When you say the words “stateless society,” most people consider them an oxymoron. “A society without a state?! Isn’t the state the very thing that makes society possible?!” Many of them will ask in disbelief, and they have reason to be skeptical. The state, after all, currently provides certain goods and services, the most basic of them
being protection and dispute resolution, necessary (or at least highly desirable) for a functioning society. When one advocates a stateless society, you inevitably wind up hearing objections on these grounds. Some say that an advocate places way too much faith in the goodness of man. The fact that it is men who are in charge of the state, who can, by their logic be just as easily corrupted, or just as evil, and what’s more have a monopoly on aggressive action never seems to enter their minds. Nonetheless, the advocate of the stateless society must in the eyes of skeptics, demonstrate the validity of the idea, and go through the difficulty of the inertia that the state has in people’s minds (it is an institution thousands of years old, after all). In this paper I will argue that the state is not necessary for a functioning and flourishing human society, and that what’s more, certain services currently being provided by the state are sub-optimally provided.
Firstly, I contend that problems in human society can all be solved by the market. What I mean by the market is not strictly a private entity or business selling a good or service for a profit, but rather the free interaction of people.
A market is after all, a matrix of people demanding something, and then being supplied in that demand. Society itself could then be seen as an outgrowth of the market. People live together in a society for their mutual benefit through their free interaction with one another.
There are problems in society, (problems in interaction) obviously, and David Gauthier, in his treatise Morals By Agreement outlines a few of these. He contends in chapter four that there are certain necessities for markets to operate that cannot themselves be provided by markets, and that certain outcomes need correction via law.
But is law really outside of the market? Remember, markets are the matrix of free human interaction. Obviously, people have a preference for rules of some kind to safeguard their own interests (whether they be short term or long term). In this sense does law precede markets, or do we have a chicken and egg scenario? Are laws and rules the outcome of markets or are markets the outcome of law and rules? In my opinion, the two are very much interlinked, to the extent that I would say they are one in the same, all operating under the aegis of human action.
Nonetheless, Gauthier is certainly valid in his concerns. It is in the interest of all parties to have modes of conduct (what he calls moral constraints). To Gauthier, moral constraints are those that “replace the utility-maximizing response, with the optimizing response,” (Gauthier, 82) which, in somewhat of an irony, winds up maximizing utility, even if it is not at first obvious. It is in effect, your interest to sacrifice your immediate utility-maximizing interest for a longer term Pareto optimal interest that winds up maximizing your utility.
It sounds circular, but here Gauthier is completely correct. While I would hesitate to call it morality, as stated earlier, there are certain common rules that are necessary to satisfy our preferences of a cohesive society, even if they at first appear to dissatisfy our immediate utility. But this again begs the question of how do these rules come about, and what problems must be solved? There are many problems in society that require solving
via a corrective method, but who does the correcting, and why? How do the rules operate?
Consider an example that Gauthier outlines in chapter four: “Let us now suppose that a factory owner disposes of the wastes from her factory by having them discharged into the atmosphere, thus causing pollution. If anyone may use the air as she pleases, so that it is a free good, then there is no way to require the factory owner to compensate
others for the ill effects on them of her method of waste disposal. The effect of any person breathing the polluted air then is a negative externality.” (Gauthier, 88)
Gauthier goes on to explain externalities as arising as a result of free goods, whether positive or negative. The existence of externalities prevents the market from being a perfect one, and thus, prevents the market from being a morally free zone. To deal with this issue, there needs to be some type of moral constraint, that is to say, rules or correction via law.
To this, we can agree. There has never been, nor there will there ever be, a perfectly competitive market. The trick of the matter is to find out how to get closest to that point, in order to make a solution optimal. How would a stateless society deal with such a scenario?
