A man who wants protection will fire patrolmen who waste their time harassing minorities. . . . No private policeman has ever spent many hours at a restroom peephole in hopes of apprehending deviates.


I have described how a private system of courts and police might function but not the laws it would produce and enforce; I have discussed institutions, not results. That is why I have used the term ‘anarcho-capitalist’, which describes the institutions, rather than ‘libertarian’. Whether these institutions will produce a libertarian society—a society in which each person is free to do as he likes with himself and his property as long as he does not use either to initiate force against others—remains to be proven.

Under some circumstances they will not. If almost everyone believes strongly that heroin addiction is so horrible that it should not be permitted anywhere under any circumstances, anarcho-capitalist institutions will produce laws against heroin. Laws are being produced for a market and that is what the market wants.

But market demands are in dollars, not votes. The legality of heroin will be determined not by how many are for or against but by how high a cost each side is willing to bear in order to get its way. People who want to control other people’s lives are rarely eager to pay for the privilege; they usually expect to be paid for the services they provide for their victims. And those on the receiving end, whether of laws against drugs, laws against pornography, or laws against sex, get a lot more pain out of the oppression than their oppressors get pleasure. They are willing to pay a much higher price to be left alone than anyone is willing to pay to push them around. For that reason the laws of an anarcho-capitalist society should be heavily biased toward freedom.

So compulsory puritanism—crimes without victims—should be much rarer under anarcho-capitalism than under political institutions. We can get some idea of how rare by considering the costs such laws now impose on their victims and the value of such laws to their supporters. If the value of a law to its supporters is less than its cost to its victims, that law, by the logic of the previous chapter, will not survive in an anarcho-capitalist society.

Heroin addicts pay over $2 billion a year for heroin. If heroin were legal, its cost would be much lower. Almost all of the $2 billion now spent for heroin is the cost of the law, not the habit; addicts bear additional costs in prison sentences, overdoses caused by the poor quality control typical of illegal products, and other side effects of the laws against heroin. Heroin addicts would therefore be willing, if necessary, to bear a cost of $2 billion or more in order to have the drug legal. It would cost the rest of the population, assuming all of them wanted to keep heroin illegal, an annual expenditure of about ten dollars per capita or forty dollars per family to match that.

If the choice had to be made on an all-or-nothing basis, public opinion against heroin is probably strong enough that people would be willing to bear that cost. But one of the advantages of a market system of laws is its ability to tailor its product to its customers, geographically as well as in other ways. If the maximum return comes from having heroin illegal in some places and legal in others, that is what will happen.

Most of the population lives in areas where there are few heroin addicts. For those people the cost of having heroin made illegal locally would be low, since there would be no one on the other side bidding to have it legal except perhaps a few New York addicts who wanted to vacation away from the big city and bring their habit with them. In those areas rights enforcement agencies would accept arbitration agencies that viewed using or selling heroin as a crime. But people in those areas would have little to gain by paying a much higher price to have heroin illegal in New York as well.

That leaves 8 million New York nonaddicts bidding against 100,000 New York addicts, raising the cost to the nonaddicts of keeping heroin illegal in New York to over $100 a year per person. I predict that, if anarcho-capitalist institutions appeared in this country tomorrow, heroin would be legal in New York and illegal in most other places. Marijuana would be legal over most of the country.

By now the reader may be feeling confused. This is natural enough; I am describing law making in economic terms and you are used to thinking of it in political terms. When I talk of bidding for one law or another, I do not mean that we will have a legislature that literally auctions off laws. I mean that each person’s desire for the kinds of laws he believes in will be reflected in the different rates he is willing to pay his agency according to how good a job it does of getting him the law he wants. This set of demands for laws will be reconciled through the sort of bargaining described in the previous chapter. The process is analogous to the way you and I bid to have a piece of private land used the way we want it used. Our demands—for the food that can be grown on it, the buildings that can be built on it, possible recreational uses, or whatever—determine how it eventually gets used.

What I have been saying is that just as the market allocates resources to producing illegal drugs in response to the demands of those who want to use them, it would make use of those drugs legal in response to the same demand. That raises the question of why the same argument does not hold for making murder legal. The answer is that it is worth much more to the victim not to be shot than to the murderer to shoot him. There is a market demand from me for a law saying that you cannot kill me. Crimes without victims do not hurt anyone, except in the vague sense of arousing moral indignation in people upset over their neighbors’ sins. Thus there is little market demand for laws against them.

The same geographical effect that I described for drug laws would apply to other laws as well. Under present institutions the areas over which laws apply are determined by historical accident. If a majority of the population of a state supports one kind of law, everyone in the state gets it. Under anarcho-capitalism, insofar as it would be possible, everyone would have his own law. Diversity of law cannot be unlimited, since the same law must cover both parties to a dispute, but it is possible to have much more diversity than our present system allows. Where the majority and minority, or minorities, are geographically separate, the majority is mainly concerned with having the laws it wants for itself. It is only our political system that imposes those laws on the minority as well.

At this point in the argument, the question of poor people is often raised. Since dollars vote, won’t the poor lose out? Yes and no. The more money you are willing to spend for protection, the better quality of protection you can get and the better you will be able to get the details of law the way you want them. This is notoriously true now. Our political system of police and courts provides much better service to those with higher incomes. Here as elsewhere, although the market will not bring equality, it will greatly improve the position of the poor.

Why? Because the market allows people to concentrate their resources on what is most important to them. I discussed this point earlier in the context of the poor man buying a necessity outbidding the rich man who wants the same good for a luxury. Protection from crime is not a luxury.

Current government expenditures on police and courts run about forty dollars a year per capita[9]. According to Friedman’s law, that means that private protection of the same average quality would cost about twenty dollars. There are many inhabitants of the ghetto who would be delighted to pay twenty dollars a year if in exchange they actually got protection; many of them have more than that stolen every year as a result of the poor protection they get from our government-run protection system. They would be even happier if at the same time they were relieved of the taxes that pay for the protection that the government police do not give them.

In spite of popular myths about capitalism oppressing the poor, the poor are worst off in those things provided by government, such as schooling, police protection, and justice. There are more good cars in the ghetto than good schools. Putting protection on the market would mean better protection for the poor, not worse.

[9] As of about 1970.

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