ayrnieu

A World Without Theft

-- go back to the Garden of Eden. (laughter) (applause)

They didn't have microphones then at that time, but what they did have was a superabundance of goods, and if you have a superabundance of goods then it is impossible that human beings have any conflicts with each other, because what should they fight about, if there exists a superabundance of things.

Except of course, in two regards even in the Garden of Eden problems would exist, namely with regard to our own physical bodies. That is still scarce -- we have only one of them, not millions. And of course the standing room on which our physical bodies rest.

And insofar as scarcity exists, even in the Garden of Eden in these two regards, conflicts are possible. And because conflicts are possible, it would be even in the Garden of Eden necessary to have certain rules in order to avoid these conflicts. And the rules would have to be rules assigning rights of exclusive control, rights of ownership with regard to scarce resources, namely our bodies.

And what the rules would be most likely adopted in the Garden of Eden would be: every person is the owner of his own physical body and can do with it whatever he wants with his own physical body and anybody else who wants to do something to me or I want to do something to somebody else, he would need the permission of the owner.

And the second rule that we would need is: I can move around wherever I want, but I cannot try to occupy a space that has already been occupied by someone else.

And outside of the Garden of Eden, where we have all-around scarcity, and all sorts of conflicts can arise, we would also need rules that avoid conflicts in this situation. And again, without going into very detailed explanation what sort of rules would be most likely adopted outside of the Garden of Eden, there would be again: every person owns his own physical body, we acquire the right of exclusive control over scarce resources that were previously unowned, by being the first one to put scarce resources to some use. The third rule would be: whoever uses his physical body and some originally apropriated, previously unowned goods and further produces something with the help of his body and so forth, would be the owner of whatever he has produced. And the final rule would be the rule that exclusive rights of control over scarce resources can also be acquired by voluntarily transferring ownership from the previous owner to a later owner.

These elementary rules are very old rules, through all of mankind basically these rules have been recognized. They make intuitive sense. We can even see them adhered to in the animal kingdom to a certain extent. And we recognize that even small children for instance recognize the rule that he who uses something first becomes the owner of it, because whenever kids get into a fight the first thing that they point out is that I played with the toy first, and until I drop it you had better leave me alone.

It should also be clear that the alternative to these rules are rather absurd. The first alternative to self-ownership would be slavery, which is morally objectionable as well as economically inefficient. If the second person coming along would become the owner of something, then the second person would become the first because the first one wouldn't do it. And that has absurd consequences. If the first owner would have to share ownership with other people, then again conflicts would not be avoided and in addition this would be economically unproductive, because the incentive to be the first would be reduced and so forth. The incentive to be the producer would be reduced if the producer would have to share his property with those people who have not produced it, and so forth.

Now the next problem that then arises is: even if we recognize the truth, the morality, the economic efficiency of these sorts of principles, what do we do about those people who do not respect these rules? And of course there are always people who break these rules. That is, we need some institution that enforces and threatens with punishment breakers of rules.

And the traditional answer to the question who is in charge of enforcing these rules and threatening potential violators of these rules with punishment in case they do not adhere to these rules, the traditional answer is: this is the task of the state. This is the sole and only task of the state.

Now whether this answer is correct or not depends on what is the definition of the state. Now states are traditionally defined as being a territorial monopolist of ultimate decision-making or ultimate arbitration in cases of conflict. In every case of conflict, the ultimate judge who is right and who is wrong, is the state. And because the state is the monopolist of ultimate decision making, the state has then by implication also the right to say what the price for its arbitration is, and it can unilaterally impose what the price would be, that is to say: the state is also a territorial monopolist of taxation.

Now once we have this definition of the state in front of us, then it is not all that difficult to discover that there is something wrong with this answer to the question who should enforce the rules that I initially explained.

First of all we have a classical argument against any type of monopoly. And as I said, the state is a monpolist. He is the only one that can do such-and-such. The classical argument against monopolists is: whenever we do not have free entry into a specific line of production, in this case the production line of arbitration, of police protection and so forth. Whenever we have restrictions with regards to free entry, then producers are no longer forced to produce at the lowest possible cost. As long as free entry exists producers must produce at the lowest possible cost because otherwise they will invite competition against them.

