Busting Myths about the State and the Libertarian Alternative

IV. Myths Justifying the Need for the State

If the above commentary about the state and the free market is true, then why does the state exist? This is a complex question, the answer to which has several aspects to it.

As has been discussed earlier, no individual—not even the most ardent statist—signs a contract explicitly consenting to the state’s existence or actions. Instead, the state exists through the implicit acquiescence of the non-libertarian population. I will discuss below how different forms of this acquiescence arise, and then go on to review some of the key fallacies underlying this acquiescence.1

Acquiescence to the State

Host/Parasite Analogy

The individuals at the state live off the productive capacity of the rest of the population. It is the rest of the population that produces the real wealth in society, namely, goods and services which satisfy human wants. When these products are created and traded, they generate the base on which state personnel can forcibly levy taxes to fund their personal incomes and professional activities. This is why, to libertarians, the state is analogous to a parasite living within the body of civil society as the host.

Biologically speaking, a parasite cannot exist without a host, for the host is the source of the parasite’s sustenance. Accordingly, unless a parasite is highly mobile, it does not want to completely destroy its host, as then the parasite would perish too. Moreover, the host is always more powerful than the parasite, pound for pound, so in some sense the parasite depends for its existence not only on the host’s survival (even flourishing), but also the host’s passive acquiescence.

Thus state personnel have to be careful not to milk society so extensively during their time in office that they drain it of some base level of productive capacity. In those states that have historically gone too far, civil society exists in dire poverty, e.g., Cuba, North Korea, the Soviet Union, Venezuela, and Zimbabwe, and this can only end in total system collapse (as happened eventually in the Soviet Union).

More importantly, however, the individuals at the state are numerically always a small fraction of the overall population. If the population as the host were to rise up in a coordinated fashion to rid itself of the state parasite, then state personnel would be powerless to stop this. This has occurred historically through successful revolutions, the most famous of which are the French and American Revolutions of the late 18th century.

Accordingly, to try to prevent such revolutionary action, the modern state uses three different means to ensure the population’s acquiescence.

Fear

Individuals at the state can act with great physical brutality against anyone engaging in revolutionary action, or those merely suspected of thinking revolutionary thoughts. This is designed to instill fear in the minds of citizens, to suppress acting on any revolutionary inclinations they might harbor. This is a key feature of most totalitarian states, and its effect can be described as “fear-based acquiescence.”

However, in modern democracies, where there is no ongoing, widespread physical brutality, the mere awesome power of the state in concept, along with periodic displays of its power by its military, police, and other executive bodies, could be sufficient to induce a “Stockholm syndrome” among the population. This syndrome is a psychological phenomenon in which hostages express empathy with, and have positive feelings toward, their captors, sometimes to the point of defending and identifying with them. These feelings are generally considered irrational in light of the danger or risk endured by the victims, who essentially mistake any lack of abuse from their captors for kindness.

So, for instance, even though state personnel could at any time decide to forcibly confiscate up to 100 percent of an individual’s income, the fact that they “only” choose to confiscate, say, 35 percent, is regarded as a beneficent act that should not be questioned by the population, and should even be applauded for its restraint. Or, if, for many years, the state prohibits a pharmaceutical company from selling to those afflicted with a painful condition a drug which alleviates their pain & suffering—in what would be a purely voluntary exchange between the parties—then once the state removes the prohibition by approving commercial sale of the drug, the approval is cheered by the population as a beneficent act, notwithstanding all the agony suffered in the meantime by those afflicted with the condition.

Participation

State personnel can also divide and conquer. By renting out its coercive powers to special-interest groups, the state can, in effect, invite a percentage of civil society to live as parasites too. This involves the state using subsidies, monopoly licenses, protective tariffs, welfare or other transfer payments, etc. to benefit many different sub-groups in society, who thereby live off those who are not so well organized to demand these benefits or oppose these programs.2

This practice ensures that there are many individuals who become dependent on the state for their own well-being, such that they are unlikely to rise up and reject it. “Don’t bite the hand that feeds you” is the adage that comes to mind. This is a feature of every state in existence today, and its effect can be described as “participation-based acquiescence.”

Education

In addition, the political class can seize control of the minds of the population and pump them full of fallacies about why we need the state. In this way, such subversive ideas as rejecting the parasite never even arise, or don’t develop very far. The state does this primarily by controlling education.3

The state sets or influences educational curricula through many means: licensing of teaching professionals, accreditation of educational institutions, funding the development of learning materials, funding the budgets of educational institutions, and subsidizing key intellectuals to produce “thought leadership” that just happens to favor the state.4

Further, the state either compels the population to sit and listen to its educational content (as is the case with compulsory K-12 school attendance), or bribes the population to sit and listen (as is the case with heavily subsidized “college-for-everyone” programs).

As a result, the state can rightfully expect very little host resistance. When one looks at the history of state-provided and state-financed education around the world, it is quite clear that the original purpose was to mold each child into a state worshipper, euphemistically called a “good citizen.” This is not supposition; when state education was first conceived, its creators were not shy about making this point explicitly.5

This indoctrination is a feature of every state in existence today, and its effect can be described as “fallacy-based acquiescence.”6

The impact of this indoctrination is that the statist could be likened to the proverbial “frog in boiling water.” While to the libertarian, each new action of the state is a moral outrage, because the libertarian’s benchmark is fixed, namely, the absence of coercion, to the statist, each new action of the state is acceptable or, at worst, tolerable, because the benchmark is dynamic, namely, the status quo immediately before the new action. The statist has been taught to accept the status quo, and thus each incremental state action seems quite bearable, whereas the libertarian does not accept the status quo, and thus views the totality of all state actions together as a gargantuan abomination.

This is not to imply that “good citizens” are stupid. To claim that someone believes in a fallacy is not a statement about that person’s intelligence, which is biological, but rather about that person’s knowledge, which has to be actively sought. One could have a high IQ but not know anything, or anything correct, about a particular subject, and thus have erroneous views with respect to that subject. Thus, while to a libertarian it seems unreasonable for a person to support the state given the depth and breadth of the moral, economic, and historical cases against the state, one must take account of the fact that few statists have devoted any time to learning about libertarianism, and most have spent much of their lives drinking from the fountain of statism.7

It should be noted that a key component of generating this fallacy-based acquiescence is creating and furthering the illusion that voting makes one an active participant in, and influencer of, the state. The more that people believe that the broader the suffrage, the more “We’re all in it together,” the more the state can get away with, because it can always retort that its decisions reflect the “general will” of the population, or that “The people have spoken.” In this sense, it is no coincidence that the growth of the state has been greatest in modern times in parallel with the growth of democracy and broader voting rights among populations.

* * * * *

Fear-based acquiescence and participation-based acquiescence are mostly immune to rational debate; one could understand the issues with the state, but still support it for one of those two reasons. However, fallacy-based acquiescence can and ought to be addressed by remedial action. The issue for libertarians, though, is that the underlying fallacies as to why we need the state are rarely challenged, much less addressed, in regular discourse among the population. Accordingly, below I will address some of the larger fallacies about the need for the state.

Before I do so, however, I am willing to concede that there might be statists who are quite cognizant of all of the failings of the state, and who might even doubt the need for a state in its present form, but who nevertheless support today’s state simply because they believe that there is no better alternative. I see this as resulting from a lack of imagination, a lack of intellectual curiosity to search for a better solution, and/or an inadequate education.

Myth #9: The State Is an Improvement on the Free Market

Inappropriate Benchmarking

The public has become conditioned to believe that if a market is not “perfectly competitive” (defined below), then it is broken, and this calls for state intervention.

The state, aided by its intellectuals, has convinced the population that “perfect competition” should be the benchmark against which all private-sector entrepreneurial activity is to be graded. However, as defined, “perfect competition” is never attainable, anywhere. It requires all firms in an industry to have the same products, cost structures, information, market shares, etc., so all they do is produce as automatons and sell to uniformly demanding consumers. Just to state this is to explain why this is an unrealistic view of human action. The “perfect competition” model takes no account of the realities of, and continuous changes in, individual consumers’ subjective preferences, or of continuous changes in resource availability and pricing, technology, and entrepreneurial insights and errors.

More generally, however, this approach is misguided because it uses a comparison between reality and perfection as the criterion by which to decide whether the state should intervene; this is a common mistake made by statists. There could only be one answer if that is the question asked. The more reasonable question to ask is, which is better, reality without state intervention or reality with state intervention?8

Failure to “Keep Score”

Moreover, if the comparison between reality and perfection is the criterion statists use to decide whether the state should intervene, then this suggests that statists see the state as the agent of perfection. Yet statists never go back and ask whether state intervention has ever led to the nirvana for which they were hoping, i.e., the standard to which they hold the private sector.

As discussed earlier, statists hold the state to a much lower standard than they hold the private sector. Not only is the private sector blamed when it doesn’t achieve outcomes statists (unrealistically) believe should be attained, the private sector is also blamed when it reacts to state intervention. In other words, the private sector can only do wrong. On the other hand, statists never hold the state to any meaningful benchmark—certainly not the perfection benchmark to which they hold the private sector—so in their eyes state intervention can always be justified.9

If, at any point in time, the state hasn’t achieved its objectives with a particular program, then the usual answer given is that the state is not large enough, i.e., the solution is that we need more regulation and/or taxes. Yet no state program—every one of which starts out with absurdly lofty objectives such as “We’re going to eradicate poverty,” or “We’re going to ensure that everyone has healthcare”—has ever been declared successful such that it could be shut down. With that track record, you would think that statists would at least conclude that the state is awful at estimating problems or awful at solving them, or both.

And, as noted earlier, if the state is the statist’s solution to “market failure,” then why isn’t the market the statist’s solution to state failure?

The most the statist will ever admit is that, in some areas, the state needs to be reformed. However, statists never ponder that perhaps the state is inherently incapable of being reformed, given that its personnel are able to exercise unrestrained coercive powers, and have incentives and knowledge misaligned with maximizing the satisfaction of human wants. When the statist says “We need to reform government,” what the statist is saying is that we should plead with those exercising power “Please sir, make yourself better. Only exercise your power omnisciently and magnanimously.” The state metaphorically must chuckle at this plea.

Yet, in the private sector, no such pleading is necessary. If consumers don’t like what a firm is producing, then they put it or its relevant product out of business by abandoning it; witness, for instance, the respective fates of Blockbuster Video, the Ford Edsel, New Coke, and Wang Computing.

However, there is no way to effectively abandon the products supplied by the state, no matter how bad they are.

Incorrect Analysis of Causation

The public has also been trained by the state to look at imperfection in the world and blame the “free market” (which, as previously explained, doesn’t even exist, so the fault is misdirected), and then to believe that only the state could make things better. There are two fundamental points to make about this conclusion.

First, as previously discussed, the world is imperfect because of human imperfection and scarcity of resources. Neither issue is the fault of the free market, and nor could the state solve either issue. It is difficult to comprehend why the statist would believe that the imperfect human beings running the state could be a better solution to the imperfect human beings involved in the private sector.10 And it is equally hard to comprehend how entrepreneurs organizing scarce resources to meet customer preferences, with the risk of going out of business if they get it wrong and the upside of personal profit if they get it right, could be bested by central planners at the state, who neither have the necessary knowledge of customer preferences nor the incentives of entrepreneurs.

Second, and not surprisingly, statists have been taught a version of history which credits the state with most of the positive developments in the human condition, and blames the private sector for all of the negative aspects. Statists then take this mistaken view of history and apply it to all current problems, so the only possible result can be a call for state intervention. However, this shows a poor appreciation of economic principles and history.

Sweatshops.11 To give a classic example, statists will bemoan the operation of sweatshops in poor countries, and regard this as a problem of the free market.12 They reflect on their comfortable personal situation, and demand that we somehow stop sweatshop labor elsewhere in the world because “I wouldn’t want to live that way.” This ignores a number of key facts.

First, sweatshop labor is a feature only of poor countries and, these days, countries tend to be poor mostly because of heavy state intervention. Most poor countries suffer from central planning of the economy, regulations that make it unattractive for foreign financial capital to be invested locally (e.g., high taxes, exchange controls, complex bureaucracies that firms are required to navigate, etc.), and dismal healthcare, education, and banking sectors due to significant state control.

Second, sweatshop labor is not usually forced labor (if it were, then the statist’s concern would be valid). The companies employing these workers are not using armed personnel to round up the workers each morning and march them to the factory floor; these workers are voluntarily choosing to work in the factories. This means that, as bad as the working conditions might be, they must be better than the alternatives these workers face, otherwise, why would the workers turn up each morning? The reality is that these workers and their families live in abject poverty and face a miserable existence. The traditional alternative for these workers is to engage in back-breaking and dangerous agricultural labor on the family farm to eke out a subsistence lifestyle, or, failing that, to turn to prostitution, begging, or violent crime to generate income.

