WEBVTT NOTE Anarchy and Economies of Scale 1 00:00:00.000 --> 00:00:09.000 Before I get into the heart of my remarks, I just wanted to clarify that the title of the talk and your schedule 2 00:00:09.000 --> 00:00:14.000 had to do with economies of scale, whereas the title on my paper doesn't mention that, but 3 00:00:14.000 --> 00:00:18.000 that's because I realized when Mark asked me what the title would be, I told him the economies of scale, 4 00:00:18.000 --> 00:00:24.000 because that's what I originally wanted to work on, but then I realized as I started proceeding that 5 00:00:24.000 --> 00:00:28.680 The thing that I was going to use to try to solve or mitigate the alleged problem of economies 6 00:00:28.680 --> 00:00:34.120 of scale under anarcho-capitalist defense agencies was actually this neglected role 7 00:00:34.120 --> 00:00:39.360 of ideology and it had much wider implications and so that's why the titles are different. 8 00:00:39.360 --> 00:00:43.600 The other thing I want to say especially for those who may be listening to this and not 9 00:00:43.600 --> 00:00:50.800 seeing this presentation is apparently Chad is going to put on the, when you go to Mises.org 10 00:00:50.800 --> 00:01:20.800 So what's interesting if you're somebody who's a proponent of Rothbardian anarcho-capitalism is that actually there's a treatment of this in the literature which I was unaware of until Ed Stringham brought to my attention so I'd like to thank him publicly for doing that and there are in several fairly highly ranked journals there are actually people 11 00:01:20.800 --> 00:01:50.800 Treating Anarchy and so for those of you who are anarchists and you're going to be professional economists and you want to find some way to get published this is one route you might take and it's admittedly it's not a very popular topic and it's not I'm not saying it's easy to get published on anarchy but I found it's much easier than getting published on Eugen von Boehm-Bawerk's Capital Theory so it's depends it's a relative claim. So just to summarize some of the major things for example the most highly ranked paper or 12 00:01:50.800 --> 00:01:57.800 The first journal that I saw was in the journal Political Economy, the one by Hirschleifer, who's a fairly known economist. 13 00:01:57.800 --> 00:02:04.800 And there, he doesn't directly talk about Murray Rothbard or anything like that, but he does mention spontaneous order of the type Hayek talks about, 14 00:02:04.800 --> 00:02:10.800 and says anarchy theoretically could be a spontaneous order, and then he sets up a mathematical general equilibrium model 15 00:02:10.800 --> 00:02:16.800 and finds the parameter values for which anarchy is stable or for which it breaks down into pure chaos, 16 00:02:16.800 --> 00:02:22.920 or I think he calls it breaks up into something of a state all right so that's 17 00:02:22.920 --> 00:02:27.800 just one example and so just so you know that's where I'm coming from with this 18 00:02:27.800 --> 00:02:32.680 paper is I'm trying to get my foot in the door to the big mainstream journals 19 00:02:32.680 --> 00:02:36.560 that way and we'll see we'll see how that turns out but later on I'll try to 20 00:02:36.560 --> 00:02:40.440 give you more justification because as I was working on this some of the fellows 21 00:02:40.440 --> 00:02:44.820 were giving me the evil eye last week about seeing the deltas and gammas on 22 00:02:44.820 --> 00:02:48.980 my paper so I will try to come back and justify why is it that an Austrian 23 00:02:48.980 --> 00:02:53.060 economist is having a mathematical model in this paper but we can put that aside 24 00:02:53.060 --> 00:02:57.460 till the very end I will come back to the the model in the paper but right now 25 00:02:57.460 --> 00:03:02.700 let's just talk about the principles the basic ideas so a very common claim that 26 00:03:02.700 --> 00:03:06.860 people will make and that's what I tried to summarize in the second section of 27 00:03:06.860 --> 00:03:11.740 the paper is that anarchy and when I say anarchy I mean of the type that Murray 28 00:03:11.740 --> 00:03:19.740 Murray Rothbard advocated. So there's of course left-wing anarchists and they mean something different by anarchy. They mean the absence of private property. 29 00:03:19.740 --> 00:03:36.740 Of course, I'm not going to keep qualifying myself, but from now on when I'm talking about anarchy, I mean an absence of a state where private property still reigns and people have private legal systems and privately produced police and judicial services. 30 00:03:36.740 --> 00:03:42.740 So that's what I mean by anarchy. I'm just going to use that as a shorthand for that more complicated concept. 31 00:03:42.740 --> 00:03:48.740 So the claim against that specific arrangement has been addressed. 32 00:03:48.740 --> 00:03:54.740 For example, Sutter in the Southern Economic Journal has a long piece. 33 00:03:54.740 --> 00:03:57.740 And I was, as I said before, Ed Stringham had alerted me to these things. 34 00:03:57.740 --> 00:04:03.740 I just figured the only place you could go to read about Rothbardian defense agencies would be the JLS or the QJ. 35 00:04:03.740 --> 00:04:07.100 And that's incorrect. There actually are other journals. 36 00:04:07.100 --> 00:04:11.980 Tyler Cullen has published in a philosophy and economics journal on this topic. 37 00:04:11.980 --> 00:04:17.780 So what I'm saying to you is don't assume that we here at the Mises Institute know these great ideas 38 00:04:17.780 --> 00:04:21.100 and no one else has even heard of them and there's no way to get published except in our journals. 39 00:04:21.100 --> 00:04:24.260 That's not necessarily true. So just keep that in mind. 40 00:04:24.260 --> 00:04:30.180 But anyway, back to the claim, they say amongst other things that 41 00:04:30.180 --> 00:04:36.460 It's wrong to critique the state provision of police and judicial services 42 00:04:36.460 --> 00:04:41.540 and then contrast that with an open market in those services. 43 00:04:41.540 --> 00:04:45.380 The way you, for example, would, as a Rothbardian, you might say, 44 00:04:45.380 --> 00:04:47.540 the state shouldn't produce television sets. 45 00:04:47.540 --> 00:04:48.700 That would obviously be silly. 46 00:04:48.700 --> 00:04:51.740 There'd be no link there to consumer satisfaction. 47 00:04:51.740 --> 00:04:53.220 There'd be no competition. 48 00:04:53.220 --> 00:04:55.820 They wouldn't be able to calculate costs correctly. 49 00:04:55.820 --> 00:04:58.820 And whereas if we contrast state provision of TV on the one hand 50 00:04:58.820 --> 00:05:28.820 with market produced television sets obviously hands down the market would do a better job and by the same token why wouldn't the market produce judicial rulings and police services much more effectively and equitably than the state would so a lot of people are going to say no the difference is the crucial thing that separates the police and judicial services from every other type of good and service is that in order to have market exchange in the first place you need to have a stable system of property rights you need 51 00:05:28.820 --> 00:05:58.820 to have that better rock foundation before you can then go ahead and exchange those rights in the marketplace and the claim is specifically for today's topic that it's in some sense unstable and that these even if there weren't initially open competitive market for enforcement of property rights where you had private companies that hired armed agents and they went out and enforced claims that that would somehow 52 00:05:58.820 --> 00:06:05.580 Now, either break down into pure chaos or it would turn into a de facto state that because 53 00:06:05.580 --> 00:06:12.820 of economies of scale in particular, you wouldn't have hundreds and hundreds of little mercenary 54 00:06:12.820 --> 00:06:18.360 groups that you could go and hire to protect your property from your neighbor that of course 55 00:06:18.360 --> 00:06:22.720 it just seems obvious that rather than having all these little groups of a hundred employees 56 00:06:22.720 --> 00:06:27.060 each, somebody would just buy out everybody, they would merge because it's better to have 57 00:06:27.060 --> 00:06:57.060 and that after a while, you're going to have this huge group of armed people who basically can tell everyone else what to do and that they also are the ones enforcing property rights and so the claim is at that point, what's the difference between that and what the government does and Randall Holcomb goes so far as to say that at least if we establish a new government, we're going to be able to do that. 58 00:06:57.060 --> 00:07:03.000 our own government preemptively, we can set up a constitution and have a bill of rights and things like that. 59 00:07:03.000 --> 00:07:08.600 Whereas if we just sit back in an initial state of anarcho-capitalism and wait for the inevitable outcome 60 00:07:08.600 --> 00:07:16.800 when either some outside conqueror or a homegrown agency that gets so big that no one can stop it takes over, 61 00:07:16.800 --> 00:07:21.000 maybe that situation is going to be far worse than the limited government we have now. 62 00:07:21.000 --> 00:07:26.260 So that's a very typical claim you see and I in the paper documented several examples of this. 63 00:07:26.260 --> 00:07:32.980 So that's what I'm trying to address with my paper, that common claim. 