Peace, Progress, Social Capital, and Government


Governed behavior

Human action, even when it is the behavior of a free person, is often subject to laws, norms, rules, and customs. For short, call these simply laws. Human action is governed behavior, which means it is ordered, restrained, and constrained. The restraints are administered by three kinds of governance: political, social, and individual.

When governance is working properly, based on both proper laws and proper administration of those laws, it supports and encourages peace which sets the stage for individual well-being, and societal growth in wealth. I use James Ostrowski’s definition of peace: "Peace is the absence of violence or the palpable threat of violence against persons and their property." Proper governance has a hand in decreasing crime, protecting life and property, settling conflicts and disputes, facilitating exchanges that help man satisfy his material, emotional, and spiritual needs, supporting trust and cooperation, and maintaining and transmitting social capital. But a beneficial social framework is not automatic. Few people would exchange living in the U.S., even in its present condition, for living in the old Soviet Union. The customs, rules, laws, and institutions by which human beings govern themselves make a decided difference in their well-being.

Governed behavior relates to two facts. The first is that human beings are not hermits. We live together in groups such as families and communities. We associate. We work with others. We live social lives. Our individual actions intermingle with those of others. We interact with one another. Social interaction is the basic framework within which we go about satisfying our individual wants and needs. There is no society without individuals and no individual can live without society. Looking at matters from the individual perspective, each of us has strong incentives to live together and behave ourselves. This is why we want governed behavior. We gain peace, safety, plenty, and opportunities to flourish. We gain the benefits of division of labor and trade over extended geographical regions. We gain wealth production. If we did not get along with one another, we would accomplish far less. We would find ourselves far poorer and our lives far more difficult and unsatisfying.

The second fact is that we do not and cannot live primarily by predation upon other human beings. Predation of goods cannot occur unless there is net production of goods. Furthermore, widespread predation imposes costs that reduce production and discourage capital accumulation. Therefore, we cannot and do not rely upon predation of each other as a predominant mode of living. We cannot engage in predation either en masse or indefinitely because there would eventually be nothing left to take, and we would extinguish ourselves. (In a later article, I extend this line of argument to justify private property.) Eschewing predation means living together socially in peace and having property. Governing our behavior is a means to these ends.

If we want to live and live with any degree of civilization that fosters more and more opportunities to satisfy our needs, the only possible long-term course of social action is to live together peaceably. That course facilitates the search for ways to make life better, which includes better ways to live in peace. There is a virtuous feedback cycle. The course of peaceful interaction demands governed behavior because (1) governed behavior contributes so much to cooperation, and cooperation contributes so much to better lives; and (2) continued life demands net production. The major question surrounding governed behavior is not whether or not society shall have it, but what sort of governance it shall be. What is proper governance and what is improper governance? What governance brings about living together peaceably? What brings proper governance about? What sustains proper governance?

None of this says that mankind must or does continually live in peace. It says that progress in terms of wealth (capital) accumulation, let us say, occurs in those periods of history when societies choose proper laws and methods of implementing them. Why societies have broken the peace and continue to break the peace is another matter. But if mankind had not lived in peace for lengthy periods of time, we would not be conversing about it now in relative comfort. And since men generally get what they want when it is attainable, we have arrived at this position because we and generations past generally wanted peace and secured it.

To sum up, out of our common desire to live with one another, we necessarily have to coordinate and control those acts of ours that engage others, simply because they do involve others. Such coordination is a major function of governed behavior. Individually and together, we by and large want and succeed in maintaining a peaceful set (or realm) of social interactions within which we seek to attain our individual goals and values; and we accomplish this goal in part through governed behavior.

Despite this conclusion, which follows logically from man’s conditions of life and is confirmed by mankind’s long-term growth in wealth, states and statists frequently champion power over peace and property, while glorifying war. It is not at all hard to find now and in the past concerted and extensive efforts to extol war, violence, and martial values, even as instruments of progress and nobility. Saburo Ienaga documents the Japanese case of war glorification within the Japanese education system. Historians sometimes interpret wars as bringing net improvements to the conquered cultures and peoples while also benefiting the war makers. War itself is sometimes lauded. Those who approve of war correctly note that war and its preparations mobilize a great deal of technical, organizational, and inventive human energy, but they fail to count the monstrous actual costs and the opportunity costs. War leaders are almost always built up into heroes and glorified. The horrific gore and the mind-wrenching brutalities of war that shroud the dead and scar their killers are buried beneath medal, flags, ceremonies, and parades. It should be observed that just wars are sometimes fought to attain freedom and remedy conditions in which violence and tyranny are being maintained against the better interests of a subjugated people, and that these just wars fall under the heading of restoring peace; but war-glorifiers then seek to wrap and hide unjust wars under the banner of wars for freedom and justice.