Thus, when statists insist that sweatshop labor be made illegal, or that the employers be boycotted out of business, they are likely pushing these workers into these less than savory alternatives; in this light, factory work is a relative “luxury” for these families. From statists’ unique vantage points thousands of miles away, and based on their own existence and values, they are seeking to impose their views on what is the “better” choice for these workers, without appreciating the actual alternatives that reality (or state intervention) has served up to these families.

Third, as noted earlier, basic economics teaches that the upper bound on what employers would pay workers is based on their productivity level (why would an employer pay a worker $2.00 per hour when the worker can only add $1.00 per hour of value?), and the lower bound is based on competition, as employers must compete for workers and so cannot underpay them relative to their alternatives. The usual reason sweatshop workers are paid so little is that their upper bound is quite low, because they are lowly productive. The reason for this is twofold: they aren’t well trained, and there is insufficient capital equipment available locally to make them more productive.

In the free market, as foreign entrepreneurs begin to invest in the local economy, given its cheap labor, they make more capital available (through machines, processes, training, etc.) to make these workers more productive, and thus able to command higher compensation. Provided there is free competition for these workers, employers would compete to hire and retain the more productive workers through some combination of higher wages and better working conditions. This is the only sustainable way for wages and working conditions to gradually improve, even though statists believe that these things could improve simply by the state commanding that this be so.

To that end, statists will often retort that the state could accelerate this process by forcing employers to pay higher wages, and offer better working conditions, more quickly than the rate at which things would naturally evolve.13 This is labeled a “moral imperative” to improve these workers’ lives. However, there are a few problems with this line of thinking.

First, statists ignore the fact that sweatshop wages are often significantly above poverty-level income in these regions, and even compare well with average incomes, making sweatshop employment a step up the local career ladder. Rather than bemoaning these opportunities for these workers, we should be supporting such jobs if we care about these workers having a real chance to pull themselves up out of poverty.

In fact, history shows that sweatshops are an important positive development for the poorest in emerging economies, as they evolve from subsistence agriculture to the living standards that we enjoy in the First World today. This was true in England during the Industrial Revolution, then subsequently in the U.S., and then more recently in the “East Asian Tigers” of Hong Kong, Singapore, South Korea, and Taiwan.14 The same could be expected in the sweatshop economies of other parts of Asia, and in Central America, if they are allowed to run their natural course too.

Second, those at the state cannot possibly appreciate the economics of each employer, nor each employer’s market. Statists incorrectly assume that, just because a business has an existing profit margin, the entrepreneur would voluntarily absorb higher costs imposed on him by the state. Yet all economic decisions are made at the margin.

The entrepreneur has choices as to what to do with the firm’s financial capital, which production processes to use, where to locate, what mix of labor and capital equipment to use, etc., and he would have a view on what is an adequate return for the risk he is taking. If labor costs (cash wages, benefits, and working conditions) are forcibly increased at the margin, then the entrepreneur would adjust to counteract that increase to try to preserve his profits. For instance, if cash wages are forced up by legislation, then the entrepreneur may reduce working conditions or benefits, such as free meals, air conditioning running time, or vacation days; more generally, he may substitute machines for labor, or he may relocate to a cheaper region (in either case, the effect is to reduce the cash income of the workers who desperately need it). An entrepreneur who was contemplating opening up in the region may reconsider his decision in light of the higher costs, thereby adversely impacting those poor workers in this region whom the entrepreneur might have hired.15

As noted earlier, the only sustainable ways to improve a worker’s plight are to improve the two factors that bound the compensation a firm would pay him: at the lower bound, facilitate increased competition for workers, by reducing the costs for new firms to enter the market and for existing firms to remain in the market (mainly by reducing or eliminating taxes and regulations); at the upper bound, facilitate increased worker productivity, by reducing restrictions on financial and human capital investment (mainly by reducing restrictions on education and funds flows, reducing taxes on income, etc.).

Third, employers look at the total cost of employing a worker relative to his productivity, but are agnostic as to how that cost is distributed between (a) cash wages, (b) benefits (vacation, healthcare, etc.), and (c) working conditions (safety, air conditioning, etc.).

Accordingly, in the free market, the mix of cash compensation, benefits, and working conditions that an employer offers to his workers tends to reflect workers’ choices, because employers would have to offer the best mix of these factors to keep the best workers satisfied. Often times the poorest workers are first interested in cash, which they can use to buy food, clothing, and shelter for their families, and they are willing to forego benefits and better working conditions to maximize cash. As their productivity increases, and thus so too their ability to command higher compensation, beyond some level of subsistence cash they may start to demand better working conditions instead of more cash. At still higher levels of compensation they may demand more vacation time, or health benefits, instead of more cash or better working conditions.

The key point is that the individuals at the state are in no position to second guess the mix of compensation components that workers desire. Those statists who try to force improvements in wages, benefits, and/or working conditions on employers in these regions are simply imposing their compensation-component preference rankings, instead of allowing employers to respond to their workers’ actual preferences.16

Fourth, what’s odd about the statist’s criticism of the sweatshop factory owner is that the statist is not also taking aim that those who do not choose to open factories in this region. Those who choose not to open a factory are doing nothing for the poorest in that region; they are not offering them higher wages than they could earn elsewhere, better working conditions than they presently endure, or the opportunity to develop their skills through gainful employment. In contrast, the sweatshop factory owner is the only one who is offering to use his financial capital to improve these individuals’ lives. If there is a “moral imperative” to improve the plight of these workers, then why don’t statists target people who are doing nothing to contribute to this imperative, instead of picking on the one party who is doing something positive?

Instead of burdening this entrepreneur with state intervention, we should be applauding and encouraging his actions which, though born out of self-interest, are also providing the poorest with an opportunity to reach the first rung on the ladder towards improved living standards.17

Unseen Costs

Statists often observe reality at time t0 when there was no state intervention, and then at time t1 after the state has intervened, and conclude that, if the latter reality is better than the former, then the state’s intervention was beneficial. However, this conclusion ignores economics, morality, and history.

Economics. Each time the state intervenes there is a cost, but this cost is never compared with the alleged benefits from the intervention. The state forcibly diverts scarce resources from where they would have flowed naturally in order to satisfy customer preferences, to where the individuals at the state define as the priority. While we see the impact of this diversion of resources in the form of the end result, we never see the impact of this diversion in the sense of how the resources might have otherwise been deployed. Thus it is impossible to know if the benefits of that diversion exceeded the costs.

For instance, if the state imposes significant compliance costs on drug developers, requiring them to jump through the process hoops the state has designed before the drug developers can market their products, then we can never know if the scarce resources that were diverted into such compliance activities could have been used to develop other valuable drugs, perhaps saving lives and alleviating suffering.18

If we judge state intervention just by the visibly positive outcomes, without considering its hidden but very real costs, then we are making uneconomic decisions, in the sense that we are assuming that there are no trade-offs, which is contrary to the reality of a world where resources are scarce. By this (unrealistic) rationale, state intervention could never be the wrong decision.

How do we know that the free market can do better? In the free market, entrepreneurs from different industries and at different firms bid against each other for scarce resources. This tends to drive their prices up, but there is a limit, as an entrepreneur is not going to purchase a resource at a price which he doesn’t think would allow him to make a profit on selling his final product to customers. Customers are willing to pay more for products that satisfy their more important needs than those that satisfy their less important needs. Thus, as customers express their relative preferences through the prices that they are willing to pay for different products, this guides entrepreneurs as to how much to bid for scarce resources. By definition, those entrepreneurs satisfying customers’ most important needs would be able to bid more for scarce resources than those who are not. In this way, we know that resources would tend to move to where they can bring the most value, which is another way of saying that we know that the cost/benefit trade-off is being appropriately considered.

To illustrate this point, assume that input X is used both by entrepreneurs supplying product A and by those supplying product B. If customers value product A more highly than product B, and thus are willing to pay more for product A than for product B, then in bidding for input X, entrepreneurs who manufacture product A would be able to outbid those who manufacture product B, and more of input X would flow to these entrepreneurs. Through this process, resources would flow to their most important uses as “voted” by customers with their own dollars. Contrast this with state intervention, which would forcibly direct input X to the use deemed most important by individuals at the state, even though they are not the customers. Which process is more apt to appropriately weigh trade-offs and maximize satisfaction of customers’ wants?

Often statists will point to a product developed with the state’s backing and note the absence of a private-sector alternative, and then claim that this product would not have been developed by the private sector, so that there must have been a significant benefit from the state’s intervention. However, this is quite disingenuous on several counts.

First, it’s possible that there is no actual, substantial, voluntary customer demand for the product, so the claim might indeed be partially correct, namely, that the private sector would not have developed this product (which would have been a good thing in terms of resource usage!). Some examples might be nuclear weapons, “bridges to nowhere,” and monuments deifying former presidents, generals, or others in the state sector.

Second, we can never know if the claim is true but, given the incentives in the private sector, the chances are high that, if there were real demand, then the private sector would have developed a relevant product to address that demand.

Third, when an entrepreneur in the private sector tries to develop a product that competes with an effort backed by the state, the private-sector product is normally crowded out by the state. Since the state can forcibly divert resources to its project, whereas the entrepreneur has to bid for resources, and can only obtain them if others voluntarily yield them, the state has a huge advantage in terms of the resources it could throw at a project. Further, since the state is not concerned with profitability—it cannot go out of business, as it uses taxes to fund its expenses—the state can price its products well below private-sector prices. In addition, the state can of course use its regulatory muscle to further handicap or outright prohibit the private-sector alternative.19

Morality. While some individuals in the economy might appreciate that the state produced the outcome that occurred, by definition, the state would have forced other individuals in the economy to pay for an outcome that they might not have wanted (either at all, or in priority to other outcomes for which they might have preferred to use their income that was taxed away).

As raised earlier, statists have no good response to the moral question, namely, if all men are metaphysically equal, so that no man has the right to rule another without his consent, then by what right can those at the state seize an individual’s income to use in ways that this individual does not want?

History. Almost every example that statists rely on to “prove” the benefits of state intervention is, in fact, belied by the trends that preceded the intervention.

For instance, statists will cite examples of where, following the state’s imposition of health & safety regulations, workplace accidents declined; what they will fail to observe is that workplace accidents were already declining for a long time before the introduction of the regulations, and usually at a rate faster than after the regulations were implemented. In fact, the history of sweatshops globally shows that legislation dealing with minimum wages, benefits, workplace conditions, etc. mostly followed voluntary industry developments caused by the economic dynamics previously discussed, rather than preceding these developments and causing them to occur. Tellingly, where this type of legislation sought to get out in front of economics—meaning it attempted to prematurely force adoption of uneconomic workplace improvements—the various parties (factory owners and employees) simply ignored the legislation, and operated in non-compliance.

Similarly, statists will cite the implementation of a state-provided option for health insurance as a positive factor in increasing the percentage of the population that has health insurance, ignoring the fact that this percentage had been growing more rapidly before the new state scheme was introduced.

More generally, economic history shows that where there has been real demand for something—be it safer working conditions, or health insurance—entrepreneurs have always worked to develop a product to meet that demand in the most efficient manner possible. On the other hand, all that state intervention has ever done is increase the cost of supplying products, leading to lower supply, and impose centralized resource direction on the economy, leading to misdirection relative to satisfying actual preferences.

Myth #10: We Need the State to Provide “Public Goods”20

The Theory

Another fallacious belief purportedly justifying the state is the notion of so-called “public goods.” The supposed argument is that there are some goods that no private firm would supply at all, or that wouldn’t be supplied in sufficient quantities by the private sector, but which are beneficial to society, and so the state must forcibly direct resources towards the production of these goods and even provide these goods itself.

As the theory goes, private firms wouldn’t produce these goods for one of two reasons.

First, because of the so-called “free-rider” problem, namely, private firms wouldn’t be able to prevent people from benefiting from these goods without paying for them. Commonly cited examples of these goods include lighthouses, national defense, and police.

Second, because these goods are just too difficult for the private sector to handle: they require complex arrangements or huge amounts of financial capital, and profits would be too hard to generate or would be too distant in the future. Examples of these goods include roads, schools, money, courts, railroads, power, and scientific research and development.

Actually, for many of these goods, the statist argument goes further: not only must the state produce these goods, but it must do so as a monopoly, i.e., it must prohibit others from trying to produce competitive goods.

It’s hard to know where to start in refuting the many fallacies bound up in these assumptions.

History to the Contrary

Probably the easiest place to start is to review history. Every single good that statists now claim is a “public good,” and thus must be produced by the state or else it would not be produced at all, has at one time or another been produced privately, until the state forcibly intervened. In addition, in different parts of the world many of these goods are still produced privately. In other words, the private sector has not found providing these goods to be too complex, too capital intensive, or too distantly profitable.

