This text is part of a lecture, sponsored by the Libertarian Longhorns, given on 8 September 2008 at the University of Texas.
Good evening. Tonight I’ll be talking about socialism: what it is, the problems it creates, and counterpoint of solutions that are offered by the free market. But I will be doing this for a line of production that most people take for granted should be managed by the state: internal security. I’ll get into the nuts and bolts of the problems of socialism, talk about the problems of power that are particular to the production of internal security, and I will discuss free market solutions and alternatives to the production of internal security.
The Struggle Between Socialism and Capitalism
The popular view of the struggle between socialism and capitalism is that it was the century-long struggle between socialist states and non-socialist states. In point of fact, the struggle between socialism and capitalism pre-dates the Communist Manifesto, and it continues to this day. In each country in the world, the twentieth century saw a slide toward socialism and only the smallest amount of reform to recover free markets has taken place. This slide toward socialism took place in our own country also at the state level, the county level, and down to the municipal level. We have, in our day, capitalism in name only across the globe. Rarely are the ideologies themselves spelled out and compared and understood.
So, it is to this struggle to establish free markets that this speech is dedicated. What are very difficult to overcome are the prejudices that people develop by living day to day with socialism. This institutional momentum of preferring that which is to that which could be, this unthinking conservatism, has been called the tyranny of the status quo. It leads to rationalization. One of my favorite examples of the rationalization of socialist policies occurred at the American Enterprise Institute in 1990.
First, remember the context. Whereas the classic Marxist formulation of socialism was "from each according to his ability, to each according to his need," Gorbachev, in his famous book Perestroika, had recast this as "from each according to his ability, to each according to his work." Socialism is classically defined as state ownership of the means of production, but socialist reforms in China and Russia had by this time relinquished to the private sector the freedom for all manner of lines of production to be privately owned, as is natural and right.
Now, the party in question was the late Anatoly Sobchak, first mayor of St. Petersburg after the Perestroika reforms. He was discussing economic issues of the post communist transition with Yuri Maltsev. Yuri Maltsev was a member of a senior team of Soviet economists that worked on President Gorbachev’s Perestroika reform package until 1989. He had, at that time, recently come to the US to be a professor of economics. So, there at lunch, Sobchak and Maltsev were discussing privatization of various lines of production. Sobchak told Maltsev, "bread is too important for people to leave it to private business."
Of course, the proper position is that bread is too important to allow it to be socialized. In the US, where there are free markets in bread production, we have supermarkets everywhere, open 24 hours a day. In the USSR, under socialized bread production, there were shortages and bread lines.
This brings to mind a great poem and a great book, both by R. W. Grant, The Incredible Bread Machine. I think I won’t spoil things for you by telling you that The Incredible Bread Machine is a metaphor for the free market.
Socialism and Policing
OK, so much for history and context. What I aim to explain now is what socialism is, what its problems are, and how policing, in particular, suffers from these problems.
The root problems are twofold. They are taxation and monopoly. Taxation means to take money from people without their consent. Monopoly means to prevent others from competing in a line of production. For instance, the delivery of first-class letters in the US is monopolized by the US Postal Service. No one can compete in that line of production. Similarly, the state by its very nature monopolizes the adjudication of disputes within its territory. You may choose a private arbiter for disputes, but your disputant can always force you to accept a government court, even when you have made a prior agreement with your disputant to the contrary. And, of course, disputes involving the government as a disputant are also heard in government courts.
I want to focus specifically on policing and patrols, but before we move to that subject, it is necessary to say a few words about the allied subjects of law, legislation, and adjudication. The production of law and policing are usually considered to be a unified line of production with one organization acting in concert, as portrayed in the TV show Law and Order. The reality is that they are related and they interact, but are distinct functions. Consider, first, adjudication.
A judge listens to the facts of a case and makes a determination about whether a disputant is culpable, and what form of redress is due to the victim. In the libertarian conception of justice, there is no such thing as a victimless crime — indeed, there are no crimes, only torts. As such, there is no need for criminal law, and no need for state prosecutors. For instance, if a murder or rape or theft or burglary is committed, then the victim or another party with standing seeks restitution from the perpetrator. There is no need for a prosecutor.
The libertarian does not recognize as unjust crimes such as prostitution, gambling, or drug use. Instead, we favor a traditional understanding of justice. Again, this lecture is not about justice. I encourage you to read Rothbard and de Jasay on justice. But it is clear that a libertarian conception of justice is consistent with a free market in adjudication of disputes. There is no reason for the field to be monopolized.