And monopolists because of that tend to be, from the point of view of consumers, more pricey, and the quality of their product tends to be lower than it would be if competition existed in their area of production.

But when it comes to the state, matters are actually worse than in the case letsay of a milk monopoly, which would produce milk at above minimum cost, price would be higher quality of the milk would be lower. But in the case of government, the problem is that governments do not just produce maybe lousy goods. But they can actually produce bads.

Namely in the following sense: because governments are the ultimate arbitrator in any type of conflict, governments can also cause conflicts and then decide, when it comes to who is right and who is wrong in the case of conflicts, in their own favor. And given that they are human beings just like everyone else, and realize this possibility, of course they will cause conflicts and then decide the conflicts in their own favor and then on top of it they determine what the price of the victims of their misjustice have to pay for this misservice of causing conflicts, deciding them in their own favor, and what the price for this must be.

So this is the fundamental problem with having a state in charge of this particular task. And now this problem is even compounded if we have a democratic state in front of us. The classical liberals, who proposed the state as the solution to the problem of social conflicts, faced as their opponents typically monarchical governments, kings and queens. And they rejected the rule of kings and queens for the simple reason that they thought that they had privileges, that they were treated differently by the law than the rest of the people were. And they advocated, instead, that the state should be organized democratically, by making the point that if everyone can enter the state, not just some king or queen, then we have so to speak equality before the law.

However it turns out that this is of course a fundamental mistake to think that once you create open entry into every governmental position that you have equality before the law. What actually happens is that we substitute a democracy for monarchy, is we replace personal privileges -- privileges restricted to the king and queen and so forth -- with functional privileges, privileges that are given to public officials.

But in fact the distinction between 'higher law' and 'lower law' exists in a democracy just as much as it exists under monarchy. In the form of two different types of law: one that we call 'public law', that covers so to speak the actions of public officials, and 'private law' that covers the activities of private citizens.

As a private citizen, you may not steal. As a public official however, covered by public law, you can steal.

As a private citizen, you may not enslave somebody else. On the other hand, if you do the same as a public official, draft somebody into the army for instance, then that is perfectly alright.

If you steal from somebody and give it to somebody else, that is fence stolen goods, this is considered to be under private law a crime. If you do it as a public official it's called redistribution of income.

So under public law you can do certain things that under private law would be considered to be illegal. So the distinction between two types of law exists still exists under democracy just as much as it exists under monarchy.

In addition there are some more problems arising once we have a democracy. What you do is you exchange somebody, the king or queen who considers the country his own private property, with somebody, a democratically elected politician, who is the temporary caretaker of public property. And now ask yourself: will this make a difference in terms of the behavior of these two individuals? And the answer of course is it will make a fundamental difference.

If you consider yourself the owner of a country, you will as every private owner does, by and large be concerned about preserving or enhancing the value of the country. After all, you want to pass on something valuable to the next generation. You might even sell off some of this and are concerned about the price that you will get for whatever you sell off and so forth.

On the other hand, if you are just a temporary caretaker, and not the owner of it, then you will take the short-run perspective: I have to loot the country as fast as possible because I only have four years to do it (laughter) and no chance afterwards.

So you will be engaging in capital consumption, rather than in the preservation and the enhancement of the capital value embodied in the country.

In addition, it is frequently pointed out that but isn't it good that we have open entry into the position of governmental rulers under democracy whereas entry into governmental positions under monarchy is of course restricted by accident of birth.

Now, what is wrong with this argument is the fact that: yes, open entry is good as long as we are talking about the production of goods. But open entry is not good when it comes to the production of bads -- and I already explained that governments produce something bad.

We would not want to have open competition in who is the best killer; we would not want to have competition in who steals more effectively than other people do.

And when it comes to this we notice some very important difference. A king might be bad, that is true, as all governmental positions can be filled by bad people. But because he is a member of a family, other family members will have an interest in containing people who are bad because they might just lose the property of the family, might threaten the position of the dynasty, and bad kings are typically surrounded by members of his own family, by entourage, that controls him.

And if need be, they get killed, if they just go out of line.

And on the other hand a king can be conceivably a good and decent person, because it just an accident of birth that he comes into his position.

