By Jock Coats

In the nearly four decades since Harvard University Professor Robert Nozick wrote what is probably his best known work, “Anarchy, State and Utopia [ASU]” (1974), much of the academic debate it has generated has focussed on its role as a response to fellow Harvard political philosopher John Rawls’s “A Theory of Justice” (1971).  This debate, therefore has concentrated on the second of the three distinct parts of ASU in which Nozick advances his own libertarian theory of distributive justice (Vallentyne, 2011) and on his critique of Rawls’s influential liberal, redistributive version (Meadowcroft, 2011).

However ASU can also be read as a seminal work of libertarian theory in its own right, and arguably forms a marginally more moderate response to his contemporary libertarian-anarchists’ work such as that of Murray Rothbard (1970 & 1973), David D Friedman (1973) and Morris and Linda Tannehill (1970).  Nozick developed libertarian-conservative themes beginning to emerge in the mainstream American political arena in the 1960s culminating in the 1964 Republican presidential candidacy of Senator Barry Goldwater (Goldwater, 1960).

This part of the libertarian intellectual debate tends to concentrate more on the first part of ASU, in which Nozick sets out his theory of how, beginning from a “state of nature” position (1974: Ch 2), at least a minimal, or “night-watchman”, state will inevitably emerge through a natural “hidden hand” driven process of consolidation of protective services into a “dominant protective association” (Ch 3).  This would eventually achieve a Weberian “monopoly of the legitimate use of physical force within a given territory” (1919: p1), a de facto state.

In this paper, then, I wish to examine Nozick’s idea that such minimal state is inevitable and that therefore the institutions and norms that will emerge should be accepted and planned for, and argue that, in fact, he doesn’t adequately justify this contention.  I intend to try and demonstrate firstly that his night-watchman state is not inevitable; second, that such an outcome would be precarious in that once the monopoly of violence is attained there is nothing stopping it engrossing itself to become the larger, activist state he seeks to avoid; and third, that by contrast, free market mechanisms of competing protective associations would adequately guard against such a monopoly whilst producing better justice with more liberty.

Whilst such a task may at first seem like an exploration of an arcane obsession of a tiny libertarian-anarchist minority against the very idea of a state I believe it is a vital debate for political philosophy.  As Hans-Hermann Hoppe writes, “[A]mong the most popular and consequential beliefs of our age is the belief in collective security.  Nothing less significant than the legitimacy of the modern state rests on this belief” (2003: p 335).  If a state cannot even be justified in Nozick’s minimal role of “protecting all its citizens against violence, theft, fraud and to the enforcement of contracts” (1974: p26) those whose theories of justice appear to require such a “basic structure” of a state, such as Rawls’s (1971: p 7), may need to examine again the kind of institutions that could achieve their aims.

The Invisible Hand or Immaculate Conception?

Nozick postulates that in a pre-political “state of nature”, because free individuals will find it inconvenient to enforce their own “natural rights”, to “bodily integrity, to freedom of movement and expression, to justly acquired property” (Miller, 2002: p 12) a variety of competing “protective associations” providing security, arbitration of disputes and enforcement of penalties, for a fee, will develop.  Further, that by a “hidden hand” process, economic incentives, such as economies of scale and the postulated advantages of having arbitration dealt with under one set of procedural rules, will make customers gravitate toward the largest and most powerful firm in a given geographical area. This will find itself eventually in a position to define dominant procedural rules and to prevent its smaller competitors from enforcing judgements made under different rules that disadvantage its customers.

From this ultra-minimal state, in which, thus far, the dominant agency permits competing agencies to operate so long as they adhere to its acceptable rules, those other agencies will enter a “declining spiral” (Nozick, 1974: p 17) and the dominant agency will likely buy out the smaller agencies’ customers by compensating those agencies and their customers for restricting the market.  At this point, because it can now both set the fees for everyone and use some of those fees to compensate these “independents” it has taken on all the characteristics of a minimal de facto state: it can, in other words, effectively levy tax and redistribute it to the losers in the protection market.  Since nobody’s rights are violated by this free market process, or, if they are, they are justly compensated, such a minimal state is legitimate and has emerged by purely voluntary, market directed means (Miller, 2002: p 14).

Mark Friedman, however, suggests that “virtually every political theorist who has examined Nozick’s demonstration regards it…as a failure” (2011: Ch 4).  Rothbard, for instance, criticises Nozick’s story on the grounds that no state in history has emerged in this benign, “immaculate conception” manner, and that on the contrary, “every state where the facts are available originated by a process of violence, conquest and exploitation” (1977: p 45).  Friedman (Mark) further suggests that in denying competing agencies the right to operate under their own procedures, the dominant protection agency itself exercises a “procedural ‘imperialism’” (2011: Ch4) that is inconsistent with the assertion that the resulting minimal state fulfils Nozick’s own criteria of emerging voluntarily and without violating others’ rights.

The Precarious Protection Agency

Other criticisms of Nozick’s model contend that it is a precarious solution.  On the one hand, essayist Roy Childs uses the “invisible hand” metaphor himself to show that, if it is not to violate the rights of other, emerging entrepreneurs to compete in the market, it is likely that it itself will end up devolving back into a free market of competing agencies.  The dominant agency may, like other monopolies, become inefficient, with a bloated bureaucracy fuelled by its ability to dictate terms in the market such as price and services offered.  New competitors will emerge, even if initially they have to operate as under Nozick’s ultra-minimal state, using the dominant agency’s approved procedures so as to be acceptable to customers choosing to remain with the dominant agency (Childs, 1977: p 26).  These new competitors may spot a niche, offering a small neighbourhood a specialist service, or focussing on one part of the market such as commercial contract enforcement only, or personal security only.