For instance, lighthouses were originally provided by the private sector before the state took them over. Similarly, originally roads were privately built, and there are still many private roads in gated communities, strip malls, office parks, and private cities. Schooling was originally private until the state intervened, and private schools still exist and are growing globally (even in the poorest slums in the Third World). Originally policing was private, and there are now more private security guards than state police in the U.S.; in addition, when private citizens are free to carry personal firearms, they are more effective at preventing crimes against themselves (or others) than the police are.21 Law and courts originally developed from the ground up before states took them over, and private mediation and arbitration are growing as forms of dispute resolution. The first successful railroad in the U.S. was privately built, and there are privately run railroads globally. Money was historically developed privately before being taken over by the state for its own ends. Walt Disney World is an entirely privately constructed and privately run “village” with its own security, roads, immigration rules, etc.

Why Insist on a Monopoly?

Even statists accept that monopolies are bad because they lead to higher prices and less innovation compared with when there is competition. If so, why would the statist argue that the state must monopolize the production of a “public good”; what would be the harm in allowing genuine competition? If the statist is correct, namely, that the private sector would not produce such a good, then the statist should not be concerned if the state doesn’t outlaw competition.

Note, however, that what I am advocating is real competition, where consumers could opt out of paying for the state’s “public good,” and instead purchase only the competitive, private good. There is no real competition if the state forcibly extracts payment for its “public good” from all consumers, in the form of taxes, but then allows competitive, private suppliers to also produce the same type of good. This puts these suppliers at a tremendous disadvantage, since it raises the effective price to consumers of the private good because the consumers have to pay for the state’s “public good” via taxes, and then also for the supplier’s good.22

In addition, as noted earlier, the state is not concerned with profitability, because it can force taxpayers to fund its operations. Thus the explicit prices of state-provided “public goods” are typically set well below the prices of competitive, private goods. This makes the state an even more formidable competitor to private-sector suppliers, tending to depress the demand for competitive, private goods.23

All of this generally means that private-sector goods that compete with “public goods” are well out of the reach of the less well-off. Only the wealthier citizens can afford to purchase the relatively scarce, competitive, private goods (which tend to be of much higher quality), while the less well-off are left to consume the state-provided (lower-quality) goods.

The “Free-Rider” Concept

The most fundamental point relating to “public goods,” however, is that statists cannot convincingly answer the question “Which goods are ‘public goods’ and which are not?” Often times the statist’s simplistic response is to cite those goods currently produced by the state. However, that is circular reasoning. The question is asking for the principles from which one could deduce which goods should be produced by the state and which should not; just because the state is currently producing a good doesn’t provide any principled argument for the necessity or morality of its production by the state.

As noted above, the statist’s most common justification for “public goods” is the so-called “free-rider” problem. However, there are moral, economic, and practical issues with using this as a workable principle.

In terms of the moral issue, what the statist is saying is this: I want this good, but you benefit from it even if you don’t pay for it, so I’m going to force you to pay for it. The moral counter-argument is this: I don’t want to pay for this good, and am not asking for this benefit to be freely bestowed upon me, so why should I be forced to pay just because you want the good and can’t figure out how to exclude me?

In fact, it is more likely that the statist is really saying this: I want this good, but can’t afford it myself, so I’m going to enlist the state’s help to force others to contribute—using the argument that they benefit—so that I can get what I want. Thus the alleged solution to the “free-rider” problem is to create “forced riders”!

In terms of economics, one of the key insights of Austrian economics is that all benefits are subjective. Thus it is not correct for A to tell B that B is benefiting from a so-called “public good” (and thus must pay for it); only B can make that call.24

In practical terms, the “free-rider” principle is capable of expanding the range of “public goods” to absurd levels.

If a company provides a significant number of jobs in a local community, then this could provide certain benefits to that community which flow from lower unemployment, such as lower crime, greater vibrancy, etc., yet the community is not reimbursing that company for these benefits. Shouldn’t the “free-riding” community be obliged to pay for these benefits? If a person works on his front garden extensively to make it beautiful, then this could provide benefits to his neighbors in terms of beautifying the street, yet his neighbors are not paying for this. Shouldn’t they be obliged to contribute to the upkeep of his garden, lest they “free-ride”? If a person wears deodorant, then this could provide benefits to those commuters who are jammed up against this person on the subway, yet they are not paying for his deodorant. Shouldn’t these “free-riders” be required to pay? If a person pays a dog trainer to teach his dog how to behave in public, then those who come across this dog could benefit from that training, but they are “free-riding” on this person’s investment; shouldn’t they be required to contribute? If a person installs smoke detectors in his house to provide early warnings about fire, then this could provide benefits to those neighbors whose houses are close to his house (if a fire is contained early, then it won’t spread to the neighbors’ houses), yet they are not paying for these smoke detectors. Shouldn’t these “free-riding” neighbors be required to pay?

The point is, so-called “free-riding” is everywhere. Yet statists conveniently only choose to use this as a justification for the state’s provision of “public goods” if the product is something they really want but (a) could not afford to purchase for themselves, and (b) don’t think they could persuade others to voluntarily pay for too.

The Statist Economist’s View

More technically, statist economists use fancier terms to try to create a definition of and justification for “public goods.” They claim that “public goods” are those which are both “non-rivalrous” and “non-excludable.”

Non-Rivalrous. The term “non-rivalrous” means one person’s consumption of the good does not interfere with another person’s consumption of the good, so the additional cost to the producer of supplying an additional consumer is perceived to be zero. The statist economist points out that since (as he sees it) it doesn’t cost the producer to serve an additional consumer, the producer should be required to supply at full capacity without charging, because if he doesn’t, then society wouldn’t be supplied with “enough” of the good (according to the statist economist’s estimation). Since private producers might object to this business model, the implication is that the state must be the producer of this good (assuming the good is also non-excludable).25

A classic example often given is the less-than-full cinema. If a movie is going to be shown at 80-percent capacity, then the perceived marginal cost of admitting one more patron is zero. However, this is problematic for two reasons.

First, it is not true that admitting one more patron has no marginal cost. The next patron might be noisy, tall, smelly, or too large to comfortably fit into just his seat, and thus might adversely impact the other patrons’ experience. In addition, the next patron requires additional effort by the cinema in terms of clean-up afterwards (this patron might contribute additional trash), and at some point additional ticketing staff and security might be required as the number of patrons grows. Also, each patron increases the “wear & tear” on the carpeting and seats.

More generally, however, one of the key insights of Austrian economics is that all costs are subjective. Thus no one other than the cinema owner can legitimately judge whether there is a cost to admitting one more patron. In fact, the owner’s decision not to admit an additional patron for free demonstrates that he believes that there is a cost to doing so.

Second, this principle can be applied to other situations which illustrate the principle’s absurdity. For instance, if someone’s living room is not filled to capacity, then should the house owner be expected to admit a small group of strangers who want to use a comfortable space for a meeting? Would this justify the state taking over and opening up all houses that are not used to capacity?26

In fact, the logical extension of this principle would suggest that all products should be given away for free, for once a good is manufactured and is sitting idle somewhere, the statist economist would have to conclude that the additional cost to the vendor of a customer wandering in and picking up that good is zero.

Other examples often cited include roads and the Internet. However, each person’s use of a road or the physical equipment constituting the Internet’s “pipes” impacts others’ usage by “clogging up” the resource (in the case of roads, traffic; in the case of the Internet, waiting for a video to buffer or an email to download). Further, each person’s usage also increases the “wear & tear” on the relevant resource, thereby increasing the maintenance costs.

Non-Excludable. The term “non-excludable” is the fancy term for a good that is subject to the aforementioned “free-rider” issue. It means that the supplier of a good could not exclude any particular consumer from benefiting, even if the consumer did not pay for the good, and thus, faced with this issue, private producers wouldn’t produce the good at all, as there would be no viable business model. Therefore, the state must be the producer (assuming the good is also non-rivalrous).

The classic example often given is the lighthouse. Once the light is shining on the water, all ships out there could benefit from this, so how would the lighthouse owner be able to charge for his service?

The problem with this line of thinking is that it speaks of no logical principle but, rather, simply a lack of ingenuity on the part of the statist economist. Just because the economist cannot conceive of how to make a business out of this service doesn’t mean that entrepreneurs could not come up with a solution. In fact, historically, lighthouses were privately owned. Ships and their insurers voluntarily paid to ensure this service was provided, because the cost was very cheap compared with the potential cost from the loss of a ship and/or its cargo due to a collision with another ship or rocks.

Consider also what happened with analog radio. While it is not possible to exclude listeners from analog-radio programming, radio-station entrepreneurs figured out a way to create a viable business model, by charging advertisers who wanted access to the radio station’s listener base.27

The critical point to note about goods that are supposedly “non-excludable” is that, for the private sector to supply such goods, it is not necessary that entrepreneurs would be able to charge everyone who benefits. All that matters is that entrepreneurs could produce the goods at a lower cost than the revenues they generate. That’s where entrepreneurial ingenuity trumps the limitations of the statist economist’s imagination.

The other key point to note, which statist economists overlook, is the fact that the benefit of many of these allegedly “non-excludable” goods could be tied to living in, visiting, or using a particular territory (either physical territory, or intangible “territory,” such as the abovementioned radio programming). This has two principal implications.

First, since people can be excluded from any territory, the benefits of such goods are, in fact, excludable.

Second, if the provider of the goods in question also owns the territory, then he could build the cost of providing such goods into the territory-use fee that he charges residents or visitors, on the basis that provision of these goods enhances the quality of living in or visiting his territory.

So, for instance, a developer of a residential community could establish roads, security, parks, etc. and then price the provision of these goods into the sale price of individual plots of land and/or residents’ annual maintenance dues. The owner of a road could supply streetlights as a service to those who pay his toll fee, which would incorporate the cost of providing such lighting. In the case of the lighthouse example, since each ship ultimately calls into a port, and it is to the port’s benefit to provide its customers with light to make the approach to the port easier, the port owner could easily build the cost of providing the lighthouse into docking fees charged to ships.28

Combining the Two Concepts. As noted earlier, the statist economist only classifies as a “public good” something which is both non-rivalrous and non-excludable.

The classic example of what a statist economist would call a true “public good” is national defense. However, even this can be shown to be a false assumption.

National defense is not “non-rivalrous.” “National defense” is a concept, not a product. Real resources are required to create a real defense product, and thus questions arise as to how much defense do we want, and in what form?

Do we just want to protect the coastal states, or the interior too? If we choose the interior too, then we need to spend more money than if we just protected the coastal states, so the marginal cost of producing that extra defensive capability is not zero. Do we want to protect citizens who are abroad, or just those who are in the homeland? If the former, then we need to spend more money than if we just pursued the latter. Do we want to offer citizens protection in the air, in the sea, or just on the ground? Each of those decisions entails different costs. Looked at another way, if a fixed set of protective resources is deployed to cover a larger area or population, then this would detract from the quality of protection that would otherwise be provided to a smaller area or group of citizens.

Neither is national defense “non-excludable.” It only appears so, given the way that individuals at the state, in their infinite wisdom, have decided to provide this good.

National defense is ultimately about protecting lives and property from damage. Each individual and each piece of property could either be included in the protection umbrella or not; private security agencies do this all the time, as do insurers. Property, life, and health insurers could offer their policyholders compensation against destruction, death, and injury from attack. If you bought such a policy, then you would be compensated if you suffered this type of loss, and if you didn’t, then you wouldn’t. The insurers would then invest in defensive capabilities to protect their policyholders from attack, since done efficiently, this would be cheaper than making large payouts. As technology improves, the exclusion of non-payers could become more precise.

A good illustration of this was provided by the operation of Israel’s Iron Dome defensive missile system during the 2014 conflict with the Hamas group based in the Gaza Strip. When Hamas fired a rocket into Israeli air space, Iron Dome would calculate where the rocket would land, and if it would do damage to houses or people. If the calculations showed that the rocket would be landing harmlessly, then Iron Dome would not fire off an intercepting missile; if the calculations showed that Israelis were at risk, then Iron Dome would intercept and destroy the rocket. One could imagine insurers offering this precision protection only to their policyholders.29

The “non-excludable” argument is also belied by the fact that adjacent nations have their own defensive capabilities. If it were true that national defense is “non-excludable,” then neither Canada nor Mexico would bother having defensive capabilities, as they could just “free-ride” on the coattails of the capabilities of the U.S. Similarly, it would make no sense for some states in the European Union to have their own defensive capabilities, since they are all in close proximity to other states, on whose capabilities they could “free-ride.”

Finally, to the extent that there is some perceived “free riding,” the statist economist overlooks the remedy of ostracization. The citizens of adjacent territories tend to have significant commercial and personal interaction. If the citizens of one territory had invested in defensive protection which might also benefit the citizens of an adjacent territory, but the citizens of the adjacent territory refuse to contribute to the cost of this protection, then if it were sufficiently important to them, the citizens of the paying territory could threaten to reduce trade and other interaction with the citizens of the non-paying territory. In this way, there would be some exclusion of benefits; not of the defensive protection, but of other items of equivalent value.30

How Much Must Be Supplied?