64 00:07:32.980 --> 00:07:41.020 Before I can give you my proposed solution to that, or the thing that I think would greatly mitigate that problem, 65 00:07:41.020 --> 00:07:46.140 I needed to go off on a tangent in the paper and talk about the definition of anarchy, 66 00:07:46.140 --> 00:07:51.820 because I think it's relevant in this discussion that before we can argue about the pros and cons of anarchy, 67 00:07:51.820 --> 00:07:53.140 we need to be clear on what it is. 68 00:07:53.140 --> 00:08:23.140 and specifically what worries me is in a lot of these papers the way they try to get a glimpse of what anarchy would look like if Rothbard's ideas came to fruition is they say well let's look at black markets let's look at the way mafia groups interact with each other and that they claim is a good sample of what the entire society would look like if the government didn't exist and so it's an understandable view and I've even seen some people who are pro-anarchy 69 00:08:23.140 --> 00:08:29.460 make that claim because they say things such as look mafia groups aren't always 70 00:08:29.460 --> 00:08:33.740 shooting at each other that they it's organized crime right that there are 71 00:08:33.740 --> 00:08:39.460 rules and that's one of the functions that the mafia actually performs is that 72 00:08:39.460 --> 00:08:44.020 when criminals have arguments with each other over turf or what-have-you they 73 00:08:44.020 --> 00:08:47.060 don't just go shoot each other they have to get permission from someone higher up 74 00:08:47.060 --> 00:08:50.940 and in particular you can't go kill a made man unless you get permission from 75 00:08:50.940 --> 00:08:55.420 from the crime bosses and so and that's a valid point and I think that should be 76 00:08:55.420 --> 00:08:59.100 pointed out to people who really have just a completely naive view of what 77 00:08:59.100 --> 00:09:05.260 organized criminal behavior is like but actually I think that gives too little 78 00:09:05.260 --> 00:09:12.220 credit to a spontaneous order of a free market society because let me just back 79 00:09:12.220 --> 00:09:18.780 up again the the view is look here are these criminal groups they go out and 80 00:09:18.780 --> 00:09:25.780 and they engage in gambling and they have loan sharking and they run prostitution rings and so forth 81 00:09:25.780 --> 00:09:29.780 and then if somebody is doing something they don't like and the guy's not protected, what do they do? 82 00:09:29.780 --> 00:09:31.780 They kill him and they dump his body in the river. 83 00:09:31.780 --> 00:09:35.780 They're doing all these things that are against what the state says the law is 84 00:09:35.780 --> 00:09:41.780 and then they don't even get punished for it because they've got a few policemen and judges on their payroll. 85 00:09:41.780 --> 00:09:46.780 So clearly these people aren't affected by the law that the state promulgates 86 00:09:46.780 --> 00:09:52.580 And so it seems as if that's the way people behave when they're not constrained by a police force. 87 00:09:52.580 --> 00:09:58.900 And so therefore, by extension, it seems if we just completely got rid of the police as these anarchists recommend, 88 00:09:58.900 --> 00:10:01.340 why wouldn't everybody behave the way these mobsters do? 89 00:10:01.340 --> 00:10:03.340 So that's the mentality. 90 00:10:03.340 --> 00:10:07.340 But I argue in the paper that that's, in my opinion, exactly backwards. 91 00:10:07.340 --> 00:10:12.860 That the reason the mobsters behave like that is precisely because of the presence of the government. 92 00:10:12.860 --> 00:10:18.020 that it's not random the industries that mafia groups infiltrate, 93 00:10:18.020 --> 00:10:23.340 they operate in precisely those markets where the state is most heavily involved, 94 00:10:23.340 --> 00:10:26.660 namely the prohibited markets or the heavily regulated ones. 95 00:10:26.660 --> 00:10:29.420 And so, of course, we don't have the time in this presentation 96 00:10:29.420 --> 00:10:31.580 to get into the specifics of why that's the case, 97 00:10:31.580 --> 00:10:36.260 but I'm assuming most of you are familiar with the standard economic arguments 98 00:10:36.260 --> 00:10:41.820 for why drug prohibition, for example, makes the drug market more violent and so on. 99 00:10:41.820 --> 00:10:49.560 And of course, even beyond the theory, just empirically, gangsters were involved in alcohol production during Prohibition. 100 00:10:49.560 --> 00:10:51.500 As soon as it was legalized, they didn't. 101 00:10:51.500 --> 00:10:58.660 It would be ridiculous now if you opened your paper and saw that employees of Budweiser had a drive-by shooting of employees of Coors or something. 102 00:10:58.660 --> 00:11:01.100 I mean, it just, it would be absurd. 103 00:11:01.100 --> 00:11:07.940 But yet, when you read that, oh, Al Capone had some of his men wipe out some other guys because they were on his turf, 104 00:11:07.940 --> 00:11:10.060 it's like, oh yeah, because they're mobsters and that's what they do. 105 00:11:10.060 --> 00:11:15.660 All right, so clearly the government is doing something and it has something to do with it. 106 00:11:15.660 --> 00:11:24.760 And just to, I think perhaps the best example is the infamous St. Valentine's Day massacre. 107 00:11:24.760 --> 00:11:30.220 And I'm relying on a summary that I read on the Internet, so I'm hoping, hopefully that this is correct. 108 00:11:30.220 --> 00:11:38.300 But in any event, the details that I hadn't known until I, beyond the fact that Elkhorn wiped out a bunch of his rivals on Valentine's Day, 109 00:11:38.300 --> 00:11:43.660 Apparently what specifically happened in at least one of these incidents is he sent four of his men 110 00:11:43.660 --> 00:11:50.380 to where he knew a rival gang, their members were running some black market operation, 111 00:11:50.380 --> 00:11:53.340 I don't remember what it was, he was gambling or something, 112 00:11:53.340 --> 00:11:57.420 and his men were dressed up as Chicago police officers and then they came in and said, 113 00:11:57.420 --> 00:12:04.060 this is a raid and they told the other gangsters men to put down your guns and line up on the wall 114 00:12:04.060 --> 00:12:07.180 and then when they all had their backs turned they just gunned them down and left. 115 00:12:07.180 --> 00:12:11.580 And so what's interesting about that, I think that just more than any other theoretical argument I can give you, 116 00:12:11.580 --> 00:12:19.140 proves that contrary to the assertions of many people in these articles that I cited in one section of my paper, 117 00:12:19.140 --> 00:12:27.020 where they point to, Jack Hirschleifer specifically points to Prohibition-era Chicago as an example of anarchistic behavior. 118 00:12:27.020 --> 00:12:34.260 And that, I think, just proves that, no, on the contrary, the biggest gang in any city is the government's police force. 119 00:12:34.260 --> 00:12:41.980 They are the biggest, strongest gang and they're the gang that the other gang members or the other gangs have to pay tribute to, literally. 120 00:12:41.980 --> 00:12:48.020 And if you think about it, why did it benefit Al Capone's men to dress up as police officers? 121 00:12:48.020 --> 00:12:52.780 Because then they could walk in there with their guns in plain view and say, drop your guns and turn around. 122 00:12:52.780 --> 00:12:55.100 And the other guy's men said, oh, OK, and they did that. 123 00:12:55.100 --> 00:13:02.300 Whereas if Capone's men had just walked in and not given their identity, the other guy's gangsters would have shot them or they would have said no. 124 00:13:02.300 --> 00:13:32.300 and they would have taken out some of them before they wiped them out because there were only four of Capone's men and there were more than four of the other guys so if you just push it and think through I mean it's obvious to you that when four police officers walk in and tell you to do something you don't start shooting that if you just think through what why is that the case it's not that they were afraid they were all going to die from those four individuals it's not that those police officers if they thought they were police officers were necessarily sharpshooters it was that if you kill a police officer you know life as you know it is over that 125 00:13:32.300 --> 00:13:37.300 No matter who you've got connections with, that if you kill a police officer, you're going to be in really big trouble 126 00:13:37.300 --> 00:13:41.300 because the police do not take kindly to someone killing one of their own, okay? 127 00:13:41.300 --> 00:13:47.300 So that's, again, just to show in terms of the pure power politics involved, 128 00:13:47.300 --> 00:13:55.300 despite the movie's portrayal sometimes of this idea that mobsters, nobody can touch them and that even the police can't get them 129 00:13:55.300 --> 00:14:01.300 and, oh, we're having such trouble pinning the charges on Al Capone and it's, oh, he's just above the law. 130 00:14:01.300 --> 00:14:08.300 Yes and no. He clearly, Al Capone, at the height of his power, could not go up in broad daylight in front of a police precinct to shoot somebody. 131 00:14:08.300 --> 00:14:14.300 He wouldn't be that stupid. There would just be too much political pressure behind that. 132 00:14:14.300 --> 00:14:21.300 If innocent people saw that happen and told their friends what they saw with their own eyes and the government did nothing, that would just be too unpopular. 