THE

MARKET
FOR

LIBERTY
MORRIS AND LINDA TANNEHILL

The Ludwig von Mises Institute

Auburn, Alabama

2007

Copyright© 1970 by Morris and Linda Tannehill

P. 0. Box 1383
Lansing, Michigan 48904
All rights reserved.
First Printing, March, 1970
TABLE OF CONTENTS
Acknowledgments iv

PART I - The Great Conflict

1. If We Don’t Know Where We’re Going
2. Man and Society
3. The Self-Regulating Market
4. Government - An Unnecessary Evil

PART II - A Laissez-Faire Society

5. A Free and Healthy Economy
6. Property - The Great Problem Solver
7. Arbitration of Disputes
8. Protection of Life and Property
9. Dealing With Coercion
10. Rectification of Injustice
11. Warring Defense Agencies and Organized Crime
12. Legislation and Objective Law
13. Foreign Aggression
14. The Abolition of War

PART III - How Do We Get There?

15. From Government to Laissez Faire
16. The Force Which Shapes the World

Acknowledgments
The authors wish to express their gratitude to Skye d’Aureous and Natalee Hall for
numerous ideas and suggestions (including Mr. d’Aureous’ ideas on data banks for
intellectual property, educational TV, and the interest of insurance companies in medical
and drug safety); to Roy A. Childs, Jr., for several philosophical arguments against
statism; and to Anthony I.S. Alexander for the concept of monetary reparations for
coercive injustices and the idea that justice consists of rectifying the injustice insofar as is
humanly possible, the idea that property ownership is the solution to pollution problems,
the idea that Ayn Rand’s “competing governments” argument against anarchy is actually
a devastating argument against government, and for many hours of fruitful discussion.

PART I
THE GREAT CONFLICT
“Since late Neolithic times, men in their political capacity have lived almost
exclusively by myths.” - Dr. James J. Martin
1
If We Don’t Know Where We’re Going
If we don’t know where we’re going, chances are we won’t get there!

Our world is increasingly stirred with dissatisfaction. Myriads of people on every

continent are whispering or shouting or writing or rioting their discontent with the
structures of their societies. And they have a lot to be dissatisfied with - poverty which
increases in step with increasingly expensive anti-poverty programs, endlessly heavier
burdens of taxation and regulation piled on by unmindful bureaucrats, the long death-
agonies of meaningless mini-wars, the terrible, ironfisted knock of secret police.

Youth are especially dissatisfied. Many long to turn the world upside down, in hopes that
a better, freer, more humane society will emerge. But improvements in man’s condition
never come as a result of blind hope, pious prayers, or random chance; they are the
product of knowledge and thought. Those who are dissatisfied must discover what sort of
being man is and, from this, what kind of society is required for him to function most
efficiently and happily. If they are unwilling to accept this intellectual responsibility, they
will only succeed in exchanging our present troubles for new, and probably worse, ones.

An increasing number of people are beginning to suspect that governmental actions are
the cause of many of our social ills. Productive citizens, on whom the prosperity of
nations depends, resent being told (in ever more minute detail) how to run their business
and their lives. Youth resent being drafted into involuntary servitude as hired killers. The
poor are finding, to their bitter disappointment, that government can bleed the economy
into anemia but that all its grandiose promises and expensive programs can do nothing
but freeze them in their misery. And everyone is hurt by the accelerating spiral of taxes
and inflation.

Nearly everyone is against some governmental actions, and an increasing number want to
cut the size of government anywhere from slightly to drastically. There are even a few
who have come to believe that it is not just certain governmental activities, nor even the
size of the government, but the very existence of government which is causing the problems..
These individuals are convinced that if we want to be permanently free of government-caused ills
we must get rid of government itself, Within this broad anti-statist faction, there are plenty of
“activists” who march or protest or just dream and scheme about means of bringing part or all of
the governmental system crashing down.

Although these anti-authoritarian individuals have taken a firm and well-justified stand against
the injustice of government, few of them have an explicitly clear idea of what they are for. They
want to tear down the old society and build a better one, but most of them hold only hazy and
contradictory ideas of what this better society would be like and what its structure should be.

But if we have no clear idea of what our goals are, we can hardly expect to achieve them. If we
bring our present authoritarian system crashing down around our ears withour formulating and
disseminating valid ideas about how society will operate satisfactorily without governmental rule,
all that will result is confusion, ending in chaos. Then people, bewildered and frightened and still
convinced that the traditional governmental system was right and necessary in spite of its glaring
flaws, will demand a strong leader, and a Hitler will rise to answer their plea. So we’ll be far
worse off than we were before, because we will have to contend with both the destruction
resulting from the chaos and a dictator with great popular support.

The force which shapes men’s lives and builds societies is not the destructive power of protests
and revolutions but the productive power of rational ideas. Before anything can be produced -
from a stone axe to a social system - someone must first have an idea of what to aim for and how
to go about achieving it. Ideas must precede all production and all action. For this reason, ideas
are the most powerful (though often the most underestimated) force in man’s world.

This is a book about an idea - the discovery of what kind of society man needs in order to
function most efficiently and happily
and how to achieve that society. It is a book about freedom - what it really is and implies, why
man needs it, what it can do for him, and how to build and maintain a truly free society.
We are not envisioning any Utopia, in which no man ever fries to victimize another. As long as
men are human, they will be free to choose to act in an irrational and immoral manner against
their fellows, and there will probably always be some who act as brutes, inflicting their will upon
others by force. What we are proposing is a system for dealing with such men which is far
superior to our present governmental one - a system which makes the violation of human liberty
far more difficult and less rewarding for all who want to live as brutes, and downright impossible
for those who want to be politicians.

Nor are we proposing a “perfect” society (whatever that is). Men are fallible, so mistakes will
always be made, and there will never be a society of total equity. Under the present governmental
system, however, blunders and aggressive intrusions into the lives of peaceful individuals tend to
feed on themselves and to grow automatically, so that what starts as a small injustice (a tax, a
regulation, a bureau, etc.) inevitably becomes a colossus in time. In a truly free society, blunders
and aggressions would tend to be self-correcting, because men who are free to choose will not
deal with individuals and firms which are stupid, offensive, or dangerous to those they do
business with.

The society we propose is based on one fundamental principle: No man or group of men -
including any group of men calling themselves “the government” - is morally entitled to
initiate (that is, to start) the use of physical force, the threat of force, or any substitute for
force (such as fraud) against any other man or group of men.

This means that no man, no gang, and no government may morally use force in even the smallest
degree against even the most unimportant individual so long as that individual has not himself
initiated force.’ Some individuals will choose to initiate force; how to deal with them justly
occupies a major part of this book. But, although such aggressions will probably never by fully
eliminated, rational men can construct a society which will discourage them rather than
institutionalizing them as an integral part of its social structure.

Of course, our knowledge of what a truly free society would be like is far from complete. When
men are free to think and produce, they innovate and improve everything around them at a
startling rate, which means that only the bare outlines of the structure and functioning of a free
society can be seen prior to its actual establishment and operation. But more than enough can be
reasoned out to prove that a truly free society - one in which the initiation of force would be dealt
with justly instead of institutionalized in the form of a government - is feasible. By working from
what is already known, it is possible to show in general how a free society would operate and to
answer fully and satisfactorily the common questions about and objections to such a society.

‘The terms “initiated force” and “coercion” are used to include not only the actual initiation of force but also the threat
of such force and any substitute f or force. This is because a man can be coerced into acting against his win by threats
or deprived of a value by force-substitutes, such as fraud or theft by stealth, just as surely as he can by the actual use of
physical force. The threat of force is intimidation, which is, itself, a form of force.

For years men with plans to improve society have debated the merits and demerits of various
kinds and amounts of government, and they have argued long and heatedly over how much
freedom was desirable or necessary to provide for the needs of man’s life. But very few of them
have tried to clearly identify the nature of government, the nature of freedom, or even the nature
of man. Consequently, their social schemes have not been in accordance with the facts of reality
and their “solutions” to human ills have been little more than erudite fantasies. Neither the futile
and time-worn panaceas of the Establishment, nor the “God and country” fervor of the Right, nor
the angry peace marches of the Left can build a better society if men do not have a clear, reality-
based, non-contradictory idea of what a better society is. If we don’t know where we’re going, we
won’t get there.
It is the aim of this book to show where we are (or should be) going.

2
Man and Society
In all of recorded history, men have never managed to establish a social order which didn’t
institutionalize violations of freedom, peace, and justice - that is, a social order in which man
could realize his full potential. This failure has been due to the fact that thinkers have never
clearly and explicitly understood three things - namely, 1 - the nature of man, 2 - what kind of
society this nature requires for men to realize their full potential, and 3 - how to achieve and
maintain such a society.

