[Eran]

According to David Friedman, the rich will be willing to pay for a law that favours them. The poor will agree, because they prefer being paid. In other words, law is still achieved based on mutual agreement.

For example, imagine a rich neighbourhood in which local law tends to be biased against visitors (including temporary workers) and in favour of local residents.

In order to attract domestic help, the residents would have to pay higher salaries than they otherwise would, to compensate for the unfavourable laws. Only those domestic workers who prefer the extra pay for the reduction in legal protections will come and work there.

As long as it is done on a consensual basis, what's wrong with that?

Contrast that with our own society. Do you have any doubt that in practice, the law favours the rich over the poor? One often-cited example is the difference in criminal penalties between crack and power cocaine. More generally, wealthy people are more likely to have political influence, which distorts the law in their favour.

[eugenekop]

What you mentioned is not what I meant. Today 1% of the richest people in the United States own about 1/3 of the money in the country. Now I assume that in anarchy courts and protection firms would receive 1/3 of their income from this 1%. Now it does seem likely that the courts and protection firms will try to appease the rich more than the poor. Therefore you could expect that in a conflict between a poor and a rich person the court would more likely favor the rich, and the police firm will have more motivation to persecute the rich rather than the poor.

[eugenekop]

To quote David Friedman:

At this point in the argument, the question of poor people is often raised. Since dollars vote, won't the poor lose out? Yes and no. The more money you are willing to spend for protection, the better quality you can get and the better you will be able to get the details of law the way you want them.

Through the bargaining process explained by Friedman, in which two protective agencies decide which court to use in conflicts arising between their respective customers, the rich definitely do get better laws than the poor. Since violence is rarely in the interest of the protective agencies, it is highly likely that they will use the bargaining process that Friedman described. Now I don't see how laws that benefit the rich more than the poor are good for society in general.

[eugenekop]

Now I'm not talking about a specific rich person bribing a specific judge. This can happen in every system. I am talking about a systematic preference of wealthier clients. As David Friedman said a very likely bargaining process will occur between protective companies, in which, as he admits himself, the rich people will have more bargaining power.

Let's say a protective company A has a million middle class clients who pay a fee of 100$ a year. Now protective company B has 1000 clients who are owners of oil companies, these clients pay 100,000$ a year. Now company A and company B have the same revenues. Whenever a customer of company A and company B have a conflict, these companies will have to reach a compromise. Both companies will have an equal bargaining power.

Now let's say a conflict was that a particular oil magnate wanted to expand his factory, but the house of the customer of company A was in the way. Now, through the bargaining process, a resolution that is pretty likely to be reached, is that the owner of the house will have to leave his house, but will be compensated by the oil magnate.

Now this example clearly shows that the libertarian principle of non aggression doesn't hold, since the house owner did not voluntarily leave his house, he was forced to do so because company B had a disproportionate fire power. They didn't physically use this fire power, but they threatened to use it if their share in the bargaining process would not be 50%

[Eran]

We are confusing Friedmanite and Rothbardian visions of a free society.

Friedman believes that a free society will work better than one with government. He makes no assumptions with respect to the legal standards of such a society - other than that they will emerge through free negotiation.

Rothbard, on the other hand, presupposes libertarian principles, and goes on to examine their implications on the possible legal and other structures within society.

In a Friedmanite world, there are much looser constraints on the range of possible outcomes. Consequently, it is easy to imagine scenarios in which the results are unpalatable. All Friedman is arguing, I think, is that given a range of attitudes in society, the result would be better without government. For example, can you imagine how much worse the lot of the client of company A be if, instead of a decision by a court he (indirectly) agreed to, he would have been victim to an arbitrary eminent domain decision by a public official on the pay of the oil magnate?

As for your example, I am surprised. Since when is there correlation between overall revenue and "bargaining position"? Haven't we worked hard to demonstrate the fallacy of the superior bargaining position of employers? Selecting a court in an Anarchy is not a wrestling match in which the wealthier win. Rather, it MUST be done by mutual agreement. If not losing your house arbitrarily is important, you wouldn't give your business to a company that would negotiate your property rights away. Friedman's point is that people may agree to give up certain legal rights, but only in exchange for something they value more.

Add that to your scenario, and you will see that the lot of the homeowner is actually improved. After all, he got something better for his agreement to compromise his property rights.

In a Rothbardian world, of course, law is subject to strict constraints. It must comply with the libertarian non-aggression principle. That still leaves some room for variety, but the wriggle room is much more limited. In particular, you could never be forced out of your property.



To go back to your earlier post, the richest 1% of American own 1/3 of the property (not money). However, they do not account for 1/3 of the expenses in any particular category, such as legal services. Protection firms will not generally try to appease the rich more than the poor. Rather, they will try to appease their own customers (for otherwise they will lose them). If you are a poor person, you will only subscribe to a protection agency known for protecting the rights of people like you.

To be sure, richer customers will get superior service (better protection, more frequent patrols, the best PIs to help identify aggressors, etc.
But then rich people get superior products in every way. That's why it pays to be rich.

Courts, on the other hand, will not have an incentive to appease the rich, because such courts will not be chosen by firms representing the poor. Courts, you must keep in mind, are chosen by mutual consent, not by whomever has more money.

Now I don't see how laws that benefit the rich more than the poor are good for society in general.

