“In order to achieve a perfect market, it would be necessary, first, to create an absolutely symmetrical information space; second, to exclude non-excludable and non-competitive goods from the economic system; third, to eliminate external effects; fourth, to completely remove differentiated products; fifth, to somehow maintain all the above-mentioned (in themselves fantastic) conditions; sixth, to prevent the intentional violation of the established order by others.”
A perfect market is a market in a vacuum, a simplified model for graphs and clear explanations of theories. Therefore, the transition to a “beautiful ancap” is impossible not because of “omnipresent etatism,” but simply because the conditions for its existence in the form you imagine are unattainable”
How should I prove that the market is real? Perhaps you can suggest some articles on this topic?
Igor
This is a classic “straw man” rhetorical device, where it is not the opponent’s actual thesis that is refuted, but one that is convenient to refute. A perfect market (or perfect competition) is a term from neoclassical economic theory, whereas ancap is based primarily on the Austrian school. Something similar to the perfect market model is described by Mises in Human Action, introducing such a theoretical construct as a uniformly functioning economy. In such an economy, all agents possess full information, and all other conditions described by your opponent are met. As a result, such an economy is absolutely predictable, and entrepreneurship is impossible within it. This theoretical construct is introduced for exactly one purpose: to demonstrate the difference between a real economy and a uniformly functioning one, and thereby show what the role of the entrepreneur consists of (which is precisely obtaining profit by utilizing the uncertainty of the future) and the role of the investor (which is to maintain a certain reserve of capital goods in the past for consumption in the future). Similarly, in physics, there is the concept of uniform rectilinear motion; in various schools of dance and martial arts, there are basic stances, basic steps, and so on. To say that an ideal market is a market of perfect competition is like claiming that an ideal dance is a couple moving in basic steps from a basic stance, while the whole essence of dance is precisely improvisation based on that very foundation.
In my view, this substitution is made far too often partly because of the poor choice of the term “perfect market” itself—it contains a manipulation that makes one think of this phenomenon as something desirable, for who doesn’t dream of perfection! Meanwhile, a perfect market is generally indistinguishable from a perfect planned economy, where everything is also calculated and predetermined. Likewise, we could speak of a perfect communism, where absolutely all material objects are in public ownership, and absolutely all actions are performed only with universal consent after comprehensive and full discussion. Indeed, such a theoretical model of perfect communism is used by theorists when they demonstrate the necessity of self-ownership.
Who taught you to dance like that? Where is the correct stance?
This question was inspired by an article on Habr and the subsequent comments. The gist is: there is Yandex — they have a search engine. In the search engine, they promote their other products, thereby limiting competition. How correct is this? In the article and comments themselves, there are quite a few arguments IN FAVOR of antitrust legislation. What do you think?
анонимный вопрос
In connection with this question, I would like to recommend Vyacheslav Kostrov’s lecture “Platform Economy and the Hayekian Market Process,” delivered by him at the “Capitalism and Freedom” conference in 2019.
The lecture is very rambling and contains no conclusions, but it places the question you are asking into a broader frame — it considers not a specific case of using a dominant market position, but the principles of the functioning of the platform economy as such.
Let’s consider a platform such as a search engine. By design, it is a service that searches the web for mentions of information that interests the user, based on certain input data provided by the user. After attracting a sufficiently large number of users with the convenience of the service and the quality of the search, the owner of the search engine may raise the question of monetizing the platform.
The most direct way to monetize a service in its original form is through customer donations. This method is implemented by Wikipedia, and it allows it to focus its efforts on the completeness of content and the neatness of its presentation, that is, on improving exactly those consumer qualities of the supplied product for which the user came to the platform. Of course, Wikipedia is not a search engine in the pure sense, but theoretically, nothing prevents the use of the same model for classic search engines. My channel practices this method of monetization.
A search engine could also sell analytics on user search queries to interested clients. This is also a fairly “herbivorous” way to make money and, as in the case of Wiki, is unlikely to bring in mega-bucks. My channel also practices this method of monetization in a sense — these are answers to questions with attached donations and commissioned articles.
