Hoppe begins by examining the nature of the state as “a monopolist of defense and the provision and enforcement of law and order.” Like all state-mandated monopolies, the monopoly of law enforcement also leads to higher prices and lower quality of services. Why is this state of affairs tolerated? The modern democratic states, much more than the monarchies and princely estates of old, are seen as moral and necessary despite ample evidence to the contrary.

In this initial analysis, we find much of what Hoppe eventually expanded into his 2001 book Democracy: The God that Failed, which systematically dismantled modern arguments in favor of the democratic state.

In the final portion of his speech, Hoppe turns to discussing how a modern partisan of liberty might act to counter the march of centralization and the destruction of property, culture, learning, and natural social hierarchies.

A Bottom-Up Revolution

At last to the detailed explanation of the meaning of this bottom-up revolutionary strategy. For this, let me turn to my earlier remarks about the defensive use of democracy, that is, the use of democratic means for nondemocratic, libertarian pro-private property ends. Two preliminary insights I have already reached here.

First, from the impossibility of a top-down strategy, it follows that one should expend little or no energy, time, and money on nationwide political contests, such as presidential elections. And also not on contests for central government, in particular, less effort on senatorial races than on house races, for instance.

Second, from the insight into the role of intellectuals, in the preservation of the current system, the current protection racket, it follows that one should likewise expend little or no energy, time, or money trying to reform education and academia from the inside. By endowing free enterprise or private property chairs within the established university system, for instance, one only helps to lend legitimacy to the very idea that one wishes to oppose. The official education and research institutions must be systematically defunded and dried up. And to do so all support of intellectual work, as an essential task of this overall task in front of us, should of course be given to institutions and centers determined to do precisely this.

The reasons for both of these pieces of advice are straightforward: Neither the population as a whole nor all educators and intellectuals in particular are ideologically completely homogeneous. And even if it is impossible to win a majority for a decidedly antidemocratic platform on a nationwide scale, there appears to be no insurmountable difficulty in winning such a majority in sufficiently small districts, and for local or regional functions within the overall democratic government structure. In fact, there seems to be nothing unrealistic in assuming that such majorities exist at thousands of locations. That is, locations dispersed all over the country but not evenly dispersed …

But what then? Everything else falls almost automatically from the ultimate goal, which must be kept permanently in mind, in all of one’s activities: the restoration from the bottom-up of private property and the right to property protection; the right to self-defense, to exclude or include, and to freedom of contract. And the answer can be broken down into two parts.

First, what to do within these very small districts, where a pro-private property candidate and anti-majoritarian personality can win. And second, how to deal with the higher levels of government, and especially with the central federal government. First, as an initial step, and I’m referring now to what should be done on the local level, the first central plank of one’s platform should be: one must attempt to restrict the right to vote on local taxes, in particular on property taxes and regulations, to property and real estate owners. Only property owners must be permitted to vote, and their vote is not equal, but in accordance with the value of the equity owned, and the amount of taxes paid.

Further, all public employees — teachers, judges, policemen — and all welfare recipients, must be excluded from voting on local taxes and local regulation matters. These people are being paid out of taxes and should have no say whatsoever how high these taxes are. With this platform one cannot of course win everywhere; you cannot win in Washington, D.C. with a platform like this. But I dare say that in many locations this can be easily done. The locations have to be small enough and have to have a good number of decent people.

Consequently, local taxes and rates as well as local tax revenue will inevitably decrease. Property values and most local incomes would increase whereas the number and payment of public employees would fall. Now, and this is the most decisive step, the following thing must be done, and always keep in mind that I am talking about very small territorial districts, villages.

In this government funding crisis which breaks out once the right to vote has been taken away from the mob, as a way out of this crisis, all local government assets must be privatized. An inventory of all public buildings, and on the local level that is not that much — schools, fire, police station, courthouses, roads, and so forth — and then property shares or stock should be distributed to the local private property owners in accordance with the total lifetime amount of taxes — property taxes —that these people have paid. After all, it is theirs, they paid for these things …

Without local enforcement, by compliant local authorities, the will of the central government is not much more than hot air. Yet this local support and cooperation is precisely what needs to be missing. To be sure, so long as the number of liberated communities is still small, matters seem to be somewhat dangerous. However, even during this initial phase in the liberation struggle, one can be quite confident.

It would appear to be prudent during this phase to avoid a direct confrontation with the central government and not openly denounce its authority or even abjure the realm. Rather, it seems advisable to engage in a policy of passive resistance and noncooperation. One simply stops to help in the enforcement in each and every federal law. One assumes the following attitude: “Such are your rules, and you enforce them. I cannot hinder you, but I will not help you either, as my only obligation is to my local constituents …”

“United Bases of America.” Click here for the full infographic.

The State

Conventionally, the state is defined as an agency with two unique characteristics. First, it is a compulsory territorial monopolist of ultimate decision-making (jurisdiction). That is, it is the ultimate arbiter in every case of conflict, including conflicts involving itself. Second, the state is a territorial monopolist of taxation. That is, it is an agency that unilaterally fixes the price citizens must pay for its provision of law and order.

Predictably, if one can only appeal to the state for justice, justice will be perverted in favor of the state. Instead of resolving conflict, a monopolist of ultimate decision-making will provoke conflict in order to settle it to his own advantage. Worse, while the quality of justice will fall under monopolistic auspices, its price will rise. Motivated like everyone else by self-interest but equipped with the power to tax, the state agents’ goal is always the same: to maximize income and minimize productive effort.

State, War, and Imperialism

Instead of concentrating on the internal consequences of the institution of a state, however, I will focus on its external consequences, i.e., foreign rather than domestic policy.

For one, as an agency that perverts justice and imposes taxes, every state is threatened with “exit.” Especially its most productive citizen may leave to escape taxation and the perversions of law. No state likes this. To the contrary, instead of seeing the range of control and tax base shrink, state agents prefer that they be expanded. Yet this brings them in conflict with other states. Unlike competition between “natural” persons and institutions, however, the competition between states is eliminative. That is, there can be only one monopolist of ultimate decision-making and taxation in any given area. Consequently, the competition between different states promotes a tendency toward political centralization and ultimately one single world state.

Further, as tax-funded monopolists of ultimate decision-making, states are inherently aggressive institutions. Whereas “natural” persons and institutions must bear the cost of aggressive behavior themselves (which may well induce them to abstain from such conduct), states can externalize this cost onto their taxpayers. Hence, state agents are prone to become provocateurs and aggressors and the process of centralization can be expected to proceed by means of violent clashes, i.e., interstate wars.

Moreover, given that states must begin small and assuming as the starting point a world composed of a multitude of independent territorial units, something rather specific about the requirement of success can be stated. Victory or defeat in interstate warfare depend on many factors, of course, but other things such as population size being the same, in the long run the decisive factor is the relative amount of economic resources at a state’s disposal. In taxing and regulating, states do not contribute to the creation of economic wealth. Instead, they parasitically draw on existing wealth. However, state governments can influence the amount of existing wealth negatively. Other things being equal, the lower the tax and regulation burden imposed on the domestic economy, the larger the population will tend to grow and the larger the amount of domestically produced wealth on which the state can draw in its conflicts with neighboring competitors. That is, states which tax and regulate their economies comparatively little – liberal states – tend to defeat and expand their territories or their range of hegemonic control at the expense of less-liberal ones.

This explains, for instance, why Western Europe came to dominate the rest of the world rather than the other way around. More specifically, it explains why it was first the Dutch, then the British and finally, in the 20th century, the United States, that became the dominant imperial power, and why the United States, internally one of the most liberal states, has conducted the most aggressive foreign policy, while the former Soviet Union, for instance, with its entirely illiberal (repressive) domestic policies has engaged in a comparatively peaceful and cautious foreign policy. The United States knew that it could militarily beat any other state; hence, it has been aggressive. In contrast, the Soviet Union knew that it was bound to lose a military confrontation with any state of substantial size unless it could win within a few days or weeks.

From Monarchy and Wars of Armies to Democracy and Total Wars

Historically, most states have been monarchies, headed by absolute or constitutional kings or princes. It is interesting to ask why this is so, but here I have to leave this question aside. Suffice it to say that democratic states (including so-called parliamentary monarchies), headed by presidents or prime-ministers, were rare until the French Revolution and have assumed world-historic importance only after World War I.

While all states must be expected to have aggressive inclinations, the incentive structure faced by traditional kings on the one hand and modern presidents on the other is different enough to account for different kinds of war. Whereas kings viewed themselves as the private owner of the territory under their control, presidents consider themselves as temporary caretakers. The owner of a resource is concerned about the current income to be derived from the resource and the capital value embodied in it (as a reflection of expected future income). His interests are long-run, with a concern for the preservation and enhancement of the capital values embodied in “his” country. In contrast, the caretaker of a resource (viewed as public rather than private property) is concerned primarily about his current income and pays little or no attention to capital values.

The empirical upshot of this different incentive structure is that monarchical wars tended to be “moderate” and “conservative” as compared to democratic warfare.

Monarchical wars typically arose out of inheritance disputes brought on by a complex network of inter-dynastic marriages. They were characterized by tangible territorial objectives. They were not ideologically motivated quarrels. The public considered war the king’s private affair, to be financed and executed with his own money and military forces. Moreover, as conflicts between different ruling families, kings felt compelled to recognize a clear distinction between combatants and noncombatants and target their war efforts exclusively against each other and their family estates. Thus military historian Michael Howard noted about 18th-century monarchical warfare:

On the [European] continent commerce, travel, cultural and learned intercourse went on in wartime almost unhindered. The wars were the king’s wars. The role of the good citizen was to pay his taxes, and sound political economy dictated that he should be left alone to make the money out of which to pay those taxes. He was required to participate neither in the decision out of which wars arose nor to take part in them once they broke out, unless prompted by a spirit of youthful adventure. These matters were arcane regni, the concern of the sovereign alone. [War in European History, 73]

Similarly Ludwig von Mises observed about the wars of armies:

In wars of armies, the army does the fighting while the citizens who are not members of the army pursue their normal lives. The citizens pay the costs of warfare; they pay for the maintenance and equipment of the army, but otherwise they remain outside of the war events. It may happen that the war actions raze their houses, devastate their land, and destroy their other property; but this, too, is part of the war costs which they have to bear. It may also happen that they are looted and incidentally killed by the warriors – even by those of their “own” army. But these are events which are not inherent in warfare as such; they hinder rather than help the operations of the army leaders and are not tolerated if those in command have full control over their troops. The warring state which has formed, equipped, and maintained the army considers looting by the soldiers an offense; they were hired to fight, not to loot on their own. The state wants to keep civil life as usual because it wants to preserve the tax-paying ability of its citizens; conquered territories are regarded as its own domain. The system of the market economy is to be maintained during the war to serve the requirement of warfare. [Nationalökonomie, 725–26]

In contrast to the limited warfare of the ancien regime, the era of democratic warfare – which began with the French Revolution and the Napoleonic Wars, continued during the 19th century with the American War of Southern Independence, and reached its apex during the 20th century with World War I and World War II – has been the era of total war.

In blurring the distinction between the rulers and the ruled (“we all rule ourselves”), democracy strengthened the identification of the public with a particular state. Rather than dynastic property disputes which could be resolved through conquest and occupation, democratic wars became ideological battles: clashes of civilizations, which could only be resolved through cultural, linguistic, or religious domination, subjugation and, if necessary, extermination. It became increasingly difficult for members of the public to extricate themselves from personal involvement in war. Resistance against higher taxes to fund a war was considered treasonous. Because the democratic state, unlike a monarchy, was “owned” by all, conscription became the rule rather than the exception. And with mass armies of cheap and hence easily disposable conscripts fighting for national goals and ideals, backed by the economic resources of the entire nation, all distinctions between combatants and noncombatants fell by the wayside. Collateral damage was no longer an unintended side-effect but became an integral part of warfare. “Once the state ceased to be regarded as ‘property’ of dynastic princes,” Michael Howard noted,

and became instead the instrument of powerful forces dedicated to such abstract concepts as Liberty, or Nationality, or Revolution, which enabled large numbers of the population to see in that state the embodiment of some absolute Good for which no price was too high, no sacrifice too great to pay; then the ‘temperate and indecisive contests’ of the rococo age appeared as absurd anachronisms. [ibid. 75–76]

Similar observations have been made by the military historian and major-general J.F.C. Fuller:

The influence of the spirit of nationality, that is of democracy, on war was profound, … [it] emotionalized war and, consequently, brutalized it; …. National armies fight nations, royal armies fight their like, the first obey a mob – always demented, the second a king, generally sane. … All this developed out of the French Revolution, which also gave to the world conscription – herd warfare, and the herd coupling with finance and commerce has begotten new realms of war. For when once the whole nation fights, then is the whole national credit available for the purpose of war. [War and Western Civilization, 26–27]

And William A. Orton thus summarized matters:

Nineteenth-century wars were kept within bounds by the tradition, well recognized in international law, that civilian property and business were outside the sphere of combat. Civilian assets were not exposed to arbitrary distraint or permanent seizure, and apart from such territorial and financial stipulations as one state might impose on another, the economic and cultural life of the belligerents was generally allowed to continue pretty much as it had been. Twentieth-century practice has changed all that. During both World Wars limitless lists of contraband coupled with unilateral declarations of maritime law put every sort of commerce in jeopardy, and made waste paper of all precedents. The close of the first war was marked by a determined and successful effort to impair the economic recovery of the principal losers, and to retain certain civilian properties. The second war has seen the extension of that policy to a point at which international law in war has ceased to exist. For years the Government of Germany, so far as its arms could reach, had based a policy of confiscation on a racial theory that had no standing in civil law, international law, nor Christian ethics; and when the war began, that violation of the comity of nations proved contagious. Anglo-American leadership, in both speech and action, launched a crusade that admitted of neither legal nor territorial limits to the exercise of coercion. The concept of neutrality was denounced in both theory and practice. Not only enemy assets and interests, but the assets and interests of any parties whatsoever, even in neutral countries, were exposed to every constraint the belligerent powers could make effective; and the assets and interests of neutral states and their civilians, lodged in belligerent territories or under belligerent control, were subjected to practically the same sort of coercion as those of enemy nationals. Thus “total war” became a sort of war that no civilian community could hope to escape; and “peace loving nations” will draw the obvious inference. [The Liberal Tradition: A Study of the Social and Spiritual Conditions of Freedom, 251–52]

Excursus: The Doctrine of Democratic Peace

I have explained how the institution of a state leads to war; why, seemingly paradoxical, internally liberal states tend to be imperialist powers; and how the spirit of democracy has contributed to the de-civilization in the conduct of war.

More specifically, I have explained the rise of the United States to the rank of the world’s foremost imperial power; and, as a consequence of its successive transformation from the early beginnings as an aristocratic republic into an unrestricted mass democracy which began with the War of Southern Independence, the role of the United States as an increasingly arrogant, self-righteous and zealous warmonger.

What appears to be standing in the way of peace and civilization, then, is above all the state and democracy, and specifically the world’s model democracy: the United States. Ironically if not surprisingly, however, it is precisely the United States, which claims that it is the solution to the quest for peace.

The reason for this claim is the doctrine of democratic peace, which goes back to the days of Woodrow Wilson and World War I, has been revived in recent years by George W. Bush and his neo-conservative advisors, and by now has become intellectual folklore even in liberal-libertarian circles. The theory claims:

• Democracies do not go to war against each other.
• Hence, in order to create lasting peace, the entire world must be made democratic.

And as a – largely unstated – corollary:

• Today, many states are not democratic and resist internal – democratic – reform.
• Hence, war must be waged on those states in order to convert them to democracy and thus create lasting peace.

I do not have the patience for a full-blown critique of this theory. I shall merely provide a brief critique of the theory’s initial premise and its ultimate conclusion.

First: Do democracies not go to war against each other? Since almost no democracies existed before the 20th century the answer supposedly must be found within the last hundred years or so. In fact, the bulk of the evidence offered in favor of the thesis is the observation that the countries of Western Europe have not gone to war against each other in the post–World War II era. Likewise, in the Pacific region, Japan and South Korea have not warred against each other during the same period. Does this evidence prove the case? The democratic-peace theorists think so. As “scientists” they are interested in “statistical” proof, and as they see it there are plenty of “cases” on which to build such proof: Germany did not war against France, Italy, England, etc.; France did not war against Spain, Italy, Belgium, etc.. Moreover, there are permutations: Germany did not attack France, nor did France attack Germany, etc.. Thus, we have seemingly dozens of confirmations – and that for some 60 years – and not a single counterexample. But do we really have so many confirming cases?

The answer is no: we have actually no more than a single case at hand. With the end of World War II, essentially all of – by now: democratic – Western Europe (and democratic Japan and South Korea in the Pacific region) has become part of the US Empire, as indicated by the presence of US troops in practically all of these countries. What the post World War II period of peace then “proves” is not that democracies do not go to war against each other but that a hegemonic, imperialist power such as the United States did not let its various colonial parts go to war against each other (and, of course, that the hegemon itself did not see any need to go to war against its satellites – because they obeyed – and they did not see the need or did not dare to disobey their master).

Moreover, if matters are thus perceived – based on an understanding of history rather than the naïve belief that because one entity has a different name than another their behavior must be independent from one another – it becomes clear that the evidence presented has nothing to do with democracy and everything with hegemony. For instance, no war broke out between the end of World War II and the end of the 1980s, i.e., during the hegemonic reign of the Soviet Union, between East Germany, Poland, Czechoslovakia, Romania, Bulgaria, Lithuania, Estonia, Hungary, etc. Was this because these were communist dictatorships and communist dictatorships do not go to war against each other? That would have to be the conclusion of “scientists” of the caliber of democratic-peace theorists! But surely this conclusion is wrong. No war broke out because the Soviet Union did not permit this to happen – just as no war between Western democracies broke out because the United States did not permit this to happen in its dominion. To be sure, the Soviet Union intervened in Hungary and Czechoslovakia, but so did the United States at various occasions in Middle-America such as in Guatemala, for instance. (Incidentally: How about the wars between Israel and Palestine and Lebanon? Are not all these democracies? Or are Arab countries ruled out by definition as undemocratic?)

Second: What about democracy as a solution to anything, let alone peace? Here the case of democratic-peace theorists appears even worse. Indeed, the lack of historical understanding displayed by them is truly frightening. Here are only some fundamental shortcomings:

First, the theory involves a conceptual conflation of democracy and liberty (freedom) that can only be called scandalous, especially coming from self-proclaimed libertarians. The foundation and cornerstone of liberty is the institution of private property; and private – exclusive – property is logically incompatible with democracy – majority rule. Democracy has nothing to do with freedom. Democracy is a soft variant of communism, and rarely in the history of ideas has it been taken for anything else. Incidentally, before the outbreak of the democratic age, i.e., until the beginning of the 20th century, government (state) tax-expenditures (combining all levels of government) in Western European countries constituted somewhere between 7–15% of national product, and in the still young United States even less. Less than a hundred years of full-blown majority rule have increased this percentage to about 50% in Europe and 40% in the United States.

Second, the theory of democratic peace distinguishes essentially only between democracy and non-democracy, summarily labeled dictatorship. Thus not only disappear all aristocratic-republican regimes from view, but more importantly for my current purposes, also all traditional monarchies. They are equated with dictatorships a la Lenin, Mussolini, Hitler, Stalin, Mao. In fact, however, traditional monarchies have little in common with dictatorships (while democracy and dictatorship are intimately related).

Monarchies are the semi-organic outgrowth of hierarchically structured natural – stateless – social orders. Kings are the heads of extended families, of clans, tribes, and nations. They command a great deal of natural, voluntarily acknowledged authority, inherited and accumulated over many generations. It is within the framework of such orders (and of aristocratic republics) that liberalism first developed and flourished. In contrast, democracies are egalitarian and redistributionist in outlook; hence, the above-mentioned growth of state power in the 20th century. Characteristically, the transition from the monarchical age to the democratic one, beginning in the second half of the 19th century, has seen a continuous decline in the strength of liberal parties and a corresponding strengthening of socialists of all stripes.

Third, it follows from this that the view democratic-peace theorists have of conflagrations such as World War I must be considered grotesque, at least from the point of view of someone allegedly valuing freedom. For them, this war was essentially a war of democracy against dictatorship; hence, by increasing the number of democracies, it was a progressive, peace-enhancing, and ultimately justified war.

“Democracy has nothing to do with freedom. Democracy is a soft variant of communism, and rarely in the history of ideas has it been taken for anything else.”

In fact, matters are very different. To be sure, pre-war Germany and Austria may not have qualified as democratic as England, France, or the United States at the time. But Germany and Austria were definitely not dictatorships. They were (increasingly emasculated) monarchies and as such arguably as liberal – if not more so – than their counterparts. For instance, in the United States, anti-war proponents were jailed, the German language was essentially outlawed, and citizens of German descent were openly harassed and often forced to change their names. Nothing comparable occurred in Austria and Germany.

In any case, however, the result of the crusade to make the world safe for democracy was less liberal than what had existed before (and the Versailles peace dictate precipitated World War II). Not only did state power grow faster after the war than before. In particular, the treatment of minorities deteriorated in the democratized post–World War I period. In newly founded Czechoslovakia, for instance, the Germans were systematically mistreated (until they were finally expelled by the millions and butchered by the tens of thousands after World War II) by the majority Czechs. Nothing remotely comparable had happened to the Czechs during the previous Habsburg reign. The situation regarding the relations between Germans and southern Slavs in pre-war Austria versus post-war Yugoslavia respectively was similar.

Nor was this a fluke. As under the Habsburg monarchy in Austria, for instance, minorities had also been treated fairly well under the Ottomans. However, when the multicultural Ottoman Empire disintegrated in the course of the 19th century and was replaced by semi-democratic nation-states such as Greece, Bulgaria, etc., the existing Ottoman Muslims were expelled or exterminated. Similarly, after democracy had triumphed in the United States with the military conquest of the Southern Confederacy, the Union government quickly proceeded to exterminate the Plains Indians. As Mises had recognized, democracy does not work in multi-ethnic societies. It does not create peace but promotes conflict and has potentially genocidal tendencies.

Fourth and intimately related, the democratic-peace theorists claim that democracy represents a stable “equilibrium.” This has been expressed most clearly by Francis Fukuyama, who labeled the new democratic world order as the “end of history.” However, overwhelming evidence exists that this claim is patently wrong.

On theoretical grounds: How can democracy be a stable equilibrium if it is possible that it be transformed democratically into a dictatorship, i.e., a system which is considered not stable? Answer: that makes no sense!

Moreover, empirically democracies are anything but stable. As indicated, in multi-cultural societies democracy regularly leads to the discrimination, oppression, or even expulsion and extermination of minorities – hardly a peaceful equilibrium. And in ethnically homogeneous societies, democracy regularly leads to class warfare, which leads to economic crisis, which leads to dictatorship. Think, for example, of post-Czarist Russia, post-World War I Italy, Weimar Germany, Spain, Portugal, and in more recent times Greece, Turkey, Guatemala, Argentina, Chile, and Pakistan.

Not only is this close correlation between democracy and dictatorship troublesome for democratic-peace theorists; worse, they must come to grips with the fact that the dictatorships emerging from crises of democracy are by no means always worse, from a classical liberal or libertarian view, than what would have resulted otherwise. Cases can be easily cited where dictatorships were preferable and an improvement. Think of Italy and Mussolini or Spain and Franco. In addition, how is one to square the starry-eyed advocacy of democracy with the fact that dictators, quite unlike kings who owe their rank to an accident of birth, are often favorites of the masses and in this sense highly democratic? Just think of Lenin or Stalin, who were certainly more democratic than Czar Nicholas II; or think of Hitler, who was definitely more democratic and a “man of the people” than Kaiser Wilhelm II or Kaiser Franz Joseph.

According to democratic-peace theorists, then, it would seem that we are supposed to war against foreign dictators, whether kings or demagogues, in order to install democracies, which then turn into (modern) dictatorships, until finally, one supposes, the United States itself has turned into a dictatorship, owing to the growth of internal state power which results from the endless “emergencies” engendered by foreign wars.

Better, I dare say, to heed the advice of Erik von Kuehnelt-Leddihn and, instead of aiming to make the world safe for democracy, we try making it safe from democracy – everywhere, but most importantly in the United States.

The Best of Hans-Hermann Hoppe

The following is the text of a speech first delivered at the Edelweiss Holdings Symposion held in Zuerich, Switzerland, on September 17, 2011

Let me begin with a brief description of what a capitalist-entrepreneur does, and then explain how the job of the capitalist-entrepreneur is changed under statist conditions.

What the capitalist does is this: He saves (or borrows saved funds), hires labor, buys or rents capital goods and land, and he buys raw materials. Then he proceeds to produce his product or service, whatever it may be, and he hopes that he will make a profit.

Profits are defined simply as an excess of sales revenue over the costs of production. The costs of production, however, do not determine the revenue. Otherwise, if the cost of production would determine price and revenue, everyone could be a capitalist. No one would ever fail. Rather: It is anticipated prices and revenues that determine what production costs the capitalist can possibly afford.

The capitalist does not know what the future prices will be or what quantity of his product will be bought at such prices. This depends on the consumers, and the capitalist has no control over them. The capitalist must speculate what the future demand for his products will be, and he can go wrong in his speculation, in which case he does not make profits but will incur losses instead.

To risk your own money in anticipation of an uncertain future demand is obviously a difficult task. Great profits may await you, but also total financial ruin. Few people are willing to take this risk, and even fewer are good at it and stay in business for a lengthy time.

In fact, there is even more to be said about the difficulty of being a capitalist.

Every capitalist stands in permanent competition with every other one for the invariably limited amounts of money to be spent on their goods and services by consumers. Every product competes with every other product. Whenever consumers spend more (or less) on one thing, they must spend less (or more) on another. Even if a capitalist has produced a successful product and earned a profit, there is nothing that guarantees that this will go on. Other businessmen can imitate his product, produce it more cheaply, underbid his price and outcompete him. To prevent this, every capitalist must thus continuously strive to lower his production costs. Yet even trying to produce whatever you produce ever more cheaply is not enough.

The set of products offered by various capitalists is in constant flux, and so is the evaluation of these products by consumers. Continuously new or improved products are offered on the market and consumer tastes constantly change. Nothing remains constant. The uncertainty of the future facing every capitalist never disappears. There is always the lure of profits but also the threat of losses. Again, then: it is very difficult to be continuously successful as a businessman and not to sink back to the rank of an employee.

In all of this there is only one thing that the businessman can count on and take for granted, and that is his real, physical property — and even that is not safe, as we will see.

His real property comes in two forms. First, there are the physical resources, the means of production, including labor services, that the capitalist has bought or rented for some time and that he combines in order to produce whatever he produces. The value of all of these items is variable, as already explained. It depends ultimately on consumer evaluations. What is stable about them is only their physical character and capability. But without this physical stability of his productive property the capitalist could not produce what he produces.

Second: Besides his productive property, the capitalist can count on his ownership of real money. Money is neither a consumer good, nor is it a producer good. It is the common medium of exchange. As such it is the most easily and widely sold good. And it is used as the unit of account. In order to calculate profit and loss, the capitalist needs recourse to money. The input factors and the output, his products to be produced, are incommensurable, like apples and oranges. They are made commensurable only insofar as they can all be expressed in terms of money. Without money, economic calculation is impossible, as Ludwig von Mises above all has explained. The value of money, too, is variable, like the value of everything else. But money, too, has physical characteristics. It is commodity money, such as gold or silver, and money profits are reflected in an increase in the supply of this commodity, gold or silver, at the disposal of the capitalist.

What can be said, then, about both the capitalist’s means of production and his money, is this: their physical characteristics do not determine their value, but without their physics, they would have no value at all, and changes in the physical quality and quantity of his property do affect the value of his property, whatever other factors (such as changing consumer evaluations) may affect the value of his property also.

Now let me introduce the State and see how it affects the business of the capitalist.

The State is conventionally defined as an institution that possesses a territorial monopoly of ultimate decision-making in every case of conflict, including conflicts involving the state and its agents itself, and, by implication, the right to tax, i.e., to unilaterally determine the price that its subjects must pay to perform the task of ultimate decision-making.

To act under these constraints — or rather, lack of constraints — is what constitutes politics and political action, and it should be clear from the outset that politics, then, by its very nature, always means mischief.

More specifically, we can make two interrelated predictions as to the effect of a state on the business of business. First, and most fundamentally, under statist conditions real property will become what may be called fiat property. And secondly and more specifically, real money will be turned into fiat money.

First: With the state being the ultimate arbiter in every case of conflict including those in which it is involved itself, the state has essentially become the ultimate owner of all property. In principle, it can provoke a conflict with a businessman and then decide against him by expropriating him and making itself (or someone of its liking) the owner of the businessman’s physical property. Or else, if it doesn’t want to go as far, it can pass legislation or regulations that involve only a partial expropriation. It can restrict the uses that the businessman can make of his physical property. Certain things the businessman is no longer permitted to do with his property. The state cannot increase the quality and quantity of real property. But it can redistribute it as it sees fit. It can reduce the real property at the disposal of businessmen or it can limit the range of control that they are allowed over their property; and it can thereby increase its own property (or that of its allies) and increase its own range of control over existing physical things. The businessmen’s property, then, is their property in name only. It is granted to them by the state, and it exists only as long as the state does not decide otherwise. Constantly, a Damocles sword is hanging over the heads of businessmen. The execution of their business plans is based on their assumption of the existence, at their disposal, of certain physical resources and their physical capabilities, and all of their value-speculations are based on this physical basis being given. But these assumptions about the physical basis can be rendered incorrect at any time — and their value-calculations vitiated as well — if only the state decides to change its current legislation aand regulations.

The existence of a state, then, heightens the uncertainty facing the businessman. It makes the future less certain than would be the case otherwise. Realizing this, many people who might otherwise become businessmen will not become businessmen at all. And many businessmen will see their business plans spoiled. Not because they did not correctly anticipate future consumer demand, but because the physical basis, on which their plan was based, was altered by some unexpected and unanticipated change in state laws and regulations.

Second: Rather than meddling with a businessman’s productive capital through confiscation and regulation, however, the state prefers to meddle with money. Because money is the most easily and widely saleable good, it allows the state operators the greatest freedom to spend their income as they like. Hence the state’s preference for money-taxes, i.e., for confiscating money income and money profits. Real money becomes subject to confiscation and changing rates of confiscation. This is the first sense, in which money becomes fiat money under statist conditions. People own their money only insofar as the state allows them to keep it.

But there is also a second, even more perfidious way, in which money becomes fiat money under statist conditions.

States everywhere have discovered an even smoother way of enriching themselves at the expense of productive people: by monopolizing the production of money and replacing real, commodity money and commodity credit with genuine fiat money and fiat or fiduciary credit.

On its territory, per legislation, only the state is permitted to produce money. But that is not sufficient. Because as long as money is a real good, i.e., a commodity that must be costly produced, there is nothing in it for the state except expenses. More importantly, then, the state must use its monopoly position in order to lower the production cost and the quality of money as close as possible to zero. Instead of costly quality money such as gold or silver, the state must see to it that worthless pieces of paper, which can be produced at practically zero cost, will become money.

Under competitive conditions, i.e., if everyone is free to produce money, a money that can be produced at zero cost would be produced up to a quantity where marginal revenue equals marginal cost, and since marginal cost is zero the marginal revenue, i.e., the purchasing power of this money, would be zero as well. Hence, the necessity to monopolize the production of paper money, so as to be able to restrict its supply, in order to avoid hyperinflationary conditions and the disappearance of money from the market altogether (and a flight into “real values”) – and the more so the cheaper the money-commodity.

Having monopolized the production of money and reduced its production cost and quality to virtually zero, the state has made a marvelous accomplishment. It costs almost nothing to print money and one can turn around and buy oneself something really valuable, such as a house or a Mercedes.

What are the effects of such fiat money, and in particular what are the effects for the business of business? First and in general: more paper money does not in the slightest affect the quantity or quality of all other, non-monetary goods. Rather, what the additional money does is twofold. On the one hand, money prices will be higher than they would otherwise be and the purchasing power per unit of money will be lower. And secondly, with the injection of additional paper money existing wealth will be redistributed in favor of those receiving and spending the new money first and at the expense of those receiving and spending it later or last.

And specifically regarding capitalists, then, paper money adds another dose of uncertainty to his business. If and as long as money is a commodity, such as gold or silver, it may not be exactly “easy” to predict the future supply and purchasing power of money. However, based on information about current production costs and industry profits it is very well possible to come up with a realistic estimate. In any case, the task is not pure guesswork. And while it is conceivable that with gold or silver as money nominal money profits may not always equal “real” profits, it is at least impossible that a nominal profit should ever amount to nothing at all. There is always something left: quantities of gold or silver.

In distinct contrast: With paper money, the production of which is unconstrained by any kind of natural (physical) limitations (scarcity) but dependent solely on subjective whim and will, the prediction of the future money supply and purchasing power does become guesswork. What will the money printers do? And it is not just conceivable, but a very real possibility, that nominal money profits turn out to represent literally nothing but bundles of worthless paper.

Moreover, hand in hand with fiat money comes fiat or fiduciary credit, and this creates still more uncertainty.

If the state can create money out of thin air it also can create money credit out of thin air. And because it can create credit out of thin air, i.e., without any previous savings on its part, it can offer cheaper loans than anyone else, at below-market rates of interest, even at rates as low as zero. The interest rate is thus distorted and falsified, and the volume of investment will become divorced from the volume of savings. Systematic mal-investment is thus generated, i.e., investment un-backed by savings. An unsustainable investment boom is set in motion, necessarily followed by a bust, revealing large-scale clusters of entrepreneurial errors.

Last but not least, under statist conditions, i.e., under a regime of fiat property and fiat money, the character of businessmen and of doing business is changed, and this change introduces another hazard into the world.

Absent a state it is consumers that determine what will be produced, in what quality and quantity, and who among businessmen will succeed or fail. With the state, the situation facing businessmen becomes entirely different. It is now the state and its operators, not consumers, who ultimately decide who will succeed or fail. The state can keep any businessman alive in subsidizing him or bailing him out; or else it can ruin anyone by deciding to investigate him and find him in violation of state laws and regulations.

Moreover, the state is flush with taxes and fiat money and can spend more money than anyone else. It can make any businessman rich (or not). And the state and its operators have a different spending behavior than normal consumers. They do not spend their own money, but other people’s money, and in most cases not for their own, personal purposes, but for those of some anonymous third parties. Accordingly, they are frivolous and wasteful in their spending. Neither the price nor the quality of what they buy is of great concern to them.

In addition, the state can go into business itself. And because it doesn’t have to make profits and avoid losses, as it can always supplement its earnings through taxes or made-up money, it can always outcompete any private producer of the same or similar goods or services.

And finally, by virtue of its ability to legislate, to make laws, the state can grant exclusive privileges to some businesses, insulating or shielding them from competition, and by the same token partially expropriate and disadvantage other businesses.

In this environment, it is imperative for every businessman to pay constant and close attention to politics. In order to stay alive and possibly prosper, he must spend time and effort to concern himself with matters that have nothing to do with satisfying consumers, but with power politics. And based on his understanding of the nature of the state and of politics, then, he must make a choice: a moral choice.

He can either join in and become a part of the vast criminal enterprise that is the State. He can bribe politicians, political parties or public officials, whether with cash or in-kind (including promises of future employment in the “private” sector as “board-members,” “advisors” or “consultants”), in order to gain for himself economic advantages at the expense of other businesses. That is, he can pay bribes to secure state contracts or subsidies for himself and at the exclusion of others. Or he can pay bribes for the passing or maintenance of legislation that secures him and his business legal privileges and monopoly profits (and capital gains) while partially expropriating and thus screwing his competitors. – Needless to say, countless businessmen have chosen this path. In particular big banking and big industry have thus become intricately involved in the state, and many a wealthy businessman has made his fortune more on account of his political skills than his abilities as a consumer-serving economic entrepreneur.

Or else: a businessman can choose the honorable but at the same time also the most difficult path. This businessman is aware of the nature of the state. He knows that the state and its operators are out to get him and bully him, to confiscate his property and money and, even worse, that they are arrogant, self-righteous, haughty, and full of themselves. Based on such understanding, this very different breed of businessman then tries his best to anticipate and adjust to the state’s every evil move. But he does not join the gang. He does not pay bribes to secure contracts or privileges from the state. Instead, he tries as well as he can to defend whatever is still left of his property and property rights and make as large profits as possible in doing so.

Hans-Hermann Hoppe [send him mail] is distinguished fellow at the Ludwig von Mises Institute and founder and president of the Property and Freedom Society. His books include Democracy: The God That Failed and The Myth of National Defense. Visit his website.

The Best of Hans-Hermann Hoppe

Imagine you are in command of the state, defined as an institution that possesses a territorial monopoly of ultimate decision making in every case of conflict, including conflicts involving the state and its agents itself, and, by implication, the right to tax, i.e., to unilaterally determine the price that your subjects must pay you to perform the task of ultimate decision making.

To act under these constraints – or rather, lack of constraints – is what constitutes politics and political action, and it should be clear from the outset that politics, then, by its very nature, always means mischief. Not from your point of view, of course, but mischief from the point of view of those subject to your rule as ultimate judge. Predictably, you will use your position to enrich yourself at other people’s expense.

More specifically, we can predict in particular what your attitude and policy vis-à-vis money and banking will be.

Assume that you rule over a territory that has developed beyond the stage of a primitive barter economy and where a common medium of exchange, i.e., a money, is in use. First off, it is easy to see why you would be particularly interested in money and monetary affairs. As state ruler, you can in principle confiscate whatever you want and provide yourself with an unearned income. But rather than confiscating various producer or consumer goods, you will naturally prefer to confiscate money. Because money, as the most easily and widely saleable and acceptable good of all, allows you the greatest freedom to spend your income as you like, on the greatest variety of goods. First and foremost, then, the taxes you impose on society will be money taxes, whether on property or income. You will want to maximize your money-tax revenues.

In this attempt, however, you will quickly encounter some rather intractable difficulties. Eventually, your attempts to further increase your tax income will encounter resistance in that higher tax rates will not lead to higher but to lower tax revenue. Your income – your spending money – declines, because producers, burdened with increasingly higher tax rates, simply produce less.

In this situation, you only have one other option to further increase or at least maintain your current level of spending: by borrowing such funds. And for that you must go to banks – and hence your special interest also in banks and the banking industry. If you borrow money from banks, these banks will automatically take an active interest in your future well-being. They will want you to stay in business, i.e., they want the state to go on in its exploitation business. And since banks tend to be major players in society, such support is certainly beneficial to you. On the other hand, as a negative, if you borrow money from banks you are not only expected to pay your loan back, but to pay interest on top.

The question, then, that arises for you as the ruler is, How can I free myself of these two constraints, i.e., of tax-resistance in the form of falling tax revenue and of the need to borrow from and pay interest to banks?

It is not too difficult to see what the ultimate solution to your problem is.

You can reach the desired independence of taxpayers and tax payments and of banks, if only you establish yourself first as a territorial monopolist of the production of money. On your territory, only you are permitted to produce money. But that is not sufficient. Because as long as money is a regular good that must be expensively produced, there is nothing in it for you except expenses. More importantly, then, you must use your monopoly position in order to lower the production cost and the quality of money as close as possible to zero. Instead of costly quality money such as gold or silver, you must see to it that worthless pieces of paper that can be produced at practically zero cost will become money. (Normally, no one would accept worthless pieces of paper as payment for anything. Pieces of paper are acceptable as payment only insofar as they are titles to something else, i.e., property titles. In other words then, you must replace pieces of paper that were titles to money with pieces of paper that are titles to nothing.)

Under competitive conditions, i.e., if everyone were free to produce money, a money that can be produced at almost zero cost would be produced up to a quantity where marginal revenue equals marginal cost, and because marginal cost is zero the marginal revenue, i.e., the purchasing power of this money, would be zero as well. Hence, the necessity to monopolize the production of paper money, so as to restrict its supply, in order to avoid hyperinflationary conditions and the disappearance of money from the market altogether (and a flight into "real values") – and the more so the cheaper the money commodity.

In a way, you have thus accomplished what all alchemists and their sponsors wanted to achieve: you have produced something valuable (money with purchasing power) out of something practically worthless. What an achievement. It costs you practically nothing and you can turn around and buy yourself something really valuable, such as a house or a Mercedes; and you can achieve these wonders not just for yourself but also for your friends and acquaintances, of which you discover that you have all of a sudden far more than you used to have (including many economists, who explain why your monopoly is really good for everyone).

What are the effects? First and foremost, more paper money does not in the slightest affect the quantity or quality of all other, nonmonetary goods. There exist just as many other goods around as before. This immediately refutes the notion – apparently held by most if not all mainstream economists – that "more" money can somehow increase "social wealth." To believe this, as everyone proposing a so-called easy-money policy as an efficient and "socially responsible" way out of economic troubles apparently does, is to believe in magic: that stones – or rather paper – can be turned into bread.

Rather, what the additional money you printed will affect is twofold. On the one hand, money prices will be higher than they would otherwise be, and the purchasing power per unit of money will be lower. In a word, the result will be inflation. More importantly, however, all the while the greater amount of money does not increase (or decrease) the total amount of presently existing social wealth (the total quantity of all goods in society), it redistributes the existing wealth in favor of you and your friends and acquaintances, i.e., those who get your money first. You and your friends are relatively enriched (own a larger part of the total social wealth) at the expense of impoverishing others (who as a result own less).

The problem, for you and your friends, with this institutional setup is not that it doesn’t work. It works perfectly, always to your own (and your friends’) advantage and always at the expense of others. All you have to do is to avoid hyperinflation. For in that case people would avoid using money and flee into real values, thus robbing you of your magic wand. The problem with your paper-money monopoly, if there is one at all, is only that this fact will be immediately noticed also by others and recognized as the big, criminal rip-off that it indeed is.

But this problem can be overcome, too, if, in addition to monopolizing the production of money, you also set yourself up as a banker and enter the banking business with the establishment of a central bank.

Because you can create paper money out of thin air, you can also create credit out of thin air. In fact, because you can create credit out of nothing (without any savings on your part), you can offer loans at cheaper rates than anyone else, even at an interest rate as low as zero (or even at a negative rate). With this ability, not only is your former dependency on banks and the banking industry eliminated; you can, moreover, make banks dependent on you, and you can forge a permanent alliance and complicity between banks and state. You don’t even have to become involved in the business of investing the credit yourself. That task, and the risk involved in it, you can safely leave to commercial banks. What you, your central bank, need to do is only this: You create credit out of thin air and then loan this money, at below-market interest rates, to commercial banks. Instead of you paying interest to banks, banks now pay interest to you. And the banks in turn loan out your newly created easy credit to their business friends at somewhat higher but still submarket interest rates (to earn from the interest differential). In addition, to make the banks especially keen on working with you, you may permit the banks to create a certain amount of their own new credit (of checkbook money) in addition and on top of the credit that you have created (fractional-reserve banking).

What are the consequences of this monetary policy? To a large extent they are the same as with an easy money policy: First, an easy credit policy is also inflationary. More money is brought into circulation and prices will be higher, and the purchasing power of money lower, than would have been the case otherwise. Second, the credit expansion too has no effect on the quantity or quality of all goods currently in existence. It neither increases nor decreases their amount. More money is just this: more paper. It does not and cannot increase social wealth by one iota. Third, easy credit also engenders a systematic redistribution of social wealth in favor of you, the central bank, and the commercial banks within your cartel. You receive an interest return on money that you have created at practically zero cost out of thin air (instead of on money costly saved out of an existing income), and so do the banks, who earn additional interest on your costless money loans. Both you and your banker friends thereby appropriate an "unearned income." You and the banks are enriched at the expense of all "real" money savers (who receive a lower interest return than they otherwise would, i.e., without the injection of your and the banks’ cheap credit into the credit market).

On the other hand, there also exists a fundamental difference between an easy, print-and-spend money policy and an easy, print-and-loan credit policy.

First off, an easy credit policy alters the production structure – what is produced and by whom – in a highly significant way.

You, the chief of the central bank, can create credit out of thin air. You do not have to first save money out of your money income, i.e., cut your own expenses, and thus abstain from buying certain nonmoney goods (as every normal person must, if he extends credit to someone). You only have to turn on the printing press and can thus undercut any interest rate demanded of borrowers by savers elsewhere in the market. Granting credit does not involve any sacrifice on your part (which is why this institution is so "nice"). If things then go well, you will be paid a positive-interest return on your paper investment, and if they don’t go well – well, as the monopoly producer of money, you can always make up losses more easily than anyone else: by covering your losses with even more printed paper.

Without costs and no genuine, personal risk of losses, then, you can grant credit essentially indiscriminately, to everyone and for any purpose, without concern for the creditworthiness of the debtor or the soundness of his business plan. Because of your "easy" credit, certain people (in particular investment bankers) who otherwise would not be deemed sufficiently creditworthy, and certain projects (in particular of banks and their main clients) that would not be considered profitable but wasteful or too risky instead do get credit and do get funded.

Essentially, the same applies to the commercial banks within your banking cartel. Because of their special relationship to you, as the first recipients of your costless low-interest paper-money credit, the banks, too, can offer loans to prospective lenders at interest rates below market interest rates – and if things go well for them they go well; and if they don’t, they can rely on you, as the monopolistic producer of money, to bail them out in the same way as you bail yourself out of any financial trouble: by more paper money. Accordingly, the banks too will be less discriminating in the selection of their clients and their business plans and more prone to funding the "wrong" people and the "wrong" projects.

And there is a second significant difference between a print-and-spend and a print-and-loan policy and this difference explains why the income and wealth redistribution in your and your banker friends’ favor that is set in motion by easy credit takes the specific form of a temporal – boom-bust – cycle, i.e., of an initial phase of seeming general prosperity (of expected increases in future incomes and wealth) followed by a phase of widespread impoverishment (when the prosperity of the boom period is revealed as a widespread illusion).

This boom-bust feature is the logical – and physically necessary – consequence of credit created out of thin air, of credit unbacked by savings, of fiduciary credit (or however else you may call it) and of the fact that every investment takes time and only shows later on, at some time in the future, whether it is successful or not.

The reason for the business cycle is as elementary as it is fundamental. Robinson Crusoe can give a loan of fish (which he has not consumed) to Friday. Friday can convert these savings into a fishing net (he can eat the fish while constructing the net), and with the help of the net, then, Friday, in principle, is capable of repaying his loan to Robinson, plus interest, and still earn a profit of additional fish for himself. But this is physically impossible if Robinson’s loan is only a paper note, denominated in fish, but unbacked by real-fish savings, i.e., if Robinson has no fish because he has consumed them all.

Then, and necessarily so, Friday must fail in his investment endeavor. In a simple barter economy, of course, this becomes immediately apparent. Friday will not accept Robinson’s paper credit in the first place (but only real, commodity credit), and because of this, the boom-bust cycle will not get started. But in a complex monetary economy, the fact that credit was created out of thin air is not noticeable: every credit note looks like any other, and because of this the notes are accepted by the takers of credit.

This does not change the fundamental fact of reality that nothing can be produced out of nothing and that investment projects undertaken without any real funding whatsoever (by savings) must fail, but it explains why a boom – an increased level of investment accompanied by the expectation of higher future income and wealth – can get started (Friday does accept the note instead of immediately refusing it). And it explains why it then takes a while until the physical reality reasserts itself and reveals such expectations as illusory.

But what’s a little crisis to you? Even if your path to riches is through repeated crises, brought about by your paper-money regime and central-bank policies, from your point of view – from the viewpoint as the head of state and chief of the central bank – this form of print-and-loan wealth redistribution in your own and your banker friends’ favor, while less immediate than that achieved with a simple print-and-spend policy, is still much preferable, because it is far more difficult to see through and recognize for what it is. Rather than coming across as a plain fraud and parasite, in pursuing an easy-credit policy you can even pretend that you are engaged in the selfless task of "investing in the future" (rather than spending on present frivolities) and "healing" economic crises (rather than causing them).

What a world we live in!

Reprinted from Mises.org.

Hans-Hermann Hoppe [send him mail] is distinguished fellow at the Ludwig von Mises Institute and founder and president of the Property and Freedom Society. His books include Democracy: The God That Failed and The Myth of National Defense. Visit his website.

The Best of Hans-Hermann Hoppe

Let me begin with a quote from an article that my old friend Ralph Raico wrote some 15 years ago:

Ludwig von Mises and F. A. Hayek are widely considered the most eminent classical liberal thinkers of this century. They are also the two best known Austrian economists. They were great scholars and great men. I was lucky to have them both as my teachers.… Yet it is clear that the world treats them very differently. Mises was denied the Nobel Prize for economics, which Hayek won the year after Mises’s death. Hayek is occasionally anthologized and read in college courses, when a spokesman for free enterprise absolutely cannot be avoided; Mises is virtually unknown in American academia. Even among organizations that support the free market in a general way, it is Hayek who is honored and invoked, while Mises is ignored or pushed into the background.

I want to speculate – and present a thesis – why this is so and explain why I – and I take it most of us here – take a very different view. Why I (and presumably you) are Misesians and not Hayekians.

My thesis is that Hayek’s greater prominence has little if anything to do with his economics. There is little difference in Mises’s and Hayek’s economics. Indeed, most economic ideas associated with Hayek were originated by Mises, and this fact alone would make Mises rank far above Hayek as an economist. But most of today’s professed Hayekians are not trained economists. Few have actually read the books that are responsible for Hayek’s initial fame as an economist, i.e., his Monetary Theory and the Trade Cycle and his Prices and Production. And I venture the guess that there exist no more than 10 people alive today who have studied, from cover to cover, his Pure Theory of Capital.

Rather, what explains Hayek’s greater prominence is Hayek’s work, mostly in the second half of his professional life, in the field of political philosophy – and here, in this field, the difference between Hayek and Mises is striking indeed.

My thesis is essentially the same one also advanced by my friend Ralph Raico: Hayek is not a classical liberal at all, or a "Radikalliberaler" as the NZZ, as usual clueless, has just recently referred to him. Hayek is actually a moderate social democrat, and since we live in the age of social democracy, this makes him a "respectable" and "responsible" scholar. Hayek, as you may recall, dedicated his Road to Serfdom to "the socialists in all parties." And the socialists in all parties now pay him back in using Hayek to present themselves as "liberals."

Now to the proof, and I rely for this mostly on the Constitution of Liberty, and his three volume Law, Legislation, and Liberty which are generally regarded as Hayek’s most important contributions to the field of political theory.

According to Hayek, government is "necessary" to fulfill the following tasks: not merely for "law enforcement" and "defense against external enemies" but "in an advanced society government ought to use its power of raising funds by taxation to provide a number of services which for various reasons cannot be provided, or cannot be provided adequately, by the market." (Because at all times an infinite number of goods and services exist that the market does not provide, Hayek hands government a blank check.)

Among these goods and services are

protection against violence, epidemics, or such natural forces as floods and avalanches, but also many of the amenities which make life in modern cities tolerable, most roads … the provision of standards of measure, and of many kinds of information ranging from land registers, maps and statistics to the certification of the quality of some goods or services offered in the market.

Additional government functions include "the assurance of a certain minimum income for everyone"; government should "distribute its expenditure over time in such a manner that it will step in when private investment flags"; it should finance schools and research as well as enforce "building regulations, pure food laws, the certification of certain professions, the restrictions on the sale of certain dangerous goods (such as arms, explosives, poisons and drugs), as well as some safety and health regulations for the processes of production; and the provision of such public institutions as theaters, sports grounds, etc."; and it should make use of the power of "eminent domain" to enhance the "public good."

Moreover, it generally holds that "there is some reason to believe that with the increase in general wealth and of the density of population, the share of all needs that can be satisfied only by collective action will continue to grow."

Further, government should implement an extensive system of compulsory insurance ("coercion intended to forestall greater coercion"), public, subsidized housing is a possible government task, and likewise "city planning" and "zoning" are considered appropriate government functions – provided that "the sum of the gains exceed the sum of the losses." And lastly, "the provision of amenities of or opportunities for recreation, or the preservation of natural beauty or of historical sites or scientific interest … Natural parks, nature-reservations, etc." are legitimate government tasks.

In addition, Hayek insists we recognize that it is irrelevant how big government is or if and how fast it grows. What alone is important is that government actions fulfill certain formal requirements. "It is the character rather than the volume of government activity that is important." Taxes as such and the absolute height of taxation are not a problem for Hayek. Taxes – and likewise compulsory military service – lose their character as coercive measures,

if they are at least predictable and are enforced irrespective of how the individual would otherwise employ his energies; this deprives them largely of the evil nature of coercion. If the known necessity of paying a certain amount of taxes becomes the basis of all my plans, if a period of military service is a foreseeable part of my career, then I can follow a general plan of life of my own making and am as independent of the will of another person as men have learned to be in society.

But please, it must be a proportional tax and general military service!

I could go on and on, citing Hayek’s muddled and contradictory definitions of freedom and coercion, but that shall suffice to make my point. I am simply asking: what socialist and what green could have any difficulties with all this? Following Hayek, they can all proudly call themselves liberals.

In distinct contrast, how refreshingly clear – and very different – is Mises! For him, the definition of liberalism can be condensed into a single term: private property. The state, for Mises, is legalized force, and its only function is to defend life and property by beating antisocial elements into submission. As for the rest, government is "the employment of armed men, of policemen, gendarmes, soldiers, prison guards, and hangmen. The essential feature of government is the enforcement of its decrees by beating, killing, and imprisonment. Those who are asking for more government interference are asking ultimately for more compulsion and less freedom."

Moreover (and this is for those who have not read much of Mises but invariably pipe up, "but even Mises is not an anarchist"), certainly the younger Mises allows for unlimited secession, down to the level of the individual, if one comes to the conclusion that government is not doing what it is supposed to do: to protect life and property. And the older Mises never repudiated this position. Mises, then, as my own intellectual master, Murray Rothbard, noted, is a laissez-faire radical: an extremist.

Reprinted from Mises.org.

Hans-Hermann Hoppe [send him mail] is distinguished fellow at the Ludwig von Mises Institute and founder and president of the Property and Freedom Society. His books include Democracy: The God That Failed and The Myth of National Defense. Visit his website.

The Best of Hans-Hermann Hoppe

Franz Cuhel Memorial Lecture, Prague, April 24, 2009

Franz Cuhel occupies an honored place in the history of economic thought and of the “Viennese” or “Austrian” school of economics in particular. In his book Zur Lehre von den Bedürfnissen (1907), Cuhel presented for the first time a strictly ordinal interpretation of marginal utility and thus contributed to a systematic advance of pure economic theory. Since this lecture is named in Cuhel’s honor, I felt it appropriate that I, too, should discuss here a purely theoretical problem of economics. My subject is not the general theory of value, however, but, more specifically, the theory of money.

I have chosen the title of my lecture after a famous article by William H. Hutt, “The Yield from Money Held.”[1] Like Hutt, I want to attack the following notion: that money held in cash balances and deposit accounts is somehow “unproductive,” “barren,” or “sterile,” offering a “yield of nil;” that only consumer goods and producer (investment) goods are productive of human welfare; that the only productive use of money lies in its “circulation,” i.e., in its spending on consumer or producer goods; and that the holding, i.e., the not spending, of money diminishes future consumption and production.

This view is extremely popular within the economics profession and outside. Hutt offers many examples of its proponents. I will offer only two here. The first is John Maynard Keynes. One famous quote from his General Theory will suffice for my purpose: “An act of individual saving,” by which Keynes means cash holding or “hoarding” instead of consumption or investment spending,

means — so to speak — a decision not to have dinner to-day. But it does not necessitate a decision to have dinner or buy a pair of boots a week hence or a year hence or to consume any specified thing at any specified date. Thus it depresses the business of preparing to-day’s dinner without stimulating the business of making ready for some future act of consumption. It is not a substitution of future consumption-demand for present consumption-demand — it is a net diminution of such demand.[2]

Here it is: the holding of money, i.e., the not spending of it on either consumer or investment goods, is unproductive, indeed detrimental. According to Keynes, the government or its central bank must create and then spend the money that “savers,” i.e., the holders of cash balances, are unproductively holding back, so as to stimulate both consumption and investment. (Needless to say, this is precisely what governments and central banks are presently doing to supposedly rectify the current economic crisis.)

The second example is from closer to home, i.e., from the proponents of “free banking” such as Lawrence White, George Selgin, and Roger Garrison. According to them, an (unanticipated) increase in the demand for money “pushes the economy below its potential,” (Garrison) and requires a compensating money-spending injection from the banking system.

Here it is again: an “excess demand for money” (Selgin & White) has no positive yield or is even detrimental; hence, help is needed. For the free bankers help is not supposed to come from the government and its central bank, but from a system of freely competing fractional-reserve banks. However, the idea involved is the same: the holding of (some, “excess”) money is unproductive and requires a remedy.[3]

I do not want to engage in a textual critique of Keynes or the “free bankers” here. I only mentioned them to further elucidate the idea that I want to attack, and to indicate how widespread — and consequential — its acceptance is within the economics profession, both inside and outside Keynesian circles. Unlike Hutt, who proceeds “critically” in his article, i.e., through a textual examination of various authors, and arrives at his own contrary view of the (positive) yield from money held in a rather indirect and circumstantial way, I want to proceed “apodictically”: by way of a positive demonstration of money’s unique productivity.[4]

The first natural response to the thesis that money held in or added to cash balances is unproductive is to counter, why, then, if money held in or added to cash balances is unproductive of human welfare, do people hold them or add to them? If cash holdings are indeed “good for nothing,” no one would hold or add to them — and yet almost everyone does so all the time! And since all money is always held or hoarded by someone — when it “circulates,” it only leaves one holding hand to be passed into another — money must be continuously “good for something” all the while it is being held (which is always).