Most self-styled planners and builders of societies haven’t even considered that man might have a
specific nature. They have regarded him as something infinitely plastic, as the product of his
cultural or economic milieu, as some sort of identity-less blob which they could mold to suit their
plans. This lack of realization that man has a specific nature which requires that he function in a
specific way has given rise to floods of tears and blood as social planners tried to wrench man
...

apart and put him back together in a form they found more to their liking.

But because man Is, he is something – a being with a specific nature, requiring a specific type of
society for his proper functioning as a human being. Since Darwin, scientific research has been
steadily uncovering evidences of evolution which show the development of the nature of the
human animal. In order to survive, men had to acquire certain behavioral knowledge and
capacities - for instance, the knowledge that voluntary cooperation is good and the capacity to
stop clubbing each other. Most men conduct their lives according to this knowledge and, when
left alone, get along quite well. Social planners have always been among the most ignorant about
man’s nature. Evidence that man has a specific biological nature which cannot be remolded to
suit society-builders continues to mount,1 but political rulers continue to ignore it. If men are to
be happy and successful, they must live in harmony with the requirements of their nature. What,
then, are the essentials of man’s nature?
1
See TERRITORIAL IMPERATIVE and AFRICAN GENESIS, by Robert Ardrey, and THE NAKED APE, by Desmond
Morris.

Life is given to man, but the means to sustain his life are not. If a man is to continue living, he
must in some way acquire the things he needs to sustain his life, which means that either he or
someone else must produce these things. There is no environment on earth where man could exist
without some sort of productive effort, and there is no way he could be productive without using
his mind to decide what to produce and how to produce it. In order to survive, man must think -
that is, he must make use of the information provided by his senses. The more fully and clearly he
uses his mind, the better he will be able to live (on both the physical, including the material, and
the psychological levels).

But thinking is not an automatic process. Man may expend a little or a lot of mental effort to
solve his problems, or he may just ignore them and hope they’ll go away. He may make it a
policy to keep his mind fully aware and always to use it as effectively as he can (whether he is a
genius or a dimwit), or he may drift through life in an unfocused mental haze, playing ostrich
whenever he sees something that would require mental effort and commitment. The choice to
think or not to think is his, and it is a choice which every man must make.
Because man must initiate and maintain the process of thinking by an act of choice, no one else
can force him to think or do his thinking for him. This means that no man can successfully run
another man’s life. The best thing one man can do for another is not to prevent him from enjoying
the benefits of his thinking and productive work, nor to shield him from the bad effects of
refusing to think and produce.

Life is given to man, but the knowledge of how to sustain that life is not. Man has no automatic
knowledge of what is good or bad for him, and he needs this knowledge in order to know how to
live. If he is to have a full and happy life, he needs a blueprint to show him what is pro-life and
what is anti-life and to guide his choices and actions. Such a blueprint is a code of morality - a
chosen guide to action. If a man wants his morality to further his life instead of crippling it, he
must choose a morality which is in harmony with his evolved nature as a sensing, thinking being.

Choosing effective guides to action is not a matter for blind faith or reasonless whim; it requires
clear, rational thought. Therefore, one’s morality shouldn’t be a set of dos and don’ts inherited
from one’s parents or learned in church or school. It should be a clearly thought-out code, guiding
one toward pro-life actions and away from anti-life actions. “The purpose of morality is … to
teach you to enjoy yourself and live.”2 A rational morality doesn’t say, “Don’t do this because
God (or society, or legal authorities, or tradition) says it’s evil.” It does say, “Only if you act
according to your reason can you have a happy, satisfying life.”

2
From John Gait’s speech in Ayn Rand’s ATLAS SHRUGGED.

In any code of morality, there must be a standard - a standard by which all goals and actions can
be judged. Only life makes values meaningful … or even possible - if you’re dead you can’t
experience any values at all (and without values, happiness is impossible). So, for each man who
values living, his own life is his moral standard (death, the negation of all values, is the only
alternative “standard”). Since each man’s own life is his objective standard, it follows that
whatever serves or enhances his life and well-being is good, and whatever damages or destroys it
is wrong. In a rational morality - one designed to further each individual man’s life and
happiness, whatever is pro-life is moral and whatever is anti- life is immoral. By “life” is not
meant merely man’s physical existence but all aspects of his life as a sensing, thinking being.
Only by rational thought and action can a man’s life be lived to its fullest potential, producing the
greatest possible happiness and satisfaction for him.

Man has only one tool for getting knowledge - his mind, and only one means to know what is
beneficial and harmful - his faculty of reason. Only by thinking can he know what will further his
life and what will harm it. For this reason, choosing to think is man’s most powerful tool and
greatest virtue, and refusing to think is his greatest danger, the surest way to bring him to
destruction.

Since man’s life is what makes all his values possible, morality means acting in his own self-
interest, which is acting in a pro-life manner. There is nothing mystical or hard to understand
about right and wrong - a rational morality makes sense. Traditional morality, teaching that each
man must devote a part of his life, not primarily for his own good, but for God or the State or “the
common good,” regards man as a sacrificial animal. Today, many are recognizing this doctrine
for what it is - the cause of incalculable human carnage, and a morality or life is gradually
replacing it. A rational morality is a morality of self-interest - a pro-life morality.

The only way for a man to know what will further his life is by a process of reason; morality,
therefore, means acting in his rational self-interest (in fact, no other kind of self-interest exists,
since only that which is rational is in one’s self-interest). Sacrifice (the act of giving up a greater
value for a lesser value, a non-value, or a dis-value) is always wrong, because it is destructive of
the life and well-being of the sacrificing individual.3 In spite of traditional “moralities” which
glorify “a life of sacrificial service to others,” sacrifice can never benefit anyone. It demoralizes
both the giver, who has diminished his total store of value, and the recipient, who feels guilty
about accepting the sacrifice and resentful because he feels he is morally bound to return the
“favor” by sacrificing some value of his own. Sacrifice, carried to its ultimate end, results in
death; it is the exact opposite of moral, pro-life behavior, traditional “moralists” to the contrary
notwithstanding.

3
If a mother goes without a new dress to buy a coat for her child whom she loves, that is not a sacrifice but a gain - her
child’s comfort was of more value to her than the dress. But if she deprives herself and the child by giving the money to
the local charity drive so that people won’t think she’s “selfish,” that is a sacrifice.

A man who is acting in his own self-interest (that is, who is acting morally) neither makes
sacrifices nor demands that others sacrifice for him. There is no conflict of interest between men
who are each acting in his own self-interest, because it is not in the interest of either to sacrifice
for the other or to demand a sacrifice from the other. Conflicts are produced when men ignore
their self- interest and accept the notion that sacrifice is beneficial; sacrifice is always anti-life.

In summary: man, by his nature, must choose to think and produce in order to live, and the better
he thinks, the better he will live. Since each man’s own life makes his values possible, chosen
behavior which furthers his life as a thinking being is the moral, and chosen behavior which
harms it is the immoral. (Without free choice, morality is impossible.) Therefore, rational thought
and action and their rewards, emotional, physical, and material, are the whole of a man’s self-
interest. The opposite of self-interest is sacrfiice which is always wrong because it’s destructive
of human life.4

4
For a much fuller development of objective ethics, sec Chapter 1, “The Objectivist Ethics,” of THE VIRTUE OF
SELFISHNESS, by Ayn Rand. While Miss Rand is at present confused in the area of politics, her explanation of ethics
is, by and large, very good.
Any society in which men can realize their full potential and live as rational and productive
human beings must be established in accordance with these basic facts of man’s nature. It must be
a society in which each man is left unmolested, in which he is free to think and to act on his ideas
… without anyone else trying to force him to live his life according to their standards. Not only
must each man be free to act, he must also be free to fully enjoy the rewards of all his pro-life
actions. Whatever he earns in emotional joy, material goods, and intellectual values (such as
admiration and respect) must be completely his - he must not be forced against his will to give up
any of it for the supposed benefit of others. He must not be forced to sacrifice, not even for “the
good of society.”
To the extent that a man isn’t free to live his life peacefully according to his own standards and to
fully own whatever he earns, he is a slave. Enslaving men “for the good of society” is one of the
most subtle and widespread forms of slavery. It is continually advocated by priests, politicians,
and quack philosophers who hope, by the labor of the enslaved, to gain what they haven’t earned.