Next come the methods of earning money whose application degrades the product itself.
First, there is advertising. In addition to providing the user with what they are searching for, the search engine slips into the results something that the advertiser would like them to be introduced to. Thus, for the user, the product becomes worse due to the lower relevance of the results, but the platform owner gets a profit. I no longer practice this method, and if a request to sell advertising on the channel appears, I try to switch the requester to one of the monetization methods mentioned above.
And finally, the owners of the search engine may start earning not only from others’ advertising, but also lure the user to their own subsidiary services that have no direct relation to the search engine. This is exactly what we see in the article under discussion. As a result of such a policy, search results become even less relevant for the user, and they start looking toward DuckDuckGo, but before the user has completely fled the search engine, the subsidiary platforms, thanks to the inertia of human thinking, will manage to build their own customer base. I do not practice this either, but I can well imagine a blogger periodically advertising some own business on their channel.
As a result of the development of such a mega-platform, after some time it turns out that some businesses under the general brand are more profitable, others less, and some are completely loss-making. However, making decisions about optimizing the asset structure is quite difficult because they influence each other. The platform flounders, making increasingly less balanced decisions, until it finally goes belly up. Just relatively recently, one such behemoth of the platform economy went bankrupt — Cook’s outfit, which existed for over a century and a half. It was the first to implement the package principle for organizing tourist trips, thanks to which it quickly became a global hegemon in the tourism industry, and it ultimately burned out on exactly that: too many of its assets, instead of reacting to market stimuli, were engaged in serving other subsidiary companies of the holding. Its own airlines, its own hotels, its own tour operators — it would seem, here is a monopoly, just collect the rent — but no, it failed to keep up with progress and lost to a conditional Booking.com, a next-generation platform business.
Exactly the same fate will befall Yandex, without any antitrust authorities.
I keep wondering which currency will prevail in conditions of free currency circulation: a guaranteed hard currency or one with an emission center?
Let’s imagine a hypothetical case of gold/bitcoin versus paper money. In this case, paper money could be issued by a Central Bank or a private issuer (like MMM) and have a pre-announced inflation rate at the beginning of the year (for example, 0.5%). They could also be stored on cards, meaning everything would be like with the dollar, but without the obligation to use it specifically in a certain territory. Mainstream proponents claim that this is better than hard money (because there are fewer crises, as far as I can understand), and I am supposedly some kind of backward Austrian. But I want to argue that it is their statism that has skewed everything in the modern economy, and free people use free money. In short, my question is: which money will win under conditions of freedom—money controlled by a group of economists or free money?
Attached to the question is a donation in the amount of 0.00118933btc
Since you are a proponent of AES, you most likely mean not “price increases”—that is, a decrease in the value of the currency relative to some hypothetical basket of goods—by inflation, but purely monetary inflation, meaning the rate of increase of the money supply. For gold in 2017, inflation was 1.5%. For bitcoin today, it is 3.65%. Presumably, it will equal gold in terms of inflation rates in 2022. Thus, the hypothetical fiat money with 0.5% inflation that you propose comparing with gold and bitcoin appears, at first glance, to be an even better store of value than gold or bitcoin.
However, you did not mention such a parameter as the hardness of money for nothing. By hardness, we mean the elasticity of the money supply in response to a price increase. Let’s say, if the price of gold rises sharply, it becomes more profitable to invest in its development at deposits previously closed as unprofitable, or even in extracting dispersed gold from seawater. Thus, gold is not a very hard currency, but due to the enormous stock of gold accumulated by humanity, even a twofold increase in the global production of this metal would still only increase its inflation to 3%.
In order to increase the supply of bitcoins, a hard fork is necessary. But a hard fork means a split of the chain and the creation of two cryptocurrencies with different emission rates. Naturally, the main mining power will work on producing the less inflationary old bitcoin, and the fork will remain a toy for speculators, losing value even more strongly than could be attributed to the difference in inflation rates. In other words, one can quite confidently assert that bitcoin is an absolutely hard currency, and there are no scenarios in which the production of new bitcoins could increase in response to a price increase.