More broadly, there are two fundamental problems with the concept of the “public good” justification for state action. There is a practical problem and a moral problem.

First, the practical problem. The “public goods” argument implies that there is in fact a set, socially optimal amount of the good that must be produced. The theory runs that if, in the state’s estimation, the private sector would produce less than this level, then the state must step in. However, statists never ask, much less answer, how one could derive this “socially optimal production level,” and who has the omniscience to do this?

In the private sector, the “socially optimal production level” is pursued by individual entrepreneurs trying to anticipate individual consumer preferences based on pricing signals given to them in the market by individual consumers and the owners of factors of production. As noted earlier, those entrepreneurs who anticipate correctly and please voluntarily paying consumers would make profits, and thus would be able to bid for more scarce resources, and those who fail to do this would tend to go out of business, and thus would yield scarce resources. Note that this “socially optimal production level” continuously changes with consumer preferences and resource availability, so entrepreneurs must continuously adjust.

Practically speaking, it is impossible for individuals at the state, or their economists, to make a credible theoretical calculation in advance, or to adjust on the fly, regarding the “socially optimal production level” of any “public good.” State personnel cannot know consumers’ changing preferences, since they cannot know what is inside each consumer’s head, and nor does the state, as a coercive monopoly, get any actionable, market feedback from consumers, since consumers are not making voluntary purchases of state-provided “public goods.”

In addition, if state personnel get the production quantity or quality wrong relative to what consumers actually want, then the state does not go out of business, but rather continues to divert scarce resources into producing these goods away from goods that consumers actually want.

Accordingly, in justifying the state’s provision of “public goods,” the state can only rely on models produced by intellectuals, which models (like their intellectual creators) are entirely divorced from the real world.

Further, even if the state could know each individual’s preferences, how on earth could it reconcile them into one production decision (this is analogous to the “common good” issue discussed earlier)? Society is not a single consumer, but rather the aggregation of many individuals, and while the private sector can satisfy all individuals concurrently through competing products, the state (at best) can only satisfy a subset of individuals who are in favor of the single production decision made by the state.

Second, the moral problem. Any time the state produces a “public good,” it is charging every single taxpayer whether that taxpayer wants that good or not. Taxpayers do not have the opportunity to opt out. By what right can the individuals at the state tell each citizen that he must pay for those goods that state personnel decide they want to produce? This means that state personnel have a claim over the income of individuals which is superior to the claim of those individuals themselves! How could this be justified?

Basic Science. The typical statist claim that basic science is a “public good” illustrates both of the above issues. The statist believes that basic science is a “public good” because it involves significant sums of money, doesn’t always have a commercial payoff—either because not everything works out, or the benefits might occur too distantly in the future—and all of society could benefit from scientific advances. Apparently these are reasons why the private sector—entrepreneurs and philanthropists—will not fund “sufficient” basic science, and thus the state must step in to fill the gap by coercively diverting taxpayers’ money.

Just on the surface, the given reasons are not compelling: there are plenty of projects that involve significant sums of money which get funded by the private sector (e.g., airplanes, cruise ships, oil rigs, satellites, and skyscrapers); the private sector is comfortable spending money on uncertain outcomes, both in terms of quantity and time (e.g., the development of new blockbuster drugs, and the funding of new technology companies); and society always benefits from advances created by the private sector (which is why people are willing to voluntarily purchase products that incorporate these advances).

However, there are deeper arguments against basic science being a “public good.” Below I’ll focus on the core principled arguments, and I’ll leave aside the empirical evidence, of which there is plenty, that (a) the private sector has historically funded enormous amounts of basic science, and still does, and (b) the majority of advances in technology have come not from basic R&D, but from applied R&D conducted by commercial enterprises under pressure to innovate to beat out competition.31

How could the statist know that the private sector wouldn’t fund “sufficient” basic R&D? That implies that there is some objective definition of “basic R&D,” some objectively identifiable minimum required amount, and some ability to foresee what the private sector would and wouldn’t fund. From where does the statist derive this minimum required dollar amount? Could the statist even specify this amount, much less defend it? Could the statist specify which types of basic R&D require which minimum amounts? No!

If the statist cannot credibly specify how much basic R&D is required, nor in which areas, then how could we know whether the state is even carrying out its stated task sufficiently? Essentially it becomes an arbitrary “gut” calculation: the definition of “sufficient” is the opinion of whoever is in power at any one point in time.

This is not to say that any single person in the private sector knows the answers either, but (a) the private sector is not coercively taking anyone’s income when it hazards a guess, (b) the private sector is taking multiple guesses at any point in time, since many people are simultaneously personally funding their different ideas, and (c) those in the private sector pay a personal financial penalty for guessing wrong, and stand to make a personal financial gain if they guess right, and thus the incentives are much more aligned with guessing correctly over time.

The statist’s usual retort is to point to some beneficial development that he believes only came about through the state funding the basic research. However, just because the state coercively diverted resources out of the private sector towards state-identified research priorities doesn’t mean that this is efficient or moral.32

There is nothing special about basic R&D spending. Like any other investment that occurs in the economy, basic R&D spending just represents the allocation of scarce resources towards an objective. Thus the same core principles apply to basic R&D as to any use of resources in the economy. If the state funds this good, then it is engaging in central planning. It is diverting resources that would have been used otherwise by the private sector, which has better incentives than the state to use scarce resources efficiently, and can better take account of dispersed knowledge and preferences in the economy than could the central planners with their “one-size-fits-all,” coercive approach.

It also means that the state is forcibly diverting resources away from individuals in the economy who might have preferred to use their resources in a different way. Some people might indeed be glad that the state diverted resources to help develop a particular good, but not everyone might have seen this as their top priority. No one was given a choice.

As noted earlier, statists don’t appear to fully appreciate the notion of trade-offs. Given scarce resources, it’s not the case that we could spend on basic R&D without a cost; we would have to give up something to devote resources in that direction. So even saying “We should spend more on cancer research” is not a reasonable proposition. We have to ask “Using resources taken from what other activity?” To stay focused on R&D trade-offs in medicine, spending more on cancer research might mean spending less on AIDS research.33 How do we know that this priority reflects the preferences of each individual whose money was confiscated by the state in this endeavor? The individuals at the state cannot efficiently or morally make these decisions, as they are making “either/or” decisions for everyone at once, without knowing their actual preferences.

State personnel react to political causes, which they can easily perceive and benefit from, but not to consumer preferences, to which they are blind. For instance, whereas combating Ebola in Africa might become a hot political cause, leading to the state diverting resources into this area as politicians respond to special-interest pressure or polls, it could be the case that there is actually very little consumer demand for an Ebola vaccine, and much more demand for a malaria vaccine (malaria kills far more Africans than Ebola). These actual consumer preferences would be thwarted by such state intervention.

In fact, given the incentives for those at the state to respond to the most aggressive lobbying by those seeking to rent the state’s coercive powers, it’s usually a very safe bet that the process by which basic R&D funding was created was highly political. The politicization of this decision could manifest itself in matters such as the choice of field to research, the specific scientists or institutions involved, the geographic location of the research, the privileged beneficiaries of the research, and the definition of the objectives and benchmarks.

Consider the vast amount of societal resources diverted by the state to defense companies in the U.S., some of which is spent on military R&D. Each year billions of dollars are drawn out of the portion of the economy that serves actual consumer preferences, and these dollars are plowed into researching and developing products the main purpose of which is to kill humans or destroy property. These products are then used aggressively around the globe by the U.S. government in activities having nothing to do with defending U.S. citizens against actual threats to the homeland. That hardly satisfies consumer preferences.

Or consider the whole NASA space R&D program. This was ramped up in the 1960s as part of a testosterone-laced competition with the Soviet Union to waste the most money in outer space, which in some way was supposed to express “national pride” (as defined by the state). Neither the Soviet Union (now Russia) nor the U.S. has ever derived any substantial, non-military benefits from their respective space R&D programs, yet we are continually told by the state that it is critical that we forego our actual consumer preferences to forcibly fund this R&D. The defense, aerospace, electronics, and communications industries have lobbied hard to promote taxpayer funding of their R&D, but which consumer preferences does this satisfy?

As a final example, consider how AIDS became a high profile political cause in the 1980s, which meant that dollars were politically diverted into AIDS research, when in fact it might have made more sense to allow these dollars to flow into other deserving areas. Taxpayers were never given the choice.

The last point to make about the basic science area is that, in addition to the state’s R&D funding process being driven by politics, it also tends to be driven by scientists who are not risking their own financial capital, and thus who are not concerned with any particular return on the funds invested; remember, these funds represent scarce resources forcibly diverted from other uses in the economy. If scientists want to “dream big” about breaking new frontiers without worrying about returns on capital, then they and their supporters should “dream big” with their own funds, and not with those funds forcibly taken from others. Let these scientists engage with philanthropies or with private-sector firms which don’t contract with the state, and thereby raise the money to pursue their dreams from the voluntary sector.

Myth #11: We Need the State to Deal with Negative Externalities

The Theory

There is another justification for the state, which is the inverse of the “public goods” argument. This is referred to as “negative externalities.” The argument is that the production of some goods involves costs to society which the entrepreneur does not incur, and thus he does not factor these costs into his production function (these costs are said to be “externalized,” in that they are shifted to society, instead of being “internalized” into the good). Accordingly, the consumers of these goods, in paying a price that doesn’t account for these costs, are getting a “free-ride” on the backs of those who do suffer these costs but don’t get the benefit of the goods. Or, looked at another way, these goods are over-produced.

The state is therefore required to intervene to prohibit or reduce these externalized costs, or shift them back onto the entrepreneur.34

Pollution

The classic example given in this area is pollution. For instance, if an entrepreneur’s factory emits toxic chemicals into a river and this causes damage to people downstream who use the river’s water, but the entrepreneur does not have to pay for this damage, then, when he prices his goods for consumers, he would not need to factor in this pollution cost, and thus could offer consumers a lower price than if the entrepreneur were to factor in this cost. Those who suffer from the pollution damage therefore would bear some of the production costs, even though they didn’t buy the entrepreneur’s goods. This is supposedly an argument for the state to step in and regulate the entrepreneur, either to prevent such pollution, or to make the entrepreneur pay for the associated costs.

The main argument against this situation being a justification for the state is that the reason the entrepreneur “gets away” with not paying the costs of his pollution is due to a weak system of private-property rights. This is generally due to state interference with property ownership and the enforcement system. Too much property such as water sources, roads, parks, etc. is regarded as owned by the state instead of by private citizens, which means there is less efficient stewardship—no one takes care of property as well as someone who has their own financial capital invested—and no obvious defendants to sue when things go wrong.

In the above example, if instead the river were privately owned, then the downstream users of the river who buy their water from the river owner would take action against the river owner for supplying them with polluted water, and the river owner would have a strong interest in taking action against the entrepreneur for polluting his water. The action by the river owner against the entrepreneur would be for what is called “nuisance,” a well-established cause of action developed in the common law hundreds of years ago, whereas the downstream users who buy their water from the river owner would likely have a claim for breach of contract against the river owner. Faced with these actual or potential liabilities, the entrepreneur and the river owner (either on their own initiative, or as required by their liability insurers) would quickly take effective action to reduce toxic emissions, because this would be a cheaper way of running their businesses compared with being subject to continual liability (I will discuss the libertarian take on this issue in greater detail later).

Instead, statists argue that the state should (a) own the river, (b) direct the entrepreneur how to organize his operations, and (c) be able to fine (and ultimately imprison) the entrepreneur if he doesn’t comply with the state’s directives.

However, this is a very ineffective and an immoral system for regulating the relevant activities. As in many other parts of the economy, once the state moves in, it crowds out more effective private-sector solutions. This regime forcibly substitutes the inefficient state for those who have a direct interest in the outcome, and weakens the regulation against wrongdoers. I will elaborate on the deficiencies of a state regulatory regime below.

First, recall that the alleged justification for the state to intervene here is because the statist believes that the entrepreneur could externalize his pollution costs to society. However, when the state intervenes to try to internalize the pollution costs to the entrepreneur, the state externalizes the enforcement costs to society! Every state-instituted regulatory regime involves significant costs to set up and support large state bureaucracies to write, pass, and enforce regulations against entire industries, as opposed to against just wrongdoers within those industries. All taxpayers foot the bills for these enforcement systems, not just those who might benefit directly. In contrast, in a purely private-sector system based on private lawsuits, the enforcement costs—as well as the liability for pollution damage—would mostly, if not wholly, be internalized just to the wrongdoers.35

Second, the state will produce standardized regulations for an industry, which necessarily can’t take into account each entrepreneur’s unique production methods and situation. This “one-size-fits-all” approach can only mean overkill for some entrepreneurs, and too light regulation for others, when compared with a system of individual private lawsuits (or the mere threat thereof). Such lawsuits would impose a customized regime of damages to be paid by each individual entrepreneur who is guilty of wrongdoing, and thus would create incentives for each individual entrepreneur to fine tune his own situation (mainly to avoid such lawsuits in the first place).

