Yves here. We are continuing with Andrew Dittmer’s series on what happens when you take libertarian ideas to their logical conclusion.
This post first ran on December 1, 2011
By Andrew Dittmer, who recently finished his PhD in mathematics at Harvard and is currently continuing work on his thesis topic. He also taught mathematics at a local elementary school. Andrew enjoys explaining the recent history of the financial sector to a popular audience.
Simulposted at The Distributist Review
ANDREW: Let’s imagine that a future libertarian society has been established, and security and justice are provided by competing insurance companies. What will happen if two different people, covered by two different security GLOs, disagree about what their rights are?
CODE NAME CAIN: The two people would find an independent arbitrator that would be the unanimous choice of both parties .
ANDREW: Suppose that one of the two parties is stronger, and so will likely outlast the other in a direct conflict. Wouldn’t that party prefer to refuse all arbitration and, during the delay, squeeze the other party into submission?
ANDREW: Suppose someone annoys you, and you pay their GLO a sum of money that is significantly more than the present value of that person’s future insurance payments. Would the GLO kill the person for you?
ANDREW: Suppose that one security GLO is much stronger than a competing GLO, and it wishes to expand its market share. Will it strategically assassinate clients of the weaker GLO in order to advertise its superior security capabilities?
ANDREW: These scenarios all appear plausible to me. Why are you sure they won’t happen?
CNC: Security GLOs will understand that the sort of aggressive behavior you describe is economically irrational. In fact, insurers will [not engage] in any form of external aggression because any aggression is costly… implying the loss of clients to other, nonaggressive competitors. Insurers will engage exclusively in defensive violence… 
ANDREW: Suppose the CEO of a security GLO understands his own self-interest differently than you do, and starts killing people. What would happen then?
CNC: A security GLO that started assassinating people would represent a threat to stable order not just for the insurer of the murdered individuals, but for all security GLOs. Therefore, the security GLOs would cooperate and defend weaker GLOs from aggression.
ANDREW: How can we be sure about whether you’re right? What if the security GLOs fail to cooperate in the way you say?
CNC: There is nothing that would stop the GLOs from cooperating in order to establish stability. Already today, all insurance companies are connected through a network of contractual agreements… as well as a system of… reinsurance agencies, representing a combined economic power which dwarfs that of most existing governments.  Under pressure to settle questions about intergroup conflict, competition would promote the development and refinement of a body of law that incorporated the widest… consensus and agreement… [250-251]
ANDREW: So the insurance companies, taken together, will constitute a sort of global, non-coercive, non-government GLO, established in a consensual and rights-protecting manner.
ANDREW: Although it can be very difficult, ordinary people in America can sometimes influence what their government does. I get that the global GLO will be different in that ordinary people will have no voice in what happens – but in what other ways will the global GLO not be a government?
CNC: First, you’re wrong – not only will consumers have a voice in the global GLO, they will be sovereign. They will completely control the GLO through their decisions about where to purchase insurance.
Anyway, to answer your question, a government is an organization that exercises a compulsory territorial monopoly of protection and the power to tax . The global GLO will be very different.
ANDREW: The global GLO will protect people through the security GLOs that are part of it. Those organizations will be paid money by people who desire protection: noncoercive Tax-Like Payments. Aside from everything being completely voluntary, what is the difference here?
CNC: The fact that everything will be completely voluntary is, of course, a very important difference. But there will be another difference.
Governments not only monopolize the business of protecting people, but they also monopolize control over territory. In the libertarian society, security GLOs will protect people, but they will not hold final authority over a specific piece of real estate.
ANDREW: Oh, I see, private homeowners will rule over territory instead.
CNC: Not exactly. Most of the time, houses will be part of “proprietary communities,” like modern-day gated residential communities… owned by a single entity, either an individual or a private corporation… The proprietor [will be] an entrepreneur seeking profits from developing and managing… communities… . The residents will not have full title to their homes, since the proprietor will retain the right to enforce covenants – i.e. rules about who can live there under what conditions.