A society in which men can realize their full potential must be one in which each man is free to
act in his self-interest according to the judgment of his own mind. The only way a man can be
compelled against his will to act contrary to his judgment is by the use or threat of physical force
by other men. Many pressures may be brought to bear on a man, but unless he is compelled by
physical force (or the threat of force, or a substitute for force) to act against his will, he still has
the freedom to make his own choices. Therefore, the one basic rule of a civilized society is that
no man or group of men is morally entitled to initiate (to start) the use of physical force, the
threat of force, or any substitute for force (such as taking something from another person by
stealth) against any other man or group of men.

This doesn’t mean that a man may not defend himself if someone else initiates force against him.
It does mean that he may not start the use of force. Ta initiate force against anyone is always
wrong, because it compels the victim to act contrary to his own judgment. But to defend oneself
against force by retaliating with counter-force is not only permissible, it is a moral imperative
whenever it is feasible, or reasonably safe, to do so.5 If a man really values his values, he has a
moral obligation to himself to defend. them - not to do so would be sacrificial and, therefore, self-
destructive. The difference between initiated force and retaliatory force is the difference between
murder and self-defense. (Pacifists who have consistently refused to defend themselves when
attacked have frequently been killed - the belief in pacifism is anti-life.)

5
Retaliatory force is defensive, not coercive, in nature; coercion is initiated force, the threat to initiate force - which is
intimidation, or any substitute for initiated force.

As long as a man doesn’t initiate force, the actual goals and interests which he chooses to pursue
don’t control the free choice or threaten the goals of anyone else. It doesn’t matter whether a man
goes to church every day or advocates atheism, whether he wears his hair long or short, whether
he gets drunk every night or uses drugs or stays cold sober, whether he believes in capitalism or
voluntary communalism - so long as he doesn’t reach for a gun
or a politician … to compel others to live as he thinks they should. As long as men mind their
own business and don’t initiate force against their fellow men, no one’s life-style is a threat to
anyone else.

When a man initiates force against another man, he violates his victim’s rights. A right is a
principle which morally prohibits men from using force or any substitute for force against
anyone whose behavior is non-coercive. A right is a moral prohibition; it doesn’t specify anything
with regard to what actions the possessor of the right may take (so long as his actions are non-
coercive) - it morally prohibits others from forcibly interfering with any of his non-coercive
actions. For example, a beachcomber has the right to life; this right says nothing of what the
beachcomber may do with his life - it says only that no one else may forcibly interfere with his
life so long as he doesn’t initiate force or fraud against them. Suppose, however, that the
beachcomber does initiate force against a cab driver and does $100 worth of damage to the
taxicab. In order to rectify the injustice, the beachcomber must pay the cabbie $100. The
beachcomber does not, then, have the right to whatever part of his life and/or property that is
required to make reparations to the cabbie (the cabbie has a just claim to it). Suppose, further, that
the beachcomber will not willingly pay the $100; the cabbie is no longer morally prohibited from
using force against the beachcomber to collect what is now rightfully his. The beachcomber, by
his initiation of force against and to the detriment of another man, has alienated himself from the
right to that part of his life which is required to pay his debt.6 Rights are not inalienable, but only
the possessor of a right can alienate himself from that right - no one else can take a man’s rights
from him.

6
This subject will be discussed in greater detail in Chapter 10, “Rectification of Injustice.”

Each person has a right to his own life, which means that each person is a self-owner (assuming
that his behavior has been and is non-coercive). Because a man has a right to own his life, he has
the same right to any part of that life. Property is one part of a man’s life. Material goods are
necessary to sustain life, and so are the ideas which a man generates. So, man invests his time in
generating ideas and in producing and maintaining material goods. A man’s life is made up of
time, so when he invests his time in material or intellectual property (ideas) he is investing parts
of his life, thereby making that property an extension of his life. The right to property is part of
the right to life. There is no conflict between property rights and human rights - property rights
are human rights.

Another aspect of man’s life is his freedom of action. If a man is not free to use his mind, his
body, and his time in any action he wishes (so long as he doesn’t initiate force or fraud), he is in
some degree a slave. The right to liberty, like the right to property, is an aspect of the right to life.

All rights are aspects of the right to life, which means that each man has the right to every part of
his own life. By the same token, he is not morally entitled to any part of another man’s life
(assuming the other man has not initiated force or fraud against him). Any “right” which violates
someone else’s rights is no right at all. There can be no such thing as a right to violate a right, or
rights would be meaningless. A man has the right to earn a decent living, but he does not have the
right to a decent living if it must be provided by force out of someone else’s earnings. That is, he
has no right to enslave others and force them to provide his living - not even if he does so by
getting the government to pass a law taxing others to make payments to him. Each individual is
the owner of his own life … and no one else’s.

Rights are not a gift of God or of society; they are the product of the nature of man and of reality,
if man is to live a productive and happy life and realize his full potential as a human being, he
must be free from coercion by other men. The nature of man demands that he must have values
and goals in order to live - without them, human life is impossible. ‘When a man is not free to
choose his own goals, he can’t act on the feedback from his behavior and so he can’t correct his
errors and live successfully. To the extent that a man is forcibly prevented by others from
choosing his own values and goals, he is a slave. Slavery is the exact opposite of liberty; they
cannot coexist.
Rights pertain only to individual men! There is no such thing as minority rights, States’ rights,
“civil” rights, or any other form of collective rights. The initiation of force against the collective
is really the initiation of force against the individuals of which the collective is composed,
because the collective has no existence apart from the individuals who compose it. Therefore,
there are no collective rights - there are only the rights which every individual has to be free from
the coercive actions of others.

Morally, each man owns himself, and he has the right to do anything which does not violate
another man’s right of sell-ownership. The only way a right can be violated is by coercion. This is
why society in harmony with the requirements of man’s nature must be based on the rule of non-
initiation of force - it must be a laissez-faire society.

Laissez faire means “let people do as they please,” meaning, let everyone leave others alone to do
as they choose. A laissez-faire society is a society of non-interference -- a mind-your-own-
business, live-and-let-live society. It means freedom for each individual to manage his own affairs
in any way he pleases … not just in the realm of economics but in every area of his life. (If he
restricts his behavior to his own affairs, it is obvious that he cannot initiate the use of force
against anyone else.) In a laissez-faire society, no man or group of men would dictate anyone’s
life-style, or force them to pay taxes to a State bureaucracy, or prohibit them from making any
voluntary trades they wanted.

There will likely never be a society completely free from the initiation of physical force by some
men against others, because men can act irrationally if they choose to. A laissez-faire society is
not a Utopia in which the initiation of violence is impossible. Rather, it is a society which does
not institutionalize the initiation of force and in which there are means for dealing with
aggression justly when it does occur.

Can men ever achieve a laissez-faire society? Many people have an unshakable conviction that
anything so “ideal” could never become a practical reality. They can’t explain why they’re so
sure of this; they just feel an unreasoned “certainty” that it must be so. What is behind this
reasonless “certainty” that the good (liberty) is unachievable? The answer lies in the inverted
“morality” of tradition - altruism.

Altruism is the philosophical doctrine which holds that anything which is done out of concern for
the welfare of others is good but that it is evil if motivated by concern for self. Some variation of
this doctrine has been a basic part of nearly all of the world’s religions and philosophies for
man’s entire history. One of the most common of religious tenets is that selfishness is evil and
that only a selfless concern for the needs of others will win favor with God and man. Sacrifice is
held to be among the greatest of virtues, simply because the beneficiaries of the sacrifice are
others and the loser is self. It isn’t hard to see one of the reasons for the long-standing prominence
of altruistic doctrines - religious and political leaders can collect much more substantial offerings
and taxes from people whom these leaders succeed in convincing that it is their moral duty to
give as much as possible in sacrificial service to others than they can from people who live for
their own rational self-interest. This “something for nothing” doctrine - altruism - is the moral
ideal of human parasites.

Altruism is an inverted morality, a “morality” of death. It teaches man that his interests are
opposed to the interests of everyone else and that the only “moral” thing he can do is to sacrifice
his interests. This means that whatever is practical and beneficial for a man is “immoral,” and
conversely, that whatever is “moral” for him is impractical and destructive of his values. To the
extent that a man is committed to some version of altruism, he can be either practical and
immoral or moral and impractical - he cannot be both moral and practical at the same time … and
his self-respect and honesty hang in the balance.

This artificial dichotomy between the moral and the practical splits man in two and sets him
against himself. To the extent he makes himself worthy to live (by sacrificing his values), he
makes himself unable to live; to the extent he makes himself able to live (by keeping and using
his values), he makes himself unworthy to live. No man can fully practice such a code - if he did,
it would kill him. For those who accept a “morality” based on altruism, their only protection from
this belief is hypocrisy; they give it lip-service but practice it only so far as it is religiously and
socially required to keep up a good front. This is the cause of most of the hypocrisy in our
culture. Altruism makes hypocrisy necessary in order to live.