When centralized regulations are overkill, this means an entrepreneur’s costs would increase by more than is just, thus artificially reducing his ability to supply goods, leading to higher prices for consumers. When the regulations are too light or are out of date, not only would this not prevent damage from occurring, but the entrepreneur who complies with the regulations would have less incentive to actually reduce his harmful activities, since he would have a valid defense to any lawsuit, namely, that he was fully compliant with the state’s (inadequate or antiquated) regulations.36

Even assuming that those writing the regulations have the best of intentions (which is a dubious assumption, as to which see below), given the reality of human imperfection, there is a huge difference between (a) having regulations imposed centrally from the top down, and (b) allowing regulations to develop from the ground up (via private lawsuits). If those at the state make a mistake issuing regulations, then it impacts millions of people at once; if a private-sector entity makes a mistake, then it only impacts those who interact with that entity. As noted earlier, we should all want the issues with human imperfection (whether incompetence or corruption) decentralized as far as possible, as opposed to becoming more centralized.

Statists tend to scream out for centralized state regulation in particular after the occurrence of a low probability but high profile accident. The mere fact that this event occurred is cited as evidence of the need for regulating the activity which caused the harm, and regulations may then be written to try to prevent this event from ever happening again.

However, what this inevitably leads to is society incurring all of the problems and costs associated with a state regulation just to mitigate a small risk; it takes no account of the benefits that accrue from the activity that accidentally caused the harm, which activity would be curtailed by the new regulation. It is as if the statist believes that it’s possible or desirable to eliminate all risks in life, no matter how small, regardless of the cost. Yet every action every person takes is fraught with risk: driving a car, crossing the street, flying on an airplane, etc. Each person has a different tolerance for assuming risk, as each person would implicitly first weigh up the perceived benefits against the perceived risks. How could the state assume that it could create a centralized regulation which satisfies every person’s benefit/risk trade-off calculus? Obviously this is an impossible task, so why take it on?

When regulations are written in response to an accident, this is usually due to some single-issue, special-interest group lobbying the state for the new regulation. In essence, then, what actually happens is that this group effectively rents the state’s coercive powers to impose the group’s benefit/risk assessment on everyone else.

Third, there is deeper point to make about the trade-offs that are ignored with centralized regulations. As noted above, every person has his own sense of how much risk he is prepared to assume; in the case of pollution, this means weighing up the risks to his personal health and/or property from the pollution against the benefits he expects to gain from the production activity leading to the pollution. Production activity, while creating pollution, provides goods which satisfy human wants, as well as employment opportunities. Probably the only thing we know for certain is that very few people, if any, would argue that zero pollution ought to be the standard by which we live. This would cause all production activity to grind to a halt, which would lead to a return to the significant human poverty and misery that was a feature of pre-Industrial Revolution society.

However, the level of pollution above zero that we should accept as the trade-off for production activity is where each person’s standard starts to diverge.

For instance, the least well-off might prefer more production activity and less pollution regulation (i.e., potentially more pollution), since their highest priorities would be the availability of affordable goods that meet their basic needs, and employment income to purchase these goods. As people become wealthier, it makes sense that they start to prefer less production activity in return for a cleaner environment; in this sense, a cleaner environment is a “luxury good.” We have seen this in operation all throughout history, and still see it today, whereby in those countries that are emerging from poverty, such as China and India, the populations are more concerned about production activity than the environment, but in the wealthier countries there is a tendency to prefer the inverse.

However, this is not just a principle that applies across national borders. Within national borders, even one as wealthy as the U.S., there is still a spread of preferences among the population. In other words, while in the U.S. there are those who would prefer less pollution even though it means less production activity, there are still many whose highest priorities are satisfaction of their consumption needs and steady employment, and, accordingly, they would be willing to live with more pollution. This is what statists overlook, or perhaps intentionally ignore. Those who are clamoring for more stringent, centralized environmental regulation are often the same individuals who have attained sufficient wealth such that they could now afford to “purchase” a cleaner environment. They never consider the costs that they are imposing on others who don’t share their views. While the cleaner environment is the visible outcome, there are unseen costs of less production activity, including the lower living standards of those who might not have made this choice, resulting from there being fewer or more expensive consumption goods, and fewer employment opportunities.37

For instance, statists like to point to the environmental regulations that preceded the improvement in the air quality in Los Angeles. This supposedly positive outcome is regarded as proof that the state “can get the job done” where the market “failed.” Leaving aside the issue of whether the market failed and why (since, as noted above, this is generally due to a weak system of property rights established by the state in the first place), the conclusion that the solution was positive for everyone concerned is dubious.

For the sake of illustration, let’s assume that there were local restrictions placed on production and driving activities in Los Angeles, and costly, mandatory “clean” vehicle production specifications introduced.38 Now consider the interests of those at the lower end of the economic spectrum who (a) lost their actual jobs when their factory had to shut down, move, or cut back due to higher regulatory costs, (b) were deprived of a potential job by the production that was now too costly to establish or expand, (c) had to pay more or endure other difficulties when buying a vehicle and/or driving to their jobs, and (d) had to pay higher costs for locally produced goods. Or consider those who similarly suffered because productive resources were drawn out of the economy to set up the state agencies to write, implement, and enforce these regulations, when these resources might have otherwise been used by the private sector to employ these people or produce more and cheaper goods for consumption.

Since a single trade-off was coercively imposed on everyone, we cannot say that the centralized solution was the most efficient way to organize scarce resources to maximize the satisfaction of millions of individuals given their different trade-off preferences.

In addition, such imposition by force was, of course, immoral.39

Fourth, what invariably happens when the state is involved in regulating industries is that the individuals at the regulating agency start to develop a career dependence on the industry’s survival, and a bias in favor of the regulated industry (this is known as “regulatory capture”). Leaving aside actual instances of trading favors between the regulated and the regulators, there are three natural, job-related reasons for regulatory capture.

To do his job effectively, the regulator needs detailed information on the regulated firms, and the only way in which he could get that data is from the regulated firms themselves. Thus, as the saying goes, he has to “be careful not to bite the hands that feed him.”

In addition, it is highly likely that the public wouldn’t pay much attention to the nuances of how regulations get written, but the regulated producers, for whom each regulation imposes new costs, would be all over the regulation-writing process and, as another saying goes, “The squeaky wheel gets the oil.” When the regulator has to decide between two choices on how a regulation is to be written, he cannot help but be influenced by the lobbying from the regulated producers, for which there is little to no counterbalance.40

Further, a regulator who creates too many problems for his industry puts his job at risk, since, without a healthy industry, his role would be less important or viable. Thus the regulator will be careful to impose regulations sufficient to look like he is doing his job, but not so severe as to cause real problems for his industry.41

For all these reasons, when the state gets involved, instead of implementation of effective, pro-victim regulation, we get a careful career balancing act by the regulator. In the pollution example cited above, the real interests of those downstream who suffer loss would quickly become of secondary importance relative to the regulator maintaining good relationships with industry participants.

Contrast this with victims pursuing private lawsuits against a polluting producer, which would put the interests of the victims first.

In fact, the history of environmental regulation in the U.S. is an interesting case study in regulatory capture.

Originally, before state-imposed regulation became the norm, the U.S. operated under a relatively free market in environmental regulation. The private tort lawsuit was the primary way in which producers were regulated; those individuals who suffered damage sued these producers, and won.

Over time, industrial producers found that this regime became too onerous, so these producers sought out the individual U.S. states to help stem the tide of these lawsuits. Producers preferred to become subject to the states’ regulations instead of private lawsuits, because they could have significant input into how the regulations were drafted, which they obviously saw as an opportunity to live under a friendlier regime.

However, as time went on, it became difficult for the largest producers to comply with the multitude of different states’ regulations, and some states became stricter than others. Thus producers sought out the federal government and, in an odd alliance with environmental activists, supported the creation of the Environmental Protection Authority. Producers decided that a uniform regulatory regime over which they would have significant influence would be preferable to state-by-state regulation.

Of course lost in all of this regulatory evolution are the actual interests of those who suffer damage from pollution but whose lawsuits are prohibited or stymied by the regulations promulgated through this regulatory capture process.

Fifth, and related to the prior point, even if the regulator were not captured by the regulated, the individuals at the state would act against the interests of the victims of an environmental problem if one of the state’s key cronies had a conflicting interest.

For instance, after the 2010 deep-water oil spill in the Gulf of Mexico, the U.S. federal government received a number of offers by foreign ship operators to use their advanced technology and highly relevant experience to contain the spill. However, the government rejected these offers because they involved using non-union labor, and labor unions are very important cronies of the state.

As explained earlier, unlike those in the private sector, the state has immunity from suit by private citizens who suffer damage from its decisions, and also the state cannot go out of business for failure to provide a valuable service. Accordingly, in the above situation, there was little risk to the state in keeping cronies such as unions satisfied, even though this conflicted with the state’s supposed environmental regulatory role; keeping the unions satisfied was a much more effective way for individuals at the state to advance their own interests than addressing the needs of the mere victims of the pollution.42

Sixth, consider under a state regulatory regime who actually benefits from regulatory fines paid by the errant producers. The fines are paid to the state to support the state’s operations, and many times it is the actual regulatory agency itself that benefits directly. Perversely, the fines are not paid over to the individuals who actually suffer losses caused by the relevant producers’ violations (see the example cited earlier relating to the tobacco-company settlements).43

Contrast this with private lawsuits, where those who suffer loss receive damages payments directly from the guilty defendants.44

The result of the state regulator being able to feed off its ability to levy fines is that this becomes one of its core objectives. Every organization is naturally interested in expanding its revenues because this enables its members to do more. However, this is particularly troubling when the organization is a state regulator, since it could write rules which would enable it to forcibly increase its revenues by conjuring up violations having nothing to do with punishing individuals for infringing the rights of others.

One of the most egregious examples of the state feeding off its regulatory activities (although unrelated to pollution) is the “civil-asset-forfeiture” legislation in the U.S. This empowers the police to seize private property as part of the “War on Drugs,” without the owner even being arrested, never mind convicted. Based merely on a suspicion that property might have been used in activities relating to illegal narcotics, the police regularly seize cash, vehicles, houses, etc. The owner has to go to court to try to free his seized property and, unlike in any other area of the law, the burden is shifted to the owner to prove a negative, namely, that the property is not being used in relation to illegal narcotics (note that the state could prevail even if someone other than the owner had used the property for these purposes). This process is very difficult and expensive for the owner, whereas the state could spend taxpayers’ money—including the owner’s—on court proceedings to contest the owner’s arguments.45

What happens to the seized property? Federal legislation and some states’ legislation allow the police to keep all or a portion of the proceeds they seize or can obtain from selling the seized property. This creates a strong incentive to seize more property, because such proceeds supplement the budget that the police receive from taxes; indeed, this is why such seizure has increased dramatically over time (what police force doesn’t want more money to spend on shiny new equipment?).46

This regime sets up some strange incentives. For instance, if the police seize drugs, then it is hard to legally monetize them, and thus hard to supplement the police budget. Yet if the police first allow drug traffickers to sell their drugs, then the police could seize the cash proceeds, which would be much easier for the police to benefit from. There are actually cases where it has been shown that the police allowed drugs to be sold before moving in to seize the proceeds. So much for civil asset-forfeiture being a tool to combat the drug trade.

In addition, given the financial incentives for the police to focus on civil asset-forfeiture, and therefore on the “War on Drugs,” they devote less time and fewer resources to dealing with actual violent crimes, such as murder, theft, rape, etc. Working on those violent crimes just doesn’t have the same payoff for the police, and there is no downside to allocating their resources in this manner. If the rates of these violent crimes increase, then the police cannot get fired; in fact, if violent-crime rates increase, then typically statists will then support the police’s request for an even larger taxpayer-funded budget.

Note that the “War on Drugs” is clearly an immoral “war.” When A puts a drug in his body or sells a drug to someone who wants it, he harms no other person; it is a victimless “crime.”47 Since A has caused no harm, it would be immoral to punish him by imprisoning him or seizing his property, as this would constitute unjustifiable coercion by one man against another. Yet that is exactly what happens with civil asset-forfeiture, making it an immoral action in furtherance of a phony, immoral “war.”

And, perversely, the spoils of this “war” enrich the only aggressors in this whole ecosystem, namely, the police. Precisely because there are no victims in these “drug crimes,” there is no one else to whom the proceeds could be paid over. That should tell us something.

Enforcement Issues

Statists also argue that, in two respects, state-based regulation regarding negative externalities is a more efficient system of enforcement than private lawsuits.

