Where Are the Rothbardian Defense Agencies?

For some time now, I have thought that a standard libertarian argument against Drug Prohibition ironically supported statism. In a recent blog post, Gene Callahan (author of an excellent introduction to Austrian economics) illustrated my point perfectly: RothbardSmileCallahan pointed to organized crime as an (alleged) example of what free-market security agencies look like. First I’ll quote from Callahan to see his point, then I’ll explain why he’s wrong, and the broader problem with the standard pro-drug-legalization arguments.

Here’s Callahan:

You want your private defense agencies?

We have them, and we can see exactly how they operate: they are called drug cartels, and the picture isn’t very pretty.

People buying and selling illegal drugs (or sex, or alcohol during Prohibition) are operating in an environment in which they cannot turn to a state to enforce contracts, property rights, and so on. Thus, they must enforce these things on their own. And how do they operate? Largely as lawless gangs.

Look, there is nothing stopping them from following a book by Murray Rothbard in terms of how they behave. There is nothing stopping them from forming agreements with each other as to how to peacefully arbitrate disputes. (Well, except the fact they don’t have a state to turn to to enforce those contracts, but that point isn’t going to help anarchists very much!)

But we can see how they actually behave instead. That is your competing defense agencies, folks. You’ve got it, live and in the real world, right in front of your eyes. You just have to have the moral courage to look.

As I said upfront, Callahan’s mistake here is forgivable, because even many Rothbardians have probably made it when discussing prohibition. So let me explain that intellectual error, then circle back to deal with Callahan.

We all have the empirical evidence in front of our faces that prohibition goes hand-in-hand with increased violence. We saw it in the U.S. clearly during alcohol Prohibition, with Al Capone and other gangsters ruthlessly running the liquor trade when it was illegal, to be replaced (of course) by peaceful, legitimate businesspeople once it was legalized. On the basis of this historical example, current proponents of legalizing marijuana, heroin, cocaine, etc. will argue that the violence currently associated with these illicit substances is due to the prohibition, not the nature of the drugs themselves.

So far, so good. But the problem comes in when the proponent of legalization wants to explain why drug prohibition goes hand-in-hand with violence. Typically, the answer is the same one Callahan gives in his quotation above: That because they can’t turn to the State-provided police and courts for property protection, drug dealers have no choice but to shoot each other up and establish a reputation for ruthlessness.

Yet this doesn’t really work. I spell it out at length in this post at Mises.org (US), but here’s the punchline: There are all sorts of historical and current examples of industries and merchants not protected by government, yet they aren’t riddled with violent thugs. For example, poor Chinese immigrants operating a dry cleaning service or restaurant in an inner city probably won’t get much help from the police if they are robbed. So they do things like set up bulletproof glass and take other procedures to ensure the (relative) safety of their workers. The relative absence of police and court protection doesn’t cause them to start shooting other dry cleaners.

In contrast, cocaine dealers in the United States can do no such thing. It would be quite easy to ensure that major drug deals never led to a shootout, if only the government would stay out of it. For example, the representatives could go to a third party building, owned by someone with  reputation for integrity. Personnel and metal detectors at the doors would ensure that nobody were bringing AK-47s into the deal. Each group could even put a large bond up with the third party, to guarantee performance and the quality of the product. Indeed, a face-to-face meeting wouldn’t even be necessary.

But none of that is possible today, because the government actively interferes with the drug trade. If some company offered to buy a building and offer the above services, the owners would be prosecuted for drug trafficking, and/or the drug dealers going to the building would be sitting ducks for the police watching the doors. The neighbors would see the drug dealers operating in plain sight, and would complain to the police to “do something,” so they couldn’t even look the other way while taking bribes (the way they do now).

So Callahan is simply wrong (or at least, highly misleading) when he writes, “Look, there is nothing stopping them from following a book by Murray Rothbard in terms of how they behave. There is nothing stopping them from forming agreements with each other as to how to peacefully arbitrate disputes.” The reason reputable, peace-loving, use-force-as-a-last-resort defense agencies don’t arise is that the government would shut them down immediately.

If you want academic support, Ed Stringham has written several peer-reviewed articles (and edited an entire book volume) that showcase historical examples of merchants and customers interacting with each other peacefully, even relying on sophisticated financial contracts, back in the days when there was no single political authority to enforce their agreements. Yet these merchants from centuries ago didn’t “get medieval” on each other.

We would indeed see legitimate businesspeople running efficient defense / protection agencies in the marketplace, if only the government would allow them to operate. For Callahan (and others) to point at organized drug gangs as examples of “the free market in protection services” is as nonsensical as pointing to them as “the free market in cocaine production.”

4 Responses to “Where Are the Rothbardian Defense Agencies?”

  1. Devin says:

    I live in a town of about 40,000 people.

    I just checked the Yellow Pages, there are nine private protection companies listed. All have been in business for more than ten years. Somehow there hasn't been a single war between any of them in that time.

  2. Michael says:

    It is of course true that income-generating organizations will sometimes follow the rational procedures recommended by economic theory, as Murphy (Rothbard, Hoppe, etc., etc.) claim. It is though also true that sometimes they will not. There are equally as many examples through history on the other side of the ledger. This is partially a function of the fact that reduced economic well being in the aggregate often enhances economic well being in the local, as Robinson and Acemoglu illustrate in their brilliant book Why Nations Fail. The other problem is how many Rothbardians seem to forget the Misesian lesson that praxeological calculation cannot be restricted to material considerations. Subjective preference hierarchies are more complicated than that. There can be huge benefits in going to war, regardless of the material costs.

    This doesn't mean that private protection agencies are impossible, nor that they wouldn't have some benefit. It does mean that idealizing them as a panacea is both mistaken and misleading.

  3. Matt T says:

    The Silk Road did precisely this – allow peaceful sales of drugs and other illegal, but harmless goods. And so the US government shut it down. Whoops.

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