Let us now turn to policing. What are the functions of police? They are:
- patrol for the purpose of catching tortfeasors in the act, stopping them, identifying them, and giving the relevant information to the courts
- patrol for the purpose of deterring would-be tortfeasors from acting
- investigation for the purpose of finding tortfeasors, and then identifying them and/or arresting them to conduct them to the courts
Now, modern police have a lot more to do, such as:
- escorting funeral processions
- conducting vice raids
- writing tickets for traffic violations
- rendering aid when called, from cats in trees to health emergencies
- making public appearances for public relations purposes
What I argue here is that the first three functions — catching tortfeasors in the act, deterring would-be tortfeasors, and investigation — are the proper functions of internal security. The other functions are other lines of production that have been placed in the hands of modern police, but are not matters of internal security.
So, the question boils down to this: how does socialist provision of patrol services compare to capitalist provision of patrol services?
The Knowledge Problem
The first problem that socialism runs into is the problem of knowledge. This is not very important for the production of patrol, but I include it for completeness. Friedrich Hayek explained this problem in his famous article The Use of Knowledge in Society. To the extent that planning is done by a central planner, the less likely he is to have the requisite knowledge of particular, localized knowledge necessary to make good decisions. Hayek has in mind knowledge of this sort:
To know of and put to use a machine not fully employed, or somebody’s skill which could be better utilized, or to be aware of a surplus stock which can be drawn upon during an interruption of supplies, is socially quite as useful as the knowledge of better alternative techniques. The shipper who earns his living from using otherwise empty or half-filled journeys of tramp-steamers, or the estate agent whose whole knowledge is almost exclusively one of temporary opportunities, or the arbitrageur who gains from local differences of commodity prices — are all performing eminently useful functions based on special knowledge of circumstances of the fleeting moment not known to others.
In the US, police are generally deployed at the city or county level; and, we live in a relatively free market economy. Therefore, all of the inputs to the production of security — cars, uniforms, direct labor, guns, chemical mace, and so forth — are available upon the market at a market price. For this reason, price signals for these inputs already contain all requisite particular knowledge of time and place. The remaining knowledge problems for patrol (e.g., where to patrol within a neighborhood and the methods to employ) are technical problems, not knowledge problems in the Hayekian sense.
The Calculation Problem
The much more formidable problem is the calculation problem. In 1922, Ludwig von Mises wrote his pathbreaking essay Economic Calculation in the Socialist Commonwealth wherein he showed that because of the very important role that profit-and-loss accounting plays in decision-making in all lines of production, no fully socialist commonwealth could function with a complex economy. As this relates to policing, a Sheriff has no criteria to set a budget for his staffing. Even if he knows that increasing his staff by 25 patrolmen and putting them on patrol in neighborhoods A, B, and C is almost certain to reduce burglaries in those neighborhoods by 10%; because his services are not on a market, there is no way for him to know whether this is the best use of the marginal resources of neighborhoods A, B, and C. That is, if A, B, and C are to be taxed $100 more per year to reduce burglaries by 10%, is this a deal that A, B, and C would take?
Having read in the literature of patrol studies, I can tell you that knowledge of this sort of tradeoff is impossible to obtain, and so much so, that most theorists don’t even bother. They use arbitrary rules of thumb to set patrol staffing.
Literally speaking, those who deploy patrols have no idea how effective their patrols are. They may know how many miles they log, how many criminals they catch in the act, and what the rate of crime is in an area; but this is like knowing how many gigabytes are on a computer, and how many computation cycles can be done in its processor, but without any real idea of how these facts relate to consumer satisfaction.
If computers were supplied in a socialist mode of production, like policing is supplied, then you would get exactly the computer that hardware designers thought you needed. You would have no choice in how often you got a computer. Your sole feedback is that you, along with everyone in your neighborhood could vote once every four years for either a Democrat or Republican computer design lead. This gives you a clue into how far we are from a rational system of policing in the US.
Incentive Problems: Shirking, Quality, Investment
Of course, the incentive problems of socialism are well known. The police department personnel, from the patrolman to the dispatcher to the clerks to the 911 operators to the managers to the police chief, are paid without regard to how well they have satisfied the consumers of their services. For this reason, shirking of work is done. Without competition from another organization, if everyone shirks the same amount, then it appears that all are equally productive. And so police are famous for taking long lunches and loitering and talking on their cell phones while on duty. Compare their culture with, say, FedEx drivers. The difference is clear.