ANDREW: Since these real estate corporations will have authority over specific territorial areas, could we call them territory GLOs?
CNC: We can call them whatever we want, as long as we use our terms precisely.
ANDREW: So I guess the idea is that even though the global GLO and the security GLOs will impose a few basic rules on everyone, there will be a lot of room for each territory GLO to create its own individual culture.
CNC: You’re finally starting to understand. Catholics will be able to live by their principles, Muslims by Islamic principles, and Non-believers by Secular principles.
ANDREW: So these local communities will increasingly separate from each other… That might not bother some people, but given that Dr. Hoppe is an economist, isn’t he worried that the world will divide up into small, economically isolated units?
CNC: That won’t happen – just because one does not want to associate with or live in the neighborhood of Blacks, Turks, Catholics or Hindus, etc., it does not follow that one does not want to trade with them from a distance .
ANDREW: Uh… will a lot of people not want to live with blacks or Catholics?
CNC: Each territory GLO will have entrance requirements (for example, no beggars, bums, or homeless, but also no homosexuals, drug users, Jews, Moslems, Germans, or Zulus) and those who [do] not meet those entrance requirements [will] be kicked out as trespassers. 
ANDREW: If you’re only allowed to live in certain areas depending on your race, behavior, and religion, that might sound to some people like a less free society.
CNC: Those people are clearly uncomfortable with free individuals making decisions that they think are mutually beneficial. Maybe they would prefer living in the United States of today, where [d]iscrimination is outlawed… [t]eachers cannot get rid of lousy or ill-behaved students, employers are stuck with poor or destructive employees… banks and insurance companies are not allowed to avoid bad risks… and private clubs and covenants are compelled to accept members… in violation of their very own rules and restrictions. 
ANDREW: Presumably, some people will not mind living with people of other races.
CNC: Of course, every territory GLO would be free to discriminate in whatever way it wishes. But we need to be realistic. Notwithstanding the variety of discriminatory policies pursued by different proprietary communities… no proprietary community can be as “tolerant” and “non-discriminatory” as left-libertarians wish every place to be. 
ANDREW: What do you mean by “left-libertarians”?
CNC: Murray Rothbard likes to call them “modal-libertarians” (MLs). As Rothbard says, “the ML is an adolescent rebel against everyone around him,” who only hates government because it is something else to disrespect. MLs think that profanity, drug use… homosexuality… pedophilia… or any other conceivable perversity or abnormality… are perfectly normal and legitimate activities and lifestyles . What these countercultural libertarians fail to realize… is that the restoration of private property rights and laissez-faire economics implies a sharp and drastic rise in social “discrimination” and will swiftly eliminate most if not all of the… life style experiments so close to the heart of left libertarians. 
Left-libertarians and multi- or countercultural lifestyle experimentalists, even if they were not engaged in any crime, would once again have to pay a price for their behavior. If they continued with their behavior or lifestyle [in public], they would be barred from civilized society and live physically separate from it, in ghettos or on the fringes of society, and many positions or professions would be unattainable to them. 
ANDREW: I can tell you’re excited about this… But maybe you’re getting your hopes up. After all, you’ve said that every territory GLO will be free to develop its own culture. What if some territory GLOs make it so people are rewarded for smoking weed?
CNC: Every territory GLO is free to develop its own culture, but only subject to the constraints of inexorable economic laws. First of all, the proprietor and largest investors in the territory GLO would, in order to protect and possibly enhance the value of their property and investments,  be very careful about whom to welcome to their territory, and these leaders would set clear standards on what kind of behavior is acceptable for local residents.
Second, the security GLOs would also have a say on who immigrates into the territory GLOs, and even more than any one of their clients, insurers would be interested in… excluding those whose presence leads to a higher risk and lower property values. That is, rather than eliminating discrimination, insurers would rationalize and perfect its practice. 
ANDREW: So the security GLOs would regulate the territory GLOs… Let’s see if I understand. Suppose that the security GLOs decide, based on their research, that watching television makes people more docile. Do you think maybe they would require every family to watch television for a certain number of hours per day?