As against these pro-war sentiments, wars invariably involve large-scale destruction of life and property, disruption of production, seizure of productive assets, and suppression of people’s freedoms to realize their own values, among the armies and citizenries of both victors and vanquished. Wars divert resources to destruction that otherwise could be used constructively. Long wars, like long periods of pestilence, accompany marked declines in living standards; but even short wars sacrifice butter for guns, and the guns simply destroy human beings and capital. War and threat of war almost invariably register in stock markets of the world by driving down stock market values. This fact alone implicates war as a net destructive endeavor since stock market values reflect the long-run wealth consequences of human actions. War is commonly thought of as an abnormal state of affairs or an interruption in the normal course of life. Famine, deprivation, dislocation, desolation, and disease often accompany war. Conquest, war, and famine are apocalyptic. They are scourges. By contrast, the predominance of peace over war is evident in the long-run survival of human beings and in the gradual improvement of their lives over the centuries. Most of this progress is associated with peaceful endeavors such as marriage and child-rearing, education, science, technology, trade, discovery, invention, language, law, and property that have nothing inherently to do with war.

Social capital

Because we want (or in economic terms demand) peaceful interactions at reasonable cost, we need, and find it valuable to have, social rules and laws to govern the behavior of each of us in our associations with others. Treating other people fairly is such a rule. Not stealing from others is such a rule. These rules that we take to be beneficial in bringing about peaceful interactions are part of a larger set of social economic goods that comprise social capital. Other social capital goods include a common language, trust, a common money, and appropriate moral beliefs. They are called social goods or social capital because they are used in social interactions by most if not all the people within a social group, and they contribute to peaceful interactions, the accumulation of wealth, and the realization of individual values, all accomplished in a reasonably efficient way.

Social capital goods are factors of production in the production of private wealth. As such, they have positive value. We cannot measure their value, but their value is reflected in both material wealth accumulation and individual happiness. That value can rise and fall. If the society adopts customs and rules that decrease trust, it creates social bads. It destroys social capital, and thence private capital falls. Lower trust places a higher burden on individuals to monitor social interactions with others. Business exchanges, for example, become more costly. Agreements are more likely to end in disappointment. Disputes become more probable and their settlement more costly. If the language deteriorates and people lose the ability to communicate or use concepts effectively, another social bad, then social capital deteriorates. People then find that the costs of amassing accurate knowledge increase. They make worse decisions. If people adopt rules that decrease conflicts or resolve them more quickly and efficiently, a social good, then social capital rises. If an agency that governs behavior enforces rules that disrupt peaceful exchanges, then social capital falls. If individuals engage in aggressive driving or expressions of road rage, they are destroying social capital. Politeness, on and off the road, is a social good.

The very coming together of groups of human beings and their self-identification as a people create social capital. The amalgamation process results in a greater measure of security against intruders. It makes trade easier by lowering several of the costs of exchange. These include such costs as learning the reputation of others, communication, recognizing goods, use of money, and resolving disputes. There is bi-directional causality in that trade helps create a people. The process of trade widens the set of persons who identify themselves as having commonalities with others.


We wish to order our social behavior. Somehow we do. We come into rules of association and behavior that we largely agree upon, accept, and follow. We teach them to one another and to our children. We develop customs, norms, rules, regulations, and laws. We live by moral and ethical codes. We categorize ways of behaving as right and wrong, and as good and bad for social order. We then govern ourselves by a range of such measures, from informal to formal, and by a range of enforcement from lax to tight. Some acts become socially acceptable. Some are frowned on. Some acts are crimes.

We need rules and laws to guide individual actions as components of social interactions. Such rules are part of a people’s social capital. They are a necessity for social living. But such rules and laws can only be made operative with human participation. This raises a question. What forms shall this participation take? Administering rules and laws is a general function with many sub-functions. What are the administering agencies? The human beings and institutions (or organizations) that express, transmit, support, elaborate, interpret, and manage these rules of social association comprise government.