On the other hand, the minimal state, if it succeeds in maintaining its monopoly, has all the economic incentives for would be exploiters to take control and expand its operations to their advantage.  As Hoppe notes, such an organisation, a nascent government, “is the ultimate judge in every case of conflict, including conflicts involving itself” and has every incentive not merely to protect and resolve conflicts between its “clients” but to define and provoke conflicts that can be resolved to its own benefit.  It can decide unilaterally “how much security to produce” and what to charge for it in order to maximize its income and minimize its effort (Hoppe, 2006).  Over time, all the economic incentives suggest that this will far outstrip Nozick’s idea of a limited state and shift away from discovering just, emergent law into producing its own legislative law creating artificial winners and losers according to the interests of whoever comes to control the dominant agency.

Either way then, this minimal state is precarious.  It can either not survive intact and will devolve again into competing free market agencies, or grow to serve particular interests in an environment in which conflict over control of the agency’s government is all but inevitable.

Acceptable Alternative Arrangements?

In the remaining part of this paper, I wish now to outline in more practical terms how the private production of law and security might operate.  As I argue elsewhere (Coats, 2011), state produced law and enforcement suffers by being a monopoly, with inherent conflicts of interest between itself and both the victim and the perpetrator.  Moreover, history, as Bruce Benson demonstrates, shows that state involvement in the production and enforcement of law has consistently been motivated not by a desire better to protect or provide restitution for victims on injustice, but to produce revenue for the state (Benson, 2011: Ch 3).

As long ago as 1849, Gustave de Molinari described the market principles that he suggested applied just as much to the production of security as to any other human need: “That in all cases…it is in the consumer’s best interest that labour and trade remain free, because … [they] … have as their necessary and permanent result the maximum reduction of price”; “that the interests of the consumer should always prevail over the interests of the producer”; and therefore “that the production of security should, in the interests of the consumers of this intangible commodity, remain subject to the law of free competition” (Molinari, 1849).

It is perhaps remarkable that the institutions and organisations that might effectively provide security, arbitration and enforcement have survived this long onslaught by the state.  Indeed there is considerable evidence that they are in fact thriving in the face of a state apparatus that has become expensive, bureaucratic, and is riddled with incentives that lead to abuse by police, legislators, prosecutors, judges, special interest and lobby groups and those responsible for administering punishment  (Benson, 2011: Ch 5 & 6).

Private security guards far outnumber government police in many countries and consumers are usually forced by the lack of restitution to victims in the system to make provision against our own losses in the form of insurance.  It is common in commercial contracts, and especially in international transaction where more than one state legal jurisdiction is involved, to make provision for private, mutually agreeable arbitration of disputes, often by trade bodies, rather than state courts.

ContraNozick, actual physical conflict is expensive and often counter-productive: who would wish to be a customer of a security force that went about its business using violence?  (Murphy, 2010: p 22)  In arbitration services, who would agree to arbitration by a firm with a reputation for bias in favour of customers of one’s opponent’s protection agency?  (p 15) Such arbitration firms would likely quickly fail in a free market.

At the same time, only those laws that customers demanded, and were prepared to pay for by patronising arbitrators that offered them, would be produced and enforced (Friedman, 1973: Ch 29).  Continual negotiation between competing insurers, arbitrators and enforcers on behalf of their customers would “discover” appropriate norms to apply to different types of cases and appropriate, usually restitutive, penalties.  Insurance agencies could offer packages for particular groups in a community, so that adherents of different religions, for example, could apply their religious laws when dealing with each other, but negotiate secular arbitration services when conflict arises with a non-adherent served by a different agency.

Such arrangements need not be so expensive as to exclude anyone from access to justice (even though it is evident that state enforced law disadvantages the poorest, either through non-enforcement or lack of access to quality legal representation).  If you are not likely to be a criminal, in a system in which a perpetrator and his agents are the ones who rightly pay the costs while victims receive just restitution, premiums are likely to be low for mutual neighbourhood protection services.  For the uninsured, entrepreneurial prosecutors, not unlike the “Associations for the Prosecution of Felons” operating in England in the 18^th and early 19^th centuries (Friedman, 1995), could enjoin in choses in action to prosecute on the uninsured’s behalf and take a proportion of the restitution.

Finally, modern technology tend to make all of this more efficient: databases of precedent help to ensure judgments do not stray far from established norms, but allow flexibility for those norms to develop as with customary law or Common Law.  Judgments and penalties databases enable subscribers and their insurance agencies effectively to ostracise perpetrators (or adjust premiums for future insurance) who do not fulfill judgments against them, much in the way that credit reference systems operate currently.

Conclusions

State created and enforced law is inherently riddled with conflicts of interest, monopoly and public goods grounded incentives for abuse, and regularly fails to provide justice for victims, in the sense of restitution to make them “whole” again as far as possible.  As if that were not enough, the victims, as well as other tax payers, rather than perpetrators, pay most either through increased insurance costs, or simply maintaining them in prison.

I suggest that Nozick’s minimal state is, in fact, the unattainable utopia, precariously balanced between devolving back to free market competition or growing into Leviathan.  Many of the institutions needed for the private production of law and its enforcement already exist, have considerable historic grounding and are in regular and growing use, if not presently in the enforcement of domestic legislative or criminal law.

If I have been able to demonstrate even a little of the potential of a private law based society, it should be evident, for political philosophy in particular, that this common justification for the state cannot be sustained.  In addition, if voluntary institutions can replace such basic human needs as security, they can also be developed to implement solutions for other needs currently assumed to be only within the power of a state to deliver, including a better distribution of economic welfare in a community (Chartier, 2013: p. 328).