Tuesday, July 13, 2010

Adam’s Rib and Anarchy: A Response to David Friedman

Previously I wrote about Milton Friedman of blessed memory and his documentaries "Free to Choose," done during the 1980s. John Stossel recently devoted an episode of his talk show to pay homage to "Free to Choose."

Milton Friedman's son, David Friedman, is also a libertarian economist. In The Machinery of Freedom: A Guide to Radical Capitalism (follow the link to read the book for free), though, he takes his libertarian logic to its anarchist extreme. After spending the first half of the book suggesting ways to sell off excess parts of government such as schools and roads (policies that I heartily support), Friedman turns to government itself and to how we might function without it. Friedman offers the following scenario:

Suppose, then, that at some future time there are no government police, but instead private protection agencies. These agencies sell the service of protecting their clients against crime. Perhaps they also guarantee performance by insuring their clients against losses resulting from criminal acts.

How might such protection agencies protect? That would be an economic decision, depending on the costs and effectiveness of different alternatives. On the one extreme, they might limit themselves to passive defenses, installing elaborate locks and alarms. Or they might take no preventive action at all, but make great efforts to hunt down criminals guilty of crimes against their clients. They might maintain foot patrols or squad cars, like our present government police, or they might rely on electronic substitutes. In any case, they would be selling a service to their customers and would have a strong incentive to provide as high a quality of service as possible, at the lowest possible cost. It is reasonable to suppose that the quality of service would be higher and the cost lower than with the present governmental protective system.

Friedman's system goes all the way up to having private court systems. When members of different systems come into conflict the protection agencies step in as arbitrators. In essence, instead of one giant nation-State, we would have numerous private States with no relation to boundaries, but simply personal choice. The advantage of this is that people would be free to choose their protection agencies and even to switch agencies as it suits their interests.

I admit that there is a certain elegance to David Friedman's suggestion and if I were to try putting together an anarchist system it would look something like Friedman's. What I particularly admire about Friedman is that he comes to his anarchism honestly, from a libertarian desire to avoid coercion, as opposed to most anarchists who come to their beliefs from a socialism based desire to use coercion to overthrow capitalism. The problem, as I see it, with Friedman's anarcho-capitalism is that it does not take into account the question of authority; mainly that States, in order for their authority to be meaningful, need their citizens to accept them as having a meta-legitimacy regardless of what they think of specific decisions. The State cannot simply be something that you accept or reject based on how you feel about it at the moment.

Take for example a woman whose husband cheats on her. To play out this alternative Adam's Rib scenario, our woman approaches the political establishment, headed by Spencer Tracy, to demand justice. Spencer Tracy, operating within the parameters of modern legal theory, suggests that this woman should be able to get a divorce on favorable terms and might be able to sue for emotional harm. Now if we are operating by standard government, the story ends here. Regardless of whether this woman believes that her honor has been violated and that it can only be redeemed if her husband and his mistress are given a more frontier form of justice, such as a bullet in the arm, she is held back by her "social contract" with the government. As long as the government protects her life, liberty and property, she is required to obey the law even when the results are not to her liking. Enter Friedman's anarcho-capitalism and all of a sudden we have an alternative to this woman going into therapy to get over her wounded sense of honor. She can break off services with Spencer Tracy's conventional modern justice protection agency and take up Katherine Hepburn's alternative protection agency, which offers its clients the option of choosing from its select line of vendetta specialists (otherwise known as hit-men) to bring them a more "personal" justice. Perhaps our woman can take a leaf from Shylock and prepare her scales to receive her pound of flesh and start sharpening her knife against her shoe. It is useless here to tell the woman that such actions are wrong, because she believes that, in this case, she is in the right, and now she has a justice system to give her what is "rightfully" hers.

Libertarianism relies on the fact that people are usually rational in their economic activities and can shrug off the exceptions. These principles break down when it comes to tort law, because it means handing decision making over to people who, in their current state, are, by definition, incapable of making rational decisions. Think of divorce cases with both parties engage in a mutually destructive conflict, consumed by a hatred for the other and egged on by their lawyers. Besides for being personal, divorce cases suffer from the fact that they lack clear expectations and rules of conduct. Allow someone to stew in their anger and they are likely to believe that they deserve nothing less than a pound of flesh and if their current venue does not give it to them, they will find one that will. Friedman's anarcho-capitalism would mean divorce style cases across the board with guns to boot.