Now let’s consider a private fiat MMM-coin. Yes, we know that today the inflation rate is 0.5%. But we have no guarantees that tomorrow the emission center will not decide to make inflation 1% or 10%. Fiat whose emission is centralized is absolutely soft money; therefore, its use as a means of saving only makes sense if the investor in this currency has reasons to trust the issuer that the supply of new money will remain low in the future. For example, he holds a hypothetical gun to the issuer’s hypothetical temple, but even in this case, hackers could be a serious problem.
However, the function of storing value is not the only task set for money. The second function is the use of money for settlements. And here, fiat certainly holds all the trump cards. Distributed ledger technology, which underlies bitcoin, will be inferior to the centralized ledger technology used in fiat settlements in terms of speed and cost—at least in the part of the operation where end users of the settlement system are served.
Naturally, the bitcoin community is also solving this problem by proposing the use of technology such as Lightning or sidechains. Their essence is that a certain amount of bitcoins in the blockchain is frozen, and in return, exactly the same amount is launched to move outside the main blockchain. In other words, we are talking about the issuance of fiduciary means of circulation, and if bitcoin is digital gold, then Lightning or Liquid is the technology for issuing digital banknotes.
What can a centralized money producer oppose this with? First and foremost—aggressive marketing. Imagine that tomorrow total ancap and free banking arrive, and the day after, Jeff Bezos releases a fiat Amazoncoin. He can offer his store customers a 10% discount when paying with Amazons. He can provide any other stores with terminals for accepting Amazons for free and charge them less for acquiring than Visa does, or charge nothing at all for the first year. Finally, he can invest tons of money in advertising.
So I wouldn’t write off fiat just yet; it will leave the stage slowly and majestically, and most likely will eventually simply merge with the crypto-economy, turning into fiduciary money backed by bitcoin, just as it once grew out of fiduciary money backed by gold.
Deterrence doctrine? Yes, yes, hilarious — 25 people against one. He’ll stop them with a deterrence doctrine, uh-huh. He’ll blow up his own house with a “dead hand” system so the bastards get nothing. Sounds like nonsense. It’s like saying: if I have a weapon, 25 people with the same weapon won’t stop me because they’ll miss.
Gangs and organized crime under ancap cannot be stopped by any means whatsoever. Self-organization? Sure, look at the protests — there’s your free and voluntary self-organization for you.
The market will sort it out, so they can only be stopped by a PDA (Private Defense Agency) or another gang — that is self-organization, just for money — everything according to the market.
Consequently, panarchy is the future structure of society, and ancap is a fantasy about what would happen if people didn’t organize into gangs, just like in ancient times.
анонимный вопрос
When making predictions about what society will look like, a person holds a certain image of society in their head. Following Laksi Katal (and perhaps for the same reasons, namely the experience of the nineties, which I myself didn’t have enough time to fully drink in), you see society as a collection of people who are eager to unite for joint looting, but extremely reluctant to unite for mutual assistance in defending against looting.
I am constantly asked how ancaps can withstand millions of Chinese hordes and other collectivist bullshit — behind all these questions lies the same fear of being alone in the face of an aggressive crowd.
So here it is. The dominance of anarcho-capitalist (i.e., free market) relations in society is possible only when being part of an aggressive crowd is far less profitable than not being part of it. Just as in South Korea any schoolchild knows that while you sleep, your competitor is studying, under ancap it should be a fairly common belief that while you are risking your life snatching phones behind garages, your competitor is launching a startup — and you’ll be lucky if it’s not a startup for delivering remote kicks to those who snatch phones.
As a salvation from gangs, you suggest PDAs or other gangs (meaning something like the insurance rackets described by the aforementioned Laksi Katal). This truly is capable of reducing organized systematic aggressive violence in society, if there is a lot of it. The other thing is that the reduction of violence will quickly reduce the demand for expensive insurance services against violence. For instance, in earthquake-safe areas, people are unlikely to insure against earthquakes. For this very reason, I am quite ready to consider the PDA system as a transitional stage to ancap, but I find it hard to believe that they would have a noticeable influence for long enough. Right now, the most profitable business in the world is running your own state. But competition will quickly lower the margin, and the lack of sacred reverence for this field of earnings will do its part. Protection rackets in a society with a developed free market will be about as significant as pest control companies are today. Yes, someone suffers from harmful rodents and uses the services of specialists to exterminate them. And someone had their phone snatched, and they also turn to specialists to eliminate this inconvenience.
