have referred innumerable times to the “free market,” the social
array of voluntary exchanges of goods and services. But despite
this abundance of treatment, their analysis has slighted the deeper
implications of free exchange. Thus, there has been general neglect
of the fact that free exchange means exchange of titles
of ownership to property, and that, therefore, the economist is
obliged to inquire into the conditions and the nature of the property
ownership that would obtain in the free society.
If a free society
means a world in which no one aggresses against the person or property
of others, then this implies a society in which every man has the
absolute right of property in his own self and in the previously
unowned natural resources that he finds, transforms by his own labor,
and then gives to or exchanges with others.
A firm property right in one’s own self and in the resources that
one finds, transforms, and gives or exchanges, leads to the property
structure that is found in free-market capitalism. Thus, an economist
cannot fully analyze the exchange structure of the free market without
setting forth the theory of property rights, of justice in property,
that would have to obtain in a free-market society.
In our analysis
of the free market in Man,
Economy, and State, we assumed that no invasion of property
takes place there, either because everyone voluntarily refrains
from such aggression or because whatever method of forcible defense
exists on the free market is sufficient to prevent any such aggression.
But economists have almost invariably and paradoxically assumed
that the market must be kept free by the use of invasive and unfree
actions – in short, by governmental institutions outside the market
A supply of
defense services on the free market would mean maintaining the axiom
of the free society, namely, that there be no use of physical force
except in defense against those using force to invade person
or property. This would imply the complete absence of a State apparatus
or government; for the State, unlike all other persons and institutions
in society, acquires its revenue, not by exchanges freely contracted,
but by a system of unilateral coercion called “taxation.” Defense
in the free society (including such defense services to person and
property as police protection and judicial findings) would therefore
have to be supplied by people or firms who
- gained their revenue voluntarily rather than by coercion and
- did not – as the State does – arrogate to themselves a compulsory
monopoly of police or judicial protection.
such libertarian provision of defense service would be consonant
with a free market and a free society. Thus, defense firms would
have to be as freely competitive and as noncoercive against noninvaders
as are all other suppliers of goods and services on the free market.
Defense services, like all other services, would be marketable and
and others who espouse the philosophy of laissez faire
believe that the freedom of the market should be upheld and that
property rights must not be invaded. Nevertheless, they strongly
believe that defense service cannot be supplied by the
market and that defense against invasion of property must therefore
be supplied outside the free market, by the coercive force of the
government. In arguing thus, they are caught in an insoluble contradiction,
for they sanction and advocate massive invasion of property by the
very agency (government) that is supposed to defend people against
invasion! For a laissez-faire government would necessarily
have to seize its revenues by the invasion of property called taxation
and would arrogate to itself a compulsory monopoly of defense services
over some arbitrarily designated territorial area.
theorists (who are here joined by almost all other writers) attempt
to redeem their position from this glaring contradiction by asserting
that a purely free-market defense service could not exist
and that therefore those who value highly a forcible defense against
violence would have to fall back on the State (despite its black
historical record as the great engine of invasive violence)
as a necessary evil for the protection of person and property.
offer several objections to the idea of free-market defense. One
objection holds that, since a free market of exchanges presupposes
a system of property rights, therefore the State is needed to define
and allocate the structure of such rights. But we have seen that
the principles of a free society do imply a very definite
theory of property rights, namely, self-ownership and the ownership
of natural resources found and transformed by one’s labor. Therefore,
no State or similar agency contrary to the market is needed to define
or allocate property rights. This can and will be done by the use
of reason and through market processes themselves; any other allocation
or definition would be completely arbitrary and contrary to the
principles of the free society.
A similar doctrine
holds that defense must be supplied by the State because of the
unique status of defense as a necessary precondition of market activity,
as a function without which a market economy could not exist. Yet
this argument is a non sequitur that proves far too much.
It was the fallacy of the classical economists to consider goods
and services in terms of large classes; instead, modern economics
demonstrates that services must be considered in terms of marginal
units. For all actions on the market are marginal.
If we begin
to treat whole classes instead of marginal units, we can discover
a great myriad of necessary, indispensable goods and services all
of which might be considered as “preconditions” of market activity.
Is not land room vital, or food for each participant, or clothing,
or shelter? Can a market long exist without them? And what of paper,
which has become a basic requisite of market activity in the complex
modern economy? Must all these goods and services therefore be supplied
by the State and the State only?
also assumes that there must be a single compulsory monopoly of
coercion and decision-making in society, that there must, for example,
be one Supreme Court to hand down final and unquestioned decisions.
