Where food production is monopolized by the government, it can be hard for the people to imagine how it could ever be any other way. They fear they may starve without government to plan and direct food production. They cannot imagine how a free market in food production could possibly work, let alone how much better off they would be with that system. They are too accustomed to having food provided for them by the government.
We are accustomed to a society where the arbitration and law industry – the courts system – is monopolised by the government. We fear chaos and disorder without government to plan and direct law. We find it hard to imagine how a free market in law could possibly work. In this video I will broadly describe how law and security could be provided by competing voluntary institutions.
This is Alice. Alice lives in a free society, where security and law are provided not by a government, but by competing firms. Like most people, Alice demands to feel secure in her person and property. She does not want anyone to aggress against her. Alice also demands that, if someone does commit aggression against her, she will be able to bring the aggressor to justice, and receive compensation.
A number of competing firms exist to satisfy these consumer demands. The firm Alice subscribes to, Dawn Defense, has a good reputation for preventing crime, and for obtaining justice when crimes do take place.
Alice pays her security bill monthly, the same way she pays for her electricity and telephone services. She is on a standard package, which suits her budget and her lifestyle choices. She has chosen an insurance option, so that if someone steals from her, she is guaranteed quick compensation.
One evening while walking home, Alice becomes a victim of aggression, when she is mugged at gunpoint. At the earliest opportunity, Alice calls the emergency service number and is put through to Dawn Defense emergency response center. They quickly dispatch agents to her location.
Unfortunately, by the time their agents arrive on the scene, the mugger is long gone. The agents examine the crime scene, and gather witness statements and any evidence that might help them identify and locate the mugger.
As specified in their contract, Dawn Defense pays Alice compensation for her losses: enough to cover the possessions taken from her, and a good deal more for her time, trouble and distress. Alice’s part in this story is now over. Dawn Defense, however, will want to bring the mugger to justice. They will want to recover their costs, and they have promised their customers that muggers will not get off lightly.
After doing some detective work, Dawn Defense identifies, with reasonable confidence, Bob as the aggressor. They locate him and issue him with a written demand: that he pays them $10,000 as a punishment for the crime he committed against Alice. Bob has two choices. He could admit his guilt and pay up so that Dawn Defense leaves him alone. Or he could refuse to pay.
Bob refuses to pay, claiming he is innocent. Dawn Defense will not want to have a reputation for harassing or using force against innocent people, so it will listen to his case.
After hearing his case, if they remain convinced of his guilt, they will insist on payment, threatening to use force against him if necessary. Bob now faces the same two choices. If he still refuses to pay, Dawn Defense will send armed men round to his house to enforce their punishment.
What if Bob has his own security? After receiving the first letter from Dawn Defense, Bob calls Tanna Justice, the security agency he subscribes to. He tells them he is completely innocent, and that he is being unjustly threatened with force by Dawn Defense. Tanna Justice calls Dawn Defense immediately to discuss the accusation of mugging. They insist on seeing some evidence. They conduct their own investigation.
After their investigation, they might agree with Dawn Defense that Bob is guilty. In this case, they order Bob to accept his punishment, and will not protect him from any force that Dawn Defense uses against him. Or they might reach the opposite conclusion: that Bob is innocent. In this case, they’ll stand by Bob, and consider the threats made by Dawn Defense to be aggressive. The two firms just cannot agree about what events took place.
So what happens now? Do they fight it out? Such a war would be costly for both sides and they would suffer reputational damage. Security firms that resort to war soon find themselves bankrupt, as consumers switch to their cheaper and more peaceful competitors. Dawn Defense and Tanna Justice have every incentive to find some peaceful way to resolve the conflict.
Since they cannot reach agreement about what happened, the two firms agree to pay for an independent arbitrator to look at the case, and agree to be bound by that arbitrator’s decision. Since both firms are large and well-established, they have a prior agreement about which firm to go in such cases.
Their chosen arbitrator – Benson Enterprises – is a firm that specializes in resolving such disagreements between security firms. Bensons examine the evidence presented by the two sides, and listen to their arguments. After careful consideration, they conclude that Bob is guilty of mugging Alice. As agreed, both sides accept the decision. Tanna Justice stand down from defending Bob.
Now with no-one to protect him, Bob has no other choice but to accept his punishment. Benson Enterprises is a highly respected firm, and no other security firm will agree to defend him now against the force threatened by Dawn Defense, unless new evidence emerges or the reputation of Bensons is brought into question.
If he is unable to pay the $10,000 punishment because he is poor, Dawn Defense will accept payment over a longer term. They may insist on taking a portion of his wages until his debt, plus interest, is paid, and may contract with his employer to guarantee they are paid. If Bob is unemployed, they may insist on taking a more active role in his life. They may force him to work at a place of their choosing.
If Bob is dangerous, or cannot be trusted to make the payments, they may restrict his movements to a certain region, or as a last resort, to a certain building – a secure workhouse where criminals are held while they pay off their debts to their victims and serve their punishment.
Bob’s crime against Alice will be noted by the various competing criminal records bureaus, and his identity will be made public in databases and in the media.
Security agencies now consider Bob a higher risk for committing further crimes, and may take steps to protect their customers from him. Bob may find it difficult to find a security firm that will accept him as a customer, and if he does he will have to pay higher premiums for it. Because of his record, other business owners may refuse to employ or trade with him, and landowners may not permit him to enter their land.
The performance of the security agencies is noted by various competing watchdog organizations that provide consumers with information about the quality of security and arbitration firms. The details of the case will be made available to auditors who check that the practices of the security and law firms adhere to quality standards.
We cannot know in advance how the security and arbitration firms will be structured. We cannot know how many firms will operate in a given area, or how large an area the typical firm will cover. For simplicity in this video, the two security firms Dawn Defense and Tanna Justice performed a number of distinct functions themselves. Free market competition is needed in order to know whether all these functions will be provided ‘in-house’, or whether some would be ‘outsourced’ or provided by distinct firms.
All these related industries keep the firms satisfying consumer demands for security and law true to their function of protecting individuals against aggression, serving justice, and maintaining order in society.
In my next video, I will consider disagreements between security firms about what punishments are to be used, and disagreements about what constitutes a crime. I will go on to consider what laws and punishments we can expect to be produced by competing free market law firms.