I would also add a libertarian objection to Friedman's system. Libertarianism relies on a distinction between direct physical harm, which is the proper object of government intervention, and non-physical harm, which the government has no place in and which must be left to the individual to pursue privately through the social realm. (For example our woman might not be able to use the government to punish her cheating husband, but she can still have him publically humiliated by being thrown out of his church or synagogue.) Once we turn to anarcho-capitalism, there is no longer any distinction between the political and social; everything becomes social. As such the protection system, coming to replace the government, will no longer be bound by physical harm. People can pursue "justice" for the non-physical harm done to them and keep looking for a protection agency that gives it to them until they find one.

If I were to hone in on the difference between David Friedman and I it is that Friedman approaches the issue squarely from an economics prospective. He assumes rational behavior on the part of his participants as they pursue their monetary self interest. I come to the issue from political theory and therefore ask how it is that governments can carry innate authority. This is something outside of economics and outside of pure reason as the nature of the game is for everyone to buy into an illusion. This is strange because Friedman does not strike me as a narrow minded economist. For one thing, in addition to his father and Friedrich Hayek, he also dedicates his book to Robert A. Heinlein. Friedman has a strong interest in science-fiction and fantasy and has even written some; my challenge to him is why has he not allowed these things to come over into his political writing to transcend the mere economist in him?


David Friedman said...

I am glad you enjoyed the first two parts of my book, but you do not seem to have read the third part very carefully. Legal rules are not produced by rights enforcement agencies in the system I describe, but by the private courts that pairs of rights enforcement agencies agree to use.

An agency doesn't have the option of offering hit men to its customers unless it either can get the agencies of potential victims to agree to such a system, which is unlikely, or is willing to fight a war with another agency every time the question comes up, which gets expensive.

I suggest that you read the relevant sections again and try to figure out how the system would actually work, given that the courts are trying to produce systems of legal rules that the customers of the agencies will want to live under. Letting someone get out of a contract by changing his agency after the contract is signed does not seem like a likely outcome.

David Friedman

Izgad said...

Dr. Friedman

It is an honor to be able to speak to you. Thank you or making your book available on line; I really enjoyed it, particularly the third part.

I understood your court systems as being, in practice, an extension of your protection agencies, much as our police and courts are part of the same government. As such I did not bother to clearly differentiate between them, but used the term “protection agency” as a general term for your replacement government, with its version of police, courts and legislature.

You are very confident that your system would avoid violence; that agencies would not declare war on each other. For this you rely on the libertarian assumption that people will do what is in their physical best interests. I bring in people who are, by definition, anger bitter and unstable so our libertarian assumptions about self interest are no longer in play. What kind of mind set would you be in if your daughter was raped and murdered and the person you were convinced that did it got off? To that I bring another libertarian principle that if someone wants something badly enough someone, through the free market, is going to show up to supply them with it. So the question comes down whether the cost of doing someone bodily harm or even murdering them, under your system, would be so prohibitively expensive (say a million dollars) that it would cease to be a plausible option. Considering the risks that street level drug dealers take for the money they make (if we are to go with the numbers offered by Freakonomics) the cost to round up a few street level thugs to serve as my vendetta included protection agency would likely be in the very affordable thousands, not millions. Let me also point out that individuals are capable of pursuing vendettas. To the best of our knowledge Lee Harvey Oswald managed to assassinate the President of the United States all by himself. My neighbor should not pose nearly as difficult target.

A major theme in my writing is the notion that even if I might not be able to prove something and hands down win a debate, I still strive to be able to get on to the field with a plausible argument. So in our case grieving father with a raped and murdered daughter, I, with my conventional though limited government, would be able to sit down and tell him with a straight face that what happened was terrible, but that there is nothing we can do. Twelve idiots have spoken and going around and murdering people is not the “American” way. What about you? What do you say to this man when he starts muttering to himself “someone needs to pay,” fingering a revolver with one hand and a business card with “alternative protection agency” written on it with the other? At a practical level your system would break down after the fact. My conventional government is perfectly capable and can be relied upon to take down vengeful fathers. Under your system, once the father has gotten his vengeance, there is little motive for any protection agency to strike back. Our father is protected by an agency and without anyone paying the bills, the agency of the guy he killed has every reason to avoid an expensive war if they can make a face saving peace. In essence your system works against you.

Izgad said...

On a side note, have your read C. J. Cherryh Foreigner series. It involves an alien planet that works similar to your system. There is not much of a formal government. Instead of courts there is this “assassin’s guild” for hire, which functions as an informal legal system. These aliens are fairly peaceful so I guess Cherryh would likely have some sympathy for your anarcho-capitalism.

David Friedman said...