The first argument statists make is that, in some cases, it might be difficult to show sufficient evidence in a private lawsuit that an entrepreneur accused of, say, pollution damage, is actually guilty of causing a loss to someone, but he should nevertheless be held liable if he violated the state’s regulations.

The retort to this is quite obvious: a just system of punishment requires symmetry, namely, if A is to be punished by suffering some physical loss, such as a fine or imprisonment, then this should only occur if he has actually first caused some physical loss to B. Merely violating some arbitrary regulations established by individuals at the state is not sufficient to justify physically sanctioning A. Accordingly, if the evidence of loss and causation cannot be satisfactorily adduced by B in a private lawsuit, then, by definition, A should not be punished. To argue in this instance that the state should be able to penalize A as if he were guilty, merely for breaching the state’s regulations, makes decisions about guilt and innocence completely arbitrary. The standard becomes violation of a regulation, rather than causation of loss.

Statists also believe that the state regulator would be more effective than private parties at collecting the required evidence, because the state has independent agencies which specialize in this type of thing. However, this overlooks three points.

First, since the state’s “independent” agency is staffed by humans who have their own interests, namely, job security and expansion, the agency’s activities are likely to be geared towards whatever would support those objectives. This may mean being sympathetic with industry participants (regulatory capture), or hiding the agency’s errors, safe in the knowledge that, unlike in the private sector, no state agency is ever bankrupted for incompetence. Such agencies also tend to purposely increase complexity, by creating many processes and procedures for industry participants to follow—the intricacies of which are known only to the agency’s personnel, and the relevance of which to the perceived issues at hand may be quite tenuous—thereby increasing the scope of the agency’s activities and the importance of its role, coincidentally providing support for increased budget requests.

Second, state agencies don’t offer their personnel the same compensation structure as in the private sector. There is no upside reward for satisfying end-users, and there is no personal financial or career risk in causing delay, complexity, or increased costs for those with whom the personnel interact (nor for preferring on-the-job leisure). Accordingly, such agencies tend to hire lower-quality staff who are less focused and motivated than those in the private sector.48

Third, there already are independent agencies in the private sector, such as Consumer Reports, UL, and private detective agencies, and there are good reasons to believe that more such agencies would arise and prosper in the free market.

For instance, an entrepreneur’s liability insurer would have to indemnify the entrepreneur against successful damages claims by individuals who have suffered loss caused by the entrepreneur’s polluting activities. This means that the insurer would have a very strong interest in trying to prevent the entrepreneur from causing such losses in the first place. Accordingly, the insurer may look to hire a private, outside consultant to suggest ways to make the entrepreneur’s processes environmentally safer, and to monitor compliance.49

This consultant would have its business reputation at stake each time it takes on a client, and thus it would be motivated to do a good job in suggesting effective processes, and monitoring the entrepreneur. If the consultant did a poor job, then it would lose business from insurers in favor of those of its competitors that do a better job. Contrast this with the state’s agency, which has no competition or financial incentives to motivate it to be highly effective.

The second statist argument in favor of state enforcement is that often times it might be difficult in a private lawsuit for a plaintiff to round up all the relevant defendants. For instance, if someone living next to a highway were suffering damage from exhaust pollution, then he might want to sue all the drivers who have poor exhaust controls, but this is impracticable. However, this example only reinforces why the existence of the state is problematic. The easy way to resolve this problem would be to sue the owner of the road for allowing cars with poor exhaust controls to drive on its property, but the problem is that the owner of the road is normally the state itself, and, as noted earlier, the state has immunity!

If roads were fully private, then the resident could sue the road owner. In addition, faced with this prospect, the road owner (either of his own volition, or as required by his liability insurer) would likely experiment with various processes to prevent cars with poor exhaust controls from using his highway.

The state has no such incentive. Even where it does appear to take action to forestall such problems, it would likely be “captured” by the motor vehicle manufacturers (or any other interest group that is better organized than the residents living next to the highway).

The State Itself Creates Massive Negative Externalities

The final point to make about the alleged necessity of the state to prevent negative externalities from arising is that, in arguing this, the statist doesn’t take into account that the operation of the state itself creates many substantial negative externalities. In fact, perhaps it is only the state that could actually create negative externalities on a grand scale.

Most directly, and as already noted above, if the state imposes taxes or regulations on private firms to try to deal with alleged, potential negative externalities, then the costs of those taxes or regulations incurred by these firms may cause existing firms to relocate or reduce their operations, thereby creating a negative externality in terms of local employment. In a similar vein, firms not already operating in that area may shelve their plans to establish operations there, thereby creating a negative externality in terms of potential jobs foregone.

For a more general example of the state’s impact, consider that the users of state services usually don’t pay their full cost directly, because provision of these services is also funded by (i.e., externalized to) taxpayers who don’t use such services. This leads to relative under-pricing and thus over-use of these services. This is precisely the logic used by statists to argue against the free market when it comes to negative externalities and the environment, so why is this not an argument against the state when it comes to the services it provides?

For a further example, consider the issuance of state bonds, which is how the state borrows money from investors. The state typically takes these borrowed funds and “invests” them in various state programs.

In the private sector, typically a borrower would only borrow funds if he anticipated that the project or business in which he proposed to invest the funds would yield sufficient proceeds at least to repay the loan and interest (but hopefully more). This is because: (a) the borrower personally has to repay the loan, even if the project or business fails and, if it fails, then he would have to dip into his other assets; and (b) borrowers who develop a reputation for not repaying loans would develop poor credit records, and then would find it difficult to borrow from other lenders in the future.

On the other side, a private-sector lender would undertake a similar type of repayment analysis to try to ensure that his loan is sufficiently “safe,” and that the interest rate he is charging is appropriate for the risk.

Yet when the state issues bonds, neither the lender (the buyer of the bonds) nor the borrower (represented by the responsible individual at the state) really expects that, nor particularly cares whether, the proceeds will be used in a productive manner to enable repayment of the loan plus interest. In fact, neither party bothers performing a project evaluation, and the lender charges a very low interest rate, as they both regard the loan as “riskless.” This is because both parties know that, regardless of how the proceeds are used, the individuals at the state could always repay the loan through future direct taxes (forcibly seizing taxpayers’ income), or through the implicit tax of monetary inflation (by creating new money).50

Accordingly, the individuals at the state can borrow money for their pet projects—which brings significant benefits to state personnel in terms of rewarding their cronies and other supporters—and externalize the costs of those loans onto taxpayers. Thus there is a significant, relative over-production of state-bond issuance.51

As a final example of the state causing negative externalities, consider that there are unseen negative externalities that arise from the thousands of regulations that already exist, and the new regulations that are implemented by the state each year.

It is impossible for the average citizen to be knowledgeable about the vast majority of these regulations, many of which are vague and thus subject to expansive interpretation, are at odds with local custom, and have nothing to do with protecting private-property rights (in fact, most of them violate private-property rights); indeed, it is likely that each of us is violating some regulation each day of our lives.52 It is also impossible for the state to realistically enforce all or even most of these regulations against everyone who violates them. In addition, since no one knows in advance which new regulations will be passed each year—although everyone knows that there will be more coming—we live under a highly uncertain legal regime. Thus regulation and enforcement are seen as incomprehensible and arbitrary, instead of understandable and principled.

As a result, there is a complete loss of respect for “the law,” which has significant, negative cultural implications for society. This leads to a loss of respect for law-makers and law-enforcers, growth of “grey” and “black” markets, increased conflict in society, as people see themselves racing against their fellow citizens to try to get regulations written and enforced in their favor, and increased opportunities for official corruption.

Yet the statist never considers these negative externalities when arguing for the state. And because these negative externalities from regulations are not factored in, we get a massive, relative over-production of regulations.

Myth #12: We Need the State to Deal with Anti-Competitive Behavior

Another twist on the idea of “market failure” is that statists claim that we need the state to curb so-called “anti-competitive” behavior by entrepreneurs. The legislation which has been passed in the U.S. to combat this behavior is known as “anti-trust” legislation. The argument runs that large firms will try to bankrupt their smaller competitors by undercutting these competitors’ prices at loss-making levels, so that the large firms could attain monopoly status (so-called “predatory pricing”), and then afterwards these large monopolists would cut production and jack prices up to very high levels, so that they could generate significant profits (so-called “monopoly pricing”). Apparently, only the state can act to thwart this societal menace. Well, this argument is wrong in many respects.53

First, this phenomenon has never happened. This whole idea is merely a theory; there is not one single example of this occurring in U.S. history prior to the anti-trust legislation being passed. In fact, prior to passage of the legislation, the industries that have often been cited as the monopolistic villains justifying such legislation were actually increasing production and lowering prices faster than what was happening in the overall economy.54

Second, it makes no economic sense for an entrepreneur to engage in this practice.

Customers would stock up at the unusually low prices and simply shift their demand from the future to the present, so that when the entrepreneur later jacks up his prices, demand would be lower than it otherwise would have been.

Further, the losses could be potentially enormous for a large firm operating in many markets. Such a firm would have to price at a loss in each market to drive out all competitors in those markets.

In addition, once the entrepreneur has bankrupted his competitors and jacks up his prices, he would create the impetus for new competitors to enter the market and offer customers a better value-proposition. In fact, the new competitors would be able to purchase the bankrupt former competitors’ assets at bargain prices, and thus be even more effective competition for the incumbent.

Third, the whole notion of anti-trust legislation is actually anti-consumer. The purpose of economic activity is to organize scarce resources to maximally satisfy consumer wants. Consumers benefit significantly from lower prices and, if firms want to engage in pricing wars, then all the better for consumers. No “predatory pricing” complaints ever come from consumers (why would consumers complain about lower prices?!); these complaints always come from the inefficient firms in an industry, which are trying to enlist the state’s help to combat the lower prices offered by the more efficient firms.

However, in protecting firms that are inefficient—in that they are doing a relatively poor job of organizing scarce resources to satisfy consumer demand—the state only helps these less effective entrepreneurs tie up resources, when these resources could be better used by the more effective entrepreneurs.

Statists often retort that if inefficient firms go out of business, then jobs would be lost, but this is essentially an argument that it is more important to protect jobs than to satisfy consumer wants. We can see how absurd this idea is through a thought experiment. Imagine a world where all material consumer wants are satisfied by a deity, so that no one needs to work (although people could still choose to do so); in this world, everyone could devote their lives to leisure activities if they wish. Now consider a world where everyone has a job, but the job is to break large rocks into small stones; while everyone has a job, no one’s actual wants are satisfied. In which world would you rather live? I repeat, the purpose of all economic activity is to satisfy consumer wants, not to provide jobs.

To the statist’s follow-up argument that the state needs to use anti-trust enforcement to strike a balance between (a) allowing firms to satisfy consumer wants, and (b) protecting jobs, one could respond in two ways. First, who at the state is so omniscient to be able to strike this exquisite balance, knowing the wants of all relevant consumers and the economics of all relevant firms? Second, on what moral basis does anyone at the state have the right to forcibly interfere in the peaceful trades between entrepreneurs and consumers?

Anti-trust legislation is just another example of crony capitalism, where the weaker firms engage in political lobbying—making the “jobs” argument—to rent the state’s coercive powers to help them compete.

Fourth, enduring monopolies are only a feature of a statist system; a monopoly cannot be sustained in the free market.

In the free market, customers only purchase products voluntarily, and entrepreneurs are free to enter an industry as new competitors at any time. Even if at any one point in time there is only one producer in an industry, if he is not supplying the right types of products at the right prices, then customers would abstain from purchasing. This would then create an opportunity for other entrepreneurs to enter the industry to serve the unsatisfied customer demand.

Just because other entrepreneurs have not entered the industry at any particular point in time doesn’t mean the incumbent is doing anything wrong. In fact, just the opposite: if his products are in demand, then he should be lauded as the only entrepreneur who is currently satisfying customer demand! Think of all the individuals in society who are not taking business risk to try to satisfy this demand. They are the problem, not the incumbent.

Statists claim that there are some industries where the upfront financial capital investment required is so large, that long-run average costs would decline significantly as output expands, and thus a single producer would be able to produce at a lower cost than two producers, and hence offer lower prices. As such, this theory states that consumer welfare would be maximized if there were only one producer, the so-called “natural monopoly.” Yet history shows that, absent state interference, (a) there has never been an instance of a single producer attaining lower long-run average costs than everyone else, thereby establishing a permanent monopoly, and (b) in every industry where it is claimed that a “natural monopoly” exists (e.g., utilities), there have been multiple producers. What the statist really means by a “natural monopoly” is that he believes that this product should be produced and priced in a particular way, and he cannot conceive of how multiple entrepreneurs and capital-providers, through trial and error, might be able to figure out how to produce it in a competitive environment at prices that customers would be willing to pay. It represents the arrogant substitution of the statist’s intellectual limitations for the combined intellects of market entrepreneurs.