Rats, cockroaches, the state, and other problems that can arise in society are the result of poor hygiene. Assuring people that the only way to get rid of rats is to bring out the rat king, and the only way to eliminate armed gangs is to hire other armed gangs, looks like a quite reasonable idea, but only when society is very poor and the mentioned plagues are literally at every step. Wealth and social hygiene skills provide a greater variety of methods to prevent all this nonsense.
The state from the perspective of a rich and developed society
I answered a similar question in quite some detail analyzing all stages of water supply in a free market, from finding a water source to its delivery via pipes to the end consumer. But you are not so much interested in how various market actors will negotiate the coordination of geological exploration, extraction, pipe laying, and repair—but rather what mechanisms will affect the tariffs for the end consumer. And, presumably, you have a concern that without central controlling bodies, tariffs will skyrocket.
Here, I suggest you familiarize yourself with the analysis of such a mechanism for electricity supplies that I provided previously. For the water market, the hard upper limit for tariffs turns out to be the cost of water production or supply by the consumers themselves: this could be buying bottled water in a store, collecting rainwater, desalination, recycling—depending on who the consumer is. But slightly before the price hits this natural barrier, the factors of competition and demand elasticity will kick in: expensive water will be conserved, and at a certain point, the supplier will realize that it is more profitable to earn from volume rather than markups, especially if alternative water suppliers do not jack up their prices and seize the market while the miser tries to squeeze their few remaining clients dry.
At the same time, of course, I do not rule out that water will be supplied to different houses by one company at different prices, taking into account the length of the pipes, for example, or the different competitive environment in different districts. Finally, a price markup is also added by the company that manages the building, if such a company exists. For instance, in Thailand, where I vacationed in the spring, it seems that every condominium has its own water price, because in one they water the garden, in another the pool is larger, in a third it is smaller, and so on. This is normal.
Here is an example of a condominium where water will certainly be expensive
If some greedy people honestly bought a lake into their ownership and decided to take all the fish out of it for quick enrichment, they will get the fish, sell it, and then they will have to find some other use for their lake. They could breed some other kind of fish there, use the water for irrigation, build a water park nearby — there are plenty of uses for a body of water. These guys are within their rights.
If these same greedy people decide to take all the fish at once from someone else’s lake, then the owner of the lake will, of course, try to oppose this, if not during the process, then certainly demand compensation after the fact. This is not a state fishery inspection where you can wiggle out with a bribe or connections — quick enrichment will not happen.
Finally, they could find an ownerless lake in the deep wilderness, claim it as their own, and take all the fish in the lake at once. But here is the problem: the lake is in the wilderness, which means problems with transporting the catch. They would have to use expensive transport like a helicopter, likely in more than one trip, and this again means that super-profits will not happen; transport costs will eat up all the profit. Therefore, a lake in the wilderness is useful for recreational fishing and selfies against beautiful views, but not for industrial fishing. If, for some reason, the transport costs are not so high, then the new owners of the lake have no reason to fish out all the fish from their lake at once when they can do it regularly without depleting the resource. They aren’t some poachers who are forced to feed on stealthy raids. They honestly claimed this lake as something nobody wanted, and now they will honestly exploit it.
Exactly the same applies to hunting animals, logging the taiga, and so on. It is precisely the ability to not worry that the state will come tomorrow and drive you off your plot that allows one to moderate their appetite and exploit the resource carefully enough. It’s a pity that the entire taiga in Russia is state-owned; now even putting out its fires has become economically inefficient.
Opposition to the honest homestead of the state sturgeon
In May, Bitarch and I on one side, and Ved Neumann on the other, debated the applicability of the deterrence doctrine to ensure the secession of individuals from the state. Here is a description of the doctrine, and here is a summary article, which also briefly recounts the course of the discussion.
