The internal libertarian debate about the justifiability of the state – the exemplar of a coercive institution – is itself complex and multi-dimensional. We can, however, examine the key contentions and most interesting objections and responses by considering three contending positions – Free Market Anarchism, the No Taxation Minimal State, and the Taxation Minimal State. We will also take note of two versions of the No Taxation Minimal State position (see Figure 5.1). Important contributors to libertarian theory, for example, Hayek and Lomasky, ultimately endorse a Taxation Semi-Minimal State, which both funds its activities through taxation and extends its activities beyond the protection of the rights of life, liberty, and estate. It may extend its tax-funded activities to financing public goods such as scientific research or mosquito abatement; and it may provide a basic safety net – perhaps in the name of a moral right to assistance or on the basis of more pragmatic considerations.! Putting aside the classical liberal Semi- Minimal State, we will focus here on
three alternative libertarian institutional proposals.
Figure 5.1 Free Market Anarchism, No Taxation Minimal State and Taxation
We can most readily explain the positions shown in Figure 5.1 and engage the contentions, objections, and responses among advocates of these positions in terms of the persons’ first-order Lockean rights of life, liberty, and estate and their second-order Lockean rights to engage in self-defense, the enforcement of restitution for rights violations, and the infliction of punishment for rights violations.- The libertarian view that emerges from taking these rights very seriously – as Nozick does in ASU and as do his free market anarchist opponents – is that coercion is justifiable if and only if it is directed against rights- violating conduct. Each person’s rights to life, liberty, and estate entail her rights against the coercive violation of those rights. And each person’s rights to defense, restitution, and retribution entail her rights to use and authorize coercion against violations of her first-order rights of life,
liberty, and estate. No one has a right not to be subjected to the coercive suppression or nullification of the effects of her rights- violating coercion. To what conclusion about the nature and scope of justifiable coercive institutions do these libertarian claims about the rights of individuals lead?
The standard and most readily understandable libertarian answer to this question is the No Taxation Minimal (or “night-watchman”) State – the NTMS. It is an essential feature of any state that it engages in – or stands ready to engage in – coercion. Advocates of the NTMS generally maintain that it is unique among states in its compliance with libertarian principles because it employs coercion only to enforce reasonable articulations of people’s basic rights to life, liberty, property, and contract – and only in ways that do not themselves violate rights. It limits – or seems to limit – its use of force or the threat of force to coercive defensive action, coercive implementation of restitution for rights violations, and coercive infliction of punishment for rights violations. Most strikingly, the NTMS does not finance its operations through the coercive extraction of funds, that is, taxation, from those whose rights it purports to protect. Rather, the NTMS finances its operations through the sale of its protective services to willing buyers of those services.
But, here is a complication. As any state must, NTMS claims for itself a monopoly on what it takes to be the legitimate use of coercion within the territory or over the population it rules and it must at least somewhat successfully enforce that monopoly. As a state, the NTMS does not allow significant challenges to its being the final authorizer of coercive force within its realm.- Note, though, that the enforcement of such a monopoly itself involves the coercive suppression or control of would- be alternative suppliers of legitimate defensive, restitutive, and retributive services. So, as Nozick recognized in ASU, the key question for the vindication of the NTMS is whether the coercion that the NTMS employs to sustain its monopoly on defensive, restitutive, and retributive services is itself permissible coercion. Nozick’s elaborate defense of the NTMS in ASU is fundamentally an argument for the permissibility of the coercion that the NTMS must employ to maintain its position as the monopoly supplier (or authorizer) of coercive protective services.
