Fraud, Restitution, and Retaliation: The Libertarian Approach
In, Bryan Caplan's EconLog post Fraud and Punishment, Caplan comes down on the pro property side while Hayekian Will Wilkinson proclaims that "libertarianism is not Rothbardism" and chides Caplan and others for "conflating" the two. Leaving aside this dispute about who should be thrown out of the libertarian "church," I noted a few points made that were worth responding to at length. My comment there is reproduced below.
Regarding the contention that libertarianism doesn't prohibit fraud.
This was argued years ago by non-libertarian James Child. In this post, The Problem with "Fraud": Fraud, Threat, and Contract Breach as Types of Aggression, the "Fraud" section, I explain what is wrong with standard libertarian views on fraud (and with the criticisms of libertarianism in this regard, based in part on loose talk about "fraud). The problem is that people use fraud to mean basically "dishonesty," and in this usage it's hard to see why it's a type of aggression. If one has a coherent understanding of the nature of contract (a title-transfer theory along the Evers-Rothbard line) and property rights, then one has to understand fraud as some kind of misrepresentation that vitiates the consent needed for a title transfer to be effective. But I go into this in greater detail in that post, and in the articles linked therein.
(Regarding the term "coercion," I think this too is a term misused by libertarians--coercion is not a synonym for or even a subset of aggression; it's a type of force, and force can be justified or not. SEe my post "Coercion" is annoying, but coercion is neutral.)
Regarding the contention of Cowen "that not only punishment, but even requiring restitution, is contrary to libertarianism", because it's impossible to get restitution in some cases. Thus, punishment is unlibertarian, since it does not make the victim whole--so the argument goes.
The problem here is a common libertarian mistake of making restitution the goal of justice. Then someone like Cowen quite rightly points out that restitution really means making someone whole, but that this is a utopian, unattainable goal; and therefore, there's nothing to be done in such cases.
The mistake is in thinking restitution is primary and punishment is only secondary, or even impermissible--that the only force that is permissible is that used to enforce some kind of restitution, or perhaps as some kind of extended self-defense (putting down a standing threat, as Randy Barnett argues (see pp. 80- and n. 11, in the section "Standing Threats," in my Inalienability and Punishment); or as some kind of incapacitation)--but never pure "retribution" or punishment.
As I have laid out in detail elsewhere (Punishment and Proportionality: The Estoppel Approach; also Inalienability and Punishment; Defending Argumentation Ethics; and New Rationalist Directions in Libertarian Rights Theory), I believe the proper approach is to realize that justice is about giving someone their due, and what a victim is due is being allowed to respond in kind to the aggressor, within the limits of proportionality.
That is, libertarianism opposes aggression, the initiation of force. But it does not hold that the opposite of aggression is unjustified. The opposite of aggression--the initiation of force--is not "defensive" force, or "force used to enforce restitution"--but rather, "responsive" force--force in response to aggression. Force is thus either initiated, or it is in response to intiated force. "Responsive force" is justified; aggression is not.
Responsive force may also be referred to as retaliation, even punishment or retribution, but the latter concepts are probably best viewed as a type of responsive force, or one possible purpose of responsive force. As I note in Inalienability and Punishment (see the section "The Right of Proportional Punishment," at p. 84; see also Punishment and Proportionality),
an individual has a right to use force against an aggressor in response to aggression. This right to use force can be utilized for a variety of purposes: for self-defense during or before the act of aggression, for revenge, to obtain restitution, to prevent the aggressor from committing further crimes, or to deter others from committing crimes. What the victim wants to use the right for is his business. But the reason why a victim has a right to retaliate or defend against an aggressor is that the aggressor cannot sensibly withhold his consent to retaliatory, defensive, or restitutive force (these may be considered different types of responsive force, that is, non-initiated force, force which is in response to initiated force). To use related legal terminology, the aggressor is "estopped," or precluded, from denying the victim's right to use (proportional) responsive force, since such a denial would contradict the aggressor's view that the use of force is permissible (the view demonstrated by the act of aggression).
In other words, it is retaliation--the right to respond with proportionate force against the aggressor--that is the primary right the victim has under libertarian justice. Restitution is then seen not as some utopian, unattainable goal of making the victim whole (which is impossibe), but simply the ransom paid by the aggressor pursuant to negotiation backed by the victim's threat of imposing the rightful amount of responsive force he is entitled to impose.
Thus, in the example given about the tolen and destroyed painting, the victim has the right to do something similar to the aggressor--take the aggressor's property and destroy it (or not--up to the victim). This does not rest on any fallacious notion that there are property rights in value (there are not, as Hoppe shows--see here and here). But there is no reason to take into account the consequences to the victim, that are a result of an act of trespass (aggression), when determining the proportionality of the response.
Finally, let me note that just because the right to forcefully respond, including use of force for not only defensive or restitutive purposes, but also for retaliation or retribution, does not mean that we would expect a libertarian society to actually employ punishment often in practice. As I argued in Knowledge, Calculation, Conflict, and Law, a review essay of Randy Barnett's The Structure of Liberty, "It is ... more costly to seek punishment than to seek restitution. For this and other reasons, restitution would probably become the predominant mode of justice in a free society."
Nevertheless, acknowledging (and justifying) the theoretical legitimacy of punishment can be useful. For example, punishment (or a theory of punishment) may be utilized to reach a more objective determination of the proper amount of restitution, because a serious aggression leads to the right to inflict more severe punishment on the aggressor, which would thus tend to be traded for a higher average amount of ransom or restitution than for comparatively minor crimes. Especially offended victims will tend to bargain for a higher ransom; and richer aggressors will tend to be willing to pay more ransom to avoid the punishment the victim has a right to inflict, thereby solving the so-called "millionaire" problem faced under a pure restitution system (where a rich man may commit crimes with impunity, since he can simply pay easily-affordable restitution after committing the crime).
Moreover, even if punishment is banned (de facto or de jure) and is not an actual option--because of the possibility of mistakenly punishing innocents, say--an award of restitution can be based on the model of punishment. To-wit: a jury could be instructed to award the victim an amount of money it believes he could bargain for, given all the circumstances, if he could threaten to proportionately punish the aggressor. This can lead to more just and objective restitution awards than would result if the jury is simply told to award the amount of damages it "feels" is "fair."
This latter point is significant because, as noted above, restitution based on the idea of restoring the victim is, as Cowen notes, often impossible, so meaningless; for this reason, those advocating restitution usually are vague about the proper standard (since there is no proper standard), or just "punt" it to the juries or courts, much like Congress does when it uses vague terms in statutes or Constitutions such as "accommodate" in the Americans with Disabilities Act or "privileges or immunities" in the Fourteenth Amendment.
One final note. To claim that a murderer who is imprisoned is there unjustly is a confusion. It does not violate his rights, as I argued in Inalienability and Punishment. It is unjust for other reasons--for one, it's done by the state, which is inherently criminal and unjust; for another, it's paid for by tax dollars stolen from citizens; for another, it violates the rights of the victim by depriving them of either personal vengeance or a type of restitution.