But he fails to recognize that the world has lived quite well throughout
its existence without a single, ultimate decision-maker over its
whole inhabited surface.
for example, lives in a state of “anarchy,” of nongovernment, in
relation to the citizen of Uruguay – or of Ceylon. And yet the private
citizens of these and other countries live and trade together without
getting into insoluble legal conflicts, despite the absence of a
common governmental ruler. The Argentinian who believes he has been
aggressed upon by a Ceylonese, for example, takes his grievance
to an Argentinian court, and its decision is recognized by the Ceylonese
courts – and vice versa if the Ceylonese is the aggrieved party.
is true that the separate nation-States have warred interminably
against each other, the private citizens of the various countries,
despite widely differing legal systems, have managed to live together
in harmony without having a single government over them. If the
citizens of northern Montana and of Saskatchewan across the border
can live and trade together in harmony without a common government,
so can the citizens of northern and of southern Montana. In short,
the present-day boundaries of nations are purely historical and
arbitrary, and there is no more need for a monopoly government over
the citizens of one country than there is for one between the citizens
of two different nations.
is all the more curious, incidentally, that while laissez-faireists
should by the logic of their position, be ardent believers in a
single, unified world government, so that no one will live in a
state of “anarchy” in relation to anyone else, they almost never
are. And once one concedes that a single world government is not
necessary, then where does one logically stop at the permissibility
of separate states? If Canada and the United States can be separate
nations without being denounced as being in a state of impermissible
“anarchy,” why may not the South secede from the United States?
New York State from the Union? New York City from the state? Why
may not Manhattan secede? Each neighborhood? Each block? Each house?
Each person? But, of course, if each person may secede
from government, we have virtually arrived at the purely free society,
where defense is supplied along with all other services by the free
market and where the invasive State has ceased to exist.
The role of
freely competitive judiciaries has, in fact, been far more important
in the history of the West than is often recognized. The law merchant,
admiralty law, and much of the common law began to be developed
by privately competitive judges, who were sought out by litigants
for their expertise in understanding the legal areas involved.
The fairs of Champagne and the great marts of international trade
in the Middle Ages enjoyed freely competitive courts, and people
could patronize those that they deemed most accurate and efficient.
Let us, then,
examine in a little more detail what a free-market defense system
might look like. It is, we must realize, impossible to blueprint
the exact institutional conditions of any market in advance, just
as it would have been impossible 50 years ago to predict the exact
structure of the television industry today. However, we can postulate
some of the workings of a freely competitive, marketable system
of police and judicial services. Most likely, such services would
be sold on an advance subscription basis, with premiums paid regularly
and services to be supplied on call. Many competitors would undoubtedly
arise, each attempting, by earning a reputation for efficiency and
probity, to win a consumer market for its services.
it is possible that in some areas a single agency would outcompete
all others, but this does not seem likely when we realize that there
is no territorial monopoly and that efficient firms would be able
to open branches in other geographical areas. It seems likely, also,
that supplies of police and judicial service would be provided by
insurance companies, because it would be to their direct advantage
to reduce the amount of crime as much as possible.
objection to the feasibility of marketable protection (its desirability
is not the problem here) runs as follows: Suppose that Jones subscribes
to Defense Agency X and Smith subscribes to Defense Agency Y. (We
will assume for convenience that the defense agency includes a police
force and a court or courts, although in practice these two functions
might well be performed by separate firms.) Smith alleges that he
has been assaulted, or robbed, by Jones; Jones denies the charge.
How, then, is justice to be dispensed?
will file charges against Jones and institute suit or trial proceedings
in the Y court system. Jones is invited to defend himself against
the charges, although there can be no subpoena power, since any
sort of force used against a man not yet convicted of a crime is
itself an invasive and criminal act that could not be consonant
with the free society we have been postulating. If Jones is declared
innocent, or if he is declared guilty and consents to the finding,
then there if no problem on this level, and the Y courts then institute
suitable measures of punishment.
But what if
Jones challenges the finding? In that case, he can either take the
case to his X court system, or take it directly to a privately competitive
Appeals Court of a type that will undoubtedly spring up in abundance
on the market to fill the great need for such tribunals. Probably
there will be just a few Appeals Court systems, far fewer than the
number of primary courts, and each of the lower courts will boast
to its customers about being members of those Appeals Court systems
noted for their efficiency and probity. The Appeals Court decision
can then be taken by the society as binding. Indeed, in the basic
legal code of the free society, there probably would be enshrined
some such clause as that the decision of any two courts will be
considered binding, i.e., will be the point at which the court will
be able to take action against the party adjudged guilty.
legal system needs some sort of socially-agreed-upon cutoff point,
a point at which judicial procedure stops and punishment against
the convicted criminal begins. But a single monopoly court of ultimate
decision-making need not be imposed and of course cannot be in a
free society; and a libertarian legal code might well have a two-court
cutoff point, since there are always two contesting parties, the
plaintiff and the defendant.
objection to the workability of free-market defense wonders: May
not one or more of the defense agencies turn its coercive power
to criminal uses? In short, may not a private police agency use
its force to aggress against others, or may not a private court
collude to make fraudulent decisions and thus aggress against its
subscribers and victims? It is very generally assumed that those
who postulate a stateless society are also nave enough to believe
that, in such a society, all men would be “good,” and no one would
wish to aggress against his neighbor. There is no need to assume
any such magical or miraculous change in human nature.
some of the private defense agencies will become criminal, just
as some people become criminal now. But the point is that in a stateless
society there would be no regular, legalized channel for
crime and aggression, no government apparatus the control of which
provides a secure monopoly for invasion of person and property.