To understand what this “good for something” of money is, it is best to ask, when, under what conditions, would there be no demand for cash holdings? Interestingly, wide agreement exists within the economics profession on the answer. It has been most lucidly stated by Ludwig von Mises. No money, and no demand for cash balances, would exist in “general equilibrium,” or as Mises calls it, within the imaginary construction of an “evenly rotating economy.” In this construction, all uncertainty is by assumption removed from human action. Everyone knows precisely the terms, times, and locations of every future action, and accordingly all exchanges can be prearranged and take the form of direct exchanges.

Writes Mises,

In a system without change in which there is no uncertainty whatever about the future, nobody needs to hold cash. Every individual knows precisely what amount of money he will need at any future date. He is therefore in a position to lend all the funds he receives in such a way that the loans fall due on the date he will need them.[5]

Based on this fundamental insight, we can state as a first provisional conclusion concerning the positive theory of money that money and cash balances would disappear with the disappearance of uncertainty (never) and, mutatis mutandis, that the investment in money balances must be conceived of as an investment in certainty or an investment in the reduction of subjectively felt uneasiness about uncertainty.

In reality, outside the imaginary construction of an evenly rotating economy, uncertainty exists. The terms, times, and locations of all future actions and exchanges cannot be predicted perfectly (with certitude). Action is by nature speculative and subject to error. Presently unpredictable surprises can occur. Whenever double coincidences of wants between pairs of prospective buyers and sellers are absent, for instance, i.e., when one does not want what the other has to sell or vice versa, any direct trade (exchange) becomes impossible. Faced with this challenge of unpredictable contingencies, man can come to value goods on account of their degree of marketability (rather than their use-value for him as consumer or producer goods) and consider trading also whenever a good to be acquired is more marketable than that to be surrendered, such that its possession would facilitate the future acquisition of other directly or indirectly serviceable goods and services. That is, a demand for media of exchange can arise, i.e., a demand for goods valued on account of their marketability or resalability.

And since a more easily and widely resalable good is preferable to a less easily and widely resalable good as a medium of exchange, “there would be,” as Mises writes,

an inevitable tendency for the less marketable of a series of goods used as media of exchange to be one by one rejected until at last only a single commodity remained, which was universally employed as a medium of exchange; in a word, money.[6]

While this brief reconstruction of the origin of money is familiar, insufficient attention has been drawn to the fact that, as the most easily and widely salable good, money is at the same time the most universally present — instantly serviceable — good (which is why the interest rate, i.e., the discount rate of future goods against present goods, is expressed in terms of money) and, as such, the good uniquely suited to alleviate presently felt uneasiness about uncertainty. Because money can be employed for the instant satisfaction of the widest range of possible needs, it provides its owner with the best humanly possible protection against uncertainty. In holding money, its owner gains in the satisfaction of being able to meet instantly, as they unpredictably arise, the widest range of future contingencies. The investment in cash balances is an investment contra the (subjectively felt) aversion to uncertainty. A larger cash balance brings more relief from uncertainty aversion.

The term uncertainty aversion is meant here in its technical sense, as opposed to risk aversion. The categorical distinction between uncertainty on the one hand and risk on the other was introduced into economics by Frank H. Knight and further elaborated on by Ludwig von Mises with his distinction between case probability and class probability.[7]

Risks (instances of class probability) are contingencies against which it is possible to take out insurance, because objective long-run probability distributions concerning all possible outcomes are known and predictable. We know nothing about an individual outcome, but we know everything about the whole class of events, and we are certain about the future. Insofar as man faces a risky future, then, he does not need to hold cash. To satisfy his desire to be protected against risk, he can buy or produce insurance. The sum of money that he spends on insurance is an indication of the height of his aversion to risk. Insurance premiums are money spent, not held, and are as such invested in the physical production structure of producer and consumer goods. The payment of insurance reflects a man’s subjectively felt certainty concerning (predictable) future contingencies (risks).

In distinct contrast, insofar as man faces uncertainty he is, quite literally, not certain concerning future contingencies, i.e., as to what he might want or need and when. In order to be protected against unpredictable contingencies at unpredictable moments, he cannot invest in producer goods (as in the case of risk insurance); for such investments would reflect his certainty concerning particular future needs. Only present, instantly serviceable goods can protect against unpredictable contingencies (uncertainty). Nor does a man want to invest in consumer goods for uncertainty protection. For an investment in consumer goods, too, is an expression of certainty concerning specific momentary or immediately impending wants. Only money, on account of its instant and unspecific wide-ranging salability, can protect him against uncertainty. Thus, just as insurance premiums are the price paid for protection against risk aversion, so cash holdings are the price paid for protection against uncertainty aversion.

To the extent that a man feels certain regarding his future needs, he will invest in consumer or producer goods. To invest in money balances is to invest neither in consumer goods nor producer goods. Unlike consumer and producer goods, which are used up in consumption or production, money is neither used up through its use as a medium of exchange nor transformed into another commodity. To invest in cash balances means, I am uncertain about my present and future needs and believe that a balance of the most easily and widely saleable good on hand will best prepare me to meet my as-of-yet unknown needs at as-of-yet unknown times.

If a person then adds to his cash balance, he does so because he is confronted with a situation of (subjectively perceived) increased uncertainty regarding his future. The addition to his cash balance represents an investment in presently felt certainty vis-à-vis a future perceived as less certain. In order to add to his cash balance, a person must restrict his purchases or increase his sales of nonmoney goods (producer or consumer goods). In either case, the outcome is an immediate fall in certain nonmoney goods’ prices. As the result of restricting his purchases of x, y, or z, the money price of x, y, or z will be lowered (as compared to what it would have been otherwise), and likewise, by increasing his sales of a, b, or c, their prices will fall. The actor thus accomplishes exactly and immediately what he wants. He commands a larger (nominal and real) cash balance and is better prepared for an increasingly uncertain future. The marginal utility of the added cash is higher than (ranks above) the marginal utility of the nonmoney goods sold or unbought. He is better off with more cash on hand and less nonmoney goods, otherwise he would not have reallocated his assets in this way. There is more investment in the removal of perceived uncertainty, and there is less investment in needs, present or future, considered as certain.

The situation does not change if there is a general increase in the demand for money, i.e., if all or most people try to increase their cash holdings, in response to heightened uncertainty. With the total quantity of money given, the average size of cash holdings cannot increase, of course. Nor is the total quantity of producer and consumer goods that make up the physical production structure affected by a general increase in the demand for money. It remains unchanged. In generally striving to increase the size of their cash holdings, however, the money prices of nonmoney goods will be bid down, and the purchasing power per unit money will correspondingly rise. Thus, the (increased) demand for and the (given) supply of money are equilibrated again, but at a higher purchasing power per unit money and lower prices of nonmoney goods. That is, even if nominal cash balances cannot rise as a result of a general increase in the demand for money, the real value of cash balances can; and it is this increase in the value of real cash balances that brings about precisely and immediately the effect desired: being better prepared for a future deemed as less certain.

No one cares about the nominal number of money units in his possession. Rather, people want to keep cash with a definite amount of purchasing power on hand. If the purchasing power per unit money increases as the result of an increased demand for cash holdings, each unit of money confronted with an array of generally lower nonmoney goods prices can do a better job in affording its owner protection against uncertainty.

This shall suffice as my attempt to provide a positive demonstration of the unique productivity of cash holdings as “yielders of certainty” in an uncertain world. Only a brief additional comment concerning the present, unprecedentedly severe economic crisis and the consequences that our theoretical considerations imply for its solution seems to be in order.

I shall say nothing here about the cause of the present crisis, except that I consider it another, spectacular vindication of the so-called Austrian — or “Mises-Hayek” — business-cycle theory. In any case, the crisis has led to heightened uncertainty. People want more certainty vis-à-vis a future considered far less certain than before. Accordingly, their demand for cash increases. With the quantity of money given, the higher demand for money can be satisfied only by bidding down nonmoney goods’ prices. Consequently, as the overall “level” of prices falls, the purchasing power per unit money correspondingly rises. Each unit of money is productive now of more certainty, and the desired level of uncertainty protection is restored. The crisis is ended.

The solution to the crisis suggested instead by most economists and pundits and officially adopted by governments everywhere is entirely different. It is motivated by the here-criticized, fundamentally flawed doctrine that money held in or added to cash balances is money unproductively withheld from production and consumption. The additions to their cash holdings that people want to bring about are thus interpreted, wrongly, as a diminution of human welfare. Accordingly, huge efforts are now undertaken to increase the amount of spending. But this stands at cross purpose to the general public’s needs and desires: in order to be better protected against heightened perceived uncertainty, prices must fall and the purchasing power of money must rise. Yet with an influx of additional, newly created money, prices will be higher and the purchasing power per unit money will be lower than otherwise. Thus, as the result of the current monetary policy, the restoration of the desired level of uncertainty protection will be delayed and the crisis prolonged.

Notes

[1] William H. Hutt, “The Yield from Money Held,” in: Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises, ed. M. Sennholz, Chicago: Van Nostrand, 1956, pp. 196-216.

[2] John Maynard Keynes, The General Theory of Employment, Interest, and Money, New York: Harcourt, Brace, and World, 1964, p. 210.

[3] Roger Garrison, “Central Banking, Free Banking, and Financial Crises,” Review of Austrian Economics 9, no.2, 1996, p. 117; George Selgin & Lawrence White, “In Defense of Fiduciary Media,” Review of Austrian Economics 9, no. 2, 1996, p. 100/01.

[4] For a detailed critique of Keynes see Hans-Hermann Hoppe, “Theory of Employment, Money, Interest, and the Capitalist Process: The Misesian Case Against Keynes“; for a detailed critique of the free banking doctrine see idem, “How is Fiat Money Possible?” Review of Austrian Economics 7, no. 2, 1994 and idem, “Against Fiduciary Media,” Quarterly Journal of Austrian Economics 1, no.1, 1998.

These articles are collected in Hans-Hermann Hoppe, The Economics and Ethics of Private Property, 2nd Edition, Auburn, Al.: Ludwig von Mises Institute, 2006.

[5] Ludwig von Mises, Human Action, Chicago: Regnery, 1966, p. 249.

[6] Ludwig von Mises, Theory of Money and Credit, Irvington, N.Y.: Foundation for Economic Education, 1971, pp. 32-33.

[7] Frank H. Knight, Risk, Uncertainty and Profit, Chicago: University of Chicago Press, 1971; Ludwig von Mises, Human Action, chap. VI.

See also Hans-Hermann Hoppe, “The Limits of Numerical Probability,” Quarterly Journal of Austrian Economics, 10. no. 1, 2007, and idem, “On Certainty and Uncertainty,” Review of Austrian Economics, 10, no.1, 1997.

Reprinted from Mises.org.

Hans-Hermann Hoppe [send him mail] is distinguished fellow at the Ludwig von Mises Institute and founder and president of the Property and Freedom Society. His books include Democracy: The God That Failed and The Myth of National Defense. Visit his website.

The Best of Hans-Hermann Hoppe

This talk was delivered at the Mises Institute Brasil’s 2nd Austrian School Conference in Porto Alegre on April 10, 2011.

The Problem of Social Order

Alone on his island, Robinson Crusoe can do whatever he pleases. For him, the question concerning rules of orderly human conduct — social cooperation — simply does not arise. This question can only arise once a second person, Friday, arrives on the island. Yet even then, the question remains largely irrelevant so long as no scarcity exists. Suppose the island is the Garden of Eden. All external goods are available in superabundance. They are “free goods,” just as the air that we breathe is normally a “free” good. Whatever Crusoe does with these goods, his actions have no repercussions – neither with respect to his own future supply of such goods nor regarding the present or future supply of the same goods for Friday (and vice versa). Hence, it is impossible that a conflict concerning the use of such goods can arise between Crusoe and Friday. A conflict is possible only, if goods are scarce; and only then is there a need to formulate rules that make orderly, conflict-free social cooperation possible.

In the Garden of Eden only two scarce goods exist: a person's physical body and its standing room. Crusoe and Friday each have only one body and can stand only at one place at a time. Hence, even in the Garden of Eden conflicts between Crusoe and Friday can arise: Crusoe and Friday cannot occupy the same standing room simultaneously without coming into physical conflict with each other. Accordingly, even in the Garden of Eden rules of orderly social conduct must exist — rules regarding the proper location and movement of human bodies. Outside the Garden of Eden, in the realm of all-around scarcity, there must be rules that regulate the use not only of personal bodies, but of everything scarce, such that all possible conflicts can be ruled out. This is the problem of social order.

The Solution: The Idea of Private Property

In the history of social and political thought, myriad proposals have been offered as solutions to the problem of social order, and this multitude of mutually incompatible proposals has contributed to the widespread belief that the search for a single “correct” solution is futile and illusory. Yet a correct solution does exist. There is no reason to succumb to moral relativism. Indeed, the solution to the problem of social order has been known for hundreds of years. The solution is the idea of private property.

Let me formulate the solution first for the special case represented by the Garden of Eden and subsequently for the general case represented by the “real” world of all-around scarcity.

In the Garden of Eden, the solution is provided by the simple rule stipulating that everyone may place or move his own body wherever he pleases, provided only that no one else is already standing there and occupying the same space.

Outside of the Garden of Eden, in the realm of all-around scarcity, the solution is provided by four logically interrelated rules.

First: Every person is the private (exclusive) owner of his own physical body. Indeed, who else, if not Crusoe, should be the owner of Crusoe's body? Friday? Or Crusoe and Friday jointly? Yet that would not help avoid conflict. Rather, it would create conflict and make it permanent.

Second: Every person is the private owner of all nature-given goods that he has perceived as scarce and put to use by means of his body, before any other person. Again: who else, if not the first user, should be their owner? The second user? Or the first and the second user jointly? Yet such rulings again would be contrary to the very purpose of norms: of helping to avoid conflict, rather than to create it.

Third, every person who, with the help of his body and his originally appropriated goods, produces new products thereby becomes the proper owner of these products, provided only that in the process of production he does not physically damage the goods owned by another person.

Fourth, once a good has been first appropriated or produced, ownership in it can be acquired only by means of a voluntary, contractual transfer of its property title from a previous to a later owner.

I can spare myself here the task of providing a detailed ethical as well as economic justification of these rules. This has been done elsewhere. However, a few statements in this connection are in order.

Contrary to the frequently heard claim that the institution of private property is only a convention, it must be categorically stated: A convention serves a purpose, and it is something to which an alternative exists. The Latin alphabet, for instance, serves the purpose of written communication and there exists an alternative to it, the Cyrillic alphabet. That is why it is referred to as a convention. What, however, is the purpose of action-norms? If no interpersonal conflict existed — that is: if, due to a pre-stabilized harmony of all interests, no situation ever arises in which two or more people want to use one and the same good in incompatible ways — then no norms would be needed. It is the purpose of norms to help avoid otherwise unavoidable conflict. A norm that generates conflict rather than help avoid it is contrary to the very purpose of norms. It is a dysfunctional norm or a perversion. With regard to the purpose of conflict-avoidance, however, the institution of private property is definitely not just a convention, because no alternative to it exists. Only private (exclusive) property makes it possible that all otherwise unavoidable conflicts can be avoided. And only the principle of property acquisition through acts of original appropriation, performed by specific individuals at a specific time and location, makes it possible that conflict can be avoided from the beginning of mankind onward, since only the first appropriation of some previously un-appropriated good can be conflict-free — simply, because – per definitionem – no one else had any previous dealings with the good.

The Enforcement of Social Order and the Protection of Private Property: The State

As important as this insight is: that the institution of private property, ultimately grounded in acts of original appropriation, is without alternative given the desideratum of conflict-avoidance (peace), it is not sufficient to establish social order. For even if everyone knows how conflict can be avoided, it is still possible, that people simply do not want to avoid conflict, because they expect to benefit from it at the expense of others. In fact, as long as mankind is what it is, there will always exist murderers, robbers, thieves, thugs and con-artists, i.e., people not acting in accordance with the above-mentioned rules. Hence, every social order, if it is to be successfully maintained, requires institutions and mechanisms designed to keep such rule-breakers in check. How to accomplish this task, and by whom?

The standard reply to this question is to say: this task, i.e., the enforcement of law and order, is the first and primary duty — indeed: the raison d'etre – of the state. In particular, this is the answer also given by classical liberals such as my own intellectual master, Ludwig von Mises. Whether or not this answer is correct, depends on how "state" is defined. The state, according to the standard definition, is not a regular, specialized firm. Rather: it is defined as an agency characterized by two unique, logical connected features. First, the state is an agency that exercises a territorial monopoly of ultimate decision-making. That is, the state is the ultimate arbiter in every case of conflict, including conflicts involving itself. It allows no appeal above and beyond itself. Second, the state is an agency that exercises a territorial monopoly of taxation. That is, it is an agency that unilaterally fixes the price that private citizens must pay for the state's service as ultimate judge and enforcer of law and order.

The Fundamental Error of "Statism"

As widespread as the standard view regarding the necessity of the institution of a state as the provider of law and order is, it stands in clear contradiction to elementary economic and moral laws and principles.

First off, among economists and philosophers two near-universally accepted propositions exist.

First: Every "monopoly" is "bad" from the viewpoint of consumers. Monopoly is here understood in its classic meaning as an exclusive privilege granted to a single producer of a commodity or service, or as the absence of "free entry" into a particular line of production. Only one agency, A, may produce a given good or service, X. Such a monopoly is "bad" for consumers, because, shielded from potential new entrants into a given area of production, the price of the product will be higher and its quality lower than otherwise, under free competition.

Second: The production of law and order, i.e., of security, is the primary function of the state (as just defined). Security is here understood in the wide sense adopted in the American Declaration of Independence: as the protection of life, property, and the pursuit of happiness from domestic violence (crime) as well as external (foreign) aggression (war).

Both propositions are apparently incompatible with each other. This has rarely caused concern among philosophers and economists, however, and in so far as it has, the typical reaction has been one of taking exception to the first proposition rather than the second. Yet there exist fundamental theoretical reasons (and mountains of empirical evidence) that it is indeed the second proposition that is in error.

As a territorial monopoly of ultimate decision-making and law enforcement, the state is not just like any other monopoly, such as a milk or a car monopoly that produces milk and cars of comparatively lower quality and higher prices. In contrast to all other monopolists, the state not only produces inferior goods, but "bads" (non-goods). In fact, it must first produce bads (such as taxes) before it can produce anything that might be considered a (inferior) good.

If an agency is the ultimate judge in every case of conflict, then it is also judge in all conflicts involving itself. Consequently, instead of merely preventing and resolving conflict, a monopolist of ultimate decision-making will also cause and provoke conflict in order to settle it to his own advantage. That is, if one can only appeal to the state for justice, justice will be perverted in the favor of the state, constitutions and supreme courts notwithstanding. These constitutions and courts are state constitutions and courts, and whatever limitations on state action they may set or find is invariably decided by agents of the very same institution under consideration. Predictably, the definition of property and protection will be continually altered and the range of jurisdiction expanded to the state's advantage. The idea of some u2018given,' eternal and immutable law that must be discovered will disappear and be replaced by the idea of law as legislation – as arbitrary, state-made law.

Moreover, as ultimate judge the state is also a monopolist of taxation, i.e., it can unilaterally, without the consent of everyone affected, determine the price that its subjects must pay for the state's provision of (perverted) law. However, a tax-funded life-and-property protection agency is a contradiction in terms: an expropriating property protector. Motivated, as everyone is, by self-interest and the disutility of labor, but equipped with the unique power to tax, state agents will invariably strive to maximize expenditures on protection, and almost all of a nation's wealth can conceivably be consumed by the cost of protection, and at the same time to minimize the actual production of protection. The more money one can spend and the less one must work for it, the better off one will be.

The Error Compounded: the Democratic State

Apart from the fundamental error of statism generally, additional errors are involved in the special case of a democratic state. A detailed treatment of this subject has been provided elsewhere, but a brief mention is indicated.

The traditional, pre-modern state-form is that of a (absolute) monarchy. Yet monarchy was faulted, in particular also by classical liberals, for being incompatible with the basic principle of "equality before the law." Monarchy instead rested on personal privilege. Thus, the critics of monarchy argued, the monarchical state had to be replaced by a democratic one. In opening participation and entry into state-government to everyone on equal terms, not just to a hereditary class of nobles, it was thought that the principle of the equality of all before the law had been satisfied.

However, this democratic equality before the law is something entirely different than and incompatible with the idea of one universal law, equally applicable to everyone, everywhere, and at all times. In fact, the former objectionable schism and inequality of a higher law of kings versus a subordinate law of ordinary subjects is fully preserved under democracy in the separation of "public" versus "private" law and the supremacy of the former over the latter. Under democracy, everyone is equal insofar as entry into government is open to all on equal terms. Everyone can become king, so to say, not only a privileged circle of people. Thus, in a democracy no personal privileges or privileged persons exist. However, functional privileges and privileged functions exist. Public officials, as long as they act in an official capacity, are governed and protected by public law and occupy thereby a privileged position vis-à-vis persons acting under the mere authority of private law. In particular, public officials are permitted to finance or subsidize their own activities through taxes. That is, they do not, as every private law subject must, earn their income through the production and subsequent sale of goods and services to voluntarily buying or not-buying consumers. Rather, as public officials, they are permitted to engage in, and live off, what in private dealings between private law subjects is considered "theft" and "stolen loot." Thus, privilege and legal discrimination — and the distinction between rulers and subjects – will not disappear under democracy. To the contrary. Rather than being restricted to princes and nobles, under democracy privileges will be available to all: everyone can engage in theft and live off stolen loot if only he becomes a public official.

Predictably, then, under democratic conditions the tendency of every monopoly of ultimate decision-making to increase the price of justice and to lower its quality and substitute injustice for justice and is not diminished but aggravated. As hereditary monopolist, a king or prince regards the territory and people under his jurisdiction as his personal property and engages in the monopolistic exploitation of his "property." Under democracy, monopoly and monopolistic exploitation do not disappear. Rather, what happens with democracy is this: instead of a prince and a nobility who regard the country as their private property, a temporary and interchangeable caretaker is put in monopolistic charge of the country. The caretaker does not own the country, but as long as he is in office he is permitted to use it to his and his proteges’ advantage. He owns its current use – usufruct – but not its capital stock. This does not eliminate exploitation. To the contrary, it makes exploitation less calculating and carried out with little or no regard to the capital stock. Exploitation becomes shortsighted and capital consumption will be systematically promoted.

The Solution: Private Law Society instead of State

If the state, and especially the democratic state, is demonstrably incapable of creating and maintaining social order; if, instead of helping avoid conflict, the state is the source of permanent conflict; and if, rather than assuring legal security and predictability, the state itself continuously generates insecurity and unpredictability through its legislation and replaces constant law with "flexible" and arbitrary whim, then inescapably the question as to the correct — obviously: non-statist — solution to the problem of social order arises.

The solution is a private law society, i.e., a society in which every individual and institution is subject to one and the same set of laws. No public law granting privileges to specific persons of functions (and no public property) exists in this society. There is only private law (and private property), equally applicable to each and everyone. No one is permitted to acquire property by any means other than through original appropriation, production or voluntary exchange, and no one possesses a privilege to tax and expropriate. Moreover, in a private law society no one is permitted to prohibit anyone else from using his property in order to enter any line of production he wishes and compete against whomever he pleases.

Specifically regarding the problem at hand: in a private law society the production of security — of law and order — will be undertaken by freely financed individuals and agencies competing for a voluntarily paying (or not-paying) clientele, just as the production of all other goods and services.

It would be presumptuous wanting to predict the precise shape and form of the security industry emerging within the framework of a private law society. However, it is not difficult to predict a few central changes that would fundamentally = and favorably – distinguish a competitive security industry from the present, all-too-well-known statist production of (in)justice and (dis)order.

First off, while in a complex society based on the division of labor self-defense will play only a secondary role (for reasons yet to be explained), it should be emphasized from the outset that in a private law society everyone's right to defend oneself from aggression against one's person and property is entirely undisputed. In distinct contrast to the present, statist practice, which renders people increasingly unarmed and defenseless against aggressors, in a private law society no restrictions on the private ownership of firearms and other weapons exist. Everyone's elementary right to engage in self-defense to protect his life and property against invaders would be sacrosanct, and as one knows from the experience of the not-so-wild Wild West as well as numerous recent empirical investigations into the relationship between the frequency of gun ownership and crime rates: more guns imply less crime.

Just as in today's complex economy we do not produce our own shoes, suits and telephones, however, but partake in the advantages of the division of labor, so it is to be expected that we will also do so when it comes to production of security, especially the more property a person owns and the richer a society as a whole. Hence, most security services will without doubt be provided by specialized agencies competing for voluntarily paying clients: by various private police-, insurance-, and arbitration-agencies.

If one wanted to summarize in one word the decisive difference and advantage of a competitive security industry as compared to the current statist practice, it would be: contract. The state, as ultimate decision-maker and judge, operates in a contract-less legal vacuum. There exists no contract between the state and its citizens. It is not contractually fixed, what is actually owned by whom, and what, accordingly, is to be protected. It is not fixed, what service the state is to provide, what is to happen if the state fails in its duty, nor what the price is that the "customer" of such "service" must pay. Rather, the state unilaterally fixes the rules of the game and can change them, per legislation, during the game. Obviously, such behavior is inconceivable for freely financed security providers. Just imagine a security provider, whether police, insurer or arbitrator, whose offer consisted in something like this: I will not contractually guarantee you anything. I will not tell you what specific things I will regard as your to-be-protected property, nor will I tell you what I oblige myself to do if, according to your opinion, I do not fulfill my service to you — but in any case, I reserve the right to unilaterally determine the price that you must pay me for such undefined service. Any such security provider would immediately disappear from the market due to a complete lack of customers. Each private, freely financed security producer instead must offer its prospective clients a contract. And these contracts must, in order to appear acceptable to voluntarily paying consumers, contain clear property descriptions as well as clearly defined mutual services and obligations. Moreover, each party to a contract, for the duration or until the fulfillment of the contract, would be bound by its terms and conditions; and every change of terms or conditions would require the unanimous consent of all parties concerned.

Specifically, in order to appear acceptable to security buyers, these contracts must contain provisions about what will be done in the case of a conflict or dispute between the protector or insurer and his own protected or insured clients as well as in the case of a conflict between different protectors or insurers and their respective clients. And in this regard only one mutually agreeable solution exists: in these cases the conflicting parties contractually agree to arbitration by a mutually trusted but independent third party. And as for this third party: it, too, is freely financed and stands in competition with other arbitrators or arbitration agencies. Its clients, i.e., the insurers and the insured, expect of it that it come up with a verdict that is recognized as fair and just by all sides. Only arbitrators capable of forming such judgments will succeed in the arbitration market. Arbitrators incapable of this and viewed as biased or partial will disappear from the market.

From this fundamental advantage of a private law society all other advantages follow.

First off, competition among police, insurers and arbitrators for paying clients would bring about a tendency toward a continuous fall in the price of protection (per insured value), thus rendering protection increasingly more affordable, whereas under monopolistic conditions the price of protection will steadily rise and become increasingly un-affordable.

Furthermore, as already indicated, protection and security are goods and services that compete with others. If more resources are allocated to protection, fewer can be expended on cars, vacations, food, or drink, for example. Also, resources allocated to the protection of A or group A (people living along the Pacific) for instance, compete with resources expended on the protection of B or group B (people living along the Atlantic). As a tax-funded protection monopolist, the state’s allocation of resources will necessarily be arbitrary. There will be overproduction (or underproduction) of security as compared to other competing goods and services, and there will be overprotection of some individuals, groups, or regions and under-protection of others. In distinct contrast, in a system of freely competing protection agencies all arbitrariness of allocation (all over- and underproduction) would disappear. Protection would be accorded the relative importance that is has in the eyes of voluntarily paying consumers, and no person, group, or region would receive protection at the expense of any other one. Each and everyone would receive protection in accordance with his own payments.

The most important advantage of a private, contract-based production of law and order, however, is of a qualitative nature.

First, there is the fight against crime. The state is notoriously inefficient in this regard, because the state-agents entrusted with this task are paid out of taxes, i.e., independent of their productivity. Why should one work, if one is also paid for doing nothing at all? In fact, it can be expected that state agents take an interest in maintaining a moderately high crime rate, because this way they can justify ever increased funding. Worse, for state agents the victims of crime and the indemnification and compensation of such victims play an at best negligible role. The state does not indemnify the victims of crime. To the contrary, the harmed victims are still further insulted in making them, qua taxpayers, pay for the incarceration and "rehabilitation" of the criminal (should he be captured). The situation in a private law society is entirely different. Security providers, in particular insurers, will have to indemnify their clients in the case of actual damage (otherwise they would find no clients) and hence, they must operate efficiently. They must be efficient in the prevention of crime, for unless they can prevent a crime, they would have to pay up. Further, even if a criminal act could not be prevented, they must be efficient in detecting and recovering stolen loot, because otherwise they must pay to replace theses goods. In particular, they must be efficient in the detection and apprehension of the criminal, for only if the criminal is apprehended is it possible for them to make him pay for the compensation owed to the victim and thus reduce their costs.

Moreover, a private, competitive and contract-based security industry has a general peace-promoting effect. States are, as already explained, by nature aggressive. They can cause or provoke conflict in order to then "solve" it to their own advantage. Or put differently: as tax-funded monopolists of ultimate decision-making states can externalize the costs associated with aggressive behavior onto others, i.e., the hapless taxpayers, and accordingly will tend to be more aggressive vis-à-vis their own population as well as "foreigners." In distinct contrast, competing private insurers are by nature defensive and peaceful. On the one hand this is because every act of aggression is costly, and an insurance company engaged in aggressive conduct would require comparatively higher premiums, involving the loss of clients to cheaper non-aggressive competitors. On the other hand, it is not possible to insure oneself against every conceivable "risk." Rather, it is only possible to insure oneself against "accidents," i.e., risks over whose outcome the insured has no control and to which he contributes nothing. Thus, it is possible to insure oneself against the risk of death and fire, for instance, but it is impossible to insure oneself against the risk of committing suicide tomorrow or setting one's own house on fire. Similarly, it is impossible to insure oneself against the risk of business failure, of unemployment, or of disliking one's neighbors, for in each case one has some control over the event in question. Most significantly, the un-insurability of individual actions and sentiments (in contradistinction to accidents) implies that it is also impossible to insure oneself against the risk of damages resulting from one's own prior aggression or provocation. Instead, every insurer must restrict the actions of his clients so as to exclude all aggression and provocation on their part. That is, any insurance against social disasters such as crime must be contingent on the insured submitting themselves to specified norms of civilized, non-aggressive conduct.

Further, due to the same reasons and financial concerns, insurers will tend to require that their clients abstain from all forms of vigilante justice (except perhaps under quite extraordinary circumstances), for vigilante justice, even if justified, invariably causes uncertainty and provokes possible third party intervention. By obliging their clients instead to submit to regular publicized procedures whenever they think they have been victimized, these disturbances and associated costs can be largely avoided. Lastly, it is worthwhile pointing out that while states as tax funded agencies can – and do – engage in the large-scale prosecution of victimless crimes such as "illegal drug" use, prostitution or gambling, these "crimes" would tend to be of little or no concern within a system of freely funded protection agencies. "Protection" against such "crimes" would require higher insurance premiums, but since these "crimes," unlike genuine crimes against persons and property, do not create victims, very few people would be willing to spend money on such "protection."

Still more: While states, as already noted, are always and everywhere eager to disarm its population and thus rob it of an essential means of self-defense, private law societies are characterized by an unrestricted right to self-defense and hence by widespread private gun and weapon ownership. Just imagine a security producer who demanded of its prospective clients that they would first have to completely disarm themselves before it would be willing to defend the clients' life and property. Correctly, everyone would think of this as a bad joke and refuse such on offer. Freely financed insurance companies that demanded potential clients first hand over all of their means of self-defense as a prerequisite of protection would immediately arouse the utmost suspicion as to their true motives, and they would quickly go bankrupt. In their own best interest, insurance companies would reward armed clients, in particular those able to certify some level of training in the handling of arms, charging them lower premiums reflecting the lower risk that they represent. Just as insurers charge less if homeowners have an alarm system or a safe installed, so would a trained gun owner represent a lower insurance risk.

Last and most importantly, a system of competing protection agencies would have a two-fold impact on the development of law. On the one hand, it would allow for greater variability of law. Rather than imposing a uniform set of standards onto everyone (as under statist conditions), protection agencies could compete against each other not just via price but also through product differentiation. There could exist side by side, for instance, Catholic protection agencies or insurers applying Canon law, Jewish agencies applying Mosaic law, Muslim agencies applying Islamic law, and agencies applying secular law of one variety or another, all of them sustained by a voluntarily paying clientele. Consumers could choose the law applied to them and their property. No one would have to live under "foreign" law.

On the other hand, the very same system of private law and order production would promote a tendency toward the unification and harmonization of law. The "domestic" – Catholic, Jewish, Roman, etc. – law would apply only to the person and property of those who had chosen it. Canon law, for instance, would apply only to professed Catholics and deal solely with intra-Catholic conflict and conflict resolution. Yet it is also possible, of course, that a Catholic might come into conflict with the subscriber of some other law code, e.g., a Muslim. If both law codes reached the same or a similar conclusion, no difficulties exist. However, if competing law codes arrived at distinctly different conclusion (as they would at least in some cases), a problem arises. "Domestic" (intra-group) law would be useless, but naturally every insured person would want protection against the contingency of inter-group conflicts as well. In this situation, it cannot be expected that one insurer and the subscribers of its law code simply subordinate their judgment to that of another insurer and its law. Rather, as I have already explained, in this situation there exists only one credible and acceptable way out of this predicament: From the outset, every insurer would have to be contractually obliged to submit itself and its clients to arbitration by an independent third party. This party would not only be independent, but at the same time the unanimous choice of both parties. It would be agreed upon, because of its commonly perceived ability to find mutually agreeable (fair) solutions in cases of inter-group disagreement. If an arbitrator failed in this task and arrived at conclusions that were perceived as "unfair" or "biased" by either one of the insurers or their clients, this person or agency would not likely be chosen as an arbitrator in the future. As a result of the constant cooperation of various insurers and arbitrators, then, a tendency toward the unification of property and contract law and the harmonization of the rules of procedure, evidence, and conflict resolution would be set in motion. Thus, in buying protection-insurance, every insurer and insured becomes a participant in an integrated system of conflict-avoidance and peace-keeping. Every single conflict and damage claim, regardless of where and by or against whom, would fall in the jurisdiction of one or more specific insurance agency and would be handled either by an individual insurer's "domestic" law or by the "international" or "universal" law provisions and procedures agreed upon by everyone in advance.

Hence, instead of permanent conflict, in-justice and legal insecurity, as under the present statist conditions, in a private law society peace, justice and legal security would hold sway.

Bibliography

Hans-Hermann Hoppe, Eigentum, Anarchie und Staat. Studien zur Theorie des Kapitalismus (1987)

Hans-Hermann Hoppe, A Theory of Socialism and Capitalism. Economics, Morals, and Politics (1989)

Hans-Hermann Hoppe, The Economics and Ethics of Private Property. Studies in Political Economy and Philosophy (1993; enlarged 2003)

Hans-Hermann Hoppe, Democracy the God That Failed. The Economics and Politics of Monarchy, Democracy and Natural Order (2001)

Hans-Hermann Hoppe, Ed., The Myth of National Defense (2005)

See also my annotated bibliography.

Hans-Hermann Hoppe [send him mail] is distinguished fellow at the Ludwig von Mises Institute and founder and president of the Property and Freedom Society. His books include Democracy: The God That Failed and The Myth of National Defense. Visit his website.

The Best of Hans-Hermann Hoppe

The Daily Bell is pleased to present an exclusive interview with Dr. Hans-Hermann Hoppe.

Introduction: Dr. Hans-Hermann Hoppe, born in 1949 in Peine, West Germany, studied philosophy, sociology, economics, history and statistics at the University of the Saarland, in Saarbruecken, the Johann Wolfgang Goethe University, in Frankfurt am Main, and at the University of Michigan, in Ann Arbor. He received his doctorate (Philosophy, 1974, under Juergen Habermas) and his "Habilitation" degree (Foundations of Sociology and Economics, 1981) both from the Goethe University in Frankfurt.

In 1985 Hoppe moved to New York City to work with Murray N. Rothbard (1926-1995), the most prominent American student of the Austrian economist Ludwig von Mises (1881-1973). In 1986 Hoppe followed Rothbard to the University of Nevada, Las Vegas, where he served as Professor of Economics until his retirement in 2008. After Rothbard’s death, Hoppe also served for many years as editor of the Quarterly Journal of Austrian Economics and of the interdisciplinary Journal for Libertarian Studies. Hoppe is a Distinguished Fellow of the Ludwig von Mises Institute, in Auburn, Alabama, and founder and president of the Property and Freedom Society. He currently lives with his wife Dr. Guelcin Imre, a fellow economist, in Istanbul, Turkey.

Hoppe is the author of eight books – the best known of which is Democracy: The God That Failed – and more than 150 articles in books, scholarly journals and magazines of opinion. As an internationally prominent Austrian School economist and libertarian philosopher, he has lectured all over the world and his writings have been translated into more than twenty languages.

In 2006 Hoppe was awarded the Gary S. Schlarbaum Prize for Lifetime Achievement in the Cause of Liberty, and in 2009 he received the Franz Cuhel Memorial Prize from the University of Economics in Prague. At the occasion of his 60th birthday, in 2009, a Festschrift was published in his honor: Joerg Guido Huelsmann & Stephan Kinsella (eds.), Property, Freedom and Society. Essays in Honor of Hans-Hermann Hoppe. Hoppe’s personal website is www.HansHoppe.com. There the bulk of his scholarly and popular writings as well as many public lecture recordings are electronically available.

Daily Bell: Please answer these questions as our readers were not already aware of your fine work and considered opinions. Let’s jump right in. Why is democracy "The God that failed?"

Dr. Hans-Hermann Hoppe: The traditional, pre-modern state-form is that of a (absolute) monarchy. The democratic movement was directed against kings and the classes of hereditary nobles. Monarchy was criticized as being incompatible with the basic principle of the "equality before the law." It rested on privilege and was unfair and exploitative. Democracy was supposed to be the way out. In opening participation and entry into state-government to everyone on equal terms, so the advocates of democracy claimed, equality before the law would become reality and true freedom would reign. But this is all a big error.

True, under democracy everyone can become king, so to speak, not only a privileged circle of people. Thus, in a democracy no personal privileges exist. However, functional privileges and privileged functions exist. Public officials, if they act in an official capacity, are governed and protected by "public law" and thereby occupy a privileged position vis-à-vis persons acting under the mere authority of "private law." In particular, public officials are permitted to finance or subsidize their own activities through taxes. That is, they are permitted to engage in, and live off, what in private dealings between private law subjects is prohibited and considered "theft" and "stolen loot." Thus, privilege and legal discrimination – and the distinction between rulers and subjects – will not disappear under democracy.

Even worse: Under monarchy, the distinction between rulers and ruled is clear. I know, for instance, that I will never become king, and because of that I will tend to resist the king’s attempts to raise taxes. Under democracy, the distinction between rulers and ruled becomes blurred. The illusion can arise "that we all rule ourselves," and the resistance against increased taxation is accordingly diminished. I might end up on the receiving end: as a tax-recipient rather than a tax-payer, and thus view taxation more favorably.

And moreover: As a hereditary monopolist, a king regards the territory and the people under his rule as his personal property and engages in the monopolistic exploitation of this "property." Under democracy, monopoly and monopolistic exploitation do not disappear. Rather, what happens is this: instead of a king and a nobility who regard the country as their private property, a temporary and interchangeable caretaker is put in monopolistic charge of the country. The caretaker does not own the country, but as long as he is in office he is permitted to use it to his and his protégés’ advantage. He owns its current use – usufruct – but not its capital stock. This does not eliminate exploitation. To the contrary, it makes exploitation less calculating and carried out with little or no regard to the capital stock. Exploitation becomes shortsighted and capital consumption will be systematically promoted.

Daily Bell: If democracy has failed what would you put in its place? What is the ideal society? Anarcho-capitalism?

Dr. Hans-Hermann Hoppe: I prefer the term "private law society." In a private law society every individual and institution is subject to one and the same set of laws. No public law granting privileges to specific persons or functions exists in this society. There is only private law (and private property), equally applicable to each and everyone. No one is permitted to acquire property by means other than through original appropriation of previously un-owned things, through production, or through voluntary exchange, and no one possesses a privilege to tax and expropriate. Moreover, no one is permitted to prohibit anyone else from using his property in order to enter any line of production he wishes and compete against whomever he pleases.

Daily Bell: How would law and order be provided in this society? How would your ideal justice system work?

Dr. Hans-Hermann Hoppe: In a private law society the production of law and order – of security – would be undertaken by freely financed individuals and agencies competing for a voluntarily paying (or not-paying) clientele – just as the production of all other goods and services. How this system would work can be best understood in contrast to the workings of the present, all-too-familiar statist system. If one wanted to summarize in one word the decisive difference – and advantage – of a competitive security industry as compared to the current statist practice, it would be: contract.

The state operates in a legal vacuum. There exists no contract between the state and its citizens. It is not contractually fixed, what is actually owned by whom, and what, accordingly, is to be protected. It is not fixed, what service the state is to provide, what is to happen if the state fails in its duty, nor what the price is that the "customer" of such "service" must pay. Rather, the state unilaterally fixes the rules of the game and can change them, per legislation, during the game. Obviously, such behavior is inconceivable for freely financed security providers. Just imagine a security provider, whether police, insurer or arbitrator, whose offer consisted in something like this: I will not contractually guarantee you anything. I will not tell you what I oblige myself to do if, according to your opinion, I do not fulfill my service to you – but in any case, I reserve the right to unilaterally determine the price that you must pay me for such undefined service. Any such security provider would immediately disappear from the market due to a complete lack of customers.

Each private, freely financed security producer must instead offer its prospective clients a contract. And these contracts must, in order to appear acceptable to voluntarily paying consumers, contain clear property descriptions as well as clearly defined mutual services and obligations. Each party to a contract, for the duration or until the fulfillment of the contract, would be bound by its terms and conditions; and every change of terms or conditions would require the unanimous consent of all parties concerned.

Specifically, in order to appear acceptable to security buyers, these contracts must contain provisions about what will be done in the case of a conflict or dispute between the protector or insurer and his own protected or insured clients as well as in the case of a conflict between different protectors or insurers and their respective clients. And in this regard only one mutually agreeable solution exists: in these cases the conflicting parties contractually agree to arbitration by a mutually trusted but independent third party. And as for this third party: it, too, is freely financed and stands in competition with other arbitrators or arbitration agencies. Its clients, i.e., the insurers and the insured, expect of it, that it come up with a verdict that is recognized as fair and just by all sides. Only arbitrators capable of forming such judgments will succeed in the arbitration market. Arbitrators incapable of this and viewed as biased or partial will disappear from the market.

Daily Bell: Are you denying, then, that we need the state to defend us?

Dr. Hans-Hermann Hoppe: Indeed. The state does not defend us; rather, the state aggresses against us and it uses our confiscated property to defend itself. The standard definition of the state is this: the state is an agency characterized by two unique, logically connected features. First, the state is an agency that exercises a territorial monopoly of ultimate decision-making. That is, the state is the ultimate arbiter and judge in every case of conflict, including conflicts involving itself and its agents. There is no appeal above and beyond the state. Second, the state is an agency that exercises a territorial monopoly of taxation. That is, it is an agency that can unilaterally fix the price that its subjects must pay for the state’s service as ultimate judge. Based on this institutional set-up you can safely predict the consequences. First, instead of preventing and resolving conflict, a monopolist of ultimate decision-making will cause and provoke conflict in order to settle it to its own advantage. That is, the state does not recognize and protect existing law, but it perverts law through legislation. Contradiction number one: the state is a law-breaking law protector. Second, instead of defending and protecting anyone or anything, a monopolist of taxation will invariably strive to maximize his expenditures on protection and at the same time minimize the actual production of protection. The more money the state can spend and the less it must work for this money, the better off it is. Contradiction number two: the state is an expropriating property protector.

Daily Bell: Are there any good laws and regulations?

Dr. Hans-Hermann Hoppe: Yes. There are a few, simple good laws that almost everyone intuitively recognizes and acknowledges and that can also be demonstrated to be "true" and "good" laws. First: If there were no interpersonal conflicts and we all lived in perfect harmony there would be no need for any law or norm. It is the purpose of laws or norms to help avoid otherwise unavoidable conflict. Only laws that achieve this can be called good laws. A law that generates conflict rather than help avoid it is contrary to the purpose of laws, i.e., bad, dysfunctional or perverted law.

Second: Conflicts are possible only if and insofar as goods are scarce. People clash, because they want to use one and the same good in different, incompatible ways. Either I win and get my way or you win and get your way. We cannot both be "winners." In the case of scarce goods, then, we need rules or laws helping us decide between rival, conflicting claims. In contrast, goods that are "free," i.e., goods that exist in superabundance, that are inexhaustible or infinitely re-producible, are not and cannot be a source of conflict. Whenever I use a non-scarce good it does not in the slightest diminish the supply of this good available to you. I can do with it what I want and you can do with it what you want at the same time. There is no loser. We are both winners; and hence, as far as non-scarce goods are concerned, there is never any need for laws.

Third: All conflict concerning scarce goods, then, can be avoided if only every good is privately owned, i.e., exclusively controlled by one specified individual(s) rather than another, and it is always clear which thing is owned, and by whom, and which is not. And in order to avoid all possible conflict from the beginning of mankind on, it is only necessary to have a rule regulating the first, original appropriation of previously un-owned, nature-given goods as private property. In sum then, there are essentially three "good laws" that assure conflict-free interaction or "eternal peace:" a) he who first appropriates something previously on-owned is its exclusive owner (as the first appropriator he cannot have come into conflict with anyone else as everyone else appeared on the scene only later); b) he who produces something with his body and homesteaded goods is owner of his product, provided he does not thereby damage the physical integrity of others’ property; and c) he who acquires something from a previous or earlier owner by means of voluntary exchange, i.e., an exchange that is deemed mutually beneficial, is its owner.

Daily Bell: How, then, does one define freedom? As the absence of state coercion?

Dr. Hans-Hermann Hoppe: A society is free, if every person is recognized as the exclusive owner of his own (scarce) physical body, if everyone is free to appropriate or "homestead" previously un-owned things as private property, if everyone is free to use his body and his homesteaded goods to produce whatever he wants to produce (without thereby damaging the physical integrity of other peoples’ property), and if everyone is free to contract with others regarding their respective properties in any way deemed mutually beneficial. Any interference with this constitutes an act of aggression, and a society is un-free to the extent of such aggressions.

Dr. Hans-Hermann Hoppe: I agree with my friend Kinsella, that the idea of intellectual property rights is not just wrong and confused but dangerous. And I have already touched upon why this is so. Ideas – recipes, formulas, statements, arguments, algorithms, theorems, melodies, patterns, rhythms, images, etc. – are certainly goods (insofar as they are good, not bad, recipes, etc.), but they are not scarce goods. Once thought and expressed, they are free, inexhaustible goods. I whistle a melody or write down a poem, you hear the melody or read the poem and reproduce or copy it. In doing so you have not taken anything away from me. I can whistle and write as before. In fact, the entire world can copy me and yet nothing is taken from me. (If I didn’t want anyone to copy my ideas I only have to keep them to myself and never express them.)

Now imagine I had been granted a property right in my melody or poem such that I could prohibit you from copying it or demanding a royalty from you if you do. First: Doesn’t that imply, absurdly, that I, in turn, must pay royalties to the person (or his heirs) who invented whistling and writing, and further on to those, who invented sound-making and language, and so on? Second: In preventing you from or making you pay for whistling my melody or reciting my poem, I am actually made a (partial) owner of you: of your physical body, your vocal chords, your paper, your pencil, etc. because you did not use anything but your own property when you copied me. If you can no longer copy me, then, this means that I, the intellectual property owner, have expropriated you and your "real" property. Which shows: intellectual property rights and real property rights are incompatible, and the promotion of intellectual property must be seen as a most dangerous attack on the idea of "real" property (in scarce goods).

Daily Bell: What do you think of Ragnar Redbeard’s Might Is Right?

Dr. Hans-Hermann Hoppe: You can give two very different interpretations to this statement. I see no difficulty with the first one. It is: I know the difference between "might" and "right" and, as a matter of empirical fact, might is in fact frequently right. Most if not all of "public law," for instance, is might masquerading as right. The second interpretation is: I don’t know the difference between "might" and "right," because there is no difference. Might is right and right is might. This interpretation is self-contradictory. Because if you wanted to defend this statement as a true statement in an argument with someone else you are in fact recognizing your opponent’s property right in his own body. You do not aggress against him in order to bring him to the correct insight. You allow him to come to the correct insight on his own. That is, you admit, at least implicitly, that you do know the difference between right and wrong. Otherwise there would be no purpose in arguing. The same, incidentally, is true for Hobbes’ famous dictum that one man is another man’s wolf. In claiming this statement to be true, you actually prove it to be false.

Daily Bell: It has been suggested that the only way to reorganize society is via a return to the clans and tribes that characterized homo-sapiens communities for tens of thousands of years? Is it possible that as part of this devolution, clan or tribal justice could be re-emphasized?

Dr. Hans-Hermann Hoppe: I don’t think that we, in the Western world, can go back to clans and tribes. The modern, democratic state has destroyed clans and tribes and their hierarchical structures, because they stood in the way of the state’s drive toward absolute power. With clans and tribes gone, we must try it with the model of a private law society that I have described. But wherever traditional, hierarchical clan and tribe structures still exist, they should be supported and attempts to "modernize" "archaic" justice systems along Western lines should be viewed with utmost suspicion.

Daily Bell: You have also written extensively on money and monetary affairs. Is a gold standard necessary for a free society?

Dr. Hans-Hermann Hoppe: in a free society, the market would produce money, as all other goods and services. There would be no such thing as money in a world that was perfectly certain and predictable. But in a world with unpredictable contingencies people come to value goods also on account of their marketability or salability, i.e., as media of exchange. And since a more easily and widely salable good is preferable to a less easily and widely salable good as a medium of exchange, there is an inevitable tendency in the market for a single commodity to finally emerge that differs from all others in being the most easily and widely salable commodity of all. This commodity is called money. As the most easily salable good of all it provides its owner with the best humanly possible protection against uncertainty in that it can be employed for the instant satisfaction of the widest range of possible needs. Economic theory has nothing to say as to what commodity will acquire the status of money. Historically, it happened to be gold. But if the physical make-up of our world would have been different or is to become different from what it is now, some other commodity would have become or might become money. The market will decide. In any case, there is no need for government to get involved in any of this. The market has provided and will provide some money-commodity, and the production of that commodity, whatever it is, is subject to the same forces of supply and demand as the production of everything else.

Daily Bell: How about the free-banking paradigm? Is private fractional banking ever to be tolerated or is it a crime? Who is to put people in jail for private fractional banking?

Dr. Hans-Hermann Hoppe: Assume gold is money. In a free society you have free competition in gold-mining, you have free competition in gold-minting, and you have freely competing banks. The banks offer various financial services: of money safekeeping, clearing services, and the service of mediating between savers and borrower-investors. Each bank issues its own brand of "notes" or "certificates" documenting the various transactions and resulting contractual relations between bank and client. These bank-notes are freely tradable. So far so good. Controversial among free bankers is only the status of fractional reserve deposit banking and bank notes. Let’s say A deposits 10 ounces of gold with a bank and receives a note (a money substitute) redeemable at par on demand. Based on A’s deposit, then, the bank makes a loan to C of 9 ounces of gold and issues a note to this effect, again redeemable at par on demand.

Should this be permitted? I don’t think so. For there are now two people, A and C, who are the exclusive owner of one and the same quantity of money. A logical impossibility. Or put differently, there are only 10 ounces of gold, but A is given title to 10 ounces and C holds title to 9 ounces. That is, there are more property titles than there is property. Obviously this constitutes fraud, and in all areas except money, courts have also considered such a practice fraud and punished the offenders. On the other hand, there is no problem if the bank tells A that it will pay interest on his deposit, invest it, for instance, in a money market mutual fund made up of highly liquid short-term financial papers, and make its best efforts to redeem A’s shares in that investment fund on demand in a fixed quantity of money. Such shares may well be very popular and many people may put their money into them instead of into regular deposit accounts. But as shares of investment funds they would never function as money. They would never be the most easily and widely saleable commodity of all.

Daily Bell: Where do you stand on the current central banking paradigm? Is central banking as it is currently constituted the central disaster of our time?

Dr. Hans-Hermann Hoppe: Central banks are certainly one of the greatest mischief-makers of our time. They, and in particular the FED, have been responsible for destroying the gold standard, which has always been an obstacle to inflationary policies, and replacing it, since 1971, with a pure paper money standard (fiat money). Since then, central banks can create money virtually out of thin air. More paper money cannot make a society richer, of course, – it is just more printed-paper. Otherwise, why is it that there are still poor countries and poor people around? But more money makes its monopolistic producer (the central bank) and its earliest recipients (the government and big, government-connected banks and their major clients) richer at the expense of making the money’s late and latest receivers poorer.

Thanks to the central bank’s unlimited money printing power, governments can run ever higher budget deficits and pile up ever more debt to finance otherwise impossible wars, hot and cold, abroad and at home, and engage in an endless stream of otherwise unthinkable boondoggles and adventures. Thanks to the central bank, most "monetary experts" and "leading macro-economists" can, by putting them on the payroll, be turned into government propagandists "explaining," like alchemists, how stones (paper) can be turned into bread (wealth). Thanks to the central bank, interest rates can be artificially lowered all the way down to zero, channeling credit into less and least credit-worthy projects and hands (and crowding out worthy projects and hands), and causing ever greater investment bubble-booms, followed by ever more spectacular busts. And thanks to the central bank, we are confronted with a dramatically increasing threat of an impending hyperinflation when the chicken finally come home to roost and the piper must be paid.

Daily Bell: We have often pointed out that the Seven Hills of Rome were initially independent societies just like the Italian city-states during the Renaissance and the 13 colonies of the US Republic. It seems great empires start as individual communities where people can leave one community if they are oppressed and go nearby to start afresh. What is the driving force behind this process of centralization? What are the building blocks of Empire?

Dr. Hans-Hermann Hoppe: All states must begin small. That makes it easy for people to run away. Yet states are by nature aggressive, as I have already explained. They can externalize the cost of aggression onto others, i.e., hapless tax-payers. They don’t like to see productive people run away and try to capture them by expanding their territory. The more productive people the state controls, the better off it will be. In this expansionist desire, they run into opposition by other states. There can be only one monopolist of ultimate jurisdiction and taxation in any given territory. That is, the competition between different states is eliminative. Either A wins and controls a territory, or B. Who wins? At least in the long run, that state will win – and take over another’s territory or establish hegemony over it and force it to pay tribute – that can parasitically draw on the comparatively more productive economy. That is, other things being the same, internally more "liberal" states (in the classic European sense of "liberal") will tend to win over less "liberal," i.e., illiberal or oppressive states.

Looking only at modern history, we can so explain first the rise of liberal Great Britain to the rank of the foremost world Empire and then, subsequently, that of the liberal US. And we can understand a seeming paradox: why it is, that internally liberal imperial powers like the US tend to be more aggressive and belligerent in their foreign policy than internally oppressive powers, such as the former Soviet Union. The liberal US Empire was sure to win with its foreign wars and military adventures, while the oppressive Soviet Union was afraid that it might lose.

But Empire building also bears the seeds of its own destruction. The closer a state comes to the ultimate goal of world domination and one-world government, the less reason is there to maintain its internal liberalism and do instead what all states are inclined to do anyway, i.e., to crack down and increase their exploitation of whatever productive people are still left. Consequently, with no additional tributaries available and domestic productivity stagnating or falling, the Empire’s internal policies of bread and circuses can no longer be maintained. Economic crisis hits, and an impending economic meltdown will stimulate decentralizing tendencies, separatist and secessionist movements, and lead to the break-up of Empire. We have seen this happen with Great Britain, and we are seeing it now, with the US and its Empire apparently on its last leg.

There is also an important monetary side to this process. The dominant Empire typically provides the leading international reserve currency, first Britain with the pound sterling and then the US with the dollar. With the dollar used as reserve currency by foreign central banks, the US can run a permanent "deficit without tears." That is, the US must not pay for its steady excesses of imports over exports, as it is normal between "equal" partners, in having to ship increasingly more exports abroad (exports paying for imports). Rather: Instead of using their export earnings to buy American goods for domestic consumption, foreign governments and their central banks, as a sign of their vassal status vis-à-vis a dominant US, use their paper dollar reserves to buy up US government bonds to help Americans to continue consuming beyond their means.

I do not know enough about China to understand why it is using its huge dollar reserves to buy up US government bonds. After all, China is not supposed to be a part of the US Empire. Maybe its rulers have read too many American economics textbooks and now believe in alchemy, too. But if only China would dump its US treasuries and accumulate gold reserves instead, that would be the end of the US Empire and the dollar as we know it.

Daily Bell: Is it possible that a shadow of impossibly wealthy families located in the City of London is partially responsible for all this? Do these families and their enablers seek world government by elites? Is it a conspiracy? Do you see the world in these terms: as a struggle between the centralizing impulses of elites and the more democratic impulses of the rest of society?

