DEMAND FOR COERCIVE SERVICES
If there were some criminals unwilling to compensate their victims; and if some of those victims were unable or unwilling to force the payment of compensation, but also unwilling to forgo it; and if it were possible to hire a third party to force the payment of compensation at a price less than the value of the compensation, then there would be demand for such services. If these conditions would hold in the hypothesized anarcho-capitalist society, which I contend they would, then there will be demand for coercive services in the anarcho-capitalist society.
THE COERCIVE SERVICE PROVIDER (CSP)
The entity which provides coercive services is the object of our analysis.
ROLE OF THE CSP IN RESOLVING DISPUTES
Let us employ an example to illustrate the role of the CSP in resolving disputes. Smith accuses Jones of destroying his car, which is valued at $5,000. On the principle of double indemnity, Smith asks Jones to pay $10,000 in compensation; Jones refuses. Smith asks Jones to submit to arbitration; Jones refuses. Smith hires JustCorp, a CSP, to force Jones to pay. JustCorp sends a letter to Jones demanding that he pay, and threatening to seize $10,000 worth of his property by force if he refuses. Under this pressure, Jones relents and pays Smith the $10,000. Alternately, Jones refuses and JustCorp does actually seize $10,000 worth of his property on behalf of Smith.
DISPUTE BETWEEN TWO CSP
Let us consider what happens when a CSP is itself a disputant. Continuing where we left off in the above scenario; Jones has been made to pay compensation to Smith, but he still denies stealing Smith’s car. In his view, he has simply been robbed of $10,000 by Smith and JustCorp. Accordingly, on the principle of double indemnity, and supposing Smith and JustCorp share liability, he asks Smith and JustCorp each for $10,000; they refuse. He asks them to submit to arbitration; they refuse. Unable to force them to pay, yet unwilling to abandon his claim against them, he hires another CSP, SecureCorp, to force them to pay. What happens now? Now one CSP is trying to get compensation from another. They are in a dispute. How can this dispute be resolved? The outcome will either be favorable to SecureCorp and its client Jones, favorable to JustCorp and its client Smith, or a perfect compromise. What determines which of these outcomes actually occurs?
RESOLUTION OF INTER-CSP DISPUTE
There are, broadly speaking, two possible methods of resolution: negotiation or violence (1). If violence, then the strongest firm will prevail. For example, if SecureCorp is stronger than JustCorp, it will seize the $10,000 and JustCorp will be unable to seize it back: the end. But what if the dispute is resolved by negotiation rather than violence? While a negotiated settlement between two firms need not necessary result in a completely one-sided settlement favoring the stronger, certainly the result is more likely to favor the stronger. If this is not immediately obvious, consider some analogous situations: negotiations between armed mugger and unarmed pedestrian, negotiation between gangster armed with pistol and gangster armed with knife, negotiations between Germany and Czechoslovakia c. 1939, negotiations between a defiant anarcho-capitalist and the IRS. Needless to say, the stronger party has the stronger negotiating position. Thus, in a dispute between CSP, the outcome is likely to favor the stronger CSP and its client. The greater the disparity in strength between the two CSP, the more the outcome is likely to favor the stronger. At the extreme, given sufficient disparity in strength, the outcome will be entirely one-sided in favor of the stronger: as, for example, it would be in the negotiations between an anarcho-capitalist and the IRS. At a certain point, the imbalance of strength is so severe that it becomes rather absurd to even lend the name “negotiation” to the exchange.
If Firm X (a) always satisfies its clients’ demands (i.e. either gets compensation or them, or prevents them from having to pay compensation, depending on whether the client is a plaintiff or defendant), and, (b) charges its clients less than the value of the compensation in question, (conclusion) then it will have a 100% share of the coercive services market.
If ex hypothesi there is 0% chance that a consumer will achieve his goal (either getting compensation or avoiding having to pay compensation) by hiring any firm other than Firm X, and if ex hypothesi there is any cost at all to hiring any firm other than Firm X, then there is no value in hiring any firm other than Firm X. Whereas, if ex hypothesi there is a 100% chance of a consumer achieving his goal if he hires Firm X, and Firm X charges less than the compensation in question, there is value in hiring Firm X. Therefore, under these conditions, Firm X will have 100% of market share.
Justification of Premises:
The argument above proves that, under certain conditions, there will be a monopoly in the coercive services market. Those conditions are, once again: (a) that some firm wins 100% of its disputes with other firms, and (b) that such a firm charges its clients less than the value of the compensation in question. Now we shall examine those two conditions, and see whether they are realistic.
A firm would be able to win all disputes with all firms if it were strongest, as explained above. Not only is it possible for one firm to be stronger than all the rest, it is virtually certain, since “strongest” is a relative property. Surely not all firms at all times would be equally strong. There will almost certainly at any moment be a strongest firm, and sometimes a firm which is considerably stronger than all of its rivals.
Could the strongest firm charge a fee less than the value of the compensation in question? I see no a priori reason to doubt that this is possible. One might object that violence is expensive, soldiers are expensive, etc. And of course that’s true, but it simply does not follow that their cost necessarily exceeds the value of the compensation they collect for the firm and its clients. In some cases it may, it others it may not. In those latter cases, we shall have monopoly.
We have established that, in a stateless society, there will be demand for coercive services; and that there will be coercive-service providers; and there will be disputes between coercive-service providers; and that the results of such disputes are likely to favor the stronger CSP; and that it is entirely possible for the strongest CSP to acquire and maintain a monopoly.
The argument presented above is sufficient to prove the thesis: that a coercive services monopoly is possible. What follows is for the purpose of illustration. What is the fundamental difference between the coercive services market and other markets? Why is monopoly possible in the former but not in the latter? Rival producers of all kinds in all markets compete in two dimensions: price and quality. What is unique about the coercive services market involves quality: namely, for one CSP to provide a higher quality service, its rivals must necessarily provide a lower quality service. For JustCorp to satisfy its client completely, SecureCorp must completely fail to satisfy its client. Or, in a less extreme case, for JustCorp to mostly satisfy its client, Securecorp must mostly not satisfy its client. This is because the demands of their respective clients are mutually exclusive: Smith wants compensation from Jones, Jones does not want to pay compensation to Smith. It is logically impossible for both demands to be fully satisfied. And to the extent that one is partially satisfied, the other is partially unsatisfied. It is a zero-sum game. This is not the case in any other market. In no other market does the satisfying of one consumer logically prelude the satisfying of another.
There is a third possibility: employment by either SecureCorp, JustCorp, or both of another CSP. However, if every dispute between CSP is resolved by resort to yet another CSP, there is an infinite regress and the dispute is never resolved at all. At some point, a dispute between two CSP must be resolved between those two CSP, without intervention by any third party. It is a logical necessity, unless we posit the existence of an infinite number of CSP, which is absurd.