CNC: No, you don’t understand. If one security GLO tried to do this, they would lose business to competing security GLOs that allowed people not to watch television.
ANDREW: Suppose that the security GLOs decide, based on their research, that kids who are home-schooled are more likely to oppose a libertarian society. Would they refuse to insure territory GLOs where kids are home-schooled?
CNC: Once again, you fail to reckon with the power of market competition. Security GLOs will only cooperate when doing so leads to positive consequences. For example …insurers would… be particularly interested in gathering information on potential… crimes and aggressors… [A]lways under competitive pressure, they would develop and continually refine an elaborate system of demographic and sociological crime indicators. That is, every neighborhood would be described, and its risk assessed, in terms of a multitude of crime indicators, such as… its inhabitants’ sexes, age groups, races, nationalities, ethnicities, religions, languages, professions, and incomes. [260-261]
ANDREW: Do you think that the security GLOs might offer people they consider to be potential criminals the opportunity to wear a device keeping them under surveillance – as a condition for granting them insurance?
CNC: Now you’re coming up with more practical ideas. But the insurance companies are good at thinking outside the box – they’ve probably already thought of that.
ANDREW: Let’s see – so security GLOs will set up precise financial incentives to segregate residential communities by race, etc., following detailed mathematical models. Many people will be effectively forced, in a rights-respecting manner, to be under 24-hour surveillance. I’m curious – what kind of society do you think this will produce?
CNC: I think most people would agree that under such conditions, all … regional, racial, national… religious, and linguistic wealth redistribution would disappear, and [so] a constant source of social conflict would be removed permanently .
ANDREW: I know that you think this is very unlikely, but suppose people living in the free society of the future decide that they don’t like it very much, and would like to go back to living in a democracy. Could they do it?
CNC: That will not be possible.
ANDREW: You mean, you are sure that no one will want to go back to democracy?
CNC: No, I mean they won’t be allowed to discuss that possibility. In a covenant… among proprietor and community tenants for the purpose of protecting their private property, no such thing as a right to free (unlimited) speech exists, not even to unlimited speech on one’s own tenant-property. One may say innumerable things and promote almost any idea under the sun, but naturally no one is permitted to advocate ideas contrary to the very covenant of preserving and protecting private property, such as democracy and communism. There can be no tolerance toward democrats and communists in a libertarian social order. They will have to be physically separated and removed from society. 
ANDREW: But all of these outlaws, excluded from the libertarian society – how do you know they won’t try to rebel against the civilization you’ve created?
CNC: You mean, what if the rejects continue to nurture ideas of democracy, and they make plans to take away the rights of rich people? Keep in mind that in the society of the future, a lot of jobs will be done by robots. As pacifist libertarian Bryan Caplan says, “rich people rarely take the ‘transition to socialism’ lying down…. [If you were a rich person in this scenario], you might want to reprogram your robots for civil war…. True, all of the soldiers of the future may be robots… But… [j]ust because robots do all of the killing doesn’t mean humans won’t do their share of the dying.”
In part 4 of this interview series, Code Name Cain will explain why an attentive survey of history shows that all of the rights of governments are illegitimate, and that all of the rights of modern corporations and property-holders are legitimate.
Karl Widerquist envisions a fully sovereign state growing from landholdings like this (“A Dilemma for Libertarianism,” Politics, Philosophy, and Economics 8.1 (2009): 43-72).
“Now that I think of it, they already have”: Insurance 2020: Innovating beyond old models IBM
p. 2: “The… rising tide of technology… empowers insurance underwriters to bring their products closer to realtime interaction via sensor networks and enlightened privacy regulations.” See also p. 6, second paragraph from the top.
Bryan Caplan, however, points out that since the libertarian society will be incredibly wealthy, it will be “child’s play” for the numerous billionaires to support everyone else through “voluntary charity.” He therefore considers a revolution extremely unlikely.