133 00:14:21.300 --> 00:14:30.300 So it's very naive, I think, to assume that mobsters are above or beyond the reach of the law, that that's not really at all what's going on. 134 00:14:30.300 --> 00:14:34.700 And like I said, the more you analyze it, the more you realize the mob derives its strength 135 00:14:34.700 --> 00:14:35.700 from the government. 136 00:14:35.700 --> 00:14:42.820 And so just as when the government legalized the production and sale of alcohol, mobsters 137 00:14:42.820 --> 00:14:48.060 lost that market, so too I would argue that it's not merely just applying the principle, 138 00:14:48.060 --> 00:14:51.900 but also there's some theoretical reasons to believe this, that if the government legalized 139 00:14:51.900 --> 00:14:58.760 everything, including judicial services and police enforcement of judicial rulings, that 140 00:14:58.760 --> 00:15:04.440 The corruption and violence that we currently associate with those things would also virtually disappear. 141 00:15:04.440 --> 00:15:11.120 All right, so that's, again, I can't dwell too much on that, but I think it is relevant for obvious reasons to today's talk, 142 00:15:11.120 --> 00:15:20.720 that when people are talking about anarchy versus the state, it's not merely irrelevant to point to mobsters as examples of anarchy, 143 00:15:20.720 --> 00:15:23.560 but it's actually exactly wrong, that that's examples of, 144 00:15:23.560 --> 00:15:28.740 Look what happens when the government tries to use its guns to impose order on a certain 145 00:15:28.740 --> 00:15:33.400 area of society. Instead of getting rid of the problem, what happens is over time the 146 00:15:33.400 --> 00:15:38.960 people who survive end up being very violent and armed themselves. That's not really surprising 147 00:15:38.960 --> 00:15:42.840 when the government declares war on anything, the people are going to retaliate and whoever 148 00:15:42.840 --> 00:15:48.440 ends up surviving the onslaught is going to be armed. So it's to suppose that, or to 149 00:15:48.440 --> 00:15:53.240 to wonder, gee, why is it that the gambling market becomes violent 150 00:15:53.240 --> 00:15:58.880 or the alcohol market becomes violent when the government tries to use prisons and guns 151 00:15:58.880 --> 00:16:02.680 to stop that activity and to attack people who sell alcohol? 152 00:16:02.680 --> 00:16:04.440 To wonder why does that happen is sort of like saying, 153 00:16:04.440 --> 00:16:08.360 well, gee, why is it that when the government goes out and tries to destroy al-Qaeda, they strike back? 154 00:16:08.360 --> 00:16:09.720 Why do they do that? I don't understand. 155 00:16:09.720 --> 00:16:15.360 So it's really when the government declares war on something, of course, they're going to retaliate. 156 00:16:15.360 --> 00:16:21.120 Another quick example of that is the example that Sutter gives. 157 00:16:21.120 --> 00:16:23.920 So if you've read the paper, you'll know what I'm talking about. 158 00:16:23.920 --> 00:16:26.160 Just give a quick summary. 159 00:16:26.160 --> 00:16:31.840 So in Sutter's paper, he tries to model anarcho-capitalism. 160 00:16:31.840 --> 00:16:38.320 And it's a very simple approach where he has a few perturbations of the model. 161 00:16:38.320 --> 00:16:43.440 But in various stages, he first shows that suppose there's an individual who's a member 162 00:16:43.440 --> 00:16:48.600 of a Defense Agency and wants to leave and then the agency can decide do we 163 00:16:48.600 --> 00:16:52.760 let this customer go or do we compel them to stay and then Sutter puts in 164 00:16:52.760 --> 00:16:58.920 payoffs in the payoff matrix and for reasonable parameters of course the 165 00:16:58.920 --> 00:17:02.880 company would always tell the customer who wants to leave no you have to say 166 00:17:02.880 --> 00:17:07.000 and he's got a lot of game theory bells and whistles involved but all Sutter's 167 00:17:07.000 --> 00:17:12.240 really saying is if the only possible constraining factors are that the 168 00:17:12.240 --> 00:17:18.240 If the company can decide to keep money by having all of our armed men point at this one individual 169 00:17:18.240 --> 00:17:24.240 or letting him go of his own free will, then the profit maximizing thing to do is to point the guns at the person and take his money. 170 00:17:24.240 --> 00:17:33.240 So it's really simply as if you were modeling the fact that, oh gee, under anarchy, someone walking down the street would always take a $10 bill from a little five-year-old kid 171 00:17:33.240 --> 00:17:36.240 because the kid can't fight back and they're a strong adult. 172 00:17:36.240 --> 00:17:40.240 And so clearly under anarchy, little kids won't ever be able to hold on to their money. 173 00:17:40.240 --> 00:17:47.960 It's really just that simple if the only incentives you build in are the interaction between the two groups right then. 174 00:17:47.960 --> 00:17:56.200 And then he tries to make it more realistic and says, well, maybe there's an outside group, outside agency that the customer appeals to and so on. 175 00:17:56.200 --> 00:18:03.720 But in any event, for the point I was making a few minutes ago, what Sutter's trying to do is he wants to, after he does his model, 176 00:18:03.720 --> 00:18:06.200 he wants to say, well, what's the empirical relevance? 177 00:18:06.200 --> 00:18:18.840 And one of the examples he cites of this asymmetric power relationship, that's his big theme, is that there's asymmetric power relationships in anarchy and so therefore maybe the outcome won't be as rosy as Rothbard thinks it will. 178 00:18:18.840 --> 00:18:32.120 He points to the prostitution market and he says, look it, we all know from watching movies and just our general knowledge that it's not as if prostitutes can choose their pimps the way an actor right now can choose agents. 179 00:18:32.120 --> 00:18:39.280 Okay, that if a particular pimp is abusive and doesn't give the prostitute a very high percentage of her earnings, 180 00:18:39.280 --> 00:18:44.360 she can't just fire him and go hire somebody else because he might beat her to death or beat her severely and so on. 181 00:18:44.360 --> 00:18:49.680 And so Sutter is going to say, yep, there's an asymmetric power relationship and that's the kind of thing that's going to happen under anarchy. 182 00:18:49.680 --> 00:18:57.120 And the way he thinks, or the reason he thinks that that's indicative of it is, again, the obvious reason that, well, it's illegal right now. 183 00:18:57.120 --> 00:19:27.120 Now, the government says it's illegal to use violence to compel someone to be in a business relationship with you and people have the ostensible right to fire an agent, someone acting on their behalf and hire someone else and yet these pimps are flouting the law and no policeman is coming in to aid this woman and so that's the kind of thing that's going to happen. Isn't that anarchy in action? The government's not intervening to help her to enforce her rights and therefore look at the horrible outcome. But an alternative way of looking at that is to say 184 00:19:27.120 --> 00:19:33.120 that why are all these prostitutes continually going in the first place when they get into the business, 185 00:19:33.120 --> 00:19:39.120 why are they patronizing these pimps who they can see with their own eyes are beating up all these other prostitutes? 186 00:19:39.120 --> 00:19:45.120 And the answer is, well, because no reputable people are in that industry in the areas where it's illegal. 187 00:19:45.120 --> 00:19:51.120 And so it's really, I think, inaccurate or very short-sighted to just look at that relationship 188 00:19:51.120 --> 00:19:55.120 between the pimp and the prostitute and say, I don't see policemen rushing to aid them, 189 00:19:55.120 --> 00:19:58.400 them so that's what happens when there are no police rather I think you need 190 00:19:58.400 --> 00:20:02.520 to back up and look at the whole picture and say all these policemen are busy 191 00:20:02.520 --> 00:20:07.080 making arrests and putting people in jail and now the latest thing is to 192 00:20:07.080 --> 00:20:11.440 publish in the newspaper on the internet pictures of people who get caught in in 193 00:20:11.440 --> 00:20:15.640 the prostitution business and so anybody who's a decent human being is not going 194 00:20:15.640 --> 00:20:19.960 to go in and become a pimp that that's I mean just the very term that that's not 195 00:20:19.960 --> 00:20:22.840 you're gonna say yeah mom I decided I'm going to become a pimp with my life but 196 00:20:22.840 --> 00:20:28.640 But that's not a very reputable thing to do and that's precisely or largely because of the government prohibitions, right? 197 00:20:28.640 --> 00:20:38.040 So what I'm saying is I think it's wrong to look at that situation as what happens when the police are impotent, 198 00:20:38.040 --> 00:20:44.960 but rather to say no, to the extent that the police are effective in keeping people out of the prostitution market, 199 00:20:44.960 --> 00:20:52.160 specifically in the capacity of being a pimp, then you're going to get this result that the people who do end up 200 00:20:52.160 --> 00:20:56.160 People going into the market are people who are antisocial and don't care about legal penalties 201 00:20:56.160 --> 00:21:01.160 or the people who don't want to go to jail but aren't as afraid of jail as most people are 202 00:21:01.160 --> 00:21:07.160 and also they have a very high time preference that they would rather get the high monetary returns now 203 00:21:07.160 --> 00:21:12.160 even though they know there's a good chance they might get arrested at some point and have to do some time. 204 00:21:12.160 --> 00:21:18.160 So given the sampling bias it's no wonder that the people who end up being pimps act the way they do 205 00:21:18.160 --> 00:21:22.160 is not an outcome of anarchy, it's precisely the opposite. 