"I understood your court systems as being, in practice, an extension of your protection agencies, much as our police and courts are part of the same government. "

That's a little like imagining that, since groceries are distributed by the grocery industry, you can think of groceries and farms as a single firm. The industry as a whole, if it were one firm, would raise prices and reduce quantity--engage in monopoly pricing. The outcome of a bunch of firms competing with each other is entirely different.

In my case, you are trying to treat a market as if it were a government. It isn't. In order to provide its customers with what they are paying for, a rights enforcement agency has to have agreements with the other agencies whose customers its customers might have disputes with. No agency is likely to agree that another agency can make the rules for such conflicts. So they have to find neutral third parties--the private courts. Rights enforcement agencies and courts aren't a single organization, they are a marketplace--a decentralized order. The outcome is quite different from what it would be if they were a single organization.

I go into some detail in part III of the book on how such a system works and what the implications are. It isn't a replacement government, any more than a competitive agricultural industry, instead of a Soviet style system, is a replacement government.

I am a fan of Cherryh's. My favorite of her books is Paladin, which helped inspire some feature of my one published novel. But I also like the Foreigner books. I think part of the point she is making in them is that what political system works depends in part on behavior patterns hardwired in individuals of a species--and the patterns of her aliens are not the same as ours.

Simon said...

When reading the account of Dr. Friedman's thinking, I was struck by the similarity to the position of Robert Nozick in Anarchy, The State, and Utopia. Both argue that protective agencies will be formed and that everyone is likely to join an agency. The difference between Friedman and Nozick is that Nozick comes to the conclusion that the agencies are likely to merge, leading to what he calls the minimal state. In contrast, Friedman argues that procedures will be established to deal with disputes between agencies. In order to choose between a merger and the establishment of procedures between them, we can think about which would be more efficient. In this context, we can think about Coase’s theory of the firm, where he argues that a firm will perform functions internally rather than contracting out for the functions because of transactions costs. It would appear to me that because of the transactions costs, it would be more efficient for the protections agencies to merge, than for them to have to develop procedures between them. Thus, I think Nozick’s solution is preferable.

Izgad said...

Dr. Friedman

I get the idea that we can have separate agencies and separate courts that are not run by the same people, say protection agencies Nike, Reebok and Adidas, using the Pepsi and Coke court systems. I guess you would also be able to choose to live under say under a Sears or Wal-Mart code of law. Just like you buy a car with insurance you can put yourself down for the Nike protection and the Pepsi court for arbitration. Earlier I was using protection agency as a word for the whole system with its many competing parts like one might talk about the capitalist system with its millions of competing parts or American Democracy with its Republicans and Democrats.

I can understand the established agencies in your system behaving themselves and not turning violent. Our Nike and Reebok would have no more reason to turn violent than their real life counterparts in the shoe business. What happens, though, when alternative agencies pop up to service precisely that cliental out for blood and other such services not offered by the established agencies on account that such services are unprofitable. (As a free marketer I am skeptical of the notion of an unprofitable enterprise; unprofitable simply means it takes a little more creativity than usual to make it profitable.)
Now in our current form of government authority, when I hire someone to kill someone else for me (think the opening of the Godfather Part I) the authorities have the physical capability and the ideological justification for stopping such actions. The Federal government is far more powerful than any protection offering family. More important to me is the will to do so. Pro government people like me believe in our bones that hiring hit men is morally wrong, even if it is to take out Jack the Ripper, as opposed to the workings of the legal system which is “justice.” Your protection agencies, even the powerful ones like Nike and Reebok, would not have the overwhelming power to keep the alternative agencies in line. Furthermore your established protection agencies would have no ideological grounds to pursue such a course of action. According to you there is nothing intrinsically wrong with hiring an alternative vendetta offering agency, particularly if the person you want killed deserves it.

As an aside, I do not see being pro limited government and being a libertarian as being contradictions since my libertarianism is an extension of my beliefs about government. I turn to government as a solution to a basic problem, mainly to take the power of vendetta out of the hands of individuals. Obviously government itself with its coercive power is also dangerous, even if it is less dangerous than millions of individuals pursuing their own brand of Hobbesian justice. The solution I follow is that while the government has real coercive power it is limited to exercising this power within the framework of protecting people from direct physical harm caused by other people. This of course leaves the vast majority of human affairs, from schools to what kind of substances to put into your body, free of government.

David Friedman said...

". Just like you buy a car with insurance you can put yourself down for the Nike protection and the Pepsi court for arbitration. "

You are still not understanding the system. The customer doesn't get to choose the court system--he can't, because a dispute involves (at least) two people, and there is no reason why they would happen to have chosen the same court.