Dr. Hans-Hermann Hoppe: I’m not sure if conspiracy is still the right word, because in the meantime, thanks to people such as Carroll Quigley, for instance, much is known about what is going on. In any case, it is certainly true that there are such impossibly rich families, sitting in London, New York City, Tel Aviv and elsewhere, who have recognized the immense potential for personal enrichment in the process of State- and Empire-building. The heads of big banking houses played a key role in the founding of the FED, because they realized that central banking would allow their own banks to inflate and expand credit on top of money and credit created by the central bank, and that a "lender of last resort" was instrumental in allowing them to reap private profits as long as things would go well and to socialize costs if they wouldn’t.

They realized that the classical gold standard stood as a natural impediment to inflation and credit expansion, and so they helped set up first a phony gold standard (the gold exchange standard) and then, after 1971, a pure fiat money regime. They realized that a system of freely fluctuating national fiat currencies was still imperfect as far as inflationist desires are concerned, in that the supremacy of the dollar could be threatened by other, competing currencies such as a strong German Mark, for instance; and in order to reduce and weaken this competition they supported "monetary integration" schemes such as the creation of a European Central Bank (ECB) and the Euro.

And they realized that their ultimate dream of unlimited counterfeiting power would come true, if only they succeeded in creating a US dominated world central bank issuing a world paper currency such as the bancor or the phoenix; and so they helped set up and finance a multitude of organizations such as the Council on Foreign Relations, the Trilateral Commission, the Bilderberg Group, etc., that promote this goal. As well, leading industrialists recognized the tremendous profits to be made from state-granted monopolies, from state-subsidies, and from exclusive cost-plus contracts in freeing or shielding them from competition, and so they, too, have allied themselves to and "infiltrated" the state.

There are "accidents" in history, and there are carefully planned actions that bring about consequences which are unintended and unanticipated. But history is not just a sequence of accidents and surprises. Most of it is designed and intended. Not by common folks, of course, but by the power elites in control of the state apparatus. If one wants to prevent history from running its present, foreseeable course to unprecedented economic disaster, then, it is indeed imperative to arouse public indignation by exposing, relentlessly, the evil motives and machinations of these power elites, not just of those working within the state apparatus, but in particular also of those staying outside, behind the scenes and pulling the strings.

Daily Bell: It has been our contention that just as the Gutenberg press blew up existing social structures in its day, so the Internet is doing that today. We believe the Internet may be ushering in a new Renaissance after the Dark Age of the 20th century. Agree? Disagree?

Dr. Hans-Hermann Hoppe: It is certainly true that both inventions revolutionized society and greatly improved our lives. It is difficult to imagine what it would be to go back to the pre-internet age or the pre-Gutenberg era. I am skeptical, however, if technological revolutions in and of themselves also bring about moral progress and an advance toward greater freedom. I am more inclined to think that technology and technological advances are "neutral" in this regard. The Internet can be used to unearth and spread the truth as much as to spread lies and confusion. It has given us unheard of possibilities to evade and undermine our enemy the state, but it has also given the state unheard of possibilities of spying on us and ruining us. We are richer today, with the Internet, than we were, let’s say, in 1900, without it (and we are richer not because of the state but in spite of it). But I would emphatically deny that we are freer today than we were in 1900. Quite to the contrary.

Daily Bell: Any final thoughts? Can you tell us what you are working on now? Any books or websites you would like to recommend?

Dr. Hans-Hermann Hoppe: I once deviated from my principle not to speak about my work until it was done. I have regretted this deviation. It was a mistake that I won’t repeat. As for books, I recommend above all reading the major works of my two masters, Ludwig von Mises and Murray Rothbard, not just once, but repeatedly from time to time. Their work is still unsurpassed and will remain so for a long time to come. As for websites, I go most regularly to mises.org and to lewrockwell.com. As for other sites: I have been called an extremist, a reactionary, a revisionist, an elitist, a supremacist, a racist, a homophobe, an anti-Semite, a right-winger, a theocrat, a godless cynic, a fascist and, of course, a must for every German, a Nazi. So, it should be expected that I have a foible for politically "incorrect" sites that every "modern," "decent," "civilized," "tolerant," and "enlightened" man is supposed to ignore and avoid.

Daily Bell: Thank you for your time in answering these questions. It has been a special honor to address them to you in the context of your remarkable work.

Dr. Hans-Hermann Hoppe: You’re welcome.

Daily Bell After Thoughts

What a great interview. We say this immodestly because with some exceptions (free-banking and money competition being notable ones), Dr. Hans-Hermann Hoppe, one of the finest libertarian thinkers and educators in the world today, actually seemed to agree with some of what has been proposed in these modest pages for several years. Don’t take our word for it. Reread the interview if you wish. To have someone of Dr. Hoppe’s caliber of mind endorse and elaborate on fundamental perceptions such as we have advanced on occasion is incredibly affirming and even (we don’t mind admitting) intellectually satisfying.

On a less frivolous note, what comes across in the interview is that Dr. Hoppe is one of those peculiar individuals who, having glimpsed truth not available to most people, is unable by temperament to temporize about its validity. One sees this characteristic reflected in the work and narratives of Murray Rothbard and Ludwig von Mises to name two brilliant thinkers that come to mind. The inability to avoid the conclusions (or to shy away from voicing them) developed from one’s belief system is a telltale sign of intellectual courage and even, we submit, greatness.

It is indeed rare to have the privilege of conducting a dialogue with a truly clarified intellect, someone in fact with a mercilessly resonant frame of reference. If you read the interview closely, you can actually see (or hear) the disciplined approach with which Dr. Hoppe approaches the issues on which he comments. Each position is developed rationally and each conclusion evolves relentlessly from evidence adumbrated.

We won’t write much more because like a great musical composition, this interview in our view is best appreciated on its own. Our clumsy commentary probably only detracts from its muscularity and elegant austerity. Of course, you may not appreciate our efforts, dear reader, but please acknowledge the courtesy, wisdom and intellectual courage of one of the world’s profound free-market thinkers, Dr. Hans-Hermann Hoppe.

Reprinted with permission from The Daily Bell.

Anthony Wile is an author, columnist, media commentator and entrepreneur focused on developing projects that promote the general advancement of free-market thinking concepts. He is the chief editor of the popular free-market oriented news site, TheDailyBell.com. Mr. Wile is the Executive Director of The Foundation for the Advancement of Free-Market Thinking — a non-profit Liechtenstein-based foundation. His most popular book, High Alert, is now in its third edition and available in several languages. Other notable books written by Mr. Wile include The Liberation of Flockhead (2002) and The Value of Gold (2002).

I will first state this general theory of property as a set of rulings applicable to all goods, with the goal of helping to avoid all possible conflicts by means of uniform principles, and I will then demonstrate how this general theory is implied in the nonaggression principle. According to the nonaggression principle, a person can do with his body whatever he wants as long as he does not thereby aggress against another person’s body. Thus, that person could also make use of other scarce means, just as one makes use of one’s own body, provided these other things have not already been appropriated by someone else but are still in a natural unowned state.

As soon as scarce resources are visibly appropriated — as soon as somebody “mixes his labor” with them, as John Locke phrased it,[1] and there are objective traces of this — then property (the right of exclusive control), can only be acquired by a contractual transfer of property titles from a previous to a later owner, and any attempt to unilaterally delimit this exclusive control of previous owners or any unsolicited transformation of the physical characteristics of the scarce means in question is, in strict analogy with aggressions against other people’s bodies, an unjustifiable action.[2]

The compatibility of this principle with that of nonaggression can be demonstrated by means of an argumentum a contrario. First, it should be noted that if no one had the right to acquire and control anything except his own body (a rule that would pass the formal universalization test), then we would all cease to exist, and the problem of the justification of normative statements simply would not exist. The existence of this problem is only possible because we are alive, and our existence is due to the fact that we do not, indeed cannot, accept a norm outlawing property in other scarce goods next to and in addition to that of one’s physical body. Hence, the right to acquire such goods must be assumed to exist.

However, the position of property titles being acquired through declaration is incompatible with the above-justified nonaggression principle regarding bodies. For one thing, if one could indeed appropriate property by decree, this would imply that it would also be possible for one to simply declare another person’s body to be one’s own. Clearly enough, this would conflict with the ruling of the nonaggression principle, which makes a sharp distinction between one’s own body and the body of another person.Now, if this is so, and if one does not have the right to acquire such rights of exclusive control over unused, nature-given things through one’s own work (by doing something with things with which no one else has ever done anything before), and if other people have the right to disregard one’s ownership claim to things which they did not work on or put to some particular use before, then this is only possible if one can acquire property titles not through labor (i.e., by establishing some objective, intersubjectively controllable link between a particular person and a particular scarce resource), but simply by verbal declaration, by decree.[3]

Furthermore, this distinction can only be made in such a clear-cut and unambiguous way because for bodies, as for anything else, the separation between “mine and yours” is not based on verbal declarations, but on action. The observation is based on some particular scarce resource that had in fact — for everyone to see and verify because objective indicators for this existed — been made an expression or materialization of one’s own will or, as the case may be, of somebody else’s will.

More importantly, to say that property could be acquired not through action but through a declaration would involve an obvious practical contradiction, because nobody could say and declare so unless his right of exclusive control over his body as his own instrument of saying anything was in fact already presupposed, in spite of what was actually said.

As I intimated earlier, this defense of private property is essentially also Murray Rothbard’s. In spite of his formal allegiance to the natural-rights tradition, Rothbard, in what I consider his most crucial argument in defense of a private-property ethic, not only chooses essentially the same starting point — argumentation — but also gives a justification by means of a priori reasoning almost identical to the one just developed. To prove the point I can do no better than simply quote:

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 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.[4]

In making this argument, one would not have to claim to have derived an “ought” from an “is.” In fact, one can readily subscribe to the almost generally accepted view that the gulf between “ought” and “is” is logically unbridgeable.[5] Rather, classifying the rulings of the libertarian theory of property in this way is a purely cognitive matter. It no more follows from the classification of the libertarian ethic as “fair” or “just” that one ought to act according to it, than it follows from the concept of validity or truth that one should always strive for it.So far it has been demonstrated that the right of original appropriation through actions is compatible with and implied by the nonaggression principle as the logically necessary presupposition of argumentation. Indirectly, of course, it has also been demonstrated that any rule specifying different rights cannot be justified. Before entering a more detailed analysis, though, of why it is that any alternative ethic is indefensible, a discussion which should throw some additional light on the importance of some of the stipulations of the libertarian theory of property — a few remarks about what is and what is not implied by classifying these latter norms as justified is in order.

To say that it is just also does not preclude the possibility of people proposing or even enforcing rules that are incompatible with this principle. As a matter of fact, the situation with respect to norms is very similar to that in other disciplines of scientific inquiry. The fact, for instance, that certain empirical statements are justified or justifiable and others are not does not imply that everybody only defends objective, valid statements.

On the contrary, people can be wrong, even intentionally. But the distinction between objective and subjective, between true and false, does not lose any of its significance because of this. Instead, people who would do so would have to be classified as either uninformed or intentionally lying.

The case is similar with respect to norms. Of course there are people, lots of them, who do not propagate or enforce norms that can be classified as valid according to the meaning of justification I have given above. However, the distinction between justifiable and nonjustifiable norms does not dissolve because of this, just as that between objective and subjective statement does not crumble because of the existence of uninformed or lying people.

Rather, and accordingly, those people who would propagate and enforce such different, invalid norms would again have to be classified as uninformed or dishonest, insofar as one had made it clear to them that their alternative norm proposals or enforcements cannot and never will be justifiable in argumentation.

Why is it then that other nonlibertarian property theories fail to be justifiable? First, it should be noted, as will become clear shortly, that all of the practiced alternatives to libertarianism and most of the theoretically proposed nonlibertarian ethics would not even pass the first formal universalization test and would fail for this fact alone!There would be even more justification for doing so in the moral case than in the empirical one, since the validity of the nonaggression principle and that of the principle of original appropriation through action as its logically necessary corollary must be considered to be even more basic than any kind of valid or true statements. For what is valid or true has to be defined as that upon which everyone — acting according to this principle — can possibly agree. As I have just shown, at least the implicit acceptance of these rules is the necessary prerequisite to being able to be alive and argue at all.

All these versions contain norms within their framework of legal rules that have the form, “some people do, and some people do not.” However, such rules that specify different rights or obligations for different classes of people have no chance of being accepted as fair by every potential participant in an argument for simply formal reasons.

Unless the distinction made between different classes of people happens to be such that it is acceptable to both sides as grounded in the nature of things, such rules would not be acceptable because they would imply that one group is awarded legal privileges at the expense of complementary discriminations against another group. Some people, either those who are allowed to do something or those who are not, would not be able to agree that these were fair rules.[6]

Since most alternative ethical proposals, as practiced or preached, have to rely on the enforcement of rules such as “some people have the obligation to pay taxes, and others have the right to consume them,” or “some people know what is good for you and are allowed to help you get these alleged blessings even if you do not want them, but you are not allowed to know what is good for them and help them accordingly,” or “some people have the right to determine who has too much of something and who too little, and others have the obligation to accept that,” or even more plainly, “the computer industry must pay to subsidize the farmers, the employed for the unemployed, the ones without kids for those with kids,” or vice versa. They all can be discarded as serious contenders to the claim of being a valid theory of norms qua property norm, because they all indicate by their very formulation that they are not universalizable.

There are two related specifications in the libertarian property theory with at least one of which any alternative theory comes into conflict. According to the libertarian ethic, the first such specification is that aggression is defined as an invasion of the physical integrity of other people’s property.[7] There are popular attempts to define it as an invasion of the value or psychic integrity of other people’s property. Conservatism, for instance, aims at preserving a given distribution of wealth and values and attempts to bring those forces that could change the status quo under control by means of price controls, regulations, and behavioral controls. Clearly, in order to do so, property rights to the value of things must be assumed to be justifiable, and an invasion of values, mutatis mutandis, would have to be classified as unjustifiable aggression.What is wrong with a nonlibertarian ethic if this is resolved and there is indeed a theory formulated that contains exclusively universalizable norms of the type “nobody is allowed to” or “everybody can”? Even then the validity of such proposals could never hope to be proven — not because of formal reasons but because of their material specifications. Indeed, while the alternatives that can be refuted easily as regards their claim to moral validity on simple formal grounds can at least be practiced, the application of those more sophisticated versions that would pass the universalization test would prove for material reasons to be fatal: even if one tried to, they simply could never be implemented.

Not only does conservatism use this idea of property and aggression; redistributive socialism does too. Property rights to values must be assumed to be legitimate when redistributive socialism allows me, for instance, to demand compensation from people whose chances or opportunities negatively affect mine. The same is true when compensation for committing psychological, or “structural violence” is requested.[8] In order to be able to ask for such compensation, what one must have done, namely affect my opportunities, my psychic integrity, or my feeling of what is owed to me, would have to be classified as an aggressive act.

Why is this idea of protecting the value of property unjustifiable? First, while every person, at least in principle, can have full control over whether or not his actions cause the physical characteristics of something to change and hence can also have full control over whether or not those actions are justifiable, control over whether or not one’s actions affect the value of somebody else’s property does not rest with the acting person but rather with other people and their subjective evaluations. Thus, no one could determine ex ante if his actions would be qualified as justifiable or unjustifiable.

One would first have to interrogate the whole population to make sure that one’s planned actions would not change another person’s evaluations regarding his own property. Even then, nobody could act until universal agreement was reached on who is supposed to do what with what, and at which point in time.

However, in order to argue that there is a way out of such conflicts it must be presupposed that actions must be allowed prior to any actual agreement or disagreement because if they were not, one could not even argue so. Yet if one can do this (and, insofar as it exists as an argued intellectual position, the position under scrutiny must assume that one can), then this is only possible because of the existence ofobjective borders of property — borders which anyone can recognize as such on his own without having to agree first with anyone else with respect to his system of values and evaluations.Clearly, because of all the practical problems involved, everyone would be long dead and nobody could argue any longer, well before agreement could be reached.[9] Even more decisively, this position regarding property and aggression could not even be effectively argued because arguing in favor of any norm implies that there is conflict over the use of some scarce resources; otherwise there would simply be no need for discussion.

Such a value-protecting ethic, too, in spite of what it says, must in fact presuppose the existence of objective property borders rather than of borders determined by subjective evaluations, if only in order to have any surviving persons who can make its moral proposals.

The idea of protecting value instead of physical integrity also fails for a second related reason. Evidently, one’s value, for example on the labor or marriage market, can be and indeed is affected by other people’s physical integrity or degree of physical integrity. Thus, if one wanted property values to be protected, one would have to allow physical aggression against people.

However, it is only because of the very fact that a person’s borders — that is the borders of a person’s property in his own body as his domain of exclusive control, which another person is not allowed to cross unless he wishes to become an aggressor — are physical borders (intersubjectively ascertainable, and not just subjectively fancied borders) that everyone can agree on anything independently (and agreement means agreement among independent decision-making units!).

Only because the protected borders of property are objective (i.e., fixed and recognizable as fixed prior to any conventional agreement), can there be argumentation and possibly agreement of and between independent decision-making units. Nobody could argue in favor of a property system defining borders of property in subjective, evaluative terms because simply to be able to say so presupposes that, contrary to what theory says, one must in fact be a physically independent unit saying it.

It is with this additional specification as well that alternative, nonlibertarian ethics come into conflict. Instead of recognizing the vital importance of the prior-later distinction in deciding between conflicting property claims, they propose norms which in effect state that priority is irrelevant for making such a decision and that late-comers have as much of a right to ownership as first-comers.The situation is no less dire for alternative ethical proposals when one turns to the second essential specification of the rulings of the libertarian theory of property. The basic norms of libertarianism are characterized not only by the fact that property and aggression are defined in physical terms; it is of no less importance that property is defined as private, individualized property, and that the meaning of original appropriation, which evidently implies making a distinction between prior and later, has been specified.

Clearly, this idea is involved when redistributive socialism makes the natural owners of wealth and/or their heirs pay a tax so that the unfortunate late-comers can participate in its consumption. It is also involved when the owner of a natural resource is forced to reduce (or increase) its present exploitation in the interest of posterity. Both times it only makes sense to do what one does when it is assumed that the person accumulating wealth first, or using the natural resource first, has thereby committed an aggression against some late-comers. If they had done nothing wrong, then the late-comers should have no such claim against them.[10]

What is wrong with this idea of dropping the prior-later distinction as morally irrelevant? First, if the late-comers (those who did not do something with some scarce goods), indeed had as much of a right to them as the first-comers (those who did do something with the scarce goods), then nobody would ever be allowed to do anything with anything, as one would have to have all of the late-comers’ consent prior to doing what one wanted to do.

Indeed, as posterity would include one’s children’s children — people who come so late that one could not possibly ask them — to advocate a legal system that does not make use of the prior-later distinction as part of its underlying property theory is simply absurd, because it implies advocating death but must presuppose life to advocate anything.

Rather, insofar as a person finds himself alone, he must be able to act, to use, to produce, and to consume goods straightaway, prior to any agreement with people who are simply not around (and perhaps never will be). Insofar as a person finds himself in the company of others and there is conflict over how to use a given scarce resource, he must be able to resolve the problem at a definite point in time with a definite number of people instead of having to wait unspecified periods of time for unspecified numbers of people.Neither we, nor our forefathers, nor our progeny could, do, or will survive and say or argue anything if one followed this rule. In order for any person — past, present or future — to argue anything it must be possible to survive now. Nobody can wait and suspend acting until everyone of an indeterminate class of late-comers happens to come around and agree to what one wants to do.

Simply in order to survive, then, which is a prerequisite to arguing in favor or against anything, property rights cannot be conceived of as being timeless and nonspecific regarding the number of people concerned. Rather, they must be thought of as originating through acting at definite points in time for definite acting individuals.[11]

Furthermore, the idea of abandoning the prior-later distinction would simply be incompatible with the nonaggression principle as the practical foundation of argumentation. To argue and possibly agree with someone (if only on the fact that there is disagreement) means to recognize the prior right of exclusive control over one’s own body. Otherwise, it would be impossible for anybody to say anything at a definite point in time and for someone else to be able to reply, for neither the first nor the second speaker would be a physically independent decision-making unit anymore at any time.

Eliminating the prior-later distinction, then, is tantamount to eliminating the possibility of arguing and reaching agreement.

However, as one cannot argue that there is no possibility for discussion without the prior control of every person over his own body being recognized and accepted as fair, a late-comer ethic that does not make this distinction could never be agreed upon by anyone. Simply saying that it could be would imply a contradiction, for one’s being able to say so would presuppose one’s existence for an independent decision-making unit at a definite point in time.

Hence, one is forced to conclude that the libertarian ethic not only can be justified and justified by means of a priori reasoning, but that no alternative ethic can be defended argumentatively.

[1] John Locke, Two Treatises on Government, ed. Peter Laslett (Cambridge: Cambridge University Press, 1970), esp. vols. II, V.Notes

[2] On the nonaggression principle and the principle of original appropriation see also Rothbard, For A New Liberty, chap. 2; idem, The Ethics of Liberty, chaps. 6—8.

[3] This is the position taken by Jean-Jacques Rousseau, when he asks us to resist attempts to privately appropriate nature-given resources by, for example, fencing them in. He says in his famous dictum; “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 Jean-Jacques Rousseau, The Social Contract and Discourses, ed. G.D.H. Cole [New York: 1950], p. 235). However, to argue so is only possible if it is assumed that property claims can be justified by decree. How else could “all” (even those who never did anything with the resources in question) or “nobody” (not even those who made use of it) own something unless property claims were founded by mere decree?

[4] Rothbard, The Ethics of Liberty, p. 32; on the method of a priori reasoning employed in the above argument see also, idem, Individualism and the Philosophy of the Social Sciences (San Francisco: Cato Institute, 1979); Hans-Hermann Hoppe, Kritik der kausalwissenschaftlichen sozialforschung. Untersuchungen zur Grundlegung von Soziologie und Ökonomie (Opladen: Westdeutscher Verlag 1983); idem, “Is Research Based on Causal Scientific Principles Possible in the Social Sciences? Ratio (1983); supra chap. 7; idem, A Theory of Socialism and Capitalism, chap. 6.

[5] On the problem of deriving “ought” from “is” see W.D. Hudson, ed., The Is-Ought Question (London: Macmillan 1969).

[6] See Rothbard, The Ethics of Liberty, p. 45.

[7] On the importance of the definition of aggression as physical aggression see also Rothbard, ibid., chaps. 8—9; idem, “Law, Property Rights and Air Pollution,” Cato Journal (Spring, 1982).

[8] On the idea of structural violence as distinct from physical violence see Dieter Senghass, ed., Imperialismus und strukturelle Gewalt (Frankfurt/M.: Suhrkamp, 1972). The idea of defining aggression as an invasion of propertyvalues also underlies both the theories of justice of John Rawls and Robert Nozick, however different these two authors may have appeared to be to many commentators. For how could Rawls 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 ones — advantage or benefit,” John Rawls, A Theory of Justice[Cambridge, Mass.: Harvard University Press 1971], pp. 60—83, 75ff.), as justified unless he 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 Robert Nozick claim it to be justified for a “dominant protection agency” to outlaw competitors, regardless of what their actions would have been like? (Robert Nozick, Anarchy, State, and Utopia [New York: Basic Books, 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 to have the integrity of one’s property values (rather than its physical integrity) preserved existed? For a devastating critique of Nozick’s theory in particular see Rothbard, The Ethics of Liberty, chap. 29; on the fallacious use of the indifference curve analysis, employed both by Rawls and Nozick, idem, Toward a Reconstruction of Utility and Welfare Economics (New York: Center for Libertarian Studies, Occasional Paper Series, No. 3, 1977)

[9] See also Rothbard, The Ethics of Liberty, p. 46.

[10] For an awkward philosophical attempt to justify a late-comer ethic see James P. Sterba, The Demands of Justice (Notre Dame, Ind.: Notre Dame University Press, 1980), esp. pp. 58ff., 137ff.; on the absurdity of such an ethic see Rothbard, Man, Economy, and State, p. 427.

[11] It should be noted here 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 in time to the agreement and which then concern the transfer of property titles to definite things from a definite prior to a definite later owner. No such thing as contracts could conceivably exist in the framework of a late-comer ethic!

Reprinted from Mises.org.

I — Classical Economic Theory

It is my goal to reconstruct some basic truths regarding the process of economic development and the role played in it by employment, money, and interest. These truths neither originated with the Austrian school of economics nor are an integral part of only this tradition of economic thinking.

In fact, most of them were part and parcel of what is now called classical economics, and it was the recognition of their validity that uniquely distinguished the economist from the crank. Yet the Austrian school, in particular Ludwig von Mises and later Murray N. Rothbard, has given the clearest and most complete presentation of these truths (Mises [1949] 1966; Rothbard [1962] 1970). Moreover, that school has presented their most rigorous defense by showing them to be ultimately deducible from basic, incontestable propositions (such as that man acts and knows what it means to act) so as to establish them as truths whose denial would not only be factually incorrect but, much more decisively, would amount to logical contradictions and absurdities.

I will first systematically reconstruct this Austrian theory of economic development. Then I will turn to the "new" theory of J.M. Keynes, which belongs, as he himself proudly acknowledged, to the tradition of "underworld" economics (like mercantilism) and of economic cranks like S. Gesell (Keynes 1936). I will show that Keynes’s new economics, like that "underworld" tradition, is nothing but a tissue of logical falsehoods reached by means of obscure jargon, shifting definitions, and logical inconsistencies intended to establish a statist, anti-free-market economic system.

Read the rest of this article

Hans-Hermann Hoppe [send him mail] is distinguished fellow at the Ludwig von Mises Institute and founder and president of the Property and Freedom Society. His books include Democracy: The God That Failed and The Myth of National Defense. Visit his website.

Democracy: The God That Failed
$28.00 $25.00

Economics and Ethics of Private Property
$30.00 $28.00

Economic Science and the Austrian Method $10.00 $7.00

The Myth of National Defense
$30.00 $25.00

Private Production of Defense
$6.00 $5.00

A Theory of Socialism and Capitalism
$24.00 $20.00

Economy, Society, and History: A Seminar with Hans-Hermann Hoppe
(MP3 CD) $35.00 $15.00
—
(cassettes) $59.00 $15.00

Natural Elites, Intellectuals, and the State
$3.00 $2.00

Hoppe Collection
$127.00 $107.95

In a recent survey, people of different nationalities were asked how proud they were to be American, German, French, etc., and whether or not they believed that the world would be a better place if other countries were just like their own. The countries ranking highest in terms of national pride were the United States and Austria. As interesting as it would be to consider the case of Austria, we shall concentrate here on the United States and the question of whether and to what extent the American claim can be justified.

In the following, we will identify three main sources of American national pride, the first two of which are justified sources of pride, while the third actually represents a fateful error. Finally, we will look at how this error might be repaired.

I — A Country of Pioneers

The first source of national pride is the memory of America’s not-so-distant colonial past as a country of pioneers.

In fact, the English settlers coming to North America were the last example of the glorious achievements of what Adam Smith referred to as “a system of natural liberty”: the ability of men to create a free and prosperous commonwealth from scratch. Contrary to the Hobbesian account of human nature — homo homini lupus est — the English settlers demonstrated not just the viability but also the vibrancy and attractiveness of a stateless, anarchocapitalist social order. They demonstrated how, in accordance with the views of John Locke, private property originated naturally through a person’s original appropriation — his purposeful use and transformation — of previously unused land (wilderness). Furthermore, they demonstrated that, based on the recognition of private property, division of labor, and contractual exchange, men were capable of protecting themselves effectively against antisocial aggressors — first and foremost by means of self-defense (less crime existed then than exists now), and as society grew increasingly prosperous and complex, by means of specialization, i.e., by institutions and agencies such as property registries, notaries, lawyers, judges, courts, juries, sheriffs, mutual defense associations, and popular militias.

Read the rest of this article

Hans-Hermann Hoppe [send him mail] is distinguished fellow at the Ludwig von Mises Institute and founder and president of the Property and Freedom Society. His books include Democracy: The God That Failed and The Myth of National Defense. Visit his website.

Democracy: The God That Failed $28.00 $25.00 Economics and Ethics of Private Property $30.00 $28.00 Economic Science and the Austrian Method $10.00 $7.00 The Myth of National Defense $30.00 $25.00 Private Production of Defense $6.00 $5.00 A Theory of Socialism and Capitalism $24.00 $20.00 Economy, Society, and History: A Seminar with Hans-Hermann Hoppe (MP3 CD) $35.00 $15.00 — (cassettes) $59.00 $15.00 Natural Elites, Intellectuals, and the State $3.00 $2.00 Hoppe Collection $127.00 $107.95

This paper was first presented at the 3rd annual meeting of the Property and Freedom Society, held in Bodrum, Turkey, 22nd to 26th May 2008.

Let me begin with the definition of a state. What must an agent be able to do to qualify as a state? This agent must be able to insist that all conflicts among the inhabitants of a given territory be brought to him for ultimate decision-making or be subject to his final review. In particular, this agent must be able to insist that all conflicts involving himself be adjudicated by him or his agent. And implied in the power to exclude all others from acting as ultimate judge, as the second defining characteristic of a state, is the agent’s power to tax: to unilaterally determine the price that justice seekers must pay for his services.

Based on this definition of a state, it is easy to understand why a desire to control a state might exist. For whoever is a monopolist of final arbitration within a given territory can make laws. And he who can legislate can also tax. Surely, this is an enviable position.

More difficult to understand is how anyone can get away with controlling a state. Why would others put up with such an institution?

I want to approach the answer to this question indirectly. Suppose you and your friends happen to be in control of such an extraordinary institution. What would you do to maintain your position (provided you didn’t have any moral scruples)? You would certainly use some of your tax-income to hire some thugs. First: to make peace among your subjects so that they stay productive and there is something to tax in the future. But more importantly, because you might need these thugs for your own protection should the people wake up from their dogmatic slumber and challenge you.

This will not do, however, in particular if you and your friends are a small minority in comparison to the number of subjects. For a minority cannot lastingly rule a majority solely by brute force. It must rule by opinion. The majority of the population must be brought to voluntarily accept your rule. This is not to say that the majority must agree with every one of your measures. Indeed, it may well believe that many of your policies are mistaken. However, it must believe in the legitimacy of the institution of the state as such, and hence, that even if a particular policy may be wrong, such mistake is an accident that one must tolerate in view of some greater good provided by the state.

Yet how can one persuade the majority of the population to believe this? The answer is: only with the help of intellectuals.

How do you get the intellectuals to work for you? To this the answer is easy. The market demand for intellectual services is not exactly high and stable. Intellectuals would be at the mercy of the fleeting values of the masses, and the masses are uninterested in intellectual-philosophical concerns. The state, on the other hand, can accommodate the intellectuals’ typically over-inflated egos and offer them a warm, secure, and permanent berth in its apparatus.

However, it is not sufficient that you employ just some intellectuals. You must essentially employ them all, even the ones who work in areas far removed from those that you are primarily concerned with: that is philosophy, the social sciences and the humanities. For even intellectuals working in mathematics or the natural sciences, for instance, can obviously think for themselves and so become potentially dangerous. It is thus important that you secure also their loyalty to the state. Put differently: you must become a monopolist. And this is best achieved if all educational institutions, from kindergarten to universities, are brought under state control and all teaching and researching personnel is state-certified.

But what if the people do not want to become educated? For this, education must be made compulsory; and in order to subject the people to state-controlled education for as long as possible, everyone must be declared equally educable. The intellectuals know such egalitarianism to be false, of course. Yet to proclaim nonsense such as everyone is a potential Einstein if only given sufficient educational attention pleases the masses and, in turn, provides for an almost limitless demand for intellectual services.

None of all this guarantees correct statist thinking, of course. It certainly helps, however, in reaching the correct conclusion, if one realizes that without the state one might be out of work and may have to try one’s hands at the mechanics of gas pump operation instead of concerning oneself with such pressing problems as alienation, equity, exploitation, the deconstruction of gender and sex roles, or the culture of the Eskimos, the Hopis and the Zulus.

In any case, even if the intellectuals feel underappreciated by you, that is, by one particular state administration, they know that help can only come from another state administration but not from an intellectual assault on the institution of the state as such. Hence, it is hardly surprising that, as a matter of fact, the overwhelming majority of contemporary intellectuals, including most conservative or so-called free market intellectuals, are fundamentally and philosophically statists.

Has the work of the intellectuals paid off for the state? I would think so. If asked whether the institution of a state is necessary, I do not think it is exaggerated to say that 99 percent of all people would unhesitatingly say yes. And yet, this success rests on rather shaky grounds, and the entire statist edifice can be brought down if only the work of the intellectuals is countered by the work of intellectual anti-intellectuals, as I like to call them.

The overwhelming majority of state supporters are not philosophical statists, i.e., because they have thought about the matter. Most people do not think much about anything philosophical. They go about their daily lives, and that is it. So most support stems from the mere fact that a state exists, and has always existed as far as one can remember (and that is typically not farther away than one’s own lifetime). That is, the greatest achievement of the statist intellectuals is the fact that they have cultivated the masses’ natural intellectual laziness (or incapacity) and never allowed for the subject to come up for serious discussion. The state is considered as an unquestionable part of the social fabric.

The first and foremost task of the intellectual anti-intellectuals, then, is to counter this dogmatic slumber of the masses by offering a precise definition of the state, as I have done at the outset, and then to ask if there is not something truly remarkable, odd, strange, awkward, ridiculous, indeed ludicrous about an institution such as this. I am confident that such simple, definitional work will produce some serious doubt regarding an institution that one previously had been taken for granted.

Further, proceeding from less sophisticated (yet, not incidentally, more popular) pro-state arguments to more sophisticated ones: To the extent that intellectuals have deemed it necessary to argue in favor of the state at all, their most popular argument, encountered already at kindergarten age, runs like this: Some activities of the state are pointed out: the state builds roads, kindergartens, schools; it delivers the mail and puts the policeman on the street. Imagine, there would be no state. Then we would not have these goods. Thus, the state is necessary.

At the university level, a slightly more sophisticated version of the same argument is presented. It goes like this: True, markets are best at providing many or even most things; but there are other goods markets cannot provide or cannot provide in sufficient quantity or quality. These other, so-called public goods are goods which bestow benefits onto people beyond those actually having produced or paid for them. Foremost among such goods rank typically education and research. Education and research, for instance, it is argued, are extremely valuable goods. They would be under-produced, however, because of free riders, i.e., of cheats, who benefit via so-called neighborhood effects from education and research without paying for it. Thus, the state is necessary to provide otherwise un-produced or under-produced (public) goods such as education and research.

These statist arguments can be refuted by a combination of three fundamental insights: First, as for the kindergarten argument, it does not follow from the fact that the state provides roads and schools that only the state can provide such goods. People have little difficulty recognizing that this is a fallacy. From the fact that monkeys can ride bikes it does not follow that only monkeys can ride bikes. And second, immediately following, it must be recalled that the state is an institution that can legislate and tax; and hence, that state agents have little incentive to produce efficiently. State roads and schools will only be more costly and their quality lower. For there is always a tendency for state agents to use up as many resources as possible doing whatever they do but actually work as little as possible doing it.

Third, as for the more sophisticated statist argument, it involves the same fallacy encountered already at the kindergarten level. For even if one were to grant the rest of the argument, it is still a fallacy to conclude from the fact that states provide public goods that only states can do so.

More importantly, however, it must be pointed out that the entire argument demonstrates a total ignorance of the most fundamental fact of human life: namely scarcity. True, markets will not provide for all desirable things. There are always unsatisfied wants as long as we do not inhabit the Garden of Eden. But to bring such un-produced goods into existence scarce resources must be expended, which consequently can no longer be used to produce other, likewise desirable things. Whether public goods exist next to private ones does not matter in this regard, the fact of scarcity remains unchanged: more public goods can come only at the expense of less private goods. Yet what needs to be demonstrated is that one good is more important and valuable than another one. This is what is meant by economizing. Yet can the state help economize scarce resources? This is the question that must be answered. In fact, however, conclusive proof exists that the state does not and cannot economize: For in order to produce anything, the state must resort to taxation (or legislation) which demonstrates irrefutably that its subjects do not want what the state produces but prefer instead something else as more important. Rather than economize, the state can only re-distribute: it can produce more of what it wants and less of what the people want and, to recall, whatever the state then produces will be produced inefficiently.

Finally, the most sophisticated argument in favor of the state must be briefly examined. From Hobbes on down this argument has been repeated endlessly. It runs like this: In the state of nature before the establishment of a state permanent conflict reigns. Everyone claims a right to everything, and this will result in interminable war. There is no way out of this predicament by means of agreements; for who would enforce these agreements? Whenever the situation appeared advantageous, one or both parties would break the agreement. Hence, people recognize that there is but one solution to the desideratum of peace: the establishment, per agreement, of a state, i.e., a third, independent party as ultimate judge and enforcer.

Yet if this thesis is correct and agreements require an outside enforcer to make them binding, then a state-by-agreement can never come into existence. For in order to enforce the very agreement which is to result in the formation of a state (to make this agreement binding), another outside enforcer, a prior state, would already have to exist. And in order for this state to have come into existence, yet another still earlier state must be postulated, and so on, in infinite regress.

On the other hand, if we accept that states exist (and of course they do), then this very fact contradicts the Hobbesian story. The state itself has come into existence without any outside enforcer. Presumably, at the time of the alleged agreement, no prior state existed. Moreover, once a state-by-agreement is in existence, the resulting social order still remains a self-enforcing one. To be sure, if A and B now agree on something, their agreements are made binding by an external party. However, the state itself is not so bound by any outside enforcer. There exists no external third party insofar as conflicts between state-agents and state-subjects are concerned; and likewise no external third party exists for conflicts between different state-agents or -agencies. Insofar as agreements entered into by the state vis–vis its citizens or of one state agency vis–vis another are concerned, that is, such agreements can be only self-binding on the State. The state is bound by nothing except its own self-accepted and enforced rules, i.e., the constraints that it imposes on itself. Vis–vis itself, so to speak, the state is still in a natural state of anarchy characterized by self-rule and enforcement, because there is no higher state which could bind it.

Further: If we accept the Hobbesian idea that the enforcement of mutually agreed upon rules does require some independent third party, this would actually rule out the establishment of a state. In fact, it would constitute a conclusive argument against the institution of a state, i.e., of a monopolist of ultimate decision-making and arbitration. For then, there must also exist an independent third party to decide in every case of conflict between me (private citizen) and some state agent, and likewise an independent third party must exist for every case of intra-state conflicts (and there must be another independent third party for the case of conflicts between various third parties) yet this means, of course, that such a state (or any independent third party) would be no state as I have defined it at the outset but simply one of many freely competing third-party conflict arbitrators.

Let me conclude then: the intellectual case against the state seems to be easy and straightforward. But that does not mean that it is practically easy. Indeed, almost everyone is convinced that the state is a necessary institution, for the reasons that I have indicated. So it is very doubtful if the battle against statism can be won, as easy as it might seem on the purely theoretical, intellectual level. However, even if that should turn out to be impossible at least let’s have some fun at the expense of our statist opponents. And for that I suggest that you always and persistently confront them with the following riddle: Assume a group of people, aware of the possibility of conflicts; and then someone proposes, as a solution to this eternal human problem, that he (someone) be made the ultimate arbiter in any such case of conflict, including those conflicts in which he is involved. I am confident that he will be considered either a joker or mentally unstable and yet this is precisely what all statists propose.

Conventionally, the state is defined as an agency with two unique characteristics. First, it is a compulsory territorial monopolist of ultimate decision-making (jurisdiction). That is, it is the ultimate arbiter in every case of conflict, including conflicts involving itself. Second, the state is a territorial monopolist of taxation. That is, it is an agency that unilaterally fixes the price citizens must pay for its provision of law and order.

Predictably, if one can only appeal to the state for justice, justice will be perverted in favor of the state. Instead of resolving conflict, a monopolist of ultimate decision-making will provoke conflict in order to settle it to his own advantage. Worse, while the quality of justice will fall under monopolistic auspices, its price will rise. Motivated like everyone else by self-interest but equipped with the power to tax, the state agents’ goal is always the same: to maximize income and minimize productive effort.

State, War, and Imperialism

Instead of concentrating on the internal consequences of the institution of a state, however, I will focus on its external consequences, i.e., foreign rather than domestic policy.

For one, as an agency that perverts justice and imposes taxes, every state is threatened with “exit.” Especially its most productive citizen may leave to escape taxation and the perversions of law. No state likes this. To the contrary, instead of seeing the range of control and tax base shrink, state agents prefer that they be expanded. Yet this brings them in conflict with other states. Unlike competition between “natural” persons and institutions, however, the competition between states is eliminative. That is, there can be only one monopolist of ultimate decision-making and taxation in any given area. Consequently, the competition between different states promotes a tendency toward political centralization and ultimately one single world state.

Further, as tax-funded monopolists of ultimate decision-making, states are inherently aggressive institutions. Whereas “natural” persons and institutions must bear the cost of aggressive behavior themselves (which may well induce them to abstain from such conduct), states can externalize this cost onto their taxpayers. Hence, state agents are prone to become provocateurs and aggressors and the process of centralization can be expected to proceed by means of violent clashes, i.e., interstate wars.

Moreover, given that states must begin small and assuming as the starting point a world composed of a multitude of independent territorial units, something rather specific about the requirement of success can be stated. Victory or defeat in interstate warfare depend on many factors, of course, but other things such as population size being the same, in the long run the decisive factor is the relative amount of economic resources at a state’s disposal. In taxing and regulating, states do not contribute to the creation of economic wealth. Instead, they parasitically draw on existing wealth. However, state governments can influence the amount of existing wealth negatively. Other things being equal, the lower the tax and regulation burden imposed on the domestic economy, the larger the population will tend to grow and the larger the amount of domestically produced wealth on which the state can draw in its conflicts with neighboring competitors. That is, states which tax and regulate their economies comparatively little u2014 liberal states u2014 tend to defeat and expand their territories or their range of hegemonic control at the expense of less-liberal ones.

This explains, for instance, why Western Europe came to dominate the rest of the world rather than the other way around. More specifically, it explains why it was first the Dutch, then the British and finally, in the 20th century, the United States, that became the dominant imperial power, and why the United States, internally one of the most liberal states, has conducted the most aggressive foreign policy, while the former Soviet Union, for instance, with its entirely illiberal (repressive) domestic policies has engaged in a comparatively peaceful and cautious foreign policy. The United States knew that it could militarily beat any other state; hence, it has been aggressive. In contrast, the Soviet Union knew that it was bound to lose a military confrontation with any state of substantial size unless it could win within a few days or weeks.

From Monarchy and Wars of Armies to Democracy and Total Wars

Historically, most states have been monarchies, headed by absolute or constitutional kings or princes. It is interesting to ask why this is so, but here I have to leave this question aside. Suffice it to say that democratic states (including so-called parliamentary monarchies), headed by presidents or prime-ministers, were rare until the French Revolution and have assumed world-historic importance only after World War I.

While all states must be expected to have aggressive inclinations, the incentive structure faced by traditional kings on the one hand and modern presidents on the other is different enough to account for different kinds of war. Whereas kings viewed themselves as the private owner of the territory under their control, presidents consider themselves as temporary caretakers. The owner of a resource is concerned about the current income to be derived from the resource and the capital value embodied in it (as a reflection of expected future income). His interests are long-run, with a concern for the preservation and enhancement of the capital values embodied in “his” country. In contrast, the caretaker of a resource (viewed as public rather than private property) is concerned primarily about his current income and pays little or no attention to capital values.

The empirical upshot of this different incentive structure is that monarchical wars tended to be “moderate” and “conservative” as compared to democratic warfare.

Monarchical wars typically arose out of inheritance disputes brought on by a complex network of inter-dynastic marriages. They were characterized by tangible territorial objectives. They were not ideologically motivated quarrels. The public considered war the king’s private affair, to be financed and executed with his own money and military forces. Moreover, as conflicts between different ruling families, kings felt compelled to recognize a clear distinction between combatants and noncombatants and target their war efforts exclusively against each other and their family estates. Thus military historian Michael Howard noted about 18th-century monarchical warfare:

On the [European] continent commerce, travel, cultural and learned intercourse went on in wartime almost unhindered. The wars were the king’s wars. The role of the good citizen was to pay his taxes, and sound political economy dictated that he should be left alone to make the money out of which to pay those taxes. He was required to participate neither in the decision out of which wars arose nor to take part in them once they broke out, unless prompted by a spirit of youthful adventure. These matters were arcane regni, the concern of the sovereign alone. [War in European History, 73]

Similarly Ludwig von Mises observed about the wars of armies:

In wars of armies, the army does the fighting while the citizens who are not members of the army pursue their normal lives. The citizens pay the costs of warfare; they pay for the maintenance and equipment of the army, but otherwise they remain outside of the war events. It may happen that the war actions raze their houses, devastate their land, and destroy their other property; but this, too, is part of the war costs which they have to bear. It may also happen that they are looted and incidentally killed by the warriors u2014 even by those of their “own” army. But these are events which are not inherent in warfare as such; they hinder rather than help the operations of the army leaders and are not tolerated if those in command have full control over their troops. The warring state which has formed, equipped, and maintained the army considers looting by the soldiers an offense; they were hired to fight, not to loot on their own. The state wants to keep civil life as usual because it wants to preserve the tax-paying ability of its citizens; conquered territories are regarded as its own domain. The system of the market economy is to be maintained during the war to serve the requirement of warfare. [Nationalökonomie, 725–26]

In contrast to the limited warfare of the ancien regime, the era of democratic warfare u2014 which began with the French Revolution and the Napoleonic Wars, continued during the 19th century with the American War of Southern Independence, and reached its apex during the 20th century with World War I and World War II u2014 has been the era of total war.

In blurring the distinction between the rulers and the ruled (“we all rule ourselves”), democracy strengthened the identification of the public with a particular state. Rather than dynastic property disputes which could be resolved through conquest and occupation, democratic wars became ideological battles: clashes of civilizations, which could only be resolved through cultural, linguistic, or religious domination, subjugation and, if necessary, extermination. It became increasingly difficult for members of the public to extricate themselves from personal involvement in war. Resistance against higher taxes to fund a war was considered treasonous. Because the democratic state, unlike a monarchy, was “owned” by all, conscription became the rule rather than the exception. And with mass armies of cheap and hence easily disposable conscripts fighting for national goals and ideals, backed by the economic resources of the entire nation, all distinctions between combatants and noncombatants fell by the wayside. Collateral damage was no longer an unintended side-effect but became an integral part of warfare. “Once the state ceased to be regarded as ‘property’ of dynastic princes,” Michael Howard noted,

and became instead the instrument of powerful forces dedicated to such abstract concepts as Liberty, or Nationality, or Revolution, which enabled large numbers of the population to see in that state the embodiment of some absolute Good for which no price was too high, no sacrifice too great to pay; then the ‘temperate and indecisive contests’ of the rococo age appeared as absurd anachronisms. [ibid. 75–76]

Similar observations have been made by the military historian and major-general J.F.C. Fuller:

The influence of the spirit of nationality, that is of democracy, on war was profound, … [it] emotionalized war and, consequently, brutalized it; …. National armies fight nations, royal armies fight their like, the first obey a mob u2014 always demented, the second a king, generally sane. … All this developed out of the French Revolution, which also gave to the world conscription u2014 herd warfare, and the herd coupling with finance and commerce has begotten new realms of war. For when once the whole nation fights, then is the whole national credit available for the purpose of war. [War and Western Civilization, 26–27]

And William A. Orton thus summarized matters:

Nineteenth-century wars were kept within bounds by the tradition, well recognized in international law, that civilian property and business were outside the sphere of combat. Civilian assets were not exposed to arbitrary distraint or permanent seizure, and apart from such territorial and financial stipulations as one state might impose on another, the economic and cultural life of the belligerents was generally allowed to continue pretty much as it had been. Twentieth-century practice has changed all that. During both World Wars limitless lists of contraband coupled with unilateral declarations of maritime law put every sort of commerce in jeopardy, and made waste paper of all precedents. The close of the first war was marked by a determined and successful effort to impair the economic recovery of the principal losers, and to retain certain civilian properties. The second war has seen the extension of that policy to a point at which international law in war has ceased to exist. For years the Government of Germany, so far as its arms could reach, had based a policy of confiscation on a racial theory that had no standing in civil law, international law, nor Christian ethics; and when the war began, that violation of the comity of nations proved contagious. Anglo-American leadership, in both speech and action, launched a crusade that admitted of neither legal nor territorial limits to the exercise of coercion. The concept of neutrality was denounced in both theory and practice. Not only enemy assets and interests, but the assets and interests of any parties whatsoever, even in neutral countries, were exposed to every constraint the belligerent powers could make effective; and the assets and interests of neutral states and their civilians, lodged in belligerent territories or under belligerent control, were subjected to practically the same sort of coercion as those of enemy nationals. Thus “total war” became a sort of war that no civilian community could hope to escape; and “peace loving nations” will draw the obvious inference. [The Liberal Tradition: A Study of the Social and Spiritual Conditions of Freedom, 251–52]

Excursus: The Doctrine of Democratic Peace

I have explained how the institution of a state leads to war; why, seemingly paradoxical, internally liberal states tend to be imperialist powers; and how the spirit of democracy has contributed to the de-civilization in the conduct of war.

More specifically, I have explained the rise of the United States to the rank of the world’s foremost imperial power; and, as a consequence of its successive transformation from the early beginnings as an aristocratic republic into an unrestricted mass democracy which began with the War of Southern Independence, the role of the United States as an increasingly arrogant, self-righteous and zealous warmonger.

What appears to be standing in the way of peace and civilization, then, is above all the state and democracy, and specifically the world’s model democracy: the United States. Ironically if not surprisingly, however, it is precisely the United States, which claims that it is the solution to the quest for peace.

The reason for this claim is the doctrine of democratic peace, which goes back to the days of Woodrow Wilson and World War I, has been revived in recent years by George W. Bush and his neo-conservative advisors, and by now has become intellectual folklore even in liberal-libertarian circles. The theory claims:

• Democracies do not go to war against each other.
• Hence, in order to create lasting peace, the entire world must be made democratic.

And as a u2014 largely unstated u2014 corollary:

• Today, many states are not democratic and resist internal u2014 democratic u2014 reform.
• Hence, war must be waged on those states in order to convert them to democracy and thus create lasting peace.

I do not have the patience for a full-blown critique of this theory. I shall merely provide a brief critique of the theory’s initial premise and its ultimate conclusion.

First: Do democracies not go to war against each other? Since almost no democracies existed before the 20th century the answer supposedly must be found within the last hundred years or so. In fact, the bulk of the evidence offered in favor of the thesis is the observation that the countries of Western Europe have not gone to war against each other in the post–World War II era. Likewise, in the Pacific region, Japan and South Korea have not warred against each other during the same period. Does this evidence prove the case? The democratic-peace theorists think so. As “scientists” they are interested in “statistical” proof, and as they see it there are plenty of “cases” on which to build such proof: Germany did not war against France, Italy, England, etc.; France did not war against Spain, Italy, Belgium, etc.. Moreover, there are permutations: Germany did not attack France, nor did France attack Germany, etc.. Thus, we have seemingly dozens of confirmations u2014 and that for some 60 years u2014 and not a single counterexample. But do we really have so many confirming cases?

The answer is no: we have actually no more than a single case at hand. With the end of World War II, essentially all of u2014 by now: democratic u2014 Western Europe (and democratic Japan and South Korea in the Pacific region) has become part of the US Empire, as indicated by the presence of US troops in practically all of these countries. What the post World War II period of peace then “proves” is not that democracies do not go to war against each other but that a hegemonic, imperialist power such as the United States did not let its various colonial parts go to war against each other (and, of course, that the hegemon itself did not see any need to go to war against its satellites u2014 because they obeyed u2014 and they did not see the need or did not dare to disobey their master).

Moreover, if matters are thus perceived u2014 based on an understanding of history rather than the naïve belief that because one entity has a different name than another their behavior must be independent from one another u2014 it becomes clear that the evidence presented has nothing to do with democracy and everything with hegemony. For instance, no war broke out between the end of World War II and the end of the 1980s, i.e., during the hegemonic reign of the Soviet Union, between East Germany, Poland, Czechoslovakia, Romania, Bulgaria, Lithuania, Estonia, Hungary, etc. Was this because these were communist dictatorships and communist dictatorships do not go to war against each other? That would have to be the conclusion of “scientists” of the caliber of democratic-peace theorists! But surely this conclusion is wrong. No war broke out because the Soviet Union did not permit this to happen u2014 just as no war between Western democracies broke out because the United States did not permit this to happen in its dominion. To be sure, the Soviet Union intervened in Hungary and Czechoslovakia, but so did the United States at various occasions in Middle-America such as in Guatemala, for instance. (Incidentally: How about the wars between Israel and Palestine and Lebanon? Are not all these democracies? Or are Arab countries ruled out by definition as undemocratic?)

Second: What about democracy as a solution to anything, let alone peace? Here the case of democratic-peace theorists appears even worse. Indeed, the lack of historical understanding displayed by them is truly frightening. Here are only some fundamental shortcomings:

First, the theory involves a conceptual conflation of democracy and liberty (freedom) that can only be called scandalous, especially coming from self-proclaimed libertarians. The foundation and cornerstone of liberty is the institution of private property; and private u2014 exclusive u2014 property is logically incompatible with democracy u2014 majority rule. Democracy has nothing to do with freedom. Democracy is a soft variant of communism, and rarely in the history of ideas has it been taken for anything else. Incidentally, before the outbreak of the democratic age, i.e., until the beginning of the 20th century, government (state) tax-expenditures (combining all levels of government) in Western European countries constituted somewhere between 7–15% of national product, and in the still young United States even less. Less than a hundred years of full-blown majority rule have increased this percentage to about 50% in Europe and 40% in the United States.

Second, the theory of democratic peace distinguishes essentially only between democracy and non-democracy, summarily labeled dictatorship. Thus not only disappear all aristocratic-republican regimes from view, but more importantly for my current purposes, also all traditional monarchies. They are equated with dictatorships a la Lenin, Mussolini, Hitler, Stalin, Mao. In fact, however, traditional monarchies have little in common with dictatorships (while democracy and dictatorship are intimately related).

$25 “Democracy has nothing to do with freedom. Democracy is a soft variant of communism, and rarely in the history of ideas has it been taken for anything else.”

Monarchies are the semi-organic outgrowth of hierarchically structured natural u2014 stateless u2014 social orders. Kings are the heads of extended families, of clans, tribes, and nations. They command a great deal of natural, voluntarily acknowledged authority, inherited and accumulated over many generations. It is within the framework of such orders (and of aristocratic republics) that liberalism first developed and flourished. In contrast, democracies are egalitarian and redistributionist in outlook; hence, the above-mentioned growth of state power in the 20th century. Characteristically, the transition from the monarchical age to the democratic one, beginning in the second half of the 19th century, has seen a continuous decline in the strength of liberal parties and a corresponding strengthening of socialists of all stripes.

Third, it follows from this that the view democratic-peace theorists have of conflagrations such as World War I must be considered grotesque, at least from the point of view of someone allegedly valuing freedom. For them, this war was essentially a war of democracy against dictatorship; hence, by increasing the number of democracies, it was a progressive, peace-enhancing, and ultimately justified war.

In fact, matters are very different. To be sure, pre-war Germany and Austria may not have qualified as democratic as England, France, or the United States at the time. But Germany and Austria were definitely not dictatorships. They were (increasingly emasculated) monarchies and as such arguably as liberal u2014 if not more so u2014 than their counterparts. For instance, in the United States, anti-war proponents were jailed, the German language was essentially outlawed, and citizens of German descent were openly harassed and often forced to change their names. Nothing comparable occurred in Austria and Germany.

In any case, however, the result of the crusade to make the world safe for democracy was less liberal than what had existed before (and the Versailles peace dictate precipitated World War II). Not only did state power grow faster after the war than before. In particular, the treatment of minorities deteriorated in the democratized post–World War I period. In newly founded Czechoslovakia, for instance, the Germans were systematically mistreated (until they were finally expelled by the millions and butchered by the tens of thousands after World War II) by the majority Czechs. Nothing remotely comparable had happened to the Czechs during the previous Habsburg reign. The situation regarding the relations between Germans and southern Slavs in pre-war Austria versus post-war Yugoslavia respectively was similar.

Nor was this a fluke. As under the Habsburg monarchy in Austria, for instance, minorities had also been treated fairly well under the Ottomans. However, when the multicultural Ottoman Empire disintegrated in the course of the 19th century and was replaced by semi-democratic nation-states such as Greece, Bulgaria, etc., the existing Ottoman Muslims were expelled or exterminated. Similarly, after democracy had triumphed in the United States with the military conquest of the Southern Confederacy, the Union government quickly proceeded to exterminate the Plains Indians. As Mises had recognized, democracy does not work in multi-ethnic societies. It does not create peace but promotes conflict and has potentially genocidal tendencies.

Fourth and intimately related, the democratic-peace theorists claim that democracy represents a stable “equilibrium.” This has been expressed most clearly by Francis Fukuyama, who labeled the new democratic world order as the “end of history.” However, overwhelming evidence exists that this claim is patently wrong.

On theoretical grounds: How can democracy be a stable equilibrium if it is possible that it be transformed democratically into a dictatorship, i.e., a system which is considered not stable? Answer: that makes no sense!

Moreover, empirically democracies are anything but stable. As indicated, in multi-cultural societies democracy regularly leads to the discrimination, oppression, or even expulsion and extermination of minorities u2014 hardly a peaceful equilibrium. And in ethnically homogeneous societies, democracy regularly leads to class warfare, which leads to economic crisis, which leads to dictatorship. Think, for example, of post-Czarist Russia, post-World War I Italy, Weimar Germany, Spain, Portugal, and in more recent times Greece, Turkey, Guatemala, Argentina, Chile, and Pakistan.