When a State exists, there does exist such a built-in channel, namely,
the coercive taxation power, and the compulsory monopoly of forcible
protection. In the purely free-market society, a would-be criminal
police or judiciary would find it very difficult to take power,
since there would be no organized State apparatus to seize and use
as the instrumentality of command. To create such an instrumentality
de novo is very difficult, and, indeed, almost impossible;
historically, it took State rulers centuries to establish a functioning
the purely free-market, stateless society would contain within itself
a system of built-in “checks and balances” that would make it almost
impossible for such organized crime to succeed. There has been much
talk about “checks and balances” in the American system, but these
can scarcely be considered checks at all, since every one of these
institutions is an agency of the central government and eventually
of the ruling party of that government. The checks and balances
in the stateless society consist precisely in the free market,
i.e., the existence of freely competitive police and judicial agencies
that could quickly be mobilized to put down any outlaw agency.
It is true
that there can be no absolute guarantee that a purely market society
would not fall prey to organized criminality. But this concept is
far more workable than the truly Utopian idea of a strictly
limited government, an idea that has never worked historically.
And understandably so, for the State’s built-in monopoly of aggression
and inherent absence of free-market checks have enabled it to burst
easily any bonds that well-meaning people have tried to place upon
it. Finally, the worst that could possibly happen would be for the
State to be reestablished. And since the State is what we have now,
any experimentation with a stateless society would have nothing
to lose and everything to gain.
object to marketable defense on the grounds that defense is one
of an alleged category of “collective goods” that can be supplied
only by the State. This fallacious theory is refuted elsewhere.
And two of the very few economists who have conceded the possibility
of a purely market defense have written:
individuals were willing to pay sufficiently high price, protection,
general education, recreation, the army, navy, police departments,
schools and parks might be provided through individual initiative,
as well as food, clothing and automobiles.
and Allen greatly underestimated the workability of private action
in providing these services, for a compulsory monopoly, gaining
its revenues out of generalized coercion rather than by the voluntary
payment of the customers, is bound to be strikingly less efficient
than a freely competitive, private enterprise supply of such services.
The “price” paid would be a great gain to society and to the consumers
rather than an imposed extra cost.
Thus, a truly
free market is totally incompatible with the existence of a State,
an institution that presumes to “defend” person and property by
itself subsisting on the unilateral coercion against private property
known as taxation. On the free market, defense against violence
would be a service like any other, obtainable from freely competitive
remain in this area could easily be solved in practice by the market
process, that very process which has solved countless organizational
problems of far greater intricacy. Those laissez-faire
economists and writers, past and present, who have stopped short
at the impossibly Utopian ideal of a “limited” government are trapped
in a grave inner contradiction. This contradiction of laissez
faire was lucidly exposed by the British political philosopher,
A is to compel
B to co-operate with him, or B to compel A; but in any case co-operation
cannot be secured, as we are told, unless, through all time, one
section is compelling another section to form a State. Very good;
but then what has become of our system of Individualism? A has
got hold of B, or B of A, and has forced him into a system of
which he disapproves, extracts service and payment from him which
he does not wish to render, has virtually become his master –
what is all this but Socialism on a reduced scale? … Believing,
then, that the judgment of every individual who has not aggressed
against his neighbour is supreme as regards his actions, and that
this is the rock on which Individualism rests – I deny that A
and B can go to C and force him to form a State and extract from
him certain payments and services in the name of such State; and
I go on to maintain that if you act in this manner, you at once
Murray N. Rothbard, Man,
Economy, and State (Princeton, N.J.: D. Van Nostrand, 1962;
2004 by the Mises Institute). [Publisher’s Note: Page numbers in
footnotes citing Man, Economy, and State refer to the present
Suppose that Smith, convinced of Jones’ guilt, “takes the law into
his own hands” rather than go through the court procedure? What
then? In itself this would be legitimate and not punishable as a
crime, since no court or agency may have the right, in a free society,
to use force for defense beyond the selfsame right of each individual.
However, Smith would then have to face the consequence of a possible
countersuit and trial by Jones, and he himself would have to face
punishment as a criminal if Jones is found to be innocent.
The Law Code of the purely free society would simply enshrine the
libertarian axiom: prohibition of any violence against the person
or property of another (except in defense of someone’s person or
property), property to be defined as self-ownership plus the ownership
of resources that one has found, transformed, or bought or received
after such transformation. The task of the Code would be to spell
out the implications of this axiom (e.g., the libertarian sections
of the law merchant or common law would be co-opted, while the statist
accretions would be discarded). The Code would then be applied to
specific cases by the free-market judges, who would all pledge themselves
to follow it.
Man, Economy, and State, pp. 1029–36.
Auberon Herbert and J.H. Levy, Taxation and Anarchism (London:
The Personal Rights Association, 1912), pp. 2–3.