State provides what the market demands

By Eli Harman

One recurrent (and basically valid) libertarian criticism of the state is that it offers a “bundle” of services, that you can only take, in toto, or leave, with great difficulty and expense, by moving thousands of miles cutting ties with friends and family, etc.

But when you tell non-libertarians that they could simply shop for these services individually, purchase defense from one source, arbitration and dispute resolution from another, roads from still another, etc. (and refrain entirely from purchasing services they don’t want) they gape in disbelief or recoil in horror.

This tells me that there is strong market demand for this bundling service (states.) It’s all simply more than most people want to sort out for themselves. Libertarians discount the transaction costs and information costs because we already have this abnormal compulsion to examine everything in insane detail. But they are real, and it’s not reasonable to expect normal people to be willing or able to do what we do.

This is actually good, because there are services (the provision of public goods) that people would free ride if not required to purchase. Bundling is one practical, historically proven method of accomplishing this.

Rothbard dismissed all talk of public goods and externalities by invoking the subjective theory of value. But there is an objective standard by which these things can be measured, the ability to muster, organize and apply the means of purposeful violence. By this measure, states have demonstrably, empirically, excelled, in large part by producing public goods, managing externalities, and suppressing free-riding.

There really ARE some inconveniences attendant to anarchy, and while you can’t trust states (taken individually) to iron these out more satisfactorily than people can without states (either by pursuing their individual self-interest, or by other means) some states in fact have, and in the clash between different states and stateless peoples, these have come to the fore. When states stop doing this (as I believe has been occurring in America for some time) states crumble and are supplanted by other states.

The question is how to reproduce that historical success more reliably and at lower cost; without all the collateral damage, so to speak?

We need more competition between more bundlers in order to impose accountability and calculability (the absence of which has allowed bureaucratic states to become rife with parasitism, abuse, and irrationality.) Libertarians have shown us why, and how. But they have no clear idea how to get us there.

We may or may not be able to dispense with states entirely. But at the very least, we need a more granular statism to replace the monolithic sort of today. Thinkers like Hoppe and McCallum have pointed the way. Their proposals, while they may carry this principle farther than is practically achievable, are tremendously useful, if only as thought experiments.

My hope is that the rational economic calculating ability of these new institutions will translate into the practical ability to call forth superior might. And this hope, I think, is not totally in vain.



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