The State is the enemy of peace: $25

Not only is this close correlation between democracy and dictatorship troublesome for democratic-peace theorists; worse, they must come to grips with the fact that the dictatorships emerging from crises of democracy are by no means always worse, from a classical liberal or libertarian view, than what would have resulted otherwise. Cases can be easily cited where dictatorships were preferable and an improvement. Think of Italy and Mussolini or Spain and Franco. In addition, how is one to square the starry-eyed advocacy of democracy with the fact that dictators, quite unlike kings who owe their rank to an accident of birth, are often favorites of the masses and in this sense highly democratic? Just think of Lenin or Stalin, who were certainly more democratic than Czar Nicholas II; or think of Hitler, who was definitely more democratic and a “man of the people” than Kaiser Wilhelm II or Kaiser Franz Joseph.

According to democratic-peace theorists, then, it would seem that we are supposed to war against foreign dictators, whether kings or demagogues, in order to install democracies, which then turn into (modern) dictatorships, until finally, one supposes, the United States itself has turned into a dictatorship, owing to the growth of internal state power which results from the endless “emergencies” engendered by foreign wars.

Better, I dare say, to heed the advice of Erik von Kuehnelt-Leddihn and, instead of aiming to make the world safe for democracy, we try making it safe from democracy u2014 everywhere, but most importantly in the United States.

Suppose the island is the Garden of Eden; all external goods are available in superabundance. They are “free goods,” just as the air that we breathe is normally a “free” good. Whatever Crusoe does with these goods, his actions have no repercussions — neither with respect to his own future supply of such goods nor regarding the present or future supply of the same goods for Friday (and vice versa). Hence, it is impossible for there ever to be a conflict between Crusoe and Friday concerning the use of such goods. A conflict is only possible if goods are scarce. Only then will the need arise to formulate rules that make orderly, conflict-free social cooperation possible.

In the Garden of Eden only two scarce goods exist: the physical body of a person and its standing room. Crusoe and Friday each have only one body and can stand only at one place at a time. Hence, even in the Garden of Eden conflicts between Crusoe and Friday can arise: Crusoe and Friday cannot occupy the same standing room simultaneously without coming into physical conflict with each other. Accordingly, even in the Garden of Eden rules of orderly social conduct must exist — rules regarding the proper location and movement of human bodies. Outside the Garden of Eden, in the realm of scarcity, there must be rules that regulate not only the use of personal bodies but also of everything scarce so that all possible conflicts can be ruled out. This is the problem of social order.

The Classical Liberal Conception of Social Order

In the history of social and political thought, myriad proposals have been offered as solutions to the problem of social order, and this variety of mutually incompatible proposals has contributed to the fact that the search for a single “correct” solution is frequently deemed illusory, yet a correct solution exists. There is no reason to succumb to moral relativism. The solution has been known for hundreds of years. In modern times this simple solution has been most closely associated with “classical liberalism.”

Let me formulate the solution, first for the special case represented by the Garden of Eden and subsequently for the general case represented by the “real” world of all-around scarcity, and then briefly indicate why this solution must be considered just, as well as economic.

In the Garden of Eden, the solution is provided by the simple rule stipulating that everyone may place or move his own body wherever he pleases, provided only that no one else is already standing there and occupying the same space. Outside of the Garden of Eden, in the realm of all-around scarcity, the solution is provided by four interrelated rules.

First, every person is the proper owner of his own physical body. Who else, if not Crusoe, should be the owner of Crusoe’s body? Otherwise, would it not constitute a case of slavery, and is slavery not unjust as well as uneconomical?

Secondly, every person is the proper owner of all nature-given goods that he has perceived as scarce and put to use by means of his body, before any other person. Indeed, who else, if not the first user, should be their owner? The second or third one? Were this so, however, the first person would not perform his act of original appropriation, and so the second person would become the first, and so on and on. That is, no one would ever be permitted to perform an act of original appropriation and mankind would instantly die out. Alternatively, the first user together with all late-comers become part-owners of the goods in question. Then conflict will not be avoided, however, for what is one to do if the various part-owners have incompatible ideas about what to do with the goods in question? This solution would also be uneconomical because it would reduce the incentive to utilize goods perceived as scarce for the first time.

In the third place, every person who, with the help of his body and his originally appropriated goods, produces new products thereby becomes the proper owner of these products, provided only that in the process of production he does not physically damage the goods owned by another person.

Finally, once a good has been first appropriated or produced, ownership in it can be acquired only by means of a voluntary, contractual transfer of its property title from a previous to a later owner.

The institution of private property and in particular the establishment of private property by means of original appropriation are frequently referred to as "conventions." However, as should have become clear, this is false. A convention serves a purpose, and it is something to which an alternative exists. For instance, the Latin alphabet serves the purpose of written communication. There exists an alternative to it, the Cyrillic alphabet. That is why it is referred to as a convention. What, however, is the purpose of action-norms? The avoidance of possible conflict! Conflict-generating norms are contrary to the very purpose of norms. However, with regard to the purpose of conflict-avoidance, the two mentioned institutions are not just conventional; no alternative to them exists. Only private property makes it possible for all otherwise unavoidable conflicts to be avoided; and only the principle of property acquisition by acts of original appropriation performed by specific individuals at a specific time and location makes it possible for conflicts to be avoided from the beginning of mankind on.

The Enforcement of Social Order: The Role of the State in Classical Liberalism

As important as this discovery is, however, it leaves us with another even more difficult problem. Even if we all know how to avoid all possible conflict, and even if we all know that in doing so all-around prosperity will be maximized in the long run, it does not follow that we are always interested in conflict-avoidance and the long-run consequences of our actions. In fact, mankind being what it is, murderers, robbers, thieves, thugs, and con-artists, or people not acting in accordance with the above-mentioned rules, will always exist, and life in society will be impossible if they are not deterred. In order to maintain law and order, it is necessary that the members of society be prepared and equipped to pressure anyone who does not respect the life and property of others to acquiesce to the rules of society. How and by whom is this enforcement of law and order accomplished?

The answer given by classical liberals and by almost everyone else is only too well known. The indispensable task of maintaining law and order is the unique function of the state. How is the state defined, then? A state is not simply a specialized firm. Conventionally, the state is defined as an agency that possesses two unique characteristics. First, the state is an agency that exercises a territorial monopoly of ultimate decision-making. That is, it is the ultimate arbiter in every case of conflict, including conflicts involving itself, and it allows no appeal above and beyond itself. Furthermore, the state is an agency that exercises a territorial monopoly of taxation. That is, it is an agency that unilaterally fixes the price private citizens must pay for its provision of law and order.

The Errors of Classical Liberalism

As widespread as the classical liberal view is regarding the necessity of the institution of a state as the provider of law and order, several rather elementary economic and moral arguments show this view to be entirely misguided.

Among political economists and political philosophers it is one of the most widely accepted proposition that every “monopoly” is “bad” from the viewpoint of consumers. Here, monopoly is understood as an exclusive privilege granted to a single producer of a commodity or service, or as the absence of “free entry” into a particular line of production. For example, only one agency, A, may produce a given good or service, X. Such monopoly is “bad” for consumers because, shielded from potential new entrants into a given area of production, the price of the product will be higher and its quality lower than under competitive conditions. Accordingly, it should be expected that state-provided law and order will be excessively expensive and of particularly low quality.

However, this is only the mildest of errors. Government is not just like any other monopoly such as a milk or a car monopoly that produces low-quality products at high prices. Government is unique among all other agencies in that it produces not only goods but also bads. Indeed, it must produce bads in order to produce anything that might be considered a good.

As noted, the government is the ultimate judge in every case of conflict, including conflicts involving itself. Consequently, instead of merely preventing and resolving conflict, a monopolist of ultimate decision-making will also provoke conflict in order to settle it to his own advantage. That is, if one can only appeal to government for justice, justice will be perverted in the favor of government, constitutions and supreme courts notwithstanding. Indeed, these are government constitutions and courts, and whatever limitations on government action they may find is invariably decided by agents of the very same institution under consideration. Predictably, the definition of property and protection will be altered continually and the range of jurisdiction expanded to the government’s advantage. The idea of eternal and immutable law that must be discovered will disappear and be replaced by the idea of law as legislation — as flexible state-made law.

Even worse, the state is a monopolist of taxation, and while those who receive the taxes — the government employees — regard taxes as something good, those who must pay the taxes regard the payment as something bad, as an act of expropriation. As a tax-funded life-and-property protection agency, then, the very institution of government is nothing less than a contradiction in terms. It is an expropriating property protector, “producing” ever more taxes and ever less protection. Even if a government limited its activities exclusively to the protection of the property of its citizens, as classical liberals have proposed, the further question of how much security to produce would arise. Motivated, as everyone is, by self-interest and the disutility of labor but equipped with the unique power to tax, a government agent’s goal will invariably be to maximize expenditures on protection, and almost all of a nation’s wealth can conceivably be consumed by the cost of protection, and at the same time to minimize the production of protection. The more money one can spend and the less one must work to produce, the better off one will be.

In sum, the incentive structure inherent in the institution of government is not a recipe for the protection of life and property, but instead a recipe for maltreatment, oppression, and exploitation. This is what the history of states illustrates. It is first and foremost the history of countless millions of ruined human lives.

The Errors Compounded: Democratic Liberalism

Once classical liberalism had erroneously assumed the institution of government to be necessary for the maintenance of law and order, the following question arose: Which form of government is best suited for the task at hand? While the classical liberal answer to this question was by no means unanimous, it was still loud and clear. The traditional form of princely or royal government was apparently incompatible with the cherished idea of universal human rights for it was government based on privilege. Accordingly, it was ruled out. How, then, could the idea of the universality of human rights be squared with government? The liberal answer was by opening participation and entry into government on equal terms to everyone via democracy. Anyone — not just a hereditary class of nobles — was permitted to become a government official and exercise every government function.

However, this democratic equality before the law is something entirely different from and incompatible with the idea of one universal law, equally applicable to everyone, everywhere, and at all times. In fact, the former objectionable schism and inequality of the higher law of kings versus the subordinate law of ordinary subjects is fully preserved under democracy in the separation of public versus private law and the supremacy of the former over the latter. Under democracy, everyone is equal insofar as entry into government is open to all on equal terms. In a democracy no personal privileges or privileged persons exist. However, functional privileges and privileged functions exist. As long as they act in an official capacity, public officials are governed and protected by public law and thereby occupy a privileged position vis-à-vis persons acting under the mere authority of private law, most fundamentally in being permitted to support their own activities by taxes imposed on private law subjects. Privilege and legal discrimination will not disappear. To the contrary. Rather than being restricted to princes and nobles, privilege, protectionism, and legal discrimination will be available to all and can be exercised by everyone.

Predictably, then, under democratic conditions the tendency of every monopoly to increase prices and decrease quality is more pronounced. As hereditary monopolist, a king or prince regarded the territory and people under his jurisdiction as his personal property and engaged in the monopolistic exploitation of his “property.” Under democracy, monopoly, and monopolistic exploitation do not disappear. Even if everyone is permitted to enter government, this does not eliminate the distinction between the rulers and the ruled. Government and the governed are not one and the same person. Instead of a prince who regards the country as his private property, a temporary and interchangeable caretaker is put in monopolistic charge of the country. The caretaker does not own the country, but as long as he is in office he is permitted to use it to his and his protgs’ advantage. He owns its current use — usufruct — but not its capital stock. This does not eliminate exploitation. To the contrary, it makes exploitation less calculating, carried out with little or no regard to the capital stock. Exploitation is shortsighted and capital consumption systematically promoted.

The Idea of a Private Law Society

In light of the multiple errors of classical liberalism, then, how is law and order vis-à-vis actual and potential lawbreakers maintained? The solution lies in a private law society — a society where every individual and institution is subject to one and the same set of laws! No public law granting privileges to specific persons of functions (and no public property) exists in this society. There is only private law (and private property), equally applicable to each and everyone. No one is permitted to acquire property by any other means than through original appropriation, production, or voluntary exchange; and no one possesses the privilege to tax and expropriate. Moreover, no one in a private law society is permitted to prohibit anyone else from using his property in order to enter any line of production and compete against whomever he pleases.

More specifically, in order to be just and efficient, the production and maintenance of law will have to be undertaken by freely financed and competing individuals and agencies. How can this be done? While it is impossible to predict the precise shape and form that the “security industry” would take within the framework of a private law society — just as it is impossible to predict the specific structure of almost any industry under such hitherto non-existing circumstances — a significant number of fundamental structural changes as compared to the status quo of state-provided security protection can be predicted.

First, in complex societies one aspect of the emerging solution will only be of secondary importance, but under no circumstances should it be overlooked. Whereas the statist provision of law and order has led to the successive disarmament of the population, rendering it increasingly defenseless against lawbreakers, in a private law society essentially no restrictions on the private ownership of firearms and other weapons would exist. Everyone’s elementary right to engage in self-defense to protect one’s life and property against invaders would be sacrosanct, and as one knows from the experience of the not-so-wild Wild West, as well as numerous empirical investigations into the relationship between the frequency of gun ownership and crime rates, more guns imply less crime. Intuition dictates this, but government propaganda relentlessly tries to deny it.

However, in complex modern societies self-defense will constitute only a small part in the overall production of security. In today’s world we do not produce our own shoes, suits and telephones; we partake in the advantages of the division of labor. This is also true of the production of security. To a large extent, we rely on specialized agents and agencies to protect our life and property. In particular, most people rely on freely financed and competing insurance companies for their protection, and this reliance on insurers will tend to increase and intensify the greater and more valuable the quantity of one’s property. Insurance companies in turn will associate and cooperate with police and detective agencies, either directly as a subdivision of the insurance company or indirectly as separate business entities. At the same time, insurance agencies will cooperate constantly with internal and with independent, external arbitrators and arbitration agencies.

How would this competitive system of interconnected insurance, police, and arbitration agencies work?

Competition among insurers, police, and arbitrators for paying clients would bring about a tendency toward a continuous fall in the price of protection (per insured value), thus rendering protection more affordable. In contrast, a monopolistic protector who may tax the protected can charge ever-higher prices for his services.

Furthermore, as already indicated, protection and security are goods and services that compete with others. If more resources are allocated to protection, fewer can be expended on cars, vacations, food, or drink, for example. Also, resources allocated to the protection of A or group A (people living along the Pacific) for instance, compete with resources expended on the protection of B or group B (people living along the Atlantic). As a tax-funded protection monopolist, the state’s allocation of resources will necessarily be arbitrary. There will be overproduction (or underproduction) of security as compared to other competing goods and services, and there will be overprotection of some individuals, groups, or regions and under-protection of others.

In distinct contrast, in a system of freely competing protection agencies all arbitrariness of allocation (all over- and underproduction) would vanish. Protection would be accorded the relative importance that is has in the eyes of voluntarily paying consumers, and no person, group, or region would receive protection at the expense of any other one, but each would receive protection in accordance with its payments.

In addition, insurers would have to indemnify their clients in the case of actual damage; hence, they must operate efficiently. Regarding social disasters (crime) in particular, this means that the insurer would be concerned above all with effective prevention, for unless he could prevent a crime, he would have to pay up. Further, if a criminal act could not be prevented, an insurer would still want to recover the loot, apprehend the offender, and bring him to justice, for in so doing the insurer could reduce his costs and force the criminal — rather than the victim and his insurer — to pay for the damages and cost of indemnification.

In distinct contrast, as compulsory monopolists states do not indemnify victims, and because they can resort to taxation as a source of funding, they have little or no incentive to prevent crime or to recover loot and capture criminals. Indeed, if they do manage to apprehend a criminal, they typically force the taxpaying victim and others to pay for the criminal’s incarceration, thus adding insult to injury.

It has already been pointed out that private law societies are characterized by an unrestricted right to self-defense and hence by widespread private gun and weapon ownership. This tendency is further strengthened by the important role of insurance companies in such societies. All states attempt to disarm their subject population, for the obvious reason that it is less dangerous to collect taxes from an unarmed than from an armed man. If a freely financed insurance company were to demand as a prerequisite of protection that potential clients hand over all means of self-defense, it would immediately arouse the utmost suspicion as to their true motives, and they would quickly go bankrupt. In their own best interest, insurance companies would reward armed clients, in particular those able to certify some level of training in the handling of arms, charging them lower premiums reflecting the lower risk that they represent. Just as insurers charge less if home owners have an alarm system or a safe installed, so would a trained gun owner represent a lower insurance risk.

As tax-funded monopolists of ultimate decision-making, states can externalize the costs associated with aggressive behavior onto hapless taxpayers. Hence, states are by nature more prone to become aggressors and warmongers than agents or agencies that must themselves bear the costs involved in aggression and war. Insurance companies are by their very nature defensive rather than aggressive agencies. On the one hand this is so because every act of aggression is costly, and an insurance company engaged in aggressive conduct would require comparatively higher premiums, implying the loss of clients to non-aggressive competitors.

On the other hand, it is not possible to insure oneself against every conceivable “risk.” Rather, it is only possible to insure oneself against “accidents,” i.e., risks over whose outcome the insured has no control and to which he contributes nothing. Thus, it is possible to insure oneself against the risk of death and fire, for instance, but it is impossible to insure oneself against the risk of committing suicide or setting one’s own house on fire. Similarly, it is impossible to insure oneself against the risk of business failure, of unemployment, or of disliking one’s neighbors, for in each case one has some control over the event in question.

Most significantly, the un-insurability of individual actions and sentiments (in contradistinction to accidents) implies that it is also impossible to insure oneself against the risk of damages resulting from one’s own prior aggression or provocation. Instead, every insurer must restrict the actions of his clients so as to exclude all aggression and provocation on their part. That is, any insurance against social disasters such as crime must be contingent on the insured submitting themselves to specified norms of non-aggressive conduct. Incidentally, due to the same reasons and financial concerns, insurers will tend to require that all their clients abstain from all forms of vigilante justice (except perhaps under quite extraordinary circumstances), for vigilante justice, even if justified, invariably causes uncertainty and provokes possible third party intervention. By obliging their clients instead to submit to regular publicized procedures whenever they think they have been victimized, these disturbances and associated costs can be largely avoided.

Lastly, it is worth pointing out that while states as tax-funded agencies can — and do — engage in the large-scale prosecution of victimless crimes such as “illegal drug” use, prostitution, or gambling, these “crimes” would tend to be of little or no concern within a system of freely funded protection agencies. “Protection” against such “crimes” would require higher insurance premiums, but since these “crimes,” unlike genuine crimes against persons and property, do not create victims, very few people would be willing to spend money on such “protection.”

Last and most important, a system of competing protection agencies would have a two-fold impact on the development of law. On the one hand, it would allow for greater variability of law. Rather than imposing a uniform set of standards onto everyone (as under statist conditions), protection agencies could compete against each other not just via price but also through product differentiation. There could exist side by side, for instance, Catholic protection agencies or insurers applying Canon law, Jewish agencies applying Mosaic law, Muslim agencies applying Islamic law, and agencies applying secular law of one variety or another, all of them sustained by a voluntarily paying clientele. Consumers could choose the law applied to them and their property. No one would have to live under “foreign” law.

On the other hand, the very same system of private law and order production would promote a tendency toward the unification of law. The “domestic” law — Catholic, Jewish, Roman, etc. — would apply only to the person and property of those who had chosen it, the insurer, and all others insured by the same insurer under the same law. Canon law, for instance, would apply only to professed Catholics and deal solely with intra-Catholic conflict and conflict resolution. Yet it is also possible, of course, that a Catholic might come into conflict with the subscriber of some other law code, e.g., a Muslim. If both law codes reached the same or a similar conclusion, no difficulties exist.

However, if competing law codes arrived at distinctly different conclusions (as they would at least in some cases), a problem arises. “Domestic” (intra-group) law would be useless, but every insured person would want protection against the contingency of inter-group conflicts as well. In this situation it cannot be expected that one insurer and the subscribers of its law code simply subordinate their judgment to that of another insurer and its law. Rather, for all the parties involved there is only one credible and acceptable way out of this predicament.

From the outset, every insurer would be compelled to submit itself and its clients to arbitration by a truly independent third party. This party would not only be an independent entity, however, but at the same time the unanimous choice of both parties. It would be agreed upon because of its commonly perceived ability to find mutually agreeable (fair) solutions in cases of inter-group disagreement. Moreover, if an arbitrator failed in this task and arrived at conclusions that were perceived as “unfair” or “biased” by either one of the insurers or their clients, this person or agency would not likely be chosen as an arbitrator in the future.

In sum, protection and security contracts would come into existence. Insurers (unlike states) would offer their clients contracts with well-specified property descriptions and clearly defined duties and obligations. Likewise, the relationship between insurers and arbitrators would be governed by contract. Each party to a contract, for the duration or until fulfillment of the contract, would be bound by its terms and conditions; and every change in the terms or conditions of a contract would require the unanimous consent of all parties concerned. That is, in a private law society, unlike under statist conditions, no “legislation” would exist. No insurer could get away with promising its clients protection without letting them know how or at what price, and insisting that it could unilaterally change the terms and conditions of the protector-client relationship. Insurance-clients would demand something significantly better, and insurers would supply contracts and constant law, instead of promises and shifting and changing legislation.

Furthermore, as a result of the continual cooperation of various insurers and arbitrators, a tendency toward the unification of property and contract law and the harmonization of the rules of procedure, evidence, and conflict resolution would be set in motion. Through buying protection-insurance, everyone would share in the common goal of striving to reduce conflict and enhance security. Moreover, every single conflict and damage claim, regardless of where and by or against whom, would fall into the jurisdiction of one or more specific insurance agencies and would be handled either by an individual insurer’s “domestic” law or by the “international” law provisions and procedures agreed upon in advance by a group of insurers.

Such a system would assure more complete and perfect legal stability and certainty than any system of security to which we can currently appeal.

Hans-Hermann Hoppe [send him mail], whom Lew Rockwell calls “an international treasure,” is distinguished fellow at the Ludwig von Mises Institute and professor of economics at the University of Nevada, Las Vegas. Democracy: The God That Failed is his eighth book. Visit his website.

of this site probably know about my ordeal at my university, which

has been covered quite extensively on this site and by the major

mainstream press. Now that major combat operations have ended

(to employ a phrase used by Bush in reference to Iraq…two years

ago), I’ve had some time to reflect on what happened, why, and whether

and to what extent I responded properly.

And

so here are my thoughts on this incident that took my career as

a professor of economics in a direction I would never had anticipated.

Now that the case is more-or-less settled, I no longer feel bound

by legal considerations to keep silent on important details. This

article is the first to disclose the full details of the case.

Las

Vegas prides itself for its tolerance and so does UNLV, its university. At

the university, however, tolerance is selective. You may assert

that white heterosexual males are responsible for all of mankind’s

misery, that Castro’s Cuba is a great success story, that capitalism

means exploitation, or that most university professors are liberals

because conservatives are too stupid to teach. If anyone should

complain about this, such complaint will be dismissed outright.

And

rightly so. After all, the university is committed to academic freedom.

Its faculty has the “freedom and an obligation … (to) discuss

and pursue the faculty member’s subject with candor and integrity,

even when the subject requires consideration of topics which may

be politically, socially or scientifically controversial. …

(a) faculty member…shall not be subjected to censorship or

discipline by the University … on grounds that the faculty member

has expressed opinions or views which are controversial, unpopular

or contrary to the attitudes of the University…or the community.”

None

of this applies to professors who dissent from socialist, statist,

or culturally left-wing view, however, as I would find out.

In

March of 2004, during a 75-minute lecture in my Money and Banking

class on time preference, interest, and capital, I presented numerous

examples designed to illustrate the concept of time preference (or

in the terminology of the sociologist Edward Banfield of “present-

and future-orientation”). As one brief example, I referred to homosexuals

as a group which, because they typically do not have children, tend

to have a higher degree of time preference and are more present-oriented.

I also noted – as have many other scholars – that J.M

Keynes, whose economic theories were the subject of some upcoming

lectures, had been a homosexual and that this might be useful to

know when considering his short-run economic policy recommendation

and his famous dictum “in the long run we are all dead.”

During

my lecture no question was raised. (You

can hear the same lecture, given some time later, on the Mises

Media server.) However, two days later an informal complaint was

filed by a student with the university’s affirmative action

“commissar.” The student claimed that he as a homosexual had

been made to “feel bad” by my lecture. Based on this “evidence”

the commissar, who, as I would find out only weeks later, was a

former clergyman turned “certified” gay activist, called me at home

to inform me that he would shut down my class if I continued making

such remarks.

I

agreed to meet the commissar in my office thinking that this would

bring matters to a quick end. The student would be informed about

the nature of a university and academic freedom, including his right

to ask and challenge his professor. Instead, the commissar lectured

me on what and how I was to teach my classes. I explained to him

the difference between a professor and a bureaucrat and that he

was overstepping his bounds, but to no avail. However, because the

student had falsely claimed that my remarks had been about “all”

homosexuals, I agreed to explain the difference between “all” and

“average” statements during my next class.

In

my next lecture I explained that when I say that Italians eat more

Spaghetti than Germans for instance this does not mean that every

Italian eats more Spaghetti than every German. It means that on

the average Italians eat more Spaghetti than Germans.

Upon

this the student filed a “formal” complaint. I had not taken his

feelings seriously. He felt “hurt again;” and as he had learned

from the commissar, feeling bad twice constituted a “hostile learning

environment” (an offense that is not defined in the university by-laws).

From then on the commissar made the student’s case his own.

Every pretence of acting as a neutral mediator was abandoned, and

he became a prosecutor.

In

April I was ordered to appear before an administrative committee

assembled by the commissar and to prove my statement. This was in

clear violation of university rules: not only is there no provision

for any “truth squad,” but as bureaucrats the committee members

were entirely unqualified for such a task.

However,

I naïvely provided the requested evidence. My request to have the

meeting taped was denied. During the hearing, which was conducted

in a style reminiscent of the interrogations of politically suspect

academics in communist countries or Nazi Germany, essentially only

the commissar spoke.

My

repeated request to hear witnesses was denied. One student, recommended

by the complainant, was later secretly interviewed, but because

her testimony contradicted what the commissar wanted to hear, it

was suppressed. Furthermore, in his indictment, which I would not

see until November, the commissar referred to a previous unrelated

student complaint, but he suppressed the information that this complaint

had been dismissed as without merit and actually resulted in an

embarrassment for the university administration.

The

provided evidence was brushed aside, because some of it had also

allegedly appeared on anti-gay sites which I had never visited.

Indeed, whatever I or anyone else said was irrelevant because the

commissar had already found “proof” of my hostility in my writing.

In

my book Democracy,

The God That Failed I not only defend the right to discrimination

as implied in the right to private property, but I also emphasize

the necessity of discrimination in maintaining a free society and

explain its importance as a civilizing factor. In particular, the

book also contains a few sentences about the importance, under

clearly stated circumstances, of discriminating against communists,

democrats, and habitual advocates of alternative, non-family centered

lifestyles, including homosexuals.

For

instance, on p. 218, I wrote “in a covenant concluded among proprietors

and community tenants for the purpose of protecting their private

property, … no one is permitted to advocate ideas contrary

to the very purpose of the covenant … such as democracy and communism.”

“Likewise, in a covenant founded for the purpose of protecting family

and kin, there can be no tolerance toward those habitually promoting

lifestyles incompatible with this goal. … (violators) will

have to be physically removed from society.”

In

its proper context these statements are hardly more offensive than

saying that the Catholic Church should excommunicate those violating

its fundamental precepts or that a nudist colony should expel those

insisting on wearing bathing suits. However, if you take the statements

out of context and omit the condition: in a covenant…

then they appear to advocate a rights violation..

My

praise of discrimination was part of a frontal attack against what

is sometimes called left-libertarianism – against the politics that

equates liberty with libertinism, multiculturalism, and so-called

civil rights as opposed to existence and enforcement of private-property

rights. In retaliation, to discredit me as a “fascist,” a “racist,”

a “bigot,” etc., the left-libertarian smear-bund has routinely distorted

my views by quoting the above passages out of context.

The

commissar discovered these “quotes” – and voila! I was found guilty

as charged. (Characteristically, upon challenge the commissar proved

unable – also during a second hearing six months later – to cite on

which page the alleged quotes appeared.)

An

indictment, recommending a letter of reprimand and forfeiture of

a week’s pay, was forwarded to my dean, who neither accepted

nor rejected it but sent it to the provost. After waiting for more

than 5 months, the provost acted likewise.

In

November, he instructed the university code officer, who had been

a member of the first inquisition committee, to send me the indictment,

form another committee and order me to show up for a second trial.

The committee was composed of the dean of natural sciences, the

associate dean of the hotel college, a biology professor and the

president of the student government. The code officer served as

secretary and the commissar as prosecutor. I was accompanied by

a lawyer, in response to which the university also sent a lawyer.

No committee member had any knowledge of economics.

My

lawyer’s request to have the meeting taped or have a court

reporter present was denied. After the student explained about his

hurt feelings, my lawyer asked where in the code a “hostile learning

environment” was defined. Neither the code officer nor the university

lawyer could answer the question because no such definition exists.

I

read the above quoted passages regarding academic freedom and argued

that my contractually granted rights had been infringed upon. I

had spoken about my subject and beyond that I was not obliged to

“prove” anything. In fact, my statement was hardly “controversial”

but utterly reasonable in light of my adduced evidence. I again

requested students be interviewed concerning my alleged “hostility,”

but again the request was ignored. I offered several student letters

written on my behalf, but they were not admitted as evidence.

The

committee members asked few if any questions; only the dean contributed

some precious gems of political correctness. The most time was taken

up by the commissar. In the meantime he had gathered information

about me and my prominence and come to the conclusion that if he

could silence me he could silence anyone. He set out on a tirade

against me that in the judgment of my lawyer would have gotten him

thrown out of any regular courtroom. After ranting for almost half

an hour even the university lawyer had enough and told him to “Shut

up,” and when he continued, the lawyer admonished the committee

chair to cut him off.

Two

months later, at the end of January 2005 the code officer called

my lawyer to inform him that the “peer” committee had affirmed the

first committee’s “hostile environment” finding and would

recommend to the provost a letter of reprimand and forfeiture of

my next merit increase. There might be a little room for negotiation,

but if I didn’t accept the offer even more serious punishment

up to termination might be in the offing. My lawyer’s request

to see the report was denied.

I

rejected the offer and having until then been placed under a gag

order, finally started a counteroffensive. I was put in contact

with the ACLU Nevada, and though our political views are poles apart,

the ACLU to its eternal credit was principled enough to take on

my “rightist” professor’s case. In addition, a prominent local

attorney volunteered his services, and within a few days the Mises

Institute’s public relations machinery began its work on my

behalf.

First,

the ACLU sent a “letter of demand,” requesting an immediate end

to the charade or the university would be taken to court, then local

news stories about the case appeared, and protest letters and angry

calls began to pour in to the university.

As

a first result, on February 9th the provost sent me a

“non-disciplinary letter of instruction” – a far cry from a reprimand

and monetary punishment. But if this letter had been sent to calm

the waters, the opposite occurred. The “instructions” stood in patent

contradiction to the bylaws on academic freedom, as even a dimwit

could recognize. Whatever academic reputation the provost might

have had before, the letter made him look like an invidious fool.

A

local affair escalated into a national and even international one,

and a wave of protests turned into a flood. The university had a

public relations disaster on its hands. Only ten days later – almost

exactly one year after the affair had started – the university president,

at the order of the chancellor of the entire university system,

officially withdrew all charges against me.

This was a moment of great personal triumph, yet some things remain

undone: the university has not apologized to me, no form of restitution

has been offered for a lost year of my work, and no one has been

held accountable at UNLV. To accomplish this, a trial would be necessary.

While my lawyers agree that I would prevail in court, another year

or two of my life would be lost. This cost is too high. The outpouring

of world-wide support on my behalf and the many uplifting and heartwarming

letters are my satisfaction.

I

have long regarded the political correctness movement as a threat

to all independent thought, and I am deeply concerned about the

level of self-censorship in academia. To counteract this tendency,

I have left no political taboo untouched in my teaching. I believed

that America was still free enough for this to be possible, and

I assumed that my relative prominence offered me some extra protection.

When

I became a victim of the thought police, I was genuinely surprised,

and now I am afraid that my case has had a chilling effect on less

established academics. Still, it is my hope that my fight and ultimate

victory, even if they can not make a timid man brave, do encourage

those with a fighting spirit to take up the cudgels.

If

I made one mistake, it was that I was too cooperative and waited

too long to go on the offensive.

April

12, 2005

Hans-Hermann

Hoppe [send him mail],

whom Lew Rockwell calls “an international treasure,” is distinguished

fellow at the Ludwig von Mises Institute and professor of economics

at the University of Nevada, Las Vegas.

Democracy:

The God That Failed

is his eighth book. Visit his website.

Hans-Hermann

Hoppe Archives

by Hans-Hermann Hoppe

From and to the Chronicle of Higher Education for a published article:

Dear Professor Hoppe, here are some of the questions I’d like to pursue.

1) What do you think of the standard defined by the Provost — that you must “cease mischaracterizing opinion as objective fact in the educational environment”?

I am tempted to reply to the Provost’s suggestion with a simple quip: Is the alleged categorical distinction between fact and opinion itself a fact or an opinion? I’m certain the Provost would be somewhat helpless in answering this question. To this day, there exist vigorous philosophical debates regarding the issue. Things are not as simple as they appear to a bureaucrat’s mind.

In any case, most so-called facts in the social sciences are more or less corroborated hypotheses — and so are most opinions (insofar as they concern empirical rather than normative matters). I did not mischaracterize anything in my lecture. This is mere play with words in a desperate attempt on the part of the university to avoid any admission of guilt. They have already backpedaled quite a bit. But they do not dare say that they trampled on my right to free speech and academic freedom. I have received hundreds of letters from all over the world: no one sees this any differently — except UNLV’s leadership.

2) But, just for the record: Is there solid empirical literature re: homosexuals and time preferences, or should the public instead regard your comments as reasonable speculation?

In class (as you can also gather from the audio I sent you), the statement was presented as an intuitively plausible hypothesis (if you typically do not have offspring, you typically provide for shorter time periods).

Though I did not speak in class in detail about the subject because it was not the subject of my lecture, there exist of course abundant "indicators" (some of which are no doubt disputable — after all, most propositions of the social sciences are hypotheses) such as lower life expectancy, riskier behavior (as documented by higher incidence of AIDS, etc.), and instability of relationships.

3) Did Mr. Knight give you any warning that he was going to file a formal complaint about your comments?

He never spoke to me (and I didn’t know who he was until several weeks after the alleged incident). He never warned me about an informal or a formal complaint. He also never asked me to clarify my statement during the lecture.

4) Who sat on the grievance committee that considered Mr. Knight’s complaint?

The first grievance committee was made up of (3) administrators/bureaucrats: the affirmative action officer, the university code officer, and the student judicial code officer.

The second "peer" review committee was made up of the dean of the college of natural sciences, a biology professor, the vice-dean of the hotel college and the president of the student government (a hotel school student). To the best of my knowledge no member of the “peer” committee had any qualifications in the area of economic theory.

Please note that only one of the seven committee members was a member of the teaching faculty.

5) What actions do you believe the university should take at this point? Do you anticipate taking formal legal action against the university?

The university should apologize. They must uphold academic freedom which permits and even obliges faculty to discuss controversial matters at variance with "common wisdom" (and certainly doesn’t require we speak only about matters that have passed the test of peer-reviewed wisdom, as the letter from the Provost absurdly claims); otherwise, we would never be allowed to express "original" thought or even speak about on-going research. There exist thousands of ideas that are peer-reviewed but stand in contradiction to and are incompatible with each other. Does the Provost realize that science existed even before the printing press and peer-reviewed publications?

The university has acted in violation of my first amendment rights, due process, and its own bylaws. It has severely damaged my reputation as well as my health, and it owes me reasonable compensation for this. The ACLU Nevada, as my legal representative, is prepared to see this through in federal court.

6) The Provost’s letter says that “you were previously informed in writing regarding similar incidents by your Dean.” Could you describe those earlier conflicts?

There has been one previous incident. It concerned an entirely different subject than the present one. The present investigating committees were only provided with the initial complaint, but were NOT informed that after an informal meeting with the then affirmative action officer, that complaint was completely dismissed. In fact, during the meeting, the affirmative action officer at one point suggested, before a witness, that I was a Nazi, upon which I ended the conversation and wrote a letter of complaint to the university president (currently one and the same), who did not even acknowledge receipt of my hand-delivered letter. The university would be embarrassed if this whole matter were fully revealed. In telling a half-truth, however, UNLV has tried to smear me.

7) In a better world, how would a university manage conflicts like this one? If you were the president of a new university in an environment with no external government constraints, what would you tell students to do if they found a professor’s arguments unpersuasive and/or obnoxious?

I would inform students that they have the right and duty to ask and challenge their professors. I would inform students about the nature of a university, the principle of and reasons for the institution of academic freedom, and the meaning of the word professor. Further, I would tell them that if they don’t like what they hear they can always look for another professor more to their liking.

In any case, I would inform them that what is "politically correct" cannot be the standard of truth at a serious university.

Hans-Hermann Hoppe [send him mail], whom Lew Rockwell calls “an international treasure,” is distinguished fellow at the Ludwig von Mises Institute and professor of economics at the University of Nevada, Las Vegas. Democracy: The God That Failed is his eighth book. Visit his website.

by Hans-Hermann Hoppe

One of the most widely accepted propositions among political economists is the following: Every monopoly is bad from the viewpoint of consumers. Monopoly is understood in its classical sense to be an exclusive privilege granted to a single producer of a commodity or service, i.e., as the absence of free entry into a particular line of production. In other words, only one agency, A, may produce a given good, x. Any such monopolist is bad for consumers because, shielded from potential new entrants into his area of production, the price of the monopolist’s product x will be higher and the quality of x lower than otherwise.

This elementary truth has frequently been invoked as an argument in favor of democratic government as opposed to classical, monarchical or princely government. This is because under democracy entry into the governmental apparatus is free — anyone can become prime minister or president — whereas under monarchy it is restricted to the king and his heir.

However, this argument in favor of democracy is fatally flawed. Free entry is not always good. Free entry and competition in the production of goods is good, but free competition in the production of bads is not. Free entry into the business of torturing and killing innocents, or free competition in counterfeiting or swindling, for instance, is not good; it is worse than bad. So what sort of "business" is government? Answer: it is not a customary producer of goods sold to voluntary consumers. Rather, it is a "business" engaged in theft and expropriation — by means of taxes and counterfeiting — and the fencing of stolen goods. Hence, free entry into government does not improve something good. Indeed, it makes matters worse than bad, i.e., it improves evil.

Since man is as man is, in every society people who covet others’ property exist. Some people are more afflicted by this sentiment than others, but individuals usually learn not to act on such feelings or even feel ashamed for entertaining them. Generally only a few individuals are unable to successfully suppress their desire for others’ property, and they are treated as criminals by their fellow men and repressed by the threat of physical punishment. Under princely government, only one single person — the prince — can legally act on the desire for another man’s property, and it is this which makes him a potential danger and a "bad."

However, a prince is restricted in his redistributive desires because all members of society have learned to regard the taking and redistributing of another man’s property as shameful and immoral. Accordingly, they watch a prince’s every action with utmost suspicion. In distinct contrast, by opening entry into government, anyone is permitted to freely express his desire for others’ property. What formerly was regarded as immoral and accordingly was suppressed is now considered a legitimate sentiment. Everyone may openly covet everyone else’s property in the name of democracy; and everyone may act on this desire for another’s property, provided that he finds entrance into government. Hence, under democracy everyone becomes a threat.

Consequently, under democratic conditions the popular though immoral and anti-social desire for another man’s property is systematically strengthened. Every demand is legitimate if it is proclaimed publicly under the special protection of "freedom of speech." Everything can be said and claimed, and everything is up for grabs. Not even the seemingly most secure private property right is exempt from redistributive demands. Worse, subject to mass elections, those members of society with little or no inhibitions against taking another man’s property, that is, habitual a-moralists who are most talented in assembling majorities from a multitude of morally uninhibited and mutually incompatible popular demands (efficient demagogues) will tend to gain entrance in and rise to the top of government. Hence, a bad situation becomes even worse.

Historically, the selection of a prince was through the accident of his noble birth, and his only personal qualification was typically his upbringing as a future prince and preserver of the dynasty, its status, and its possessions. This did not assure that a prince would not be bad and dangerous, of course. However, it is worth remembering that any prince who failed in his primary duty of preserving the dynasty — who ruined the country, caused civil unrest, turmoil and strife, or otherwise endangered the position of the dynasty — faced the immediate risk either of being neutralized or assassinated by another member of his own family. In any case, however, even if the accident of birth and his upbringing did not preclude that a prince might be bad and dangerous, at the same time the accident of a noble birth and a princely education also did not preclude that he might be a harmless dilettante or even a good and moral person.

In contrast, the selection of government rulers by means of popular elections makes it nearly impossible that a good or harmless person could ever rise to the top. Prime ministers and presidents are selected for their proven efficiency as morally uninhibited demagogues. Thus, democracy virtually assures that only bad and dangerous men will ever rise to the top of government. Indeed, as a result of free political competition and selection, those who rise will become increasingly bad and dangerous individuals, yet as temporary and interchangeable caretakers they will only rarely be assassinated.

One can do no better than quote H.L. Mencken in this connection. "Politicians," he notes with his characteristic wit, "seldom if ever get [into public office] by merit alone, at least in democratic states. Sometimes, to be sure, it happens, but only by a kind of miracle. They are chosen normally for quite different reasons, the chief of which is simply their power to impress and enchant the intellectually underprivileged….Will any of them venture to tell the plain truth, the whole truth and nothing but the truth about the situation of the country, foreign or domestic? Will any of them refrain from promises that he knows he can’t fulfill — that no human being could fulfill? Will any of them utter a word, however obvious, that will alarm or alienate any of the huge pack of morons who cluster at the public trough, wallowing in the pap that grows thinner and thinner, hoping against hope? Answer: may be for a few weeks at the start…. But not after the issue is fairly joined, and the struggle is on in earnest…. They will all promise every man, woman and child in the country whatever he, she or it wants. They’ll all be roving the land looking for chances to make the rich poor, to remedy the irremediable, to succor the unsuccorable, to unscramble the unscrambleable, to dephlogisticate the undephlogisticable. They will all be curing warts by saying words over them, and paying off the national debt with money no one will have to earn. When one of them demonstrates that twice two is five, another will prove that it is six, six and a half, ten, twenty, n. In brief, they will divest themselves from their character as sensible, candid and truthful men, and simply become candidates for office, bent only on collaring votes. They will all know by then, even supposing that some of them don’t know it now, that votes are collared under democracy, not by talking sense but by talking nonsense, and they will apply themselves to the job with a hearty yo-heave-ho. Most of them, before the uproar is over, will actually convince themselves. The winner will be whoever promises the most with the least probability of delivering anything."

Hans-Hermann Hoppe [send him mail], whom Lew Rockwell calls “an international treasure,” is senior fellow at the Ludwig von Mises Institute, professor of economics at the University of Nevada, Las Vegas, and editor of The Journal of Libertarian Studies. Democracy: The God That Failed is his eighth book. Visit his website.

Alone on his island, Robinson Crusoe can do whatever he pleases. For him, the question concerning rules of orderly human conduct — social cooperation — simply does not arise. Naturally, this question can only arise once a second person, Friday, arrives on the island. Yet even then, the question remains largely irrelevant so long as no scarcity exists. Suppose the island is the Garden of Eden; all external goods are available in superabundance. They are u201Cfree goods,u201D just as the air that we breathe is normally a u201Cfreeu201D good. Whatever Crusoe does with these goods, his actions have repercussions neither with respect to his own future supply of such goods nor regarding the present or future supply of the same goods for Friday (and vice versa). Hence, it is impossible that there could ever be a conflict between Crusoe and Friday concerning the use of such goods. A conflict is only possible if goods are scarce. Only then will there arise the need to formulate rules that make orderly — conflict-free — social cooperation possible.

In the Garden of Eden only two scarce goods exist: the physical body of a person and its standing room. Crusoe and Friday each have only one body and can stand only at one place at a time. Hence, even in the Garden of Eden conflicts between Crusoe and Friday can arise: Crusoe and Friday cannot occupy the same standing room simultaneously without coming thereby into physical conflict with each other. Accordingly, even in the Garden of Eden rules of orderly social conduct must exist — rules regarding the proper location and movement of human bodies. And outside the Garden of Eden, in the realm of scarcity, there must be rules that regulate not only the use of personal bodies but also of everything scarce so that all possible conflicts can be ruled out. This is the problem of social order.

II The Solution: Private Property and Original Appropriation

In the history of social and political thought, various proposals have been advanced as a solution to the problem of social order, and this variety of mutually inconsistent proposals has contributed to the fact that today’s search for a single u201Ccorrectu201D solution is frequently deemed illusory. Yet as I will try to demonstrate, a correct solution exists; hence, there is no reason to succumb to moral relativism. The solution has been known for hundreds of years, if not for much longer.
[1]
In modern times this old and simple solution was formulated most clearly and convincingly by Murray N. Rothbard.
[2]

Let me begin by formulating the solution — first for the special case represented by the Garden of Eden and subsequently for the general case represented by the u201Crealu201D world of all-around scarcity — and then proceed to the explanation of why this solution, and no other, is correct.

In the Garden of Eden, the solution is provided by the simple rule stipulating that everyone may place or move his own body wherever he pleases, provided only that no one else is already standing there and occupying the same space. And outside of the Garden of Eden, in the realm of all-around scarcity the solution is provided by this rule: Everyone is the proper owner of his own physical body as well as of all places and nature-given goods that he occupies and puts to use by means of his body, provided that no one else has already occupied or used the same places and goods before him. This ownership of u201Coriginally appropriatedu201D places and goods by a person implies his right to use and transform these places and goods in any way he sees fit, provided that he does not thereby forcibly change the physical integrity of places and goods originally appropriated by another person. In particular, once a place or good has been first appropriated, in John Locke’s words, by u201Cmixing one’s laboru201D with it, ownership in such places and goods can be acquired only by means of a voluntary — contractual — transfer of its property title from a previous to a later owner.

In light of widespread moral relativism, it is worth pointing out that this idea of original appropriation and private property as a solution to the problem of social order is in complete accordance with our moral u201Cintuition.u201D Is it not simply absurd to claim that a person should not be the proper owner of his body and the places and goods that he originally, i.e., prior to anyone else, appropriates, uses and/or produces by means of his body? For who else, if not he, should be their owner? And is it not also obvious that the overwhelming majority of people — including children and primitives — in fact act according to these rules, and do so as a matter of course?

Moral intuition, as important as it is, is not proof. However, there also exists proof of the veracity of our moral intuition.

The proof is twofold. On the one hand, the consequences that follow if one were to deny the validity of the institution of original appropriation and private property are spelled out: If person A were not the owner of his own body and the places and goods originally appropriated and/or produced with this body as well as of the goods voluntarily (contractually) acquired from another previous owner, then only two alternatives would exist. Either another person, B, must be recognized as the owner of A’s body as well as the places and goods appropriated, produced or acquired by A, or both persons, A and B, must be considered equal co-owners of all bodies, places and goods.

In the first case, A would be reduced to the rank of B’s slave and object of exploitation. B would be the owner of A’s body and all places and goods appropriated, produced and acquired by A, but A in turn would not be the owner of B’s body and the places and goods appropriated, produced and acquired by B. Hence, under this ruling two categorically distinct classes of persons would be constituted — Untermenschen such as A and bermenschen such as B — to whom different u201Clawsu201D apply. Accordingly, such ruling must be discarded as a human ethic equally applicable to everyone qua human being (rational animal). From the very outset, any such ruling is recognized as not universally acceptable and thus cannot claim to represent law. For a rule to aspire to the rank of a law — a just rule — it is necessary that such a rule apply equally and universally to everyone.

Alternatively, in the second case of universal and equal co-ownership, the requirement of equal law for everyone would be fulfilled. However, this alternative would suffer from an even more severe deficiency, because if it were applied, all of mankind would instantly perish. (Since every human ethic must permit the survival of mankind, this alternative must also be rejected.) Every action of a person requires the use of some scarce means (at least of the person’s body and its standing room), but if all goods were co-owned by everyone, then no one, at no time and no place, would be allowed to do anything unless he had previously secured every other co-owner’s consent to do so. Yet how could anyone grant such consent were he not the exclusive owner of his own body (including his vocal chords) by which means his consent must be expressed? Indeed, he would first need another’s consent in order to be allowed to express his own, but these others could not give their consent without having first his, and so it would go on.

This insight into the praxeological impossibility of u201Cuniversal communism,u201D as Rothbard referred to this proposal, brings me immediately to an alternative way of demonstrating the idea of original appropriation and private property as the only correct solution to the problem of social order.
[3]
Whether or not persons have any rights and, if so, which ones, can only be decided in the course of argumentation (propositional exchange). Justification — proof, conjecture, refutation — is argumentative justification. Anyone who denied this proposition would become involved in a performative contradiction because his denial would itself constitute an argument. Even an ethical relativist would have to accept this first proposition, which is referred to accordingly as the apriori of argumentation.

From the undeniable acceptance — the axiomatic status — of this apriori of argumentation, two equally necessary conclusions follow. First, it follows from the apriori of argumentation when there is no rational solution to the problem of conflict arising from the existence of scarcity. Suppose in my earlier scenario of Crusoe and Friday that Friday were not the name of a man but of a gorilla. Obviously, just as Crusoe could face conflict regarding his body and its standing room with Friday the man, so might he with Friday the gorilla. The gorilla might want to occupy the same space that Crusoe already occupied. In this case, at least if the gorilla were the sort of entity that we know gorillas to be, there would be no rational solution to their conflict. Either the gorilla would push aside, crush, or devour Crusoe — that would be the gorilla’s solution to the problem — or Crusoe would tame, chase, beat, or kill the gorilla — that would be Crusoe’s solution. In this situation, one might indeed speak of moral relativism. However, it would be more appropriate to refer to this situation as one in which the question of justice and rationality simply would not arise; that is, it would be considered an extra-moral situation. The existence of Friday the gorilla would pose a technical, not a moral, problem for Crusoe. He would have no other choice than to learn how to successfully manage and control the movements of the gorilla just as he would have to learn to manage and control other inanimate objects of his environment.

By implication, only if both parties in a conflict are capable of engaging in argumentation with one another, can one speak of a moral problem and is the question of whether or not there exists a solution to it a meaningful question. Only if Friday, regardless of his physical appearance, is capable of argumentation (even if he has shown himself to be capable only once), can he be deemed rational and does the question whether or not a correct solution to the problem of social order exists make sense. No one can be expected to give any answer to someone who has never raised a question or, more to the point, who has never stated his own relativistic viewpoint in the form of an argument. In that case, this u201Cotheru201D cannot but be regarded and treated as an animal or plant, i.e., as an extra-moral entity. Only if this other entity can pause in his activity, whatever it might be, step back, and say u201Cyesu201D or u201Cnou201D to something one has said, do we owe this entity an answer and, accordingly, can we possibly claim that our answer is the correct one for both parties involved in a conflict.

Moreover, it follows from the apriori of argumentation that everything that must be presupposed in the course of an argumentation as the logical and praxeological precondition of argumentation cannot in turn be argumentatively disputed as regards its validity without becoming thereby entangled in an internal (performative) contradiction.

Now, propositional exchanges are not made up of free-floating propositions, but rather constitute a specific human activity. Argumentation between Crusoe and Friday requires that both have, and mutually recognize each other as having, exclusive control over their respective bodies (their brain, vocal chords, etc.) as well as the standing room occupied by their bodies. No one could propose anything and expect the other party to convince himself of the validity of this proposition or deny it and propose something else unless his and his opponent’s right to exclusive control over their respective bodies and standing rooms were presupposed. In fact, it is precisely this mutual recognition of the proponent’s as well as the opponent’s property in his own body and standing room which constitutes the characteristicum specificum of all propositional disputes: that while one may not agree regarding the validity of a specific proposition, one can agree nonetheless on the fact that one disagrees. Moreover, this right to property in one’s own body and its standing room must be considered apriori (or indisputably) justified by proponent and opponent alike. Anyone who claimed any proposition as valid vis–vis an opponent would already presuppose his and his opponent’s exclusive control over their respective body and standing room simply in order to say u201CI claim such and such to be true, and I challenge you to prove me wrong.u201D

Furthermore, it would be equally impossible to engage in argumentation and rely on the propositional force of one’s arguments if one were not allowed to own (exclusively control) other scarce means (besides one’s body and its standing room). If one did not have such a right, then we would all immediately perish and the problem of justifying rules — as well as any other human problem — would simply not exist Hence, by virtue of the fact of being alive property rights to other things must be presupposed as valid, too. No one who is alive can possibly argue otherwise.

Furthermore, if a person were not permitted to acquire property in these goods and spaces by means of an act of original appropriation, i.e., by establishing an objective (intersubjectively ascertainable) link between himself and a particular good and/or space prior to anyone else, and if instead property in such goods or spaces were granted to late-comers, then no one would ever be permitted to begin using any good unless he had previously secured such a late-comer’s consent. Yet how can a latecomer consent to the actions of an early-comer? Moreover, every latecomer would in turn need the consent of other and later later-comers, and so on That is, neither we, our forefathers, nor our progeny would have been or would be able to survive if one followed this rule. However, in order for any person — past, present or future — to argue anything, survival must be possible; and in order to do just this property rights cannot be conceived of as being timeless and unspecific with respect to the number of persons concerned. Rather, property rights must necessarily be conceived of as originating by means of action at definite points in time and space by definite individuals. Otherwise, it would be impossible for anyone to ever say anything at a definite point in time and space and for someone else to be able to reply. Simply saying, then, that the first-user-first-owner rule of the ethics of private property can be ignored or is unjustified implies a performative contradiction, as one’s being able to say so must presuppose one’s existence as an independent decision-making unit at a given point in time and space.
[4]

III Misconceptions and Clarifications

According to this understanding of private property, property ownership means the exclusive control of a particular person over specific physical objects and spaces. Conversely, property rights invasion means the uninvited physical damage or diminution of things and territories owned by other persons. In contrast, a widely held view holds that the damage or diminution of the value (or price) of someone’s property also constitutes a punishable offense.

As far as the (in)compatibility of both positions is concerned, it is easy to recognize that nearly every action of an individual can alter the value (price) of someone else’s property. For example, when person A enters the labor or the marriage market, this may change the value of B in these markets. And when A changes his relative valuations of beer and bread, or if A himself decides to become a brewer or baker, this changes the value of the property of other brewers and bakers. According to the view that value damage constitutes a rights violation, A would be committing a punishable offense vis–vis brewers or bakers. If A is guilty, then B and the brewers and bakers must have the right to defend themselves against A’s actions, and their defensive actions can only consist of physical invasions of A and his property. B must be permitted to physically prohibit A from entering the labor or marriage market; the brewers and bakers must be permitted to physically prevent A from spending his money as he sees fit. However, in this case the physical damage or diminution of the property of others cannot be viewed as a punishable offense. Since physical invasion and diminution are defensive actions, they are legitimate. Conversely, if physical damage and diminution constitute a rights violation, then B or the brewers and bakers do not have the right to defend themselves against A’s actions, for his actions — his entering of the labor and marriage market, his altered evaluation of beer and bread, or his opening of a brewery or bakery — do not affect B’s bodily integrity or the physical integrity of the property of brewers or bakers. If they physically defend themselves nonetheless, then the right to defense would lie with A. In that case, however, it can not be regarded as a punishable offense if one alters the value of other people’s property. A third possibility does not exist.

Both ideas of property rights are not only incompatible, however. The alternative view — that one could be the owner of the value or price of scarce goods — is indefensible. While a person has control over whether or not his actions will change the physical properties of another’s property, he has no control over whether or not his actions affect the value (or price) of another’s property. This is determined by other individuals and their evaluations. Consequently, it would be impossible to know in advance whether or not one’s planned actions were legitimate. The entire population would have to be interrogated to assure that one’s actions would not damage the value of someone else’s property, and one could not begin to act until a universal consensus had been reached. Mankind would die out long before this assumption could ever be fulfilled.

Moreover, the assertion that one has a property right in the value of things involves a contradiction, for in order to claim this proposition to be valid — universally agreeable — it would have to be assumed that it is permissible to act before agreement is reached. Otherwise, it would be impossible to ever propose anything However, if one is permitted to assert a proposition — and no one could deny this without running into contradictions — then this is only possible because physical property borders exist, i.e., borders which everyone can recognize and ascertain independently and in complete ignorance of others’ subjective valuations.
[5]

Another, equally common misunderstanding of the idea of private property concerns the classification of actions as permissible or impermissible based exclusively on their physical effects, i.e., without taking into account that every property right has a history (temporal genesis).

If A currently physically damages the property of B (for example by air pollution or noise), the situation must be judged differently depending on whose property right was established earlier. If A’s property was founded first, and if he had performed the questionable activities before the neighboring property of B was founded, then A may continue with his activities. A has established an easement. From the outset, B had acquired dirty or loud property, and if B wants to have his property clean and quiet he must pay A for this advantage. Conversely, if B’s property was founded first, then A must stop his activities; and if he does not want to do this, he must pay B for this advantage. Any other ruling is impossible and indefensible because as long as a person is alive and awake, he cannot not act. An early-comer cannot, even if he wished otherwise, wait for a late-comer and his agreement before he begins acting. He must be permitted to act immediately. And if no other property besides one’s own exists (because a latecomer has not yet arrived), then one’s range of action can be deemed limited only by laws of nature. A latecomer can only challenge the legitimacy of an early-comer if he is the owner of the goods affected by the early-comer’s actions. However, this implies that one can be the owner of un-appropriated things; i.e., that one can be the owner of things one has not yet discovered or appropriated through physical action. This means that no one is permitted to become the first user of a previously undiscovered and unappropriated physical entity.

