Date: Tue, 2 Nov 93 14:26:44 EST
From: Bryan Douglas Caplan <bdcaplan@phoenix.Princeton.EDU>
Subject: Waller on Anarchism and Justice
To: libernet-d@Dartmouth.EDU

I think that libertarian anarchists ought to take thoughtful criticisms
like
Dave Waller's seriously.  How will anarchism handle the problem of
wealthy
criminals?  It seems like anarchism makes the utopian demand that
everyone
voluntarily play by the rules.  The comment is made more persuasive by
examples from modern Columbia, medieval serfdom, and other situations
where
the wealthy have received and continue to receive unequal justice.

I think that there are two levels of reply to criticisms of this sort.
1. First, the wealthy have extra influence under GOVERNMENT, too.
Indeed, this
is precisely what the Columbian and medieval situations were: wealthy
individuals use their wealth to control or capture the government, then
use
it to bend the rules for their benefit.
In order to criticize anarchism, it is not merely necessary to point out
that
such a system permits the wealthy to evade the law.  Why?  Government,
even
minarchy, must face the same problem.  Surely minarchy free of
corruption is
just as utopian as anarchism free of murder-for-hire.  In order for the
argument from wealth to work, it would be necessary to show that
government
has a COMPARATIVE ADVANTAGE over competitive defense agencies with
respect
to equality under the law.
2. Second, GIVEN the general level of human depravity, anarchism
probably
does have a comparative advantage over government.  Holding constant the
level of human badness, we can merely look at the situation in terms of
incentives.  Under minarchy, the government faces only periodic
competition
in the form of voting; and voting is notoriously a pure public good, so
voters will probably be unable to carefully monitor the government for
corruption.  If people find that the wealthy are securing unequal
justice,
their only alternative is to move to another country.
In contrast, under anarchism there can be multiple suppliers of defense
services in a single area.  And the benefits of switching to an honest
agency
accrue to the consumer who switches, whereas the benefits of informed
voting
go to everyone equally.
Now if a defense firm's consumer is wronged by a wealthy criminal, won't
they
just abandon him?  No, for at least two reasons.  First, a defense firm
is
really selling an insurance policy, a policy to defend the rights of
their
clients IF they are wronged.  If word gets out that the firm abandons
its
clients when they come to demand the help they are entitled to, their
insurance policy will be basically worthless.  In essence, firms would
want
to protect clients even though the expected value of their case is
negative,
because otherwise their name brand would be seriously hurt.
The second reason why the rich would have trouble securing unequal
justice
comes from the incentives of the rich person's firm.  In insurance
economics,
there is a concept known as "adverse selection."  This means that unless
an
insurer properly screens its customers, the most likely people to buy
insurance are those who are most likely to demand benefits.  For
example,
chronically sick people are most likely to buy health insurance,
high-risk
drivers are most likely (other things held constant) to buy auto
insurance,
and so on.  But if most people buying insurance come from high-risk
groups,
then their premiums would have to be extremely high.
Now what would happen if a defense firm acquired a reputation for
defending
wealthy clients to the death?  It would face  an adverse selection
problem of
the worst sort.  Every criminally inclined wealthy person would want to
sign
up.  The firm would have to pay out huge payoffs, either in the form of
settlements to other firms, or to pay the cost of fighting wars with
every
honest firm.  The cost of the policy would have to rise almost to the
level
of the cost of the crimes.  However wealthy a client might be, there is
a huge deterrent against accepting him as a customer regardless of his
criminal behavior.
In contrast, honest firms could sell very cheap policies, because the
large
majority of their clients would never require the services.  This is
just
a standard application of insurance economics, which tells us that the
firms
that adequately monitor their clients can offer cheap premiums, even if
benefits are high, since the probability of payout is low.  Firms that
indiscriminately defended wealthy criminals, in contrast, would have to
charge very high premiums, since the probability of payout is high.
Finally,
since the number of honest people of ordinary means far exceeds the
number
of wealth criminals, the total number of trained police on the side of
justice
would vastly outnumber the number on the side of criminals.

Much more could be said, but the incentive system of free-market
anarchism
definitely seems better able to control the problem of wealthy criminals
that
government or even minarchy.  We don't need to assume that everyone
under
anarchism is good, because we can show that for ANY level of goodness,
the incentives of anarchism are better than for minarchy.
                         --Bryan Caplan
                           Department of Economics
                           Princeton University
                           bdcaplan@phoenix.princeton.edu