One More Try: Anarchical Policy Analysis

It seems that Randy is more confused than ever (and I have known him for over 30 years!). He writes: “I completely agree with everything Bruce said. So, what is the relevance of anarchy? Pete and Bruce hold it up as an ideal end point, and at that point all prison services would be provided by private firms, but if the government runs the legal system we may be better off with prison services provided by government rather than private firms. So in this example what things would be like at the ultimate destination of anarchy is not the relevant factor determining whether we want prison services provided by private firms; it’s whether the legal system is private or run by government.”

First, Randy clearly does not agree with everything I wrote since he still sees a key distinction between “prison services provided by government” and prison services provided to government by private firms. This ignores the second paragraph of my post. I see relatively minor incentive effects between prison services provided to government by firms under contract or private individuals under contract (whether collectively bargained or individually bargained), emphasizing that it is the source of demand (including the means of financing) that really determines what these prisons do. Second, he says it is not the destination of anarchy that matters in my policy analysis but “whether the legal system is private or run by government.” But it seems to me that the essential characteristic of anarchy that Pete and I have been discussing all along is that it has a “legal system that is private”! While there are probably other important aspects of anarchy, the legal system certainly is the element that I have been focusing on, and it is the clearly is element that matters when we are thinking about the various uses of prisons. Private production of various legal services (e.g., prison services) arises under both state law (whether by a private firm, or a bunch of private individuals working under contracts as I explained in my earlier post) and private law. The key difference between the two is how demand decisions are made and how those decisions are financed. Finally, while I might have arrived at the same policy conclusion without thinking about an ultimate objective of anarchy, I am not nearly as sure that I would have as Randy seems to think. If I had not spent years thinking about how private legal arrangements work, and how private law differs from state law, I may have had second thoughts about contracting out [first thought: it makes government more cost effective so it is a good thing; second thought: it creates numerous public choice problems so the savings are not likely to be as great as expected, but it still probably is an improvement over the alternative contractual arrangements] but I probably would not have the same ideas about how prisons under private law would differ so much from prisons under state law. Therefore, I doubt that I would have had the “Third Thoughts About Contracting Out” [Journal of Libertarian Studies 11 (Fall 1994): 44-78] that produced my conclusions [third thoughts: if a private firm under contract is more cost effective at producing something that should not be produced by the state (i.e., something that should be left to the private sector operating in anarchy), then it is undesirable].

Let me conclude my last post (I will have to try to educate Randy directly if he sends in a reaction to this one) by thanking Will Wilkinson and Pete Leeson for inviting me to participate in this exchange. It has been fun.

Also from this issue

Lead Essay

  • Everybody seems to know we need government … But pirates didn’t! How did they manage without the state? In this issue’s thought-provoking lead essay, Peter T. Leeson, the BB&T Professor for the Study of Capitalism at George Mason University, explores what pirate “constitutions,” credit institutions among 19th century African bandit traders, and the well-being of Somalians after the collapse of the Somalian state have to tell us about the possibility of practical anarchy. It works better than you think, Leeson concludes. “As long as there are unrealized gains to realize, people will find ways to realize them” — state or no state.

Response Essays

  • Bruce L. Benson, author of The Enterprise of Law: Justice Without the State, argues Peter Leeson’s defense of anarchy is too moderate. Governments in developed nations, Benson maintains, are not better than ordered anarchy. Drawing on Franz Oppenheimer’s classic account of the state as a protection racket, Benson argues that the state only seems necessary because it offers “solutions” to problems the state itself creates. Benson claims that even well-constrained states are essentially parasitic, leading him to conclude that “even when a relatively ‘good’ government exists, there still is way too much government and not nearly enough anarchy.”

  • Harvard economist Dani Rodrik is willing to accept a number of steps in Peter Leeson’s argument for anarchy, “but [Leeson’s] bottom line … represents a huge leap of faith.” Citing the work of several important thinkers, Rodrik argues that “the problem with self-enforcing agreements is that they do not scale up.” Both theory and data show that complex, well-functioning social and economic systems require the enforcement of rules by government. “Those societies in which markets work best are the ones where the reach of the state is longer, not shorter.”

  • Florida State University economist Randall Holcombe argues that even if Leeson is right about anarchy, it doesn’t much matter. “Regardless of its merits,” Holcombe writes, “anarchy has no prospect as an actual policy option.” The bottom line is that government is popular in developed nations. Furthermore, anarchy may not be a “stable equilibrium,” in which case it might “coalesce into governments … potentially more oppressive and more destructive than those we see in prosperous areas today.” According to Holcombe, if we’re going to get a government anyway, the best approach to policy is to “make it smaller, less intrusive, and more libertarian,” not to make it go away.