A society full of hypocrisy is headed for the crematorium. The moral/practical dichotomy not
only necessitates hypocrisy, it also gives all the advantages to evil, since the good is, by virtue of
its goodness, incurably impractical for life on earth. If the evil and the practical are one and the
same, then evil must always win. According to the altruist philosophy, evil holds all the cards and
man can hope for very little improvement in his life or in his society.
Of course, people who hold the moral/practical dichotomy seldom consciously realize what they
believe. They just know that whatever is right and good seems somehow unworkable, at least on
any major scale. The idea of a laissez-faire society - that is, a society of non-interference - leaves
them unmoved because it seems so impractical.

But the “morality” of altruism is exactly opposite to the facts of man’s nature. In reality, the only
thoughts and actions which are in man’s self-interest are rational ones, and there is never any
conflict of interest between men who are behaving rationally. Sacrifice harms not only the man
who makes the sacrifice but also the man who accepts it; it is, therefore, inevitably detrimental.
Acting in one’s rational self-interest is always right, so the moral and the practical are simply two
sides of the same coin. Since moral actions are inherently practical and pro-life, immoral actions
are always impractical and anti-life. Evil - i.e., anti-life behavior - is, by its nature, weak and can
only survive by the support good men can be misled into giving it. It follows, therefore, that a
laissez-faire society is both practical and attainable.

If a laissez-faire society is attainable, why haven’t men established one before now? The answer
is that essentially good people have prevented it by their unwitting support of slavery. The
majority of people throughout history have accepted the idea that it was both proper and
necessary for some men to coercively rule over others. Most of these people weren’t basically
bad, and probably only a few of them have had a lust for power. But they have held a terribly
wrong idea which has caused them to support a social system that institutionalizes slavery and
violence. It is this idea - that it is proper and/or necessary for some men to coercively govern
others, which is the idea of government - that has prevented the establishment of a laissez-faire
society and which has been responsible for incalculable human suffering and waste in the form of
political and religious persecutions, taxes, regulations, conscription, slavery, wars, despotisms,
etc., etc. To achieve a laissez-faire society, it is only necessary to enable enough people to change
this idea in their minds. All that is required for the defeat of evil is that good men stop their
unwitting support of it.

There is a great and growing conflict in our world between those who want to be free and those
who want to rule (together with those who want to be ruled). This great conflict has been taking
shape for centuries, but the vast majority of people have never understood what it was all about
because they haven’t seen that the issue was freedom versus slavery. Because they have believed
that men must be governed, most people have been, however, unwittingly and apathetically on
the side of slavery. Until recently, no more than a tiny handful of individualists have realized
what freedom means and how necessary it is for man’s happiness and well-being.

The great conflict between freedom and slavery, though it has taken many forms, finds its main
expression in a conflict between two powerful and opposing human institutions - the free market
and government. The establishment of a laissez-faire society depends on the outcome of the war
between these two institutions - a war whose most crucial battles are fought on the field of ideas.

3
The Self-Regulating Market
Government bureaucrats and their allies among the currently influential opinion-molders have
made a practice of spreading misinformation about the nature of a free market. They have
accused the market of instability and economic injustice and have misrepresented it as the origin
of myriads of evils from poverty to “the affluent society.” Their motives are obvious. If people
can be made to believe that the laissez-faire system of a free, unregulated market is inherently
faulty, then the bureaucrats and their cohorts in classrooms and editorial offices will be called in
to remedy the situation. In this way, power and influence will flow to the bureaucrats … and
bureaucrats thrive on power.

The free-market system, which the bureaucrats and politicians blame so energetically for almost
everything, is nothing more than individuals trading with each other in a market free from
political interference. Because of the tremendous benefits of trade under a division of labor, there
will always be markets. A market is a network of voluntary economic exchanges; it includes all
willing exchanges which do not involve the use of coercion against anyone. (If A hires B to
murder C, this is not a market phenomenon, as it involves the use of initiated force against C.
Because force destroys values and disrupts trade, the market can only exist in an environment of
peace and freedom; to the extent that force exists, the market is destroyed. Initiated force, being
destructive of the market, cannot be a part of the market.)

Trade is an indispensible means of increasing human well-being. If there were no trade, each
person would have to get along with no more than what he could produce by himself from the
raw materials he could discover and process. Obviously, without trade most of the world’s
population would starve to death, and the rest would be reduced to a living standard of incredible
poverty. Trade makes a human existence possible.

When two people make a trade, each one expects to gain from it (if this were not so, the trade
wouldn’t be made). And, if each trader has correctly estimated how much he values the things
being traded, each does gain. This is possible because each person has a different frame of
reference and, therefore, a different scale of values. For example, when you spend 30¢ for a can
of beans, you do so because the can of beans is more valuable to you than the 30¢ (if it weren’t,
you wouldn’t make the purchase). But, to the grocer, who has 60 cases of canned beans, the 30¢
is more valuable than one can of beans. So, both you and the grocer, acting from your different
frames of reference, gain from your trade. In any trade in which the traders have correctly
estimated their values and in which they are free to trade on the basis of these values without any
outside interference, both buyer and seller must gain.
Of course, if some outside influence - such as a gangster or a politician - prohibits the traders
from doing business or forces them to trade in a manner which is unacceptable to one or both,
either the buyer or the seller (or both) will lose. This happens whenever laws control prices,
quality of goods, time and place of purchase (liquor laws), shipment of goods over borders
(interstate commerce, tariffs, international trade restrictions), or any other aspect of trade. Only a
voluntary trade can be a completely satisfactory trade.

Money is used because it makes trading easier and increases the number and type of trades
possible. If you wanted to get rid of a motorcycle and to get in exchange a six months supply of
groceries, three pairs of pants, several records, and a night on the town with your girlfriend, you’d
find it pretty hard to make the trade without the use of money as a medium of exchange. By using
money, you can sell that motorcycle to anyone who will buy it and use the cash to buy whatever
you want. Because the use of money makes it no longer necessary for the buyer to have an
assortment of the exact goods the seller wants, many more and better trades can be made, thus
increasing the satisfaction of everyone.

Money also acts as the means of calculating the relative worth of various goods and services.
Without money, it would be impossible to know how many phonographs a car was worth, or how
many loaves of bread should be exchanged for the service of having a tooth pulled. Without a
standard medium of exchange to calculate with, the market couldn’t exist.

To the extent that voluntary trade relationships are not interfered with (prohibited, regulated,
taxed, subsidized, etc.), the market is free. Since governments have always made a practice of
interfering with markets, and indeed depend on such interferences in the form of taxes, licenses,
etc., for their very existence, there has never been a sizable and well-developed market which was
totally free.

The United States of America, though theoretically a free country, suffers from an almost
unbelievable amount of market regulation.7 Though often called a capitalistic country, the U.S.A.
actually has a mixed economy - a mixture of some government-permitted “freedom,” a little
socialism, and a lot of fascism. Socialism is a system in which the government owns and controls
the means of production (supposedly for “the good of the people,” but, in actual practice, for the
good of the politicians). Fascism is a system in which the government leaves nominal ownership
of the means of production in the hands of private individuals but exercises control by means of
regulatory legislation and reaps most of the profit by means of heavy taxation. In effect, fascism
is simply a more subtle form of government ownership than is socialism. Under fascism,
producers are allowed to keep a nominal title to their possessions and to bear all the risks
involved in entrepreneurship, while the government has most of the actual control and gets a
great deal of the profits (and takes none of the risks). The U.S.A. is moving increasingly away
from a free-market economy and toward fascist totalitarianism.

7
See TEN THOUSAND COMMANDMENTS, by Harold Fleming; 1951; PRENTICE- HALL, INC., N.Y.

It is commonly believed and taught, particularly by those who favor the present “Establishment,”
that the market must have external controls and restraints placed upon it by government to protect
helpless individuals from exploitation. It is also held that governmental “fine tuning” is needed to
prevent market instability, such as booms and busts. A vast amount of governmental action is
based on the theory that the market would speedily go awry without regulation, causing financial
suffering and economic havoc.
When politicians and so-called economists speak of “regulating the market,” what they are
actually proposing is legislation regulating people - preventing them from making trades which
they otherwise would have made, or forcing them to make trades they would not have made. The
market is a network of trade relationships, and a relationship can only be regulated by regulating
the persons involved in it.

