Archive for November, 2012

Notes on The Practical Case For Anarcho-Capitalism

November 3, 2012

In the lecture below, Peter Leeson starts by defining anarchy and justifying why it is important to study how social order emerges privately. A large portion of countries already have weak or failing governments. Also a quarter of world GDP comes from international commerce (in absence of a world government).

He digs into three levels of his case: self-enforcing contracts in presence of government backdrop (the easy case), solutions in absence of government backdrop and with force asymmetry, and finally comparing the efficiency of anarchy to government (the hard case).

He covers two broad classes of solutions to building trust and enabling social order: reputation and signalling.
Reputation works in many cases (he gives everyday examples, which are numerous since we rarely fall back on expensive government court services), but has some limitation if there is no repeat interraction (or if individuals are impatient and discount long-term gains), or if the population is large (hard to communicate) or diverse (non-uniform expectations).
Signaling is an ex-ante mitigation (before the interaction) which improves on reputation by itself.
He gives examples of restaurant reputation, brand signaling (banks, Coca Cola), the not so wild Wild West, international arbitration, diamond traders, mafia rules, ancient Iceland and Somalia.

To address the hard case, he starts by clarifying the notion of relevant alternative. Is is irrelevant to compared Iceland, the Wild West or Somalia to the modern US. Example of Somalia is important, as it is doing well on many development indicators compared to stateful Somalia and it’s African neighbors.
He also makes an interesting point about stability of anarchy. Does it devolve into a state? Somalia  is good example, where different factions are keeping a balance of power without tendency towards centralization (except whe foreign government step in to nominate the official government).



Notes on Bruce Benson at Libertopia 2010

November 3, 2012

Benson mostly focuses on private enforcement of crimes. Crimes is the category of offenses prosecuted by the state, not by the victim. Later in the talk he argues for reforming this categorization (decriminalizing crimes) and also restoring the principle of compensating the victim.

He gives a quick historical perspective explaining how the system shifted away from victim compensation. In short, it is the result of public enforcement (crimes provide justification for taxation, punishement provides a rationale to sooth un-compensated victims).

He then tries to analyze how market-based law enforcement would probably work, in broad strokes. He offers some thoughts on marketization process (rolling back current system towards competitive marketplace).

The different stages of crime: crime prevention, some crimes still happen (and get reported or witnessed), criminal is pursued, prosecuted and restitution is collected. He addresses each stage.

There is already private security guards (in fact a growing number, with 3 to 1 ratio to public cops in US). There are different functions and qualifications. Nightwatcher is probably cheaper. Incentives are better than public cops (less abuse because they are liable and firable, salary paid by customer instead of seizing assets, incentive to prevent unlike public cops who need measurable crime).
Example of a firm who offers such service successfully in some low-income housing areas. Service paid by landlords. Focus is on prevention and community-building, with properly trained personnel.

Changing back to a system of compensation would also help reporting of crimes. Currently, it is estimated that 40% of crimes are reported. Compensation offers some incentive to report, whereas low arrest-rate and high costs of assisting investigation are deterrant.

Right to compensation would also improve pursuit of criminals. Such right could be transferred and insurances and bounty hunters would offer services. Historical example of private railroad cops and early bounty hunters. Later, bounty hunting was affected by government payment as opposed to payment by the victim, which had a negative effect on the profession.

He offers some example of private prosecution and also bargaining with the victim (would become more common under a system of compensation).
He also offers counter-example of “private attorney generals” in environmental law in US. Those just extend the coercive power of government bureaucracy and create perverse incentives.

Finally, there would be a range of options for collecting the restitution, from bargaining, ostracism, using force, and imprisonment. Some would pay, others would have to pay off their debt. In some cases, the bargain would impose additional contractual constraints on the criminal.

The discussion ended with a note that crime would be less in a free society overall, and we are currently seeing trends towards market solution to social order (increasing number of private security, arbitration becoming more common).