206 00:21:22.160 --> 00:21:26.160 Okay, so now that we've clarified a little bit, 207 00:21:26.160 --> 00:21:33.160 and I probably should mention what do I think the appropriate definition of anarchy would be. 208 00:21:33.160 --> 00:21:37.160 The one that I would propose also has some admitted flaws, 209 00:21:37.160 --> 00:21:40.160 but I think at the very least what anarchy means, 210 00:21:40.160 --> 00:21:43.160 it shouldn't mean, as some of these writers seem to feel, 211 00:21:43.160 --> 00:21:47.160 the absence of a set of external rules. 212 00:21:47.160 --> 00:21:51.960 that I think that's what drives a lot of these writers is they have this idea that 213 00:21:51.960 --> 00:21:57.660 under a state there is this legal framework to which you must be, 214 00:21:57.660 --> 00:22:02.760 your behavior must conform and without that in anarchy, no, it's just incentives 215 00:22:02.760 --> 00:22:08.460 and only if institutions are such that it's in your interest to behave a certain way 216 00:22:08.460 --> 00:22:10.260 that's the only reason you'll do so. 217 00:22:10.260 --> 00:22:15.660 And I think that that's rather naive because that's really all any social institution can do 218 00:22:15.660 --> 00:22:19.500 Even when we have the government enforcing contracts, for example, 219 00:22:19.500 --> 00:22:23.560 and so that there are property rights and contract and the government enforces that, 220 00:22:23.560 --> 00:22:29.420 it doesn't automatically follow that everybody in society actually obeys those rules and never violates contracts. 221 00:22:29.420 --> 00:22:32.620 It depends on whether the government really will enforce that 222 00:22:32.620 --> 00:22:40.120 and if the threats that it makes are credible and sufficient to convince potential contract breakers not to do so. 223 00:22:40.120 --> 00:22:45.000 And that's exactly what would be true under any social system, in particular, anarcho-capitalism, 224 00:22:45.000 --> 00:22:48.200 that the potential contract violators would think, 225 00:22:48.200 --> 00:22:50.400 well, what's going to happen to me if I do violate the contract 226 00:22:50.400 --> 00:22:52.320 and let me judge the consequences? 227 00:22:52.320 --> 00:22:57.240 All right, so it's unhelpful and it stacks the deck against anarchy, 228 00:22:57.240 --> 00:23:01.080 I think, to define anarchy as some of these people did. 229 00:23:01.080 --> 00:23:04.880 In the paper, I give specific quotes to show I'm not attacking a straw man. 230 00:23:04.880 --> 00:23:08.800 But some of them say, under anarchy, there's no regulation from above. 231 00:23:08.800 --> 00:23:14.160 And the specific example, the way I tried to show that that definition 232 00:23:14.160 --> 00:23:19.700 or that attribute that's assigned to anarchy is unhelpful because looked at a certain way 233 00:23:19.700 --> 00:23:23.220 either everything's anarchy or nothing ever could be anarchy. 234 00:23:23.220 --> 00:23:28.640 If again if you use Hirschleifer's definition which was that anarchy is when people behave 235 00:23:28.640 --> 00:23:31.760 without regulation imposed from above. 236 00:23:31.760 --> 00:23:32.760 And so what do I mean? 237 00:23:32.760 --> 00:23:34.960 Well, let's take the United States. 238 00:23:34.960 --> 00:23:40.160 So I think clearly the current United States is not in a situation of anarchy, at least 239 00:23:40.160 --> 00:23:43.880 that term is to have any relevance that you could certainly define anarchy such 240 00:23:43.880 --> 00:23:49.440 that we have anarchy right now but then you would always have anarchy. So why 241 00:23:49.440 --> 00:23:54.440 would Herschleifer's definition mean that today today's US is not an 242 00:23:54.440 --> 00:23:58.000 anarchy or excuse me is an anarchy because if you say okay well where is 243 00:23:58.000 --> 00:24:01.600 the regulation from above come from you'd say well let's look at the 244 00:24:01.600 --> 00:24:05.840 government itself and who is who's in charge who's in charge of the Congress 245 00:24:05.840 --> 00:24:09.480 for example they're not in control the entire country they have to share their 246 00:24:09.480 --> 00:24:13.160 of Power with the executive branch and the Supreme Court. 247 00:24:13.160 --> 00:24:17.080 And then despite the rise in the executive power 248 00:24:17.080 --> 00:24:19.600 over the 20th century, it's still the case 249 00:24:19.600 --> 00:24:22.640 that even George Bush can't just do anything he wants. 250 00:24:22.640 --> 00:24:24.680 He can't just get up one day and say, 251 00:24:24.680 --> 00:24:26.280 I'm going to outlaw the Catholic Church, 252 00:24:26.280 --> 00:24:27.480 that he just couldn't do that. 253 00:24:27.480 --> 00:24:30.120 Or he can't say, I'm going to invade France. 254 00:24:30.120 --> 00:24:31.960 Some of his supporters would probably cheer, 255 00:24:31.960 --> 00:24:33.520 but most of them wouldn't, right? 256 00:24:33.520 --> 00:24:38.720 So as much as we use rhetoric to talk about how 257 00:24:38.720 --> 00:25:08.720 George Bush is so powerful and he is he can't just do anything he wants there are constraints on his power and so there is no single individual imposing this rule on everybody below him there is no hierarchy in which there's one person at the top that actually it's a it's a it's a nexus in which there's an interaction there and then ultimately you might say okay well maybe the government itself is in anarchy and I've even seen some people argue that they say that the governments of the world vis-a-vis each other are in a state of anarchy but 258 00:25:08.720 --> 00:25:16.220 The citizens below them certainly are not, because they're subject to the rule of the ruling class, the politicians. 259 00:25:16.220 --> 00:25:23.220 But even there, that's, especially when we consider the point I'm going to make in the next section of the paper about ideology, 260 00:25:23.220 --> 00:25:33.120 even formally speaking, no, George Bush, in an ultimate sense, is subject to the voters, as cynical as we may be about election fraud and so on. 261 00:25:33.120 --> 00:25:38.220 If in the last election, 10% of the people voted for Bush, he wouldn't be in power anymore. 262 00:25:38.220 --> 00:26:01.220 So there's a sense in which even the president or any ruler is subject to the people over whom he rules and even beyond that, they'll be on the formality and this is what the main point of my paper is that at any given time, regardless of the formal structure, the ruling class ultimately has to keep the population happy. 263 00:26:01.220 --> 00:26:31.220 Now we can quibble over how happy do they need to be, does it need to be active, fervent support, or does it just need to be a tacit consent in which the people are resigned to their fate, but clearly the politicians need to keep the public happy, they need to give the appearance, for example, that the war is going well, that Bush wants his ratings to be high, and if you just think about well why is that the case, if really he's the one imposing regulatory 264 00:26:31.220 --> 00:26:41.220 And so you realize it's a lot more complicated than that, that it's not that you can just arrange society in this hierarchy and that that's what you contrast with anarchy, all right? 265 00:26:41.220 --> 00:26:56.220 So anyway, I'm just mentioning as an aside that the typical treatment of anarchy, even among many anarchists, I think needs to be refined because you're going to end up in the problem where either everything is anarchy or nothing is anarchy. 266 00:26:56.220 --> 00:27:00.220 problem where either everything is anarchy or nothing is anarchy. 267 00:27:00.220 --> 00:27:02.380 And so again, what do I propose? 268 00:27:02.380 --> 00:27:07.340 For this paper, it doesn't really matter, but just to take a position myself, I think 269 00:27:07.340 --> 00:27:14.020 anarchy means that there are no political rulers and that in particular there's the 270 00:27:14.020 --> 00:27:18.860 absence of a state and then the state would be characterized as an institution that one 271 00:27:18.860 --> 00:27:24.220 possesses a monopoly on the rightful use of violence or can delegate that right to some 272 00:27:24.220 --> 00:27:34.220 from other subordinate group, and two, that it claims the right to extract its funding even from people who don't want to give it money. 273 00:27:34.220 --> 00:27:36.220 And so those are the two characteristics of a state. 274 00:27:36.220 --> 00:27:41.220 And so then how does a Rothbardian protection agency differ from that? 275 00:27:41.220 --> 00:27:50.220 The one hand, the agency does not enjoy a natural monopoly in the sense that in principle no one can compete with it, 276 00:27:50.220 --> 00:28:03.620 If through market forces, it happens to enjoy a practical monopoly, that's possible, but there could always be free entry into that industry and also it can't compel customers to give it money. 