Only the state can create a sustainable monopoly, through granting an exclusive license to a firm to operate in a particular territory. This is what happens in those industries in which the state has determined a “natural monopoly” is appropriate. The entrepreneur who obtains this license—usually he is the most effective at lobbying, rather than being the most effective organizer of resources—has the state’s power backing his monopoly status, meaning the state makes it illegal for any other entrepreneur to compete. There is nothing “natural” about that at all.55

Fifth, the idea of the state enforcing anti-trust legislation against perceived monopolies is really just a cruel joke. It is a perverse self-contradiction that the state—which is itself a coercive monopoly—acts to prevent private-sector monopolies from arising. Yet it exempts itself and its friends (the “natural monopolists”) from this regime.

Myth #13: The “Hobbesian Fear”

Probably the most common reason a statist will cite to justify the state is what is known as the “Hobbesian fear.” This refers to the concept that, without a state, everyone would be at constant war with everyone else, because this is man’s nature.56

Under this line of thinking, the only way to prevent this constant state of war is to have a strong state, which is defined as an entity with a legal monopoly on the use of violence in a given geographical territory. The idea is that this state would use (or threaten to use) force to prevent citizens initiating aggression against each other (as well as to protect them from foreign aggressors). To keep the peace, the state would be the only entity entitled to adjudicate disputes in its territory, including those in which the state itself is a party. In order to fund its operations, the state would be able to levy taxes on its citizens.

At this point, a number of rather obvious objections to this line of thinking should be jumping out of the page.

First, it’s important to recall that “the state” is not an entity that can actually act; only individuals can act. Thus “the state” is just a code word for a select group of individuals.

Re-framed that way, what the Hobbesian argument is actually saying is that, in order to prevent person A from initiating or threatening aggression against person B or his property, and vice versa, person S is required to “keep the peace.” However, what is it that S is actually doing in this function? Assuming either A or B has not explicitly consented to this arrangement (as to which, see the earlier discussion about true consent), S is forcibly expropriating some of the income of A and/or B (in the form of taxes), and forcibly telling A and/or B how they may live their lives and what they may do with their bodies and property (in the form of regulations). In other words, S is himself initiating or threatening aggression against A and B and their property.

This creates a self-contradiction: the alleged property protector is actually a property expropriator and violator. S might be ensuring peaceful relations between A and B, but the cost of this is S doing to A and B what they can no longer do to each other.57 Thus we’ve simply substituted one Hobbesian danger for another. This is best illustrated by how the state acts against its own citizens when it is engaged in hostilities with declared “enemies,” ostensibly protecting its citizens against such threats.58

For instance, in the U.S., the state has always used war to expand abuses against its own citizens. Examples include: enslaving citizens through military conscription to fight its wars (during the so-called “Civil War”,59 World Wars I and II, the Korean War, and the Vietnam War); outlawing criticism of the state and its key personnel, including censoring or closing down the press (through the 18th century Alien and Sedition Acts; by President Lincoln and his supporters during the “Civil War”; and again by the federal government in World Wars I and II); harassing, incarcerating, plundering, torturing, and executing people supporting or merely suspected of supporting the enemy (by President Lincoln and his supporters during the “Civil War”; the internment of those with Japanese backgrounds during World War II; the harassment of those suspected to be Communists during the Cold War; and, as part of the “War on Terror,” using drones to execute Americans deemed by the president to be appropriate targets); covertly tapping into private network communications under the pretext of needing to ferret out the enemy within (most recently with the PATRIOT Act powers, and National Security Agency eavesdropping);60 and increasing the forced confiscation of its citizens’ income to pay for these hostilities, through higher taxation.61

Note that the alleged “threat” identified by the state as a pretext for its actions could sometimes simply be an inanimate object, such as in the “War on Drugs.” Some of the state’s abuses listed above are now regular state actions in this faux war. The state’s police are now highly militarized, and engage daily in many violent raids on its citizens’ properties in search of the nefarious illegal narcotic, leading to death, injury, and property destruction.62

In addition, the state’s police track citizens’ movements,63 seize their property, and generally ruin their lives for countless other victimless “crimes.” These “crimes” are merely violations of arbitrary, state-created regulations, whereby individuals at the state tell citizens how they may live their lives and use their bodies and property.

The ability to forcibly control the population is a powerful “drug” for individuals at the state, but they need to keep coming up with new pretexts to keep selling this to the population. This is why the state is forever creating hysteria over “crises,” where it can roll out “experts” to argue speciously that, without state intervention, the probability of death, destruction, economic impoverishment, and/or misery is substantial. Consider how the state has used the swine flu, Y2K, the occasional mass shooting, 9/11, global warming/climate change, the Global Financial Crisis, inequality, racism, Ebola, ISIS, the “Iran threat,” the “Russia threat,” trade deficits with China, illegal immigration, etc. to justify significant action by the state to forcibly interfere in citizens’ lives.

So, given all of this, I say, thank heavens for S! Where would A and B be without him?

Second, in what other area of life does it make sense for one man to allow a second to adjudicate disputes between the two of them, and for the second to tell the first how much it will cost him for this alleged benefit? The fact is, no man in his right mind would explicitly agree to this type of arrangement.

Third, the Hobbesian argument claims that the true nature of man is to go to war with his fellow man, instead of first looking for a way to peacefully resolve disputes. However, S is just as human as A and B. Thus if the true nature of A and B is to be at each other’s throats, then that must also be true of S. Why then does it make sense for S to rule over A and B?64

Fourth, we ought to question the assumption that man’s true nature is to go to war with or otherwise aggress against his fellow man. It is clear from everyday life that the vast majority of people do not commit violent crimes against their fellow men or their property, even when there is little to no risk of getting caught.65 It is rarely the fear of punishment that produces this outcome but, more likely, one or both of the following reasons: (a) it is personally safer and cheaper to avoid violence, and to establish norms to settle disputes peacefully; and (b) man’s innate sense of right and wrong.

Moreover, if the Hobbesian assumption were true, then mankind would have died out long ago; the fact that it hasn’t, even when there were no strong states for long periods of time, shows that man is capable of devising non-violent means to resolve disputes.

As much as we are troubled by individual violent crime, it still constitutes a very small percentage of human activity. On the other hand, state-caused violence—external war or internal repression—is a much larger source of death in the world. This is because the individuals in charge of the state don’t have to get involved in the actual violence, or directly bear its cost.

Fifth, if we need a state to prevent the initiation of aggression among citizens within a state, then shouldn’t we also require a state to prevent the initiation of aggression among the individuals running different states? Those at the state are human too, and thus, if there is no world government, then wouldn’t they initiate aggression against the individuals running other states?66 In other words, if the “Hobbesian fear” argument is true, then why should we ever settle for more than one state in the world?

Yet if you ask anyone who is part of running a nation-state if they too should be coercively governed by a higher power, the response is a resolute “no.” They point to the concept of state sovereignty: internationally, all states are equal, none can rule over another, and all actions between states are generally worked out by consensual agreement. However, these state entities are just collections of humans. In other words, those at the state believe that they are equal with, and can work things out peacefully with, their fellow statesmen. But, importantly, they don’t believe that their own citizens could work things out peacefully among themselves without a coercive ruler.

If these individuals at the state regard themselves as having sovereignty vis-à-vis other statesmen, meaning the full right and power to act without any coercive rule by these other statesmen, then why couldn’t all individuals within their state claim similar sovereignty? Is there something magical about a geographical area known as a “nation-state,” such that within this area there is no respect for individual sovereignty, but as between the rulers of different nation-states there is?

Sixth, if the “Hobbesian fear” is truly the justification for the state’s legitimacy, then the state should be strictly limited to two activities, namely, preventing violence against its citizens and resolving disputes; essentially, police, national defense, and courts. Yet the modern state undertakes hundreds of activities costing billions of dollars per year that have nothing to do with “keeping the peace.” Perversely, many of these state activities actually involve outlawing peaceful activities by citizens (regulatory “crimes”).

Thus the state has grown well beyond its alleged Hobbesian rationale, rendering this argument even less credible.