A frequent criticism of the described doctrine was that it remains unknown whether the threat against the key functionaries of the aggressor state will actually be carried out, while the death of a citizen seeking secession could be very swift, leaving them no time to organize retribution. Moreover, if they openly insure themselves somewhere, a sad fate might await the insurance company as well, as a warning against fulfilling various anti-state contracts.
Therefore, today we will talk a bit about how a citizen can ensure the implementation of individual deterrence without putting any outsiders at risk.
The dead hand principle is a kind of threat against a potential aggressor that will be executed only if the potential victim perishes. The most vivid embodiment is a grenade with the pin pulled, held in the very much living hand of the potential victim. Their death will lead to the dead hand relaxing and an explosion occurring. Clearly, a threat based on this principle can be scaled quite arbitrarily, up to a system implementing the automatic launch of intercontinental nuclear missiles in the event of an attack by a potential adversary, without waiting for special commands from a potentially already destroyed command post.
One could fantasize about purely engineering solutions in the spirit of the 20th century that would provide such a threat scheme for a person against the state leadership—for example, by pre-mining residences, deploying rocket launchers, or programmed combat drones, but all this looks disproportionately expensive, clumsy, and unreliable. Our information age implies a slightly different style.
For example, with the appearance of bitcoins, decentralized death betting markets became quite feasible, which is a veiled form of a contract killing. The mechanism is roughly as follows.
On a website that accepts bets on certain events that may or may not happen in real life (for instance, implemented on the Augur protocol), a potential victim of state aggression can place a bet on the death of a certain government official. The size of the bet must be large enough to tempt someone to ensure that very death. The money is bet on the fact that this official already died on some day in the past, which is obviously untrue; therefore, when the official actually dies, this bet will lose, and the winner of the wager will receive it. After the bet is placed, a potential hitman only needs to choose a day to execute the order, bet that the target will die on that specific day, then commit the murder, wait for the oracles to notify the system, receive their winnings, and carefully cash them out. This wager is our grenade, but a dead hand mechanism must still be organized.
One could take a more sophisticated route and place another bet on the same market, this time on one’s own death. If this bet wins, it triggers a smart contract that then places the bet on the official’s death. But it could be simpler: a smart contract that places a bet on the official’s death is given a delayed launch and triggers if it does not receive a cancellation code in time. That’s it; now you can notify the official that, unfortunately, if I accidentally die, your precious life is in great danger, so you had better treat me with the utmost care.
Of course, the more complex the predictions the service allows, the more carefully and moderately the impact can be planned. For example, the trigger could be not only death, but also arrest, and the threat not only death, but the burning of a house, or some other non-lethal nuisance (the most elegant thing I’ve come across was an order to spray a powerful odorant in an official’s residence; a house thoroughly stinking of mercaptans is no longer fit for habitation or sale, yet no one dies even accidentally).
Naturally, to undertake these non-trivial measures, a person must be sufficiently wealthy, but this does not require exorbitant riches, so the task is quite manageable.
During land privatization, the right to choose is curtailed due to a lack of knowledge. And the consequences of this ignorance are often irreparable.
The Idea
All state land should be returned to the citizens, and its disposal should reflect the democratic nature of the state.
The Motive
If 3,155,372,300 hectares are divided among every citizen in the RF, it results in 21.84 hectares per person. At a market value of 1 million rubles per hectare, each of us is a potential millionaire. Unfortunately, the voucher privatization model proved itself unsuccessful, therefore I consider the above-described reform the optimal way to bring the market into solving the problem.
The Solution
Technological progress allows us, unlike in ancient times, to automate processes. Many things that were unavailable to the ancients are now possible.
All RF land can be divided into minimal squares (1 sq.m). Every citizen of the RF receives a proportional share of every square for life, without the right of resale, but with the right of temporary transfer under contractual terms.
Legislative Part
Everyone has their own share in every square meter of Russia, giving them the right to dispose of it.
Until all owners of the meter (Russians) have granted the right of specific land use to a User, the User has no right to carry out its specific use.
For example, if you want to build a factory, you must obtain the right to build a factory from all current owners of the leased land.