In contrast to advocates of the NTMS, some libertarians, for example the economist Ludwig von Mises^ – who was Hayek’s more libertarian mentor – advocate a taxation- funded minimal state, the TMS. Such advocacy may be defended by arguing that, if adequate funding of protective services will not be available through voluntary subscription, taxing people to finance such activities is a necessary evil. Or, perhaps, under those circumstances, such coercive takings do not count as rights violations. We need to keep this later possibility in mind as we move through this section’s discussion. Both the NTMS and the TMS eschew the employment of coercion to enforce morality (beyond the morality of respect for others’ rights) or to suppress voluntary, self-harming actions. Coercive moralistic or paternalistic interventions are as unacceptable as coercive redistributive interventions. Decent human beings will be disturbed by various sorts of immoral or self-harming activities and may seek in non-coercive ways to discourage them (Mill 1978 ). Nevertheless, to sanction the state’s coercive suppression of vice or self-injury is to invite every group with contentious ideas about what constitutes vice or self-injury to battle for state power to enforce its disputatious ideas or to block the enforcement of other groups’ contentious doctrines. It is to invite the demise of liberal pluralist society. Note also that the same limits on coercive state action apply to the state’s conduct toward foreign agencies – be they states or nonstate organizations. The only justification for a minimal state’s action against such agents is the protection of the rights of its own citizens or clients through measures that are not themselves rights-violating. (Exactly what coercive defensive measures against attackers count as morally permissible is, of course, another disputed issue within libertarianism.)
The most prominent defender of free market anarchism (hereafter, FMA) during the time that Hayek was writing his major works in political theory and Nozick was transitioning from democratic socialism to libertarianism was the economist, Murray Rothbard. And, indeed, Nozick tells us that his interest in vindicating the NTMS arose from rights-based critiques of the minimal state that he encountered in conversations with Rothbard^ (1974: xv; Raico 2002). The FMAs broad-brush critique of the state is that the state is the greatest mass-murdering, enslaving, brutalizing, depreciating, and subordinating institution in human history. It is organized predatory force, which typically asserts some special religious or moral authority that purports to sanctify its activities – activities that would immediately be perceived as criminal in the absence of some sanctifying theology or ideology (Rothbard 1974). The state is the fundamental and well-honed device through which we human beings seek to fulfill our natural desire to live at the expense of others. As the mid-nineteenthcentury French laissez-faire economist, Frederic Bastiat put it, “The state is the great fiction by which everyone endeavors to live at the expense of everyone else” (Bastiat 2012 : 97). In reality, the state generates a Hobbesian struggle in which we (our group or coalition) seek to capture the coercive mechanisms of the state and to use it against others before they capture it and use its powers against us. Since it is the essence of the state to be an instrument for killing and predation, should a more constrained state come into existence – e.g., the NTMS or the TNS – it will fairly quickly revert to the more murderous and exploitative mean. For, the anarchist reasons, there can be no sustained reliable checks on the coercive powers of any monopoly state.
The FMA’s moral charge against the TMS is that it sins twice against individual rights. It sins by coercively extracting from its peaceful subjects the funds that it purports to devote to the protection of their rights. And it sins against individuals and associations who seek to compete with the TMS in the provision of protective services by forbidding them from offering such services. Even the NTMS is guilty of the second of these sins. FMA’s economic charge against both sorts of minimal state is that the monopoly provision of any service is certain to yield shoddier, less fine-tuned, less innovative, and more expensive forms of that service than would be supplied by a competitive market. Only a competitive market for valued services – including protective services – will efficiently allocate economic resources to the diverse services that people demand. (Recall the argument against central planning discussed in Chapter 3.) Advocates of minimal monopoly states forget the lessons of their own pro-market economic arguments. The FMA’s social theory charge against both sorts of minimal state is that they presume that an apt and desirable legal order must be the deliberate product of – the promulgation of – the state. However, legal order need not arise from state promulgation. Hayek
- – himself no advocate of a market in protective services – insists that legal order arises prior to and independently of the state (1973: 72-4).