First consider what the current arrangement (at least in people’s minds) of dealing with this is. The people affected by this externality would run to the state and complain, demanding that some action be taken against the factory owner. The affected parties would then have to hope that the state responds, and if it does, hope that it responds in a timely manner. Remember, as a monopoly, the state has less of an incentive to provide the affected with a good service (dispute resolution), and what’s worse, it gets funded a priori (you pay your taxes no matter what, if you don’t you go to jail, and if you resist going to jail you are shot), a further disincentive for the performance of a good service. The result is that the state often twiddles its thumbs while the polluter still roams free. Further, the assumption that the environment is a commons problem (which is why the state, supposedly the collective will of the people, takes command of the environment) leads to just this sort of tragedy of the commons scenario. What the state winds up doing is empowering polluters, whether passively in the form of ignoring the problem, or actively in the form of subsidizing the polluter (consider the vast subsidies that corporations that pollute the environment get from the state). But it goes even further than this. Oftentimes, the state will abuse its supposed duty to protect the environment and use this power not to punish polluters, but to expand its own. Consider a program known as Superfund. It originally started out as a program to clean up abandoned waste sights. However, Superfund quickly morphed into a program that imposed devastating cleanup costs on businesses the EPA determined had sent waste to a Superfund sight, and the accused must then prove otherwise. (Bovard,) In effect you are guilty until proven innocent. Programs such as these impose pollution costs onto parties that may not have ever engaged in the act of polluting. What does all of this add up to? A sub-optimal solution to dealing with resolving disputes over negative externalities such as pollution.
So what is the alternative? First we need to realize that the beauty of the stateless society is that there is no one be-all, end-all solution, unlike the monopoly of the state that leads to the problems I just outlined. The first thing that my model of a stateless society would do is realize that this externality is an act of aggression. This is not so much a commons problem against the environment, but rather an act of aggression against a matrix of individuals, who may enjoy a good environment, but above all, healthy air to breathe. In stateless societies in the past, such as Ireland, who’s legal system (known as Brehon Law) lasted 1,000 years, the affected parties might have acted in this manner: affected parties would consider the externality of Gauthier’s factory owner an act of aggression against their property (their part of the air over say, their homes). Our modern day members of stateless Ireland would submit a dispute to an arbiter of the common law known as a Brehon. Brehons were not judges the way that we consider state judges to be. My friend, Ryan Faulk, points out what the Brehon was in Irish society: “Brehons were not appointed; they didn't go to a university and graduate, Brehons simply emerged, and one could become known as a Brehon if he was known for having a thorough understanding of Brehon law and was known for issuing fair rulings as
a judge, and people were willing to pay for your arbitration.” (Faulk, 53)
Having submitted their dispute to an effective and reputable Brehon (who needs to issue fair rulings to stay in business), Gauthier’s factory owner would have two choices: show up for arbitration, or ignore it and continue polluting. Choices, however, have consequences. The plaintiffs would more than likely be members of a Tuath, the
basic community unit in stateless Ireland.
The Tuath was composed of an assembly of freemen and led by a king (not to be confused with Hobbes’ sovereign). He was a chief representative of the Tuath when dealing with other Tuaths, and a religious and military leader (though the latter was very rare). (Peden, 4) The king did not administer justice and was independent of the Brehon courts.
The king, nonetheless, had the responsibility of making sure that the Tuath represented his clients in terms of protection. If his Tuath failed, or in any way was corrupt (in this case, empowering the polluter), individuals could secede to another Tuath that would better represent their interests, or form their own, toppling the king. If the
factory owner continued to pollute, ignoring the Brehon’s rulings, his reputation would take an immediate nose-dive, and the Tuath would enforce the ruling through a system of sureties.
In stateless Ireland, people would agree to a surety, say, to prevent property damage. (Faulk, 53) This would usually consist of a fine of some sort, but this could not exceed what was known as an honor-price which was directly related to someone’s wealth (this meant that you couldn’t take advantage of a poor person by imposing an
insane fine).
Turning back to our factory owner, he would probably have to agree to a surety with the assembly of the Tuath (of which our plaintiffs are members) in order to operate his factory in the Tuath’s territory, or to sell his goods there. Absent such a surety (which would be in the long term interests of the king and assembly), the factory owner may
never have been able to operate his capital.