Upon the death of a landowner, their land is distributed according to a will, or in its absence, to blood relatives. If there are no heirs, the shares are evenly distributed among all citizens.
The land of incapacitated citizens is under the trust management of every citizen; rental income goes toward benefits for incapacitated citizens, and a percentage is paid to the manager as a reward for quality management.
If a person obtains citizenship, they must pay the market price and buy out a proportional share from ALL citizens. This allows them to become a full citizen with the right to dispose of and grant rights to use the land.
Budget funds are spent only on maintaining the blockchain that stores the data.
Costs and lease agreements are also stored in the blockchain to solve the problem of citizens’ incomplete awareness of the real price.
No tax is levied for owning such land, as all people possess equal rights.
Land that was in private ownership prior to privatization remains private.
Consequences
Since land that is closer to a person is more valuable to them, companies will emerge that implement trust management of irrelevant land.
The process will create a huge number of jobs and contract templates, allowing interested people to negotiate and lease land from others.
Environmentalists can hinder the construction of factories without an expertise agreement; factories can hinder environmentalists in the exercise of their domestic disposal of lands.
And other market fantasies.
Answer from Ancap-chan
I’ll start with the simplest. Of course, there is not the slightest sense in keeping a land registry in a blockchain. The whole point of a distributed public ledger is to eliminate the need for trusted intermediaries. But if the land use mechanism includes the possibility of forced alienation of land or deprivation of management rights due to incapacity, then the corresponding entries in the blockchain would have to be made by certain persons with admin privileges. That’s it, the blockchain can be thrown away; the optimal solution here would be a regular centralized database. Errors in the database are inevitable, but they can be corrected through various appeal mechanisms.
Now let’s move to something more complex. The proposed mechanism assumes that there will be two land registries in the country simultaneously, and land will circulate within two fundamentally different mechanisms. The part of the land that will be in private ownership at the time of the aforementioned “privatization” (it would be more appropriate to call this procedure socialization, instead) will remain private. A contract between the seller and the buyer would be sufficient for its sale; in other words, the land will be quite liquid. Suppose that by hour X, such land in the RF will be 10%, and the remaining 90% of land belonging to the state will be in the shared ownership of all 140-something million citizens of Russia. The circulation of this socialized land will be extremely difficult, because it will be impossible to buy; only leasing for a specific project will remain, and this project must be approved by the consensus of all owners.
Thus, the legal turnover of socialized land will be completely frozen, and private land, due to the simplicity of its legal use, will immediately skyrocket in price. Judge for yourself. I want to build a factory. The construction cost is 100 million dollars plus the price of one hectare of land. If I build on socialized land, I will have to conclude an agreement with each of the 100 million disposers (counting only the capable ones who will manage the property of their wards). Suppose, with the help of arch-effective means of communication and persuasion, I manage to conclude this agreement in just one year at a price of just one dollar per vote. In total, we have an estimate: 200 million dollars and a year of time to buy construction permission. Alternative: one month of negotiations with a single owner, and I buy one hectare of land from him for just 50 million dollars. Voila: I save time and money, so I won’t even attempt the legal use of socialized land.
On the other hand, I can always carry out a land grab of this very land and use it quite peacefully. Who can stop me? Only the nearest neighbors, who would themselves not mind using this plot. I will share some money with them so they close their eyes to this. I will also share with the land inspector so that on paper the land continues to remain unoccupied. Voila, I build a factory, spending a measly million dollars on bribes and the same month of time.
Such land grabbing will take on a massive and uncontrolled character, because due to the tragedy of the commons, no one will be interested in doing things the long and expensive way if it can be done quickly and cheaply. The doctrine of deterrence will be applied to the most obtuse opponents.
So, the draconian regulation mechanism that was proposed will lead to the emergence of a very expensive white land market and a very massive black one. As we know from history, the prevalence of a black market sooner or later leads to its legalization. This happened in Great Britain, this happened in the USA, this happened in the USSR—yes, it happened in many places—and there is no reason to believe that this case will be an exception.
And what if you have to negotiate with every Russian not about building a factory, but about building a private house?