277 00:28:03.620 --> 00:28:09.020 That if at any time someone says, no, I want to fire you, I want to stop contributing, then that they had the right to do so. 278 00:28:09.020 --> 00:28:16.820 And that's, so we can argue about whether that would be a stable outcome and that's precisely the contention of the people that I'm talking about. 279 00:28:16.820 --> 00:28:22.820 They're going to say that's naive to assume that could last in that situation, but that at least is the ideal. 280 00:28:22.820 --> 00:28:27.820 Okay, so that would be anarchy because there would be not this institution of the state. 281 00:28:27.820 --> 00:28:38.820 Okay, moving on, what would prevent these nightmare scenarios that these people that I've quoted in the paper are worried about? 282 00:28:38.820 --> 00:28:42.820 There are plenty of things and I don't mean to belittle the other responses. 283 00:28:42.820 --> 00:28:56.820 So Rothbard in particular gives quite a few saying that look there are costs of combat and it's very naive to assume that all these hundreds of protection agencies are going to always be battling in the streets whenever their clients disagree with each other and that sort of thing. 284 00:28:56.820 --> 00:29:10.820 So and that's certainly true but I think even beyond that to me the most fundamental reason that we don't need to worry about these huge agencies taking over is that at least in a society like the U.S. 285 00:29:10.820 --> 00:29:16.820 They wouldn't enjoy popular support. The public would not approve of that. 286 00:29:16.820 --> 00:29:21.820 And in the long run, to be a dominant social force, you need to have the support of the public. 287 00:29:21.820 --> 00:29:27.820 And to make that, I think I just need to reiterate what I'm sure many of you have read, 288 00:29:27.820 --> 00:29:32.820 when Mises, following on David Hume, makes that argument with respect to governments, 289 00:29:32.820 --> 00:29:36.820 and that he says things such as, in the long run, there could be no such thing as an unpopular government, 290 00:29:36.820 --> 00:29:46.820 Because ultimately, no matter how totalitarian the regime, if the people are unhappy with it and want to have a different form of government, they can overthrow the existing regime. 291 00:29:46.820 --> 00:29:49.820 And that no amount of bullets and tanks is going to stop that. 292 00:29:49.820 --> 00:29:57.820 And again, this is depending on how strong you want to make the claim, we can argue about that in the Q&A if you want to. 293 00:29:57.820 --> 00:30:02.820 And I'm not wedded to any particular version of the claim except the general idea. 294 00:30:02.820 --> 00:30:11.980 for example it's it's one thing to say that if everybody dislikes the regime 295 00:30:11.980 --> 00:30:15.860 it's going to fall and versus another thing if everyone is unhappy with the 296 00:30:15.860 --> 00:30:19.460 regime and everybody knows that everyone else is unhappy then the regime is going 297 00:30:19.460 --> 00:30:23.380 to fall that's a crucial difference that in the game theory literature they would 298 00:30:23.380 --> 00:30:28.120 say it becomes common knowledge and so for example you could imagine a 299 00:30:28.120 --> 00:30:58.120 situation where there's an evil dictator and everybody does what he says because if he says do you go you know kill that dissident over there that person if he disobeys that he's just going to turn to some other soldier and say well kill him for disobeying my order and if that first soldier thinks the other soldiers going to obey then he's going to follow out the order to kill the dissident even though he personally thinks I support that dissident and this guy's a jerk but I don't want to get killed myself all right so you could have these self-sustained 300 00:30:58.120 --> 00:31:08.120 and sustaining self-fulfilling prophecies, where because everybody thinks everyone else is going to obey the evil dictator, everyone obeys him, even though everybody thinks he's an evil dictator. 301 00:31:08.120 --> 00:31:24.120 So you can imagine situations like that, and I think that accurately portrays how some of these regimes operate, but at the same time, as the fall of the Soviet Union demonstrated, I think that's more of a theoretical limiting point, 302 00:31:24.120 --> 00:31:54.120 and that in practice there has to be a huge bulk of people who they may disagree with the specific policies of the government they may think that oh yes Stalin took things too far but they still were communists they still thought market economy is horrible and exploits the poor and at least we have a classless society and yes mistakes were made and perhaps we shouldn't have liquidated so many but there's an issue of disagreeing with the particular choices that were made not with the system itself okay so like I said we can argue about 303 00:31:54.120 --> 00:32:24.120 How strong you want to make that claim, but I think people who are primarily concerned with raw physical might and that's sort of what you get the sense of when you read these critics of market anarchy that they are just focusing on well look at this protection agency has all these men with all these guns and you're just this individual consumer with your bank account and what are you supposed to do you're helpless in the face of this asymmetric power relationship that people who are just looking at who's got the most guns I think they greatly 304 00:32:24.120 --> 00:32:26.880 Overrate the Effectiveness of Physical Might. 305 00:32:26.880 --> 00:32:31.500 And it's the, just to give you an example 306 00:32:31.500 --> 00:32:32.860 that's somewhat related, 307 00:32:32.860 --> 00:32:36.620 when my wife and I were at the airport a few weeks ago, 308 00:32:36.620 --> 00:32:37.920 all these troops were coming through 309 00:32:37.920 --> 00:32:40.360 and they were either returning from duty or going out 310 00:32:40.360 --> 00:32:43.300 and they had their, they're obviously people 311 00:32:43.300 --> 00:32:44.780 in the armed forces. 312 00:32:44.780 --> 00:32:46.980 And whenever a certain number of them would go through, 313 00:32:46.980 --> 00:32:49.720 the entire airport, the Atlanta airport, 314 00:32:49.720 --> 00:32:52.440 would just stop and just start clapping. 315 00:32:52.440 --> 00:33:22.440 and unfortunately the time I was carrying a tray and so I didn't I didn't have to decide am I going to be a tough guy and hold my ground or am I going to you know pretend like I care but they but the things like that I think so someone who's concerned with just sheer power and physical might and whoever's got the whoever controls the tanks controls the society and that sort of mentality they would just think oh that's a harmless that doesn't that's irrelevant that's just the the public the sheep if you're anti-war 316 00:33:22.440 --> 00:33:29.040 or anti-US war currently going on, you would just think, oh yeah, those people are just clapping and that means nothing. 317 00:33:29.040 --> 00:33:35.240 Really what we've got to do is we've got to get to these neoconservative strides, we've got to get to Don Rumsfeld, these are the people in charge. 318 00:33:35.240 --> 00:33:39.840 But no, I think that sort of thing are all the stickers that say, support our truth that you see all over. 319 00:33:39.840 --> 00:33:44.840 What that stuff does is it convinces everybody else that, look, the country is behind this war. 320 00:33:44.840 --> 00:33:49.240 We support the troops, we support the president, and if you disagree, you're crazy. 321 00:33:49.240 --> 00:33:53.160 you go read lewrockwell.com or something you're just nuts that the the massive 322 00:33:53.160 --> 00:33:56.720 people support that because clearly in that airport what I could I didn't see 323 00:33:56.720 --> 00:34:02.280 anybody not clapping except my wife and she was I think had the baby too so you 324 00:34:02.280 --> 00:34:06.440 know people couldn't call her a traitor because she's holding a baby but then 325 00:34:06.440 --> 00:34:12.760 you know I had my tray wasn't supposed to do and so so you see there's no way 326 00:34:12.760 --> 00:34:17.560 that all those people really supported the war in Iraq or in Afghanistan 327 00:34:17.560 --> 00:34:19.280 and wherever those troops were going to be going. 328 00:34:19.280 --> 00:34:21.280 And yet there was just a social pressure 329 00:34:21.280 --> 00:34:23.120 that they felt compelled to do that. 330 00:34:23.120 --> 00:34:24.760 And so it's little things like that 331 00:34:24.760 --> 00:34:28.240 that I actually claim are far more significant 332 00:34:28.240 --> 00:34:31.800 than just again an analysis based on pure numbers 333 00:34:31.800 --> 00:34:33.960 and how many bullets and how many troops and so on 334 00:34:33.960 --> 00:34:35.440 would suggest. 335 00:34:35.440 --> 00:34:38.120 And it's, I can't spend too much time on this 336 00:34:38.120 --> 00:34:39.320 because I do want to get to the model 337 00:34:39.320 --> 00:34:40.680 and leave time for question and answer, 338 00:34:40.680 --> 00:34:45.680 but it's more even than just the typical claim 339 00:34:45.680 --> 00:35:15.680 People claim that you'd sometimes hear when people talk about why these war protesters are just horrible, that they're leading to more American deaths, right, you hear that a lot, that you shouldn't go protest a war and you're unpatriotic and you're just evil, because given that our troops are over there and committed, if you go out and go on a TV camera and say these things, what do you do is you inspire confidence in the enemy. And then Saddam would have folded perhaps, and Max Boot actually said this one time, he had an article called something like the bloody hands of war protesters. 