Nozick agrees with free market anarchists that no state authority has ever been established by any actual social contract and that it is most unlikely that there ever will be a social contract that will establish state authority.- He reminds us that the ‘‘tacit consent,” which is often invoked by social contract theorists, “isn’t worth the paper it’s not written on” (1974: 287). Therefore, Nozick seeks to provide a vindication of the NTMS that does invoke anything like a social contract that is designed to yield a state. Rather, he seeks to vindicate the NTMS by indicating how it would – in invisible-hand fashion
- – arise from a state of nature through the permissible actions of individuals and their associations. He seeks to show how, starting from the very circumstances and types of rights-protective adaptations and agencies envisioned by the advocate of FMA, the NTMS would arise through entirely permissible actions and transactions.-
According to both the free market anarchist and Nozick, a Lockean state of nature is not the horror that a Hobbesian state of nature is. Most occupants of a Lockean state of nature have some appreciation of the rights of others as equal and independent beings and some disposition as rational beings to abide by those rights. We can attribute to most of those individuals a disposition toward reciprocal respect for each other’s life, liberty, estate, and contractual claims on the basis of a Humean-Hayekian (and Lomaskian and Schmidtzian) story about people’s perception of the benefits of such reciprocal respect and about the selection over time of social orders that are more fit for survival and imitation because they embody and reinforce such norms.- Nevertheless, according to the free market anarchist and Nozick, this stateless condition is not a walk in the park. Deliberate violations of rights will still take place as will honest disputes among good- willed parties about what their property and contractual rights and obligations are. Individuals who act as judges in their own cases are likely to be biased on their own behalf in their understanding of the relevant norms and relevant facts; and they are likely to be believed to be biased. Even individuals who appeal to the appropriate norms and have their facts right may well lack the force to carry out their proper defensive, restitutive, or retributive actions – in part because others will not know whether they should be trusted. Whereas Locke presumed that these inconveniences could only be overcome by the intentional creation of political society and the state, Nozick and the free market anarchist maintain that one must investigate whether individuals have the moral and intellectual resources to overcome these inconveniences without the resort – or at least intentional resort – to the state (1974: ID-
Markets provide what people demand.- Good-willed individuals in the state of nature would seek out and find enterprising protection agencies which would offer them the service of reliable rights protection. Reliable rights protection for a client requires that her protection agency will have entered into agreements with other good-willed agencies about how precisely they will construe the rights of their potential customers. How precisely will the boundaries between various types of physical property be determined? What precisely must be in a contract to support the claim of a given contractual obligation? These codifications will not be plucked out of thin air but, rather, will likely embody evolved norms that articulate and protect property and contractual rights. Through such specifications – subject to clarifications and extensions as they are called for by changing circumstances and discoveries – positive law is restated and developed. To the extent that protective agencies wisely do not attempt to deal with all possible disputes in advance, they will seek to insure reliable and peaceful resolutions by establishing or subscribing to arbitration agencies – that is, judicial enterprises – that will supply judgments in the cases brought before them.
Rogue protective agencies that do not abide by the judgments of their selected judicial counsels or that select only biased counsels will not be able to provide their clients with reliable and peaceful dispute resolution. For the endeavors of those agencies will not be honored by nonrogue agencies. The decisions of judicial enterprises which are subscribed to by non-rogue agencies will further refine the norms that individuals will have reason to expect will be complied with or enforced. Coalitions of non-rogue protective agencies will suppress outlaw agencies that may seek to violate the increasingly well-defined rights of the clients of those protective agencies. At the same time, the various agencies will compete with one another for customers on the basis of price, quality of service, and specialized expertise. Some agencies may specialize in protection against industrial espionage, others against violations of royalty agreements for natural gas extraction; some arbitration agencies may specialize in disputes concerning industrial espionage, others in disputes concerning royalty agreements. Advocates of such a competitive system for the private provision of law maintain that it would provide better products at lower costs than any state monopoly; a system of competing private providers is as likely to work better than a state monopoly in the rights- protection arena as in, say, the provision of groceries, clothing, and housing.
Subscription to a protection agency will at least normally involve an agreement to eschew private acts of defense, restitution, and retribution. For protective agencies will not want to be drawn into – and to be known to be susceptible to being drawn into – conflicts on the basis of their clients’ freelance coercive activities. (Protective agencies may refuse to network with other agencies that allow their clients to engage in private defense, restitution, and retribution.) And subscription to a protection agency will at least normally involve agreement to pay for services rendered. Thus, within a system of competing protective agencies, protective services are not financed through impermissible coercive extraction of funds from the clients of those agencies.
The scenario offered by the free market anarchist ends with this projection of a network of competing protective agencies. However, Nozick adds two phases to this scenario which together complete his invisible-hand account of the NTMS. In the first of these further phases, one of the protective agencies or the cooperative network as a whole seems to attain a natural (non-coerced) monopoly in the provision of protective services. Nozick holds that natural monopolies are rare because the creation of a monopoly normally requires illicit coercive suppression of competition. Thus, he has to ask, “Why is this market different from all other markets?” (1974: 17). His answer is that conflict resolution will be simplest and least costly when both parties to a dispute subscribe to the same agency. So, for any given individual, settlement of disputes will be simplest and least costly if she subscribes to the protective agency with the most clients. Hence, the higher the percentage of the population that becomes customers of a given agency, the greater the competitive advantage that agency possesses over its rivals. “[S]ince the worth of the less than maximal product declines disproportionately with the number who purchase the maximal product, customers will not stably settle for the lesser good, and competing companies are caught in a declining spiral” (1974: 17).