IV. The Economics of Private Property

The idea of private property not only agrees with our moral intuitions and is the sole just solution to the problem of social order; the institution of private property is also the basis of economic prosperity and of "social welfare." As long as people act in accordance with the rules underlying the institution of private property, social welfare is optimized.

Every act of original appropriation improves the welfare of the appropriator (at least ex ante); otherwise, it would not be performed. At the same time, no one is made worse off by this act. Any other individual could have appropriated the same goods and territories if only he had recognized them as scarce, and hence, valuable. However, since no other individual made such an appropriation, no one else can have suffered a welfare loss on account of the original appropriation. Hence, the so-called Pareto-criterion (that it is scientifically legitimate to speak of an improvement of "social welfare" only if a particular change increases the individual welfare of at least one person and leaves no one else worse off) is fulfilled. An act of original appropriation meets this requirement. It enhances the welfare of one person, the appropriator, without diminishing anyone else’s physical wealth (property). Everyone else has the same quantity of property as before and the appropriator has gained new, previously nonexistent property. In so far, an act of original appropriation always increases social welfare.

Any further action with originally appropriated goods and territories enhances social welfare, for no matter what a person does with his property, it is done to increase his welfare. This is the case when he consumes his property as well as when he produces new property out of "nature." Every act of production is motivated by the producer’s desire to transform a less valuable entity into a more valuable one. As long as acts of consumption and production do not lead to the physical damage or diminution of property owned by others, they are regarded as enhancing social welfare.

Finally, every voluntary exchange (transfer) of appropriated or produced property from one owner to another increases social welfare. An exchange of property is only possible if both owners prefer what they acquire over what they surrender and thus expect to benefit from the exchange. Two persons gain in welfare from every exchange of property, and the property under the control of everyone else is unchanged.

In distinct contrast, any deviation from the institution of private property must lead to social welfare losses.

In the case of universal and equal co-ownership — universal communism instead of private property — the price to be paid would be mankind’s instant death because universal CO-ownership would mean that no one would be allowed to do anything or move anywhere Each actual deviation from a private property order would represent a system of unequal domination and hegemony. That is, it would be an order in which one person or group — the rulers, exploiters or bermenschen — would be permitted to acquire property other than by original appropriation, production or exchange, while another person or group — the ruled, exploited or Untermenschen — would be prohibited from doing likewise. While hegemony is possible, it would involve social welfare losses and would lead to relative impoverishment.

If A is permitted to acquire a good or territory which B has appropriated as indicated by visible signs, the welfare of A is increased at the expense of a corresponding welfare loss on the part of B. The Pareto criterion is not fulfilled, and social welfare is sub-optimal. The same is true with other forms of hegemonic rule. If A prohibits B from originally appropriating a hitherto unowned piece of nature; if A may acquire goods produced by B without B’s consent; if A may proscribe what B is permitted to do with his appropriated or produced goods (apart from the requirement that one is not permitted to physically damage or diminish others’ property) — in each case there is a "winner," A, and a "loser," B. In every case, A increases his supply of property at the expense of B’s corresponding loss of property In no case is the Pareto criterion fulfilled, and a sub-optimal level of social welfare always results.

Moreover, hegemony and exploitation lead to a reduced level of future production. Every ruling which grants non-appropriators, non-producers and non-traders control, either partial or full, over appropriated, produced or traded goods, leads necessarily to a reduction of future acts of original appropriation, production and mutually beneficial trade. For the person performing them, each of these activities is associated with certain costs, and the costs of performing them increases under a hegemonic system and those of not performing them decreases. Present consumption and leisure become more attractive as compared to production (future consumption), and the level of production will fall below what it otherwise would have been. As for the rulers, the fact that they can increase their wealth by expropriating property appropriated, produced or contractually acquired by others will lead to a wasteful usage of the property at its disposal. Because they are permitted to supplement their future wealth by means of expropriation (taxes), present-orientation and consumption (high time preference) is encouraged, and insofar as they use their goods "productively" at all, the likelihood of misallocations, miscalculation, and economic loss is systematically increased.

V. The Classic Pedigree

As noted at the outset, the ethics and economics of private property presented above does not claim originality. Rather, it is a modern expression of a "classic" tradition, going back to beginnings in Aristotle, Roman law, Aquinas, the late Spanish Scholastics, Grotius and Locke.
[6]

In contrast to the communist utopia of Plato’s Republic, Aristotle provides a comprehensive list of the comparative advantages of private property in Politics. First, private property is more productive. "What is common to the greatest number gets the least amount of care. Men pay most attention to what is their own; they care less for what is common; or at any rate they care for it only to the extent to which each is individually concerned. Even when there is no other cause for inattention, men are more prone to neglect their duty when they think that another is attending to it."
[7]

Secondly, private property prevents conflict and promotes peace. When people have their own separate domains of interest, "there will not be the same grounds for quarrels, and the amount of interest will increase, because each man will feel that he is applying himself to what is his."
[8]
"Indeed, it is a fact of observation that those who own common property, and share in its management, are far more often at variance with one another than those who have property in severalty."
[9]
Further, private property has existed always and everywhere, whereas nowhere have communist utopias sprung up spontaneously. Finally, private property promotes the virtues of benevolence and generosity. It allows one to be so with friends in need.

Roman law, from the Twelve Tables to the Theodosian Code and the Justinian Corpus, recognized the right of private property as near absolute. Property stemmed from unchallenged possession, prior usage established easements, a property owner could do with his property as he saw fit, and freedom of contract was acknowledged. As well, Roman law distinguished importantly between u2018national’ (Roman) law — ius civile — and u2018international’ law — ius gentium.

The Christian contribution to this classic tradition — embodied in St. Thomas Aquinas and the late Spanish Scholastics as well as Protestants Hugo Grotius and John Locke — is twofold. Both Greece and Rome were slave-holding civilizations. Aristotle, characteristically, considered slavery a natural institution. In contrast, Western — Christian — civilization, not withstanding some exceptions, has been essentially a society of free men. Correspondingly, for Aquinas as for Locke, every person had a proprietary right over himself (self-ownership). Moreover, Aristotle, and classic civilization generally, were disdainful of labor, trade, and moneymaking. In contrast, in accordance with the Old Testament, the Church extolled the virtues of labor and work. Correspondingly, for Aquinas as for Locke, it was by work, use, and cultivation of previously unused land that property first came into existence

This classic theory of private property, based on self-ownership, original appropriation (homesteading), and contract (title transfer), continued to find prominent proponents, such as J. B. Say. However, from the height of its influence in the eighteenth century until quite recently, with the advance of the Rothbardian movement, the classic theory had slipped into oblivion.

For two centuries, economics and ethics (political philosophy) had diverged from their common origin in natural law doctrine into seemingly unrelated intellectual endeavors. Economics was a value-free "positive" science. It asked "what means are appropriate to bring about a given (assumed) end?" Ethics was a "normative" science (if it was a science at all). It asked "what ends (and what use of means) is one justified to choose?" As a result of this separation, the concept of property increasingly disappeared from both disciplines. For economists, property sounded too normative; for political philosophers property smacked of mundane economics.

In contrast, Rothbard noted, such elementary economic terms as direct and indirect exchange, markets and market prices as well as aggression, crime, tort, and fraud cannot be defined or understood without a theory of property. Nor is it possible to establish the familiar economic theorems relating to these phenomena without the implied notion of property and property rights. A definition and theory of property must precede the definition and establishment of all other economic terms and theorems.

Rothbard’s unique contribution, from the early 1960s until his death in 1995, was the rediscovery of property and property rights as the common foundation of both economics and political philosophy, and the systematic reconstruction and conceptual integration of modern, marginalist economics and natural-law political philosophy into a unified moral science: libertarianism.

V. Chicago Diversions

At the time when Rothbard was restoring the concept of private property to its central position in economics and reintegrating economics with ethics, other economists and legal theorists associated with the University of Chicago such as Ronald Coase, Harold Demsetz, and Richard Posner were also beginning to redirect professional attention to the subject of property and property rights.
[10]

However, whereas for Rothbard private property and ethics logically precede economics, for the latter private property and ethics are subordinate to economics and economic considerations. According to Posner, whatever increases social wealth is just.
[11]

The difference between the two approaches can be illustrated considering one of Coase’s problem cases: A railroad runs beside a farm. The engine emits sparks, damaging the farmer’s crop. What is to be done?

From the classic viewpoint, what needs to be established is who was there first, the farmer or the railroad? If the farmer was there first, he could force the railroad to cease and desist or demand compensation. If the railroad was there first, then it might continue emitting sparks and the farmer would have to pay the railroad to be spark free.

From the Coasean point of view, the answer is twofold. First and "positively," Coase claims that it does not matter how property rights and liability are allocated as long as they are allocated and provided (unrealistically) that transaction costs are zero.

Coase claims it is wrong to think of the farmer and the railroad as either "right" or "wrong" (liable), as "aggressor" or "victim." "The question is commonly thought of as one in which A inflicts harm on B and what has to be decided is, How should we restrain A? But this is wrong. We are dealing with a problem of a reciprocal nature. To avoid the harm to B would be to inflict harm on A. The real question that has to be decided is, Should A be allowed to harm B or should B be allowed to harm A? The problem is to avoid the more serious harm."
[12]

Further, given the "equal" moral standing of A and B, for the allocation of economic resources it allegedly does not matter to whom property rights are initially assigned. Suppose the crop loss to the farmer, A, is $1000, and the cost of a spark apprehension device (SAD) to the railroad, B, is $750. If B is found liable for the crop damage, B will install an SAD or cease operations. If B is found not liable, then A will pay a sum between $750 and $1000 for B to install an SAD. Both possibilities result in the installation of an SAD. Now assume the numbers are reversed: the crop loss is $750, and the cost of an SAD is $1000. If B is found liable, he will pay A $750, but he will not install an SAD. And if B is found not liable, A is unable to pay B enough to install a SAD. Again, both scenarios end with the same result: there will be no SAD. Therefore, regardless of how property rights are initially assigned, according to Coase, Demsetz and Posner the allocation of production factors will be the same.

Second and "normatively" — and for the only realistic case of positive transaction costs — Coase, Demsetz and Posner demand that courts assign property rights to contesting parties in such a way that "wealth" or the "value of production" is maximized For the case just considered this means that if the cost of the SAD is less than the crop loss, then the court should side with the farmer and hold the railroad liable. Otherwise, if the cost of the SAD is higher than the loss in crops, then the court should side with the railroad and hold the farmer liable. Posner offers another example. A factory emits smoke and thereby lowers residential property values. If property values are lowered by $ 3 million and the plant relocation cost is $2 million, the plant should be held liable and forced to relocate. Yet if the numbers are reversed — property values fall by $2 million and relocation costs are $3 million — the factory may stay and continue to emit smoke.

Both the positive and the normative claim of Chicago law and economics must be rejected.
[13]
As for the claim that it does not matter to whom property rights are initially assigned, three responses are in order. First, as Coase cannot help but admit, it certainly matters to the farmer and the railroad to whom which rights are assigned. It matters not just how resources are allocated but also who owns them.

Second and more importantly, for the value of social production it matters fundamentally how property rights are assigned. The resources allocated to productive ventures are not simply given. They themselves are the outcome of previous acts of original appropriation and production, and how much original appropriation and production there is depends on the incentive for appropriators and producers. If appropriators and producers are the absolute owners of what they have appropriated or produced, i.e., if no liability vis–vis second- or third-comers arises out of acts of appropriation and production, then the level of wealth will be maximized On the other hand, if original appropriators and producers can be found liable vis–vis late comers, as is implied in Coase’s "reciprocity of harm" doctrine, then the value of production will be lower than otherwise. That is, the "it doesn’t matter" doctrine is counterproductive to the stated goal of wealth maximization.

Third, Coase’s claim that the use of resources will be unaffected by the initial allocation of property rights is not generally true. Indeed, it is easy to produce counterexamples Suppose the farmer does not lose $1000 in crops because of the railroad’s sparks, but he loses a flower garden worth $1000 to him but worthless to anyone else. If the court assigns liability to the railroad, the $750 SAD will be installed. If the court does not assign liability to the railroad, the SAD will not be installed because the farmer simply does not possess the funds to bribe the railroad to install an SAD. The allocation of resources is different depending on the initial assignment of property rights.

Similarly, contra the normative claim of Chicago law and economics that courts should assign property rights so as to maximize social wealth, three responses are in order. First, any interpersonal comparison of utility is scientifically impossible, yet courts must engage in such comparisons willy-nilly whenever they engage in cost-benefit analyses. Such cost-benefit analyses are as arbitrary as the assumptions on which they rest. For example, they assume that psychic costs can be ignored and that the marginal utility of money is constant and the same for everyone.

Second, as the numerical examples given above show, courts assign property rights differently depending on changing market data. If the SAD is less expensive than the crop damage, the farmer is found in the right, while if the SAD is more expensive than the damage, the railroad is found in the right. That is, different circumstances will lead to a redistribution of property titles. No one can ever be sure of his property.
[14]
Legal uncertainty is made permanent. This seems neither just nor economical; moreover, who in his right mind would ever turn to a court that announced that it may reallocate existing property titles in the course of time depending on changing market conditions?

Finally, an ethic must not only have permanency and stability with changing circumstances; an ethic must allow one to make a decision about "just or unjust" prior to one’s actions, and it must concern something under an actor’s control. Such is the case for the classic private property ethic with its first-use-first-own principle. According to this ethic, to act justly means that a person employs only justly acquired means — means originally appropriated, produced, or contractually acquired from a previous owner — and that he employs them so that no physical damage to others’ property results. Every person can determine ex ante whether or not this condition is met, and he has control over whether or not his actions physically damage the property of others. In distinct contrast, the wealth maximization ethic fails in both regards. No one can determine ex ante whether or not his actions will lead to social wealth maximization. If this can be determined at all, it can only be determined ex post. Nor does anyone have control over whether or not his actions maximize social wealth. Whether or not they do depends on others’ actions and evaluations. Again, who in his right mind would subject himself to the judgment of a court that did not let him know in advance how to act justly and how to avoid acting unjustly but that would judge ex post, after the facts?

Notes

[1]
See section V below.

[2]
See Murray N. Rothbard, Man, Economy, and State (Auburn, Al.: Mises Institute, 1993 [1962]); idem, Power and Market (Kansas City: Sheed Andrews & McMeel, 1977 [1970]); idem, The Ethics of Liberty (New York: New York University Press, 1998 [1982]); idem, Egalitarianism as a Revolt Against Nature and other Essays (Auburn, Al.: Mises Institute, 2000 [1974]); idem, The Logic of Action, 2 vols. (Cheltenham, UK: Edward Elgar, 1997).

[3]
See also Hans-Hermann Hoppe, A Theory of Socialism and Capitalism (Boston: Kluwer Academic Publishers, 1989); idem, The Economics and Ethics of Private Property (Boston: Kluwer Academic Publishers, 1993).

[4]
Note the "natural law" character of the proposed solution to the problem of social order — that private property and its acquisition through acts of original appropriation are not mere conventions but necessary institutions (in accordance with man’s nature as a rational animal). A convention serves a purpose, and an alternative to a convention exists. For instance, the Latin alphabet serves the purpose of written communication. It has an alternative, the Cyrillic alphabet. Hence, we call it a convention. What is the purpose of norms? The avoidance of conflict regarding the use of scarce physical things. Conflict-generating norms contradict the very purpose of norms. Yet with regard to the purpose of conflict avoidance, no alternative to private property and original appropriation exists. In the absence of prestabilized harmony among actors, conflict can only be prevented if all goods are always in the private ownership of specific individuals and it is always clear who owns what and who does not. Also, conflicts can only be avoided from the very beginning of mankind if private property is acquired by acts of original appropriation (instead of by mere declarations or words of late-comers).

[5]
While no one could act if everyone owned the value of his property, it is practically possible that one person or group, A, owns the value of his property and can determine what another person or group, B, may or may not do with the things under their control. This, however, means that B "owns" neither the value nor the physical integrity of the things under his control; that is, B and his property are actually owned by A. This rule can be implemented, but it does not qualify as a human ethic. Instead, it is a two-class system of exploiting bermensch and exploited Untermensch.

[6]
For details see Murray N. Rothbard, Economic Thought Before Adam Smith. An Austrian Perspective on the History of Economic Thought, Volume I (Aldershot, UK: Edward Elgar, 1995); also Tom Bethell, The Noblest Triumph. Property and Prosperity Through the Ages (New York: St. Martin’s Press, 1998).

[7]
Aristotle, Politics (Oxford: Clarendon Press, 1946), 1261b.

[8]
Ibid, 1263a.

[9]
Ibid, 1263b.

[10]
See Ronald Coase, The Firm, The Market, and the Law (Chicago, University of Chicago Press, 1988); Harold Demsetz, Ownership, Control, and the Firm (Oxford: Basil Blackwell, 1988); Richard Posner, The Economics of Justice (Cambridge: Harvard University Press, 1981).

[11]
Posner, The Economics of Justice, p. 74: "an act of injustice (is defined) as an act that reduces the wealth of society."

[12]
Ronald Coase, "The Problem of Social Cost," in: idem, The Firm, the Market, and the Law, p. 96. The moral perversity of this claim is best illustrated by applying it to the case of A raping B. According to Coase, A is not supposed to be restrained. Rather, u201Cwe are dealing with a problem of a reciprocal nature.u201D In preventing A from raping B, harm is inflicted on A because he can no longer rape freely. The real question is: Should A be allowed to rape B, or should B be allowed to prohibit A from raping him/her? u201CThe problem is to avoid the more serious harm.u201D

[13]
See also Walter Block, "Coase and Demsetz on Private Property Rights," Journal of Libertarian Studies, Vol. 1, no. 2, 1977; idem, "Ethics, Efficiency, Coasian Property Rights, and Psychic Income: A Reply to Harold Demsetz," Review of Austrian Economics, Vol. 8, no. 2, 1995; idem, "Private Property Rights, Erroneous Interpretations, Morality and Economics," Quarterly Journal of Austrian Economics, Vol. 3, no. 1, 2000; Gary North, The Coase Theorem: A Study in Epistemology (Tyler, Texas: Institute for Christian Economics, 1992); idem, "Undermining Property Rights: Coase and Becker," Journal of Libertarian Studies, Vol. 16, no. 4.

[14]
Posner, The Economics of Justice, p. 70—71, admits this with captivating frankness: "Absolute rights play an important role in the economic theory of the law. … But when transaction costs are prohibitive, the recognition of absolute rights is inefficient. …property rights, although absolute, (are) contingent on transaction costs and subservient or instrumental to the goal of wealth maximization."

This paper appears in Professor Colombatto’s Elgar Companion to the Economics of Private Property.

Hans-Hermann Hoppe [send him mail], whom Lew Rockwell calls “an international treasure,” is senior fellow at the Ludwig von Mises Institute, professor of economics at the University of Nevada, Las Vegas, and editor of The Journal of Libertarian Studies. Democracy: The God That Failed is his eighth book. Visit his website.

Hans-Hermann Hoppe thanks Enrico Colombatto and the International Center for Economic Research for their hospitality during several months of the 2002/03 academic year.

It is incorrect to infer from the fact that an immigrant has found someone willing to employ him that his presence on a given territory must henceforth be considered "invited." Strictly speaking, this conclusion is true only if the employer also assumes the full costs associated with the importation of his immigrant-employee. This is the case under the much-maligned arrangement of a "factory town" owned and operated by a proprietor. Here, the full cost of employment, the cost of housing, healthcare, and all other amenities associated with the immigrant’s presence, is paid for by the proprietor. No one else’s property is involved in the immigrant-worker settlement. Less perfectly (and increasingly less so), this full-cost-principle of immigration is realized in Swiss immigration policy. In Switzerland immigration matters are decided on the local rather than federal government level, by the local owner-resident community in which the immigrant wants to reside. These owners are interested that the immigrant’s presence in their community increase rather than decrease their property values. In places as attractive as Switzerland, this typically means that the immigrant (or his employer) is expected to buy his way into a community, which often requires multimillion-dollar donations.

Unfortunately, welfare states are not operated like factory towns or even Swiss communities. Under welfare-statist condition the immigrant employer must pay only a small fraction of the full costs associated with the immigrant’s presence. He is permitted to socialize (externalize) a substantial part of such costs onto other property owners. Equipped with a work permit, the immigrant is allowed to make free use of every public facility: roads, parks, hospitals, schools, and no landlord, businessman, or private association is permitted to discriminate against him as regards housing, employment, accommodation, and association. That is, the immigrant comes invited with a substantial fringe benefits package paid for not (or only partially) by the immigrant employer (who allegedly has extended the invitation), but by other domestic proprietors as taxpayers who had no say in the invitation whatsoever. This is not an "invitation," as commonly understood. This is an imposition. It is like inviting immigrant workers to renovate one’s own house while feeding them from other people’s refrigerators. Consequently, because the cost of importing immigrant workers is lowered, more employer-sponsored immigrants will arrive than otherwise. Moreover, the character of the immigrant changes, too. While Swiss communities choose well-heeled, highly value-productive immigrants, whose presence enhances communal property values all-around, employers under democratic welfare State conditions are permitted by state law to externalize their employment costs on others and tend to import increasingly cheap, low-skilled and low value-productive immigrants, regardless of their effect on all-around communal property values.

Theoretically bankrupt, the left-libertarian open border stance can be understood only psychologically. One source can be found in the Randian upbringing of many left-libertarians. Big businessmen-entrepreneurs are portrayed as "heroes" and, according to Ayn Rand in one of her more ridiculous statements, are viewed as the welfare state’s "most severely persecuted minority." In this view (and untainted by any historical knowledge or experience), what can possibly be wrong with a businessman hiring an immigrant worker? In fact, as every historian knows, big businessmen are among the worst sinners against private property rights and the law of the market. Among other things, in an unholy alliance with the central State they have acquired the privilege of importing immigrant workers at other people’s expense (just as they have acquired the privilege of exporting capital to other countries and being bailed out by taxpayers and the military when such investments turn sour).

A second motive for the open border enthusiasm among contemporary left-libertarians is their egalitarianism. They were initially drawn to libertarianism as juveniles because of its "antiauthoritarianism" (trust no authority) and seeming "tolerance," in particular toward "alternative" — non-bourgeois lifestyles. As adults, they have been arrested in this phase of mental development. They express special "sensitivity" in every manner of discrimination and are not inhibited in using the power of the central state to impose nondiscrimination or "civil rights" statutes on society. Consequently, by prohibiting other property owners from discrimination as they see fit, they are allowed to live at others’ expense. They can indulge in their "alternative" lifestyle without having to pay the normal price for such conduct, i.e., discrimination and exclusion. To legitimize this course of action, they insist that one lifestyle is as good and acceptable as another. This leads first to multiculturalism, then to cultural relativism, and finally to "open borders." See further on this Democracy: The God That Failed, esp. chap. 10.

Hans-Hermann Hoppe [send him mail], whom Lew Rockwell calls “an international treasure,” is senior fellow at the Ludwig von Mises Institute, professor of economics at the University of Nevada, Las Vegas, and editor of The Journal of Libertarian Studies. Democracy: The God That Failed is his eighth book. Visit his website.

This is far from the truth.

Notwithstanding considerable talk to the contrary, the natural relationship among people is one of peaceful cooperation, based on the recognition of the higher physical productivity of the division of labor. This is not to say that there will be no crime and aggression. Mankind being what it is, murderers, robbers, thieves, thugs, and con artists will always exist.

However, their anti-social behavior is typically suppressed by means of armed self-defense and mutual assistance and insurance arrangements. In most cases, conflicts are settled peacefully through arbitration and by judges endowed with natural, voluntarily acknowledged authority (typically members of the “nobility” or social elite). Men have thus cooperated for thousands of years without the help of a State (as defined below). Even today, in every small village the workings of a natural order are still discernable.

What requires explanation is not the phenomenon of cooperation but that of a State. A State is defined as a territorial monopolist of ultimate decision making in the event of conflict (including conflicts involving itself); and implied in this power to exclude all others from acting as ultimate judge is its second defining element: the State’s power to tax, i.e., to determine unilaterally the price that those seeking justice must pay for its services.

Based on this definition of a State, it is easy to understand why a desire to found a State or to come into control of an existing one might exist: He who is a monopolist of final arbitration within a given territory can make laws in his own favor. Moreover, he who can legislate can also tax and thus enrich himself at the expense of others. Surely this is an enviable position.

More difficult to understand is how anyone can get away with founding a State. Why would others put up with such an extraordinary institution? It is here that the phenomenon of “looting” enters the picture.

A natural order is characterized by peaceful cooperation. Hence, to make a State appear necessary, any would-be State must first destroy the natural order and create a Hobbesian “anarchy” characterized by looting and vandalizing. Typically, this is accomplished by some members of the social elite inciting the propertyless masses (the tenants) to riot against the propertied class (their landlords). In the ensuing chaos, the would-be State then comes to the rescue of the landlords by offering to halt the tenant-rebellion and restore peace in return for recognition of its monopoly status as ultimate judge.

Once the would-be State has thus been transformed into a State, the latter will suppress further looting, if only to have more property left for itself to loot. However, the State has no interest in being “too” successful in suppressing private crime, for it provides a constant reminder of the alleged need for a State. Indeed, to loot its own subjects more successfully, the State will attempt to disarm its citizenry, rendering it more vulnerable to private criminal attack.

Let us turn to the events in Baghdad. States are inherently aggressive. This holds for the U.S. government as well as that of Iraq. If one can externalize the costs of one’s aggression onto others in the form of taxes imposed on one’s citizenry, one will be more aggressive than if one had to pay the full cost of aggression personally. Moreover and seemingly paradoxically, “liberal” States, which tax and regulate their subjects comparatively less (such as the U.S.), tend to be more aggressive in their foreign policy than “nonliberal” States (such as Iraq).

The reason for this is simple. Victory or defeat in interstate war depends on numerous factors, but what is ultimately decisive is the relative amount of economic resources at a government’s disposal. In taxing and regulating, governments do not contribute to the creation of economic wealth. Instead, they draw parasitically on existing wealth.

However, governments can influence the amount of existing wealth negatively. Other things being equal, the lower the tax and regulation burden imposed by government on its domestic economy, the larger its population tends to grow (due to internal reasons as well as immigration factors) and the larger will be the amount of domestically produced wealth on which it can draw in its conflicts with other States. That is, States which tax and regulate comparatively little tend to defeat and expand their territorial control at the expense of nonliberal States. Indeed, it was the U.S. government which aggressed against Iraq, and not the Iraqi government against the U.S.

Predictably, the aggressor State, the U.S., has been successful in invading and occupying Iraq. Once Baghdad was conquered by U.S. troops, the Saddam Hussein government effectively ceased to exist, and a new, U.S. government was established in Iraq. Instead of Saddam Hussein, it was now the U.S. military that acted as ultimate judge in Iraq.

No people can be ruled for long at the point of a gun, however. In order to endure, the new U.S. government must gain legitimacy within the Iraqi public. Yet contrary to U.S. government propaganda, the invasion and occupation of Iraq has been no act of liberation. If A frees B, who is held hostage by C, this is an act of liberation.

It is not an act of liberation, however, if A frees B from the hands of C in order to take B hostage himself. It is not an act of liberation if A frees B from the hands of C by killing D. Nor is it an act of liberation if A forcibly takes D’s money to free B from C.

Accordingly, unlike genuine liberation, which is greeted by the liberated with unanimous assent, the U.S. occupation has been met with much less than universal enthusiasm by the “liberated” Iraqis. Even many of Saddam Hussein’s opponents, who gladly saw him overthrown, still consider the U.S. an uninvited invader.

Confronted thus with a legitimacy-deficit, what better way to demonstrate the “necessity” of a continued U.S. presence than by the old and tried method of first creating chaos? The U.S. occupiers incite the Baghdad masses to loot first (seemingly justified) only “government property,” but then also private property. Moreover, in shooting indiscriminately at any armed Iraqi, and then confiscating privately held weapons, the U.S. troops prohibit any effective self-defense on the part of the looters’ Iraqi victims (and hence prevent the re-emergence of a natural order). In the ensuing Hobbesian anarchy, Baghdad’s propertied class comes out and begs its occupiers for protection.

In conclusion, rather than cause and reason for the State, Hobbesian anarchy as seen in Baghdad is result and consequence of State-making and -overtaking, otherwise known as “regime change.”

Hans-Hermann Hoppe [send him mail], whom Lew Rockwell calls “an international treasure,” is senior fellow at the Ludwig von Mises Institute, professor of economics at the University of Nevada, Las Vegas, and editor of The Journal of Libertarian Studies. Democracy: The God That Failed is his eighth book. Visit his website.

Hans-Hermann Hoppe Archives

Robinson Crusoe, alone on his island, can do whatever he pleases. For him, the question concerning rules of orderly human conduct — social cooperation — simply does not arise. Naturally, this question can only arise once a second person, Friday, arrives on the island. Yet even then, the question remains largely irrelevant so long as no scarcity exists. Suppose the island is the Garden of Eden. All external goods are available in superabundance. They are “free goods,” such as the air that we breathe is normally a “free” good. Whatever Crusoe does with these goods, his actions have repercussions neither with respect of his own future supply of such goods, nor regarding the present or future supply of the same goods for Friday (and vice versa). Hence, it is impossible that there could ever be a conflict between Crusoe and Friday concerning the use of such goods. A conflict becomes possible only if goods are scarce, and only then can there arise a problem of formulating rules which make an orderly — conflict-free — social cooperation possible.

In the Garden of Eden only two scarce goods exist: the physical body of a person and its standing room. Crusoe and Friday each have only one body and can stand only at one place at a time. Hence, even in the Garden of Eden conflicts between Crusoe and Friday can arise: Crusoe and Friday cannot both simultaneously want to occupy the same standing room without coming thereby into physical conflict with each other. Accordingly, even in the Garden of Eden rules of orderly social conduct must exist — rules regarding the proper location and movement of human bodies. And outside the Garden of Eden, in the realm of scarcity, there must be rules that regulate not just the use of personal bodies but of everything scarce so that all possible conflicts can be ruled out. This is the problem of social order.

The Problem Solution: The Idea of Original Appropriation and Private Property

In the history of social and political thought many proposals have been advanced as an alleged solution to the problem of social order, and this variety of mutually inconsistent proposals has contributed to the fact that today the search for a single “correct” problem solution is frequently deemed illusory. Yet as I will try to demonstrate, there exists a correct solution; and hence, there is no reason to succumb to moral relativism. I did not discover this solution, nor did Murray Rothbard, for that matter. Rather, the solution has been essentially known for hundreds of years if not for much longer. Murray Rothbard’s claim to fame is “merely” that he rediscovered this old as well as simple solution and formulated it more clearly and convincingly than anyone before him.

Let me begin in formulating the solution — first for the special case represented by the Garden of Eden and subsequently for the general case represented by the “real” world of all-around scarcity — and then proceed to the explanation of why this solution, and no other one, is correct.

In the Garden of Eden, the solution is provided by the simple rule stipulating that everyone may place or move his own body wherever he pleases, provided only that no one else is already standing there and occupying the same space. And outside of the Garden of Eden, in the realm of all-around scarcity, the solution is provided by this rule: Everyone is the proper owner of his own physical body as well as of all places and nature-given goods that he occupies and puts to use by means of his body, provided only that no one else has already occupied or used the same places and goods before him. This ownership of “originally appropriated” places and goods by a person implies his right to use and transform these places and goods in any way he sees fit, provided only that he does not change thereby uninvitedly the physical integrity of places and goods originally appropriated by another person. In particular, once a place or good has been first appropriated by, in John Locke’s phrase, “mixing one’s labor” with it, ownership in such places and goods can be acquired only by means of a voluntary — contractual — transfer of its property title from a previous to a later owner.

In light of widespread moral relativism, it is worthwhile to point out that this idea of original appropriation and private property as a solution to the problem of social order is in complete accordance with our moral “intuition.” Isn’t it simply absurd to claim that a person should not be the proper owner of his body and the places and goods that he originally, i.e., prior to anyone else, appropriates, uses and/or produces by means of his body? For who else, if not he, should be their owner? And isn’t it also obvious that the overwhelming majority of people — including children and primitives — act in fact according to these rules, and do so unquestioningly and as a matter-of-course?

A moral intuition, as important as it is, is not a proof, however. Yet there also exists proof of our moral intuition being correct.

The proof can be provided in a twofold manner. On the one hand, in spelling out the consequences that follow if one were to deny the validity of the institution of original appropriation and private property: If a person A were not the owner of his own body and the places and goods originally appropriated and/or produced with this body as well as of the goods voluntarily (contractually) acquired from another previous owner, then only two alternatives exist. Either another person B must be recognized as the owner of A’s body as well as the places and goods appropriated, produced or acquired by A. Or else all persons, A and B, must be considered equal co-owners of all bodies, places and goods.

In the first case, A would be reduced to the rank of B’s slave and object of exploitation. B is the owner of A’s body and all places and goods appropriated, produced, and acquired by A, but A in turn is not the owner of B’s body and the places and goods appropriated, produced and acquired by B. Hence, under this ruling two categorically distinct classes of persons are constituted — Untermenschen such as A and bermenschen such as B — to whom different “laws” apply. Accordingly, such ruling must be discarded as a human ethic equally applicable to everyone qua human being (rational animal). From the very outset, any such ruling can be recognized as not universally acceptable and thus cannot claim to represent law. Because for a rule to aspire to the rank of a law — a just rule — it is necessary that such a rule apply equally and universally to everyone.

Alternatively, in the second case of universal and equal co-ownership the requirement of equal law for everyone is fulfilled. However, this alternative suffers from another, even more severe deficiency, because if it were applied all of mankind would instantly perish. (And since every human ethic must permit the survival of mankind, this alternative, then, must be rejected, too.) For every action of a person requires the use of some scarce means (at least the person’s body and its standing room). But if all goods were co-owned by everyone, then no one, at no time and no place, would be allowed to do anything unless he had previously secured every other co-owner’s consent to do so; and yet, how can anyone grant such consent if he were not the exclusive owner of his own body (including his vocal chords) by means of which his consent must be expressed? Indeed, he would first need others’ consent in order to be allowed to express his own, but these others cannot give their consent without having first his, etc.

This insight into the praxeological impossibility of “universal communism,” as Rothbard referred to this proposal, brings me immediately to a second, alternative way of demonstrating the idea of original appropriation and private property as the only correct solution to the problem of social order. Whether or not persons have any rights and, if so, which ones, can only be decided in the course of argumentation (propositional exchange). Justification — proof, conjecture, refutation — is argumentative justification. Anyone who were to deny this proposition would become involved in a performative contradiction, because his denial would itself constitute an argument. Even an ethical relativist, then, must accept this first proposition, which has been accordingly referred to as the a priori of argumentation.

From the undeniable acceptance — the axiomatic status — of this a priori of argumentation in turn two equally necessary conclusions follow. The first follows from the a priori of argumentation when there is no rational solution to the problem of conflict arising from the existence of scarcity. Suppose in my earlier scenario of Crusoe and Friday, that Friday was not the name of a man but of a gorilla. Obviously, just as Crusoe can run into conflict regarding his body and its standing room with Friday the man, so he might do so with Friday the gorilla. The gorilla might want to occupy the same space that Crusoe is already occupying. In this case, at least if the gorilla is the sort of entity that we know gorillas to be, there is in fact no rational solution to their conflict. Either the gorilla wins, and devours, crushes, or pushes Crusoe aside — that is the gorilla’s solution to the problem — or Crusoe wins, and kills, beats, chases away, or tames the gorilla — that is Crusoe’s solution. In this situation, one may indeed speak of moral relativism. With Alasdair MacIntyre, a prominent philosopher of the relativist persuasion, one may concur asking as the title of one of his books, Whose Justice? Which Rationality? — Crusoe’s or the gorilla’s. Depending on whose side one chooses, the answer will be different. However, it is more appropriate to refer to this situation as one where the question of justice and rationality simply does not arise: that is, as an extra-moral situation. The existence of Friday the gorilla poses for Crusoe merely a technical problem, not a moral one. Crusoe has no other choice but to learn how to successfully manage and control the movements of the gorilla just as he must learn to manage and control the inanimate objects of his environment.

By implication, only if both parties to a conflict are capable of engaging in argumentation with one another, can one speak of a moral problem and is the question of whether or not there exists a solution meaningful. Only if Friday, regardless of his physical appearance (i.e., whether he looks like a man or like a gorilla), is capable of argumentation (even if he has shown himself to be so capable only once), can he be deemed rational and does the question whether or not a correct solution to the problem of social order exists make sense. No one can be expected to give an answer — indeed: any answer — to someone who has never raised a question or, more to the point, who has never stated his own relativistic viewpoint in the form of an argument. In that case, this “other” cannot but be regarded and treated like an animal or plant, i.e., as an extra-moral entity. Only if this other entity can in principle pause in his activity, whatever it might be, step back so to speak, and say “yes” or “no” to something one has said, do we owe this entity an answer and, accordingly, can we possibly claim that our answer is the correct one for both parties involved in a conflict.

Moreover, secondly and positively it follows from the a priori of argumentation that everything that must be presupposed in the course of an argumentation — as the logical and praxeological precondition of argumentation — cannot in turn be argumentatively disputed as regards its validity without becoming thereby entangled in an internal (performative) contradiction. Now, propositional exchanges are not made up of free-floating propositions, but rather constitute a specific human activity. Argumentation between Crusoe and Friday requires that both possess, and mutually recognize each other as possessing, exclusive control over their respective bodies (their brain, vocal chords, etc.) as well as the standing room occupied by their bodies. No one could propose anything and expect the other party to convince himself of the validity of this proposition or else deny it and propose something else, unless his and his opponent’s right to exclusive control over their respective bodies and standing rooms were already presupposed and assumed as valid. In fact, it is precisely this mutual recognition of the proponent’s as well as the opponent’s property in his own body and standing room which constitutes the characteristicum specificum of all propositional disputes: that while one may not agree regarding the validity of some specific proposition one can agree nonetheless on the fact that one disagrees.

Moreover, this right to property in one’s own body and its standing room must be considered a priori (or indisputably) justified by proponent and opponent alike. For anyone who wanted to claim any proposition as valid vis-à-vis an opponent would already have to presuppose his and his opponent’s exclusive control over their respective body and standing room simply in order to say “I claim such and such to be true, and I challenge you to prove me wrong.” [So much for John Rawls' claim, in his celebrated Theory of Justice, that we cannot but "acknowledge as the first principle of justice one requiring an equal distribution (of all resources)," and his comment that "this principle is so obvious that we would expect it to occur to anyone immediately." What I have demonstrated here is that any egalitarian ethic such as this proposed by Rawls is not only not obvious but must be regarded instead as absurd, i.e., as self-contradictory nonsense. For if Rawls were right and all resources were indeed equally distributed, then he literally would have no leg to stand on and support him in proposing the very nonsense that he does pronounce.]

Furthermore, it would be equally impossible to engage in argumentation and rely on the propositional force of one’s arguments, if one were not allowed to own (exclusively control) other scarce means (besides one’s body and its standing room). For if one did not have such a right, then we would all immediately perish and the problem of justifying rules — as well as any other human problem — simply would not exist. Hence, by virtue of the fact of being alive, property rights to other things must be presupposed as valid, too. No one who is alive could possibly argue otherwise.

And if a person were not permitted to acquire property in these goods and spaces by means of an act of original appropriation, i.e., by establishing an objective (intersubjectively ascertainable) link between himself and a particular good and/or space prior to anyone else, but if, instead, property in such goods or spaces were granted to late-comers, then no one would be permitted to ever begin using any good unless he had previously secured such late-comers consent. Yet how can a late-comer consent to the actions of an early-comer? Moreover, every late-comer would in turn need the consent of other still later-comers, and so on. That is, neither we, nor our forefathers or our progeny would have been or will be able to survive if one were to follow this rule. However, in order for any person — past, present, or future — to argue anything it must be obviously possible to survive then and now; and in order to do just this property rights cannot be conceived of as being timeless and unspecific with respect to the number of persons concerned.

Rather, property rights must necessarily be conceived of as originating by acting at definite points in time and space for definite individuals. Otherwise it would be impossible for anyone to ever say anything at a definite point in time and space and for someone else to be able to reply. Simply saying, then, that the first-user-first-owner rule of the ethics of private property can be ignored or is unjustified, implies a performative contradiction, as one’s being able to say so must presuppose one’s existence as an independent decision-making unit at a given point in time and space.

Simple Solution, Radical Conclusions: Anarchy and State

As simple as the solution to the problem of social order is and as much as people in their daily lives intuitively recognize and act according to the ethics of private property just explained, this simple and undemanding solution implies some surprisingly radical conclusions. For, apart from ruling out as unjustified all activities such as murder, homicide, rape, trespass, robbery, burglary, theft, and fraud, the ethics of private property is also incompatible with the existence of a state defined as an agency that possesses a compulsory territorial monopoly of ultimate decision-making (jurisdiction) and/or the right to tax.

Classical political theory, at least from Hobbes onward, had viewed the state as the very institution responsible for the enforcement of the ethics of private property. In regarding the state as unjust — indeed, as “a vast criminal organization” — and reaching anarchist conclusions instead, Rothbard did of course not deny the necessity of enforcing the ethics of private property. He did not share the view of those anarchists, ridiculed by his teacher and mentor Mises, who believed that all people, if only left alone, would be good and peace-loving creatures.

To the contrary, Rothbard wholeheartedly agreed with Mises that there will always be murderers, thieves, thugs, con-artists, etc., and that life in society would be impossible if they were not punished by physical force. Rather, what Rothbard categorically denied, was the claim that it followed from the right and need for the protection of person and property that protection rightfully should or effectively could be provided by a monopolist of jurisdiction and taxation. Classical political theory, in making this claim, had to present the state as the result of a contractual agreement among private property owners. Yet this, Rothbard argued, was false and an impossible undertaking. No state can possibly arise contractually, and accordingly it can be demonstrated that no state is compatible with the rightful and effective protection of private property.

Private-property ownership, as the result of acts of original appropriation, production, or exchange from prior to later owner, implies the owner’s right to exclusive jurisdiction regarding his property; and no private property owner can possibly surrender his right to ultimate jurisdiction over and physical defense of his property to someone else — unless he sold or otherwise transferred his property (in which case someone else would have exclusive jurisdiction over it). To be sure, every private property owner may partake of the advantages of the division of labor and seek more or better protection of his property through the cooperation with other owners and their property. That is, every property owner may buy from, sell to, or otherwise contract with anyone else concerning more or better property protection. But every property owner also may at any time unilaterally discontinue any such cooperation with others or change his respective affiliations. Hence, in order to meet the demand for protection it would be rightfully possible and is economically likely that specialized individuals and agencies arise which provide protection, insurance, and arbitration services for a fee to voluntarily paying clients.

However, while it is easy to conceive of the contractual origin of a system of competitive security suppliers, it is inconceivable how private property owners could possibly enter a contract that entitled another agent irrevocably (once and for all) with the power of ultimate decision-making regarding his own person and property and/or the power to tax. That is, it is inconceivable how anyone could ever agree to a contract that allowed someone else to determine permanently what he may or may not do with his property; for in so doing this person would have effectively rendered himself defenseless vis-à-vis such an ultimate decision maker. And likewise is it inconceivable how anyone could ever agree to a contract that allowed one’s protector to determine unilaterally, without consent of the protected, the sum that the protected must pay for his protection.

Orthodox, i.e., statist, political theorists, from John Locke to James Buchanan and John Rawls, have tried to solve this difficulty through the make-shift of “tacit,” “implicit,” or “conceptual” agreements, contracts, or state-constitutions. All of these characteristically tortuous and confused attempts, however, have only added to the same unavoidable conclusion drawn by Rothbard: That it is impossible to derive a justification for government from explicit contracts between private property owners, and hence, that the institution of the state must be considered unjust, i.e., the result of moral error.

The Consequence of Moral Error: Statism and the Destruction of Liberty and Property

All errors are costly. This is most obvious with errors concerning laws of nature. If a person errs regarding laws of nature this person will not be able to reach his own goals. However, because the failure of doing so must be born by each erring individual, there prevails in this realm a universal desire to learn and correct one’s errors. Moral errors are costly, too. Unlike in the former case, however, their cost must not, at least not necessarily so, be paid for by each and every person committing the error. In fact, this would be the case only if the error involved were that of believing that everyone had the right to tax and ultimate decision-making regarding the person and property of everyone else. A society whose members believed this would be doomed. The price to be paid for this error would be universal death and extinction. However, matters are distinctly different if the error involved is that of believing that one agency — the state — only has the right to tax and ultimate decision-making (rather than everyone, or else, and correctly so, no one). A society whose members believed this — that is, that there must be different laws applying unequally to masters and serfs, taxers and taxed, legislators and legislated — can in fact exist and endure. This error must be paid for, too. But not everyone holding this error must pay for it equally. Rather, some people will have to pay for it, while others — the agents of the state — actually benefit from the same error. Hence, in this case it would be mistaken to assume a universal desire to learn and correct one’s errors. To the contrary, in this case it will have to be assumed that some people, rather than learning and promoting the truth, have a constant motive to lie, i.e., to maintain and promote falsehoods even if they themselves recognize them as such.

In any case, then, what are the “mixed” consequences of, and what is the unequal price to be paid for, the error and/or lie of believing in the justice of the institution of a state?

Once the principle of government — judicial monopoly and the power to tax — is incorrectly admitted as just, any notion of restraining government power and safeguarding individual liberty and property is illusory. Rather, under monopolistic auspices the price of justice and protection will continually rise and the quality of justice and protection fall. A tax-funded protection agency is a contradiction in terms — an expropriating property protector — and will inevitably lead to more taxes and less protection. Even if, as some — classical liberal — statists have proposed, a government limited its activities exclusively to the protection of pre-existing private property rights, the further question of how much security to produce would arise. Motivated (like everyone else) by self-interest and the disutility of labor, but endowed with the unique power to tax, a government agent’s answer will invariably be the same: To maximize expenditures on protection — and almost all of a nation’s wealth can conceivably be consumed by the cost of protection — and at the same time to minimize the production of protection. The more money one can spend and the less one must work to produce, the better off one will be.

Moreover, a judicial monopoly will inevitably lead to a steady deterioration in the quality of justice and protection. If no one can appeal to justice except to government, justice will be perverted in favor of the government, constitutions and supreme courts notwithstanding. Constitutions and supreme courts are state constitutions and agencies, and whatever limitations to state action they might contain or find is invariably decided by agents of the very institution under consideration. Predictably, the definition of property and protection will continually be altered and the range of jurisdiction expanded to the government’s advantage until, ultimately, the notion of universal and immutable human rights — and in particular property rights — will disappear and be replaced by that of law as government-made legislation and rights as government-given grants.

The results, all of them predicted by Rothbard, are before our eyes, for everyone to see. The tax load imposed on property owners and producers has continually increased, making the economic burden even of slaves and serfs seem moderate in comparison. Government debt — and hence, future tax obligations — has risen to breathtaking heights. Every detail of private life, property, trade, and contract is regulated by ever-higher mountains of paper laws. Yet the only task that government was ever supposed to assume — of protecting our life and property — it does not perform. To the contrary, the higher the expenditures on social, public, and national security have risen, the more our private property rights have been eroded, the more our property has been expropriated, confiscated, destroyed, and depreciated. The more paper laws have been produced, the more legal uncertainty and moral hazard has been created, and lawlessness has displaced law and order. Instead of protecting us from domestic crime and foreign aggression, our government, equipped with enormous stockpiles of weapons of mass destruction, aggresses against ever new Hitlers and suspected Hitlerite sympathizers anywhere and everywhere outside of its “own” territory. In short, while we have become ever more helpless, impoverished, threatened, and insecure, our state rulers have become increasingly more corrupt, arrogant, and dangerously armed.

The Restoration of Morality: On Liberation

What to do, then? Rothbard has not only reconstructed the ethics of liberty and explained the current morass as the result of statism, he has also shown us the way toward a restoration of morals.

First and foremost he has explained that states, as powerful and invincible as they might seem, ultimately owe their existence to ideas and, since ideas can in principle change instantaneously, states can be brought down and crumble practically overnight.

The representatives of the state are always and everywhere only just a small minority of the population over which they rule. The reason for this is as simple as it is fundamental: one hundred parasites can live comfortable lives if they suck out the life blood of thousands of productive hosts, but thousands of parasites cannot live comfortably off of a host population of just a hundred. Yet if government agents are merely a small minority of the population, how can they enforce their will on this population and get away with it? The answer given by Rothbard as well as de la Botie, Hume, and Mises before him, is: only by virtue of the voluntary cooperation of the majority of the subject population with the state. Yet how can the state secure such cooperation? The answer is: only because and insofar as the majority of the population believes in the legitimacy of state rule. This is not to say that the majority of the population must agree with every single state measure. Indeed, it may well believe that many state policies are mistaken or even despicable. However, the majority of the population must believe in the justice of the institution of the state as such, and hence, that even if a particular government goes wrong, these mistakes are merely accidents which must be accepted and tolerated in view of some greater good provided by the institution of government.

Yet how can the majority of the population be brought to believe this? The answer is: with the help of the intellectuals. In the old days that meant trying to mold an alliance between the state and the church. In modern times and far more effectively, this means through the nationalization (socialization) of education: through state-run or state-subsidized schools and universities. The market demand for intellectual services, in particular in the area of the humanities and social sciences, is not exactly high and none too stable and secure. Intellectuals would be at the mercy of the values and choices of the masses, and the masses are generally uninterested in intellectual-philosophical concerns. The state, on the other hand, notes Rothbard, accommodates their typically overinflated egos and “is willing to offer the intellectuals a warm, secure, and permanent berth in its apparatus, a secure income, and the panoply of prestige.” And indeed, the modern democratic state in particular, has created a massive oversupply of intellectuals.

This accommodation does not guarantee “correct” — statist — thinking, of course; and as well and generally overpaid as they are, intellectuals will continue to complain how little their oh-so-important work is appreciated by the powers that be. But it certainly helps in reaching the “correct” conclusions if one realizes that without the state — the institution of taxation and legislation — one might be out of work and may have to try one’s hands at the mechanics of gas pump operation instead of concerning oneself with such pressing problems as alienation, equity, exploitation, the deconstruction of gender and sex roles, or the culture of the Eskimos, the Hopis, and the Zulus. And even if one feels underappreciated by this or that incumbent government, one still realizes that help can only come from another government, and certainly not from an intellectual assault on the legitimacy of the institution of government as such. Thus, it is hardly surprising that, as a matter of empirical fact, the overwhelming majority of contemporary intellectuals are far-out lefties and that even most conservative or free market intellectuals such as Friedman or Hayek, for instance, are fundamentally and philosophically statists.

From this insight into the importance of ideas and the role of intellectuals as bodyguards of the state and statism, then, it follows that the most decisive role in the process of liberation — the restoration of justice and morality — must fall on the shoulders of what one might call anti-intellectual intellectuals. Yet how can such anti-intellectual intellectuals possibly succeed in delegitimating the state in public opinion, especially if the overwhelming majority of their colleagues are statists and will do everything in their power to isolate and discredit them as extremists and crackpots? Time permits me to make only a few brief comments on this fundamental question.

First: Because one must reckon with the vicious opposition from one’s colleagues, and in order to withstand it, and to shrug it off, it is of utmost importance to ground one’s case not in economics and utilitarianism, but in ethics and moral arguments. For only moral convictions provide one with the courage and strength needed in ideological battle. Few are inspired and willing to accept sacrifices if what they are opposed to is mere error and waste. More inspiration and courage can be drawn from knowing that one is engaged in fighting evil and lies. (I’ll return to this shortly.)

Second: It is important to recognize that one does not need to convert one’s colleagues, i.e., to persuade mainstream intellectuals. As Thomas Kuhn has shown, this is rare enough even in the natural sciences. In the social sciences, conversions among established intellectuals from previously held views are almost unheard of. Instead, one should concentrate one’s efforts on the not-yet intellectually committed young, whose idealism makes them also particularly receptive to moral arguments and moral rigorism. And likewise, one should circumvent academia and reach out to the general public (i.e., to the educated laymen), which entertains some generally healthy anti-intellectual prejudices into which one can easily tap.

Third (returning to the importance of a moral attack on the state): It is essential to recognize that there can be no compromise on the level of theory. To be sure, one should not refuse to cooperate with people whose views are ultimately mistaken and confused, provided that their objectives can be classified, clearly and unambiguously, as a step in the right direction of the de-statization of society. For instance, one would not want to refuse cooperation with people who seek to introduce a flat income tax of 10 percent (although we would not want to cooperate with those who would want to combine this measure with an increased sales tax in order to achieve revenue neutrality, for instance). However, under no circumstances should such cooperation lead to or be achieved by compromising one’s own principles. Either taxation is just or it isn’t. And once it is admitted as just, how is one then to oppose any increase in it? The answer is of course that one can’t!

Put differently, compromise on the level of theory, as we find it, for instance, among moderate free-marketeers such as Hayek or Friedman or even among the so-called minarchists, is not only philosophically flawed but is also practically ineffective and indeed counterproductive. Their ideas can be — and in fact are — easily co-opted and incorporated by the state rulers and statist ideology. Indeed, how often do we hear nowadays from statists and in defense of a statist agenda cries such as “even Hayek (Friedman) says, or, not even Hayek (Friedman) denies that such and such must be done by the state!” Personally, they may not be happy about this, but there is no denying that their work lends itself to this purpose, and hence, that they, willy-nilly, actually contributed to the continued and unabating growth of state power.

In other words: Theoretical compromise or gradualism will only lead to the perpetuation of the falsehood, evils, and lies of statism, and only theoretical purism, radicalism, and intransigence can and will lead first to gradual practical reform and improvement and possibly final victory. Accordingly, as an anti-intellectual intellectual in the Rothbardian sense one can never be satisfied with criticizing various government follies, although one might have to begin with this, but one must always proceed from there to a fundamental attack on the institution of the state as a moral outrage and its representatives as moral as well as economic frauds, liars, and impostors — as emperors without clothes.

In particular, one must never hesitate to strike at the very heart of the legitimacy of the state: its alleged indispensable role as producer of private protection and security. I have already shown how ridiculous this claim is on theoretical grounds: how can an agency that may expropriate private property possibly claim to be a protector of private property? But hardly less important is it to attack the legitimacy of the state in this regard on empirical grounds. That is, to point out and hammer away on the subject that, after all, states, which are supposed to protect us, are the very institution responsible for an estimated 170 million death in the twentieth century alone — more than the victims of private crime in all of human history (and this number of victims of private crimes, from which government did not protect us, would have been even much lower if governments everywhere and at all times had not undertaken constant efforts of disarming its own citizens so that the governments in turn would become ever more effective killing machines)!

Instead of treating politicians with respect, then, one’s criticism of them should be significantly stepped up: almost to a man, they are not only thieves but mass murderers. How dare they demand our respect and loyalty.

But will a sharp and distinct ideological radicalization bring the results aimed at? I have no doubt. Indeed, only radical — and in fact radically simple — ideas can possibly stir the emotions of the dull and indolent masses and delegitimate government in their eyes.

Let me quote Hayek to this effect (and in doing so, I hope to indicate also that my rather harsh earlier criticism of him should not be misunderstood as implying that one cannot learn anything from authors who are fundamentally wrong and muddled):

“We must make the building of a free society once more an intellectual adventure, a deed of courage. What we lack is a liberal Utopia, a programme which seems neither a mere defence of things as they are nor a diluted kind of socialism, but a truly liberal radicalism which does not spare the susceptibilities of the mighty…, which is not too severely practical and which does not confine itself to what appears today as politically possible. We need intellectual leaders who are prepared to resist the blandishments of power and influence and who are willing to work for an ideal, however small may be the prospects of its early realization. They must be men who are willing to stick to principles and to fight for their full realization, however remote. Free trade and freedom of opportunity are ideas which still may arouse the imaginations of large numbers, but a mere u2018reasonable freedom of trade’ or a mere u2018relaxation of controls’ is neither intellectually respectable nor likely to inspire any enthusiasm….

“Unless we can make the philosophical foundations of a free society once more a living intellectual issue, and its implementation a task which challenges the ingenuity and imagination of our liveliest minds, the prospects of freedom are indeed dark. But if we can regain that belief in the power of ideas which was the mark of liberalism at its best, the battle is not lost.”

Hayek of course did not heed his own advice and provide us with a consistent and inspiring theory. His Utopia, as developed in his Constitution of Liberty, is the rather uninspiring vision of the Swedish welfare state. Instead, it is Rothbard who has done what Hayek recognized as necessary for a renewal of classical liberalism; and if there is anything that can reverse the seemingly unstoppable tide of statism and restore justice and liberty, it is the personal example set by Murray Rothbard and the spread of Rothbardianism.

Hans-Hermann Hoppe [send him mail], whom Lew Rockwell calls “an international treasure,” is distinguished fellow at the Ludwig von Mises Institute and professor of economics at the University of Nevada, Las Vegas. Democracy: The God That Failed is his eighth book. See also The Economics and Ethics of Private Property. Visit his website.

To identify a problem, even a big one, is not in itself a noteworthy achievement. What makes Buchanan’s contribution remarkable is that he identifies a problem that the ruling elites tell us does not exist, or is not a problem but a blessing. In today’s intellectual climate, it requires independence of mind and even courage to say what Buchanan does. And the book’s bestseller status indicates that there are still plenty of people who have retained their good sense.