An example of government regulation of the market is “price control.” A price is the amount of
money (or other value) which sellers agree to take and buyers agree to give for a good or a
service. A price isn’t a conscious entity and couldn’t care less what level it is set at or what
controls it is subjected to. But the buyers and sellers care. It is they who must be controlled if the
price is to be held at an artificial level. Price control, like all other political controls and
regulations imposed on the market by legislative force, is people control!

Of course, such people-regulation can only be imposed by the initiation of the threat and use of
physical force. If people were willing to trade in the manner prescribed by the government
planners, they would already have been doing so and the market-regulating “services” of the
planners would be unnecessary. Only by forcing unwilling buyers and sellers to act differently
from what they would have if left free can government regulate or “fine tune” the economy.

This initiation of force against peaceful buyers and sellers inevitably causes them to act against
their best interests, or at least what they believe to be theft best interests When they act against
their interests, they inevitably suffer a loss of value. It is a commonly held myth that government
bureaucrats know far better than the rest of us “how things ought to be run,” so that it is actually
good for the public as a whole if some people are forced to act against theft selfish interests. But
this myth of “the wise government planner” ignores two important facts, First, you are in a far
better position to know how to manage your affairs, including your business and professional life,
than is some far-off, politically selected bureaucrat. And this truth is just as applicable to every
other person operating honestly and peacefully in the market, especially those whose market
transactions are extremely complex and important. You may make mistakes in your market
dealings, but the bureaucrat’s isolation from direct and immediate information about your
situation and his lack of a strong personal interest in your affairs absolutely guarantee that he will
make a lot more and bigger mistakes, even if he’s honestly trying to help. Besides, when a
bureaucrat makes a mistake in regulating your affairs, he doesn’t receive any feedback, in the
form of economic losses, to alert him to his error. You receive all the feedback, but you aren’t in
a position of control, so you can’t correct the error.

The second important fact ignored by the myth of “the wise government planner” is that the
individuals who are being forced by government regulation to act against their interests are a part
of the very public which is supposed to benefit from these governmental controls. Therefore, a
loss of value by those who are controlled is also a loss of value for “the public.” And, because a
market consists of a network of highly interconnected relationships, a loss to any person dealing
in the market tends to diffuse to those doing business with him, and from them to their business
contacts, etc.

For example, suppose the government were to pass a law requiring all washing machines in
laundromats to have a washing cycle at least 45 minutes long, to protect customers from
insufficiently washed clothes. The laundromat owners, being unable to serve as many customers
per washing machine as before, would take in less money. This would prevent them from buying
more and newer washers and driers, which would hurt the manufacturers of these products, who
would then be unable to buy as much steel and porcelain, etc., etc. At the other end of the line, the
customers of laundromats would also be hurt as a shortage of available washing machine time
developed, due to the original 45-minute regulation plus the laundromat owners’ inability to buy
new machines and replace worn-out ones. (At this point, some government bureaucrat is sure to
call for federal action to deal with the crisis in the laundromat industry caused by “the excesses of
an unregulated market!”)

In this way, people who were naturally already doing business in the most profitable way, for
both seller and buyer (remember, we’re talking about a free, competitive market), are forced by
government regulation of the market to act differently, which causes them losses. Advocates of
government regulation usually accept the idea of imposing some losses on those who are
regulated, but they fail to take into account the fact that those losses will inevitably diffuse
throughout the economy like ripples spreading in widening circles over a pond, They also fail to
recognize that a society with government regulation is dangerous to every individual person,
because anyone may be the next victim, directly or indirectly, of government controls.

But even though government regulation of the market necessitates the initiation of force and
causes widespread losses, many people still feel it is necessary to force some sort of order on the
seeming chaos of the market. This belief stems from a complete misunderstanding of the way in
which the market functions. The market is not a jumble of distorted and unrelated events. Instead,
it is a highly complex but orderly and efficient mechanism which provides a means for each
person to realize the maximum possible value and satisfaction commensurate with his abilities
and resources. A brief examination of the workings of the market will illustrate this point. (A
complete proof of it would require several hundred pages of economic analysis.8)

8
For a most excellent treatise on economic principles, see Murray N. Rothbard’s 2-Vol. MAN, ECONOMY. AND
STATE (D. Van Nostrand Company, Inc.).

The price of any good on the market (including such things as a doctor’s fees and the rates of
interest on borrowed money) is determined by the supply of the good available relative to the
demand for it.9 Within the limits of available resources, the supply is controlled by the demand,
since producers will produce more of a good in order to increase their profits when customers
demand more and are thus willing to spend more for it. So it is consumer demand which really
calls the tune in a free market.

9 The belief that prices axe set by the cost of production is erroneous. Actually, in the context of the total market, the
prices of the various factors of production are determined by the return which their products are expected to earn. For a
complete analysis of this subject, see Dr. Rothbard’s MAN, ECONOMY, AND STATE.

Consumer demand is the aggregate result of the economic value - judgments of all the individual
consumers. Thus, it is the values of individuals, expressed through their demand for various
products, which cause the market to be what it is at any given time.

The price of any good on the market will tend to be set at the point where the supply of that good
(at that price) is equal to the demand for it (at that price). If the price is set below this equilibrium
point, eager buyers will bid it up; if it is set above, the sellers will bid it down until it reaches
equilibrium. At the equilibrium price, all those who wish to buy or sell at that price will be able to
do so without creating surpluses or shortages. If, however, the price is artificially lowered by a
government price-control, more buyers will be attracted while sellers will be unwilling to sell,
creating a shortage with its attendant problems of rationing, queues, and black markets. On the
other hand, if government sets the price higher than the equilibrium price, there will be a surplus
of the good, bringing financial ruin to those who are unable to sell their excess stock. A
specialized example of this occurs in the labor market whenever government (or government-
privileged unions) forces a minimum wage higher than the equilibrium wage, leading to a surplus
of labor and so causing unemployment problems and an increase in poverty (and this is only one
way in which government causes unemployment and poverty).

Thus, the market has a built-in self-regulating mechanism which continually adjusts the price of
products (and, similarly, their quantity and quality) to the supply of available resources and to the
amount of consumer demand. It works like a complex signal system, visible to all and reliable if
not interfered with. The signals are given by consumer value choices. They are transmitted to the
sellers (businessmen and entrepreneurs) by means of profit and loss. A profit tells the
businessman that consumers are pleased with his product and that he should continue or even
increase the level of production. A loss shows him that not enough consumers are willing to buy
his product at the price he is asking, so he should either lower his price or redirect his money and
effort into some other line of production.

This signal system keeps the market constantly moving toward equilibrium even as new data
enter and upset the previous balance. For example, suppose that Eastern Electric begins
manufacturing a newly invented TV tube which shows the picture in three dimensions. As
consumers hear of the new 3D TV (via news reports and advertising), demand for it skyrockets.
The number of 3D TVs Eastern Electric can produce is limited, so the large demand and small
supply result in an extremely high price and high profit margins for Eastern Electric. But this
same high profit, which may seem at first to be an instance of market imbalance and unfairness, is
the signal which moves the market toward equilibrium. Eastern Electric’s high profits stimulate
other firms to do research on 3D TV so that they may enter the field with new and better models
and share in the profits. Soon, half a dozen firms are selling competing 3D TVs and the increased
supply satisfies the demand. This brings the price down until high profits disappear and earnings
in the 3D TV industry are about the same, percentagewise, as in every other industry. At this
point, new firms stop entering the field, as there is nothing more to attract them. The whole
market levels off and, barring another new input of data, remains stable. Thus, when the market is
unhampered, any new input of data immediately sends out profit or loss signals which set in
motion factors which maintain market equilibrium. The market is a self-regulating mechanism. (It
should be noted that the high initial profit realized from a new product is also a just process in
which the innovator is rewarded for his investment of time, money, and mental labor.)

Individual self-interest is the basis for the whole market system, which is why it works so well.
The consumer acts in his sell-interest when he buys things at the lowest prices and with the best
quality he can find. The producer acts in his self-interest in trying to make the highest profit
possible. Both consumer and producer attempt to profit from their market transactions; if either
side didn’t expect to gain, no trade would take pJace. This double utilization of the profit motive
results in maximum consumer satisfaction and rewards entrepreneurial efficiency.

