Government: unnecessary but inevitable.

• Author: Holcombe, Randall G.

Ludwig von Mises, Friedrich Hayek, and Milton Friedman, perhaps the best-known twentieth-century academic defenders of liberty, envisioned a role for limited government in protecting liberty. (1) Friedman's (1962) defense of freedom includes proposals for a negative income tax and school vouchers; Hayek (1960) advocates limited government to enforce the rule of law despite his concern about excessive government; (2) and Ludwig von Mises, who also warns of the dangers of big government, (3) states, "the task of the state consists solely and exclusively in guaranteeing the protection of life, health, liberty, and private property against violent attacks" (1979, 52). In contrast, by the end of the twentieth century, many libertarians, guided by the work of Murray Rothbard and others, viewed orderly anarchy as a desirable and potentially achievable state of affairs and--some would argue--the only state of affairs consistent with a libertarian philosophy. (4) My purpose in this article is to examine that proposition critically and to defend and extend the classical liberal idea of limited government. My conclusions align more with those theorists, such as Hayek and Mises, who see a need for limited government than with those who see the libertarian ideal as an orderly anarchy.

The debate over limited government versus orderly anarchy typically turns on the effectiveness of government versus private means to achieve certain ends. Government's defenders argue that markets cannot provide certain goods and services as efficiently as government can--in some cases, markets may be completely unable to provide certain desired goods--whereas the advocates of orderly anarchy argue that private contractual arrangements can provide every good and service more effectively and can do so without the coercion inherent in government activity. I maintain, however, that the effectiveness of government versus that of private arrangements to produce goods and services is irrelevant to the issue of the desirability of government in a libertarian society. Governments are not created to produce goods and services for citizens. Rather, they are created and imposed on people by force, most often for the purpose of transferring resources from the control of those outside government to the control of those within it.

Without government--or even with a weak government--predatory groups will impose themselves on people by force and create a government to extract income and wealth from these subjects. If people create their own government preemptively, they can design a government that may be less predatory than the one that outside aggressors otherwise would impose on them. (5)

Anarchy as an Alternative to Government

One strand of the libertarian anarchist argument is the claim that everything the government does, the market can do better, and therefore the government should be eliminated completely. (6) A second strand is the proposition that government is unethical because of its use of force. (7) Murray Rothbard has been the leading proponent of both arguments, and his 1973 book For a New Liberty is his most direct defense of orderly anarchy. Rothbard illustrates how the private sector can undertake more effectively all government activities, including national defense. All of Rothbard's arguments are persuasive, but his national-defense argument is worth reviewing here because it has direct relevance to my thesis.

Rothbard argues first that national defense is needed only because the governments of some countries have differences with the governments of others. Wars occur between governments, not between the subjects of those governments. Without a government to provoke outsiders, outside governments would have no motivation to attack, so a group of people living in anarchy would face a minimal risk of invasion from a foreign government. An auxiliary line of reasoning is that if a government does try to use military force to take over an area with no government, such a takeover would be very difficult because the aggressor would have to conquer each individual in the anarchistic area. If those people have a government, a foreign country has only to induce the other country's head of state to surrender in order to take over that other country, but in taking over a country without a government an aggressor faces the much more daunting task of getting everyone to surrender, going from house to house and from business to business, a formidable and perhaps impossible undertaking. (8)

Jeffrey Rogers Hummel offers an interesting extension of Rothbard's arguments regarding defense. Hummel (1990) argues that national defense against foreign aggression is a subset of the problem of protecting people from any state, domestic or foreign, and Hummel (2001) notes that if people can design institutions to protect themselves from domestic government, those same institutions should suffice to protect them from foreign governments. In this line of reasoning, the private production of defense services would occur as a by-product of the elimination of domestic government by an orderly anarchy.

These arguments regarding national defense show the flavor of the argument that people would be better off without government. Orderly anarchy would eliminate the need for government provision of national defense because the risks of invasion would be lower and because the private sector can supply any defense services people want. By considering each activity the government now undertakes, a substantial literature shows that in each case a superior private-sector alternative exists or might be created. Private arrangements can provide public goods, law, and order at any scale. A substantial mainstream academic literature on the inefficiencies of government production and regulation further buttresses the case against government. Thus, the libertarian anarchist position rests heavily on the argument that anything the government does, the private sector can do more effectively and less coercively.

Why Do Governments Exist?

The argument that people should do away with government because everything the government does the private sector can do better would be persuasive if governments were created, as their rationales suggest, to improve their subjects' well-being. In fact, governments are not created to improve the public's well-being. In most cases, governments have been imposed on people by force, and they maintain their power by force for the purpose of extracting resources from subjects and transferring the control of those resources to those in government. Sometimes foreign invaders take over territory and rule the people who live there; more commonly, people already subject to a government overthrow it and establish a new government in its place. Whether government is more or less effective in producing public goods or in protecting property is irrelevant.

A possible exception to this claim is the formation of the U.S. government, which was established to overthrow British rule in the colonies and to replace it with a new government designed to protect the liberty of its citizens. Much of the Declaration of Independence consists of a list of grievances against the king of England, and the American founders wanted to replace what they viewed as a predatory government with one that would protect their rights. One can dispute this story, (9) but for present purposes the point is that even in what appears to be the best real-world case in which government was designed for the benefit of its citizens, it was not designed to produce public goods or to control externalities or to prevent citizens from free riding on a social contract. Its underlying rationale had nothing to do with any of the common economic or political rationales given for government.

The point here is straightforward: despite many theories justifying government because its activities produce benefits to its citizens, no government was ever established to produce those benefits. Governments were created by force to rule over people and extract resources from them. Thus, the argument that citizens would be better off if they replaced government activities with private arrangements and market transactions is irrelevant to the issue of whether an orderly anarchy would be a desirable--or even feasible--replacement for government. The real issue is whether a group of people with no government can prevent predators both inside and outside their group from using force to establish a government.

Protection and the State

Without government, people would be vulnerable to predators and therefore would have to find ways to protect themselves. In the anarchy Hobbes described, life is a war of all against all--nasty, brutish, and short. The strong overpower the weak, taking everything the victims have, but the strong themselves do not prosper in Hobbesian anarchy because there is little for them to take. Nobody produces when the product will surely be taken away from them. Even under more orderly conditions than Hobbesian anarchy, predation has a limited payoff because people who have accumulated assets forcibly resist those who try to plunder them, and the ensuing battles consume both predators' and victims' resources. (10)

Disorganized banditry produces Hobbesian anarchy in which nobody prospers because nobody has an incentive to be productive. If the predators can organize, they may evolve into little mafias that can offer their clients some protection. This evolution will create a more productive society, with more income for both the predators and their prey, but the mafias will have to limit their take in order for this outcome to arise. If the mafia can assure its clients that in exchange for payment they will be protected from other predators and allowed to keep a substantial portion of what they produce, output will increase, and everybody's income can rise. Losses from rivalries among mafias...