Assuming that an organized crime group (OCG) could appear, engaging in banditry and robbery. As an example, I can provide such a situation: a citizen (territorially, since there is no state as such) decided to grow and sell vegetables and fruits, but in the absence of large starting capital, all his funds go only towards cultivation and care; he cannot afford security, as a result, an OCG with taped-over license plates and masks could drive up to him, and… I can only imagine such a situation: this citizen will sell his goods and services at a special market, where he will pay (tribute/taxes) for its protection. So the question is: how is it possible for a small business to grow under ancap conditions, given that criminal groups will arise that will rob and kill, and who will be interested in catching them?
анонимный вопрос
All growth in human well-being is based on the division of labor and its capitalization. The division of labor increases productivity because each participant in the system of division of labor does what they are more efficient at and does not do what they are less efficient at. The capitalization of labor is, in essence, the same division of labor, but not only among the immediate participants of the production process, but also across time and space. That is, it is not simply “Vasya digs holes, Masha plants seedlings,” but “a factory once produced a shovel somewhere, Vasya bought it, and now he digs holes faster — and Masha plants the seedlings.” A bunch of people participated in the division of labor, this labor is encapsulated in a conventional shovel, and as a result of such a division of labor, productivity in planting increased.
The flip side of the division of labor is that it is not always possible to organize it so that everyone does what they are best at and does not do what they are worst at. A bad manager (and a good locksmith) may end up being the boss of a bad locksmith (and a good manager) simply because of the way things historically unfolded — the career ladder, personal connections, and so on. The larger the business, the greater the probability of such inefficient sections appearing in it, reducing overall productivity. Also, since within one company the relationships between its employees are not market-based, the division of labor and the division of profit in it can differ greatly. These factors are amplified when scaling a business.
Small business is a form of organization with a low level of division of labor and/or a low level of its capitalization. It is effective only in those areas where the negative effect of scale is higher than the positive one. But no one knows in advance and cannot calculate all these effects — market knowledge is dispersed in nature and is acquired only in the course of activity. Therefore, new small enterprises will always be formed and old large ones will collapse.
And now, after a long theoretical preamble, let’s talk about solving the specific problem of protection for small business.
The capitalization of the business is low, so the entrepreneur grows and sells the product himself. Theoretically, he could protect himself from encroachments as well. For example, it is quite conceivable that a person sells the product he grows exclusively to friends and acquaintances, and as a result, simply remains invisible to a potential external aggressor. Trust is also a form of capitalization. A person invests effort into gaining connections, and then uses those connections to safely obtain profit.
Another possibility of using trust to ensure security is associations of small producers. Each invests relatively little in self-defense means (knowingly insufficient for independent protection against a typical gang), but at the moment of attack, combines their efforts with other members of the association and puts up a confident fight. The cry “they’re beating our people!” has been tested by centuries of practice and works splendidly.
A third possibility is also related to an association of producers, but the division of labor is added to it. A village hires seven samurai. No single peasant alone would be able to hire even one.
You described the fourth possibility yourself: producers purchase a safe sale service from the fairground owner.
The fifth possibility is to specialize only in production and sell the grown produce immediately to a wholesaler, who will come, buy, and take the goods away themselves. This is currently actively practiced by small agricultural producers in Russia, but not out of a good life, and often such a buyer is able to ensure a local monopsony, that is, a buyer’s monopoly. In other words, here is the obvious threshold that the division of labor in agricultural production hits: every producer is interested in selling the products personally to the final consumer, without losing money on intermediaries.
Under ancap, several systemic factors that hinder an agricultural producer from contacting the end consumer are abolished. First, in the absence of taxation, costs for accounting and record-keeping in retail sales are sharply reduced. Second, in the absence of urban planning regulation, the possibility of organizing trade in the city is sharply simplified — in essence, it is regulated only by consumer preferences (the consumer themselves, and not an external regulator for them, makes the choice between the cheapness of the product and the quality of service). Third, entrepreneurial initiative to ensure one’s own security is also not restricted by such a systemic factor as the state.
