from taxes and so are relatively independent of consumer satisfaction, can pass judgments which are clearly not acceptable as fair by everyone; and ask yourself if the risk of not finding the truth in a given case would be lower or higher if one had the possibility of exerting economic pressure whenever one had the feeling that a judge who one day might have to adjudicate in one’s own case had not been sufficiently careful in assembling and judging the facts of a case, or simply was an outright crook.

²⁰⁴ Cf. on the following in particular, M. N. Rothbard, For A New Liberty, New York, 1978, pp.233ff.

²⁰⁵ Cf. B. Bailyn, The Ideological Origins of the American Revolution, Cambridge, 1967; J. T. Main, The Anti-Federalists: Critics of the Constitution, Chapel Hill, 1961; M. N. Rothbard, Conceived in Liberty, 4 vols., New Rochelle, 1975-1979.

²⁰⁶ Naturally, insurance companies would assume a particularly important role in checking the emergence of outlaw companies. Note M. and L. Tannehill: “Insurance companies, a very important sector of any totally free economy, would have a special incentive to dissociate themselves from any aggressor and, in addition, to bring all their considerable business influence to bear against him. Aggressive violence causes value loss, and the insurance industry would suffer the major cost in most such value losses. An unrestrained aggressor is a walking liability, and no insurance company, however remotely removed from his original aggression, would wish to sustain the risk that he might aggress against one of its own clients next. Besides, aggressors and those who associate with them are more likely to be involved in situations of violence and are, thus, bad insurance risks. An insurance company would probably refuse coverage to such people out of a foresighted desire to minimize any future losses which their aggressions might cause. But even if the company were not motivated by such foresight, it would still be forced to raise their premiums up drastically or cancel their coverage altogether in order to avoid carrying the extra risk involved in their inclination to violence. In a competitive economy, no insurance company could afford to continue covering aggressors and those who had dealings with aggressors and simply pass the cost on to its honest customers; it would soon lose these customers to more reputable firms which could afford to charge less for their insurance coverage.

What would loss of insurance coverage mean in a free economy? Even if [the aggressor] could generate enough force to protect itself against any aggressive or retaliatory force brought against it by any factor or combination of factors, it would still have to go completely without several economic necessities. It could not purchase insurance protection against auto accidents, natural disasters, or contractual disputes. It would have no protection against damage suits resulting from accidents occurring on its property. It is very possible that [it] would even have to do without the services of a fire extinguishing company, since such companies are natural outgrowths of the fire insurance business.

In addition to the terrific penalties imposed by the business ostracism which would naturally follow its aggressive act [it] would have trouble with its employees ... . [For] if a defense service agent carried out an order which involved the intentional initiation of force, both the agent and the entrepreneur or manager who gave him the order, as well as any other employees knowledgeably involved, would be liable for any damages caused” (M. and L. Tannehill, The Market for Liberty, New York, 1984, pp.110-111).

²⁰⁷ The process of an outlaw company emerging as a state would be even further complicated, since it would have to reacquire the “ideological legitimacy’ that marks the existence of the presently existing states and which took them centuries of relentless propaganda to develop. Once this legitimacy is lost through the experience with a pure free market system, it is difficult to imagine how it could ever be easily regained.