Without the market pressure to perform, the amount and quality of policing is lower than it would otherwise be. And, the cost of policing is higher. In an office of a business, office supplies are economized upon. Every item that a worker wishes to have — a hole punch, a laptop versus a desktop computer, flying business class instead of coach, etc. — these things are evaluated for the marginal contribution they will make to the satisfaction of the customer. They are weighed on the omnipresent scale of the bottom line. If the manager thinks these things will ultimately add value for the customer, then he will approve their purchase; otherwise, he will not. Of course, there are also items that are purchased as perquisites for employees, which are, ultimately, part of their compensation.
But with regard to tools of the trade, government patrolmen carry guns, chemical mace, tasers, batons, and many other tools. Their cost-effectiveness is never plumbed. Studies are made, reports are written, and recommendations are made on the use of new types of equipment, from night vision goggles to infrared cameras to even tanks. But these things are never measured against the satisfaction of the populace. Instead, just as with every line of socialist production, salaries are greater than in the free market for similar services; and, capital investment and operating costs are greater than in the free market for similar services. This happens in the production of schooling, postal services, adjudication, charity for the poor, and it also happens in policing.
So, production is of low quality, low quantity, high cost; and, at the same time, there is over-investment in the line of production. But that’s not all!
Distribution and Budgeting
For now let us examine the socialist mode of distribution. One of the worst mistakes of sloppy thinking that people sometimes make about the production of security is to think that the government "establishes order." Like there’s some big blob of order out there, somewhere. The fact is that murder, rape, robbery, theft, burglary, and assault have always happened and always will. We can reduce their frequency, their severity, and catch higher percentages of the tortfeasors, but to do so requires an investment in capital (cars and guns and such) and the hiring and deployment of officers to specific locations and beats and random patrols. The question facing a police chief is, given that I have X officers and a specific budget for gasoline and other expenditures, how do I deploy my officers?
His answer, almost universally, is to preferentially deploy officers to areas of high crime. It does not take a genius to realize that high crime areas are also where property values are low. As a result, the socialist mode of production lives up to its promise of taking taxes according to ability to pay and giving out production according to need. This may sound nice, but there are several problems with this arrangement that I do not have time to cover in detail. But briefly, the patrols in high crime areas tend to be of the lowest productivity, since officers are more likely to be injured there, and therefore behave more timidly. The residents in high crime areas are more likely to engage in black market activities. This leads them to fear and distrust the government patrol. This results in a reinforcement mechanism, where the residents dislike the police, which leads to more police fear, which leads to less effective patrol.
Let us move on to the method of budget setting. Generally, budgets for police are set by bureaucratic rules of thumb (e.g., number of full-time patrols per 10,000 residences) or by reference to crime statistics such as the FBI’s Uniform Crime Reports. Generally, you might think that if crime goes down, the police department is being more effective with its resources and therefore its budget can be reduced. This is not the case. Generally, when crime goes down, police chiefs push for more funding as a reward for doing a good job. Of course, if crime goes up, they also need more money, so that they can combat crime that is on the rise.
Pardoning me for belaboring this point. I have already shown that police departments have no rational method for deciding how to spend a given budget, but now we see that police departments do not have any rational means by which their budgets are set.
Duty, Enforcement Error, and Enforcement Abuse
The monopolization of policing combined with lack of incentive to produce well has caused a number of problems: lack of duty, high enforcement error, and high enforcement abuse.
Lack of duty is best explained by the court case of Warren v. District of Columbia, one of the leading cases of this type. As explained by Peter Kasler in an essay on the subject:
Two women were upstairs in a townhouse when they heard their roommate, a third woman, being attacked downstairs by intruders. They phoned the police several times and were assured that officers were on the way. After about 30 minutes, when their roommate’s screams had stopped, they assumed the police had finally arrived. When the two women went downstairs they saw that in fact the police never came, but the intruders were still there. As the Warren court graphically states in the opinion: “For the next fourteen hours the women were held captive, raped, robbed, beaten, forced to commit sexual acts upon each other, and made to submit to the sexual demands of their attackers.”
The three women sued the District of Columbia for failing to protect them, but D.C.’s highest court exonerated the District and its police, saying that it is a "fundamental principle of American law that a government and its agents are under no general duty to provide public services, such as police protection, to any individual citizen."