But now look at a democratic politician: a democratic politician can never be good. Because he has to just compete openly for this position, and in order to be elected to this he must be a very good and proficient liar, cheater, somebody who is 'good' in terms of qualities that we definitely do not want to have.

So we might have good kings; we will never have anybody of any decent moral values ever coming into the position of President or Prime Minister or whatever it is.

So now we come then to the question: what is the right answer to the question of how do we enforce the rules that I initially mentioned? Self-ownership, first-use-first-own principle, producer owns whatever he has produced, and the rule of you can acquire property through voluntary exchange.

And the correct answer is: the enforcement of these rules has to occur by individuals and agencies that are bound by the same rules as everybody else. That is, we need a society where the only type of law that is in existence is private law. No such institution that is covered by public law, which of course as I explained is a misnomer, it is not public law, it is just criminal activities masquerading as law.

Now this, if the enforcement of these rules also has to occur by individuals and agencies bound by the same rules, involves then two things.

One the one hand, unlimited rights to self-defense must be permitted. And the immediate implication of course of this is that private ownership of weapons and guns must be permitted in any free society. And despite everything that we always hear from governments in terms of contrary propaganda, there is an untuitively sensible rule that says: the more guns there are, the less crime will exist. And the wild west, contrary to what some movies insinuate, is a clear indication of the fact that this is indeed the case. If people own guns, private ownership of guns is unrestricted, then there will be less crime.

But in complex societies of course, we will not want to provide for our own security only by our own means. We do not make our own suits or shoes; we rely on the division of labor in this regard. And of course in every complex society we would want to rely on division of labor, on specialized agencies, and agents also when it comes to the protection of private property rights.

And a very important role, in a free society when it comes to the protection of these rules that I mentioned before, would be insurance agencies, and associated with insurance agencies, directly or indirectly: police, detective, and arbitration agencies.

Now what would be the result of this, and a very brief comparison between the state provision of security and the provision of security by freely-funded insurance operations. The first thing would be: there would be a drastic fall in the price that we have to pay for security. As I explained, the tendency under monopolist provision of security is the price of security always goes up, we have to pay more and more, and we get lower and lower quality of protection. Precisely the opposite would occur if there were competition in this area.

The second fundamental change that would occur with regard to how much security should be produced. Every resource that is expended on providing us with security can no longer be used to provide us with other things. Money spent on security can no longer be spent on vacations, on beer and wine and food and whatever it is. Normally people decide voluntarily, based on their own judgement how important security is to them as compared to other needs that they might have.

If you have government deciding for you how much security you need, they will of course decide: the more I can spend the better it is. That this involves a restriction of satisfaction of other needs is of no concern. That is, if we have competition in this area, there will be no overproduction of security.

The next point I want to emphasize is: would there be a large amount of money, resources, expended on victimless crimes, if we had competing insurance agencies wanting to protect us. As we all know, currently huge amounts of resources are expended on combatting victimless crimes, such as drug use, prostitution, gambling, whatever it is. But it should be perfectly clear that, as much as many people dislike these type of activities, since these activities are victimless crimes and we are not directly affected in our own property by the existence of these types of activities, very few people would be willing to spend huge amounts of money to be protected from something that they do not see as a threat.

Insurance agencies that would want to protect you against these sorts of things would obviously have to charge higher premiums than insurance companies that would abstain from protecting you against these things. And since most people are not affected by such things, insurance companies that would offer services such as this would likely go out of business very quickly. So victimless crimes would tend to be treated for what they are, namely as not a big deal at all, and likely no persecution of the perpetrators of victimless crimes would occur.

More important than this is the following: insurance companies would indemnify you in case they fail in the task that they have accepted in return for you paying a premium. Governments on the other hand, monopolists of course do not indemnify you if they fail. If somebody steals from you, robs you, mistreats you and so forth, the government will not come and say: look we failed in what we promised to do, and because we failed you we will offer you compensation of such-and-such an amount. I have at least never heard of any government anywhere doing anything like this, and I'm sure that you have never heard anything like this also.

Why would insurance companies be good at this? They would be good at prevention of crime because whatever they can prevent, they would not have to pay up for it. A government police officer on the other hand, if he does fail to prevent a crime, he gets his salary paid no matter what. And in this situation it is of course better to hang around at 7-11 stores than just trying to prevent what he is supposed to prevent.

