Mises Daily: Thursday, January 17, 2013 The Stateless Equilibrium by Predrag Rajsic The stateless market society

a peaceful social arrangement based on voluntary rela tions among individuals in which the state is not present is not a popular idea. M any people believe that this society would lack the capacity to define and enfor ce property rights, and that this would result in chaos, tyranny of the rich or in a reversal to a state. This belief has led to a widespread dismissal of the s tateless society paradigm. Murray Rothbard is by many considered the champion of the stateless society doct rine. However, even Rothbard conceded that there can be no absolute guarantee tha t a purely market society would not fall prey to organized criminality. [1] While it is true that absolute guarantees for any social outcome are generally i nappropriate, I argue that there are good reasons to believe that outcomes like chaos, tyranny of the rich, or even organized criminality in the absence of a stat e are unlikely. To show this, I will assess the core economic forces that govern the development of any society and ultimately hold it together. This will show how the internal economic features of a stateless society provide incentives for nonviolence and cooperation and disincentives for violence, theft, and extortion. This analytic al journey will also lead us to the realization that the glue that keeps state s ocieties together in their current form may be nothing other than fear of an ima gined enemy. As far as humans can overcome this fear, they can open the path to a stateless society. Neither Chaos nor Tyranny The typical story one hears when the necessity of the state is questioned is tha t, in the absence of the state, we would allegedly all turn against each other a nd start taking each other s resources, and, since there would be no state to regul ate this taking, chaos would ensue. Everyone would, allegedly, become a taker. Th is outcome, however, is unlikely for at least two reasons. First, like any other economic activity, taking from others requires the use of scarce resources. Resources can be obtained by discovery, production, exchange, gift, or by taking from others by force. Those who want to take from others firs t need to acquire resources that they would use in the subsequent process of tak ing. This means that the initial resources for taking from others would have to be obtained by some method other than taking: discovery, production, exchange, o r gift. Thus, a situation in which everyone only acquires resources by taking from other s cannot be the initial stage of any society. Someone needs first to find or pro duce goods before those goods can be taken away from him or her. Any society bas ed exclusively on taking from others is illogical. Instead, a society in which s ome people take while other people produce would be something we would expect to see in reality. It is also not excluded that the same individuals may produce a t some times and take at other times. [2] The second reason why we would not all turn into takers is that unspecialized in dividuals are less productive than those that specialize in several activities o r only in one activity. The law of comparative advantage, or the law of associat

ion, compels people to specialize in activities while obtaining most products an d services from other specialized individuals. This way everyone gets to enjoy m ore goods and services than they would if they were self-sufficient. This is why , in a stateless society, like in any other society, different people would spec ialize in different activities. Only some would specialize in taking from others . However, the taking activity would not be as attractive as it may seem at first glance. First, in a capital-poor stateless society it would be quite hard to bec ome an effective taker because of the initial resource requirement needed to sta rt a successful taking operation. If one starts taking from others at a stage wh en he only acquired a low level of initial wealth (say, a cave and a stick), thi s taker will not be able to effectively defend himself from those whose resource s he took. Thus, the process of taking must be preceded by a process of capital accumulation. How about then the absence of the state in a capital-rich society such as the on e in which we live? Some argue that if the state were to be abolished, the rich would use their ample resources to force the poor into submission. This would al legedly turn the present system into a system of forced labor with minimal compe nsation. The business owners would presumably provide the workers only with enou gh resources to secure food, shelter, and clothing. However, it is not at all clear why business owners would want to enslave their employees and customers. As humans came to learn over the course of history, fre edom benefits all, in the long run, because voluntary cooperation is more produc tive than forced labor. Force stifles motivation and creativity, which are neces sary for the discovery of new and more productive activities. This is why freer societies tend to outperform in the long run those with less freedom, economical ly as well as militarily. It is the increase in the productivity of labor gained through capital accumulation and voluntary cooperation that compelled people to abolish slavery. Let us posit a total breakdown of states in a society. One possible outcome of s uch an event, as many have argued before, is the rise of new states, perhaps wor se than the ones before. Another possible outcome is what I will call a stateles s equilibrium.[3] As the following two sections will show, while there are stron g incentives for voluntary cooperation in such equilibrium, these incentives can be clouded by the oldest of emotions fear. A Stateless Equilibrium Let us suppose that after the state breakdown, there is a wild spree of mutual " taking." The wilder the fighting, the sooner will some or most of those fighting run out of resources for fighting and for sustaining their own life. At this point, some of them need to resort to production in order to sustain the ir own livelihood. Others, who haven't run out of resources, may try to take res ources from those who have turned to production. In this case, the producers wou ld have to make a two-fold effort produce and fight to protect what they have prod uced. More successful producers will survive and less successful ones won't. Sim ilarly, only the most successful takers would survive. These takers may organize into gangs to become more effective in taking. The producers may also organize to better defend their goods. Some of those that specialized in violence and taking would eventually realize t hat they can obtain more resources by protecting the producers from other takers , in exchange for money or goods and services. This is what the law of comparati ve advantage or the law of association implies. Specialized fighters are more ef

