Asymmetric power relations and cooperation in anarchy.

• Author: Sutter, Daniel

Anarchy as an organizing principle for society must appeal to anyone who places individual freedom on his scale of values.... It is not surprising that "anarchy" and "anarchism" have re-emerged as topics of discussion in the 1960's and the 1970's, as tentacles of government progressively invade private lives and as the alleged objectives of such invasions recede yet further from attainment.

Winston Bush [5, 1]

1. Introduction

   The political system of anarchy generates strong responses (positive and negative) from scholars. Conflictual and cooperative visions of anarchy coexist. The most famous proponent of the former view is Thomas Hobbes, who depicts the state of nature as a war of all against all where life is "solitary, poore, nasty, brutish, and short" [17, 186]. The Hobbesian vision has dominated the discussion of anarchy, which for many is a synonym for chaos.

   I consider the prospects for cooperative anarchy within the institutional framework of anarcho-capitalism in which private, for-profit agencies offer sets of legal codes and enforcement of these codes. In anarchy no institution exists with legitimate authority over all members of society. Many situations resemble anarchy in this respect, including international business and trade, relations between nations, the informal (black market) sector of controlled economies, the underground (criminal) sector, political promises and deals, and constitutional (or social) contracts. Cooperation is not unknown in such situations. The Merchant Law in early medieval Europe [2] and the Maghribi traders' coalition [12] are examples of institutions that enable cooperation. These examples suggest Hobbesian vision underestimates the possibilities for cooperation in anarchy.

   I proceed as follows. Section II discusses the literature on cooperation in anarchy and elaborates on the nature of anarcho-capitalism. The key issue for the effectiveness of anarcho-capitalism is the distribution of property rights. Section III models the relationship between individuals and protection agencies. I illustrate how this asymmetric power relationship might be biased in favor of the agencies, which could degenerate into exploitative gangs. Section IV considers a number of extensions to the model which allow the allocation of rights between individuals and agencies to be relatively equitable, and is the main contribution of this paper. Section V concludes by examining asymmetric relations in actual anarchic situations. Anarcho-capitalism itself has never been implemented. Competition between governments, however, does occur. This and several other situations sufficiently resemble my model to provide relevant evidence and illustrate the general applicability of this research. I find evidence of mixed effectiveness of the devices discussed in section IV.

2. The Emergence of Property Rights and Cooperation in Anarchy

   Government performs two tasks which facilitate market exchanges: it secures individuals' initial possessions, and it enforces agreements made by individuals. In some anarchic situations initial possessions are secure but government-enforced contracts are unavailable. Many scholars have examined how spontaneous (or market) forces, through the means of reciprocity, reputation, and hostages, can readily substitute for government enforcement in this circumstance.(1) Conditions which facilitate cooperation include repeated interaction between a set of parties, a low discount rate on the part of all parties, and the ability to recognize and identify trading partners.

   Several anarchic situations, including anarcho-capitalism, lack both enforceable agreements and secure initial possession. In the absence of government, spontaneous forces have to fulfill both tasks. If stable property rights can be established, reciprocity and reputation indicate economic activity could flourish in anarchy. But can secure property rights be provided in the absence of government?

   A small but growing body of research examines the emergence of property rights in an-archic situations. These models emphasize the allocation of power among individuals and the effectiveness of predatory action in determining the allocation of property [6; 16; 32; 33; 36; 37]. The distribution of rights depends critically on the balance of force: "... all private ownership rights are ultimately founded on the ability to forcefully exclude potential competitors. Force, not fairness, determines the distribution of wealth in a society" [36, 57]. Although models of the emergence of property rights focus primarily on symmetric conflict situations, the implication for asymmetric situations is that the stronger party dominates.(2)

   I consider the implications of this research for cooperation in the anarcho-capitalism model of anarchy,(3) which represents the total privatization of government. For-profit agencies offer a set of legal codes and protection and enforcement of these codes. Agencies may differ in the "laws" they offer; for example, agency A may include gambling and prostitution as "crimes" and enforce the death penalty for some offenses while agency B might not. Agencies may also differ in the level of protection and enforcement of their codes; A may rely on padlocks and alarms to protect clients' homes and businesses while B may offer armed guards. People choose the agency that most satisfies their preferences for laws and enforcement.

   The parallel with consumer choice in the market is at the core of the intuitive appeal of the system. The power of competition (hopefully) forces for-profit agencies to be more responsive to consumer preferences than bureaucratic, monopoly government. The system relies on the ability of reputation and reciprocity to allow contracting between individuals and agencies and to facilitate interagency relations. If the analogy to freedom of choice within the market place is inappropriate, the system is unlikely to perform as advertised.

   Will people be able to choose which agency to patronize in anarcho-capitalism? Market exchange occurs within a political system which enforces property and contract rights. In anarcho-capitalism there is no corresponding institution. Freedom to choose must arise as an outcome within the system. Unfortunately, the advocates of anarcho-capitalism do not adequately tackle how freedom of choice is attained as an equilibrium of the system.

   The problem of securing initial possessions is different from providing enforceable agreements. Reputation and reciprocity work only after the former task is accomplished. The distribution of force among participants is crucial in the emergence of stable property rights. In anarcho-capitalism the key relationship is between the protection agency and the individual, which is asymmetric. As a consequence, the resulting distribution of rights may be highly skewed, with no effective freedom of choice between agencies for individuals. Since personal freedom is an important normative criterion for anarcho-capitalists, such a negative result is very damaging.

   Must the protection agencies necessarily degenerate into exploitative gangs? Or might spontaneous forces be able to provide effective protection to the rights of individuals? I address this question in section IV, which represents the major contribution of this paper.

   To facilitate examination of the relationship between individuals and agencies I accept uncritically several features of anarcho-capitalism worthy of consideration in a more general study. I assume more than one protection agency exists and that agencies do not collude. I do not examine which laws and enforcement procedures agencies offer potential customers. The issue of interagency relations and dispute resolution is ignored entirely (i.e., what happens when a client of A is accused of an offense against a client of B). The internal structure of agencies and the effects of the system on economic performance are not examined.(4)

   IIl. A Model of Anarcho-Capitalism

   A population of many individuals inhabits a given region with m ([greater than] 1) existing protective agencies. Let M be the set of agencies, M = {1,..., m}. Each individual is either a client of one of the agencies or is independent. Clients of an agency make payments in exchange for protection services. Let v [is greater than] 0 be the profit an agency makes on the typical individual.(5) I consider an agency A and an individual d who does not wish to be a client of A. Let s [is greater than] 0 be the value to d of not patronizing A, either to remain independent or be a client of agency B. The reasons for d's preference are immaterial but may include the laws offered by A. Any differences in the products (laws and services) offered by agencies are assumed not to affect the per client profit. The efficient outcome in each of the...