When it comes to the next thing that we want is, we want things that have been stolen, taken from us and so forth, returned to us if at all possible. What is the incentive of governmental police to find stolen goods, to find the loot? Anyone who has any experience with this knows that the police will file a report and then you ask them what will you do about these goods and they will say we will file it away, and that's the end of the story. By accident sometimes things might be recovered, but only by accident.

What incentive on the other hand exists for insurance companies to recover things, the answer is: because they otherwise have to indemnify you, of course they have the financial incentive to recover whatever they can recover at reasonable cost. I had an acquantance whose VW got stolen in Italy. He went to the Italian police and asked them what will you do it about and they said "nothing". And then he reported this to his insurance company and a week later the insurance detective discovered where his car was. Of course the car was pretty much worthless also, but nonetheless you can see that there's an entirely different incentive in both cases.

And the last thing that you want of course is like, that the perpetrators of the crime are found and captured, and that they have to compensate the victim. Now how likely is it that the government finds the perpetrators? In capital crimes yes they do occasionally find them, because public opinion pressure is quite high. In crimes of a lesser sort: rarely if ever, do they apprehend the criminal.

And if they do apprehend the criminal, what will they do with the criminal? Will they force the criminal to now compensate the victims? And again I have never heard of this. Quite to the contrary they will probably jail the person, and the victim plus other taxpayers are forced to even pay for the incarceration of the person who victimized them in the first place, and if I remember correctly incarceration in the United States, per person per year, costs about $70,000 or in the neighborhood of this. There you can just engage in physical workouts, you have TV, you complain if you don't get your right muesli in the morning. And you might even study law, to prepare yourself for the next apprehension, you know how to better defend yourself. And all the rest of it. And does the victim ever see a penny out of this? And the answer's of course: never ever.

Would insurance companies operate like this? Imagine an insurance company would tell you: this is the condition under which I insure you, as soon as we apprehend the criminal, we will ask you also just to pay for his incarceration. I don't think that insurance companies would get very far with this type of treatment.

Next point: how about the point of disarmament of the public? As we all know, governments of course always disarm people. In the United States we are not as 'progressive' as in many other countries, but we are definitely moving in the direction of disarming the citizenry, increasingly also. And it should be perfectly clear that a business that is in the business of taxing you is interested in disarming those people that they want to tax.

But now imagine that you would go to an insurance company and the first question that they ask you: do you have any arms, weapons, dangerous objects, at home? And you say yes I do. And they would say: but the first condition attached to insuring you is that you have hand over all of these things to me. I think everyone except a moron would immediately recognize that there must be something suspicous about an agency such as this, that wants to disarm you first as a condition of protecting you afterwards.

Quite to the contrary, insurance agencies would actually encourage you to own guns, and to prove to them that you know how to safely handle these instruments, and would likely offer you a reduction in your premium that you have to pay, if can show that you are proficient in the handling of instruments of self-defense. Just as insurance companies offer you a reduction in the premium if you have a safe at home, as compared to just storing your family heirlooms on top of the kitchen table, so they would likely offer you a reduction in premium if you can show them yes, I own a gun, yes I have a training course, yes I have a certificate that shows that I know how to handle these things and so forth. So a very different type of treatment you would get there.

Moreover, insurance companies are by their very nature defensive organizations. And I should emphasize this because states of course are by their very nature aggressive institutions. Because, given that all people have a certain inclination to be aggressive, some people more than others. But assuming so to speak a natural inclination of being aggressive, if you can externalize the cost of being aggressive onto other people. That is, I don't have to pay all the price myself for being aggressive, pay my own body guards, pay for my own weapons, but I can make other people to pay for my own aggression, which I can of course once I can tax people, then I will tend to be more aggressive than I would naturally be.

Insurance companies, who cannot resource to taxation, must because of this be defensive. Aggression is an expensive proposition, and you will have to charge higher premiums if you engage in aggressive activities. If you charge higher premiums then of course you will tend to be less attractive. Most people will prefer not to be insured with aggressive agencies but with defensive agencies because this is less costly.

And not only this. Insurance companies will also make it as a requirement of all the clients that they insure that they themselves should engage in non-aggressive behavior. No insurance company would cover the risk for instance that I provoke you, then you retaliate, and then I go to my insurance company and complain about you having attacked me. Instead they would just say: look, you provoked first and then retaliation ensued, and risks of this nature will not be covered.