fective in fighting than people who are both producers and fighters. Specialized producers are more effective in producing than the producers who have to devote some of their time to fighting. Thus, a fighter can obtain more resources throu gh voluntary exchange with a specialized producer than by taking from a producer who is also a fighter. Likewise, specialized producers, even after paying for t he protection services, are able to consume more compared to when they have to d evote a portion of their time and resources to fighting the takers. The objection that is often raised against this is that these protectors would t urn against the producers and use force to extort goods and services. True, thos e less far-sighted might resort to extortion. But, the wiser ones would realize that violence, or a threat of violence, would weaken the productive capacity of the producers and consequently their own ability to provide resources necessary for the defense against the takers, while strengthening the producers' incentive s to seek the services of other potential protectors. Thus, those protectors tha t engage in voluntary transactions with the producers are in a better position t o fend off aggression. In the end, some people specialize in taking, while others specialize in either producing or protecting the producers against the takers. Since takers rely only on taking for acquiring resources, they do not directly enjoy the benefits of e ntrepreneurial discovery. Entrepreneurial discovery is a feature of the producer s and those who engage in voluntary exchanges with them. The takers are always t he secondary users of the producers' creative work. They are always the second m overs. The fact that the takers do not engage in productive activity or in voluntary co operation with producers renders the size and scope of the takers' organizations quite narrow. The fact that the protectors and producers are in a voluntary rel ationship enables the protectors to gain better access to an abundant supply of goods and services. This implies that the takers, despite the productivity benefits of a voluntary e xchange relationship with producers, still prefer a violent relationship. Takers are thus individuals with a preference for violence. What about conflict resolution among producers? It would be nave to believe that all of the producers would always agree on who owns what and what the limits of that ownership are. Thus, we should expect that some producers would at times co me into conflict over the appropriate use of resources (including the use of res ources for paying the protectors). How would this conflict be resolved without t he state? First, we know that, as anything else, being in a conflict with someone, even a nonviolent conflict, is not costless. As conflict diverts time and effort, it re duces the productive powers of the producers involved in it, so each of them wou ld prefer some sort of conflict resolution. It is unlikely that either of the pr oducers would resort to violence (which may include hiring a protector to initia te violence) because the short-run gains from such a resolution would have to be weighed against the long-run implications of being labeled as unreliable and vi olent among fellow producers. And, the hired protector must evaluate the benefit s against the costs of being labeled as a thug among the producers. This does no t mean that some unwise individuals would not resort to violence. It simply mean s that, for producers and protectors, violence against other producers is genera lly less advantageous than cooperation. This suggests that, despite being in a disagreement over the use of a resource a t one time or another, the parties involved in a conflict would still be in agre ement that nonviolent conflict resolution is better than a violent one or an ind efinitely prolonged conflict. The actual conflict resolution technique that thes

e parties might choose depends on their preferences. They may negotiate directly or they may agree on a mediator who would, based on the arguments presented by each side, judge how the conflict should be resolved. Ultimately, the conflict r esolution technique depends on the preferences of the parties involved. And, the proposed conflict-resolving course of action is generally binding not because i t is backed by a threat of state violence (i.e., imprisonment), but because not complying implies a prospect of a prolonged conflict (and all the costs involved with it). This, again, does not mean that every proposed solution to a conflict will be ac cepted by all involved parties. It simply means that, after some time of being i n a conflict, all parties would reach a point when a resolution is better than p rolonging the conflict. And, since being in a conflict requires the use of resou rces without a clear future benefit, producers will generally seek to avoid prol onged conflicts. Those that continually partake in conflicts will be shunned and avoided, and may even be perceived as takers, in which case they would not be a ble to cooperate with those that perceive them in that way. The State: An Equilibrium of Fear It is only when a large number of producers start believing that they could use the force of their protectors to take resources from other producers that a larg e scale, organized, violent conflict may arise. But, why would producers want to do such a thing when they can, in the long run, benefit more by engaging in vol untary exchanges with other producers and protectors? Let us, at this point, introduce an old instinct fear.[4] Producers may fear poten tial aggression by other groups of producers. This fear may propel the producers to support the aggression of their protectors on others while believing this ag gression is the only means of preventing a future aggression by others. This fea r would also motivate the producers to abandon the idea of seeking services of o ther groups of protectors. After all, who wants services of those who seem eager to aggress on you? In this situation, the protectors could simply take as much from the producers a s they think is "optimal" or "fair." The producers would not object to this for fear that the protectors would not otherwise be able or willing to protect them from potential "aggressors." The producers may also fear that the protectors wou ld use force to extort goods and services from them if they refuse to pay their "fair" share. Thus, there are strong incentives for the protectors to create and maintain a situation in which the producers are fearful of other producers and, potentially, of their own protectors. But, if only some protectors manage to make their partner producers fearful of o thers, this would still not lead to the elimination of voluntary relationships a mong all producers and all protectors. Those producers that are free of fear are , in the long run, more productive and thus better able to protect themselves. T hose in fear are more likely to realize that their fear is baseless and counterp roductive if they see there are other, more prosperous and better protected nona ggressing groups of producers. Thus, the scenario in which there is a universal relationship between protectors and producers based on the producers' fear of other producers can only exist if the origin of this fear is not fully grasped by most of the producers, if the f ear exists in a latent, unarticulated, and unidentified form. If we now replace the word protectors with the word states, the word producers w ith taxpayers, and the word taking with taxing, we get something that looks much like the world in which we live. The protectors that maintain the latent fear o