The factory owner, through this surety, would then (if he lost the suit, or if he ignored the Brehon) be considered a debtor, and, being most likely a rich businessman, have a high honor price to pay to those who were affected by his pollution. In effect, he’d be a debtor to his victims.
Absent all other options, the factory owner would be outlawed by the Tuath, and would be fair game to anyone who had ill intentions toward him, such as the armed men of the Tuath representing the plaintiffs (remember, the externality is aggression against the property of the plaintiffs).
In a modern day stateless society, consider the Tuath a township with an assembly or association, complete with agents of multiple protection agencies competing on the market for customers, and independent arbitration services to resolve disputes. Credit and crime ratings may also be used, that is, if the factory owner ignored arbitration or the ruling, his credit rating would go down and crime rating would go up- a further disincentive to do business with him. The only way to recover would be to pay the restitution to the plaintiffs affected by his pollution.
Here we see an alternative to the state that still fits David Gauthier’s idea of moral constraints. Furthermore, as these associations are all voluntary, and operating by a profit and loss system (even if it isn’t truly monetary, such as reputation or residents of the township), it optimizes the situation for all by not displacing costs onto third parties
(unlike with various state programs like Superfund outlined earlier), subsidizing polluters, having inevitable commons problems, and being slow to act (voluntary agencies need to settle disputes in as timely a manner as possible to satisfy their subscribers).
Here we saw that the parasite associated with the negative externality was dealt with in an example of a stateless legal order. What then, of free riders- those who benefit from a positive externality without paying the costs? David Gauthier outlined one such externality- a group of businessmen building a lighthouse that then can be used by those who have not paid any costs upfront for its construction. This results in a game of chicken- people maximizing their immediate utility by not paying the costs of construction, yet at the same time, expecting a lighthouse to be built. This, likewise, calls for some type of moral constraint- and we turn back to our structural analysis of the operation of a stateless version of those types of constraints. How would we deal with free riders operating on the positive externality of the Tuath (or in a modern day association, a defense agency operating in a township)?
We must remember first of all, that in a stateless society, there are no taxes. No one is forced to pay for a service that they do not want to use. Individuals could secede from a Tuath, for example, or a Claims Association in the Old West (before the US Government began to exercise real power) (Faulk, 61) when these protective agencies
were not fulfilling their needs or they simply did not want to be a part of them. The more conventional reader would ask: in a modern situation, how would free riders be dealt with who take advantage of a protective association’s services without paying costs? If this issue were not dealt with, may we get David Gauthier’s game of chicken?
One method to prevent such a scenario would be Robert P. Murphy’s idea of insurance and call options to spontaneously organize communal defense via market mechanisms. (Murphy, 4)
One such option he describes would be an insurance company or a competing network of insurers to provide defense. Suppose that bombers from England (the neighboring state that conquered stateless Ireland only after a very long, 500 year struggle) were swarming the skies over our modern Tuaths in Ireland. How would a stateless society mount a defense? Suppose there were insurance companies operating in the Tuath that sold policies to homeowners to protect the value of their homes. To prevent payout claims, the insurance agency would have to be quite good in specializing in shooting down enemy bombers. (Murphy, 4)
Another solution that he lays out is something known as a call option on real estate. If such an attack were inevitable, an entrepreneur may see a profit to be had, and can buy call options on the properties, which homeowners would have an incentive to sell. If the entrepreneur did nothing, his investment would collapse, if however, he defended against the attack, the property values would rise again after the danger ends, netting him a large gain. (Murphy, 6) It would be in the free rider’s interest to buy such services, or else the value of his home would plummet (especially if it got hit by a bomb).
I was somewhat skeptical of this, and Murphy admits on page seven of his small analysis that a more likely scenario would be signing a binding contract upon joining an association to pay for a part of its defense, going back to a Tuath-type model. I just wanted to point out that purely market solutions to such a problem are possible, and
they’re possible because there’s a large demand for defense, obviously!