Government effects the economy in three major ways - i) by taxation and spending, 2) by
regulation, and 3) by control of money and banking. Taxation is economic hemophilia. It drains
the economy of capital which might otherwise be used to increase both consumer satisfaction and
the level of production and thus raise the standard of living. Taxing away this money either
prevents the standard of living from rising to the heights it normally would or actually causes it to
drop. Since productive people are the only ones who make money, they are the only ones from
whom government can get money. Taxation must necessarily penalize productivity.
Some people feel that taxation really isn’t so bad, because the money taken from the “private
sector” is spent by the “public sector,” so it all comes out even. But though government spends
tax money, it never spends this legally plundered wealth the same way as it would have been
spent by its rightful owners, the taxpaying victims. Money which would have been spent on
increased consumer satisfaction or invested in production, creating more jobs and more products
for consumers, may be used instead to subsidize welfare recipients, controlling their lives and,
thus, discouraging them from freeing themselves in the only way possible - through productive
labor. Or it may be used to build a dam which is of so little value to consumers and investors that
it would never have been constructed without the force of government intervention. Government
spending replaces the spending which people, if free, would do to maximize their happiness. In
this way, government spending distorts the market and harms the economy as much or more than
taxation.

If taxation bleeds the economy and government spending distorts it, governmental regulation
amounts to slow strangulation. If a regulation requires businessmen to do what consumer desires
would have caused them to do anyway, it is unnecessary. If it forces businessmen to act against
consumer desires (which it almost always does), it harms the businessman, frustrates the
consumer, and weakens the economy - and the confused consumer can usually be propagandized
into blaming the businessman. By forcing businessmen to act against consumer desires,
government regulation increases the cost of the regulated products (which, in our present
economy, includes just about everything) and so lowers living standards for everyone and
increases poverty.

Government regulation not only hurts the poor indirectly, by raising prices, but directly as well,
by denying them opportunities to move up and out of their poverty. Suppose a black man who
couldn’t get a decent job decided to support his family by making sandwiches and selling them to
the men on local construction projects. First, he would have to apply, in proper legal language
and procedure, for licenses and permissions from all the branches and departments of government
which required them. He would probably need licenses from city and state, permitting him to
make sales. Then he would have to be regularly inspected and certified under pure food and drug
laws. If he managed to comply with all this without going broke or giving up in despair, he would
still be faced with the problem of keeping extensive records to enable the city, state, and Federal
tax collectors to take part of his earnings and to be sure he paid his “fair share.” This would
require an extensive knowledge of bookkeeping, which he probably wouldn’t have. Suppose he
decided to hire his brother-in-law, who knew a little bookkeeping, to keep his records. Then he
would have to comply with all the laws which harass other employers, including income tax and
social security deductions from his employee’s earnings, sales tax, minimum wage laws, and
working condition standards. With such powerful barriers to success, no wonder the poor get
poorer!

Not only does government regulation prevent enterprising individuals from going into business
for themselves, it also helps freeze many employees into an 8-to-5 grind unnecessarily. There are
a large and increasing number of jobs in our automated world which require, not that a specified
set of hours be put in at an office, but that a certain amount of work be accomplished, regardless
of how long it takes or where it is done. As long as an employee in this kind of job gets his work
done, it shouldn’t matter to the company if he does it in one hour a day and works only in his own
kitchen between the hours of 2 and 3 am. And yet, employers, caught in the fascism of
government regulation and red tape, become increasingly inflexible and insist that employees put
in an 8-hour day, even if five of those hours are spent sitting at a desk doing nothing but trying to
look busy. Without government regulation, businesses would be freer to innovate and would have
to compete harder for labor, due to the economic boom created by freedom. This would mean
much less rigid working conditions for employees.

Economic freedom is important to large businesses, but it’s just as important to the ordinary man
in the street, to the poor man, to the college student. In the long run, busybody regulations,
usually aimed at helping special interest groups, harm everyone.

Add to this the disaster of governmental monetary control, with its inevitable inflation,
depressions, balance of payments problems, gold drains, unsound currencies, and eventual
monetary breakdowns and one begins to realize how much damage governmental meddling does
to the marvelously efficient and productive mechanism of the market, and how much higher the
standard of living would be if the market were free. In view of the poverty created by
government’s interferences with the economy, governmental anti-poverty programs would be
laughable if they weren’t so tragic.

Any governmental interference with the market, no matter how well-meaning, distorts the market
and misdirects the vital signals, which misdirection further distorts the market and prevents it
from moving toward stability. Government bureaucrats’ “fine tuning” of the economy resembles
the activities of a bunch of lunatics, armed with crowbars, “adjusting” the workings of an
automated electronics plant.

The unregulated market has often been accused of creating unemployment, and the poverty of the
masses in England during the Industrial Revolution is cited as an example, But the market’s
critics fail to point out that the poor were in an even worse condition before the Industrial
Revolution when the infant mortality rate was almost 75% and periodic famines swept the land,
killing off the “excess population.” 10
10
While overpopulation is a theoretical possibility, it isn’t the immediate menace it is usually pictured to be, As Robert
Heinlein pointed out in his science fiction novel, THE MOON IS A HARSH MISTRESS, the earth isn’t overpopulated,
it’s just badly mismanaged … by politicians.

As a free market matures into full industrialization, the productivity of workers increases (due to
increasing investment in capital goods - that is, the tools of production) so that workers’ incomes
rise. This is because the only source of prosperity is value-production. Production depends on
tools - the more and better tools with which the worker is equipped, the greater his productive
capacity. Industries continually improve the tools (machines) their workers use in an effort to
increase production and profits. The workers’ wages then rise as industries bid against each other
for labor. In a free market, wages would rise because management’s increased investment in tools
increased the productivity of workers. Powerful unions and costly strikes would be unnecessary,
since wages would always rise to market level (which is the highest level the employer could
afford to pay).

Along with the rise in wages in a market free of government strangulation, unemployment drops
until there is employment for everyone who wants to work. Labor is and always has been
relatively less abundant than both people’s demands for goods and the natural resources
necessary to fill these demands. This will hold true unless and until we reach a point of
overpopulation where the supply of labor exceeds the supply of raw materials, at which point
there will be mass starvation. This means that (barring massive overpopulation) there will always
be enough jobs in a well-developed free market.11
11
See the article, “The Effects of the Industrial Revolution on women and Children,” by Robert Hessen, in Ayn Rand’s
CAPITALISM: THE UNKNOWN IDEAL (published in paperback by The New American Library, Inc., N.Y.).

Unemployment in a fully developed industrial society is a sign of an unhealthy economy,

weakened by government parasitism. The major cause of unemployment is government’s
interferences with the economy, minimum wage rates being a particular example. All of
government’s activities siphon money out of the market, leaving less to hire workers and pay
them good wages. Having injured labor by injuring the market, government poses as the friend of
labor and “helps” by imposing minimum wage requirements (either directly by legislation or
indirectly by giving strongly preferential treatment to labor unions.) Since business has only so
much capital which can be allocated to wages. When wage rates are artificially set above market
level, the balance must be kept by laying off the least productive workers. This creates a class of
jobless poor who are supported by government welfare. It also decreases the amount of goods
that can be produced, which increases their price and so lowers the standard of living for
everyone.

Instead of government being recognized as the culprit, automation has frequently gotten the
blame. But automation can’t cut down on the total number of available jobs, simply because there
is no limit to people’s economic wants. No matter how many wants are filled by machines, there
will still be an unlimited number of new wants left unfilled. Automation doesn’t reduce the
number of jobs, it merely rearranges the pattern of demand for labor, as, for example, from the
industry which is being automated to the industry which is manufacturing the automated
machinery, if automation were as dreadful as its foes assert, we would be wise to scrap all steam-
shovels in favor of hand shovels … or, better yet, teaspoons, to be assured of “full employment!”

The unregulated market has also been accused of the miseries of the “affluent society.” Poverty
and unemployment are the products of government intervention, but the free market certainly is
responsible for affluence, If critics object to market-provided comforts and conveniences, they
are quite free to do heavy labor with crude implements from dawn to dusk, sleep on a dirt floor,
and suffer a high mortality rate so long as they don’t try to impose their way of “life” on more
...

sensible people.

One of the reasons the bureaucrats frequently give for governmental tinkering with the economy
is that if the market were left alone it would alternate between inflation and depression, or boom
and bust. But just what is it that causes this dreaded “business cycle” - is this instability intrinsic
in the market, or is there some external cause?

Suppose that a counterfeiter succeeded in flooding a small town with worthless bills. The inflow
of new “money” would cause an artificial prosperity - a boom. Townspeople, with plenty of
money on their hands, would invest heavily in new and speculative ventures. But as soon as the
boom had run its course, it would become apparent that the economy couldn’t support these new
ventures. New businesses would fold, investors lose their money, unemployment skyrocket - a
bust would have set in.