Nevertheless, it is not clear how decisive this factor would be. The fact that it may be less complicated and costly to resolve automobile collision claims when both parties are customers of the same insurance company has not lead to one company having a virtual monopoly within the automobile insurance business. In addition, Nozick’s argument seems to overestimate the homogeneity of the services that competing protective agencies would offer. As FMA advocate Roy Childs put it, ‘An infinite variety of institutions can develop in society, concerned with as many different aspects of protection” (2007: 222). It may well be that prospective clients will care more about the specialized protections offered by diverse agencies than being a client of the agency with the most clients. Moreover, as Rothbard points out (2007: 234), Nozick moves awfully quickly from competing agencies agreeing upon procedures to resolve disputes between them to there being “one unified federal judicial system” (1974: 16). Still, we should note Tyler Cowen’s much more ingenious argument for the non-coercive transformation of a cooperative network of competing protective agencies into something like a monopoly state (or cartel of agencies). According to Cowen, precisely to the extent that competing protective agencies would create a complex grid of common rules, dispute resolution mechanisms, judicial procedures, and so on, those agencies will be able effectively and non-coercively to preclude further agencies from entering into competition with them. All the already networked agencies need do is to refuse to allow those further agencies to integrate into the established grid (Cowen 2007).
In any case, it is crucial to see that Nozick’s case for the NTMS does not really rest on the claim that such a monopoly in protective services would arise through non-coercive market processes. According to Nozick, non-coercive processes would yield only a “dominant protective association” – a DPA. Scattered among the clients of this DPA, there still would be independent selfenforcers of rights and niche providers of protective services who are not correctly classified as “outlaws.” The DPA may not simply suppress these independent and niche non-outlaw providers. Yet, according to Nozick, the non-outlaw, protective activities of these independents and niche providers have to be monitored, regulated, or channeled by the DPA for that institution to qualify as a state. How, though, can a DPA permissibly coerce non-outlaw competitors to submit to its guidance? This brings us to the second and crucial phase which completes Nozick’s invisible-hand account of the permissible formation of the NTMS. Within this phase the DPA permissibly attains statehood through its permissible coercive interference with those remaining non-outlaw self-protectors and competing protective services.
Nozick’s implicit premise here is that independent self-protectors and sellers of protective services – who have declined to submit to the DPA strictures about what procedures need to be followed for reliably ascribing guilt or liability for rights violations and for justly engaging in restitutive and retributive responses – pose a significant risk of violating the rights of the DPA’s clients.— Nevertheless, these selfenforcers and outlier providers of protective services are not outlaws. Thus, they pose too little risk to justify simple prohibition of their activities. On the other hand, they pose too much risk for those clients of the DPA simply to have to tolerate. Fortunately, according to Nozick’s explicit premise, there is a middle path between allowing non-outlaw, but risky, private or outlier enforcers to proceed at will and simply suppressing them (Nozick 1974: 83). That middle path is to interfere, to forbid, or re-channel those private or outlier risky activities while also duly compensating those subject to such interference. The formulation of this middle path that delineates permissible interference with risk-posing, but non-outlaw, protective agents is Nozick’s “Principle of Compensation,” according to which “those who are disadvantaged by being forbidden to do actions that only might harm others must be compensated for these disadvantages foisted upon them in order to provide security for others” (1974: 82-3). Given this “Principle of Compensation,” a DPA may demand that aspiring selfprotectors and outlier agencies conform their protective activities to the standards and practices established by it as long as the DPA offers due compensation to the proscribed agents. The DPA’s exercise of this oversight authority over otherwise somewhat risky freelance rights-enforcers makes it an “ultra-minimal state” which finances itself through the sale of its services to parties who are free not to purchase those services from it (or its approved auxiliaries) but, then, would have to go without protective services. Nozick says that due compensation for those who are disadvantaged by being forbidden to carry out their somewhat risky protective activities would likely take the form of their receiving the state’s protective services for free or at a reduced rate. In Nozick’s terminology, when, as a matter of due compensation, the ultra-minimal state extends protective services to some individuals free of charge or at a discounted rate, it becomes a minimal state.