So, as a condition of insurance, they will impose on you code of conduct, that forces you to accept a behavioral style that is civilized, so to speak. That will also include that insurance companies will most likely insist that you do not engage in vigilante justice. Not that self-defense under certain circumstances would be excluded, but in order to make retaliation and permanent conflict, to rule that out as far as possible, they would insist: if something has happened, please come to us and there will be some sort of regular procedures set in motion in order to avoid any unnecessary conflicts.

Furthermore, if we would have competition in the protection of private property rights, we will get on the one hand a greater variety of law and on the other hand as I will explain in a minute, a greater unification of law. What will happen on the one hand is, there might be insurance agencies or protection agencies that offer you to apply letsay Canon law. There might be others that offer to apply Mosaic law. There might be others that propose to use Islamic law, and so forth. These rules would only apply of course to people who are insured with the same company. Everybody being insured with one company knows, these are the laws that will apply to me, and everybody else who is insured with the same company. They agree to this type of law and the law procedures. So there we would have a greater variety of laws, everybody could live so to speak under those rules that he wants to accept in his own case.

On the other hand of course: conflicts can also arise between members that are insured by different law agencies, that have internally different types of law codes. And it should be perfectly clear that in conflicts between members of different types of law codes, then, in order to resolve their conflicts, we would have to have independent arbitration. And in these independent arbitration of inter-agency conflicts, there then a tendency would emerge of hammering-out the principles of procedures, punishment, conflict-resolution, and so forth, that can be said to be truly universal.

That is, so to speak, the smallest common denominator, uniting, combining all the different internal law codes that exist. So we would get a greater variety of law and at the same time enormous incentive to create a unified, international type of private law, developed by arbitration agencies competing against each other in cases of inter-agency arbitration.

Which brings me to my last point, that is to say, in such a situation, with competing insurance providers, we would first of all get contracts offered about what will be done in what cases. Currently, when it comes to the question do we get any conflicts offered, the answer is of course: no, there is no contract offered at all. The government only promises to do something, but they never say what exactly it is that they will do, and in addition they even change the rules of the game as they go along. They engage in legislation. They change the laws. Something that might be legal today might be illegal tomorrow, and vice-versa. An insurance company that would say OK we will not promise you exactly what we will do and also we will reserve the right to change the rules of procedure as we go along without your consent again would not be able to get a single client to agree to such a thing.

And an insurance company would have to offer a conflict that has provisions first for the first contigency that everyone can forsee: that is, what will you do in case I have a conflict with somebody insured by you, just as you insure me? That is, what would you do in cases if two clients of yours have a conflict with each other. Obviously the contract would have to have provisions what to do in this case.

And secondly, these contracts provided by insurance companies would also have to have provisions: what do you do in cases when I have a conflict with a member of a different insurance agency? And in order to be believeable, they must have a provision that says: in such a case of course we will go to third party independent arbitration. All insurance companies would likely have a provision such as this. Yes, if conflict exists between client A and client B, both clients are insured with a different company, an independent arbitrator will be appealed to.

And there exists competition in the field of independent arbitration, too. That is, no arbitrator can be sure that in the next case of arbitration, he again will be approached with the task of being an arbitrator, but other people can be approached as well. And given the fact that he can be removed from his position, his incentive is indeed to come up with a solution that is regarded as a fair solution by the clients of all companies involved in the dispute, because otherwise he will most likely not be chosen again. Which again emphasises this pressure of creating a body of law that is truly universal.

We would then have enhanced legal predictability, in contrast to ever-changing and flexible legislation. We would have legal certainty instead of flexible laws. And I think our private security and the protection of our property rights would be taken care far better than that is the case under the current, monopolist situations.

I know that these thoughts are familiar to some. To some they might sound somewhat strange the first time you hear them. I make you aware of the fact that I have written extensively on this subject, and of course I urge you now to all buy my book, if you don't already have it (laughter), and I am perfectly willing to sign it. Thank you very much.

(applause)

The above was delivered by Hans-Hermann Hoppe at the Mises Circle in Southern California, 2006, and was transcribed from the mp3 available at Mises.org.