In a business cycle, the government plays much the same role as that counterfeiter. A business
cycle begins when the currency is inflated because money substitutes (paper “money,” coins
made of low-value metal, such as the “sandwich” coins, etc.) are pumped into the economy.
These money substitutes are, in reality, substitutes for nothing, since they are not backed by real
monetary value (such as gold and silver); they are, therefore, worthless or very nearly so.
It is government which issues currency and government which inflates the supply of money
substitutes.12 The government-inflated currency stimulates an artificial boom which misdirects the
market’s signal system. Entrepreneurs, thinking they are more prosperous than they really are,
make mal-investments and over-investments. The boom breaks when the nature and extent of the
mal-investment is discovered. The ensuing depression is actually the market’s only means of
recovering from the inflation-caused malinvestment.13 Thus, the business cycle, which has so
often been blamed on laissez-fake capitalism, is actually the cold steel of the knife of government
intervention in the market’s vitals - free trade.14

12
Banks may also inflate by holding only fractional reserves against demand deposits - for example, by making loans
against checking accounts. If they weren’t protected by special laws, however, banks could not indulge in fractional
reserves, because this practice is too risky. In a totally free market, any bank which did not hold 100% reserves would
be driven out of business by its more financially wise and sound competitors.

13
The depression phase of the business cycle may be postponed for a long time by continued inflation, but such a
policy only makes the inevitable depression more catastrophic when it does occur.

14
See the minibook, DEPRESSIONS: Their Cause and Cure, by Murray N. Rothbard (Published by Constitutional
Alliance, Inc., Box 836, Lansing, Mich. 48904).

In spite of the fact that the free market is completely sell-regulating, and that government
intervention is the cause rather than the cure of market imbalance, many still fear a totally
unregulated market. They contend that a free market would promote the economic exploitation of
helpless individuals by powerful interest groups. It isn’t enough, they feel, for individuals to be
free of force and fraud - they must also be defended against the selfish predations of “Big
Business,” monopolies, cartels (which are actually tentative monopolies), and the rich in general.
These economic bugaboos are all similar and can all be dispelled by examining the most extreme
of them - monopoly.

When market freedom is advocated, one thought which springs to many minds is the fear of
unchecked monopolies running amuck, trampling the rights of “the little fellow” and ruthlessly
driving any would-be competitors to the wall. It is widely held that without strict government
control such monopolies would proliferate and virtually enslave the economy.

Theoretically, there are two kinds of monopoly - market monopoly and coercive monopoly. A
coercive monopoly maintains itself by the initiation of force or the threat of force to prohibit
competition, and sometimes to compel customer loyalty. A market monopoly has no effective
competition in its particular field, but it can’t prevent competition by using physical force. A
market monopoly can’t gain its ends by initiating force against anyone - its customers,
competitors, or employees - because it has no legal power to compel people to deal with it and to
protect itself from the consequences of its coercive actions. The initiation of force would frighten
away business associates and alarm customers into seeking substitute products, doing without
altogether, or, in the case of entrepreneurs, setting up a competing business to attract other
dissatisfied customers. So the initiation of force by a market monopoly, far from helping it to
attain its ends, would give it a quick push onto the short, downhill road to oblivion.

Because it does not initiate force, a market monopoly can only attain its monopoly status by
excellence in satisfying consumer wants and by the economy of its product and/or service (which
necessitates efficient business management). Furthermore, once it has attained this monopoly
position, it can only hold it by continuing to give excellent service at economical prices (and the
freer the economy, the more this rule holds true). If the managers of the monopoly become
careless and raise their prices above market level, some other entrepreneur will see that he can
undersell them and still make tremendous profits and will immediately move to enter their field.
Then their potential competition wifi have become actual competition.15 Large and well
established companies are particularly likely to offer such competition, since they have large
sums to invest and prefer to diversify their efforts into new fields in order to have a wide financial
base. In a free society, where large companies were not plundered of what bureaucrats like to
think of as their “excess profits” via heavy taxation, any monopoly which raised its prices above
market level çr became careless about the quality of its service would be virtually creating its
own competition - competition too strong for it to drive out. As is always the rule in an
unhampered market, the illness would create its own cure - the market is self- regulating.
15
From 1888 to 1940, Alcoa had a total monopoly on the manufacture of aluminum in the U.S.A. It maintained this
monopoly by selling such an excellent product at such low prices that no other company could compete with it. During
its monopoly period, Alcoa reduced aluminum prices from $8 to 20¢ a pound (I) and pioneered hundreds of new uses
for its product. The book, TEN THOUSAND COMMANDMENTS, by Harold Fleming, describes the action the
government took against this “ruthless monopoly” which had been guilty of maintaining its monopoly status by
continual and successful efforts to satisfy its customers.

Not only are market monopolies no threat to anyone, the whole concept of monopoly, as
commonly held, is in error. A monopoly is supposed to be a business which has “exclusive
control of a commodity or service in a given market, or control that makes possible the fixing of
prices and the virtual elimination of free competition.” - Webster. A market monopoly cannot
prevent competition from entering its field because it cannot use coercion against would-be
competitors, and thus it can never have that “exclusive control . . . that makes possible the fixing
of prices.” Nor can such a monopoly be said to be free of competition, even while it has exclusive
control of its market - its product must still compete for the consumer’s money with every other
good and service. For example, suppose a manufacturer of travel trailers has a complete
monopoly over the travel trailer industry. He still must compete for the “recreation dollar” with
the motel industry, and, in a broader sense, with the manufacturers of pleasure boats, swimming
pools, table tennis sets, etc. Nor does his competition end there. Because the consumer may
choose to spend his money for something other than recreation, our travel trailer monopolist must
compete indirectly with refrigerator companies, clothing manufacturers, colleges, etc., ad
infinitum. There is no industry so basic that a monopolist in that industry could manage “the
virtual elimination of free competition.” Even the steel industry must compete in the building
materials field with lighter metals, wood, plastic, concrete, brick, and now even newly developed
glass products.

In considering the concept of monopoly, it is also useful to remember that it is not the absolute
size of the firm which counts, but the size of the firm relative to its market. In the 1800s, the little
country grocery store had a far firmer control of its market than does the largest chain of big-city
supermarkets today. Advances in ease and economy of transportation continually decrease the
relative size of even the most giant firm, thus making even temporary market monopoly status
vastly more difficult to attain. So the free market moves toward the elimination, rather than the
encouragement, of monopolies. 16

16
Rogge. Benjamin A., Long Playing Record Album 9#, IS ECONOMIC FREEDOM POSSIBLE? The Foundation for
Economic Education, N.Y.

Since a market monopoly can never eliminate free competition or fix prices in defiance of the law
of supply and demand, it actually bears no resemblance at all to the common notion of “the
ruthless and uncontrolled monopoly” so many people have been taught to fear. If the term
“market monopoly” can have any meaning at all, it can only be understood as a company which
has gained a position as the only supplier of its particular good or service because customer-
wants are well satisfied and its prices are so low that it is not profitable for competitors to move
into that particular field. Its monopoly position will most likely not be permanent, because
eventually someone else will probably “build a better mousetrap” and go into competition with it.
But during the period of its market power, it is never free of competition or of the law of supply
and demand in regard to prices.

It is easy to see that a market monopoly, because it cannot initiate force, poses no threat to either
individual persons who deal with it or to the economy as a whole; but what about a coercive
monopoly?

A coercive monopoly has exclusive control of a given field of endeavor which is closed to and
exempt from competition, so that those controlling the field are able to set arbitrary policies and
charge arbitrary prices, independent of the market. A coercive monopoly can maintain this
exclusive control which prohibits any competition only by the use of initiated force. No firm
which operated in a free- market context could afford the initiation of force for fear of driving
away its customers and business associates. Thus, the only way that a business firm can sustain
itself as a coercive monopoly is through government intervention in the form of special grants of
privilege. Only government, which is itself a coercive monopoly, has the power to force
individuals to deal with a firm with which they would rather not have anything to do.

The fear of ruthless, uncontrolled monopolies is a valid one, but it applies only to coercive
monopolies. Coercive monopolies are an extension of government, not a product of the
free market. Without governmental grants of special privilege, there could be no coercive
monopolies.

Economic exploitation by monopolies, cartels, and “Big Business” is a non-existent dragon. In a

well-developed market which is free of government interference, any advantage gained from such
exploitation will send out signals calling in competition which will end the exploitation. In a free
market, the individual always has alternatives to choose from, and only physical force can compel
him to choose against his will. But the initiation of force is not a market function and cannot be
profitably employed by firms operating in an unregulated market.