340 00:35:15.680 --> 00:35:20.380 The reason we had to go to war in Iraq wasn't because of George Bush or neoconservatives, 341 00:35:20.380 --> 00:35:27.180 it was because of the people who were protesting the war, because they made Saddam not give up his weapons of mass destruction, 342 00:35:27.180 --> 00:35:30.180 and because it gave him hope that, oh, maybe they're bluffing. 343 00:35:30.180 --> 00:35:38.180 Now, I don't know how Max Bu would tweak that now, since apparently Saddam didn't have any weapons to surrender, but that was the claim. 344 00:35:38.180 --> 00:35:45.180 And you hear, especially with reference to Vietnam, that the reason Jane Fonda was so evil and so on is because 345 00:35:45.180 --> 00:35:52.680 Because of her actions she made the communists, she gave them hope and they just kept hanging on 346 00:35:52.680 --> 00:35:55.680 because they knew if we just hang on a few more years the Americans are going to leave. 347 00:35:55.680 --> 00:36:05.180 And so I think that's true, the analysis is correct insofar as it goes, but it begs the question 348 00:36:05.180 --> 00:36:14.180 because why is it that if the American public is against the war that means that the communists 349 00:36:14.180 --> 00:36:18.180 The American troops in North Vietnam just need to hang out a little bit more and the troops are going to get pulled home. 350 00:36:18.180 --> 00:36:23.180 Because it's not as if the American public are throwing bombs over the water to them. 351 00:36:23.180 --> 00:36:27.180 It's the American troops in Vietnam that are bombing their cities and so on. 352 00:36:27.180 --> 00:36:34.180 So somebody who's just concerned with real politique might think, I don't care what these American citizens think. 353 00:36:34.180 --> 00:36:39.180 What I care about is what do we need to do in order to get the American soldiers to mutiny? 354 00:36:39.180 --> 00:36:43.180 And that's the only way we're going to break their back or convince their commanders to pull out. 355 00:36:43.180 --> 00:36:53.180 What I'm saying is, no, they don't need to even do that so much. What they really need to do is get, it would be sufficient to get the American public to greatly oppose the war, and as we saw, that's eventually what happened. 356 00:36:53.180 --> 00:37:05.180 And so if you think about, well, why is that the case? Why does the government, why do they need to have these propaganda, these reports and give rosy reports about the progress in Vietnam or the progress in Iraq and so on? 357 00:37:05.180 --> 00:37:12.180 Why is that necessary if the government really is in charge and they have all the troops and all the guns? And what are these little protesters going to do? 358 00:37:12.180 --> 00:37:19.180 And it's, again, there's plenty of reasons you could offer, just to give a few, that as the war gets more and more unpopular, 359 00:37:19.180 --> 00:37:28.180 if the government doesn't pull out, well then more people are going to stop sending in their tax returns as being more honest than not, 360 00:37:28.180 --> 00:37:34.180 that people are going to cheat on their taxes more, that people who work in the munitions factories might start sabotaging more, 361 00:37:34.180 --> 00:37:40.180 or at least not working as diligently as if they're totally committed, as in World War II, for example, to the war effort, 362 00:37:40.180 --> 00:37:45.180 and things like that or that fewer people are going to sign up and so maybe then they have to impose a draft 363 00:37:45.180 --> 00:37:50.980 and all sorts of things that people, the soldiers themselves, even if they believe in what they're doing, 364 00:37:50.980 --> 00:37:55.980 if they know when they go home and they're just, you know, out in the bar or whatever and they tell people, 365 00:37:55.980 --> 00:37:59.980 oh yeah, I'm a servant over there and people are going to say, oh, you baby killer and just leave, 366 00:37:59.980 --> 00:38:04.980 that they're going to feel ostracized, whereas now when they come home, the whole airport stops and turns and applauds them. 367 00:38:04.980 --> 00:38:12.320 Okay, so it's crucial for the government to carry out its foreign empire that the public at home supports it. 368 00:38:12.320 --> 00:38:18.420 Alright, so that's the insight of this paper. It's on the one hand pretty simple, pretty obvious, 369 00:38:18.420 --> 00:38:29.320 but on the other I think it has relevance to this claim that in anarchy the defense agencies would all take over and I need to speed up. 370 00:38:29.320 --> 00:38:39.660 So let me get into the model and then I will finally come back and try to address what the connection is. 371 00:38:39.660 --> 00:38:46.160 So in this model, there's a finite population of N consumers by this set. 372 00:38:46.160 --> 00:38:51.860 So C sub 1 is consumer number 1, C sub 2 is consumer number 2 all the way up to Cn. 373 00:38:51.860 --> 00:38:59.260 And then the only way to distinguish between them is that the first are our resistors. 374 00:38:59.260 --> 00:39:02.560 And we'll see in a minute what that means, but just to anticipate, 375 00:39:02.560 --> 00:39:07.560 those are the people who, if they don't agree with what's going on, 376 00:39:07.560 --> 00:39:10.260 so they're going to belong to a protection agency, 377 00:39:10.260 --> 00:39:13.260 if they don't agree with the policies of the agency, 378 00:39:13.260 --> 00:39:19.260 they're not going to be as useful customers as the consumers who are, I'm just calling, 379 00:39:19.260 --> 00:39:25.340 and Quizzling, meaning those who collaborate regardless of the behavior of the of the group that they're a member of. 380 00:39:30.180 --> 00:39:32.180 Okay. 381 00:39:32.300 --> 00:39:41.500 All right, so now then the agencies, again there are N agencies and where each agency is a subset of the set of consumers. 382 00:39:41.500 --> 00:39:43.500 And so what that means is 383 00:39:44.500 --> 00:39:48.500 the agencies, the things that go in them, so this is set theory, is 384 00:39:49.260 --> 00:39:54.580 various consumers so maybe consumer one is in agency four maybe consumer two is 385 00:39:54.580 --> 00:39:58.780 an agency nine and so on all right and the AI are mutually exclusive and 386 00:39:58.780 --> 00:40:02.500 exhaustive so that just means every consumer is in one and only one agency 387 00:40:02.500 --> 00:40:06.580 that's what that means and then any particular agency may be empty but if 388 00:40:06.580 --> 00:40:12.460 consumer K is an agency L then that implies that consumer L is an agency L 389 00:40:12.460 --> 00:40:17.140 and what all that means are just a fancy way of saying if somebody is in an 390 00:40:17.140 --> 00:40:24.140 If you're in an agency with a certain subscript number, then that consumer with that same number has to be in it because he's the person running it. 391 00:40:24.140 --> 00:40:26.140 That's the interpretation. 392 00:40:31.140 --> 00:40:38.140 So now we need to get into combat in order for this thing to work. 393 00:40:38.140 --> 00:40:44.140 You have to model that there are losses from combat, even if you fight a group that's smaller than you. 394 00:40:44.140 --> 00:40:52.140 And this, for example, Hirsch Leiper's model doesn't have this feature, and he acknowledges that and just says, well, I got to start somewhere. 395 00:40:52.140 --> 00:41:03.140 And so clearly, to make it more realistic and to increase the chance that one group isn't going to just take over, if you have the fact that there are losses from combat, that's going to make it easier. 396 00:41:03.140 --> 00:41:12.140 So anyway, the way I modeled it is I say, okay, the side with the superior strength, and these primes just mean adjusted, and in a minute we'll talk about what does that mean, adjusted. 397 00:41:12.140 --> 00:41:42.140 The side with the superior strength is S1, they always win and they get the strength of the group they conquer but they suffer this damage where delta is a number greater than zero and the same thing with this gamma so these are just parameters and then so what's happening here just to try to give you idea is this thing right there is going to be how much each unit of the losers strength how much 398 00:41:42.140 --> 00:41:48.140 How much of the attackers they take out, and then times the total strength of the loser, S2. 399 00:41:48.140 --> 00:41:52.140 Okay, so that's why the total damage is this, but now notice, 400 00:41:52.140 --> 00:41:58.640 to try to make it realistic and to somehow capture the fact that if you have an overwhelming advantage, 401 00:41:58.640 --> 00:42:02.640 you can pick off little protection agencies without too much trouble, 402 00:42:02.640 --> 00:42:07.140 that's where this thing comes in, that remember S2 is the smaller one and S1 is bigger, 403 00:42:07.140 --> 00:42:14.640 And so, the per unit damage that you inflict gets lower the bigger this thing is compared to that thing. 404 00:42:14.640 --> 00:42:28.640 And so, for example, if you doubled your strength, then that's going to at least cut in half the units of damage that each unit of the other guy takes out before you conquer them. 405 00:42:28.640 --> 00:42:32.140 And then, so delta, the bigger that is, that's a defensive parameter. 