Buchanan argues that the West — the lands of Christendom — is doomed. Birthrates everywhere have sunk below replacement levels. At the same time, masses of third-world immigrants have infiltrated the West, where they rapidly outbreed the indigenous populations. Within just a few decades, the West and its treasures will be taken over, without a fight, by people alien or hostile to Western civilization. Our children will be minorities in foreign lands.

This suicidal development is the culmination of a cultural revolution that Buchanan describes as the de-Christianization of the West. Promoted from within by leftist intellectuals, and associated with the ideas of secular humanism, feminism, egalitarianism, moral relativism, multiculturalism, affirmative action, sexual liberation, and hedonism, the revolution has eroded man’s will to live a productive life, to multiply, and to affirm and defend his own culture.

The evidence Buchanan presents in support of this thesis is impressive. Unfortunately, his answer concerning cause and strategy is not. In a nutshell, his proposed counterrevolution consists of making him or someone like him president.

He proposes to reinvigorate the Republican party by adopting a program of sharply selective immigration restrictions, the exit from and defunding of a host of international organizations, and the withdrawal of troops from most foreign lands. All to the good. On the other hand, he wants a government family policy. Revenue-neutrally funded through taxes on consumption and various imports, this policy would eliminate the inheritance tax for estates worth less than five million dollars, provide for a three thousand dollar tax credit per child, and establish tax incentives for employers for the preferential hiring of parents vs. non-parents and single vs. dual family earners. Buchanan would also appoint like-minded Supreme Court judges, of course, and decentralize the public education system.

There is no need to examine the details of this program and its many inconsistencies. Its flaw is fundamental and obvious as soon as it is realized what it does not involve (hence, what Buchanan must believe not to be responsible for the problem he wishes to solve). He believes that the counterrevolution can be carried out within the institutional framework of a modern, centralized democratically organized nation state complete with its core "welfare" institutions of social security, medicare, medicaid, unemployment subsidies, and public education.

But this thesis stands in contradiction to common sense and elementary economic and political theory, which point directly to the democratic welfare state as the cause of the problem.

Democracy — majority rule — necessarily involves a compulsory income and wealth redistribution, i.e., the taking from some — the havers of something — and giving it to others — the non-havers. The incentive to be a haver is reduced and that of being a non-haver increased. And since what the havers have is something "good," and what the non-havers suffer is "bad," the result of any such redistribution is to stifle the production of "goods" and stimulate the production of "bads."

More specifically, in relieving individuals of the obligation to provide for their own income, health, safety, old age, and children’s education, compulsory government "insurance" is a systematic attack on personal responsibility and the institutions of family, kinship, community, and church. The range and horizon of private provision is reduced, and the value of family, kinship relations, children, community, and church diminished. Responsibility, farsightedness, civility, diligence, health, and conservatism (goods) are punished, and their opposites (bads) promoted.

To revive the West, these debilitating institutions must be abolished and security returned to private provision, insurance, and charity.

But it is not just democracy that is at fault. More fundamentally, what lies at the root of the problem is the institution of the state, i.e., a compulsory territorial monopoly of ultimate decision making and arbitration complete with the power to legislate and tax.

For one, one can only ask how it was possible that the ideas deplored by Buchanan of secularism, feminism, relativism, multiculturalism, etc., could become more than the privately held views of some isolated individuals? The obvious answer is only by virtue of the power to legislate, i.e., to impose uniform rules on all inhabitants and their private property within a given territory. If these ideas had not been incorporated in legislation, they would have done little or no harm. And it is only the state that can legislate.

More fundamentally, however, the state is not merely an instrument but an agent in all this. Public education and welfare, and the ideas of secularism, moral relativism, etc., did not have to be "forced" upon the state. Rather, the state has its own interest in promoting such an agenda.

Predictably, if an agency is permitted to legislate and tax, its agents will not only use these powers but show a tendency toward increasing their tax income and range of legislative interference. And because in so doing they encounter resistance among their subjects, it is in the state’s agents’ interest to weaken such powers of resistance. Such is the nature of the state, and to expect anything else of it is naive.

For one, this means disarming the citizenry. But it also means eroding and ultimately destroying all intermediating institutions such as the family, clan, tribe, community, association, and church with their internal layers and ranks of authority. Even if only in some limited area of jurisdiction, these institutions and authorities rival the state’s claim as ultimate territorial decision maker. The state, in order to enforce its claim as ultimate judge, must eliminate all independent jurisdictions and judges, and this requires the erosion or even destruction of the authority of the heads of households, families, communities, and churches.

This is the underlying motive of most state policies. Public education and welfare serve this destructive purpose, and so do the promotion of feminism, non-discrimination, affirmative action, relativism, and multiculturalism. They all undermine family, community, and church. They "liberate" the individual from the discipline of these institutions, in order to render him "equal," isolated, unprotected, and weak vis-a-vis the state.

In particular the extension of the multicultural agenda to the area of immigration so lamented by Buchanan is thus motivated. After the erosion of familial, communal, regional, and religious affiliations, a heavy dose of foreign immigrant invasion, especially if it comes from strange and far-away places, is calculated by the ruling neoconservative-social democratic elites to destroy whatever remains of national identities and attachments in order to promote the ultra-statist goal of a US-led multicultural One World Order.

Even more radically, reviving the West requires that the central nation state be whittled away, and that the restrictive-protective institutions of family, community, and church be restored to their original position as parts of a natural order composed of a multitude of competing jurisdictions and ranks of authority.

None or little of this should be news to conservatives, yet Buchanan appears to be unaware of it all. To be sure, he offers a few criticisms of democracy, but does not put forward a principled argument. In fact, he claims that "if America has ceased to be a Christian country, it is because she has ceased to be a democratic country." This is an astonishing pronouncement in light of the fact that neither the family nor the Christian church are democratic institutions (and to the extent they are, they are in trouble).

In any case, Buchanan does not pursue his criticism to an end. There is no hint of anti-statism in his book. The status quo of a central democratic nation state is accepted unquestioningly. The struggle is between Republicans and Democrats, the solution is to come from Washington DC, and Richard Nixon and Ronald Reagan (and to a lesser extent Robert Bork, John Ashcroft, and George W. Bush) are "good guys." Buchanan does not conclude what common sense and theoretical reflection suggest: that both parties, the congress, the supreme court, and the president (and all of his good guys) — the democratic system — may have something to do with the death of the West.

Nor is Buchanan’s failure entirely surprising. One need only recall his attacks on the classic free trade doctrine and the "dead Austrian economist" Mises, or his protectionist pleas to "buy-American." The same ignorance of economic theory displayed in these instances prevents him from penetrating to the essence of the matter at hand.

Throughout his failed presidential campaigns, Buchanan posed as a revolutionary. In fact, as a statist to the core and life-long fixture of Washington, DC, he is part of the establishment (although he may be its enfant terrible). It is not likely that he will now learn what he has not yet learnt. Instead, he will continue to waste much of his great talent in counter-productive political campaigns and maneuverings. Yet, his Death of the West could become the catalyst for the creation of a genuine counterrevolutionary movement to revive the West, if only the brightest and most curious among its readership recognize the role played in the demise of the West by the state and democracy.

Hans-Hermann Hoppe [send him mail], whom Lew Rockwell has called “a national treasure,” is senior fellow at the Ludwig von Mises Institute, professor of economics at the University of Nevada, Las Vegas, and editor of The Journal of Libertarian Studies. Democracy: The God That Failed is his eighth book. His website is www.HansHoppe.com.

Hans-Hermann Hoppe Archives

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Here is the essential reading on anarcho-capitalism, which might also be called the natural order, private-property anarchy, ordered anarchy, radical capitalism, the private-law society, or society without a state. This is not intended to be a comprehensive list. Indeed, only English-language works currently in print or forthcoming are included. Please note that suggestions are welcome, especially for Section IV: Congenial Writings.

I. Murray N. Rothbard and Austro-Libertarianism

At the top of any reading list on anarcho-capitalism must be the name Murray N. Rothbard. There would be no anarcho-capitalist movement to speak of without Rothbard. His work has inspired and defined the thinking even of such libertarians such as R. Nozick, for instance, who have significantly deviated from Rothbard, whether methodologically or substantively. Rothbard’s entire work is relevant to the subject of anarcho-capitalism, but centrally important are:

The Ethics of Liberty, the most comprehensive presentation and defense of a libertarian law code yet written. Grounded in the tradition of natural law and in its style of axiomatic-deductive reasoning, Rothbard explains the concepts of human rights, self-ownership, original appropriation, contract, aggression, and punishment. He demonstrates the moral unjustifiability of the state, and offers smashing refutations of prominent limited-statist libertarians such as L. v. Mises, F. A. Hayek, I. Berlin, and R. Nozick.

In For A New Liberty Rothbard applies abstract libertarian principles to solve current welfare-state problems. How would a stateless society provide for goods such as education, money, streets, police, courts, national defense, social security, environmental protection, etc.? Here are the answers.

Power and Market is the most comprehensive theoretical analysis of the inefficiencies and counterproductive effects of every conceivable form of government interference with the market, from price controls, compulsory cartels, anti-trust laws, licenses, tariffs, child labor laws, patents, to any form of taxation (including Henry George’s proposed “single tax” on ground land).

Egalitarianism As a Revolt Against Nature is a marvelous collection of Rothbard essays on philosophical, economic, and historical aspects of libertarianism, ranging from war and revolution to kids’ and women’s liberation. Rothbard shows his intellectual debt both to Ludwig von Mises and Austrian economics (praxeology) and to Lysander Spooner and Benjamin Tucker and individualist-anarchist political philosophy. This collection is the best single introduction to Rothbard and his libertarian research program.

The four-volume Conceived in Liberty is a comprehensive narrative history of colonial America and the role of libertarian ideas and movements. Rothbard’s magisterial two-volume An Austrian Perspective on the History of Economic Thought traces the development of libertarian economic and philosophical thought throughout intellectual history. The Irrepressible Rothbard contains delightful libertarian commentary on political, social, and cultural issues, written during the last decade of Rothbard’s life.

Justin Raimondo has written an insightful biography: Murray N. Rothbard: An Enemy of the State.

The Austro-libertarian tradition inaugurated by Rothbard is continued by Hans-Hermann Hoppe. In Democracy — The God That Failed Hoppe compares monarchy favorably to democracy, but criticizes both as ethically and economically inefficient, and advocates a natural order with competitive security and insurance suppliers. He revises fundamental orthodox historical interpretations, and reconsiders central questions of libertarian strategy. The Economics and Ethics of Private Property includes Hoppe’s axiomatic defense of the principle of self-ownership and original appropriation: anyone arguing against these principles is involved in a performative or practical contradiction.

The Myth of National Defense is a collection of essays by an international assembly of social scientists concerning the relationship between State and war and the possibility of non-statist property defense: by militias, mercenaries, guerrillas, protection-insurance agencies, etc.

II. Alternative Approaches to Anarcho-Capitalism

The following authors come to similar conclusions but reach them in different ways and varying styles. While Rothbard and Hoppe are natural-rightsers of sorts and praxeologists, there exist also utilitarian, deontic, empiricist, historicist, positivist, and plain eclectic defenders of anarcho-capitalism.

Randy E. Barnett’s The Structure of Liberty is an outstanding discussion of the requirements of a liberal-libertarian society from the viewpoint of a lawyer and legal theorist. Heavily influenced by F.A. Hayek, Barnett uses the term “polycentric constitutional order” for anarcho-capitalism.

Bruce L. Benson’s The Enterprise of Law is the most comprehensive empirical-historical study of anarcho-capitalism. Benson provides abundant empirical evidence for the efficient operation of market-produced law and order. Benson’s sequel To Serve and Protect is likewise to be recommended.

David D. Friedman’s The Machinery of Freedom presents the utilitarian case for anarcho-capitalism: brief, easy to read, and with many applications from education to property protection.

Anthony de Jasay favors a deontic approach to ethics. His writing — in The State, in Choice, Contract, Consent, and the excellent essay collection Against Politics — is theoretical, with a neo-classical, game-theoretic flavor. Brilliant critic of public choice and constitutional economics — and the notion of minarchism.

Morris and Linda Tannehill’s The Market for Liberty has a distinctly Randian flavor. However, the authors employ Ayn Rand’s pro-state argument in support of the opposite, anarchistic conclusion. Outstanding yet much neglected analysis of the operation of competing security producers (insurers, arbitrators, etc.).

III. Precursors of Modern Anarcho-Capitalism

The contemporary anarcho-capitalist intellectual movement has a few outstanding 19th and early-20th century precursors. Even when sometimes deficient — the issue of ground land ownership in the tradition of Herbert Spencer and the theory of money and interest in the Spooner-Tucker tradition — the following titles remain indispensable and largely unsurpassed. (This listing is chronological and systematic, rather than alphabetical.)

Gustave de Molinari’s pathbreaking 1849 article The Production of Security is probably the single most important contribution to the modern theory of anarcho-capitalism. Molinari argues that monopoly is bad for consumers, and that this also holds in the case of a monopoly of protection. Demands competition in the area of security production as for every other line of production.

Herbert Spencer’s Social Statics is an outstanding philosophical discussion of natural rights in the tradition of John Locke. Spencer defends the right to ignore the state. Also highly recommended are his Principles of Ethics.

Auberon Herbert is a student of Spencer. In The Right and Wrong of Compulsion by the State, Herbert develops the Spencerian idea of equal freedom to its logically consistent anarcho-capitalist end. Herbert is the father of Voluntaryism.

Lysander Spooner is a 19th-century American lawyer and legal theorist. No one who has read “No Treason,” included in The Lysander Spooner Reader, will ever see government with the same eyes. Spooner makes mincemeat of the idea of a social contract.

A concise history of individualist-anarchist thought and the related movement in 19th-century America, with particular attention to Spooner and Benjamin Tucker, is James J. Martin’s Men Against the State.

Franz Oppenheimer is a left-anarchist German sociologist. In The State he distinguishes between the economic (peaceful and productive) and the political (coercive and parasitic) means of wealth acquisition, and explains the state as instrument of domination and exploitation.

Albert J. Nock is influenced by Franz Oppenheimer. In Our Enemy, the State he explains the anti-social, predatory nature of the state, and draws a sharp distinction between government as voluntarily acknowledged authority and the State. Nock in turn influenced Frank Chodorov, who would influence young Murray Rothbard. In his Fugitive Essays, a collection of pro-market, anti-state political and economic commentary, Chodorov attacks taxation as robbery.

IV. Congenial Writings

While not directly concerned with the subject of anarcho-capitalism and written by less-than-radical libertarian or even non-libertarian authors, the following are invaluable for a profound understanding of liberty, natural order, and the state.

John V. Denson’s The Costs of War is a collection of essays by a distinguished group of libertarian and paleo-conservative scholars from various disciplines. Exposes the aggressive nature of the state. Possibly the most powerful anti-war book ever. Also to be recommended is Denson’s collection Reassessing the Presidency on the growth of state power.

David Gordon’s Secession, State, and Liberty is a collection of essays by contemporary philosophers, economists, and historians in defense of the right to secession.

Friedrich A. Hayek, Law, Legislation, and Liberty, Vol. I, is an important study on the “spontaneous” evolution of law, and the distinction of law versus legislation and between private and public law.

Bertrand de Jouvenel, On Power, is an outstanding account of the growth of state power, with many important insights concerning the role of the aristocracy as defender of liberty and mass democracy as a promoter of state power. Related, and likewise to be recommended is his Sovereignty.

tienne de la Botie, The Politics of Obedience, is the classic 16th-century inquiry into the source of government power. La Botie shows that the state’s power rests exclusively on public “opinion.” By implication, every state can be made to crumble — instantly and without any violence — simply by virtue of a change in public opinion.

Bruno Leoni, Freedom and the Law, is an earlier and in some regards superior treatment of topics similar to those discussed by Hayek. Leoni portrays Roman law as something discovered by independent judges rather than enacted or legislated by central authority — and thus akin to English common law.

Robert Nisbet, The Quest for Community (formerly published under the more descriptive title Community and Power) explains the protective function of intermediate social institutions, and the tendency of the state to weaken and destroy these institutions in order to gain total control over the isolated individual.

The Journal of Libertarian Studies. An Interdisciplinary Quarterly Review, founded by Murray N. Rothbard and now edited by Hans-Hermann Hoppe, is an indispensable resource for any serious student of anarcho-capitalism and libertarian scholarship.

The following JLS articles are most directly concerned with anarcho-capitalism.

Anderson, Terry, and P.J. Hill, The American Experiment in Anarcho-Capitalism, 3, 1.

Barnett, Randy E., Whither Anarchy? Has Robert Nozick Justified the State?, 1,1.

——, Toward a Theory of Legal Naturalism, 2, 2.

Benson, Bruce L., Enforcement of Private Property Rights in Primitive Societies, 9,1.

—–, Customary Law with Private Means of Resolving Disputes and Dispensing Justice, 9,2.

—–, Reciprocal Exchange as the Basis for Recognition of Law, 10, 1.

—–, Restitution in Theory and Practice, 12, 1.

Block, Walter, Free Market Transportation: Denationalizing the Roads, 3, 2.

—–, Hayek’s Road to Serfdom, 12, 2.

Childs, Roy A. Jr., The Invisible Hand Strikes Back, 1,1.

Cuzan, Alfred G., Do We Ever Really Get Out Of Anarchy?, 3, 2.

Davidson, James D., Note on Anarchy, State, and Utopia, 1, 4.

Eshelman, Larry, Might versus Right, 12, 1.

Evers, Williamson M., Toward a Reformulation of the Law of Contracts, 1, 1.

——, The Law of Omissions and Neglect of Children, 2, 1.

Ferrara, Peter J., Retribution and Restitution: A Synthesis, 6, 2.

Fielding, Karl T., The Role of Personal Justice in Anarcho-Capitalism, 2, 3.

Grinder, Walter E., and John Hagel, III, Toward a Theory of State Capitalism, 1, 1.

Hart, David M., Gustave de Molinari and the Anti-Statist Liberal Tradition, 3 parts, 5, 3 to 6, 1.

Hoppe, Hans-Hermann, Fallacies of Public Goods Theory and the Production of Security, 9, 1.

——, Marxist and Austrian Class Analysis, 9, 2.

——, The Private Production of Defense, 14, 1.

Kinsella, N. Stephan, Punishment and Proportionality, 12, 1.

——, New Rationalist Directions in Libertarian Rights Theory, 12, 2.

——, Inalienability and Punishment, 14, 1.

Liggio, Leonard P., Charles Dunoyer and French Classical Liberalism, 1, 3.

Mack, Eric, Voluntaryism: The Political Thought of Auberon Herbert, 2, 4.

McElroy, Wendy, The Culture of Individualist Anarchism in Late 19th-Century America, 5, 3.

McGee, Robert W., Secession Reconsidered, 11, 1.

Osterfeld, David, Internal Inconsistencies in Arguments for Government: Nozick, Rand, Hospers, 4, 3.

——, Anarchism and the Public Goods Issue: Law, Courts, and the Police, 9, 1.

Paul, Jeffrey, Nozick, Anarchism, and Procedural Rights, 1, 4.

Peden, Joseph R., Property Rights in Celtic Irish Law, 1, 2.

Peterson, Steven A., Moral Development and Critiques of Anarchism, 8, 2.

Raico, Ralph, Classical Liberal Exploitation Theory, 1, 3.

Rothbard, Murray N., Robert Nozick and the Immaculate Conception of the State, 1, 1.

——, Concepts of the Role of Intellectuals in Social Change Toward Laissez Faire, 9, 2.

——, Nations by Consent: Decomposing the Nation-State, 11, 1.

Sanders, John T., The Free Market Model versus Government: A Reply to Nozick, 1, 1.

Smith, George H., Justice Entrepreneurship in a Free Market, 3, 4 (with comments by Steven Strasnick, Robert Formani and Randy Barnett and a reply by Smith, in the same issue).

Sneed, John D., Order without Law: Where will Anarchists Keep the Madmen?, 1, 2.

Stringham, Edward, Market Chosen Law, 14, 1.

Tinsley, Patrick, Private Police: A Note, 14,1.

Watner, Carl, The Proprietary Theory of Justice in the Libertarian Tradition, 6, 3—4.

Hans-Hermann Hoppe [send him mail], whom Lew Rockwell calls “an international treasure,” is distinguished fellow at the Ludwig von Mises Institute and professor of economics at the University of Nevada, Las Vegas. Democracy: The God That Failed is his eighth book. Visit his website.

Theory and History

On the most abstract level, I want to show how theory is indispensible in correctly interpreting history. History — the sequence of events unfolding in time — is “blind.” It reveals nothing about causes and effects. We may agree, for instance, that feudal Europe was poor, that monarchical Europe was wealthier, and that democratic Europe is wealthier still, or that nineteenth-century America with its low taxes and few regulations was poor, while contemporary America with its high taxes and many regulations is rich. Yet was Europe poor because of feudalism, and did it grow richer because of monarchy and democracy? Or did Europe grow richer in spite of monarchy and democracy? Or are these phenomena unrelated?

Likewise, is contemporary America wealthier because of higher taxes and more regulations or in spite of them? That is, would America be even more prosperous if taxes and regulations had remained at their nineteenth-century levels? Historians qua historians cannot answer such questions, and no amount of statistical data manipulation can change this fact. Every sequence of empirical events is compatible with any of a number of rival, mutually incompatible interpretations.

To make a decision regarding such incompatible interpretations, we need a theory. By theory I mean a proposition whose validity does not depend on further experience but can be established a priori. This is not to say that one can do without experience altogether in establishing a theoretical proposition. However, it is to say that even if experience is necessary, theoretical insights extend and transcend logically beyond a particular historical experience. Theoretical propositions are about necessary facts and relations and, by implication, about impossibilities. Experience may thus illustrate a theory. But historical experience can neither establish a theorem nor refute it.

The Austrian School

Economic and political theory, especially of the Austrian variety, is a treasure trove of such propositions. For instance, a larger quantity of a good is preferred to a smaller amount of the same good; production must precede consumption; what is consumed now cannot be consumed again in the future; prices fixed below market-clearing prices will lead to lasting shortages; without private property in production factors there can be no factor prices, and without factor prices cost-accounting is impossible; an increase in the supply of paper money cannot increase total social wealth but can only redistribute existing wealth; monopoly (the absence of free entry) leads to higher prices and lower product quality than competition; no thing or part of a thing can be owned exclusively by more than one party at a time; democracy (majority rule) and private property are incompatible.

Theory is no substitute for history, of course, yet without a firm grasp of theory serious errors in the interpretation of historical data are unavoidable. For instance, the outstanding historian Carroll Quigley claims that the invention of fractional reserve banking has been a major cause of the unprecedented expansion of wealth associated with the Industrial Revolution, and countless historians have associated the economic plight of Soviet-style socialism with the absence of democracy.

From a theoretical viewpoint, such interpretations must be rejected categorically. An increase in the paper money supply cannot lead to greater prosperity but only to wealth redistribution. The explosion of wealth during the Industrial Revolution took place despite fractional reserve banking. Similarly, the economic plight of socialism cannot be due to the absence of democracy. Instead, it is caused by the absence of private property in factors of production. “Received history” is full of such misinterpretations. Theory allows us to rule out certain historical reports as impossible and incompatible with the nature of things. By the same token, it allows us to uphold certain other things as historical possibilities, even if they have not yet been tried.

Revisionist History

More interestingly, armed with elementary economic and political theory, I present in my book a revisionist reconstruction of modern Western history: of the rise of absolute monarchical states out of state-less feudal orders, and the transformation, beginning with the French Revolution and essentially completed with the end of World War I, of the Western world from monarchical to democratic States, and the rise of the US to the rank of “universal empire.” Neo-conservative writers such as Francis Fukuyama have interpreted this development as civilizational progress, and they proclaim the “End of History” to have arrived with the triumph of Western — US — democracy and its globalization (making the world safe for democracy).

Myth One

My theoretical interpretation is entirely different. It involves the shattering of three historical myths. The first and most fundamental is the myth that the emergence of states out of a prior, non-statist order has caused subsequent economic and civilizational progress. In fact, theory dictates that any progress must have occurred in spite — not because — of the institution of a state.

A state is defined conventionally as an agency that exercises a compulsory territorial monopoly of ultimate decison-making (jurisdiction) and of taxation. By definition then, every state, regardless of its particular constitution, is economically and ethically deficient. Every monopolist is “bad” from the viewpoint of consumers. Monopoly is hereby understood as the absence of free entry into a particular line of production: only one agency, A, may produce X.

Any monopoly is “bad” for consumers because, shielded from potential new entrants into its line of production, the price for its product will be higher and the quality lower than with free entry. And a monopolist with ultimate decison-making powers is particularly bad. While other monopolists produce inferior goods, a monopolist judge, besides producing inferior goods, will produce bads, because he who is the ultimate judge in every case of conflict also has the last word in each conflict involving himself. Consequently, instead of preventing and resolving conflict, a monopolist of ultimate decision-making will cause and provoke conflict in order to settle it to his own advantage.

Not only would no one accept such a monopoly judge provision, but no one would ever agree to a provision that allowed this judge to determine the price to be paid for his “service” unilaterally. Predictably, such a monopolist would use up ever more resources (tax revenue) to produce fewer goods and perpetrate more bads. This is not a prescription for protection but for oppression and exploitation. The result of a state, then, is not peaceful cooperation and social order, but conflict, provocation, aggression, oppression, and impoverishment, i.e., de-civilization. This, above all, is what the history of states illustrates. It is first and foremost the history of countless millions of innocent state victims.

Myth Two

The second myth concerns the historic transition from absolute monarchies to democratic states. Not only do neoconservatives interpret this development as progress; there is near-universal agreement that democracy represents an advance over monarchy and is the cause of economic and moral progress. This interpretation is curious in light of the fact that democracy has been the fountainhead of every form of socialism: of (European) democratic socialism and (American) liberalism and neo-conservatism as well as of international (Soviet) socialism, (Italian) fascism, and national (Nazi) socialism. More importantly, however, theory contradicts this interpretation; whereas both monarchies and democracies are deficient as states, democracy is worse than monarchy.

Theoretically speaking, the transition from monarchy to democracy involves no more or less than a hereditary monopoly “owner” — the prince or king — being replaced by temporary and interchangeable — monopoly “caretakers” — presidents, prime ministers, and members of parliament. Both kings and presidents will produce bads, yet a king, because he “owns” the monopoly and may sell or bequeath it, will care about the repercussions of his actions on capital values. As the owner of the capital stock on “his” territory, the king will be comparatively future-oriented. In order to preserve or enhance the value of his property, he will exploit only moderately and calculatingly. In contrast, a temporary and interchangeable democratic caretaker does not own the country, but as long as he is in office he is permitted to use it to his advantage. He owns its current use but not its capital stock. This does not eliminate exploitation. Instead, it makes exploitation shortsighted (present-oriented) and uncalculated, i.e., carried out without regard for the value of the capital stock.

Nor is it an advantage of democracy that free entry into every state position exists (whereas under monarchy entry is restricted by the king’s discretion). To the contrary, only competition in the production of goods is a good thing. Competition in the production of bads is not good; in fact, it is sheer evil. Kings, coming into their position by virtue of birth, might be harmless dilettantes or decent men (and if they are “madmen,” they will be quickly restrained or if need be, killed, by close relatives concerned with the possessions of the dynasty). In sharp contrast, the selection of government rulers by means of popular elections makes it essentially impossible for a harmless or decent person to ever rise to the top. Presidents and prime ministers come into their position as a result of their efficiency as morally uninhibited demagogues. Hence, democracy virtually assures that only dangerous men will rise to the top of government.

In particular, democracy is seen as promoting an increase in the social rate of time preference (present-orientation) or the “infantilization” of society. It results in continually increased taxes, paper money and paper money inflation, an unending flood of legislation, and a steadily growing “public” debt. By the same token, democracy leads to lower savings, increased legal uncertainty, moral relativism, lawlessness, and crime. Further, democracy is a tool for wealth and income confiscation and redistribution. It involves the legislative “taking” of the property of some — the haves of something — and the “giving” of it to others — the have-nots of things. And since it is presumably something valuable that is being redistributed — of which the haves have too much and the have-nots too little — any such redistribution implies that the incentive to be of value or produce something valuable is systematically reduced. In other words, the proportion of not-so-good people and not-so-good personal traits, habits, and forms of conduct and appearance will increase, and life in society will become increasingly unpleasant.

Last but not least, democracy is described as resulting in a radical change in the conduct of war. Because they can externalize the costs of their own aggression onto others (via taxes), both kings and presidents will be more than ‘normally’ aggressive and warlike. However, a king’s motive for war is typically an ownership-inheritance dispute. The objective of his war is tangible and territorial: to gain control over some piece of real estate and its inhabitants. And to reach this objective it is in his interest to distinguish between combatants (his enemies and targets of attack) and non-combatants and their property (to be left out of the war and undamaged). Democracy has transformed the limited wars of kings into total wars. The motive for war has become ideological — democracy, liberty, civilization, humanity. The objectives are intangible and elusive: the ideological “conversion” of the losers preceded by their “unconditional” surrender (which, because one can never be certain about the sincerity of conversion, may require such means as the mass murder of civilians). And the distinction between combatants and non-combatants becomes fuzzy and ultimately disappears under democracy, and mass war involvement — the draft and popular war rallies — as well as “collateral damage” become part of war strategy.

Myth Three

Finally, the third myth shattered is the belief that there is no alternative to Western welfare-democracies a la US. Again, theory demonstrates otherwise. First, this belief is false because the modern welfare-state is not a “stable” economic system. It is bound to collapse under its own parasitic weight, much like Russian-style socialism imploded a decade ago. More importantly, however, an economically stable alternative to democracy exists. The term I propose for this alternative is “natural order.”

In a natural order every scarce resource, including all land, is owned privately, every enterprise is funded by voluntarily paying customers or private donors, and entry into every line of production, including that of property protection, conflict arbitration, and peacemaking, is free. A large part of my book concerns the explanation of the workings — the logic — of a natural order and the requirements for the transformation from democracy to a natural order.

Whereas states disarm their citizens so as to be able to rob them more surely (thereby rendering them more vulnerable also to criminal and terrorist attack), a natural order is characterized by an armed citizenry. This feature is furthered by insurance companies, which play a prominent role as providers of security and protection in a natural order. Insurers will encourage gun ownership by offering lower premiums to armed (and weapons-trained) clients. By their nature insurers are defensive agencies. Only “accidental” — not: self-inflicted, caused or provoked — damage is “insurable.” Aggressors and provocateurs will be denied insurance coverage and are thus weak. And because insurers must indemnify their clients in case of victimization, they must be concerned constantly about the prevention of criminal aggression, the recovery of misappropriated property, and the apprehension of those liable for the damage in question.

Furthermore, the relationship between insurer and client is contractual. The rules of the game are mutually accepted and fixed. An insurer cannot “legislate,” or unilaterally change the terms of the contract. In particular, if an insurer wants to attract a voluntarily paying clientele, it must provide for the foreseeable contingency of conflict in its contracts, not only between its own clients but especially with clients of other insurers. The only provision satisfactorily covering the latter contingency is for an insurer to bind itself contractually to independent third-party arbitration. However, not just any arbitration will do. The conflicting insurers must agree on the arbitrator or arbitration agency, and in order to be agreeable to insurers, an arbitrator must produce a product (of legal procedure and substantive judgment) that embodies the widest possible moral consensus among insurers and clients alike. Thus, contrary to statist conditions, a natural order is characterized by stable and predictable law and increased legal harmony.

Moreover, insurance companies promote the development of another “security feature.” States have not just disarmed their citizens by taking away their weapons, democratic states in particular have also done so in stripping their citizens of the right to exclusion and by promoting instead — through various non-discrimination, affirmative action, and multiculturalist policies — forced integration. In a natural order, the right to exclusion inherent in the very idea of private property is restored to private property owners.

Accordingly, to lower the production cost of security and improve its quality, a natural order is characterized by increased discrimination, segregation, spatial separation, uniculturalism (cultural homogeneity), exclusivity, and exclusion. In addition, whereas states have undermined intermediating social institutions (family households, churches, covenants, communities, and clubs) and the associated ranks and layers of authority so as to increase their own power vis-a-vis equal and isolated individuals, a natural order is distinctly un-egalitarian: “elitist,” “hierarchical,” “proprietarian,” “patriarchical,” and “authoritorian,” and its stability depends essentially on the existence of a self-conscious natural — voluntarily acknowledged — aristocracy.

Strategy

Finally, I discuss strategic matters and questions. How can a natural order arise out of democracy? I explain the role of ideas, intellectuals, elites, and public opinion in the legitimation and de-legitimation of state power. In particular, I discuss the role of secession — and the proliferation of independent political entities — as an important step toward the goal of natural order, and I explain how to properly privatize “socialized” and “public” property.

The book grew out of speeches I presented at various Mises Institute and CLS conferences during the 1990s. These conferences, organized by Lew Rockwell, Burt Blumert, and, until his death in 1995, Murray Rothbard, had the purpose of advancing libertarianism by locating and anchoring abstract libertarian theory historically, sociologically, and culturally and thereby creating what has become known in the meantime as paleo-libertarianism (in contrast to left-countercultural-libertarianism and cold-and-hot-war “new” and “neo”-conservatism). The Rothbard-Rockwell Report, the precusor to LRC, was the first and most immediate expression and reflection of this intellectual movement. Others included The Costs of War, Reassessing the Presidency, and The Irrepressible Rothbard. Democracy the God That Failed is my attempt to define and give expression to the paleo-libertarian movement.

Hans-Hermann Hoppe [send him mail], whom Lew Rockwell has called “a national treasure,” is senior fellow at the Ludwig von Mises Institute, professor of economics at the University of Nevada, Las Vegas, and editor of The Journal of Libertarian Studies. Democracy: The God That Failed is his fifth book. See his interview with the Austrian Economics Newsletter.

Hans-Hermann Hoppe Archives

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Human
cooperation is the result of three factors. First, the fact of differences
among men and/or the geographical distribution of nature-given factors
of production. Second, the fact of higher productivity achieved
under the division of labor based on the mutual recognition of private
property (the exclusive control of every man over his own body and
his physical appropriations and possessions) as compared to either
self-sufficient isolation or aggression, plunder and domination.
And third, the human ability to recognize this latter fact. But
for the higher productivity of labor performed under divison of
labor and the human ability to recognize this fact, explains Ludwig
von Mises, "men would have forever remained deadly foes of
one another, irreconcilable rivals in their endeavors to secure
a portion of the scarce supply of means of sustenance provided by
nature. Each man would have been forced to view all other men as
his enemies; his craving for the satisfaction of his own appetites
would have brought him into an implacable conflict with all his
neighbors. No sympathy could possibly develop under such a state
of affairs." [Human
Action, 144]

The
higher productivity achieved under the division of labor and the
human ability to recognize this fact explains the origin of the
most elementary and fundamental of human institutions: the family
and the family household. Second, it explains the fact of neighborhood
(community) among homogeneous people (families, clans, tribes):
of neighborhood in the form of adjacent properties owned by separate
and equal owners and neighborhood in the unequal form of the relationship
characteristic of a father and his son, a landlord and his tenant,
or a community founder and his follower-residents. Third and most
important for our purposes, it explains the possibility of the peaceful
coexistence of heterogeneous and alien communities. Even if the
members of different communities find each other physically and/or
behaviorally strange, irritating, annoying or worse, and do not
want to associate as neighbors, they may still engage in mutually
beneficial trade if they are spatially separated from each other.

Let
me clarify this picture and assume the existence of different races,
ethnicities, languages, religions, and cultures (henceforth summarily:
ethno-cultures). Based on the just mentioned insight that "likes"
associate with other likes and live spatially separated from "unlikes,"
the following picture emerges: People of one ethno-culture tend
to live in closer proximity to one another and spatially separated
and distant from people of another ethno-culture. Whites live among
Whites and separate from Asians and Blacks. Italian speakers live
among other Italians and separate from English speakers. Christians
live among other Christians and separate from Muslims. Catholics
live among Catholics and separate from Protestants, etc. Naturally,
some "overlap" and "mixing" of different ethno-cultures
in various "border-territories" exists. Moreover, as centers
of interregional trade, cities naturally display a higher degree
of ethno-cultural heterogeneity. This not withstanding, however,
every neighborhood and community is internally homogeneous (uni-cultural).
In fact, even in border territories and cities the spatial association
and separation of likes and unlikes to be found in the macrocosm
finds its microcosmic equivalent. Nothing like a society where members
of different ethno-cultures live as neighbors or in close physical
proximity to each other (as propagated by some American multiculturalists)
will emerge. Rather, the emerging multiculturalism is one in which
many distinctly different ethno-cultures coexist in physical-spatial
separation and distant from one another, and trade with each other
from afar.

Let
us take one more step and assume that all property is owned privately
and the entire globe is settled. Every piece of land, every house
and building, every road, river, and lake, every forest and mountain,
and all of the coastline is owned by private owners or firms. No
such thing as "public" property or "open frontier"
exists. And let us take a look at the problem of migration under
this scenario of a "natural order."

First
and foremost, there is no such thing as "freedom of migration"
in a natural order. People cannot move about as they please. Wherever
a person moves, he moves on private property; and private ownership
implies the owner's right to include as well as to exclude others
from his property. Essentially, a person can move only if he is
invited by a recipient property owner, and this recipient-owner
can revoke his invitation and expel his invitees whenever he deems
their continued presence on his property undesirable (in violation
of his visitation code).

There
will be plenty of movement under this scenario, because there are
powerful reasons to include: to open access to one's property; but
there are also reasons to exclude: to restrict or close access.
Those who are the most inclusive are the owners of roads, railway
stations, harbors, and airports, for example. Interregional movement
is their business. Accordingly, their admission standards can be
expected to be low, typically requiring no more than the payment
of a user fee. However, even they would not follow a completely
non-discriminatory admission policy. For instance, they would exclude
intoxicated or unruly people, beggars, and bums from their property,
and they may videotape or otherwise monitor or screen their customers
while on their property.

The
situation for the owners of retail establishments, hotels, and restaurants
is similar. They are in the business of selling and renting and
thus offer easy access to their property. They have every economic
incentive not to discriminate unfairly against "strangers"
or "foreigners," because this would lead to reduced profits,
or losses. However, they must be significantly more circumspect
and restrictive in their admission policy than the owners of roads
or airports. They must take into account the local-domestic repercussions
that the presence of strangers may have. If local-domestic sales
suffer due to a retailer's or hotel's open admission policy vis-a-vis
foreigners, then discrimination is economically justified.
In order to overcome this possible problem, then, commercial establishments
can be expected to require of their "foreign" visitors
at a minimum adherence to local standards of conduct and appearance.

The
situation is similar for local employers. They prefer lower to higher
wage rates; hence, they are not predisposed against foreigners.
However, they must be sensitive to the repercussions on the local
labor force that may result from the employment of foreigners; that
is, they must be fearful of the possibility that an ethno-culturally
heterogeneous work force might lead to lower productivity. Moreover,
employment requires housing, and it is in the residential housing
and real estate market where discrimination against and exclusion
of ethno-cultural strangers will tend to be most pronounced. For
it is in the area of residential as contrasted to commercial
property where the human desire to be private, secluded and protected
and undisturbed from external events and intrusions, is most pronounced.
The value of residential property to its owner depends essentially
on its almost total exclusivity. Only family members, and occasionally
friends, are included. And if residential property is located in
a neighborhood, this desire for undisturbed possession – peace and
privacy – is best accomplished by a high degree of ethno-cultural
homogeneity (as this lowers transaction costs while simultaneously
increasing protection from external disturbances and intrusions).
In renting or selling residential property to strangers (and especially
to strangers from ethno-culturally distant quarters) heterogeneity
is introduced into the neighborhood. Transaction costs tend to increase,
and the peculiar peace-and-privacy-security – the freedom from external,
foreign intrusions – sought and expected of residential property
tends to fall, resulting in lower residential property values.

Under
the scenario of a natural order, then, it can be expected that there
will be plenty of interregional trade and travel. But owing to the
natural discrimination against ethno-cultural strangers in the area
of residential housing and real estate there will be little actual
migration, i.e., permanent resettlement. And whatever little migration
there is, it will be by individuals who are more or less completely
assimilated to their newly adopted community and its ethno-culture.

II

Let
me now introduce the institution of a State.

The
definition of a State assumed here is rather uncontroversial: A
State is an agency which possesses an exclusive monopoly of ultimate
decision-making and conflict arbitration within a given territory.
In particular, a State can insist that all conflicts involving itself
be adjudicated by itself or its agents. And implied in the power
to exclude all others from acting as ultimate judge, as the second
defining element of a State, is its power to tax: to unilaterally
determine the price justice seekers must pay to the State for its
services as the monopolistic provider of law and order.

Certainly,
based on this definition it is easy to understand why there might
be a desire to establish a State. Not, as we are told in kindergarten,
in order to attain the "common good" or because there
would be no order without a State, but for a reason far more selfish
and base. For he who is a monopolist of final arbitration within
a given territory can make and create laws in his
own favor rather than recognize and apply existing law; and he who
can legislate can also tax and thus enrich himself at the expense
of impoverishing others.

I
cannot cover here the fascinating question of how such an extraordinary
institution as a State with the power to legislate and tax can possibly
arise, except to note that ideologies and intellectuals have a lot
to do with it. Rather, I will assume states as "given"
(as in fact they are) and consider the changes as regards migration
that result from their existence.

First,
with the establishment of a state and territorially defined state
borders, "immigration" takes on an entirely new meaning.
In a natural order, immigration is a person's migration from one
neighborhood-community into a different one (micro-migration). In
contrast, under statist conditions immigration is immigration by
"foreigners" from across state borders, and the decision
whom to exclude or include, and under what conditions, rests not
with a multitude of independent private property owners or neighborhoods
of owners, but with a single central (and centralizing) state-government
as the ultimate sovereign of all domestic residents and regarding
all of their properties (macro-migration). Now, if a domestic resident-owner
invites a person and arranges for his access onto his property but
the government excludes this person from the state territory, this
is a case of forced exclusion (a phenomenon that does not
exist in a natural order). On the other hand, if the government
admits a person while there is no domestic resident-owner who has
invited this person onto his property, this is a case of forced
integration (also non-existent in a natural order, where all
movement is invited).

III

In
order to comprehend the significance of this change from decentralized
admission by a multitude of property owners and owner-associations
(micro-migration) to centralized admission by a state (macro-migration),
and in particular in order to grasp the potentialities of forced
integration under statist conditions, it is necessary first to briefly
consider a state's policy of domestic migration. Based on
the state's definition as a territorial monopolist of legislation
and taxation and the assumption of "self-interest," the
basic features of its policy can be predicted.

Most
fundamentally, it can be predicted that the state's agents will
be interested in increasing (maximizing) tax revenues and/or expanding
the range of legislative interference with established private property
rights, but they will have little or no interest in actually doing
what a state is supposed to do: protecting private property owners
and their property from domestic and foreign invasion.

More
specifically, because taxes and legislative interference with private
property rights are not paid and accepted voluntarily but are met
with resistance, a state, to assure its own power to tax and legislate,
must have an existential interest in providing its agents access
to everyone and all property within the state's territory. In order
to accomplish this, a state must take control of (expropriate) all
existing private roads and then use its tax revenue to construct
more and additional "public" roads, places, parks and
lands, ultimately until everyone's private property borders onto
or is encircled by public lands and roads.

Many
economists have argued that the existence of public roads indicates
an imperfection of the natural – free market – order. According
to them, the free market "under-produces" the so-called
"public" good of roads; and tax-funded public roads rectify
this deficiency and enhance overall economic efficiency (by facilitating
interregional movement and trade and lowering transaction costs).
Obviously, this is a somewhat starry-eyed view of things.

Free
markets do produce roads, although they may well produce
less and different roads than under statist conditions. And as viewed
from the perspective of a natural order, the increased production
of roads under statist conditions represents not an improvement
but an "over-production" or better yet "mal-production"
of roads. Public roads are not simply innocent and harmless facilitators
of interregional exchange. First and foremost they are facilitators
of state taxation and control. On public roads the government's
taxmen, police, and military can proceed directly to everyone's
doorstep.

In
addition, public roads and lands lead to a distortion and artificial
break-up of the spatial association and separation characteristic
of a natural order. As explained, there are reasons to be close
and inclusive, but there are also reasons to be physically distant
and separated from others. The over-production of roads occurring
under statist conditions means on the one hand that different communities
are brought into greater proximity to one another than they would
have preferred (on grounds of demonstrated preference). On the other
hand, it means that one coherent community is broken up and divided
by public roads.

Moreover,
under the particular assumption of a democratic state even
more specific predictions can be made. Almost by definition, a state's
territory extends over several ethno-culturally heterogeneous communities,
and dependent on recurring popular elections, a state-government
will predictably engage in redistributive policies. In an ethno-culturally
mixed territory this means playing one race, tribe, linguistic or
religious group against another; one class within anyone of these
groups against another (the rich vs. the poor, the capitalists vs.
the workers, etc.); and finally, mothers against fathers and children
against parents. The resulting income and wealth redistribution
is complex and varied. There are simple transfer payments from one
group to another, for instance. However, redistribution also has
a spatial aspect. In the realm of spatial relations it finds expression
in an ever more pervasive network of non-disciminatory "affirmative
action" policies imposed on private property owners.

An
owner's right to exclude others from his property is the means by
which he can avoid "bads" from happening: events that
will lower the value of his property to him. By means of an unceasing
flood of redistributive legislation, the democratic state has worked
relentlessly not only to strip its citizens of all arms (weapons)
but also to strip domestic property owners of their right of exclusion,
thereby robbing them of much of their personal and physical protection.
Commercial property owners such as stores, hotels, and restaurants
are no longer free to exclude or restrict access as they see fit.
Employers can no longer hire or fire who they wish. In the housing
market, landlords are no longer free to exclude unwanted tenants.
Furthermore, restrictive covenants are compelled to accept members
and actions in violation of their very own rules and regulations.
In short, forced integration is ubiquitous, making all aspects of
life increasingly unpleasant.

IV

Before
this backdrop of domestic state policies we can return to the problem
of immigration under statist conditions. It is now clear what state
admission implies. It does not merely imply centralized admission.
By admitting someone onto its territory, the state also permits
this person to proceed on public roads and lands to every domestic
resident's doorsteps, to make use of all public facilities and services
(such as hospitals and schools), and to access, protected by a multitude
of non-discrimination laws, every commercial establishment, employment,
and residential housing.

Only
one more element is missing in my reconstruction. Why would immigration
ever be a problem for a state? Who would want to migrate from a
natural order into a statist area? A statist area would tend to
lose its residents, especially its most productive subjects. It
would be an attraction only for potential state-welfare recipients
(whose admission would only further strengthen the emigration tendency).
If anything, there is an emigration problem for a state.
In fact, the institution of a state is a cause of emigration;
and indeed, it is the most important or even the sole cause of mass
migrations (more powerful and devastating in its effects than any
hurricane, earthquake or flood).

What
has been missing in our reconstruction is the assumption of a multitude
of states partitioning the entire globe (the absence of natural
orders anywhere). Then, as one state causes mass emigration, another
state will be confronted with the problem of mass immigration; and
the general direction of mass migration movements will be from territories
where states exploit (legislatively expropriate and tax) their subjects
more (and wealth accordingly tends to be lower) to territories where
states exploit less (and wealth is higher).

We
have finally arrived in the present, when the Western world – Western
Europe, North America, and Australia – is faced with the specter
of state-caused mass immigration from all over the rest of the world.
What is being – and what can be – done about this situation?

Out
of sheer self-interest states will not put up no defense at all
against uninvited intruders (that is: declare an "open border"
policy). Otherwise, the influx of immigrants would quickly assume
such proportions that the domestic state-welfare system would collapse
(apart from other problems such as popular resistance and unrest).
On the other hand, the Western welfare states do not prevent tens
or even hundreds of thousands (and in the case of the United States
well in excess of a million) of uninvited foreigners per year from
entering and settling their territories. Moreover, as far as legal
(rather than tolerated illegal) immigration is concerned, the Western
welfare states have adopted a non-discriminatory "affirmative
action" admission policy. That is, they set a maximum immigration
target and then allot quotas to various emigration countries or
regions, irrespective of how ethno-culturally similar or dissimilar
such places and regions of origin are, thus further aggravating
the problem of forced integration.

In
light of the unpopularity of this policy, one might wonder about
the motive for engaging in it. However, given the nature of the
state it is not difficult to discover such a rationale. States,
as will be recalled, are also promoters of forced domestic integration.
Forced integration is a means of breaking up all intermediate social
institutions and hierarchies (in between the state and the individual)
such as family, clan, tribe, community, and church and their internal
layers and ranks of authority. In so doing the individual is isolated
(atomized) and its power of resistance vis-a-vis the state weakened.
In the "logic" of the state, a good dose of foreign invasion,
especially if it comes from strange and far-away places, is reckoned
to further strengthen this tendency. And the present situation offers
a particularly opportune time to do so, for in accordance with the
inherently centralizing tendency of states and statism generally
and promoted here and now in particular by the U.S. as the world's
only remaining superpower, the Western world – or more precisely
the neoconservative-socialdemocratic elites controlling the state
governments in the U.S. and Western Europe – is committed to the
establishment of supra-national states (such as the European Union)
and ultimately one world state. National, regional or communal attachments
are the main stumbling block on the way toward this goal. A good
measure of uninvited foreigners and government imposed multiculturalism
is calculated to further weaken and ultimately destroy national,
regional, and communal identities and thus promote the goal of a
One World Order, led by the U.S., and a new "universal man."

V

What
if anything can be done to spoil these statist designs and regain
security and protection from invasion, whether foreign or domestic?

Let
me begin with a proposal made by the editors of the Wall Street
Journal, the Cato Institute, and various left-libertarian writers
of an "open" or "no" border policy – not
because this proposal has any merit. To the contrary, it helps to
bring out clearly what the problem is and what needs to be done
to solve it.

It
is not difficult to predict the consequences of an open border policy
in the present world. If Switzerland, Austria, Germany or Italy,
for instance, freely admitted everyone who made it to their borders
and demanded entry, these countries would quickly be overrun by
millions of third-world immigrants from Albania, Bangladesh, India,
Nigeria, for example. As the more perceptive open-border advocates
realize, the domestic state-welfare programs and provisions would
collapse as a consequence. This would not be a reason for concern;
for surely, in order to regain effective protection of person and
property, the welfare state must be abolished. But then comes the
great leap – or the gaping hole – in the open border argument. Somehow,
out of the ruins of the democratic welfare states, we are supposed
to believe, a new natural order will emerge.

The
first error involved in this line of reasoning can be readily identified.
Once the welfare states have collapsed under their own weight, the
masses of immigrants who have brought this about are still there.
They have not been miraculously transformed into Swiss, Austrians,
Bavarians or Lombards, but remain what they are: Zulus, Hindus,
Ibos, Albanians, or Bangladeshis. Assimilation can work when the
number of immigrants is small. It is entirely impossible, however,
if immigration occurs on a mass scale. In that case, immigrants
will simply transport their own ethno-culture onto the new territory.
Accordingly, when the welfare state has imploded there will be a
multitude of "little" (or not so little) Calcuttas, Daccas,
Lagos', and Tiranas strewn all over Switzerland, Austria and Italy.
It betrays a breathtaking sociological naivitee to believe that
out of this admixture a natural order will emerge. Based on all
historical experience with such forms of multiculturalism, and given
the existence of a state that intrudes into every aspect of social
and economic life, it can safely be predicted instead that the result
will be civil war. There will be wide-spread plundering and squattering
leading to massive capital consumption, and civilization as we know
it would disappear from Switzerland, Austria and Italy. Furthermore,
the host population will quickly be outbred and ultimately physically
displaced by their "guests." There will be still Alps
in Austria and Switzerland, but no Austrians or Swiss.

However,
the error of the open border proposal goes further than its dire
consequences. The fundamental error of the proposal is moral or
ethical in nature and lies in its assumption. It is the underlying
assumption that foreigners are "entitled," or have a "right,"
to immigrate. In fact, they have no such right whatsoever.

Foreigners
would have a right to enter Switzerland, Austria or Italy only if
these places were uninhabited (unowned) territories. However, they
are owned, and no one has a right to enter territories owned
by others (unless invited by the owner). Nor is it permissible to
argue, as some open border proponents have done, that while foreigners
may not enter private property without the owner's permission
they may do so with public property. In their eyes, public
property is akin to unowned property and thus "open" to
everyone, domestic citizen and foreigners alike. But this analogy
between public property and unowned resources is mistaken. There
exists a categorical difference between unowned resources (open
frontier) and public property. Public property is the result of
state-government confiscations – of legislative expropriations and/or
taxation – of originally privately owned property. While the state
does not recognize anyone as its private owner, all of government
controlled public property has in fact been brought about by the
tax-paying members of the domestic public. Austrians, Swiss, and
Italians, in accordance with the amount of taxes paid by each citizen,
have funded the Austrian, Swiss, and Italian public property. Hence,
they must be considered its legitimate owners. Foreigners have not
been subject to domestic taxation and expropriation; hence, they
cannot be assumed to have any rights regarding Austrian, Swiss or
Italian public property.

The
recognition of the moral status of public property as expropriated
private property is not only sufficient grounds for rejecting the
open border proposal. It is equally important for combatting the
present semi-open "affirmative action" immigration policies
of the Western welfare states.

Until
now, in the debate on immigration policy too much emphasis has been
placed on consequentialist (utilitarian) arguments. Apologists of
the status quo have argued that most immigrants become productive
and work and hence immigration contributes to rising domestic standards
of living. Against this critics have argued that the existing state-welfare
institutions and provisions increasingly invite welfare-immigration,
and they have warned that the only advantage of the current policies
over the open border alternative is that the former will take decades
until leading ultimately to similarly dire effects as the latter
will produce within years. As important as the resolution of these
issues is, however, it is not decisive. The opposition against current
immigration policies is ultimately independent of whether immigration
will make per capita GDP (or similar statistical measures) rise
or fall. It is a matter of justice: of right and wrong.

Understandably
the democratic welfare states try to conceal the source of
public property (i.e., acts of expropriation). However, they do
acknowledge that public property is "somehow" the property
of the citizens and they are their citizens' trustees in regard
to public property. Indeed, the state's legitimacy is derived
from its claim to protect its citizens and their property from invaders,
intruders, and trespassers domestic and foreign. Regarding foreigners,
this would require that the state act like the gatekeepers in private
gated communities: to check every newcomer for an invitation and
monitor his movement on route toward his final destination. When
it is pointed out and made clear that, contrary to this, the government
instead tolerates or even promotes the intrusion and invasion of
masses of aliens who by no stretch of the imagination can be deemed
welcome or invited by domestic residents, this is or may become
a threat to a government's legitimacy and exert enough pressure
for it to adopt a more restrictive and discriminatory admission
policy.

But
this can only be the beginning, for even if public opinion induced
the state to adopt an immigration stance more in accordance with
popular sentiments and justice, this would not change the fact that
the interests of private property owners and those of the state
as a territorial monopolist of legislation and taxation are incompatible
and in permanent conflict with each other. A state is a contradiction
in terms: a property protector who may expropriate the property
of the protected through legislation and taxation. Predictably,
a state will be interested in maximizing tax revenues and power
(the range of legislative interference with private property rights)
but disinterested in protecting anything except itself. What we
experience in the area of immigration is only one aspect of a general
problem. States are also supposed to protect their citizen from
domestic intrusions and invasions; yet as we have seen they actually
disarm them, encircle them, tax them, and strip them of their right
to exclusion, thus rendering them helpless.

Accordingly,
the solution to the immigration problem is at the same time the
solution to the general problem inherent in the institution of a
state and public property. It involves the return to a natural order
by means of secession. To regain security from domestic and foreign
intrusion and invasion, the central nation states will have to be
decomposed into their constituent parts. The Austrian and the Italian
central state do not own Austrian and Italian public property. Supposedly,
they are its citizens' trustees. But they do not protect them and
their property. Hence, just as the Austrians and the Italians (and
not foreigners) are the owners of Austria and Italy, so by extension
of the same principle do the Carinthians and the Lombards (in accordance
with individual tax payments) own Carinthia and Lombardy, and the
Bergamese Bergamo (and not the Viennese and the Roman government).
By means of secession, the central state's public roads and lands
are repossessed by their genuine owners: provinces, cities, towns,
villages, neighborhoods, and ultimately private property owners
and ownership associations. The central state, stripped of its public
property, has no longer access and its laws no longer apply anywhere.
At the same time, the right to exclusion inherent in private property
and essential for personal security and protection is returned into
the hands of a multitude of independent private decisionmaking units.

May
16, 2001

Hans-Hermann Hoppe [send
him mail] is Professor of Economics at the University of Nevada
Las Vegas, Las Vegas, Nevada, Senior Fellow of the Ludwig von Mises
Institute, Auburn, Alabama, and Editor of the
Journal of Libertarian
Studies, An Interdisciplinary Quarterly Review. He is the
author of Kritik
der kausalwissenschaftlichen Sozialforschung (1983), Eigentum,
Anarchie und Staat (1987), A
Theory of Socialism and Capitalism (1989), The
Economics and Ethics of Private Property (1993), and
Democracy:
The God That Failed (forthcoming). In Italian, see Abasso
la democrazia. L'etica libertaria e la crisi dello stato (Leonardo
Facco Editore, 2000). For additional information see: www.mises.org/faculty.

by Hans-Hermann Hoppe

Imagine a world government, democratically elected according to the principle of one-man-one-vote on a worldwide scale. What would the probable outcome of an election be? Most likely, we would get a Chinese-Indian coalition government. And what would this government most likely decide to do in order to satisfy its supporters and be reelected? The government would probably find that the so-called Western world had far too much wealth and the rest of the world, in particular China and India, had far too little, and hence, that a systematic wealth and income redistribution would be called for. Or imagine, for your own country, that the right to vote were expanded to seven-year-olds. While the government would not likely be made up of children, its policies would most definitely reflect the ‘legitimate concerns’ of children to have ‘adequate’ and ‘equal’ access to ‘free’ hamburgers, lemonade, and videos.