Roy Childs objects that the compensation that is to be offered to individuals who, because of their principled opposition to the monopoly state seek to be self-enforcers of their rights will consist in being brought under the protective umbrella of a monopoly state. ‘‘What is he willing to give us as compensation for being so prohibited? He is generous to a fault. He will give us nothing less than the State” (2007: 223). However, this objection misses the mark. According to Nozick, parties who are forbidden to be self-protectors may receive compensation in kind or in cash. “The prohibitor must completely supply enough, in money or in kind, to overcome disadvantages” (1974: 112). And recipients of monetary compensation “may, of course, refuse to pay the fee [for the state’s protective services] and so do without these compensatory services” (1974: 113). The real issue is whether the Principle of Compensation is plausible. If it is plausible that moderately risky private rights enforcement is subject to proscription as long as the proscribed party is duly compensated, then a frustrated selfprotector who is offered due compensation, cannot complain that he is being treated unjustly on the grounds that, despite the riskiness to others, he wants to be a freelance enforcer of his rights. Rothbard does criticize the Principle of Compensation by saying that, according to it, one is “permitted to cavalierly invade someone’s home and break his furniture, simply because [one is] prepared to ‘compensate’ him afterward” (2007: 240). However, this criticism ignores Nozick’s complex discussion of the special conditions that need to be present for one to be permitted to “boundary cross” even if one makes due compensation.—
Childs offers a different and more powerful criticism of Nozick’s NTMS, viz., that once it comes into existence, there are no detectible checks on its power. After all – see the lower left part of Figure 5.1 – that state is an entirely non-political institution. It is simply a monopolistic enterprise owned by its shareholders and normally controlled by its board of directors and senior management.
There is no question of a constitution, of course, merely the contracts with its clients, which in the case of conflicts it alone can judge and interpret. There is no voting. There is no separation of powers, no checks and balances, and no longer any market checks and balances either. … What happens in the event of its assuming more power? Since it is a monopoly, any disputes over its functions are solved exclusively by itself. (2007: 224)
In a nice twist, Childs maintains that we have more reason to be concerned about the risk of the DPA achieving monopolistic statehood through its subordination of selfenforcers and outlier protective agencies than we have to be concerned about the risks posed by those parties (2007: 224). Even if the NTMS does not turn to rights- violating predation, for example taxation, if the members of the network that constitute the NTMS do form an effective cartel and are thereby able to attain long-term monopolistic pricing for their increasingly shoddy services, the provision of those services will no longer have the virtues that the pro-market advocate of the NTMS expects it to have. On the other hand, if the members of the network remain sufficiently in competition with one another so that the characteristic defects of monopoly provision do not arise, then it will be far from clear that the network has become a state.
Free market anarchists maintain that the only credible check on the activity of any protective agency is the existence of competing agencies to which individuals may turn when that first agency goes rogue. Still, a possible alternative to market checks on rights-protective enterprises is political-constitutional constraints on the NTMS. A DPA that aspires to being a monopolist provider of rights-protection might self-impose such constraints in order to show that its transition to monopoly provider is not as risky to individuals at large as are the risky self-enforcers and niche agencies which the dominant agency moves to suppress or oversee. From a libertarian perspective, such constitutional constraints and procedural requirements would have to impose clearer, stricter, and more effective limits on the scope of acceptable state action than, say, the original US Constitution imposed. In her novel, Atlas Shrugged, NTMS advocate Ayn Rand has Judge Narragansett, one of her minor heroes, adding a clause to the US Constitution that forbids state abridgement of freedom of production and trade (1957: 1083). Hayek himself went from celebrating the US Constitution for its success at limiting state power (1960: 17692) to declaring it to be a failure (1973: 1) and to proposing an alternative, more resiliently liberty-protective constitutional structure (1979: 105-27).