No such state of affairs would exist in a free market. Express and implicit guarantees are made with every service rendered. Just this past month, Netflix had a 3-day hiccup in their service. It didn’t take a customer to sue. It didn’t even take a customer to complain. They spontaneously gave a credit on their service to every affected customer.
But not only do police have no duty to protect you, they either have no duty to give you restitution when they do you harm, or restitution is very difficult to obtain. Radley Balko wrote a book on this: Overkill: The Rise of Paramilitary Police Raids in America. It’s published by the Cato Institute.
What is horrifying and sad is that high enforcement error is a necessary consequent of socializing this line of production. This higher enforcement error results in damage to property and loss of lives directly by the people charged with protecting them. According to Balko’s research, he was able to document 42 deaths of innocents due to botched raids from 1985 to 2008.
Enforcement abuse, Alienation, and "Professionalization"
Now, due to all the problems of enforcement error, low quantity, poor quality, maldistribution of resources, and high costs; police and the public are alienated from one another. This results in another negative phenomenon: enforcement abuse. By enforcement abuse, I mean selectively lax enforcement or selectively stringent enforcement. Many are familiar with the "thin blue line" and "brotherhood" mentality that police maintain. It means that police almost never give tickets to other police or members of their immediate family, and it means that those citizens that are most alienated from the police are most often ticketed rather than warned, and most often stopped or checked or detained.
The rise of tax-funded policing in the United States during the 20th century can be characterized in a sociological schema as having proceeded in three phases. In the first phase, tax-funded extraordinary patrol was assigned (at first in high-population-density, high-crime areas) to assist citizens in catching perpetrators in the act of violations of right. Increases in duties and powers of the tax-funded patrol, and decreases in service and efficiency that are a necessary consequent of socialization of any line of production, resulted in a rise in abuses which led to the second phase: "professionalization" of the tax-funded police. Professionalization is a term that encompasses diverse developments, from the procedural rules of Miranda and the Exclusionary Rule, to the rise of college curricula in Criminal Justice for patrolmen, to extensive empirical studies on patrol efficacy, to the scientism of endless statistical regressions on crime rates.
I do not mean to say that statistical regression cannot be a useful tool in understanding crime. In some cases, it can. For instance, the work of John Lott is excellent. Instead, I make an analogy from the work of Peter Bauer on development economics. The important factors about development cannot be put into mathematics (cultural traditions, attitudes, habits, customs, etc.). Similarly, the important factors about crime rates cannot be put into mathematics (awareness, behaviors, habits, attitudes, etc.). Broadly speaking, crime rates are related to factors over which patrol agents have no immediate control (employment opportunities, teen pregnancy, alcoholism, single parenting, demographics, etc.), and even those things over which they have control (e.g., patrol intensity) affect crime rates to such a small degree that the elasticity is not even measurable.
Professionalism has led to alienation of the community from the tax-funded, policing class and a concomitant alienation of the tax-paying community from its proper, primary role in the provision of defense.
In The Privatization of Policing (Georgetown University Press, 1999), Brian Forst writes:
The notion that police were the experts contributed to police arrogance and a sense among the police that members of the community were inferior. Effective use of technology and emphasis on efficiency need not interfere with a healthy relationship between the police and the public, but the leaders of the professional era managed to replace a friendly service attitude with a cool, detached one and thus to severely damage that relationship. Police in many jurisdictions further alienated the public by spending less and less time on the street.
This has led to a third phase, whereby tax-funded police attempt to address this alienation and redress their inefficiencies by means of the mode of patrol known as community policing.
Community policing does hold out great hope, because it simultaneously empowers communities to assert their authority in crime prevention activities, and addresses the at-risk conditions (see note 19, above) that have the greatest long-term impact on crime rates.
Unfortunately for tax-funded police, they are constitutionally unable to perform community policing.
Poulin and Nemeth cite several reasons for this fundamental contradiction in their book Private Security and Public Safety: A Community-Based Approach, in a section titled The Incompatibility of Public Police and Community-Based Policing Initiatives: vehicles vs. face-to-face patrols, reactive dynamics vs. integrative dynamics, "thin blue line" culture, police unions, and re-education of patrolmen, among many reasons.
This sociological schema is essential to understanding the value proposition that modern security companies offer to consumers. That value proposition centers on empowering the customer to effect his own security through the agency of the security company.
What Can Be Done?
So now, we come to the Solutions section, which is short and sweet.