This is not a definition of political governments as we commonly know them. It is a functional definition arising from two distinct facts: (1) that social interaction requires social rules, and (2) that social rules require governance. In this definition, government does not originate or invent the laws. Government might play an entrepreneurial role in discovering or articulating rules. It surely administers them. Government refines, interprets, and applies them to particular cases. It communicates them, teaches them, enforces, preserves, and administers them.

The laws logically abide outside of and precede government, which is here viewed as the people and institutions that administer the rules. If government attains or has the function of making up rules and laws, that function goes beyond government. It is something else, which is lawmaking and/or rule making. But where laws and rules come from is a separate matter that is related to what law actually is. Law is not what a government arbitrarily says it is.

Mankind carries out its governance in three realms: political, social, and individual. Political government restrains people primarily by force and threat of force, financing itself by taxes. Its hallmarks are (a) a tendency toward wide-ranging (as opposed to local) territorial dominion, and (b) deliberate enactments, stemming from legislative, executive, judicial, and bureaucratic actions. Political government is the administrative apparatus of the guiding central organization known as the State.

Social government, comprising institutions such as family, church, association, and business, constrains primarily by non-violent means that include custom, influence, agreement, and morality. Its strictures are not consciously imposed from a single central source. The sources of social government are decentralized and lack the official directing and taxing powers of political government. This gives its actions a far more spontaneous and unpremeditated cast.

Finally, there is individual government, which is accomplished at the personal level when an individual controls his own behavior. He or she does this both by giving effect to political and social government, in idiosyncratic ways that depend on a myriad of individually-experienced situations, and by developing his own rules of guidance. Individuals widely accept and adopt governed behavior out of reasons such as habit, deference to custom, sanctions, rewards, religious training, moral and ethical inculcation, conscience, love, and expediency. Clearly individuals are influenced by political and social government; yet they behave in socially-appropriate ways to serve individual self-interests and they individually apply those rules and laws to individual cases and situations. The individual realm of government is immediate, pervasive, and idiosyncratic, constantly occupying the time and thought of every individual who is making choices and aiming to achieve his or her individual purposes and values. Individuals largely control or govern themselves. Their actions and interactions with others effectuate political and social government. And there is plenty of room for individuals to discover rules of behavior fitted to their individuality.

Government is not solely the state, not solely the federal or national government, nor does it mean only the government of a region, province, or individual state, or the government of a county, city, municipality or town. In other words, government is not solely what we commonly call the government. All of the latter are governmental political organizations. They are a portion of all government. They are to be distinguished from other forms of government by (a) having coercive power or force at their root, (b) having this power as a monopoly, and (c) centralizing or concentrating this power, usually in a small set of persons such as the State. The State is the quintessential political organization, the one that sits atop all the others at the apex of a nation’s pyramid of power. The State that we know as the United States of America, led by the President of the U.S.A., is probably a relatively small organization run by as few as 15—50 key people. The set of all these governmental political organizations is a nation’s political government.

Social government manages social rules by means other than political power. Its institutions have a broad range of means at their disposal. They may rely on love, nurturing, emotional and financial dependence, approval and disapproval, and authority such as parental authority, or spirituality, religious feelings, and heavenly intermediation as in the church. They may rely on morals and ethics, voluntary measures, agreements, understandings, norms, customs, social pressures, social influences, persuasion, teaching, and the like.

The institutions of social government, while maintaining an important influence on individuals, are nonetheless built up from voluntary individual action. They do not rely upon coercive monopoly power as in the case of political government. Instead, being in society and not over society by force, they are subject to individual voice and exit. Children rapidly develop the capacity for voice. Adults speak out against what they regard as undue influence, domination, and oppression. The possibility of exit is an even stronger sanction. People can leave a church they dislike. They can dissociate from family members. Voice and exit stimulate institutional innovation and competition. Social government tends to decentralize society’s management of rules and it tends to be subject to incentives akin to those found in the world of business competition. There is not a complete parallel to consumer sovereignty, but there is some. But, of absolutely critical importance, is the fact that social government has no ability to tax in order to finance itself. Therefore it bears the costs of its own irresponsible behavior; voice and exit become effective because of that fact. On the other side of the coin, responsible and effective actions bring benefits to the initiators.