• 1All references to the “state” in this book include all arms of the state: the legislature, executive, judiciary, bureaucracy, agencies, etc. While they each have different functions, substantively they are all funded in the same manner, they all have the same inherent characteristics, and they are all responsible for appointing one another and/or working together. The differences between these different arms of the state are trivial compared with the differences between how the state acts and how private citizens act, which is one of the key points of this book.
• 2In this book, when I talk about “moral acts” and “morality,” I am referring only to an evaluation of inter-personal behavior, and not to the evaluation of any actions only involving oneself, which might be better described as “virtues” and “vices.”
• 3I still believe that there is a role for utilitarian analysis, but not the one that is usually cited. If economists believe that a particular outcome would lead to greater benefits (however defined) than the outcome that would result from individuals acting based on their own preferences, then these economists should publicize their analysis and use it to try to persuade individuals to change their decision-making processes. The real problem with utilitarian analysis is that it is used by statists to justify forcing individuals to make different decisions, instead of merely trying to persuade them.
• 4The last term refers to Murray Rothbard, who was the libertarian historian, economist, and philosopher who really ignited modern libertarianism in the 20th century.
• 5Just checking that you were paying attention.
• 6In the case of resisting prison labor, the punishment would be a longer sentence than would otherwise be the case.
• 7If you want a pithier and more articulate version of this idea, read libertarian philosopher Robert Nozick’s piece, “The Tale of a Slave” in his book, Anarchy, State, and Utopia.
• 8Lest there be any confusion, for the remainder of this book I will use “coercive” to mean using or threatening force against those who don’t agree with the state’s existence or actions. Obviously the state is not seen as coercive by those who accept the state’s legitimacy in any particular instance under discussion.
• 9As the saying goes, under this way of thinking it would be reasonable for two wolves and a sheep to vote on what’s for lunch.
• 10The argument would be similar within a U.S. state with respect to that state’s constitution.
• 11As libertarian attorney Stephan Kinsella has put it, it’s as if statists are saying that only the first generation had the freedom to make a choice, but no subsequent generation had or will have this freedom.
• 12This is not an entirely fair analogy, since it is conceivable that Customer Service representatives might be paid to retain customers, and thus they might try to be helpful when you call. On the other hand, Supreme Court justices are appointed for life, regardless of how helpful or destructive their decisions might be to the cause of liberty.
• 13In the U.S. (although this is likely true elsewhere too), as populations have grown substantially, the increase in the number of elected representatives has not kept pace, thereby increasing the number of people “represented” by each elected official well beyond what might have been considered reasonable originally. For instance, the Constitution specifies a minimum House of Representatives district size of 30,000; today, the average is over 730,000 (put another way, were the House of Representatives to operate at that original ratio, there would need to be over 10,000 members). This severely further diminishes any notion of “representation” of any individual voter’s interests by his elected member of Congress.
• 14To renounce U.S. citizenship is not easy, fast, or cheap. One must fill out a number of forms, participate in several interviews with the state, pay a fee of over $2,000, obtain a certificate of renunciation, and pay an “expatriation tax” on one’s entire wealth. The relevant legislation also requires publication of one’s name in the Federal Register, meant to “shame” those who expatriate, and expatriates can be barred from re-entering the U.S. if the state determines that they expatriated to avoid U.S. tax legislation (generally the main reason for most!). Moreover, the Internal Revenue Service (IRS) has the power to direct the U.S. State Department to revoke or not renew a citizen’s U.S. passport if the IRS claims that the citizen owes more than $50,000 in back taxes (note, the IRS does not have to prove this, just allege it).
• 15One way to effect this governance separation would be through secession, which I discuss in more detail later.
• 16The astute reader will note that the state is no different from the Mafia in this respect.
• 17It would be a circular response for a statist to retort “Because the Mafia is criminal but the state is legitimate.” We are here asking why the state is legitimate when it does exactly what the Mafia does.
• 18Other renditions include for the “general welfare” or the “public good.”
• 19Note that it is possible for a group of people to contractually agree to a common objective, such as in a homeowner’s association. But that is a voluntary arrangement in which each member explicitly consents to the definition of the objective, in contrast to the state, which forces a definition upon everyone, whether they agree to it or not.
• 20To the statist who responds that it is impractical to have continuously changing definitions of the “common good,” and that once an election cycle is the best we could hope for, I would respond that this is precisely an argument for the stateless society. In that society, each individual could continuously change and acquire his preferences at his own pace, regardless of what others want, without coercing others into his regime nor being coerced by others into theirs. Just because the statist cannot imagine a better system doesn’t mean such a system cannot exist.
• 21In addition, as explained by the public choice theory branch of economics, it’s not even clear that the majority view prevails in political deliberations. The sequence in which proposals are put up for debate and vote, and the framing of those proposals, impact the actual outcome, which does not necessarily match the alleged preferences of the majority. The individuals who control the proposal process have a huge degree of influence.
• 22As libertarian economist and philosopher Walter Block has noted, there are over 30,000 deaths each year on state-managed roads. Imagine if there were this many deaths on private properties, such as in malls, parking lots, or department stores. There would be public outrage, a loss of confidence in the managers of these properties, and calls to do something about it. Yet there is virtual silence from the public about the state’s appalling road management.
• 23Perhaps by one of the Tooth Fairy Theories?
• 24Not to mention (but I will) the fact that since those at the state can prohibit peaceful individuals from doing relatively mundane things with their person and property, such as opening a business, renovating a house, etc., state personnel can and do extort favors from private individuals in return for not enforcing these prohibitions.
• 25Strictly speaking, there are private-sector security firms and arbitration tribunals operating in parallel with the state’s police and courts, respectively. However, taxpayers have to pay for the state’s provision of these services even if they choose to use private-sector alternatives. Thus the total cost to a taxpayer of using these alternatives is significantly higher, making for an uneven playing field (and only the well-off can afford to use the generally better private-sector alternatives). The state also coercively limits the activities of private-sector security firms.
• 26Imagine how much success an underperforming private vendor would have if he tried to increase his pricing!
• 27Of course those statists who subscribe to one of the Tooth Fairy Theories would object to this characterization, but that rejection practically indicts itself.
• 28Statists may respond that state personnel sometimes do get regular feedback from polls. However, polls group individuals into artificial categories rather than treating them as individuals, so they don’t reveal individual preferences. Also, polls suffer from sample size and bias issues. Most importantly, however, individual preferences are only revealed through purchase decisions, not answering surveys; the former has a real financial cost, whereas the latter is costless to the respondent.
• 29Another contributing factor to the police using excessive force in the U.S. is the fact that the police are increasingly recruiting or being trained by former soldiers who previously prosecuted the state’s brutal “War on Terror,” and are also using surplus military equipment from that conflict. Treating civilians like enemy combatants and the streets like battlefields, with the aid of military equipment and tactics, can only lead to bringing the brutality of war to our towns and villages.
• 30Note that these war activities mostly cause death, injury, and destruction to foreigners, for which state personnel are rarely held liable. Yet there is no cogent, logical principle which argues that death, injury, or destruction is excusable if the victim of a state’s violence is not currently under that state’s territorial control; that victim is still another human being.
• 31This thesis is laid out methodically in Hoppe’s book, Democracy—The God That Failed. Note that Hoppe is not suggesting that a monarchical state is acceptable, only that it exhibits characteristics that make it preferable to a democratic state. Hoppe’s thesis has been challenged in at least one academic article: see Jacek Sierpinski’s work, “A Critique of Hans-Hermann Hoppe’s Thesis on Lesser Harmfulness of Monarchy than Democracy,” Res Publica Revista de Historia de las Ideas Politicas, Vol. 19 Num. 2 (2016): 521–559.
• 32In using the term “democracy” here, I am using it loosely to describe any political system without hereditary rule in which the broad population elects government officials in periodic elections, where such officials are drawn from the general populace and serve for limited terms. Technically, however, “democracy” refers to a specific political system in which, among other things, there is unlimited majority rule and direct self-governance. Contrast this, for instance, with the U.S., which is not technically a democracy but, rather, a constitutional federative republic, because (a) there are elected representatives, and (b) in order to protect the minority, the majority is theoretically limited by a fundamental written law (the Constitution) and the system’s structure (different horizontal and vertical branches of government). However, for all purposes going forward I will treat the U.S. as a democracy, since the key point is to distinguish it from monarchies.
• 33Whereas war between monarchs was not ideologically motivated, but, rather, a limited dispute over specific property, democratic states make war on broad, nationalistic lines, and seek cultural, linguistic, and/or religious domination of the vanquished population. In addition, democratic states make “total war,” as will be discussed later.
• 34These trends in democracies are empirical, and, as with all historical events, it is difficult to use these observations alone to definitively conclude that this shows causation, as opposed to mere correlation. Thus one needs a plausible theory to explain the different types of decision-making and officeholders in democracies compared with monarchies, which is what Hoppe has attempted to do in his work.
• 35Although it should not be overlooked that dictatorships are states too, and in fact dictators sometimes come to power through elections or, once in office, hold elections as a means to justify remaining in power. While one may be skeptical about elections in dictatorships—due to claims of voter fraud, intimidation, and suppression, and limitations on opposing candidates—those issues are regularly cited as issues in democracies too! In any event, when we include dictatorships, the number of citizens or other subjects killed by their own state totals over one hundred million in just the 20th century alone (this excludes the millions of people killed in wars, which are also initiated by states of all types).
• 36While Germany was a totalitarian state by the time the German government invaded Poland in 1939 at the beginning of World War II, Adolf Hitler and his Nazi Party colleagues were duly elected into office in 1933 as in any other democracy. While the Nazi Party did not initially hold a majority of seats in the Reichstag (parliament), Hitler was appointed by President Hindenburg as Chancellor to head a ruling coalition. Subsequently, Hitler was given emergency powers by Hindenburg according to the Weimar Constitution, and the Nazi Party then won a majority in a general election (in which the Socialist and Communist Parties were banned and their voters intimidated). Hitler’s Enabling Law, which gave him vast power, was passed through a vote by the Reichstag, although members of the Reichstag who would presumably have voted against this legislation were not allowed into the Reichstag building at the time of the vote. This is when Hitler began his totalitarian takeover of Germany, and the vestiges of democracy began to disappear.
• 37The “War on Drugs,” like Prohibition, should really be called the “War on People Who Believe That They Own Their Own Bodies.”
• 38Note that, in many of these conflicts, the U.S. government was joined by the governments of other democracies (such as Australia, Canada, France, and Great Britain).
• 39For a chilling and thought-provoking discussion of drone aggression waged by the U.S. government in recent times, see Laurie Calhoun’s book, We Kill Because We Can.
• 40Note that there is also some “self-conflation.” That is, the rulers in a democracy promote, and many statists accept, the false notion that a threat to the government’s image, power, or continuity is a threat to civil society or individual citizens.
• 41Note that it’s not only in violent war that civilians are targeted by democratic states; when such states levy “economic war” against another state, such as through trade sanctions, the explicit purpose is to economically hurt the other state’s civilian population as a means of pressuring its government. (Of course the democratic state also hurts its own civilian population by levying such sanctions, since these sanctions prohibit its own civilians from freely trading with the civilians of the other state.)
• 42For an example in a democracy suggesting that this issue might not trouble statists, consider that, in the U.S., between 1861 and 1865, President Lincoln’s generals waged war on the citizens of the Confederate states, which actions many statists still support to this day. Of course one could also argue that, since this war followed the Confederate states’ secession from the U.S., this war was actually waged against a foreign nation’s citizens. In which case the statist could rest easy, morally speaking!
• 43For a very insightful articulation of the delusions that accompany modern warfare, see Laurie Calhoun’s book, War and Delusion.
• 44For an excellent discussion of what war does to a population, see the book edited by John Denson, The Costs of War.
• 45Note that not only do the rulers (and their cronies) benefit from war while not bearing its costs, but the most senior members of the state also receive significant personal protection against any blowback—paid for by the confiscated income of private citizens—in the form of massive amounts of armed protection wherever they go (while denying private citizens the right to be armed for their own protection), as well as underground bunkers to which to flee if there is an actual or threatened attack.
• 46One might have more sympathy for those in the armed forces who are conscripted by the state to fight its wars. Even then, the real honor should be reserved for those who flee conscription to avoid carrying out the state’s violence.
• 47Probably the most startling example of this in recent times is the fact that, as disclosed in 2012, during his presidency President Obama regularly presided over a “kill list,” whereby he ordered the murder by drone strike of designated individuals overseas, including Americans, none of whom had been tried and found guilty of any violent crime. While many of these strikes also murdered individuals not on the list, according to one report in The New York Times, the president had a formula for minimizing the official count of mistaken casualties that “in effect counts all military-age males in a strike zone as combatants . . . unless there is explicit intelligence posthumously proving them innocent.” This is quite a perverse reversal of the usual burden of proof required in capital crimes. Yet this shocking activity quickly ceased being a central discussion point in the U.S.; it appeared that the vast majority of the population didn’t know about, didn’t care about or, in the case of foreign policy hawks, actively supported, this horrific exercise of state power.
• 48Such person could assign or abandon this right, but that would be his voluntary decision.
• 49In today’s state “justice” system, to bolster the aura around the supposed infallibility of, and the supreme “justice” imposed by, the state’s court system, note how intimidating the setup is, almost as if there are some divine aspects to it. The judge wears a fearsome black robe, is seated higher than everyone else, may be supported by armed guards, and must be addressed using honorific terms (otherwise contempt charges might be brought against the miscreant). This is of a piece with other ridiculously childish aspects of the state, such as the aura created around, and forced respect given to, the presidency, the legislature, and the military. Respect and honor should be earned, not imposed, but the pomp and ceremony is important for the state’s illusion of superiority.
• 50For instance, according to a U.S. Department of Justice report from June 2012, just at the federal government alone in 2008 there were 40 federal agencies with over 120,000 officers authorized to carry firearms and make arrests. Unusual examples include the Department of Agriculture, the Department of Education, the Environmental Protection Agency, the Federal Reserve, the Fish and Wildlife Service, the General Services Administration, the Department of Housing and Urban Development, the IRS, the Bureau of Land Management, the Library of Congress, the National Institute of Health, the National Oceanic and Atmospheric Administration, the Park Service, and the Veterans Health Administration.
• 51According to the latest data from the U.S. Bureau of Justice Statistics, approximately one-third of the federal and state prison population in the U.S. (that is, approximately 520,000 prisoners) had been incarcerated for these types of non-violent, victimless “crimes.” Note that these numbers exclude another 700,000+ prisoners held in local jails and over 4.7 million individuals on probation and parole, for which “category of offense” data is not available, although undoubtedly a large number of these individuals were also incarcerated for non-violent, victimless “crimes.”
• 52To bolster its argument, the state typically claims that reducing private gun ownership would itself reduce violent crime, but that claim is demonstrably false: see John Lott’s book, More Guns, Less Crime. The aggressor rarely pays attention to gun-control regulations, or uses other means to conduct his violence, such as vehicles, knives, clubs, superior strength, explosives, etc. So the only effect of gun-control regulations is to disarm the law-abiding victims.
• 53A “plea bargain” is an agreement by a defendant with a prosecutor to plead guilty to certain charges without a trial, in return for other charges being dropped and/or the prosecutor recommending to the judge a potentially lighter sentence.
• 54If the victim tried to sue the prosecutor for negligence, then the prosecutor would likely benefit from the immunity principle discussed earlier, and of course the victim would have to sue the state prosecutor in the state’s own courts!
• 55Moreover, in some areas the state may actually prohibit a parallel, private civil action by the victim against the aggressor. Even where both actions might be run in parallel, findings in the criminal case could impact the outcome of the civil case, but the victim has no real input into or control over the criminal case.
• 56The U.S. Supreme Court has ruled that federal prosecutors and Federal Bureau of Investigation agents can use trickery, deceptions, and outright lies (including such things as disguises, verbal traps, and fraud) to help them extract information from a witness or person they are investigating.
• 57And note that the state uses the ordinary citizen’s income to fund possession of large amounts of firearms and ammunition to protect individuals at the state, while at the same time, through gun-control regulations, substantially limiting the ordinary citizen’s ability to use the same firearms and ammunition to protect himself.
• 58This concept is even more egregious when paired with the immunity concept described earlier: the police get the benefit of immunity when they do something wrong, and when they are wronged, their aggressors suffer greater penalties.
• 59Obviously I’m not suggesting that taxes are a “debt due” to the state, since taxes are forcibly mandated, as opposed to arising from a voluntary payment contract.
• 60In the U.S., quite apart from the IRS’s enforcement arm, there are other examples of armed tax collectors, such as the New York state government’s “strike force” to combat the heinous crime of trying to avoid payment of state taxes on cigarettes.
• 61“Tax havens” are simply states that have the temerity to charge lower tax rates than states like the U.S. might prefer. They represent tax-rate competition for higher taxing states, as they attract taxpayers (individuals and firms) who relocate to reduce the theft engaged in by their current state. And if there is one thing a state dislikes, it is competition.
• 62There is some irony to this entire point anyway. In the U.S., the largest danger to the ordinary citizen’s privacy is actually the federal government, which spends billions of citizens’ confiscated tax dollars each year intercepting citizens’ telephone calls and emails, and monitoring their web browsing and physical movement.
• 63In early 2015, the U.S. government’s program of capturing citizens’ license plates to track their movements around the country came to light. Ostensibly this database was first established as part of the “War on Drugs” but, as is often the case, it is now being shared broadly among various law enforcement arms for other reasons.
• 64Unless one believes in one of the Tooth Fairy Theories.
• 65Similarly, most people will perform acts of good, even if they aren’t forced to do so, such as leaving tips, giving to charity, helping a neighbor, etc.
• 66See footnote 64.