In light of these ‘thought experiments’, is there any doubt about the consequences which resulted from the process of democratization that began in Europe and the U.S. in the second half of the nineteenth century and has come to fruition since the end of World War I? The successive expansion of the franchise and finally the establishment of universal adult suffrage did within each country what a world democracy would do for the entire globe: it set in motion a seemingly permanent tendency toward wealth and income redistribution.

One-man-one-vote combined with ‘free entry’ into government — democracy — implies that every person and his personal property comes within reach of — and is up for grabs by — everyone else. A ‘tragedy of the commons’ is created. It can be expected that majorities of ‘have-nots’ will relentlessly try to enrich themselves at the expense of minorities of ‘haves’. This is not to say that there will be only one class of have-nots and one class of haves, and that the redistribution will be uniformly one from the rich onto the poor. To the contrary. While the redistribution from rich to poor will always play a prominent role everywhere, it would be a sociological blunder to assume that it will be the sole or even the predominant form of redistribution. After all, the ‘permanently’ rich and the ‘permanently’ poor are usually rich or poor for a reason. The rich are characteristically bright and industrious, and the poor typically dull, lazy, or both. It is not very likely that dullards, even if they make up a majority, will systematically outsmart and enrich themselves at the expense of a minority of bright and energetic individuals. Rather, most redistribution will take place within the group of the ‘non-poor’, and frequently it will actually be the better-off who succeed in having themselves subsidized by the worse-off. Just think of the almost universal practice of offering a ‘free’ university education, whereby the working class, whose children rarely attend universities, is made to pay for the education of middle-class children! Moreover, it can be expected that there will be many competing groups and coalitions trying to gain at the expense of others. There will be various changing criteria defining what it is that makes one person a ‘have’ (deserving to be looted) and another a ‘have-not’ (deserving to receive the loot). At the same time, individuals will be members of a multitude of groups of ‘haves’ and/or ‘have-nots’, losing on account of one of their characteristic and gaining on account of another, with some individuals ending up net-losers and others net-winners of redistribution.

The recognition of democracy as a machinery of popular wealth and income redistribution, then, in conjunction with one of the most fundamental principles in all of economics — that one will end up getting more of whatever it is that is being subsidized — provides the key to an understanding of the present age.

All redistribution, regardless of the criterion on which it is based, involves ‘taking’ from the original owners and/or producers (the ‘havers’ of something) and ‘giving’ to non-owners and non-producers (the ‘non-havers’ of something). The incentive to be an original owner or producer of the thing in question is reduced, and the incentive to be a non-owner and non-producer is raised. Accordingly, as a result of subsidizing individuals because they are poor, there will be more poverty. In subsidizing people because they are unemployed, more unemployment will be created. Supporting single mothers out of tax funds will lead to an increase in single motherhood, ‘illegitimacy’, and divorce. In outlawing child labor, income is transferred from families with children to childless persons (as a result of the legal restriction on the supply of labor, wage rates will rise). Accordingly, the birthrate will fall. On the other hand, by subsidizing the education of children, the opposite effect is created. Income is transferred from the childless and those with few children to those with many children. As a result the birthrate will increase. Yet then the value of children will again fall, and birthrates will decline as a result of the so-called Social Security System, for in subsidizing retirees (the old) out of taxes imposed on current income earners (the young), the institution of a family — the intergenerational bond between parents, grandparents, and children — is systematically weakened. The old need no longer rely on the assistance of their children if they have made no provision for their own old age, and the young (with typically less accumulated wealth) must support the old (with typically more accumulated wealth) rather than the other way around, as is typical within families. Parents’ wish for children, and children’s wish for parents will decline, family breakups and dysfunctional families will increase, and provisionary action — saving and capital formation — will fall, while consumption rises.

In subsidizing the malingerers, the neurotics, the careless, the alcoholics, the drug addicts, the Aids-infected, and the physically and mentally ‘challenged’ through insurance regulation and compulsory health insurance, there will be more illness, malingering, neuroticism, carelessness, alcoholism, drug addiction, Aids infection, and physical and mental retardation. By forcing non-criminals, including the victims of crime, to pay for the imprisonment of criminals (rather than making criminals compensate their victims and pay the full cost of their own apprehension and incarceration), crime will increase. By forcing businessmen, through ‘affirmative action’ (‘non-discrimination’) programs, to employ more women, homosexuals, blacks, or other ‘minorities’ than they would like to, there will be more employed minorities, and fewer employers and fewer male, heterosexual, and white employment. By compelling private land owners to subsidize (‘protect’) ‘endangered species’ residing on their land through environmental legislation, there will be more and better-off animals, and fewer and worse-off humans.

Most importantly, by compelling private property owners and/or market income earners (producers) to subsidize ‘politicians’, ‘political parties’, and ‘civil servants’ (politicians and government employees do not pay taxes but are paid out of taxes), there will be less wealth formation, fewer producers and less productivity, and ever more waste, ‘parasites’ and parasitism.

Businessmen (capitalists) and their employees cannot earn an income unless they produce goods or services which are sold in markets. The buyers’ purchases are voluntary. By buying a good or service, the buyers (consumers) demonstrate that they prefer this good or service over the sum of money that they must surrender in order to acquire it. In contrast, politicians, parties, and civil servants produce nothing which is sold in markets. No one buys government ‘goods’ or ‘services’. They are produced, and costs are incurred to produce them, but they are not sold and bought. On the one hand, this implies that it is impossible to determine their value and find out whether or not this value justifies their costs. Because no one buys them, no one actually demonstrates that he considers government goods and services worth their costs, and indeed, whether or not anyone attaches any value to them at all. From the viewpoint of economic theory, it is thus entirely illegitimate to assume, as is always done in national income accounting, that government goods and services are worth what it costs to produce them, and then to simply add this value to that of the ‘normal’, privately produced (bought and sold) goods and services to arrive at gross domestic (or national) product, for instance. It might as well be assumed that government goods and services are worth nothing, or even that they are not “goods” at all but “bads”; hence, that the cost of politicians and the entire civil service should be subtracted from the total value of privately produced goods and services. Indeed, to assume this would be far more justified. For on the other hand, as to its practical implications, the subsidizing of politicians and civil servants amounts to a subsidy to ‘produce’ with little or no regard for the well-being of one’s alleged consumers, and with much or sole regard instead for the well-being of the ‘producers’, i.e., the politicians and civil servants. Their salaries remain the same, whether their output satisfies consumers or not. Accordingly, as a result of the expansion of ‘public’ sector employment, there will be increasing laziness, carelessness, incompetence, disservice, maltreatment, waste, and even destruction — and at the same time ever more arrogance, demagoguery, and lies (‘we work for the public good’).

After less than one hundred years of democracy and redistribution, the predictable results are in. The ‘reserve fund’ that was inherited from the past is apparently exhausted. For several decades (since the late 1960s or the early 1970s), real standards of living have stagnated or even fallen in the West. The ‘public’ debt and the cost of the existing social security and health care system have brought on the prospect of an imminent economic meltdown. At the same time, almost every form of undesirable behavior — unemployment, welfare dependency, negligence, recklessness, uncivility, psychopathy, hedonism and crime — has increased, and social conflict and societal breakdown have risen to dangerous heights. If current trends continue, it is safe to say that the Western welfare state (social democracy) will collapse just as Eastern (Russian-style) socialism collapsed in the late 1980s.

However, economic collapse does not automatically lead to improvement. Matters can become worse rather than better. What is necessary besides a crisis are ideas — correct ideas — and men capable of understanding and implementing them once the opportunity arises. Ultimately, the course of history is determined by ideas, be they true or false, and by men acting upon and being inspired by true or false ideas. The current mess is also the result of ideas. It is the result of the overwhelming acceptance, by public opinion, of the idea of democracy. As long as this acceptance prevails, a catastrophe will be unavoidable, and there is no hope for improvement even after its arrival. On the other hand, once the idea of democracy is recognized as false and vicious — and ideas can, in principle, be changed almost instantaneously — a catastrophe can be avoided.

The central task ahead of those wanting to turn the tide and prevent an outright breakdown is the ‘delegitimation’ of the idea of democracy as the root cause of the present state of progressive ‘decivilization’. To this purpose, one should first point out that it is difficult to find many proponents of democracy in the history of political theory. Almost all major thinkers had nothing but contempt for democracy. Even the Founding Fathers of the U.S., nowadays considered the model of a democracy, were strictly opposed to it. Without a single exception, they thought of democracy as nothing but mob-rule. They considered themselves to be members of a ‘natural aristocracy’, and rather than a democracy they advocated an aristocratic republic. Furthermore, even among the few theoretical defenders of democracy such as Rousseau, for instance, it is almost impossible to find anyone advocating democracy for anything but extremely small communities (villages or towns). Indeed, in small communities where everyone knows everyone else personally most people cannot but acknowledge that the position of the ‘haves’ is typically based on their superior personal achievement just as the position of the ‘have-nots’ finds its typical explanation in their personal deficiencies and inferiority. Under these circumstances, it is far more difficult to get away with trying to loot other people and their personal property to one’s advantage. In distinct contrast, in large territories encompassing millions or even hundreds of millions of people, where the potential looters do not know their victims, and vice versa, the human desire to enrich oneself at another’s expense is subject to little or no restraints.

More importantly, it must be made clear again that the idea of democracy is immoral as well as uneconomical. As for the moral status of majority rule, it must be pointed out that it allows for A and B to band together to rip off C, C and A in turn joining to rip off B, and then B and C conspiring against A, etc. This is not justice but a moral outrage, and rather than treating democracy and democrats with respect, they should be treated with open contempt and ridiculed as moral frauds. On the other hand, as for the economic quality of democracy, it must be stressed relentlessly that it is not democracy but private property, production, and voluntary exchange that are the ultimate sources of human civilization and prosperity. In particular, contrary to widespread myths, it needs to be emphasized that the lack of democracy had essentially nothing to do with the bankruptcy of Russian-style socialism. It was not the selection principle for politicians that constituted socialism’s problem. It was politics and political decision-making as such. Instead of each private producer deciding independently what to do with particular resources, as under a regime of private property and contractualism, with fully or partially socialized factors of production each decision requires someone else’s permission. It is irrelevant to the producer how those giving permission are chosen. What matters to him is that permission must be sought at all. As long as this is the case, the incentive of producers to produce is reduced and impoverishment will result. Private property is as incompatible with democracy, then, as with any other form of political rule. Rather than democracy, justice as well as economic efficiency require a pure and unrestricted private property society — an ‘anarchy of production’ — in which no one rules anybody, and all producers’ relations are voluntary, and thus mutually beneficial.

Lastly, as for strategic considerations, in order to approach the goal of a non-exploitative social order, i.e., a private property anarchy, the idea of majoritarianism should be turned against democratic rule itself. Under any form of governmental rule, including a democracy, the ‘ruling class’ (politicians and civil servants) makes up only a small proportion of the total population. While it is possible that one hundred parasites may lead a comfortable life on the products of one thousand hosts, one thousand parasites cannot live off of one hundred hosts. Based on the recognition of this fact, it would appear possible to persuade a majority of the voters that it is adding insult to injury to let those living off of other peoples’ taxes have a say in how high these taxes are, and to thus decide, democratically, to take the right to vote away from all government employees and everyone who receives government benefits, whether they are welfare recipients or government contractors. In addition, in conjunction with this strategy it is necessary to recognize the overwhelming importance of secession and secessionist movements. If majority decisions are ‘right’, then the largest of all possible majorities, a world majority and a democratic world government, must be considered ultimately ‘right’ with the consequences predicted at the outset of this article. In contrast, secession always involves the breaking away of smaller from larger populations. It is thus a vote against the principle of democracy and majoritarianism. The further the process of secession proceeds — to the level of small regions, cities, city districts, towns, villages, and ultimately individual households and voluntary associations of private households and firms — the more difficult it will become to maintain the current level of redistributive policies. At the same time, the smaller the territorial units, the more likely it will be that a few individuals, based on the popular recognition of their economic independence, outstanding professional achievement, morally impeccable personal life, superior judgement, courage, and taste, will rise to the rank of natural, voluntarily acknowledged elites and lend legitimacy to the idea of a natural order of competing (non-monopolistic) and freely (voluntarily) financed peacekeepers, judges, and overlapping jurisdictions as exists even now in the arena of international trade and travel — a pure private law society — as the answer to democracy and any other form of political (coercive) rule.

Hans-Hermann Hoppe [send him mail], whom Lew Rockwell calls “an international treasure,” is senior fellow at the Ludwig von Mises Institute, professor of economics at the University of Nevada, Las Vegas, and editor of The Journal of Libertarian Studies. Democracy: The God That Failed is his eighth book. Visit his website.

In
light of these ‘thought experiments’, is there any doubt about the
consequences which resulted from the process of democratization
that began in Europe and the U.S. in the second half of the nineteenth
century and has come to fruition since the end of World War I? The
successive expansion of the franchise and finally the establishment
of universal adult suffrage did within each country what
a world democracy would do for the entire globe: it set in motion
a seemingly permanent tendency toward wealth and income redistribution.

One-man-one-vote
combined with ‘free entry’ into government — democracy — implies
that every person and his personal property comes within reach of — and is up for grabs by — everyone else. A ‘tragedy of the commons’
is created. It can be expected that majorities of ‘have-nots’ will
relentlessly try to enrich themselves at the expense of minorities
of ‘haves’. This is not to say that there will be only one class
of have-nots and one class of haves, and that the redistribution
will be uniformly one from the rich onto the poor. To the contrary.
While the redistribution from rich to poor will always play a prominent
role everywhere, it would be a sociological blunder to assume that
it will be the sole or even the predominant form of redistribution.
After all, the ‘permanently’ rich and the ‘permanently’ poor are
usually rich or poor for a reason. The rich are characteristically
bright and industrious, and the poor typically dull, lazy, or both.
It is not very likely that dullards, even if they make up a majority,
will systematically outsmart and enrich themselves at the expense
of a minority of bright and energetic individuals. Rather, most
redistribution will take place within the group of the
‘non-poor’, and frequently it will actually be the better-off who
succeed in having themselves subsidized by the worse-off. Just think
of the almost universal practice of offering a ‘free’ university
education, whereby the working class, whose children rarely attend
universities, is made to pay for the education of middle-class children!
Moreover, it can be expected that there will be many competing groups
and coalitions trying to gain at the expense of others. There will
be various changing criteria defining what it is that makes one
person a ‘have’ (deserving to be looted) and another a ‘have-not’
(deserving to receive the loot). At the same time, individuals will
be members of a multitude of groups of ‘haves’ and/or ‘have-nots’,
losing on account of one of their characteristic and gaining on
account of another, with some individuals ending up net-losers and
others net-winners of redistribution.

The
recognition of democracy as a machinery of popular wealth and income
redistribution, then, in conjunction with one of the most fundamental
principles in all of economics — that one will end up getting more
of whatever it is that is being subsidized — provides the key to
an understanding of the present age.

All
redistribution, regardless of the criterion on which it is based,
involves ‘taking’ from the original owners and/or producers (the
‘havers’ of something) and ‘giving’ to non-owners and non-producers
(the ‘non-havers’ of something). The incentive to be an original
owner or producer of the thing in question is reduced, and the incentive
to be a non-owner and non-producer is raised. Accordingly, as a
result of subsidizing individuals because they are poor, there will
be more poverty. In subsidizing people because they are unemployed,
more unemployment will be created. Supporting single mothers out
of tax funds will lead to an increase in single motherhood, ‘illegitimacy’,
and divorce. In outlawing child labor, income is transfered from
families with children to childless persons (as a result of the
legal restriction on the supply of labor, wage rates will rise).
Accordingly, the birthrate will fall. On the other hand, by subsidizing
the education of children, the opposite effect is created. Income
is transfered from the childless and those with few children to
those with many children. As a result the birthrate will increase.
Yet then the value of children will again fall, and birthrates will
decline as a result of the so-called Social Security System, for
in subsidizing retirees (the old) out of taxes imposed on current
income earners (the young), the institution of a family — the intergenerational
bond between parents, grandparents, and children — is systematically
weakened. The old need no longer rely on the assistance of their
children if they have made no provision for their own old age, and
the young (with typically less accumulated wealth) must support
the old (with typically more accumulated wealth) rather than the
other way around, as is typical within families. Parents’ wish for
children, and children’s wish for parents will decline, family breakups
and dysfunctional families will increase, and provisionary action — saving and capital formation — will fall, while consumption rises.

In
subsidizing the malingerers, the neurotics, the careless, the alcoholics,
the drug addicts, the Aids-infected, and the physically and mentally
‘challenged’ through insurance regulation and compulsory health
insurance, there will be more illness, malingering, neuroticism,
carelessness, alcoholism, drug addiction, Aids infection, and physical
and mental retardation. By forcing non-criminals, including the
victims of crime, to pay for the imprisonment of criminals (rather
than making criminals compensate their victims and pay the full
cost of their own apprehension and incarceration), crime will increase.
By forcing businessmen, through ‘affirmative action’ (‘non-discrimination’)
programs, to employ more women, homosexuals, blacks, or other ‘minorities’
than they would like to, there will be more employed minorities,
and fewer employers and fewer male, heterosexual, and white employment.
By compelling private land owners to subsidize (‘protect’) ‘endangered
species’ residing on their land through environmental legislation,
there will be more and better-off animals, and fewer and worse-off
humans.

Most
importantly, by compelling private property owners and/or market
income earners (producers) to subsidize ‘politicians’, ‘political
parties’, and ‘civil servants’ (politicians and government employees
do not pay taxes but are paid out of taxes), there
will be less wealth formation, fewer producers and less productivity,
and ever more waste, ‘parasites’ and parasitism.

Businessmen
(capitalists) and their employees cannot earn an income unless they
produce goods or services which are sold in markets. The buyers’
purchases are voluntary. By buying a good or service, the buyers
(consumers) demonstrate that they prefer this good or service
over the sum of money that they must surrender in order to acquire
it. In contrast, politicians, parties, and civil servants produce
nothing which is sold in markets. No one buys government
‘goods’ or ‘services’. They are produced, and costs are incurred
to produce them, but they are not sold and bought. On the one hand,
this implies that it is impossible to determine their value and
find out whether or not this value justifies their costs. Because
no one buys them, no one actually demonstrates that he considers
government goods and services worth their costs, and indeed, whether
or not anyone attaches any value to them at all. From the viewpoint
of economic theory, it is thus entirely illegitimate to assume,
as is always done in national income accounting, that government
goods and services are worth what it costs to produce them, and
then to simply add this value to that of the ‘normal’,
privately produced (bought and sold) goods and services to arrive
at gross domestic (or national) product, for instance. It might
as well be assumed that government goods and services are worth
nothing, or even that they are not “goods” at all but “bads”; hence,
that the cost of politicians and the entire civil service should
be subtracted from the total value of privately produced
goods and services. Indeed, to assume this would be far
more justified. For on the other hand, as to its practical implications,
the subsidizing of politicians and civil servants amounts to a subsidy
to ‘produce’ with little or no regard for the well-being of one’s
alleged consumers, and with much or sole regard instead for the
well-being of the ‘producers’, i.e., the politicians and civil servants.
Their salaries remain the same, whether their output satisfies consumers
or not. Accordingly, as a result of the expansion of ‘public’ sector
employment, there will be increasing laziness, carelessness, incompeence,
disservice, maltreatment, waste, and even destruction — and at the
same time ever more arrogance, demagogery, and lies (‘we work for
the public good’).

After
less than one hundred years of democracy and redistribution, the
predictable results are in. The ‘reserve fund’ that was inherited
from the past is apparently exhausted. For several decades (since
the late 1960s or the early 1970s), real standards of living have
stagnated or even fallen in the West. The ‘public’ debt and the
cost of the existing social security and health care system have
brought on the prospect of an imminent economic meltdown. At the
same time, almost every form of undesirable behavior — unemployment,
welfare dependency, negligence, recklessness, uncivility, psychopathy,
hedonism and crime — has increased, and social conflict and societal
breakdown have risen to dangerous heights. If current trends continue,
it is safe to say that the Western welfare state (social democracy)
will collapse just as Eastern (Russian-style) socialism collapsed
in the late 1980s.

However,
economic collapse does not automatically lead to improvement. Matters
can become worse rather than better. What is necessary besides a
crisis are ideas — correct ideas — and men capable of understanding
and implementing them once the opportunity arises. Ultimately, the
course of history is determined by ideas, be they true or false,
and by men acting upon and being inspired by true or false ideas.
The current mess is also the result of ideas. It is the result of
the overwhelming acceptance, by public opinion, of the idea of democracy.
As long as this acceptance prevails, a catastrophy will be unavoidable,
and there is no hope for improvement even after its arrival. On
the other hand, once the idea of democracy is recognized as false
and vicious — and ideas can, in principle, be changed almost instantaneously — a catastrophy can be avoided.

The
central task ahead of those wanting to turn the tide and prevent
an outright breakdown is the ‘delegitimation’ of the idea of democracy
as the root cause of the present state of progressive ‘decivilization’.
To this purpose, one should first point out that it is difficult
to find many proponents of democracy in the history of political
theory. Almost all major thinkers had nothing but contempt for democracy.
Even the Founding Fathers of the U.S., nowadays considered the model
of a democracy, were strictly opposed to it. Without a single exception,
they thought of democracy as nothing but mob-rule. They considered
themselves to be members of a ‘natural aristocracy’, and rather
than a democracy they advocated an aristocratic republic. Furthermore,
even among the few theoretical defenders of democracy such as Rousseau,
for instance, it is almost impossible to find anyone advocating
democracy for anything but extremely small communities (villages
or towns). Indeed, in small communities where everyone knows everyone
else personally most people cannot but acknowledge that the position
of the ‘haves’ is typically based on their superior personal achievement
just as the position of the ‘have-nots’ finds its typical explanation
in their personal deficiencies and inferiority. Under these circumstances,
it is far more difficult to get away with trying to loot other people
and their personal property to one’s advantage. In distinct contrast,
in large territories encompassing millions or even hundreds of millions
of people, where the potential looters do not know their victims,
and vice versa, the human desire to enrich oneself at another’s
expense is subject to little or no restraints.

More
importantly, it must be made clear again that the idea of democracy
is immoral as well as uneconomical. As for the
moral status of majority rule, it must be pointed out that it allows
for A and B to band together to rip off C, C and A in turn joining
to rip off B, and then B and C conspiring against A, etc..This is
not justice but a moral outrage, and rather than treating democracy
and democrats with respect, they should be treated with open contempt
and ridiculed as moral frauds. On the other hand, as for the economic
quality of democracy, it must be stressed relentlessly that it is
not democracy but private property, production, and voluntary exchange
that are the ultimate sources of human civilization and prosperity.
In particular, contrary to widespread myths, it needs to be emphasized
that the lack of democracy had essentially nothing to do with the
bankruptcy of Russian-style socialism. It was not the selection
principle for politicians that constituted socialism’s problem.
It was politics and political decision-making as such. Instead of
each private producer deciding independently what to do with particular
resources, as under a regime of private property and contractualism,
with fully or partially socialized factors of production each decision
requires someone else’s permission. It is irrelevant to the producer
how those giving permission are chosen. What matters to him is that
permission must be sought at all. As long as this is the case, the
incentive of producers to produce is reduced and impoverishment
will result. Private property is as incompatible with democracy,
then, as with any other form of political rule. Rather than democracy,
justice as well as economic efficiency require a pure and unrestricted
private property society — an ‘anarchy of production’ — in which
no one rules anybody, and all producers’ relations are voluntary,
and thus mutually beneficial.

Lastly,
as for strategic considerations, in order to approach the goal of
a non-exploitative social order, i.e., a private property anarchy,
the idea of majoritarianism should be turned against democratic
rule itself. Under any form of governmental rule, including a democracy,
the ‘ruling class’ (politicians and civil servants) makes up only
a small proportion of the total population. While it is possible
that one hundred parasites may lead a comfortable life on the products
of one thousand hosts, one thousand parasites cannot live off of
one hundred hosts. Based on the recognition of this fact, it would
appear possible to persuade a majority of the voters that it is
adding insult to injury to let those living off of other peoples’
taxes have a say in how high these taxes are, and to thus decide,
democratically, to take the right to vote away from all government
employees and everyone who receives government benefits, whether
they are welfare recipients or government contractors. In addition,
in conjunction with this strategy it is necessary to recognize the
overwhelming importance of secession and secessionist movements.
If majority decisions are ‘right’, then the largest of all possible
majorities, a world majority and a democratic world government,
must be considered ultimately ‘right’ with the consequences predicted
at the outset of this article. In contrast, secession always involves
the breaking away of smaller from larger populations. It is thus
a vote against the principle of democracy and majoritarianism. The
further the process of secession proceeds — to the level of
small regions, cities, city districts, towns, villages, and ultimately
individual households and voluntary associations of private households
and firms — the more difficult it will become to maintain the
current level of redistributive policies. At the same time, the
smaller the territorial units, the more likely it will be that a
few individuals, based on the popular recognition of their economic
independence, outstanding professional achievement, morally impeccable
personal life, superior judgement, courage, and taste, will rise
to the rank of natural, voluntarily acknowledged elites and lend
legitimacy to the idea of a natural order of competing (non-monopolistic)
and freely (voluntarily) financed peacekeepers, judges, and overlapping
jurisdictions as exists even now in the arena of international trade
and travel — a pure private law society — as the answer
to democracy and any other form of political (coercive) rule.

November
17, 2000

Hans-Hermann
Hoppe is professor economics at the University of Nevada, Las Vegas,
and a senior fellow of the Ludwig
von Mises Institute in Auburn, Ala.

Recently by Hans-Hermann Hoppe: On the Impossibility of Limited Government and the Prospects for a Second American Revolution

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ANNOUNCER: This is the Lew Rockwell Show.

ROCKWELL: Recently, at the 2009 Mises University, Professor Hans-Hermann Hoppe talked about the economics of political centralization. What is it that brings about unification, unfortunate unification and centralization within a country like the United States where the states gradually become irrelevant under an all-powerful D.C., and, for that matter, drives countries to join together into an even worse situation, of course, a world government?

Here’s Dr. Hoppe.

HOPPE: OK, I will begin my lecture.

At the beginning, I want to repeat a few points that I have made in my previous lecture on law and economics, and then I want to get to an entirely different subject than the one that I dealt with in that previous lecture.

Because there is a scarcity in the world, we can have conflicts regarding these scarce resources. And because conflicts can exist whenever and wherever there exists scarcity, we do need norms to regulate human life. Norms — the purpose of norms is to avoid conflicts. And in order to avoid conflicts regarding scarce resources, we need rules of exclusive ownership of such scarce resources or, to say exactly the same, we need property rights to determine who is entitled to control what and who is not entitled to control what.

These rules, I have defended in my previous lecture, the rules that Austrians regard as rules capable of doing this, avoiding conflict and, at the same time, being just rules are the following. One is every person owns himself, his own physical body. He has exclusive control over his own physical body. The second rule refers to, how do we acquire property, the right of exclusive control of scarce resources outside of our body in the external world. Previously — initially, the outside world is un-owned and we acquire property in objects outside of our body by being the first one to put certain resources to use and, thereby, we become the owner. This is also sometimes referred to as original appropriation or as homesteading. Rule number three and four are implied in the previous two. He who uses his physical body and those things that he originally appropriates in order to produce something, to transform things into a more valuable state of affairs, thereby, becomes the owner of what he has produced. Producer owns the product. And finally, we can also acquire property by a voluntary transfer from a previous owner to a later owner.

We again only emphasize in this lecture that there are intuitively sensible rules, who should own us unless — who should own us, except ourselves. Somebody else should own us sounds absurd. Should the second one be the owner who has done nothing to a resource, instead of the first one? Again, that sounds absurd. The producer does not own the product, but somebody who has not produced it should own the product? Again, that sounds absurd. And obviously, rule number four, if it would be possible to just to take something away from other people against their consent, civilization would be destroyed in a moment’s time.

In addition, you also realize that if you would follow these rules, by and large, wealth will be maximized. And if we follow these rules, then all conflicts can conceivably be avoided.

Now the question is, there are, of course, people who just say, so what. Even if we can justify them and show that they are economically beneficial to follow and that all conflicts can be avoided if people were to follow these rules, there will be law breakers. There will be criminals, evil people as long as mankind exists. What do we do with these people? How do we enforce these rules? Merely stating them does not mean that people will actually act according to them under all circumstances. There will always be bad people.

The classical liberals gave the following answer to the question, how do we enforce these rules. They said this is the sole task of government, the sole task of a state. A state doesn’t do anything else except to make sure that everyone who breaks these laws will be hit on the head and brought to their senses.

Now what do we have to make to this answer of the classical liberals? It includes in this case, also, Ludwig von Mises. And Ludwig von Mises’ position was precisely these rules are the rules of a just society and it is the task of the state to see to it that people adhere to these rules and punish — and threaten to punish potential lawbreakers.

Now, whether this answer is right or wrong, that is, whether this is the task of the state and the state will do it efficiently, that depends, of course, on what is the definition of a state. And I’m not giving you a fanciful definition of the state but that definition that is more or less accepted by everyone who has ever written about the state. It is the standard definition of the state. And that is, the state is a territorial monopolist of ultimate decision making or of ultimate arbitration in some territory. That is, whenever there is a conflict arising, the state is the ultimate arbiter to decide who is right and who is wrong. There is no appeal beyond the state. His is the final word; you are right, you are wrong. And this implies also that the state is the final arbiter, the final judge, the final decision maker even in cases of conflict involving the state or state agents themselves. We will see in a moment that this is a very important implication of what a state is, and from that, lots of consequences follow.

A corollary of this is the state is then also the only agency that is permitted to tax people, to unilaterally determine the price that we must pay for doing this service to us, that is, enforcing these rules.

Now, given this definition of the state, I want to show that it is an illusion to believe that the state will be successful in doing what, according to the classical liberals, is his sole and only task, mainly to enforce these rules.

The first argument against this position of a minimal state is to say, look, in economics, we always say monopoly is bad from the point of view of consumers, and competition is good from the point of view of consumers. Emphasis, “from the point of consumers.” From the point of view of a producer, a monopoly is always great and competition is always terrible. But from the point of view of consumers, competition is good and monopoly, bad, for a simple reason that whenever we have a monopoly, the price of the product will be higher than it otherwise would be and the quality of the product will be lower than it otherwise would be because he is shielded from competition by other people entering the market by offering lower prices or offering a higher-quality product. If we have free competition, then there is a constant attempt of producers to produce at the lowest possible production costs, pass this on in the form of lower prices to consumers, and to produce the highest quality product. Otherwise he will simply lose out in competition against others. Otherwise, he will invite, so to speak, competition against himself.

So the first argument would be simply, why should this also not be also true for providing the service of protecting our private property? Why should a monopoly be, in this area, good, whereas, in all other areas, we say monopoly is bad? Not only this, when it comes to, say, a monopoly of milk production, then all we can say is, yes, a monopolist of milk production will offer a comparatively lousy product at comparatively high prices. So we get a lousy product in a way.

But when it comes to a monopoly of law and order, of ultimate decision making, the situation is actually far worse. Not only can they produce, so to speak, a lousy good, what a monopolist of ultimate decision making can produce is they can produce bads in the following way.

(Laughter)

Look, if I am the ultimate decision maker in any state of every conflict that might arise, what can I do? What I can do is I can cause conflict myself and then be the arbitrator in my own case. I can then determine who is right and wrong. And if I have caused the conflict myself, then it is, of course, easy to predict what a monopolist will, by and large, decide. He will decide, I was entirely justified in doing what I did to this complaining party, and I’m right.

A policeman hits you on the head, you complain about this fact. Who then decides who was right and wrong? Maybe not the policeman directly, but another person who is employed by exactly the same agency that employs the policeman also. So what you can predict in this situation is you will, instead of having a situation where peaceful cooperation between various individuals exists, you can predict that there will be constantly conflicts generated on the part of those people supposedly protecting our lives and property. And then a decision will be made that favors them over those people that have been aggressed upon by the state agents themselves.

And to make matters worse, then they can also decide what you have to pay them for this type of justice that is committed onto you. That is, first, they hit you on the head, then they decide that it was entirely justified; you looked the wrong way or whatever it was. And then they tell you, and for this service, please pay me $100, and you cannot say no.

(Laughter)

Otherwise, we will jail you. Again, this follows, so to speak, automatically from what the definition of a state is, a conflict arbitrator even in cases where you have yourself generated the conflict.

And on top of it, the standard anti-monopoly arguments apply, of course, as well. There will be a constant tendency for the quality of justice to deteriorate and, parallel to this, a constant tendency for the price of this ever-lower quality of justice to go up. You must pay more and more and more for getting less and less and less in terms of justice.

So an entirely failed argument as far as I can see in defense of a minimal state. The idea of a minimal state is some sort of absurdity.

Next point, on top of this, the classical liberals made another fateful error, the defenders of minimal states. When the classical liberals developed their program, and they saw in front of them states that were, by and large, monarchial states, kings and queens and so forth, and classical liberals now made a fateful error. They said monarchial states are bad institutions for the reason that monarchs, kings or queens, have privileges. Kings and queens are, so to speak, a violation of the principle of equality before the law. The king can do certain things that other people simply cannot do and we must institute a society where equality before the law is in effect.

And what solution did they propose? They proposed as a solution, democracy. Again, not all classical liberals, but most of them did this. And they said democracy is somehow compatible with the idea of equality before the law, because everybody can now become king or queen or senator or prime minister, instead of just a hereditary class of individuals.

Now, I want to show, first, that this is, again, a fateful error to believe that democracy implies equality before the law. All that, in fact, happens by substituting democracy for monarchy is that we replace personal privileges with functional privileges. In democracy, our democratic rulers also have privileges as compared with what normal citizens have.

I’ll give you just an example. And this privilege is reflected, so to speak, in the fact that we have a separation or a distinction between, on the one hand, what is called public law that covers the relationship between the rulers, the democratic rulers and the citizenry and, on the other hand, private law that covers the relationships between private citizens.

Under public law, that is, if you are a public official, you can do things that, under private law, you can never do. If I steal your money from your wallet, I will be punished as a private citizen. If I, however, do this as an IRS agent, this is not considered to be a crime, even though from the point of view of the person who is being robbed there is absolutely no difference whatsoever. Public law allows stealing.

Under private law, if I take you and force you to work in my garden for 16 hours, this is called kidnapping, enslaving and so forth and, again, is a punishable offense. On the other hand, if I do this as a public official and draft you into the army and send you off to get killed, to fight for democracy someplace —

(Laughter)

— then this sort of thing is just called — you are compelled to engage in public service.

(Laughter)

If I take your money and give it to somebody else as a private citizen, this is called stealing and fencing of stolen goods. If I do that as a public official, it’s called social policy.

(Laughter)

Taking from some, and then pretending to be a generous benefactor onto others. If you just look at your politicians, they go around, spend millions on this country and that country and give it to these people and then they even get a medal for this sort of —

(Laughter)

– medal for this sort of thing. It is not their own money that they give away. So it is fencing of stolen of goods.

As a matter of fact, we might even say what states do is even worse than what private criminals do, in so far as private criminals, at least when they are done with their bad stuff, at least they disappear. Next time, you can prepare yourself for such an attack and maybe smash them when they come again. Whereas, states do that on an institutional basis. They rob you and then, the next week, all over.

(Laughter)

You can expect another visit from —

(Laughter)

— from those people.

(Laughter)

So it is an error to believe that under democracy you have, so to speak, equality before the law. Only functional privileges take the place of personal privileges, but there exists privileges just as much as under monarchy.

The situation is even worse than this. If you look at the transition between — a transition from monarchy to democracy, where everybody can reach any type of position in the government and no hereditary privileges exist, what takes place here is that we replace someone who regards the country as his own private property by someone who is a temporary caretaker of a country. And this has dramatic effects.

In order to illustrate this, just image for a second, I give you a house one time. I make you the owner of the house. You can now pass it own to your sons or your daughters or whatever, and you can sell it in the market and keep the money from the sale for yourself. In the other case, I give you the house and say for five years or four years you have exclusive control over this house, but you do not own the house, you cannot determine who will be the successor, nor can you sell the house in the market and keep the money yourself from the sale, but you can try to maximize your own income from using the house for four or five years. Will that make a difference in terms of how you treat the house? And the answer is, of course, it will make a drastic difference.

In the one case, you will be interested in preserving the value of your property. You will not try — if you are the owner, you will not try to just run down the house very quickly. After all, if you would do this, you would get less in the market. The price of the house would fall. Or you might be interested in giving something that is decently valuable still in the future to the next generation. On the other hand, if you are just a temporary caretaker, what is your incentive then? Then your incentive is I want to maximize whatever I can get out of the house within four or five years, regardless of what happens to the capital value embodied in the house. Even if the house is then in ruins, so to speak, at least you had four or five glorious, glorious years. You could make all sorts of friends with your rental income that you received. You can put, whatever, 20, 30 people in the house, each paying rent. The wallpaper is falling off after a while, the toilets are plugged, the plumbing does not work anymore, the carpets are ruined and so forth, but what would you care? After all, you don’t have to just — it is not you who has to pay the price for this behavior on your part in the form of the lower prices that you would get for the house. After all, you don’t own it. You don’t own the place.

So what you see here, this is, so to speak, the difference between monarchy and democracy on a large scale. The monarch has the long-run perspective. By and large, he wants to preserve the value of his realm in order to pass something valuable on to the next generation. A democratic politician, because he knows I am only in power for a few years, his incentive is I have to milk the cow as quickly as possible and then run away from it, whatever the consequences are. Politicians, democratic politicians are precisely short sighted. Monarchs are far-sighted individuals, comparatively speaking, so to speak. So there is an additional error in believing democracy to be an advantageous form of social organization.

I want to also give you a third argument against democracy that somehow speaks favorably of monarchy. And this is, when people say, look, aren’t you always in favor of open entry, and don’t we have to embrace democracy because there’s open entry into positions, there’s competition going on, whereas, otherwise, if we have hereditary rulers, there’s not open entry, there’s no competition? Now, the argument, as it goes, is perfectly correct, except it applies only to the production of goods. That is, you do want to have competition in the area of producing things that are regarded as goods by people. But you do not want to have competition in the area where it concerns the production of bads. But it is production of bads if you can cause conflict and then decide in your own favor. It is a production of bads if you tax people; tell them you have no choice, you cannot deny my right to tax you; tell you what you have to pay for my services.

In the production of bads, it is good to have no competition. Only in the production of goods, we want to have competition. We do not want to have competition in who is the best one in beating up other people, who is the best one in running a concentration camp.

(Laughter)

There, we are happy if we have incompetence running the whole show.

(Laughter)

So we want incompetence in power. We do not want to have efficient people —

(Laughter)

— taxing us and causing conflicts.

So the argument was, open entry does work exactly the other way around as soon as we consider precisely what states do as compared to what the producer of genuine goods demanded by consumers — consumers want.

And we have a few considerations here. Look, a king comes into power by accident of birth. Now, this does not prevent that the king can be a bad guy. If he is a bad guy, however, there is usually a dynasty; that is, a family of which he is a member. If he is a bad guy and ruins the country, his family members will be very much concerned that they might loose power over this type of behavior. And what they frequently do then is to surround this bad guy by people who keep him in check. And if this does not work, they frequently resort to the means of simply having somebody kill the guy off, which, of course, would be a good thing to do.

(Laughter)

On the other hand, because he comes into power by accident of birth, you can also not rule out that he might be a decent guy, that he might be a nice type grandpa —

(Laughter)

— who just cares about his people and so forth. You cannot rule out that he might be actually a nice man. After all, these people are educated in such a way. They are prepared for such a position. And more often than not, they are decent individuals.

Now ask yourself what happens under democracy where we have competition for this type of field. First of all, you realize that if you have bad democratic rulers, the likelihood that these people will be killed is comparatively low. Why is it low? Because people all say, OK, it’s only for four years and then, of course, a really good guy from my party will come to rule the place. And there is then a certain hesitation to kill the guy off because all you say is, we have to wait four years and then things will be better. So less numbers of killing of rulers, and I think this is a bad thing.

(Laughter)

Secondly, now ask yourself, can a good guy ever rise to the top in a democracy. That is, can a guy who says, I will not tax the rich in order to give to the poor, I will strictly enforce private property rights, rich people are not bad people and poor people are not good people, I will do absolutely nothing, I will adhere to a laissez-faire policy, can a person like this ever rise to the very top of government? And I’m telling you that is absolutely impossible. Try to run a campaign on these sorts of things. Maybe you can win in some small district, maybe you can win if that election would be in a small village where everybody knows everybody else, but you can certainly not do this in a society with millions of people where each has the temptation, of course, to rob people, through the vote, of their property and personally benefit from these robbing exercises. So even on that count, again, I think monarchies are clearly superior. I’m not defending monarchies.

Now, I come to what then is the correct answer to the initial question, how do we enforce these types of laws. And the correct answer is we have to abolish monopoly. That is, this task must also be taken on by individuals or agencies that adhere to exactly the same principles as everybody else. Only then do we have, of course, equality before the law. That is, those institutions, those individuals that provide this specific service of protecting our lives and our property must themselves adhere to exactly the same rules that we require other people to adhere to. And we call this a pure private-law society, a society where only private law exists. The distinction between public law, on the one hand, and private law, on the other hand, simply disappears.

Now, how would a society such as this work? First, this implies, of course, that every person is perfectly free to engage in self defense. I’ll merely say something more about this. It should be clear that just as, in a complex society, we do not make our own shoes or sew our own suits or cut on our own hair, but rely on the division of labor, in a complex society, we’ll also rely on the division of labor when it comes to this specific task. But nonetheless, it should be emphasized from the outset that, yes, of course, each individual has the absolute right to engage in self defense against people who aggress against his private property rights. And there should be no doubt in your mind that this is a very effective means to achieve this goal. We do know, for instance, that in the Wild West, when the power of the federal government did not really extend to all the corners of the country that — and when almost all people were heavily armed that the crime rate was actually significantly lower than it currently is. In the Wild West movies, sometimes you get a different impression, but that is entirely a mistake. Many studies have been done on this.

Imagine, for instance, how likely it is that you will get away with becoming a bank robber if you go into a bank where every teller is armed. Before you ever —

(Laughter)

Before you get out of the bank, you will be a dead man.

(Laughter)

The violence that occurred in the Wild West was, in most cases, actually violence between willing participants. That is, if you go to a bar and then just get drunk and then you just start a fight with somebody else and then, OK, let’s go outside and see who is right and who is wrong —

(Laughter)

— and then one or both lie dead on the street. This is not a crime. This is, after all, something that — just like a boxing fight.

(Laughter)

That two people just decide that they want to engage in this sort of stuff. Nobody except these two people have to worry about this. If you abstained from going to bars and getting drunk, you were pretty safe in the Wild West.

A very important book in this area has been written by John Lott, More Guns, Less Crime. He gives a huge amount of empirical data showing that, of course, if people are free to defend themselves that crime rates tend to go down.

But as I said, in a complex society, this is only a small part, a small contribution to defending ourselves. We will rely on specialized agents and agencies to provide us with this service. And a particularly important role in all of this would likely be played by insurance agencies.

And I want to illustrate, in what regard a society where this service would be provided by competing insurance agencies. And again, do not think of insurance agencies as they exist nowadays. The insurance industry is one of the most heavily regulated industries at the current moment. But think of insurance companies really freely having to compete in the market for customers willing to pay them for their service and being permitted to change their provider of security services if they are dissatisfied with what their particular agency is doing for them.

So what can we expect, in such a situation where we have competing defense insurance agencies and so forth providing us with these services? The first thing that we can expect is that, as in all areas where we have free competition, prices will tend to fall and the quality of the product will tend to increase, as it is the case in any other area also. Whereas, if we have the monopolists doing it, we have predictably dependency of prices will be higher than they otherwise would be, and the quality of the product will be lower than it otherwise would be.

The second thing, in such a situation, we can avoid over and under-production of security. How many resources should be committed to beer production, to milk production, to car production? In the market, it is consumers who decide how many resources are committed to this purpose or to that purpose. Consumers make certain firms grow or make then shrink or ultimately disappear from the market. If you have a monopolist providing this service, nobody can go into competition against it. They can force you how much you have to pay for them. What will be their answers, how many resources should be permitted to this specific purpose? And the answer is the more resources we can permit to this, the better off we, as the producer of this particular service, are. Should there be one policeman or should there be 10 policemen or 1000 policemen? Should the policemen have just a stick or should they have a machine gun?

(Laughter)

Should they have tanks to provide this type of service?

You can imagine that almost all resources in a society are used to protect you, but you have hardly anything left over to eat.

(Laughter)

The government has no answer to how many resources should be committed to this sort of thing. But you should realize that the amount of security that we want, the amount of money that we would spend on feeling secure is very different from individual to individual and also from region to region. There are certain regions where you would not need any specialized provider of security at all. If you live on top of a mountain alone, you can defend yourself perfectly well just on your own. If you live in densely populated city regions, you might want to pay more for this sort of stuff. If you’re an old lady, you might be more fearful and spend more of your resources on this than if you are, whatever, Arnold Schwarzenegger —

(Laughter)

— who feels capable that he can do it on his own or with a few bodyguards.

So this problem would be automatically solved if we would have free competition in the area of security. You get as much as you want. You can increase it, decrease it, but it is not some other entity that tells you, this is how much I say you need. And they, of course, always think that more is better. That doesn’t mean that they provide more services, but the expenses that they have available to themselves are higher and higher.

Then, next advantage — victimless crimes. You know that currently a huge amount of recourses are committed to combating victimless crimes, in particular, of course, the entire war on drugs. There are millions of people in the United States locked up because they have just done nothing else but, whatever, smoked dope or take cocaine or whatever it is, without having committed any crime that has a victim that you can point.

Can you image that an insurance company that would insure you or protect you against victimless crimes would obviously charge a higher price than an agency that abstained from offering such a service? It is easy to predict that, of course, most people, because they are not affected by victimless crimes because, after all, they are not victimized by it, would say, I don’t want to shell out extra money because there is a prostitute somewhere having a client in some place, and to crack down on them, of course, requires extra resources. After all, I’m not involved in any activity such as that. I only want to be protected in my own home and with my own property. So companies that would offer these types of services would likely go out of business instantly. Currently, as I said, a huge amount of resources is wasted in things like this, going after victimless crimes.

Then, even more importantly, insurance companies would have to indemnify you in case something does happen to you. You realize, currently, with monopoly provision of these services, they say we protect your life and your property. So what if somebody gets killed or somebody’s home gets broken in? Does the state then say, look, we failed in doing what we are supposed to do, and because we failed, we owe you compensation? I have not heard of cases such as this where the government then says, I feel so bad about what happened to you —

(Laughter)

— and I really failed in my obligation towards you, and because of this, here you have a compensation.

And because insurance companies would have indemnified you in case — imagine you go to an insurance company and say, OK, this is the premium, OK, I pay my premium. And then you say, so what if something happens to me? And then they say, well, tough luck.

(Laughter)

You can immediately see that no insurance company would get off the ground if they would have this type of attitude.

People want to have three things in particular. Prevention? How about prevention? What is the incentive of a tax-funded policeman to be good at preventing crime? The answer is virtually zero. His salary does not depend on whether he is good at preventing or not preventing. As a matter of fact, preventing crime might be somewhat dangerous to do. It’s better to go out, hand out parking tickets, speeders, and these types of people. The danger is relatively low that you get shot by doing this sort of thing.

Why would insurance companies be good at prevention? The answer is, whatever they can prevent, they do not have to pay up. That is, it is an element of reducing the cost of operation for them, so they tend to be better at it.

What’s the next thing that people would want? The next thing that people would want is that, of course, whatever has been stolen or broken or whatever, is recovered. Now, how likely is it, if somebody steals something in your house, your car or your stereo, that the police will actually find this sort of thing? The answer is, you can forget about it.

(Laughter)

They will find practically nothing except by accident.

On the other hand, what is the incentive of insurance detectives, so to speak? The incentive is, of course, I try to find it as best I can, because whatever I find, I do not have to compensate the victim for it. An example, I had some friends whose V.W. got stolen in Italy. So he went to the Italian police and reported, my car has been stolen, and then the police wrote it down. And he said, now what will you do. And they said, we will file it away.

(Laughter)

So then he went to his German insurance company and said, my car has been stolen. The insurance detective was a German guy and the car was stolen in Italy. The insurance detective found it after three days. Yes, there was major damage to the car and so forth, but, nonetheless, there was a recovery of the object for an obvious reason: This is in the financial interest in such as agency to do this. There is no financial incentive on the part of monopolized police forces to do anything remotely similar.

Last thing that we want is, of course, that we have to catch the guy and we have to punish the guy. Now, an insurance company would, of course, have an incentive to get the guy and then force the guy to make compensation to the victim; again, in order to reduce their own cost of operation.

Now, what is what the state currently does? First of all, they hardly ever find them except for capital crimes. And if they do find them, what will they do? Does the victim of the crime ever receive compensation? The answer is, I have not heard of cases such as that. So you don’t get compensation.

On top of it, these people are then locked up. And who pays up for locking them up? The victim is one of those people who have to pay then for the incarceration of the perpetrator of crime. And the housing of criminals in American prisons is an expensive venture. I’m not betting my life on the numbers, but I’ve read, some time ago, it costs almost $70,000 per man per year to just house these people. Because in the meantime, they can, of course, get their breakfast buffet and complain about insufficiently clean toilets. They can play table tennis, watch TV, engage in workout, so that next time, they are stronger when they —

(Laughter)

— when they get out. They can even study law, as far as I know, so that they know next time better to defend themselves against.

(Laughter)

Next point, insurance companies would definitely not ask you to disarm yourself. Imagine you would go to an insurance company — I want you to protect me, and what is the premium and stuff like this. And then they would say, yes, but in order to be better able to protect you, first, we must make sure that you hand over all types of weapons to me.

(Laughter)

If you have a gun at home or a hammer or a knife or something like this —

(Laughter)

— everything has to be handed over to me, then we can protect you better. If they would ask something like this, you would immediately know there is something fishy going on.

(Laughter)

Nonetheless, this is, of course, precisely what states everywhere do. In some cases, they have already progressed further along this road. And in other countries, they have progressed less far on this road. But everywhere, the attempt is exactly the same, to disarm you. And this is, of course, what every agency that is in the business of robbing other people would do. Yes, of course, if I would be in the robbing business, I would love it if I would know that none of you has any sharp knives, hammers —

(Laughter)

— sickles, anything like this, not to speak of revolvers and machine guns at home, because then I can freely enter your premises. I am the only one who has all the weapons and it is easy for me to engage in my beloved activity that I do.

(Laughter)

There will also be in a system where you have competitive provision of security, an attempt by all insurance companies to make their clients comply to certain norms of civilized behavior. An insurance company would not cover you, help you if you provoke other people. They will only insure you if you have been provoke, if you have been aggressed upon, but not if I just hit you on the head and then you retaliate against me, and then I run to my insurance company, help me, this guy is smashing me —

(Laughter)

— if it were the case that I was the one who initiated the whole thing. That is, they want to avoid conflicts. And in order to avoid conflicts, every client that is accepted by a company will be forced, will be compelled to adhere to, “You have to behave in a non-provocative way. Only then will, of course, we provide you with these services. But if you behave like a wild beast, we will not accept you as a client.” As a matter of fact, there will be lists out of people, lists of people that will not be insured because they are considered to be too high a risk. And if they have no insurance, life is very dangerous.

(Laughter)

So vigilante justice would also, by and large, disappear because vigilante justice, of course, is, again, expensive. If you immediately engage in retaliation or so, that is a costly thing for insurance companies. Only if the immediate attacks are done upon you, would you be permitted, so to speak, to defend yourself. If the thing is already over and you know who the guy is and immediately go after him and then, as retaliation from his family and all the rest of them, all of this would, by and large, disappear instantly in a free market of security provision.

And most importantly, there would be contracts that you are offered. Look, currently, we have no contract with the state whatsoever; they say, we protect you. But do we have anything that we can refer to, what will happen in what type of case in what situation? And the answer is not at all. Again, go to an insurance company, and they say, this is the premium that we charge. And then you ask them, what will you offer in return. They say, I don’t know, that depends on the circumstances. You will be offered a contract, and the contract, providing, so to speak, for various contingencies, what will happen in such and such a situation.

And, of course, the contract cannot be changed. That is, the insurance company cannot say, look, we offer you this contract but we reserve the right on our part to unilaterally change the contract as we go along. This is precisely, however, what states do. States constantly change laws, make something that was yesterday still legal, tomorrow, it is illegal, and vice versa. So constantly, the rules are changed. No contract offered by insurance companies would ever stipulate, we can unilaterally change the rules, declare this to be legal and that to be illegal and, tomorrow, we change our mind and redefine matters.

And the fact that contracts would be offered has now the following additional advantages. We can imagine three scenarios. We can imagine that two individuals have a conflict with each other that are protected by the same agency, by the same insurance agency. Everybody knows that such a case can arise, that I have a conflict with somebody who is a client of the same company. Obviously, knowing this, every company would, in its contracts, have a stipulation, what will happen in such a case if one of my guys has a conflict with another one of my guys. And then they describe, so to speak, the procedure that will be set in motion. Both clients agree to this procedure from the outset and it will then afterwards simply be enforced. Just like there’s an end to it just like it is now.

The second case that we can have is I have a conflict with somebody else who is insured by a different company than I am myself. Again, every company would for its own clients offer a contract that has a stipulation, what will happen in such a case, because everybody knows that can, of course, happen, that I have a conflict with somebody else insured by some one else. So again, there are clauses in the contract saying what will happen in such a case. If these two insurance companies then come to the same conclusion, I’m the guilty one or you are the guilty one, again, there is no problem. And whatever they decide, they come to a unanimous agreement. There might be hearings and all this. Again, exactly stipulated what will happen. Then this will be, again, enforced. No problem.

Now we come to the most complicated but, in a way, the most interesting case. So what would happen in the case that two people are insured with a different company, have a conflict and they come to different judgments? That is, my company says I’m right, and your company says I’m right; my client is in the right. Well, they then shoot it out. Again, everybody knows, of course, that such a situation can arise and, again, each company will have an incentive, so to speak, to say exactly what will happen in this case. We do not agree who is right and who is wrong, what do we do in this case? Now, would the company then say, OK, in that case, one company decides, has the ultimate say, and the other company will be overruled? No company would offer any contract like this. Nobody would want to be insured with a company that comes out always as a loser. No. In this case, what they would do is they would appeal to independent third parties. That is, to arbitration agencies that also compete on the market, who offer precisely this service, who are neither, so to speak, part of Company A, nor part of Company B, but an entirely independent party. They would now take on this type of case. And there might be different layers of this, but what would be the incentive of such an independent third-party arbitrator, what would be the financial incentive for them to do? The answer is no independent third-party arbitration agency has a guarantee that they will be called upon again in the next instance. In order to stay in business, what they must do is they must come up with a judgment that is considered to be a fair judgment by both insurance companies and, by implication, also by the clients of both insurance companies. And this means, of course, that what the judgment will be is a judgment that does, indeed, incorporate, so to speak, the highest possible degree of consensus on principles of justice.

To illustrate this a little bit more, we can imagine, for instance, that we have agencies that adhere internally to Canonical law or to Mosaic Law or to Islamic law or whatever it is. This refers only to people who are both members of this group. Now, what happens if there’s a conflict between, whatever, Christian and somebody who is insured by a Muslim — an Islamic organization, or somebody who is Canonical law as compared to Mosaic Law? The answer is, of course, that the arbitration agencies that deal with such cases then must come up with principles of justice that are generally universal; that is, that are so general that all of these, in their internal law code, different agencies and clients could possibly agree to. So we would have a larger variety of law, plus a constant tendency to work out a universal legal — universal law code. And this universal law code would most likely be precisely this type of law code as the greatest common denominator of all different legal systems that might exist.

I should mention, you know, when I end, that when it comes to international relationships, there is already something like this to a certain extent. What, for instance, if a Canadian has a conflict with an American? Realize that sometimes Canadians and Americans can live very close together? It’s just across the street, so to speak. Or a conflict between a Swiss and a German? Just one street separates these two people. There is no monopoly judge in this case. That is, these people, the German and the Swiss, the Canadian and the American live in a state of anarchy vis’ a vis’ each other. The first observation, is there more conflict between Canadians and Americans living in close proximity to each other than there is conflict between Americans, two Americans living in close proximity to each other? I’m not aware of it. Is there more conflict between Swiss citizens and German citizens who live in close proximity to each other than there is between Swiss people, two Swiss guys living in close proximity, or two German guys? I’m not aware of this. What do they — what happens in this case? The Swiss goes to the Swiss Court. The German goes to the German court. If they agree, no problem. If they don’t agree, again, arbitration will set in in this case. And this arbitration in the current system is, of course, also semi-state arbitration courts because, after all, even these supranational courts are, again, manned by people that this state or that state sends into these courts. But nonetheless, you can see that, at least as far as the frequency and smoothness of operations is concerned, the fact that there is no monopoly judge does not cause any problems whatsoever. And what I’m proposing, the same sort of thing could, of course, work also within any given country.

With this, I’ll stop and let you think about it.

(Applause)

ANNOUNCER: You’ve been listening to the Lew Rockwell Show, produced by LewRockwell.com, the best-read Libertarian web site in the world. Thanks for listening.