The biggest reason why I believe that free riders leeching off of mutual associations such as a Tuath or Claims Association is minimal is because failure to pay means alienation. For example, a person without a Tuath in stateless Ireland was in effect an outlaw as described above. He forfeited all protection and took a large risk. This
would be a very strong disincentive to play the chicken game.
In addition, I believe that free riders would be alienated from the market. Their credit ratings would sink like a stone (if you’re unwilling to invest in your own protection, why should anyone loan you money?), and their crime ratings would skyrocket (such a person is an immense risk to do business with, as he has no court or the
like to peacefully resolve a dispute).
These two very strong negatives, and the demonstration that currently existing market operations (albeit operating in a new way) can work should overcome the free rider problem without much difficulty. But, we must take into account the fact that ultimately, protection is a choice. If competent parties feel good about being unprotected,
it is their choice (I assume most would form their own associations anyway). Forcing protection on people is the first step toward the complications of the state, which, for liberty advocates like me, is highly undesirable.
Gauthier also speaks of what he terms initial factor endowments. Simply put, Gauthier defines these as those things from which goods and services get converted from an initial situation, and the individual’s original situation in the market is the initial factor endowment. (Gauthier, 94) He goes on to say that the only way the outcome of market
operations can be justified are if they are originally fair.
I agree here as well, to a degree. Using words such as “fair” are problematic, due to the simple fact that they mean different things to different people. Unfortunately, I have not been able to read the entirety of Gauthier’s book to clarify what exact position he has on this. I defined what a free market is at the top of my paper. If the initial factor
endowments arise as a result of voluntary interactions in the marketplace, absent of force or fraud, I see them being fair. There may be conditions that appear unfair to the eye, such as ‘wage slavery’ or inequalities of wealth, but in a free market, these are not unfair. You work for what you get; the products of your labor are your own. The demand for
charity would help alleviate the latter, and worker-run coops would probably form too, to address the former, though I do not see these being widespread. If I’m wrong about that, it’s not a real problem. I still stand by my statement that while some find those two things undesirable, they are not unfair.
However, it is precisely the state that is responsible for most of the unfair initial factor endowments. This is done through forced barriers to entry. Barriers to entry are sets of circumstances that make it very difficult or even impossible for new firms to enter a market and compete with more established firms. Now to be fair, in a free market, there would be at least some barriers to entry, but these would be a result of superior goods or services that some firms produce, thus gaining popularity on the market. This is not unfair. As stated, the firms would have had to work and plan the structure of production correctly in order to be successful. The fruits of their labor are truly their own. However, the vast majority of barriers to entry are imposed on the market via the state, at the prodding of corporate lobbyists. (Johnson)
Consider, for example, the Consumer Product Safety Improvement Act of 2008. Even the casual reader will probably be familiar with the story leading up to it. In 2007, there was widespread media-induced hysteria over unsafe Chinese toys that were being recalled (no, I am not saying that the unsafe products should not have been recalled, just
that the attention was hyped!). Using this attention, large toy companies such as Mattel and Hasbro mobilized their lobbyists to get CPSIA passed. (Weisenthal) The law mandates that businesses (and a whole bunch of other outlets) that produce products marketed to children twelve and under have independent labs accredited by the state give them their seals of approval. This even if you’re person that likes to craft barrettes in your basement and donate them to your church’s holiday fair. (Rehyle)
What does this all mean? It means that established firms can pay for these regulations, and Mom & Pop shops get run out of business. They simply cannot afford to pay the expenses before their products even get to market, whereas the established firms can, even if it is at a higher cost to them then to the smaller businesses. Regulations such as these disproportionately hurt small firms. (Faulk, 22)
Corporations also get a hefty amount of subsidies from the state. These subsidies are (obviously) paid for in tax dollars- the same tax dollars that these Mom & Pop shops (and individuals that run them) are forced to pay. This results in less money for the up and coming entrepreneurs to operate their firms and even more money getting pushed upward toward their competitors.
It is state actions such as these that create the vast majority of unfair initial factor endowments. The modern marketplace is far from fair or competitive, rather, it is a heavily cartelized economy, and the coercive power of the state is responsible.