406 00:42:32.140 --> 00:42:36.640 The bigger delta is, the more damage the defenders do before they get conquered. 407 00:42:36.640 --> 00:42:45.640 And this thing, gamma, is an offensive parameter, the bigger this is, the more it gives weight to this thing right here. 408 00:42:45.640 --> 00:42:54.140 So if this is a two, then if you have doubled the strength of the people you're attacking, you actually get a four-fold advantage because it gets squared. 409 00:42:54.140 --> 00:42:56.640 Or if this is a three, then it gets raised to the third power. 410 00:42:56.640 --> 00:43:10.440 All right, so anyway, this was as simple as I could make it, and yet retain the fact that the stronger your advantage, the less damage you get, but you still do get damage. 411 00:43:11.840 --> 00:43:19.740 Okay, and then I talked about the adjusted strength, so this is where that ideology comes into play. 412 00:43:19.740 --> 00:43:32.740 So if you're a defensive agency, then your strength is calculated this way, where your RIs, how many resistors are your members, and QIs, how many quislings are your members, and P2 is just some number. 413 00:43:32.740 --> 00:43:43.740 Whereas if you're offensive or aggressive, your strength is calculated this way, it's P1 times how many resistors you have yourself in your agency, times P2, times how many quislings. 414 00:43:43.740 --> 00:43:55.740 And so P1 is less than P2. So the idea is if you're at the defensive agency that everybody who's a member of you is enthusiastic and they give you the price of P2. 415 00:43:55.740 --> 00:44:06.740 Whereas if you go and attack some other group, to the extent that you have resistors among your own clients, they're going to give you only P1, where P1 is less than P2. 416 00:44:06.740 --> 00:44:14.740 So your strength has to get adjusted downward based on how many resistors are among your own customers. 417 00:44:14.740 --> 00:44:20.740 Now we can, for the paper, it doesn't really matter how that manifests itself, whether it means they go out and they sabotage your operations, 418 00:44:20.740 --> 00:44:30.740 or whether it means they stop sending in the contributions and so then the agency that's turning into a rogue, aggressive agency has to go to the bank 419 00:44:30.740 --> 00:44:34.740 and withdraw your funds or send armed men to your house and intimidate you. 420 00:44:34.740 --> 00:44:44.740 So I'm not being completely naive, I'm not suggesting that if your agency becomes a rogue agency and starts attacking people that all of a sudden you don't contribute to it. 421 00:44:44.740 --> 00:44:48.740 All I'm saying is you contribute less than if it's doing things that you agree with. 422 00:44:48.740 --> 00:44:51.740 And not everybody is like that, those are only the resistors. 423 00:44:51.740 --> 00:45:01.740 So I'm not imposing that all of society is willing to risk their own safety in order to limit what their aggressive agency is doing. 424 00:45:01.740 --> 00:45:31.740 All right, so it's a very general setup and I'm just allowing for the possibility that an agency when it's deciding should we attack someone needs to consider well what if some of our customers are really opposed they might not willingly send in their monthly payments the way they were before when they actively agreed with what we were doing okay and then the last thing that I'll do for this talk is to walk you through the first results and making it a better idea if you then want to go and look at the paper as to what this model is doing is this proposition 425 00:45:31.740 --> 00:45:39.540 So, if this condition is true and this condition is true, then there exists a defensive equilibrium, 426 00:45:39.540 --> 00:45:48.540 meaning an equilibrium where none of the agencies wants to attack anybody else in which this number Ri of consumers are independent resistors, 427 00:45:48.540 --> 00:45:50.540 meaning they don't belong to any agency but their own. 428 00:45:50.540 --> 00:45:54.540 So, they're just individuals out there who aren't backed up by anybody, all right? 429 00:45:54.540 --> 00:46:01.540 So, that's one of the things that if you read this literature, they think it's just obvious that if we had a society like Rothbard proposes, 430 00:46:01.540 --> 00:46:31.540 And I'm showing, well, not in this model, that's not going to happen, that it's possible that there's going to be these independents, and while the remaining people belong to a single agency, all right, so this isn't what I think is going to happen, but I'm just trying to show the logical conclusion that even if we imagine everybody except these tiny group of heretics or hermits are out in the mountains living by themselves and they don't belong to anyone, if everyone else is in a single agency, if these parameters are satisfied, 431 00:46:31.540 --> 00:46:36.860 that agency isn't going to attack them and then so beyond the mathematics of it 432 00:46:36.860 --> 00:46:42.700 the intuition is just that if there are enough resistors in society at large 433 00:46:42.700 --> 00:46:47.820 then it's not going to be profitable to go pick off the lone guys in the 434 00:46:47.820 --> 00:46:52.780 mountains and get their assets and then lose the enthusiastic contributions from 435 00:46:52.780 --> 00:46:57.820 99.9% of society which is your customer base if you're the monopolist okay so 436 00:46:57.820 --> 00:47:27.820 So that's really the only point I'm making there that if it even were true that it's a natural monopoly to grow and take over society as a protection agency then it still doesn't follow that you would then turn into a rogue agency because if you had grown through reputable means then everybody's happy with what you're doing and then all of a sudden if you become unlawful people who patronized you while you were being lawful are then going to reduce their support. 437 00:47:27.820 --> 00:47:31.980 Let me just end this with a quick example. 438 00:47:31.980 --> 00:47:37.260 Most people would think that, oh, clearly in an anarchist society, 439 00:47:37.260 --> 00:47:40.740 if there's a homeless guy with $10 in his pocket and that's it, 440 00:47:40.740 --> 00:47:45.380 and he's walking by and some agent of a protection agency sees him, 441 00:47:45.380 --> 00:47:48.260 clearly the agent's going to stick a gun to his head and take the $10 bill. 442 00:47:48.260 --> 00:47:51.500 You gain $10, there's zero chance of retaliation. 443 00:47:51.500 --> 00:47:53.460 It's better to make $10 than to lose nothing. 444 00:47:53.460 --> 00:47:56.020 And so, of course, that's going to happen in Rothbard's world. 445 00:47:56.020 --> 00:47:59.220 Whereas I'm saying, no, that is exactly not what would happen. 446 00:47:59.220 --> 00:48:08.120 That would be crazy that the loss of goodwill from people seeing that the Acme Protection employee just robbed a homeless guy at gunpoint, 447 00:48:08.120 --> 00:48:10.420 the loss of that, and then you say, well, what are we going to gain? 448 00:48:10.420 --> 00:48:11.820 Oh, we're going to gain a $10 bill. 449 00:48:11.820 --> 00:48:13.720 It would never be worth it to do that. 450 00:48:13.720 --> 00:48:18.620 OK, so that's the intuition that this paper is relying on. 451 00:48:18.620 --> 00:48:25.820 And with that, I should stop and open it up for questions. 452 00:48:25.820 --> 00:48:29.320 I guess probably someone could turn the lights on if they wanted. 453 00:48:29.320 --> 00:48:31.320 Yeah, David. 454 00:48:31.320 --> 00:49:00.320 The one thing I don't know if this is a conjecture, is that I just couldn't think of a way to find a way to get money somewhere in the world that holds the ultimate credulity of what we would still try to do with these claims that we're putting into action in the United States and in the United States and in the United States and in the United States. 455 00:49:00.320 --> 00:49:18.960 ______ 456 00:49:18.960 --> 00:49:24.180 Right, yeah that's that's actually true. I don't have time to go into, I wanted to 457 00:49:24.180 --> 00:49:54.180 I'm going to talk about the fact that my analysis does presuppose that the legal system and the enforcement system are distinct and that yes I'm assuming that there is some consensus on what does it mean to be legal or illegal and so it's true if well yes and no because part of the way you could say well the way people in my model are quizzlings could also agree with what's going on they don't consider it illegal but yeah your point is a good one. 458 00:49:54.180 --> 00:50:23.180 I want to give a quick insight into the relevance or applicability of the model. What you've done is shown that if ideology is efficient and strong, that a particular illegitimate move by an agency would result in a loss of a certain number of patrons, that the agency would find its place in the model. 459 00:50:23.180 --> 00:50:40.180 by Dr. Hoffman, like that, too. But, I mean, it began earlier than thought by Mises and others in the paper, you know, the little v.a. about the idea of consent, passive consent. 