When you choose the Nike rights enforcement agency, part of the deal is that any disputes you have with customers of the Reebok agency will go to the Pepsi Court. On the other hand, a dispute with a customer of some other agency might go to to the coke court. Each pair of agencies has agreed, in advance, on what court will settle disputes between their customers.

I explain this in some detail in a book you have, and am not inclined to try to redo the whole explanation in comments here.

Izgad said...

I hope you forgive me, but this is like jumping on someone for saying that American citizens vote for their president when anyone with a grade school knowledge of American government (or who went through the election of 2000) knows that you do not vote for the president, you vote for the party and their list of electors and the electors vote for president. People under your system may not be able to directly choose what courts they use, but they have some say in the matter, at least indirectly, through the protection agency I avail myself to. Similarly, in the United States, I do have a part in choosing the president even if you also and millions of other Americans can outweigh my vote. The fact that, under your system, what court you use, is heavily tied to your protection agency (they are the ones negotiating with the other protection agencies) also means that, in a sense, we are dealing with one system, justifying my original statement.

All of this, though, is besides the main point that I am trying to argue, mainly that compared to government, your protection agency system is ill equipped to handle people who go vendetta and the protection agencies that choose to support them (particularly as these can be anything from the gang around my corner upwards). To give another example, I assume you have played Risk before with a large group. There is a rational side, with everyone stacking out the territory they can and moving against their most obvious threats. What no one can predict is that one player who decides that he no longer cares if he wins and just decides to go all out against someone else. Such a player may bring himself down but he can usually bring down his target as well even the strongest player in the game.

I think it says something that you are not willing to face off against this question.

Let me also second Simon's question about Nozick. Your protection agencies would have a strong interest in behaving like governments. It is to their advantage if they can control a given territory so they could more effectively protect their customers, pushing out the competition and forcing everyone in the area to choose them. They would want to bring all services under one giant corporation, other protection agencies as well as the courts. This would lead to major “corporate” mergers. Finally, considering that your protection agencies are the ones with the “guns,” what is to stop them from behaving with people and with other protection agencies like governments, even liberal ones, do now.

Thank you once again for spending the time writing in here.

David Friedman said...

"I think it says something that you are not willing to face off against this question."

There isn't a whole lot of point to arguing about how my system would work if you don't understand what the system is that I am proposing. And rewriting an explanation every time I have a conversation on the subject with a new person isn't a very efficient policy, given the existence of the printing press, not to mention the web.

You can find a more detailed discussion of some elements of the system in the chapter "Anarchy and Efficient Law" (From a book edited by other people) on my web site:


Which do you think is easier to deal with? Someone who murders secretly, or a rogue rights enforcement agency which openly defies all the agencies providing protection to everyone but its clients, by following a policy that drastically reduces the value of the service they are selling? The former is your vendetta killer in our system, the latter what you think he will use in mine.

You might also want to look at my reply to Tyler Cowen's argument that my system would end up as a monopoly:


David Friedman said...

On the subject (later in your article) of the innate authority of government, you might want to look at (if you haven't) Niven and Pournelle's _Oath of Fealty_. One of its themes, as I read it, is that an organization that provides the fundamental governmental functions, even if nominally private, will become the focus of the emotions we usually associate with government.

Izgad said...

Dr. Friedman

I could only wish that your system did work. I am not trying to fight you; please convince me that you are right and Nozick, Posner and Cowen are wrong. I would be free from the intellectual dilemma of my devil’s bargain with government. I have honestly tried to understand what you are saying about the relationship between your protection agencies and court systems. I do not even understand what your objection is to my interpretation. I am not saying that your protection agencies and courts are the same thing, just that there is a relationship. I will gladly leave things in terms of your own words: “Law enforcement is produced by enforcement agencies and sold directly to their customers. Law is produced by arbitration agencies and sold to the enforcement agencies, who resell it to their customers as one characteristic of the bundle of services they provide.”

Back to the issue of loyalty, if I understand you correctly (a big if I admit) you would rely on the fact that customers have signed over arbitration agreements through their protection agencies and this will keep them from going vendetta. You assume that you can make it in the rational self-interest of everyone to play by the rules and not overturn the apple cart. What this still does not take into account is the loyalty factor. I, along with millions of other Americans, grew up saying the pledge of allegiance to the flag of the United States of America, not to Nike. Most of us would not think twice of changing from Nike to Reebok shoes; we would think it a matter of some importance if we were to become Canadians or Mexicans.
You want to turn government into just another commodity. As I see it, government works precisely because it is not just another commodity. The American soldiers who stormed the beaches of Normandy and Iwo Jima did not do it simply as a “job.” Millions of young Americans in uniform made their peace with the fact that there was a good chance they would not make it to sunset in the belief that by doing so this larger entity, “the United States,” might live. These were people not thinking in terms of their rational self interest.