In a free market, businesses are regulated by motive to profit. It is because firms want to profit that they have an interest in selling safe products. Does this mean that we should simply take their word for it? Of course not. Obviously, there’s a demand for safe products (otherwise people wouldn’t project this demand onto the state). Therefore, I have reason to believe savvy entrepreneurs will start their own regulating firms based on reputation rather than a state monopoly like the FDA. Consider Underwriter’s Laboratories for example, an independent regulator that operates on the fees of companies sending their products to be tested, in order for them to appear safe. (Faulk, 38) I suspect that firms like these would expand in a stateless society, and may possibly be linked with one’s township association (our modern Tuath). That is, the township could approve of independent regulators to test products in order for them to be safe, if firms did not pass the test, they could not sell their products in that township. Oftentimes, a combination of whatever communitarian organization plus trusted private regulators would be enough to discourage people from buying products deemed unsafe even if they did get to market (thus, businesses have an incentive to make safe products). Is this the same as state laws like CSPIA? No! The lack of a monopolistic legal entity means it is virtually impossible for firms in a free market to impose such a blanket mandate onto everyone else. Any regulations that follow are about general safety issues, not about getting some firms coercive advantages. (Corporations as we know them today are likewise state-chartered entities given legal advantages.)
What does this all mean? Initial factor endowments would be as closely based on merit as possible. The only advantage firms would have on a free market would be those that have been earned based on the preferences of consumers.
As we have seen, there are many problems in human interaction that David Gauthier brings up, and we’ve seen various solutions to these problems, all based as closely on what people actually demand as possible. These are true moral constraints, ones which make interaction in society between people as close to Pareto-Optimal as
possible. The largest problem with the state is its monopolistic legal framework. It is based not on true interaction, but on whoever can lobby it to get some advantage that in turn gets imposed on everyone else. Think about it, the current legal system of states elevates a tiny minority of people into positions of immense power who can then impose their subjective definition of ‘law’ onto millions. How can this small an amount of people know how to deal with the issues of many millions (in each respective country)? It is truly then, the state that is Hobbes’ War of All Against All. It is fundamentally antisocial in that people war with each other for its favor. It is time that humanity looked to something new. Stateless societies throughout history, large and small, have both worked well and flourished. The idea may be radical, but radical ideas have always been the source of revolution. Without radicalism, society is stagnant. Indeed, statelessness is truly ‘the change we can believe in.’
Sources Cited:
Gauthier, David. Morals By Agreement. Oxford: Oxford University Press. 1986. Print.
Bovard, James. “Robbery with an Environmental Badge.” Freedom Daily. March 1999. Retrieved 11/29/09.
http://www.fff.org/freedom/0399d.aspFaulk, Ryan. “For an Emergent Governance.” (No date given.) Retrieved 11/30/09.
http://www.lulu.com/items/volume_66/7855000/7855614/1/source/ForAnE...Peden, Joseph, R. “Stateless Societies: Ancient Ireland.” The Libertarian Forum. April 1971. Retrieved 11/30/09.
http://mises.org/journals/lf/1971/1971_04.pdfMurphy, Robert P. “Private Solutions to Positive Externalities: Military Expenditures, Insurance, and Call Options.” Mises Institute. May 2004. Retrieved 12/05/09.
http://mises.org/journals/scholar/Murphy6.pdfWeisenthal, Joe. “The New York Times Goes to Bat for Big Toymakers.” The Business Insider. February 19th, 2009. Retrieved 12/05/09.
http://www.businessinsider.com/the-new-york-times-goes-to-bat-for-b...Paul M. Johnson. “A Glossary of Political Economy Terms.” Auburn University. (No date given.) Retrieved 12/05/09.
http://www.auburn.edu/~johnspm/gloss/barriers_to_entryReyhle, Nicole. “Understanding CPSIA and How it Will Effect Your Business.” Retail Minded. April 7th, 2009. Retrieved 12/05/09.
http://retailminded.com/blog/2009/04/understanding-cspia-and-how-it...