460 00:50:40.180 --> 00:50:49.180 It seems to me the argument could show just the argument would apply equally to these defense statements as well. 461 00:50:49.180 --> 00:51:01.180 If ideology is sufficiently strong that even the coercive demands of government agencies would lose some passive consent, 462 00:51:01.180 --> 00:51:07.180 if it were to engage in the action of these agencies, then it would not be so. 463 00:51:07.180 --> 00:51:17.180 Right, so we know from experience that the decisions you're looking at are very fizzling in your language. 464 00:51:17.180 --> 00:51:24.180 The vast majority of us will be fizzling, in a sense. 465 00:51:24.180 --> 00:51:35.180 The fact that, you know, if people would in fact withdraw that you said from the current United States government, 466 00:51:35.180 --> 00:51:40.180 If you're coming before that, you should close the page. 467 00:51:40.180 --> 00:51:46.180 Well, I mean, people have, in fact, the vast majority of people have not indeed looked on that concept. 468 00:51:46.180 --> 00:51:51.180 So I'm not sure what the argument shows exactly. 469 00:51:51.180 --> 00:51:57.180 Except that there could exist a condition under which people have a sufficiently strong attachment 470 00:51:57.180 --> 00:52:01.180 to an ideology that brought party and ethical law, 471 00:52:01.180 --> 00:52:02.180 and so on. 472 00:52:02.180 --> 00:52:07.180 So that is fact that the agency would not act in a legitimate manner. 473 00:52:07.180 --> 00:52:10.180 What is that argument for? 474 00:52:10.180 --> 00:52:11.180 Okay. 475 00:52:11.180 --> 00:52:13.560 So yes, you're right. 476 00:52:13.560 --> 00:52:14.560 And that is my view. 477 00:52:14.560 --> 00:52:19.020 That right now, if for some reason the government disappeared overnight, I do think a government 478 00:52:19.020 --> 00:52:23.740 would reemerge precisely because the vast majority of America, if we're talking about the continental 479 00:52:23.740 --> 00:52:30.700 U.S., the vast majority of people in that region don't mind an aggressive group outlawing 480 00:52:30.700 --> 00:53:00.700 competitors in the use of force and extracting revenues through coercion, namely they would all say we need a government, and so that's true, and I don't think there's any way around that fact, and so the relevance or what this gains us is these people are saying something beyond that, they're saying we could even be in an initial state of Rothbardian anarchy where we had these initially competitive firms and so on, but then market forces per se are going to lead to one huge agency, 481 00:53:00.700 --> 00:53:03.180 And then at that point, it's going to be unstoppable. 482 00:53:03.180 --> 00:53:07.980 And so what I'm saying is, well, no, if we were in that initial state and people did 483 00:53:07.980 --> 00:53:15.720 believe that it was wrong to aggress and invade property rights, that that would, it's true. 484 00:53:15.720 --> 00:53:21.120 No matter what we say, there's no way to safeguard the re-emergence of the state if everybody 485 00:53:21.120 --> 00:53:25.060 just all of a sudden wants to have a state that they're going to get one. 486 00:53:25.060 --> 00:53:30.900 So the what I'm trying to show is that the these people are neglecting when 487 00:53:30.900 --> 00:53:34.100 they're the considerations that the agency is going to use it's not merely 488 00:53:34.100 --> 00:53:37.860 how many guns of these people have and how many casualties are we going to take 489 00:53:37.860 --> 00:53:41.900 they're completely neglecting well are our customers going to take it into 490 00:53:41.900 --> 00:53:43.900 account so that's 491 00:53:55.060 --> 00:53:57.060 Right, I don't. 492 00:54:25.060 --> 00:54:53.060 The model, the results are driven by a fairly strong assumption, that it could quickly influence the register category, where for any violation of rights, even for one permit that they don't speak of or coerce, there are people who lose things in the draw at that point. 493 00:54:55.060 --> 00:55:14.540 that's true and that's true but but but right right again though in the model 494 00:55:14.540 --> 00:55:18.780 it's that difference between the p1 and the p2 could be very small so maybe it 495 00:55:18.780 --> 00:55:22.660 it just means that those people occasionally send in their payments 496 00:55:22.660 --> 00:55:28.200 late or something. Okay, so it's there's that and then also the fact that that are the number of 497 00:55:28.200 --> 00:55:32.120 resistors can vary and so all I'm showing is various situations in which. 498 00:55:32.120 --> 00:55:41.120 You're right, but your equilibrium holds, you have restrictions on the ratio of what you want to do, right? 499 00:55:41.120 --> 00:55:43.120 Right, right, right. 500 00:55:43.120 --> 00:55:56.120 And maybe, in fact, for your equilibrium to be an equilibrium, you would have to have a pretty strong ideology, but there's a weak ideology. 501 00:55:56.120 --> 00:55:57.120 Okay. 502 00:55:57.120 --> 00:56:06.600 okay okay no I don't think you would so that's I'm glad you brought that up and 503 00:56:06.600 --> 00:56:10.400 that's why some of the stuff it was jumping out at me for example and I 504 00:56:10.400 --> 00:56:13.640 couldn't get into it in the talk because with this audience I wanted to focus 505 00:56:13.640 --> 00:56:17.960 more on the background rather than the model so much but one of the things I 506 00:56:17.960 --> 00:56:20.840 was trying to find out and what's proposition two in the paper that you 507 00:56:20.840 --> 00:56:23.720 guys have seen but I didn't talk about here because I didn't quite finish it 508 00:56:23.720 --> 00:56:35.720 I was trying to say, okay, when would one agency be big enough such that if all the other agencies joined together and attacked them, that it still wouldn't be worth it for them to do so. 509 00:56:35.720 --> 00:56:41.720 And so I was trying to see the viability of having multiple competing agencies and they wouldn't get gobbled up by each other. 510 00:56:41.720 --> 00:56:50.720 And what I was finding is it was surprising me that I could have ridiculous numbers of outside agencies and it was always viable. 511 00:56:50.720 --> 00:57:03.720 And I realized what was going on is, so if I first compute, let's divide society and share, you know, one-tenth of all the customers among them, there's ten agencies, and I go ahead and say, would the other nine want to join forces and fight him, yes or no? 512 00:57:03.720 --> 00:57:12.720 And then I said, okay, what about a thousand, what about twenty thousand? And I found that the more agencies I put in and then tested, the easier it was to satisfy that condition. 513 00:57:12.720 --> 00:57:18.520 And so what was happening is there's a fixed cost that the bigger your coalition of rogue agencies, 514 00:57:18.520 --> 00:57:24.720 regardless of the proportion of people in society that are resistors, there's a greater number of them. 515 00:57:24.720 --> 00:57:28.620 And so actually the bigger your agency grows, and this is the economies of scale argument, 516 00:57:28.620 --> 00:57:35.120 the thing that sort of the offset to it is the bigger the agency grows, the more... 517 00:57:35.120 --> 00:57:41.720 So even if only 0.1% of society are resistors, if the agency consists of 200 million customers, that's a lot of people. 518 00:57:41.720 --> 00:57:56.720 And so if you're losing $10 per person, even if it's only 0.01%, you're not going to rob the homeless guy for $5 because you're going to gain $5 and lose whatever, $10 times 0.01% of 2 million people or 200 million people, all right? 519 00:57:56.720 --> 00:58:03.720 So that's the thing that I hadn't even realized before I did it is that it's not merely a proportional argument. 520 00:58:03.720 --> 00:58:10.720 There's a fixed cost that once you become a rogue agency, you instantly have this huge fixed cost depending on how big you are. 521 00:58:10.720 --> 00:58:17.440 And it's true, the smaller the proportion of resistors in society, the smaller it is, but it's still a fixed cost. 522 00:58:18.480 --> 00:58:20.480 So, it, yeah. 523 00:58:21.280 --> 00:58:29.040 On the difference between P1 and P2, I mean, is P1 equal to zero, is P2 equal to drop out? 524 00:58:29.600 --> 00:58:36.480 I mean, in other words, is it weighted in some people, I don't know, in length, other people? 525 00:58:38.160 --> 00:58:39.680 It could, right. 526 00:58:40.720 --> 00:58:51.720 I didn't take a stand. I didn't need to. In the paper that I'm going to send off these mainstream journals, I'm going to try to give a numerical exam, and I'm going to do P equals 1 and P2 equals 3 halves, just to try. 527 00:58:51.720 --> 00:58:57.720 But no, if you wanted to model what happens if people can just drop out, then yeah, P1 would be 0. 528 00:58:57.720 --> 00:58:59.720 It could be that. 529 00:58:59.720 --> 00:59:04.720 Yeah, or it could even be negative, meaning those people start sabotaging your operations. 530 00:59:04.720 --> 00:59:11.720 All right, so some of these are the things that we do, but they're actually, you know, the main cause of the net. 531 00:59:11.720 --> 00:59:21.720 Right, and just to admit, I feel funny. I don't, the way I'm thinking about this in terms of the real world is not, oh gee, what do I think P1 really is? 532 00:59:21.720 --> 00:59:28.720 I'm more, but yeah, I mean, in the model, that's what it would mean if P1 is zero, that means they just become neutral. 533 00:59:28.720 --> 00:59:35.920 Whereas, if your agency is doing something you don't like it and you want to go into the headquarters and plant a bomb, then that's a negative P1. 534 00:59:35.920 --> 00:59:37.920 All right, thanks.