Fundamentally, the producers of policing must embrace the principles of nonconfiscation and competition. That is, eschew the institutions of taxation and monopoly. But government will not just give up. It will have to be out-competed. It is for these reasons that I favor the establishment of patrol and restitution companies, that have the following business model:
Subscription services are rendered to residential subscribers against ~$35/mo. The services rendered are: patrol of premises and environs, first-response for home monitoring systems or other calls, monthly crime reports to the subscriber, crime resolution, and crime indemnification. By crime resolution is meant: should a crime occur, the business investigates, attempts to locate the perpetrator, and facilitates engaging the perpetrator in mediation or arbitration to obtain restitution for the victim-subscriber. By crime indemnification is meant that should crime resolution fail to make the subscriber whole, the business will pay the subscriber directly to make him chrematistically whole.
Making the victim whole means that the victim and the perpetrator come to a mutually agreed solution which could include payments of money, performance of services, and/or other arrangements. The key element is that the victim agrees to the arrangement as a suitable remedy for the tort. In the absence of a mediated agreement, making the victim whole is only a loose term, unless qualified.
Legally, the business stands as surety for the civil liability of the direct (special) damages caused by the perpetrator.
That is, it does not stand for surety for general damages. Examples of special damages include: extra costs, repair or replacement of damaged property, lost earnings (both historically and in the future), loss of irreplaceable items, and additional domestic costs. Examples of general damages include physical or emotional pain and suffering, loss of companionship, loss of consortium, disfigurement, loss of reputation, loss or impairment of mental or physical capacity, and loss of enjoyment of life.
Additionally, subscribers may pay for premium services: integrity check of home costs $2/day, bring in papers/mail costs $2/day, feed/water pets costs $4/day, outdoor escort $5 per 10 minutes.
OK, I’ve talked for a long time, but I haven’t nearly covered the topic. There are things to say about Restitution vs. Punishment, Law Enforcement vs. Incentives to Obey the Law, about the utility of prisons and their operation in a free market.
But I’ll leave off here for questions and discussion.
- Barnett, Randy (1998). The Structure of Liberty: Justice and the Rule of Law. Oxford University Press.
- Benson, Bruce (1990). The Enterprise of Law: Justice Without the State. Pacific Research Institute for Public Policy.
- Benson, Bruce (1998). To Serve and Protect: Privatization and Community in Criminal Justice. Independent Institute.
- de Jasay, Anthony (2002). Justice and Its Surroundings. Liberty Fund.
- Elliott, J. F. (1973). Interception Patrol: An Examination of the Theory of Random Patrol as a Municipal Police Tactic. Charles C. Thomas.
- Gorbachev, Mikhail (1987). Perestroika: New Thinking for Our Country and the World. Harper and Row.
- Grant, R.W. (1999). The Incredible Bread Machine. Fox and Wilkes.
- Hayek, Friedrich A. (1945). The Use of Knowledge in Society. American Economic Review, Vol. 35, No. 4, 519—530.
- Hoppe, Hans-Hermann (1989). A Theory of Socialism and Capitalism. Kluwer Academic Publishers.
- Hoppe, Hans-Hermann (1999). The Private Production of Defense. Journal of Libertarian Studies, Vol. 14, No. 1.
- Mises, Ludwig (1920). Economic Calculation in the Socialist Commonwealth (trans.). Ludwig von Mises Institute.
- Mises, Ludwig (1932). Socialism: A Sociological and Economic Analysis (trans.). Liberty Fund.
- Poulin, K.C. and Nemeth, Charles P. (2005). Private Security and Public Safety: A Community-Based Approach. Prentice Hall.
- Rothbard, Murray N. (1998). The Ethics of Liberty. New York University Press.
- Stringham, Edward P. (ed., 2007). Anarchy and the Law: The Political Economy of Public Choice. Independent Institute. Anthology of articles.
Gil Guillory [send him mail] is a chemical engineer by profession. He lives in The Woodlands with his wife and two daughters. He ran for US Congress (TX-8) on the Libertarian Party ticket in 2000 and 2002. He has written and presented five papers on the free-market provision of security: On the Viability of Subscription Patrol and Restitution Services, The Legal Landscape for Subscription Patrol and Restitution in Texas, An Actuarial Analysis of Crime Data with Applications to Subscription Patrol and Restitution, Patrol Study for the SPR Business Model, andThe Role of Subscription-based Patrol and Restitution in the Future of Liberty, the last of which is forthcoming in the Journal of Libertarian Studies.He has also written popular articles for anti-state.com, mises.org, lewrockwell.com, and strike-the-root.com. Visit his website.