We must, however, return to Nozick’s question, “Why is this market [in rights- protective services] different from all other markets?” For, there is a very different, widely accepted answer to this question that poses a considerable difficulty for both the advocate of the NTMS and FMA. This answer is that the anticipated product of this market, viz., rights-protection, is (largely) a public good. For our confined purposes here, we can think of a public good as a good which, if it is produced and enjoyed by some members of a given public, cannot readily be withheld from other members of that public. The standard and useful example of a public good is national-scale defense. For the sake of simplicity, imagine a defensive shield that would protect everyone within a large region against any aggressive attack from outside of that region. Imagine further that the shield is genuinely a good; its benefits clearly exceed its costs. Indeed, for each prospective consumer of that shield, there is a range of monetary payments that this individual would gladly make in order to gain the benefit to her of this good were she not able to gain that benefit without paying for it. Now imagine that an agency – perhaps an NTMS or perhaps a private construction firm – sets out to market the production of this shield. And imagine that this agency knows the prices that each prospective consumer of the shield would gladly pay to attain the protection of the shield were she not able to gain that benefit without paying for it.
Not appreciating the significance of this last italicized clause – but, instead, expecting a healthy profit – the state or firm sets out to take orders for the provision of the shield. The conventional economic wisdom (which might be mistaken) is that the total value of the orders that the state or firm will receive will be markedly less than it naively expects. Indeed, the total value of the orders may easily be less than the costs of producing the shield. The explanation, of course, is that each prospective consumer may reason that: (i) the likelihood of the shield being produced will not be significantly affected by whether or not she places an order for it; (ii) if the shield is produced, she will get the benefits of it whether or not she places an order; and (iii) she gets to retain the proposed payment if and only if she declines to place the order. On this basis, each prospective consumer may decline to place an order for the defensive shield with the hope of freeriding on its being financed by the orders of others who have not reasoned so cleverly. The problem with people reasoning in this way is not that some people will succeed at being free-riders but, rather, that no one will get to be a free-rider or even a payingrider because the voluntary financing scheme will fail due to the number of individuals who seek a free-ride.
The lesson that is conventionally drawn from such considerations is that any public good will be at least significantly underfunded unless the prospective consumers of that good are taxed to pay for it. Such taxation prevents those consumers from being too clever for their own good. If one accepts this conclusion with respect to the public good of national-scale defense and extends it to the more complicated case of the intra-societal protection of rights— – and one ought not to rush to these judgments – advocates of both FMA and the NTMS will be in a decidedly awkward position. For their honoring of people’s rights by eschewing taxation will require that they forego offering an effective defense of those rights.
To escape the awkwardness of endorsing institutions in the name of rights which, to honor those rights, will not effectively protect them, libertarians may have to swallow the bitter pill of the TMS, which seems to render itself capable of effectively protecting rights by dishonoring them, that is, by coercively extracting from individuals the funds it needs to protect people against coercive infringements. Perhaps, however, that pill is not so philosophically bitter. For, perhaps by introducing a bit of complexity into our understanding of people’s rights,— it can be argued that this coercive extraction is morally permissible. Person’s rights indicate what must not be done to them – or more specifically, what must not be done to them without their consent. But what about cases in which consent is not feasible? As Nozick says after summarizing the reasons for always prohibiting boundary crossings that are not consensual, “The complication is that some factor may prevent obtaining this prior consent or make it impossible to do so” (1974: 71). A person’s right over her own body entails that she has a right not to be cut open without her consent even by an expert surgeon seeking to save her life. However, what if the person who needs that surgery to save her life is already unconscious and, hence, unable to give consent? If it is permissible for the surgeon to proceed with the needed surgery on the already unconscious individual, this seems to be true because the requirement that the subject consent to the physical intervention is really a requirement that she consent if and only if consent is feasible. So, the libertarian advocate of the TMS may argue that, precisely because of the non-feasibility of attaining consent from individuals to make payments in exchange for the public good of rights-protection, it is permissible to impose those payments without actual consent. Hence, although a TMS finances itself through coercion, it does not do so through impermissible, rights-violating coercion. Recall, however, that this defense of the TMS turns on a striking assumption about information. It assumes that the state’s tax assessors would know, for each assessed party, what magnitude of taxation would leave that party net better off in light of the value for that party of her receipt of the tax-funded public good of protective services.