Imagine the following situation. You are the director of the “Ancapistan” insurance company, which governs a certain territory. I am the speaker for the “Ancomistan” commune (we have no leader, but I am usually entrusted with conducting meetings and going on diplomatic trips on behalf of the commune), which also owns a certain territory. We share a common water border on a lake. Ancapistan is on the right bank of the lake, and Ancomistan is on the left. Almost the entire coastline of Ancapistan, except for a single shipping port, belongs to one private individual who uses the water for his chemical plants. You supply us with fertilizers and complex machinery, and we supply you with agricultural products, timber, and metals.

Then, at one fine moment, the aforementioned private individual begins to delay the replacement of filters, and many toxic substances enter the water. Since we share a common lake, several dozen people in Ancomistan (the lake is our only external water resource, whereas you also have a river on your territory) drink water from this lake, and all of them perish. And here is where it gets interesting. In Ancomistan, negligence resulting in grave consequences is punished by 15-20 years of hard labor for the benefit of the commune or by death by hanging. In Ancapistan, it is punished only by compensating the victims for damages. I hold a meeting where I raise the question of how to assess the damages for compensation. 5% of the communards suggest taking money and placing it in the commune’s account at the bank for international trade, 10% suggest sending the private individual to 15-20 years of hard labor, and 85% suggest the gallows, given the cynicism of valuing lives in money. In the end, the commune issues a death sentence and instructs me to send an extradition request. You offer to compensate for the damages, but I show you the paper with the commune’s resolution and continue to insist on extradition. Upon receiving a refusal, I state that in this case, the commune will completely stop supplying resources to Ancapistan and stop buying from it. If we sever trade relations, Ancapistan will lose one of its markets for selling and buying resources. Besides Ancomistan, the only other raw material territories nearby are in Anprimistan. You can sell finished products to them, but due to their poverty, they will not buy your products at the high price we pay. Also, due to the higher complexity of resource extraction, they will not sell you resources at the low price Ancomistan provides.

Ancomistan itself will simply drill water wells and sign a trade contract with Transgumistan, which sells and buys products at almost the same price but is located slightly further away than Ancapistan. As a result, you will have an economic crisis, while our standard of living will practically remain unchanged. Question: will you extradite the private individual to Ancomistan and thereby violate the NAP regarding him, or will you lose one of your markets for buying and selling resources and find yourself in a deep crisis?

Ancom-kun (question accompanied by a donation in the amount of 0.00023397 BTC)

Thank you for this long and interesting story, which demonstrates the problems a territorial commune may face. Fortunately, Ancapistan is merely an insurance company. We insure lives, real estate, transport, risks of industrial disasters, and so on. The fact that an insured enterprise failed to change filters on time and we did not find out about it (although non-compliance with technical regulations by the insured party is grounds for terminating the contract or revising the premium size due to increased risk) means only one thing: our employee was negligent or was bribed by the insured enterprise. Naturally, this means we fire our agent and revise our own regulations to prevent this from happening again. We also refuse to pay insurance to the insured company and sue it for fraud—they did not perform the procedures required by the regulations but did not inform us, thereby saving on insurance premiums. If other clients approach us for insurance due to the lake pollution (for example, fishermen or travel agencies whose activities are affected), we will have to pay them premiums, after which we will file claims against the enterprise for reimbursement of our losses.

Additionally, it seems we insured the life of the enterprise owner. This contract remains in effect, and we are obliged to prevent attempts on his life within the limit of expenses agreed upon by the insurance premium. So, we either take him under protection or provide him with a comfortable shelter and give him the opportunity to safely negotiate with Ancomistan to settle the claims.

Furthermore, Ancomistan takes a principled stand and insists on executing the businessman who offended them, refusing all his offers of financial compensation, even the transfer of the plant to the commune’s ownership. Therefore, the businessman continues to stay in the shelter and manage the plant from there. When the time comes to renew the insurance contract, we face a dilemma: either refuse the renewal or set an exorbitant price, because we are effectively acting not as an insurer, but as a security company. In the end, we reach an agreement: he continues to pay the bills, and we continue to protect him.

After this, Ancomistan begins to blackmail our other clients, threatening them with the termination of contracts if we do not hand over the criminal. We realize that further protection is impractical and finally terminate the contract with him. The former client, not being a fool, immediately signs a contract with another security company operating in the middle of nowhere, and they organize his evacuation. Then, being physically several thousand kilometers away from the vengeful commune, he continues negotiations with them, because he does not wish to wake up one fine day with an ice pick in his head. But his negotiating position becomes stronger, as it is more difficult for the commune in this situation to pressure his new security company. Therefore, most likely, after some time, you will reach some compromise with him.

The question of your sanctions against my insurance company remains. We protected our client within the framework of the contract, and as for what “extradition” is, we don’t understand it at all, because in our language it is called “kidnapping.” Refusing to protect is one thing, but kidnapping a person and handing them over to some bandits for subsequent execution is something entirely different. Nevertheless, we bear part of the responsibility to the commune because we poorly monitored our agent who was tasked with overseeing the compliance of technical regulations for our client. We offer Ancomistan compensation, and since there is no question of direct guilt in this case, we will most likely reach an agreement. After this, I have a claim against our former employee, but that is a completely different story.