ROCKWELL: Well, thanks so much for listening to the Lew Rockwell Show today. Take a look at all the podcasts. There have been hundreds of them. There’s a link on the upper right-hand corner of the LRC front page. Thank you.

Podcast date, August 19, 2009

Hans-Hermann Hoppe [send him mail] is distinguished fellow at the Ludwig von Mises Institute and founder and president of the Property and Freedom Society. His books include Democracy: The God That Failed and The Myth of National Defense. Visit his website.

The Best of Hans-Hermann Hoppe

It’s true that the U.S. health care system is a mess, but this demonstrates not market but government failure. To cure the problem requires not different or more government regulations and bureaucracies, as self-serving politicians want us to believe, but the elimination of all existing government controls.

It’s time to get serious about health care reform. Tax credits, vouchers, and privatization will go a long way toward decentralizing the system and removing unnecessary burdens from business. But four additional steps must also be taken:

1. Eliminate all licensing requirements for medical schools, hospitals, pharmacies, and medical doctors and other health care personnel. Their supply would almost instantly increase, prices would fall, and a greater variety of health care services would appear on the market.

Competing voluntary accreditation agencies would take the place of compulsory government licensing — if health care providers believe that such accreditation would enhance their own reputation, and that their consumers care about reputation, and are willing to pay for it.

Because consumers would no longer be duped into believing that there is such a thing as a "national standard" of health care, they will increase their search costs and make more discriminating health care choices.

2. Eliminate all government restrictions on the production and sale of pharmaceutical products and medical devices. This means no more Food and Drug Administration, which presently hinders innovation and increases costs.

Costs and prices would fall, and a wider variety of better products would reach the market sooner. The market would force consumers to act in accordance with their own — rather than the government’s — risk assessment. And competing drug and device manufacturers and sellers, to safeguard against product liability suits as much as to attract customers, would provide increasingly better product descriptions and guarantees.

3. Deregulate the health insurance industry. Private enterprise can offer insurance against events over whose outcome the insured possesses no control. One cannot insure oneself against suicide or bankruptcy, for example, because it is in one’s own hands to bring these events about.

Because a person’s health, or lack of it, lies increasingly within his own control, many, if not most health risks, are actually uninsurable. "Insurance" against risks whose likelihood an individual can systematically influence falls within that person’s own responsibility.

All insurance, moreover, involves the pooling of individual risks. It implies that insurers pay more to some and less to others. But no one knows in advance, and with certainty, who the "winners" and "losers" will be. "Winners" and "losers" are distributed randomly, and the resulting income redistribution is unsystematic. If "winners" or "losers" could be systematically predicted, "losers" would not want to pool their risk with "winners," but with other "losers," because this would lower their insurance costs. I would not want to pool my personal accident risks with those of professional football players, for instance, but exclusively with those of people in circumstances similar to my own, at lower costs.

Because of legal restrictions on the health insurers’ right of refusal — to exclude any individual risk as uninsurable — the present health-insurance system is only partly concerned with insurance. The industry cannot discriminate freely among different groups’ risks.

As a result, health insurers cover a multitude of uninsurable risks, alongside, and pooled with, genuine insurance risks. They do not discriminate among various groups of people which pose significantly different insurance risks. The industry thus runs a system of income redistribution — benefiting irresponsible actors and high-risk groups at the expense of responsible individuals and low-risk groups. Accordingly the industry’s prices are high and ballooning.

To deregulate the industry means to restore it to unrestricted freedom of contract: to allow a health insurer to offer any contract whatsoever, to include or exclude any risk, and to discriminate among any groups of individuals. Uninsurable risks would lose coverage, the variety of insurance policies for the remaining coverage would increase, and price differentials would reflect genuine insurance risks. On average, prices would drastically fall. And the reform would restore individual responsibility in health care.

4. Eliminate all subsidies to the sick or unhealthy. Subsidies create more of whatever is being subsidized. Subsidies for the ill and diseased breed illness and disease, and promote carelessness, indigence, and dependency. If we eliminate them, we would strengthen the will to live healthy lives and to work for a living. In the first instance, that means abolishing Medicare and Medicaid.

Only these four steps, although drastic, will restore a fully free market in medical provision. Until they are adopted, the industry will have serious problems, and so will we, its consumers.

This article originally appeared on Mises.org.

Hans-Hermann Hoppe [send him mail] is distinguished fellow at the Ludwig von Mises Institute and founder and president of the Property and Freedom Society. His books include Democracy: The God That Failed and The Myth of National Defense. Visit his website.

The Best of Hans-Hermann Hoppe

A government is a territorial monopolist of compulsion — an agency which may engage in continual, institutionalized property rights violations and the exploitation — in the form of expropriation, taxation and regulation — of private property owners. Assuming no more than self-interest on the part of government agents, all governments must be expected to make use of this monopoly and thus exhibit a tendency toward increased exploitation.[1]

However, not every form of government can be expected to be equally successful in this endeavor or to go about it in the same way. Rather, in light of elementary economic theory, the conduct of government and the effects of government policy on civil society can be expected to be systematically different, depending on whether the government apparatus is owned privately or publicly.[2]

The defining characteristic of private government ownership is that the expropriated resources and the monopoly privilege of future expropriation are individually owned. The appropriated resources are added to the ruler’s private estate and treated as if they were a part of it, and the monopoly privilege of future expropriation is attached as a title to this estate and leads to an instant increase in its present value (“capitalization” of monopoly profit).

Most importantly, as private owner of the government estate, the ruler is entitled to pass his possessions on to his personal heir; he may sell, rent, or give away part or all of his privileged estate and privately pocket the receipts from the sale or rental; and he may personally employ or dismiss every administrator and employee of his estate.

In contrast, in a publicly owned government the control over the government apparatus lies in the hands of a trustee, or caretaker. The caretaker may use the apparatus to his personal advantage, but he does not own it. He cannot sell government resources and privately pocket the receipts, nor can he pass government possessions on to his personal heir. He owns the current use of government resources, but not their capital value.

Moreover, while entrance into the position of a private owner of government is restricted by the owner’s personal discretion, entrance into the position of a caretaker-ruler is open. Anyone, in principle, can become the government’s caretaker.

From these assumptions two central, interrelated predictions can be deduced:

1. A private government owner will tend to have a systematically longer planning horizon, i.e., his degree of time preference will be lower, and accordingly, his degree of economic exploitation will tend to be less than that of a government caretaker; and
2. Subject to a higher degree of exploitation, the nongovernmental public will also be comparatively more present-oriented under a system of publicly owned government than under a regime of private government ownership.

(1) Government Owners’ Time Preferences

A private government owner will predictably try to maximize his total wealth, i.e., the present value of his estate and his current income. He will not want to increase his current income at the expense of a more-than-proportional drop in the present value of his assets, and because acts of current-income acquisition invariably have repercussions on present asset values (reflecting the value of all future — expected — asset earnings discounted by the rate of time preference), private ownership in and of itself leads to economic calculation and thus promotes farsightedness.

In the case of the private ownership of government, this implies a distinct moderation with respect to the ruler’s incentive to exploit his monopoly privilege of expropriation, for acts of expropriation are by their nature parasitic upon prior acts of production on the part of the nongovernmental public. Where nothing has first been produced, nothing can be expropriated; and where everything is expropriated, all future production will come to a shrieking halt.

Accordingly, a private government owner will want to avoid exploiting his subjects so heavily, for instance, as to reduce his future earnings potential to such an extent that the present value of his estate actually falls. Instead, in order to preserve or possibly even enhance the value of his personal property, he will systematically restrain himself in his exploitation policies. For the lower the degree of exploitation, the more productive the subject population will be; and the more productive the population, the higher will be the value of the ruler’s parasitic monopoly of expropriation.

He will use his monopolistic privilege, of course. He will not exploit. But as the government’s private owner, it is in his interest to draw parasitically on a growing, increasingly productive and prosperous nongovernment economy as this would effortlessly also increase his own wealth and prosperity — and the degree of exploitation thus would tend to be low.

Moreover, private ownership of government implies moderation and farsightedness for yet another reason. All private property is by definition exclusive property. He who owns property is entitled to exclude everyone else from its use and enjoyment; and he is at liberty to choose with whom, if anyone, he is willing to share in its usage. Typically, he will include his family and exclude all others, except as invited guests or as paid employees or contractors.

Only the ruling family — and to a minor extent its friends, employees and business partners — share in the enjoyment of the expropriated resources and can thus lead a parasitic life. Because of these restrictions regarding entrance into government and the exclusive status of the individual ruler and his family, private government ownership stimulates the development of a clear “class-consciousness” on the part of the nongovernmental public and promotes opposition and resistance to any expansion of the government’s exploitative power.

A clear-cut distinction between the (few) rulers on the one hand and the (many) ruled on the other exists, and there is little risk or hope of anyone of either class ever falling or rising from one class to the other. Confronted with an almost insurmountable barrier in the way of upward mobility, the solidarity among the ruled — their mutual identification as actual or potential victims of governmental property-rights violations — is strengthened, and the risk to the ruling class of losing its legitimacy as the result of increased exploitation is heightened.[3]

In distinct contrast, the caretaker of a publicly owned government will try to maximize not total government wealth (capital values and current income), but current income (regardless, and at the expense, of capital values). Indeed, even if the caretaker wishes to act differently, he cannot. Because as public property government resources are not for sale, and without market prices economic calculation is impossible. Accordingly, it has to be regarded as unavoidable that public government ownership will result in continual capital consumption.

Instead of maintaining or even enhancing the value of the government estate, as a private owner would tend to do, a government’s temporary caretaker will quickly use up as much of the government resources as possible, for what he does not consume now, he may never be able to consume.

In particular, a caretaker — as distinct from a government’s private owner — has no interest in not ruining his country. For why should he not want to increase his exploitation if the advantage of a policy of moderation — the resulting higher capital value of the government estate — cannot be reaped privately, while the advantage of the opposite policy of increased exploitation — a higher current income — can be so reaped? To a caretaker, unlike to a private owner, moderation has only disadvantages and no advantages.[4]

In addition, with a publicly owned government, anyone in principle can become a member of the ruling class or even the supreme power. The distinction between the rulers and the ruled as well as the class consciousness of the ruled become blurred. The illusion even arises that the distinction no longer exists: that with a public government no one is ruled by anyone, but everyone instead rules himself. Accordingly, public resistance against government power is systematically weakened.

While exploitation and expropriation before might have appeared plainly oppressive and evil to the public, they seem much less so, mankind being what it is, once anyone may freely enter the ranks of those who are at the receiving end. Consequently, exploitation will increase, whether openly in the form of higher taxes or discretely as increased governmental money “creation” (inflation) or legislative regulation. Likewise, the number of government employees (“public servants”) will rise absolutely as well as relatively to private employment, in particular attracting and promoting individuals with high degrees of time preference, and low and limited farsightedness.

(2) Subjects’ Time Preferences

In contrast to the right to self-defense in the event of a criminal attack, the victim of government violations of private-property rights may not legitimately defend himself against such violations.[5]

The imposition of a government tax on property or income violates a property owner’s and income producer’s rights as much as theft does. In both cases, the owner-producer’s supply of goods is diminished against his will and without his consent. Government money or “liquidity” creation involves no less a fraudulent expropriation of private-property owners than the operations of a criminal counterfeiting gang.

As well, any government regulation as to what an owner may or may not do with his property — beyond the rule that no one may physically damage the property of others and that all exchange and trade be voluntary and contractual — implies a “taking” of somebody’s property, on a par with acts of extortion, robbery, or destruction. But taxation, the government’s provision for liquidity, and government regulations, unlike their criminal equivalents, are considered legitimate, and the victim of government interference, unlike the victim of a crime, is not entitled to physically defend and protect his property.

Owing to their legitimacy, then, government violations of property rights affect individual time preferences in a systematically different and much more profound way than crime. Like crime, all government interference with private property rights reduces someone’s supply of present goods and thus raises his effective time-preference rate. However, government offenses — unlike crime — simultaneously raise the time preference degree of actual and potential victims because they also imply a reduction in the supply of future goods (a reduced rate of return on investment).

Crime, because it is illegitimate, occurs only intermittently — the robber disappears from the scene with his loot and leaves his victim alone. Thus, crime can be dealt with by increasing one’s demand for protective goods and services so as to restore or even increase one’s future rate of investment return and make it less likely that the same or a different robber will succeed a second time.

In contrast, because they are legitimate, governmental property rights violations are continual. The offender does not disappear into hiding but stays around, and the victim does not “arm” himself but must (at least he is generally expected to) remain defenseless. The actual and potential victims of government property-rights violations respond by associating a permanently higher risk with all future production, and systematically adjusting their expectations concerning the rate of return on all future investment downward.

By simultaneously reducing the supply of present and expected future goods, then, governmental property-rights violations not only raise time preference rates (with given schedules) but also time-preference schedules. Because owner-producers are — and see themselves as — defenseless against future victimization by government agents, their expected rate of return on productive, future-oriented actions is reduced all-around, and accordingly, all actual and potential victims become more present-oriented.[6]

Moreover, because the degree of exploitation is comparatively higher under a publicly owned government, this tendency toward present-orientation will be significantly more pronounced if the government is publicly owned than if it is owned privately.[7]

II. Application: The Transition from Monarchy to Democracy (1789—1918)

Hereditary monarchies represent the historical example of privately owned governments, and democratic republics that of publicly owned governments.

For most of its history, mankind, insofar as it was subject to any government control at all, was under monarchical rule. There were exceptions: Athenian democracy, Rome during its republican era until 31 BC, the republics of Venice, Florence and Genoa during the renaissance period, the Swiss cantons since 1291, the United Provinces from 1648 until 1673, and England under Cromwell from 1649 until 1660. Yet these were rare occurrences in a world dominated by monarchies. With the exception of Switzerland, they were short-lived phenomena.

Constrained by monarchical surroundings, all older republics satisfied the open-entry condition of public property only imperfectly, for while a republican form of government implies by definition that the government is not privately but publicly owned, and a republic can thus be expected to possess an inherent tendency toward the adoption of universal suffrage, in all of the earlier republics, entry into government was limited to relatively small groups of “nobles.”

With the end of World War I, mankind truly left the monarchical age.[8] In the course of the one-and-a-half centuries since the French Revolution, Europe, and in its wake the entire world, have undergone a fundamental transformation. Everywhere, monarchical rule and sovereign kings were replaced by democratic-republican rule and sovereign “peoples.”

The first assault of republicanism and the idea of popular sovereignty on the dominating monarchical principle was repelled with the military defeat of Napoleon and the restoration of Bourbon rule in France. As a result of the revolutionary terror and the Napoleonic wars, republicanism was widely discredited for much of the 19th century.

However, the democratic-republican spirit of the French revolution left a permanent imprint. From the restoration of the monarchical order in 1815 until the outbreak of WWI in 1914, all across Europe popular political participation and representation was systematically expanded. The franchise was successively widened and the powers of popularly elected parliaments increased everywhere.[9]

From 1815 to 1830, the right to vote in France was still severely restricted under the restored Bourbons. Out of a population of some 30 million, the electorate included only France’s very largest property owners — about 100,000 people (less than 0.5 percent of the population above the age of 20). As a result of the July Revolution of 1830, the abdication of Charles X and the ascension to the throne of the Duke of Orleans, Louis Philippe, the number of voters increased to about 200,000. As a result of the revolutionary upheavals of 1848, France again turned republican, and a universal and unrestricted suffrage for all male citizens above the age of 21 was introduced. Napoleon III was elected by nearly 5.5 million votes out of an electorate of more than 8 million.

In the United Kingdom after 1815, the electorate consisted of some 500,000 well-to-do property owners (about 4 percent of the population above age 20). The Reform Bill of 1832 lowered the property owner requirements and extended the franchise to about 800,000. The next extension, from about 1 million to 2 million, came with the Second Reform Bill of 1867. In 1884 property restrictions were relaxed even further, and the electorate increased to about 6 million (almost a third of the population above age 20 and more than three-fourths of all male adults).

In Prussia, as the most important of the 39 independent German states recognized after the Vienna Congress, democratization set in with the revolution of 1848 and the constitution of 1850. The lower chamber of the Prussian parliament was hence elected by universal male suffrage.

However, until 1918 the electorate remained stratified into three estates with different voting powers. For example, the wealthiest people — those who contributed a third of all taxes — elected a third of the members of the lower house.

In 1867, the North German Confederation, including Prussia and 21 other German states, was founded. Its constitution provided for universal, unrestricted suffrage for all males above the age of 25. In 1871, after the victory over Napoleon III, the constitution of the North German Confederation was essentially assumed by the newly founded German Empire. Out of a total population of around 35 million, nearly 8 million people (or about a third of the population above 20) elected the first German Reichstag.

After Italy’s political unification under the leadership of the Kingdom of Sardinia and Piedmont in 1861, initially the vote was only given to about 500,000 people out of a population of some 25 million (about 3.5 percent of the population above age 20). In 1882, the property requirements were relaxed, and the minimum age was lowered from 25 to 21 years. As a result, the Italian electorate increased to more than 2 million. In 1913, an almost universal and unrestricted suffrage for all males above 30 and minimally restricted suffrage for males above 21 was introduced, raising the number of Italian voters to more than 8 million (more than 40 percent of the population above 20).

In Austria, restricted and unequal male suffrage was introduced in 1873. The electorate, composed of four classes or curia of unequal voting powers, totaled 1.2 million voters out of a population of about 20 million (10 percent of the population above 20). In 1867 a fifth curia was added. And forty years later the curia system was abolished, and universal and equal suffrage for males above age 24 was adopted, bringing the number of voters close to 6 million (almost 40 percent of the population above 20).

Russia had elected provincial and district councils — zemstvos — since 1864; and in 1905, as a fallout of its lost war against Japan, it created a parliament — the Duma — which was elected by a near universal, although indirect and unequal, male suffrage. As for Europe’s minor powers, universal or almost universal and equal male suffrage has existed in Switzerland since 1848, and was adopted between 1890 and 1910 in Belgium, the Netherlands, Norway, Sweden, Spain, Greece, Bulgaria, Serbia, and Turkey.

Although increasingly emasculated, the monarchical principle remained dominant until the cataclysmic events of WWI. Before 1914, only two republics existed in Europe — France and Switzerland. And of all major European monarchies, only the United Kingdom could be classified as a parliamentary system; that is, one where the supreme power was vested in an elected parliament.

Only four years later, after the United States — where the democratic principle implied in the idea of a republic had only recently been carried to victory as a result of the destruction of the secessionist Confederacy by the centralist Union government[10] — had entered the European war and decisively determined its outcome, monarchies had all but disappeared, and Europe turned to democratic republicanism.[11]

In Europe, the defeated Romanovs, Hohenzollerns, and Habsburgs had to abdicate or resign, and Russia, Germany, and Austria became democratic republics with universal — male and female — suffrage and parliamentary governments. Likewise, all of the newly created successor states — Poland, Finland, Estonia, Latvia, Lithuania, Hungary, and Czechoslovakia (with the sole exception of Yugoslavia) — adopted democratic-republican constitutions.

In Turkey and Greece, the monarchies were overthrown. Even where monarchies remained nominally in existence, as in Great Britain, Italy, Spain, Belgium, the Netherlands, and the Scandinavian countries, monarchs no longer exercised any governing power. Universal adult suffrage was introduced, and all government power was invested in parliaments and “public” officials.[12] A new world order — the democratic-republican age, under the aegis of a dominating US government — had begun.

III. Evidence and Illustrations: Exploitation and Present-Orientedness under Monarchy and Democratic Republicanism

From the viewpoint of economic theory, the end of WWI can be identified as the point in time at which private government ownership was completely replaced by public government ownership, and whence a systematic tendency toward increased exploitation — government growth — and rising degrees of social time preference — present-orientedness — can be expected to take off. Indeed, this has been the grand, underlying theme of post-WWI Western history: from 1918 onward practically all indicators

1. of governmental exploitation and
2. of rising time preferences have exhibited a systematic upward tendency.

III.1. Indicators of Exploitation

There is no doubt that the amount of taxes imposed on civil society increased during the monarchical age.[13] However, throughout the entire period, the share of government revenue remained remarkably stable and low. Economic historian Carlo M. Cipolla concludes,

All in all, one must admit that the portion of income drawn by the public sector most certainly increased from the eleventh century onward all over Europe, but it is difficult to imagine that, apart from particular times and places, the public power ever managed to draw more than 5 to 8 percent of national income.

And he then goes on to note that this portion was not systematically exceeded until the second half of the 19th century.[14] Until then, of all Western European countries only the United Kingdom had an income tax (from 1843 on). France first introduced some form of income tax in 1873, Italy in 1877, Norway in 1892, the Netherlands in 1894, Austria in 1898, Sweden in 1903, the United States in 1913, Switzerland in 1916, Denmark and Finland in 1917, Ireland and Belgium in 1922, and Germany in 1924.[15] Yet even at the time of the outbreak of WWI, total government expenditure as a percentage of Gross Domestic Product (GDP) typically had not risen above 10 percent and only rarely, as in the case of Germany, exceeded 15 percent. In striking contrast, with the onset of the democratic-republican age, total government expenditure as a percentage of GDP typically increased to 20 to 30 percent in the course of the 1920s and 1930s, and by the mid-1970s had generally reached 50 percent.[16]

There is also no doubt that total government employment increased during the monarchical age. But until the very end of the 19th century, government employment rarely exceeded 3 percent of the total labor force. In contrast, by the mid-1970s government employment as a percentage of the total labor force had typically grown to above 15 percent.[17]

The same pattern emerges from an inspection of inflation and the money supply. The monarchical world was generally characterized by the existence of a commodity money — typically silver or gold. A commodity money standard makes it difficult, if not impossible, for a government to inflate the money supply.

There had been attempts to introduce an irredeemable fiat currency. But these fiat-money experiments, associated in particular with the Bank of Amsterdam, the Bank of England, and John Law and the Banque Royale of France, had been regional curiosities which ended quickly in financial disasters, such as the collapse of the Dutch “Tulip Mania” in 1637, and the “Mississippi Bubble” and the “South Sea Bubble” in 1720. As hard as they tried, monarchical rulers did not succeed in establishing monopolies of pure fiat currencies, i.e., of irredeemable government paper monies, which can be created virtually out of thin air, at practically no cost.

It was only under conditions of all-around democratic republicanism, after 1918, that this feat was accomplished. During WWI, as during earlier wars, belligerent governments went off the gold standard. Unlike earlier wars, however, WWI did not conclude with a return to the gold standard. Instead, from the mid-1920s until 1971, and interrupted by a series of international monetary crises, a pseudo-gold standard — the gold-exchange standard — was implemented. In 1971, the last remnant of the international gold standard was abolished. Since then, and for the first time in history, the entire world has adopted a pure fiat-money system of freely fluctuating government paper currencies.[18]

As a result, a seemingly permanent secular tendency toward inflation and currency depreciation has come into existence.

During the monarchical age, with a commodity money largely outside of government control, the “level” of prices had generally fallen and the purchasing power of money increased, except during times of war or new gold discoveries. Various price indices for Britain, for instance, indicate that prices were substantially lower in 1760 than they had been a hundred years earlier; and in 1860 they were lower than they had been in 1760.[19] Connected by an international gold standard, the development in other countries was similar.[20]

In sharp contrast, during the democratic-republican age, with the world financial center shifted from Britain to the United States, a very different pattern emerged. For instance, shortly after WWI, in 1921, the US wholesale-commodity price index stood at 113.[21] After WWII, in 1948, it had risen to 185. In 1971 it was 255, by 1981 it reached 658, and in 1991 it was near 1,000. During only two decades of irredeemable fiat money, the consumer price index in the United States rose from 40 in 1971 to 136 in 1991, in the United Kingdom it climbed from 24 to 157, in France from 30 to 137, and in Germany from 56 to 116.[22]

Similarly, during more than 70 years, from 1845 until the end of WWI in 1918, the British money supply had increased about 6-fold.[23] In distinct contrast, during the 73 years from 1918 until 1991, the US money supply increased more than 64-fold.[24]

In addition to taxation and inflation, a government can resort to debt in order to finance its current expenditures. As with taxation and inflation, there is no doubt that government debt increased in the course of the monarchical age. However, as predicted theoretically, in this field monarchs also showed considerably more moderation and farsightedness than democratic-republican caretakers.

Throughout the monarchical age, government debts were essentially war debts. While the total debt thereby tended to increase over time, during peacetime at least monarchs characteristically reduced their debts. The British example is fairly representative. In the course of the 18th and 19th centuries, government debt increased. It was 76 million pounds after the Spanish War in 1748, 127 million after the Seven Years’ War in 1763, 232 million after the American War of Independence in 1783, and 900 million after the Napoleonic Wars in 1815. Yet during each peacetime period — from 1727—1739, from 1748—1756, and from 1762—1775, total debt actually decreased. From 1815 until 1914, the British national debt fell from a total of 900 to below 700 million pounds.

In striking contrast, since the onset of the democratic-republican age British debt only increased, in war and in peace. In 1920 it was 7.9 billion pounds, in 1938, 8.3 billion, in 1945, 22.4 billion, in 1970, 34 billion, and since then it has skyrocketed to more than 190 billion pounds in 1987.[25]

Likewise, US government debt has increased through war and peace. Federal government debt after WWI, in 1919, was about 25 billion dollars. In 1940 it was 43 billion, and after WWII, in 1946, it stood at about 270 billion. By 1970 it had risen to 370 billion, and since 1971, under a pure fiat-money regime, it has exploded. In 1979 it was about 840 billion, and in 1985 more than 1.8 trillion. In 1988 it reached almost 2.5 trillion, and by 1992 it exceeded 3 trillion dollars.[26]

Finally, the same tendency toward increased exploitation and present-orientation emerges upon examination of government legislation and regulation. During the monarchical age, with a clear-cut distinction between the ruler and the ruled, the king and his parliament were held to be under the law. They applied preexisting law as judge or jury.

They did not make law. Writes Bertrand de Jouvenel,

The monarch was looked on only as judge and not as legislator. He made subjective rights respected and respected them himself; he found these rights in being and did not dispute that they were anterior to his authority.… Subjective rights were not held on the precarious tenure of grant but were freehold possessions. The sovereign’s right also was a freehold. It was a subjective right as much as the other rights, though of a more elevated dignity, but it could not take the other rights away.[27]

To be sure, the monopolization of law administration led to higher prices and/or lower product quality than those that would have prevailed under competitive conditions, and in the course of time kings employed their monopoly increasingly to their own advantage. But as late as the beginning of the 20th century, A.V. Dicey could still maintain that as for Great Britain, for instance, legislative law — public law — as distinct from preexisting law — private law — did not exist.[28]

In striking contrast, under democracy, with the exercise of power shrouded in anonymity, presidents and parliaments quickly came to rise above the law. They became not only judge but legislator, the creator of “new” law.[29] Today, notes Jouvenel,

we are used to having our rights modified by the sovereign decisions of legislators. A landlord no longer feels surprised at being compelled to keep a tenant; an employer is no less used to having to raise the wages of his employees in virtue of the decrees of Power. Nowadays it is understood that our subjective rights are precarious and at the good pleasure of authority.[30]

In a development similar to the democratization of money — the substitution of government paper money for private commodity money and the resulting inflation and increased financial uncertainty — the democratization of law and law administration has led to a steadily growing flood of legislation. Presently, the number of legislative acts and regulations passed by parliaments in the course of a single year is in the tens of thousands, filling hundreds of thousands of pages, affecting all aspects of civil and commercial life, and resulting in a steady depreciation of all law and heightened legal uncertainty.

As a typical example, the 1994 edition of the Code of Federal Regulations (CFR), the annual compendium of all US Federal Government regulations currently in effect, consists of a total of 201 books, occupying about 26 feet of library shelf space. The Code’s index alone is 754 pages. The Code contains regulations concerning the production and distribution of almost everything imaginable: from celery, mushrooms, watermelons, watchbands, the labeling of incandescent light bulbs, hosiery, iron and steel manufacturing, and onion rings made out of diced onions, revealing the almost-totalitarian power of a democratic government.[31]

III.2. Indicators of Present-Orientedness

The phenomenon of social time preference is somewhat more elusive than that of expropriation and exploitation, and it is more complicated to identify suitable indicators of present-orientation. Moreover, some indicators are less direct — “softer” — than those of exploitation. But all of them point in the same direction and together provide as clear an illustration of the second theoretical prediction: that democratic rule also promotes shortsightedness (present-orientation) within civil society.[32]

The most direct indicator of social time preference is the rate of interest. The interest rate is the ratio of the valuation of present goods as compared to future goods. More specifically, it indicates the premium at which present money is traded against future money. A high interest rate implies more “present-orientedness” and a low rate of interest implies more “future-orientation.”

Under normal conditions — that is, under the assumption of increasing standards of living and real-money incomes — the interest rate can be expected to fall and ultimately approach, yet never quite reach, zero. With rising real incomes, the marginal utility of present money falls relative to that of future money, and hence under the ceteris paribus assumption of a given time preference schedule, the interest rate must fall. Consequently, savings and investment will increase, future real incomes will be still higher, and so on.

In fact, a tendency toward falling interest rates characterizes mankind’s suprasecular trend of development. Minimum interest rates on “normal safe loans” were around 16 percent at the beginning of Greek financial history in the 6th century BC, and fell to 6 percent during the Hellenistic period. In Rome, minimum interest rates fell from more than 8 percent during the earliest period of the Republic to 4 percent during the first century of the Empire. In 13th-century Europe, the lowest interest rates on ‘safe’ loans were 8 percent. In the 14th century they came down to about 5 percent. In the 15th century they fell to 4 percent. In the 17th century they went down to 3 percent. And at the end of the 19th century, minimum interest rates had further declined to less than 2.5 percent.[33]

This trend was by no means smooth. It was frequently interrupted by periods, sometimes as long as centuries, of rising interest rates. However, such periods were associated with major wars and revolutions.

Furthermore, whereas high or rising minimum interest rates indicate periods of generally low or declining living standards, the overriding opposite tendency toward low and falling interest rates reflects mankind’s overall progress — its advance from barbarism to civilization. Specifically, the trend toward lower interest rates reflects the rise of the Western World, its peoples’ increasing prosperity, farsightedness, intelligence, and moral strength, and the unparalleled height of 19th-century European civilization.

Before this historical backdrop and in accordance with economic theory, then, it should be expected that 20th-century interest rates would have to be still lower than 19th-century rates. Indeed, only two possible explanations exist why this is not so. The first possibility is that 20th-century real incomes did not exceed, or even fell below, 19th-century incomes. However, this explanation can be ruled out on empirical grounds, for it seems fairly uncontroversial that 20th-century incomes are in fact higher.

Then only the second explanation remains. If real incomes are higher but interest rates are not lower, then the ceteris paribus clause can no longer be assumed true. Rather, the social time preference schedule must have shifted upward. That is, the character of the population must have changed. People on the average must have lost in moral and intellectual strength and have become more present-oriented. Indeed, this appears to be the case.

From 1815 onward, throughout Europe and the Western World, minimum interest rates steadily declined to an historic low of, on the average, well below 3 percent at the turn of the century. With the onset of the democratic-republican age, this earlier tendency came to a halt and seems to have changed direction, revealing 20th-century Europe and the United States as declining civilizations.

An inspection of the lowest decennial average interest rates for Britain, France, the Netherlands, Belgium, Germany, Sweden, Switzerland, and the United States, for instance, shows that during the entire post-WWI era interest rates in Europe were never as low or lower than they had been during the second half of the 19th century. Only in the United States, in the 1950s, did interest rates ever fall below late 19th-century rates. This was only a short-lived phenomenon, and US interest rates even then were not lower than they had been in Britain during the second half of the 19th century.

Instead, 20th-century rates were universally higher than 19th-century rates, and if anything they have exhibited a rising tendency.[34] This conclusion does not substantially change, even when it is taken into account that modern interest rates, in particular since the 1970s, include a systematic inflation premium. After adjusting recent nominal interest rates for inflation in order to yield an estimate of real interest rates, contemporary interest rates still appear to be significantly higher than they were 100 years ago.

On the average, minimum long-term interest rates in Europe and the US nowadays seem to be well above 4 percent and possibly as high as 5 percent — that is, above the interest rates of 17th-century Europe and as high or higher than 15th-century rates. Likewise, current US savings rates of around 5 percent of disposable income are no higher than they were more than 300 years ago in a much poorer 17th-century England.[35]

Parallel to this development and reflecting a more specific aspect of the same underlying phenomenon of high or rising social time preferences, indicators of family disintegration — “dysfunctional families” — have exhibited a systematic increase.

Until the end of the 19th century, the bulk of government spending — typically more than 50 percent — went to financing the military. Assuming government expenditures to be then about 5 percent of the national product, this amounted to military expenditures of 2.5 percent of the national product. The remainder went to government administration.

Welfare spending or “public charity” played almost no role. Insurance was considered to be in the province of individual responsibility, and poverty relief seen as the task of voluntary charity. In contrast, as a reflection of the egalitarianism inherent in democracy, from the beginning of the democratization in the late 19th century onward came the collectivization of individual responsibility.

Military expenditures have typically risen to 5—10 percent of the national product in the course of the 20th century. But with public expenditures currently making up 50 percent of the national product, military expenditures now only represent 10—20 percent of total government spending. The bulk of public spending — typically more than 50 percent of total expenditures (or 25 percent of the national product) — is now eaten up by public-welfare spending.[36]

Consequently, by increasingly relieving individuals of the responsibility of having to provide for their own health, safety, and old age, the range and temporal horizon of private provisionary action have been systematically reduced. In particular, the value of marriage, family, and children have fallen, because they are needed less as soon as one can fall back on "public" assistance.

Thus, since the onset of the democratic-republican age the number of children has declined, and the size of the endogenous population has stagnated or even fallen. For centuries, until the end of the 19th century, the birth rate had been almost constant: somewhere between 30 to 40 per 1,000 population (usually somewhat higher in predominantly Catholic and lower in Protestant countries).

In sharp contrast, in the course of the 20th century all over Europe and the US birthrates have experienced a dramatic decline — down to about 15 to 20 per 1,000.[37] At the same time, the rates of divorce, illegitimacy, single parenting, singledom, and abortion have steadily increased, while personal savings rates have begun to stagnate or even fall rather than rise proportionally with rising incomes.[38]

Moreover, as a consequence of the depreciation of law resulting from legislation and the collectivization of responsibility effected in particular by social security legislation, the rate of crimes of a serious nature, such as murder, assault, robbery, and theft, has also shown a systematic upward tendency.

In the “normal” course of events — that is, with rising standards of living — it can be expected that the protection against social disasters such as crime will undergo continual improvement, just as one would expect the protection against natural disasters such as floods, earthquakes and hurricanes to become progressively better. Indeed, throughout the Western world this appears to have been the case by and large — until recently, during second half of the 20th century, when crime rates began to climb steadily upward.[39]

To be sure, there are a number of factors other than increased irresponsibility and shortsightedness brought on by legislation and welfare that may contribute to crime. Men commit more crimes than women, the young more than the old, blacks more than whites, and city dwellers more than villagers. Accordingly, changes in the composition of the sexes, age groups, races, and the degree of urbanization can be expected to have a systematic effect on crime.

However, all of these factors are relatively stable and thus cannot account for any systematic change in the long-term downward trend of crime rates. As for European countries, their populations were and are comparatively homogeneous; and in the United States, the proportion of blacks has remained roughly stable. The sex composition is largely a biological constant; and as a result of wars, only the proportion of males has periodically fallen, thus actually reinforcing the “normal” trend toward falling crime rates.

Similarly, the composition of age groups has changed only slowly; and due to declining birth rates and higher life expectancies the average age of the population has actually increased, thus helping to depress crime rates still further. Finally, the degree of urbanization began to increase dramatically from about 1800 onward. A period of rising crime rates during the early 19th century can be attributed to this initial spurt of urbanization.[40]

Yet, after a period of adjustment to the new phenomenon of urbanization, from the mid-19th century onward, the countervailing tendency toward falling crime rates took hold again, despite the fact that the process of rapid urbanization continued for about another hundred years. And when crime rates began to move systematically upward, from the mid-20th century onward, the process of increasing urbanization had actually come to a halt.

It thus appears that the phenomenon of rising crime rates cannot be explained other than with reference to the process of democratization: by a rising degree of social time preference, an increasing loss of individual responsibility, intellectually and morally, and a diminished respect for all law — moral relativism — stimulated by an unabated flood of legislation. Of course, “high time preference” is by no means equivalent with “crime.” A high time preference can also find expression in such perfectly lawful activities as recklessness, unreliability, poor manners, laziness, stupidity or hedonism.

Nonetheless, a systematic relationship between high time preference and crime exists, for in order to earn a market income a certain minimum of planning, patience and sacrifice is required. One must first work for a while before one gets paid. In contrast, most serious criminal activities such as murder, assault, rape, robbery, theft, and burglary require no such discipline. The reward for the aggressor is immediate and tangible, whereas the sacrifice — possible punishment — lies in the future and is uncertain. Consequently, if the social degree of time preference were increased, it would be expected that the frequency in particular of these forms of aggressive behavior would rise — as they in fact did.[41]

IV. Conclusion: Monarchy, Democracy, and the Idea of a Natural Order

From the vantage point of elementary economic theory and in light of historical evidence, then, a revisionist view of modern history results. The Whig theory of history, according to which mankind marches continually forward toward ever higher levels of progress, is incorrect. From the viewpoint of those who prefer less exploitation over more and who value farsightedness and individual responsibility above shortsightedness and irresponsibility, the historic transition from monarchy to democracy represents not progress but civilizational decline.

Nor does this verdict change if more or other indicators are included. Quite to the contrary. Without question the most important indicator of exploitation and present-orientedness not discussed above is war. Yet if this indicator were included the relative performance of democratic-republican government appears to be even worse, not better. In addition to increased exploitation and social decay, the transition from monarchy to democracy has brought a change from limited warfare to total war, and the 20th century, the age of democracy, must be ranked also among the most murderous periods in all of history.[42]

Thus, inevitably two final questions arise. What can we expect? And what can we do? As for the first question, the answer is brief. At the end of the 20th century, democratic republicanism in the United States and all across the Western world has apparently exhausted the reserve fund that was inherited from the past. For decades, real incomes have stagnated or even fallen.[43] The public debt and the cost of social security systems have brought on the prospect of an imminent economic meltdown.

At the same time, societal breakdown and social conflict have risen to dangerous heights. If the tendency toward increased exploitation and present-orientedness continues on its current path, the Western democratic welfare states will collapse as the East European socialist peoples’ republics did in the late 1980s. Hence one is left with only the second question: what can we do in order to prevent the process of civilizational decline from running its full course to an economic and social catastrophe?

First, the idea of democracy and majority rule must be delegitimized. Ultimately, the course of history is determined by ideas, be they true or false. Just as kings could not exercise their rule unless a majority of public opinion accepted such rule as legitimate, so will democratic rulers not last without ideological support in public opinion.[44]

Likewise, the transition from monarchical to democratic rule must be explained as fundamentally nothing but a change in public opinion. In fact, until the end of WWI, the overwhelming majority of the public in Europe accepted monarchical rule as legitimate.[45] Today, hardly anyone would do so.

On the contrary, the idea of monarchical government is considered laughable. Consequently, a return to the “ancien rgime” must be regarded as impossible. The legitimacy of monarchical rule appears to have been irretrievably lost. Nor would such a return be a genuine solution. For monarchies, whatever their relative merits, do exploit and do contribute to present-orientedness as well. Rather, the idea of democratic-republican rule must be rendered equally if not more laughable, not in the least by identifying it as the source of the ongoing process of decivilization.

But secondly, and still more importantly, at the same time a positive alternative to monarchy and democracy — the idea of a natural order — must be spelled out and understood. On the one hand, and simply enough, this involves the recognition that it is not exploitation, either monarchical or democratic, but private property, production, and voluntary exchange that are the ultimate source of human civilization.

On the other hand, psychologically more difficult to accept, it involves the recognition of a fundamental sociological insight (which incidentally also helps identify precisely where the historic opposition to monarchy went wrong): that the maintenance and preservation of a private-property-based exchange economy requires as its sociological presupposition the existence of a voluntarily acknowledged “natural” elite — a nobilitas naturalis.[46]

The natural outcome of the voluntary transactions between various private property owners is decidedly nonegalitarian, hierarchical, and elitist. As the result of widely diverse human talents, in every society of any degree of complexity a few individuals quickly acquire the status of an elite. Owing to superior achievements of wealth, wisdom, bravery, or a combination thereof, some individuals come to possess “natural authority,” and their opinions and judgments enjoy widespread respect.

Moreover, because of selective mating and marriage and the laws of civil and genetic inheritance, positions of natural authority are more likely than not passed on within a few — noble — families. It is to the heads of these families with long-established records of superior achievement, farsightedness, and exemplary personal conduct, that men turn with their conflicts and complaints against each other, and it is these very leaders of the natural elite who typically act as judges and peacemakers, often free of charge, out of a sense of obligation required and expected of a person of authority or even out of a principled concern for civil justice, as a privately produced “public good.”[47]

In fact, the endogenous origin of a monarchy (as opposed to its exogenous origin via conquest)[48] cannot be understood except before the background of a prior order of natural elites. The small but decisive step in the transition to monarchical rule — original sin — consisted precisely in the monopolization of the function of judge and peacemaker. The step was taken, once a single member of the voluntarily acknowledged natural elite — the king — could insist, against the opposition of other members of the social elite, that all conflicts within a specified territory be brought before him.

From this moment on, law and law enforcement became more expensive: instead of being offered free of charge or for a voluntary payment, they were financed with the help of a compulsory tax. At the same time, the quality of law deteriorated: instead of upholding the preexisting law and applying universal and immutable principles of justice, a monopolistic judge, who did not have to fear losing clients as a result of being less than impartial in his judgments, could successively alter and pervert the existing law to his own advantage.

It was to a large extent the inflated price of justice and the perversions of ancient law by the kings which motivated the historical opposition against monarchy. However, confusion as to the causes of this phenomenon prevailed. There were those who recognized correctly that the problem lay with monopoly, not with elites or nobility.[49] But they were far outnumbered by those who erroneously blamed it on the elitist character of the ruler instead, and who accordingly advocated to maintain the monopoly of law and law enforcement and merely replace the king and the visible royal pomp by the “people” and the presumed modesty and decency of the “common man.” Hence the historic success of democracy.

Ironically, the monarchy was then destroyed by the same social forces that kings had first stimulated when they began to exclude competing natural authorities from acting as judges. In order to overcome their resistance, kings typically aligned themselves with the people, the common man.[50]

Appealing to the always popular sentiment of envy, kings promised the people cheaper and better justice in exchange and at the expense of taxing — cutting down to size — their own betters (that is, the kings’ competitors). When the kings’ promises turned out to be empty, as was to be predicted, the same egalitarian sentiments which they had previously courted now focused and turned against them.

After all, the king himself was a member of the nobility, and as a result of the exclusion of all other judges, his position had become only more elevated and elitist and his conduct only more arrogant. Accordingly, it appeared only logical then that kings, too, should be brought down and that the egalitarian policies, which monarchs had initiated, be carried through to their ultimate conclusion: the monopolistic control of the judiciary by the common man.

Predictably, as explained and illustrated in detail above, the democratization of law and law enforcement — the substitution of the people for the king — made matters only worse, however. The price of justice and peace has risen astronomically, and all the while the quality of law has steadily deteriorated to the point where the idea of law as a body of universal and immutable principles of justice has almost disappeared from public opinion and has been replaced by the idea of law as legislation (government-made law).

At the same time, democracy has succeeded where monarchy only made a modest beginning: in the ultimate destruction of the natural elites. The fortunes of great families have dissipated, and their tradition of a culture of economic independence, intellectual farsightedness, and moral and spiritual leadership has been lost and forgotten. Rich men still exist today, but more frequently than not they owe their fortune now directly or indirectly to the state.

Hence, they are often more dependent on the state’s continued favors than people of far lesser wealth. They are typically no longer the heads of long-established leading families but “nouveaux riches.” Their conduct is not marked by special virtue, dignity, or taste but is a reflection of the same proletarian mass-culture of present-orientedness, opportunism, and hedonism that the rich now share with everyone else; and consequently, their opinions carry no more weight in public opinion than anyone else’s.

Hence, when democratic rule has finally exhausted its legitimacy, the problem faced will be significantly more difficult than when kings lost their legitimacy. Then, it would have been sufficient by and large to abolish the king’s monopoly of law and law enforcement and replace it with a natural order of competing jurisdictions, because remnants of natural elites who could have taken on this task still existed.

Now, this will no longer be sufficient. If the monopoly of law and law enforcement of democratic governments is dissolved, there appears to be no other authority to whom one can turn for justice, and chaos would seem to be inevitable. Thus, in addition to advocating the abdication of democracy, it is now of central strategic importance that at the same time ideological support be given to all decentralizing or even secessionist social forces; that is, the tendency toward political centralization that has characterized the Western world for many centuries, first under monarchical rule and then under democratic auspices, must be systematically reversed.[51]

Even if as a result of a secessionist tendency a new government, whether democratic or not, should spring up, territorially smaller governments and increased political competition will tend to encourage moderation as regards exploitation. And in any case, only in small regions, communities or districts will it be possible again for a few individuals, based on the popular recognition of their economic independence, outstanding professional achievement, morally impeccable personal life, and superior judgment and taste, to rise to the rank of natural, voluntarily acknowledged authorities and lend legitimacy to the idea of a natural order of competing judges and overlapping jurisdictions — an “anarchic” private law society — as the answer to monarchy and democracy.

This article is excerpted from the Journal of Libertarian Studies, Vol. 11 Num. 2.

This originally appeared on Mises.org.

Notes

[1] On the theory of the state see M.N. Rothbard, For A New Liberty (New York: Macmillan, 1978); idem, The Ethics of Liberty (Atlantic Highlands: Humanities Press, 1982); idem, Power and Market (Kansas City: Sheed, Andrews & McMeel, 1977); H.H. Hoppe, Eigentum, Anarchie und Staat (Opladen: Westdeutscher Verlag, 1987); idem, A Theory of Socialism and Capitalism (Boston: Kluwer, 1989); idem, The Economics and Ethics of Private Property (Boston: Kluwer, 1993); also A.J. Nock, Our Enemy, the State (Delevan: Hallberg Publishing Co., 1983); F. Oppenheimer, The State (New York: Vanguard Press, 1914); idem, System der Soziologie. Vol.2: Der Staat (Stuttgart: G. Fischer, 1964).

[2] See on the following also H.H. Hoppe, “Time Preference, Government, and the Process of De-Civilization — From Monarchy to Democracy,” Journal des Economistes et des Etudes Humaines, Vol. V, No. 4, 1994.

[3] See also B. de Jouvenel, On Power (New York: Viking, 1949), esp. pp. 9—10.

[4] See M.N. Rothbard, Power and Market, pp. 188—189; also G. Hardin & J. Baden, eds., Managing the Commons (San Francisco: W.H. Freeman, 1977; and M. Olson, “Dictatorship, Democracy, and Development,” American Political Science Review 87, 3, 1993.

[5] In addition to the works quoted in fn.1 above, see L. Spooner, No Treason: The Constitution of No Authority (Larkspur: Pine Tree Press, 1966), p. 17.

[6] On the phenomenon and theory of time preference see in particular L. von Mises, Human Action. A Treatise on Economics (Chicago: H. Regnery, 1966), chs. XVIII, XIX; also W. St. Jevons, Theory of Political Economy (New York: A. Kelley, 1965); E.v. Böhm-Bawerk, Capital and Interest, 3 vols. (South Holland: Libertarian Press, 1959); F. Fetter, Capital, Interest, and Rent (Kansas City: Sheed, Andrews & McMeel, 1977); M.N. Rothbard, Man, Economy, and State (Los Angeles: Nash, 1970).

[7] See also H.H. Hoppe, “Time Preference, Government, and the Process of De-Civilization — From Monarchy to Democracy.“

[8] See on this G. Ferrero, Peace and War (Freeport: Books for Libraries Press,1969), esp. ch. 3; idem, Macht (Bern: A. Francke, 1944); E. v. Kuehnelt-Leddihn, Leftism Revisited (Washington D.C.: H. Regnery, 1990); R. Bendix, Kings or People (Berkeley: University of California Press, 1978).

[9] For a detailed documentation see P. Flora, State, Economy, and Society in Western Europe 1815—1975, Vol. I (Frankfurt/M.: Campus, 1983), ch. 3; also R.R. Palmer & J. Colton, A History of the Modern World (New York: A. Knopf, 1992), esp. chs. XIV, XVIII.

[10] On the aristocratic (undemocratic) character of the early United States, see Lord Acton, “Political Causes of the American Revolution” in: idem, The Liberal Interpretation of History (Chicago: University of Chicago Press, 1967); also, Ch. Woltermann, “Federalism, Democracy and the People,” Telos, Vol. 26, 1, 1993.

[11] On the US war involvement, see J.F.C. Fuller, The Conduct of War (New York: Da Capo, 1992), ch. IX; on the role of Woodrow Wilson, and his policy of wanting to "make the world safe for democracy," see M.N. Rothbard, “World War I as Fulfillment; Power and the Intellectuals,” Journal of Libertarian Studies, 9, no. 1, 1989; P. Gottfried, “Wilsonianism: The Legacy that Won’t Die,” Journal of Libertarian Studies, 9, no. 2, 1990; E.v. Kuehnelt-Leddihn, Leftism Revisited, ch. 15.

[12] Interestingly, the Swiss Republic, which had been the first country to establish universal male suffrage (in 1848), was the last to expand the suffrage also to women (in 1971). Similarly, the French Republic, where universal male suffrage had existed since 1848, extended the franchise to women only in 1945.

[13] See H.J. Schoeps, Preussen. Geschichte eines Staates (Frankfurt/M.: Ullstein, 1981), p. 405 on data for England, Prussia, and Austria.

[14] C.M. Cipolla, Before the Industrial Revolution. European Society and Economy, 1000—1700 (New York: W.W. Norton, 1980), p. 48.

[15] See P. Flora, State, Economy and Society in Western Europe, Vol. 1, pp. 258—259.

[16] Ibid, ch. 8.

[17] Ibid, ch. 5. In fact, the share of government employment in present times must be considered systematically underestimated, for apart from excluding all military personnel it also excludes the personnel in hospitals, welfare institutions, social insurance agencies, and nationalized industries.

[18] See also M.N. Rothbard, What Has Government Done to Our Money? (Auburn, Al.: Ludwig von Mises Institute, 1990); H.H. Hoppe, “How is Fiat Money Possible? or, The Devolution of Money and Credit,” Review of Austrian Economics, Vol. 7, no. 2, 1994.

[19] See B.R. Mitchell, Abstract of British Historical Statistics (Cambridge: Cambridge University Press, 1962), pp.468ff.

[20] Idem, European Historical Statistics 1750—1970 (New York: Columbia University Press, 1078), pp. 388ff.

[21] 1930 = 100; see R. Paul and L. Lehrmann, The Case for Gold. A Minority Report to the U.S. Gold Commission (Washington D.C.: Cato Institute, 1982), p. 165f.

[22] 1983 = 100; see Economic Report of the President (Washington D.C.: Government Printing Office, 1992).

[23] See Mitchell, Abstract of British Historical Statistics, p. 444f.

[24] See M. Friedman & A. Schwartz, A Monetary History of the United States, 1867—1960 (Princeton: Princeton University Press, 1963), pp.704—722; and Economic Report of the President, 1992.

[25] See S. Homer & R. Sylla, A History of Interest Rates (New Brunswick: Rutgers University Press, 1991), pp. 188, 437.

[26] See J. Hughes, American Economic History (Glenview: Scott, Foresman,1990), pp. 432, 498, 589.

[27] B. de Jouvenel, Sovereignty, pp. 172—173; p.189; see also F. Kern, Kingship and Law in the Middle Ages (London, 1939), esp. p. 151; B. Rehfeld, Die Wurzeln des Rechts (Berlin, 1951), esp. p. 67.

[28] See A.V. Dicey, Lectures on the Relation between Law and Public Opinion in England during the Nineteenth Century (London: Macmillan, 1903); also F.A. Hayek, Law, Legislation, and Liberty, Vol. 1 (Chicago: University of Chicago Press, 1973), chs. 4 and 6.

[29] See R. Nisbet, Community and Power (New York: Oxford University Press,1962), pp. 110—111.

[30] B. de Jouvenel, Sovereignty, p. 189; see also R. Nisbet, Community and Power, ch. 5.

[31] See D. Boudreaux, “The World’s Biggest Government,” Free Market, November 1994.

[32] See also T.A. Smith, Time and Public Policy (Knoxville: University of Tennessee Press, 1988).

[33] See Homer & Sylla, A History of Interest Rates, pp. 557—558.

[34] See Homer/Sylla, A History of Interest Rates, pp. 554—555.

[35] See Cipolla, Before the Industrial Revolution, p. 39.

[36] See Cipolla, Before the Industrial Revolution, pp. 54—55; Flora, State, Economy, and Society in Western Europe, ch. 8; and p. 454.

[37] See Mitchell, European Historical Statistics 1750—1970, pp. 16ff.

[38] See A.C. Carlson, Family Questions. Reflections on the American Social Crises (New Brunswick: Transaction Publishers, 1992); idem, The Swedish Experiment in Family Politics (New Brunswick: Transaction Publishers, 1993); idem, “What Has Government Done to Our Families?” Essays in Political Economy, no. 13 (Auburn, Al.: Ludwig von Mises Institute, 1991); Ch. Murray, Losing Ground (New York: Basic Books, 1984); for an early diagnosis see J.A. Schumpeter, Capitalism, Socialism, and Democracy (New York: Harper, 1942), ch.14.

[39] See J.Q. Wilson & R.J. Herrnstein, Crime and Human Nature (New York: Simon & Schuster, 1985), pp. 408—409; on the magnitude of the increase in criminal activity brought about by democratic republicanism and welfarism in the course of the last hundred years see also R.D. McGrath, Gunfighters, Highwaymen, and Vigilantes (Berkeley: University of California Press, 1984), esp. ch.13; idem, “Treat them to a Good Dose of Lead,” Chronicles, January 1994.

[40] See Wilson & Herrnstein, Crime and Human Nature, p. 411.

[41] On the relationship between high time preference and crime see also E.C. Banfield, The Unheavenly City Revisited (Boston: Little, Brown & Company,1974), esp. chs. 3 and 8; idem, “Present-Orientedness and Crime,” in: R.E. Barnett/J. Hagel, eds., Assessing the Criminal (Cambridge: Ballinger, 1977); Wilson & Herrnstein, Crime and Human Nature, pp. 414—424.

[42] On the contrast between monarchical and democratic warfare see J.F.C. Fuller, The Conduct of War, esp. chs. 1 and 2; idem, War and Western Civilization (Freeport: Books for Libraries, 1969); M. Howard, War in European History (Oxford: Oxford University Press, 1976), esp. ch. 6; idem, War and the Liberal Conscience (New Brunswick: Rutgers University Press, 1978); B. de Jouvenel, On Power, ch. 8; W.A. Orton, The Liberal Tradition (Port Washington: Kennikat Press, 1969), pp. 251ff; G. Ferrero, Peace and War, ch. 1.

[43] For a revealing analysis of US data see R. Batemarco, “GNP, PPR, and the Standard of Living,” Review of Austrian Economics, vol. 1, 1987.

[44] On the relation between government and public opinion see the classic expositions by . de La Botie, The Politics of Obedience: The Discourse of Voluntary Servitude (New York: Free Life Editions, 1975); D. Hume, Essays. Moral, Political, and Literary (Oxford: Oxford University Press, 1963), esp. “Essay IV: Of the First Principles of Government.”

[45] As late as 1871, for instance, with universal male suffrage, the National Assembly of the French Republic contained only about 200 republicans out of more than 600 deputies. And the restoration of a monarchy was only prevented because the supporters of the Bourbons and the Orleans checkmated each other.

[46] See also W. Röpke, Jenseits von Angebot und Nachfrage (Bern: P.Haupt,1979), pp. 191—199; B. de Jouvenel, On Power, ch. 17.

[47] See also M. Harris, Cannibals and Kings. The Origins of Culture (New York: Vintage Books, 1977), pp.104ff on the private provision of public goods by “big men.”

[48] As a comparative evaluation of theories of the endogenous versus the exogenous origin of government and a historical critique of the latter as incorrect or incomplete see W. Mühlmann, Rassen, Ethnien, Kulturen (Neuwied: Luchterhand, 1964), pp. 248—319, esp. pp. 291—296.

For proponents of theories of the exogenous origin of government see F. Ratzel, Politische Geographie (München, 1923); F. Oppenheimer, System der Soziologie. Vol. 2: Der Staat; A. Rüstow, Freedom and Domination (Princeton: Princeton University Press, 1980).

[49] See, for instance, G. de Molinari, The Production of Security (New York: Center for Libertarian Studies, 1977), published originally in 1849, in French.

[50] See on this also H. Pirenne, Medieval Cities (Princeton: Princeton University Press, 1974), esp. pp. 179—180, and pp. 227f; B. de Jouvenel, On Power, ch.17.

[51] On the political economy of political centralization, and the rationale of decentralization and secession, see H.H. Hoppe, “Against Centralization,” Salisbury Review, June 1993; idem, “Migrazione, centralismo e secessione nell’Europa contemporanea,” biblioteca della liberta, no. 118, 1992; J. Baechler, The Origins of Capitalism (New York: St. Martin’s Press, 1976), esp. ch. 7.

Hans-Hermann Hoppe [send him mail] is distinguished fellow at the Ludwig von Mises Institute and founder and president of the Property and Freedom Society. His books include Democracy: The God That Failed and The Myth of National Defense. Visit his website.

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