Izgad said...

Jefferson made a mistake by suggesting that the Constitution should be scraped every few decades. The system works precisely because it cannot be changed on a whim. One of the great things about our Constitution is that it provides a balance between change and “absolute” authority. I am restrained from waging war against Barack Obama because I have a Constitution which cannot be changed at my whim like a pair of sneakers, that I believe in above and beyond my disagreements with him. This Constitution tells me that Obama is my president. I am released from any absolute fealty to Obama and can vote him out on a whim come 2012 because I support the authority of the Constitution as something that cannot be changed on a whim. This also take the Damocles Sword away from Obama, allowing him to assume that I am not trying to kill him and, and thus he has no reason to send the secret service to kill me in the night. Thus we can have a country that does not resemble Latin America or the late Roman Empire.

“Which do you think is easier to deal with? Someone who murders secretly or a rogue rights enforcement agency which openly defies all the agencies providing protection to everyone but its clients, by following a policy that drastically reduces the value of the service they are selling? The former is your vendetta killer in our system, the latter what you think he will use in mine.”

Obviously it is easier to deal with open opponents so let us keep a balance. Either open vendettas in our system (think Cardinal Richelieu getting in the way of the three musketeers and their dueling) against open vendettas in your system or secret vendettas in our system against secret vendettas in yours. There are very few people crazy enough to try openly defying the Federal government; hence most crime is done in secret. Under your system, people are likely to at least try to openly defy the system.

I’ll put Oath of Fealty on my reading list.

David Friedman said...

"if I understand you correctly (a big if I admit) you would rely on the fact that customers have signed over arbitration agreements through their protection agencies and this will keep them from going vendetta. "

It isn't their agreement that keeps them from "going vendetta," it's the same thing that keeps people in our society from doing so--the fact that if they kill someone they are quite likely to end up being executed or imprisoned for doing so. Since I expect private firms selling people protection of their rights to do a better job of it than a government monopoly, I expect that killing someone you are angry at will be a riskier gamble in that society than in the present one.

The emotions associated with loyalty, nationalism, and the like are very much a double edged sword. They may be useful when defending against an aggressor. But they also make it much easier for governments to get away with mistreating their subjects--or, for that matter, to fight aggressive wars.

And I think there's a good deal of evidence that what makes soldiers willing to risk their lives in war is less loyalty to their government than loyalty to their comrades--the small number of fellow soldiers they are immediately associating with. Lots of things other than rational self interest narrowly affect human behavior--but I don't they require governments to do so.

Izgad said...

Could you take me through the practical in and outs of doing an investigation under your system? In our system we have extradition laws, but handling an international investigation is significantly more complex than regular investigations. Under your system we would expect investigations to regularly take on an extreme international character. A Nike man is murdered, the Nike police want to investigate, but each person they talk to potentially means another security agency to negotiate with. Keep in mind that Reebok has no motive to be helpful since it is in their interest for Nike to fail and therefore lose business. And this is all even before anyone gets charged with a crime. Don’t tell me that the agencies are going to work things out beforehand; just look the FBI and CIA working out their respective turfs. Do prosecutors and defense lawyers work together for the cause of “justice?” There is always going to be something unforeseen which will threaten the entire agreement. It is within this gap, where justice gets bogged down by the legal system, that people are going to turn to alternatives, particularly when there is no overall authority. Can your legal balance having an effective legal system that puts criminals away without turning into vendetta justice.
I agree that nationalism is a double edged sword that has to be handled with care. I think the United States does a pretty good at handling it. The issue of who is willing to put their lives on the line is relevant even outside of war in how we negotiate. This is one of the problems that western countries get into when negotiating with entities from the Islamic world. The Islamic world clearly does not lack people willing to turn violent; this puts us at a disadvantage when negotiating. Where are there more conversations per capita about “understanding the other side and their frustrations,” Teheran and Gaza City or Tel Aviv and New York? This is classic blackmailer’s paradox. People in Teheran can act in confidence that their actions will not likely lead to terrorist attacks by people in the European Union so they have no reason to care what people in the European Union think. Now this is already dealing with post nationalist entities like the EU. What cause would they have to fear from your security agencies? The one part of your book that you seem to squirm in defense of your security agencies is when you talk about “national defense.” So take me through your security agencies negotiating with Iran to get them to give up the bomb. Where are the hordes of young men and women ready to give their lives to invade Iran and seize their WMDs in defense of Nike and Reebok?

What is going to hold back the soldiers of Nike and Reebok loyal to each other from doing a late Roman Empire?