Why three realms of government?

The ultimate initiator of responsible human action is the individual. The individual effectuates all three types of government. Although individual government is each person’s main concern, one person is not independent of others. Social interaction makes social government necessary. Political government, which is a longstanding feature of human societies, also has been thought necessary for certain functions.

Why then do human beings divide government into three realms? Why not four, or two, or one? Given that we are individuals who interact, if we are to have governed behavior, it must include social government. At a minimum, social government maintains social capital continuously in view of the fact that children are born without knowing social rules and must learn them. Social government includes agreements reached by individuals, but it is evidently of great importance, for example, that moral rules be taught by parents (or responsible adults) to children in order to transmit social capital. Education is of first-order importance in transmitting knowledge that is also part of social capital. Clearly such processes and others I have alluded to earlier require more than a single person.

Why do we also have individual or self-government? Self-government has two main aspects. Social governance via its institutions and rules influences the individual; but not to the point of entirely controlling the individual. Each human being is a creator who thinks his or her own thoughts and acts on his or her own. Excessive control by others is impossible without incurring very high costs of monitoring and controlling that lead directly to impoverishment for the controlled and the controllers. Excessive control is also counterproductive by inhibiting individual initiative and preventing individuals from bringing to bear their individual knowledge and aptitudes when faced with situations close to them. At various points, the individual commits and decides what rules to follow and how to follow them. At those points, individual government takes over. And, as with social government, the costs of irresponsible or even simply mistaken behavior fall directly upon the individual; while the individual captures the benefits of responsible and productive actions.

Secondly, individuals have a vast range of experiences that fall under the radar of both political and social government. Individuals learn what works for them in interacting with others, and in doing so, they develop their own personal rules or philosophies of life. They govern themselves in conjunction with others. They enforce their own behaviors in the ways they deal with one another.

Why does political government exist? It is by no means as easy to justify political government as it is to understand social and individual government. It is not easy to rationalize an institution that seriously harms the people under its control and, because of its taxation and other powers, is significantly more difficult to control than other forms of governance. We know that secessionist movements are frequent and that there are civil wars. Political government is a common source of discontent and grumbling, if not active efforts to alter it. It is the focal point of unbelievably bloody and brutal wars that wipe out millions and millions of people. These facts tell us that the state is not only not an unalloyed good, it is a rank evil. Even when it is not engaged in warfare, people within a state frequently disagree with its actions. They do not voluntarily agree with or affirm them. They frequently do not agree with the state itself and wish to secede from it, overthrow it, or alter it radically. If all this and more is the case, then why have a state?

The state is the institution that has strong monopolies over peoples. Its word can become law, even if it is unlawful law. It can force people to obey. It can tax, which forcibly extracts financial support. It can do great harm and does. There are serious problems in creating and allowing such a power. There are demonstrable and known problems inherent in political government that arise from the dynamics of power, the quest for power, its temptations, and the incentives to break down any barriers against its acquisition. There is a very great problem in controlling the created entity, which is obviously extremely dangerous. Why then do peoples embed such an institution within their societies and over them?

A common rationalization is that political government carries out functions that societies have heretofore regarded as necessarily society-wide in scope, so that no individual or social governmental institution is thought to be able to do them with the authority of the entire society. The corollary view is that mankind has not yet learned to or cannot decentralize these functions. As opposed to this view, neither has mankind learned how to control the political government that centralizes these functions.

The two functions we hear about are justice and defense. Political government is commonly justified as the executive organization to carry out the community’s sense of justice. It cannot be denied that such a function is essential, but as we well know from observation, it can be carried out effectively at the local level. There may be issues that require coordination when a criminal flees one jurisdiction for another, but centralizing and federalizing law, police, and courts is not a necessary method of administering the law and justice. If a people identifies a fixed, stable, and proper law, the function of justice in administering that law requires government but not necessarily centralized government. And the government it requires need not be financed by taxation.

Whether or not there needs to be one government authority and one law code in a given local region is beyond my scope here. See, for example, Benson. I suspect that even in a situation of competitive discovery of proper law, that a rapid coalescence around a single law would quickly emerge, or else the society would break up and/or be engaged in costly disputes if not wars.