Because, as I mentioned above, the poor (or their representatives) will only agree to such laws if they get in return something they value even more. That's where my example comes in - you might agree to work in a neighbourhood where the legal procedures are biased in favour of residents if you are paid enough.

Since such choice of laws will only be made by mutual consent, and thus benefit (at least ex-ante) both parties, it will, by extension, benefit society as a whole.

[eugenekop]

The bargaining process is irrelevant of revenues when there are alternatives. Yet in the process Friedman describes there are no alternatives except violence, and violence is not an alternative at all.

I quote Friedman:

Each agency can threaten to refuse to agree to any arbitrator, subjecting both to the costs of occasional violence, or at least ad hoc negotiation to avoid violence. Each knows that the other would prefer even a rather unfavorable set of legal rules to no agreement at all

This bargaining process is meaningless without the threat of violence. The problem is that the rich have in general more military power, so their threat of violence is a more serious threat. So yes, at least according to Friedman the rich will get the upper hand. He even admits this in his book.

At this point in the argument, the question of poor people is often raised. Since dollars vote, won't the poor lose out? Yes and no. The more money you are willing to spend for protection, the better quality you can get and the better you will be able to get the details of law the way you want them.

If not losing your house arbitrarily is important, you wouldn't give your business to a company that would negotiate your property rights away.

But there are no alternatives! The rich have a superior firepower, it doesn't matter which company you choose. Every police company will still cater more to its rich customers, and in every conflict between that company and a company with more rich customers, the second company will get the upper hand in negotiations.

In a Rothbardian world, of course, law is subject to strict constraints. It must comply with the libertarian non-aggression principle.

I wouldn't want to live in Friedman's world. Rothbardian world is another thing altogether, I just home anarcho-capitalism won't lead to a Friedman's world.

To be sure, richer customers will get superior service (better protection, more frequent patrols, the best PIs to help identify aggressors, etc.

I have no problem with that. My problem is with the implication of Friedman's bargaining process, in which I quote:

and the better you will be able to get the details of law the way you want them.

. Note that unlike what you said, this is not a voluntary agreement, this is a FORCED agreement under the threat of violence.

[lucky]

states can externalize their costs to the entire population, but private companies will simply lose all customers and go bankrupt

So, eugenekop, I don't understand this distinction between states and "private security companies". What is the difference? Is it size? Why can't those "private companies" tax people while Israel can?

What if two security firms started to battle each other? But, why would they? [...] Why should private security companies fight each other?

Why don't you switch away from the services of the state of Israel and sign up for the services of Blackwater, stop paying taxes to Israel (if you are working), etc? After all, they wouldn't fight your security company, would they?

In short, I don't understand your "road to anarchy". What's missing? You're already free to stop paying any taxes or whatever and try to defend from the government tax authorities with the help of Blackwater, if that's what you want to do. Or try to set up your own "private security company" and then go and work things out with the state of Israel, trying to convince them that it's not in their interest to tax you. It's already your individual choice, I don't see what exactly you want to change and how.

All in favor say "aye"!

So you want to create a democratic institution tasked with implementing anarchy?

[eugenekop]

Security companies can't tax people, they are a business like any business. You don't expect the supermarket to tax you, right?
They are not states either. They are juts security companies. You don't have to hire them either. However I expect that virtually everyone will hire a security company. The cooperation between security companies I assume will be similar to the cooperation between states.

Why don't you switch away from the services of the state of Israel and sign up for the services of Blackwater, stop paying taxes to Israel (if you are working), etc? After all, they wouldn't fight your security company, would they?

I can't do anything like that, because the vast majority of believe this is unacceptable. They just won't let me. However when individual secession would be considered an acceptable and moral alternative, there would be no problem.

[Eran]

eugenekop,
I both understand and share your reservation regarding Friedman's description. I think Friedman is making a significant mistake of underestimating the significance of societal norms. A just Anarchy (worthy of the name Anarcho-Capitalist, as opposed to Anarcho-exploitative) is one in which the basic principles of justice - self-ownership and respect for private property - are broadly accepted.

If they are, a security or insurance company which tries to take advantage of its superior wealth will meet with the resistance of the entire society, not just the one other company with which it negotiates.

This is comparable to the international arena today. The United States might be much stronger than Canada, and France might be much stronger than Belgium, but in neither case can the stronger country expect to use its military force to take over territory of the weaker country - not without attracting the rage of the entire international community.

Another point to keep in mind though is that companies serving the wealthy are not typically wealthier than companies serving the masses. Wal-mart is larger than any chain of high-end boutiques. Toyota is larger than Ferrari. McDonald's is larger than any chain of fine-dining establishments.

Finally, I would expect society to evolve a separation between insurance, arbitration and security companies, along the lines of the separation of powers in modern democracies. Beyond that obviously being a good idea, it helps protect everybody involved from the appearance and the potential legal exposure to claims of wrong-doing.

Recall that unlike police today, security companies (both as corporations and their individual employees) do not enjoy any special immunity. If an employee of a security company is found to have applied force against an innocent person, he can be sued just like any criminal. Now it is likely that the security company will indemnify its employees, but that will still make it financially liable to any damages.

With that in mind, security companies will need to carry insurance themselves. Such insurance policy will be very expensive unless certain precautions are taken. One being that force is only applied pursuant a written ruling by a credible court.

[eugenekop]

Then we are in agreement.

[eugenekop]

A good read about private law: http://www.mises.org/journals/jls/9_2/9_2_2.pdf