THE ECONOMICS OF THEFT OR THE NONEXISTENCE OF THE RULING CLASS

It could probably be shown by facts and figures that there is no distinctly American criminal class except Congress.

MARK TWAIN

Consider a free-market society in which theft does not exist. Suppose that some change, social, technological, or whatever, suddenly makes theft possible. What is the overall effect? One might suppose that it would be simply a transfer of the amount stolen from one group of people to another; the victims become poorer and the thieves richer by the same amount. This is not true.

People enter the profession of theft, like any other profession, until their numbers are sufficient to drive down the return from theft to the point where it is no more attractive than other professions available to them. Thieves end up working a normal eight-hour night and receive the same salary as other workers with the same talents employed elsewhere, allowing for such special business expenses as legal fees and time lost while imprisoned. The marginal thief, the man who finds it just barely in his interest to be a thief and would go straight if the returns of theft were just a little lower, is better off only to the extent that the added demand for his particular talents caused by the opening of opportunities in theft has slightly raised the salary those talents can command. The nonmarginal thief, the man who happens to be better suited to theft or less suited to honest employment than most other thieves or potential thieves, benefits somewhat more, but even for him the benefit is only a part of his income, since he could be spending the same effort earning somewhat less in a different profession.

Meanwhile, the victims are worse off by the entire amount stolen, which is at least as great as the total wages of the thieves. In addition, they pay the cost of burglar alarms, police, and other expensive concomitants of theft. The net effect of theft has been not the transfer of income but the diversion of labor from productive to unproductive uses, reducing the total income of the members of the society by about the amount stolen.

If there is a plentiful supply of qualified thieves or if the qualities required for theft are roughly the same as those required in other professions, the benefit to the thieves from the existence of theft will be small. If, in addition, the number of thieves is a sizable part of the population, the thieves themselves may be worse off because of the existence of theft. There is, after all, no honor among thieves; a man may return from a night of labor only to find that a fellow worker has paid him a call. In addition, the price of the goods thieves buy is increased by the cost of insurance, guards, and the like, necessitated by theft. Thieves themselves may lose more by theft than they make. If moderately rational, they might themselves prefer that theft be impossible.

Exactly the same argument can be made for the fences, the ultimate purchasers of stolen property, and everyone else who at first appears to be benefited by theft. In each case competition drives earnings down to the market rate while some of the costs of theft are borne by those who appear to benefit by it.

This analysis of private theft is useful for understanding the nature of government. Government consists largely of various forms of legalized theft. The same economic principles apply to it as to illegal theft. There is competition both for employment (as politician, bureaucrat, and so on) and for purchasing stolen goods (lobbying for subsidies and other government favors). This competition drives down the income of both politicians and their customers until it reaches its market level. Just as with private theft, individuals are benefited only to the extent that their particular talents are peculiarly suitable for governmental professions. As with private theft, the wealth taken is mostly a net loss, not a transfer. If a million dollars of the taxpayers’ money is being handed out, the people competing for it are willing to, and will, spend most of a million dollars to get it, just as a private thief will put in twenty dollars worth of labor to steal twenty-five dollars worth of loot. In addition, as with private theft, more resources are consumed by the cost of protection against government: tax lawyers, inefficient allocation of labor and capital in planning enterprises to minimize tax costs instead of to maximize real production, and so on. In the long run, society is probably poorer by more than the total amount stolen.

Just as private thieves may be injured by theft, it is possible that those who work in or through government may be injured by the existence of government. Indeed, it is probable, for the number of thieves is enormous. Virtually the entire population, to one degree or another, is using the government to steal something from someone, and the total amount stolen is a sizable fraction of the national income.

It might be argued that the chief beneficiaries of government, in particular politicians, have no talent except for theft and that the increase in their income resulting from the government’s demand for that talent is therefore considerable. This argument is rhetorically satisfying but probably false. There is stiff competition for high office and the men who win usually have considerable ability. Human ability is, I believe, quite generalizable; a man who is good at one thing usually can be good at others. If government were drastically reduced or eliminated, politicians could go into legitimate activities, perhaps as entertainers, perhaps as executives. Most politicians, if they had stayed out of politics, would probably be earning nearly as much as they are now, and if there were no politics everyone’s income would be much higher. The abolition of government, although it might lower the relative income of those who now are, or would have become, politicians, would, I suspect, raise their absolute income.

This entire analysis, as the title of the chapter suggests, is intended to answer the argument that the government cannot possibly be abolished legally, since the people who control it profit by it and, since they control it, will not allow it to be destroyed by actions within the system. Such a ruling class analysis fails to explain government activities such as airline regulation which consist mostly of destroying wealth, and the wealth of the rich at that. By imposing high airline fares, the CAB imposed a cost of about $2 billion a year on airline passengers. Many of them were surely members of the ruling class, if there was one. The airlines benefited by a small fraction of that amount; their total net income was only about half a billion dollars. If we assume that 40 percent of that income was a result of the CAB’s activities, that all of that goes to members of the ruling class and that fully half the money spent on airline fares is spent by students, low-income couples on honeymoons, and similar nonmembers of the ruling class, we still have the curious spectacle of a ruling class that steals a billion dollars from itself and pays eight hundred million for the privilege. It seems more reasonable to suppose that there is no ruling class, that we are ruled, rather, by a myriad of quarreling gangs, constantly engaged in stealing from each other to the great impoverishment of their own members as well as the rest of us.

Even if this is correct, there are still people who have sunk money into the existing system, have spent time and energy working their way into a profitable job, and thus have a short-run interest in maintaining that system. That should be only a transitional problem. Those people will fight fiercely against any attempt to abolish their jobs while they are in them, but they have no interest in preserving them for their successors. The abolition of government will take longer than the career of one generation of bureaucrats and politicians.

This does not mean that we can achieve anarchy by merely posting a few Xerox copies of this chapter around Capitol Hill and waiting for the congressmen to recognize their long-run interests. In the next two chapters I suggest more practical—and longer—roads to freedom than that. But at least we can remove from our map one roadblock—the satanic ruling class, raking in the shekels with its right hand and stuffing the ballot box with its left.

[The idea sketched in this chapter was labeled “rent seeking” in a later article by Anne Kruger. Its first appearance, so far as I know, was in an article by Gordon Tullock, “The Welfare Cost of Tariffs, Monopoly and Theft,” published a few years before I published my version.]