Of course, without a state, entry into the market for small-time bandits will also be simplified. In the example of the much-discussed Somalia, we see that entrepreneurs there have to invest quite a lot in their security, and yet its level remains low. Therefore, not only the relative size of investments in security is important, but also the level of capitalization in this sphere. Institutions that increase trust in society, a developed and diversified labor market providing potential bandits with plenty of opportunities for honest earnings, the purely technological cheapening of security — all these are measures that make the “war of all against all” scenario under ancap less likely.
Work can be done on this already now; there is no need to ask the state for permission.
The specificity of the force market: it is very difficult to understand whether a bandit or a guard is before us. Most likely, both.
Let me talk only about water supply so as not to dilute, pardon the pun, the topic.
To provide a city dweller with water, it is necessary to:
find a water source
extract the water
deliver the water to the consumer
For all of this to work in a free market, each of these stages must be able to be carried out without coercion and bring profit to the person who carries it out. Now, let’s go through the points.
Find a water source
Given the presence of bodies of water, this is a relatively simple task, so let’s consider a more difficult case: searching for an artesian basin. To carry out this work, it is necessary to hire a specialized organization that will deploy its recording equipment on the ground, use it to obtain data from depth, process it, and draw conclusions about where the boundary of the basin is and, therefore, what the water reserves are. That is, it is necessary to reach an agreement with the owners of the land where the survey will be conducted, pay them the agreed compensations, and carry out the exploration. This task is not unsolvable.
In Russia, where all subsoil belongs to the state and land can belong to private individuals, geological explorers pay landowners for land damage, and the profit will ultimately go to whoever acquired a license for extraction from the state. In a free market, it would more likely be like in the USA, where subsoil rights belong to the landowners, meaning they are even more interested in the exploration of the subsoil beneath them. Also, as far as I could understand, the data obtained during exploration possess a certain redundancy, and therefore the disagreement of some landowners or the impossibility of surveying due to the location of buildings on the land will not significantly hinder obtaining a result. In other words, at this stage there are no particular difficulties for the market—there are ordinary entrepreneurial risks, where the money for exploration is paid, but no basin is found.
Extract the water
Here, again, the greatest theoretical difficulty is the situation involving an artesian basin. The thing is that it is usually large enough that the water intake wells exploiting it can be located on the land of different owners. If there are many consumers and little water, it is important to prevent the tragedy of the commons, otherwise the source will not be able to replenish naturally due to excessive extraction.
Several such cases are analyzed in detail by Elinor Ostrom in the book “Governing the Commons”, where she presents the main principles that extraction organizations must adhere to in order to prevent the degradation of the resource. Here, they will need a fixed agreement on water extraction norms, a monitoring body, and the ability to stop abuses, using a graduated system of fines. Moreover, interestingly, it is very important that there be a possibility for contract enforcement, but no less important that no state attempts to interfere in the process of concluding the contract itself. That is, for the confident resolution of such types of property conflicts, the existence of a developed free market is not just desirable, but absolutely vital.
Deliver water to the consumer
The question of who will lay and repair the water pipeline is similar to the question of who will build roads. Roads are built by those who need them, namely the owners of the real estate to which the road leads, because it increases their value. In the same way, a water pipeline passing through a plot of land increases its value, because it means that a water-consuming facility can be built on the land and then quickly and easily connected to the water supply.
So the picture here will be roughly the same as at the exploration stage. Either the landowners pay for the pipes on their land themselves, or, at least, they grant the water supply organization permission to lay the pipes, for money or free of charge—depending on what they agree upon.
Summary
Roughly the same approach can be applied to other infrastructure objects and other spheres of housing and communal services. The process of providing a service is broken down into stages, each of which must bring profit. At each stage, property conflicts may arise, which must be resolved by concluding contracts, and these contracts will either provide direct mutual benefit, such as a land lease agreement for laying communications, or be the result of a compromise, such as an agreement on water extraction quotas. And all these complexities, of course, do not compare to the complexities of organizing the same thing through central planning mechanisms—that is where the task is truly solved haphazardly: it consumes tax money and leaves the consumer dissatisfied.