Political government is also usually thought of as the executive organization to carry out the community defense. How defense is structured and organized depends on many factors peculiar to a people, such as the willingness of ordinary individuals to risk life and limb, the costs of maintaining forces and training them, the threats it faces from neighbors, its region, its location, its geography, the available technology, and the methods by which civilians might control a professional fighting force. It is by no means obvious that a centralized monopoly government answers to the best defense strategy, as opposed to decentralized methods combined with confederation and financing by means other than taxation; yet this method is what many peoples choose. This issue too is beyond this article’s scope (see, for example, Hoppe.)

Unlike the case with individual and social government, it is certainly impossible to justify political government in the massive forms they possess today. Today’s increasingly totalitarian governments go far beyond the justice and defense functions traditionally used to justify their existence. It is relatively easy to see the great harm they do. That is why several hundred years from now, the landscape of political governance is likely to look far different. Today’s overlarge political government units are likely to diminish considerably in scope. The United States of America (the State and its government apparatus) will come to an end.


The fact that there are three forms of government is an important feature of human interactions and societies. As a corollary, human beings maintain boundaries between each pair of governing realms. This suggests immediately that human beings have found that a single form of government is not appropriate for human life.

When any one of these three forms of government fails to do what is properly expected of it or does the opposite of what is expected of it, then we raise questions about its proper role and functioning. We wonder why society is breaking down, or why crime is up, or children misbehaving, or people falling ill, or people unable to find work, or people having to wait months to see a doctor, or people getting killed in wars, or terrorist attacks occurring. We wonder what is wrong and what to do about these matters. The root of these issues is that we need to know the boundaries of the three types of government. We need to know what actions each of the three realms of government may fruitfully engage in and what actions each realm should eschew. We need to have a theory of proper government action within each realm of human life in order to understand what improper actions may be bringing about social deterioration of one sort or another.

In practice, all three forms of government exhibit ethical failings. These transform government from a means of preserving and enhancing social order into a means of creating social disorder, from a means of law into a means of lawlessness, and from a means of regularizing human interactions into a means of disrupting them.

Ethical failings invert government. Instead of producing order and progress, law-breaking government produces disorder and impedes progress. Corruption involves the type-1 error of creating laws and rules that shouldn’t be created and the type-2 error of not following rules and laws that should be followed. Law-breaking is symptomatic of government being shaped by the interests of private individuals or groups rather than being accountable and responsible to a higher authority. It is a fact that governing institutions arise, not only to reconcile the individual with the social, but also to further private interests that intend to gain at the expense of others. The rules and laws that are created, their content, their application, their effectiveness, their enforcement, and their financing are all influenced by private interests that gain at others’ expense; and when this happens, it is surely unethical and subverts what government should be.

History teaches us well that government, certainly political government, habitually becomes a heavy yoke on a people’s necks rather than a means of facilitating progress. Churches have many times strayed far from beneficial rules, laws, and practices. Family practices, now and in the past, in many countries, have harmed children and society. There is no human institution, be it science, education, business, or the media, that does not have its share of ethical failings. The presence of long-lasting oppressive government institutions throughout human history tells us that it is not enough that we understand government solely by what it should be doing. We need to evaluate how well our government institutions are actually doing. We cannot ever take them for granted.

Social order is disrupted or compromised when political and social government overstep their boundaries and attempt either to crowd each other out or dominate the realm of individual government. For example, religious institutions that cater to and support political governments by overlooking political government’s mistreatment of individuals or its law-breaking, weaken their moral credibility and weaken the peace they should be maintaining. When churches are absorbed by government, society loses important voices and means of maintaining that peaceful order which arises from voluntary individual action. In such cases, the society comes to rest more and more upon coercion and governmentally induced disorder.

Just as political and social government can intrude on each other to ill effect, so can they intrude on individual government and vice versa. If a political unit like a state or a social institution like a church oversteps its bounds by intruding too far into an individual’s life and dominating the individual inappropriately, the results will be to diminish the peace and decrease social order.

Conversely, if an individual within a church or political government acts to fulfill his own desires and goes against the proper norms of the church or government, he disrupts the social order. If an individual not belonging to a family comes between husband and wife, he disrupts the family. The social order of peaceful interactions depends on distinct boundaries being known and maintained among the three types of government.

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