f foreign or internal aggression are nation-states with their military and polic e forces that acquire resources by taxing the taxpayers, while the taxpayers[5] are all those within these nation-states earning their resources through product ive activities and voluntary exchanges with others. If you ask anyone from either side of a war, you will generally hear the same st ory. People on each side deeply believe that they are waging a defensive war. Ev en when initiating a war, this initiation is justified by claiming this was the only way to prevent a future aggression by the other side. When it comes to aggr ession within countries, most people would assert that a state police is the onl y practically feasible deterrent against individual and gang aggression. The element that holds this equilibrium in place is the producers' latent fear t hat some other producers (with the help of their protectors' state armies and po lice forces) or groups of specialized gangs of takers would take away their reso urces by force. In the first case, potential aggression is fueled by the producers' fear and not by the desire for others' resources. This is true because a producer can always benefit more in the long run through voluntary exchange with others. In the sec ond case, gangs of takers can effectively be deterred by contracting with protec tors, i.e., private security services. If this is true, one has to conclude that the fear that sends us running into the clutches of the state is, in reality, e ntirely baseless. Conclusion Despite the common belief that a stateless society is utopian, there are good re asons to believe that this society is not only economically feasible, but also p rovides continuous incentives for nonviolence. The perceived inevitability of th e state, as well as the perceived unviability of a stateless society, are founde d on faulty economic reasoning and irrational fear. Comment on this article.

Predrag Rajsic is a postdoctoral researcher in the Department of Food, Agricultu ral, and Resource Economics at the University of Guelph in Ontario, Canada. See his blog. Send him mail. See Predrag Rajsic's article archives. You can subscribe to future articles by Predrag Rajsic via this RSS feed.

Notes -------------------------------------------------------------------------------[1] Man, Economy, and State, p. 1055. [2] Some would even argue that we are all takers and producers at the same time because, thanks to the existence of the state, we extort money from others throu gh taxation but we also pay taxes. In a state society, we can indeed be producer s and takers at the same time because taking is performed indirectly through the state and state force is used to prevent individuals from using their own physi cal force against this sort of taking (taxation).

[3] Note that equilibrium here is a metaphor for the formation of social structu res and relationships (i.e., specialized industries, markets, voluntary exchange s) rather than a steady, motionless state of the world. In this equilibrium, the re are always changes, but within the general framework of the existing social s tructures. [4] While a detailed description of the origin of this fear is outside the scope of this article, some authors hypothesize that it is a biological evolutionary adaptation that was useful during the hundreds of thousands of years when humans lived in small pack-like groups. Hayek and others argue that during this long p eriod, potential benefits from cooperation through the division of labor were li mited by the primitive capital structure. This kept human packs and, later, trib es small. In contrast, the benefits from occasional violent acquisition of resou rces from other packs and tribes were greater than the foregone benefits from me rging two or more tribes through the division of labor and peaceful cooperation. Applied in the Hayekian context of social evolution, the resulting animosity to ward other tribes was a useful tradition as a defense strategy. Fear of other gr oups as an evolutionary adaptation that was useful during the larger part of hum an history is no longer necessary. However, while our social evolution outpaced our biological evolution in the sense that abandoning the tradition of animosity leads to more successful societies, the instinctive fear of others remained. [5] Note that even though state employees pay "taxes," their wages come from tax revenues, not voluntary exchanges with producers. Thus, state employees are tax receivers rather than tax payers. http://www.mises.org/daily/6339/The-Stateless-Equilibrium