Force, in fact, is penalized by the free market, as is fraud. Business depends on customers, and
customers are driven away by the exploitation of force and fraud. The penalizing of force and
fraud is an inherent part of the self-regulating mechanism of the free market.
The market, if not hampered by government regulation, always moves toward a situation of
stability and maximum consumer satisfaction - that is, toward equilibrium. Government
intervention, far from improving society, can only cause disruptions, distortions, and losses, and
move society toward chaos. The market is self-regulating - force is not required to make it
function properly. In fact, the imposition of initiated force is the only thing which can prevent the
market from functioning to the maximum possible satisfaction of all.

If men aren’t free to trade in any non-coercive way which their interests dictate, they aren’t free at
all. Men who aren’t free are, to some degree, slaves. Without freedom of the market, no other
“freedom” is meaningful. For this reason, the conflict between freedom and slavery focuses on
the free market and its only effective opponent - government.
4
Government - An Unnecessary Evil
Because the weight of governmental power has such influence on the structure and functioning of
any society, ideas concerning social organization have typically centered on the structure of the
proposed society’s government. Most “social thinkers,” however, have taken government as a
given. They have debated over the particular form of government they wished their ideal societies
to have but have seldom attempted to examine the nature of government itself. But if one doesn’t
know clearly what government is, one can hardly determine what influences governments will
have on society.

Government is a coercive monopoly which has assumed power over and certain responsibilities
for every human being within the geographical area which it claims as its own. A coercive
monopoly is an institution maintained by the threat and/or use of physical force - the initiation of
force - to prohibit competitors from entering its field of endeavor. (A coercive monopoly may
also use force to compel “customer loyalty,” as, for example a “protection” racket.)

Government has exclusive possession and control within its geographical area of whatever
functions it is able to relegate to itself, and it maintains this control by force of its laws and its
guns, both against other governments and against any private individuals who might object to its
domination. To the extent that it controls any function, it either prohibits competition (as with the
delivery of first class mail) or permits it on a limited basis only (as with the American educational
system). It compels its citizen-customers by force of law either to buy its services or, if they don’t
want them, to pay for them anyway.

While it is obvious that any government must hold a monopoly over at least some activities (e.g.,
lawmaking) within its geographical territory in order to govern at all, some thinkers have held
that a “properly limited” government would not initiate force and would, therefore, not be a
coercive monopoly. The government thus envisioned would be restricted to what its advocates
consider to be minimum essential governmental functions, such as the defense of life, liberty, and
property against both domestic and foreign aggression (police and military), arbitration of
disputes (courts), and the administration of justice (courts and penal system).

A few of these advocates of limited government have realized that taxation is theft (theft being
the act of taking the rightful property of another by force, stealth, or deceit) and have attempted to
insure against governmental initiation of force by forbidding their theoretical governments to levy
taxes - any taxes. But not only are their systems of voluntary government support rather hazy and
unconvincing, even if such a non-taxing government could be made to work, governmental
initiation of force would still not have been eliminated. A government, in order to be a
government rather than simply another business firm in an open market with actual or potential
competition, must maintain a monopoly in those areas which it has pre-empted. In order to insure
its continued existence, this monopoly must be coercive - it must prohibit competition. Thus,
government, in order to exist as a government at all, must initiate force in order to prohibit any
citizen (s) from going into business in competition with it in those fields which it claims as
exclusively its own.

If it could be proved to businessmen that those “basic governmental functions” of protection and
defense of person and property, arbitration of disputes, and rectification of injustice could be
performed very satisfactorily by private, free-market businesses (and this book will prove that
they can), any supposedly non-coercive, limited government would be faced with a crucial
dilemma. Either it would have to initiate force to prevent free enterprise from entering its
“market(s)” or free enterprise would push government out of “business” and, hence, out of
existence. As will be shown, government is unavoidably inefficient and expensive. If government
didn’t compel its citizens to deal with it (by maintaining itself as a coercive monopoly), the free
market could offer really effective services, efficiently and at lower prices, and the government
would lose all its “customers.”

Government is, and of necessity must be, a coercive monopoly, for in order to exist it must
deprive entrepreneurs of the right to go into business in competition with it, and it must compel
all its citizens to deal with it exclusively in the areas it has pre-empted. Any attempt to devise a
government which did not initiate force is an exercise in futility, because it is an attempt to make
a contradiction work. Government is, by its very nature, an agency of initiated force. If it ceased
to initiate force, it would cease to be a government and become, in simple fact, another business
firm in a competitive market. Nor can there be any such thing as a government which is partially
a free-market business, because there can be no compromise between freedom and brute force.
Either an organization is a business, maintaining itself against competition by excellence in
satisfying customer wants, or it is a gang of thieves, existing by brute force and preventing
competition by force when it can do so. It can’t be both. 16

16
As an example of this attempt to marry government and business, a few well-meaning souls have proposed that
government should avoid forcing its citizens to deal with it by making citizenship a matter of contract, so that only
those who wished to buy governmental services need do so. Rut such a government, if it were to remain a government,
would still have to initiate force to prohibit competition or it would lose its monopoly. In effect, it would be saying to
the individual in its territory, “You do not have to buy the protection you need from the government, but the
government will not allow you to buy it from anyone else.” The freedom from governmental coercion offered by this
“voluntary” government would be meaningless.

Further, since government is not a market monopoly, it can only be a coercive monopoly - no
third alternative exists.

The prohibition of competition on which government depends for its existence is an aggressive
interference with the free market and forms the basis for all the other many interferences with the
market of which government has been guilty. Since government must infringe the right of free
trade in order to exist, how can it be expected to refrain from other interferences with the market
and the rights of its citizen-subjects?

People who grow up amid the “democratic traditions of the West” are apt to feel that this
governmental initiation of force and disruption of the market is justifiable as long as the
government is one which is “chosen by the people through the democratic process of free
elections.” They feel that under a democratic government, whatever the government does is done
“by ourselves, to ourselves” and is, therefore, permissible. But the fallacy of this notion is readily
apparent when one considers the people of the democratic country as individuals, rather than as
insignificant fragments of a collective whole.

The belief that the people of a democracy rule themselves through their elected representatives,
though sanctified by tradition and made venerable by multiple repetitions, is actually mystical
nonsense. In any election, only a percentage of the people vote. Those who can’t vote because of
age or other disqualifications, and those who don’t vote because of confusion, apathy, or disgust
at a Tweedledum - Tweedledummer choice can hardly be said to have any voice in the passage of
the laws which govern them. Nor can the individuals as yet unborn, who will be ruled by those
laws in the future. And, out of those who do “exercise their franchise:’ the large minority who
voted for the loser are also deprived of a voice, at least during the term of the winner they voted
against.

But even the individuals who voted and who managed to pick a winner are not actually ruling
themselves in any sense of the word. They voted for a man, not for the specific laws which will
govern them. Even all those who had cast their ballots for the winning candidate would be
hopelessly confused and divided if asked to vote on these actual laws. Nor would their
representative be bound to abide by their wishes, even if it could be decided what these
“collective wishes” were. And besides all this, a large percentage of the actual power of a mature
democracy, such as the U.S.A., is in the hands of the tens of thousands of faceless appointed
bureaucrats who are unresponsive to the will of any citizen without special pull.
Under a democratic form of government, a minority of the individuals governed select the
winning candidate. The winning candidate then proceeds to decide issues largely on the basis of
pressure from special-interest groups. What it actually amounts to is rule by those with political
pull over those without it. Contrary to the brainwashing we have received in government-run
schools, democracy - the rule of the people through their elected representatives - is a cruel hoax!

Not only is democracy mystical nonsense, it is also immoral. If one man has no right to impose
his wishes on another, then ten million men have no right to impose their wishes on the one, since
the initiation of force is wrong (and the assent of even the most overwhelming majority can never
make it morally permissible). Opinions - even majority opinions - neither create truth nor alter
facts. A lynch mob is democracy in action. So much for mob rule.

The very word “government” means some men governing - ruling over_others.17 But to the
degree that men are ruled by other men, they exist in slavery. Slavery is a condition in which one
is not allowed to exercise his right of self-ownership but is ruled by someone else. Government -
the rule of some men over others by initiated force - is a form of slavery. To advocate
government is to advocate slavery. To advocate limited government is to put oneself in the
ridiculous position of advocating limited slavery.

17
The concept of “a government of laws, not of men” is just as mystical and meaningless as democracy. Laws must be
written and enforced by men. Therefore, a “government of laws” is a government of men.

To put it simply, government is the rule of some men over others by initiated force, which is
slavery, which is wrong.

Those who maintain that government is an institution which holds monopoly on the use of
retaliatory force (in a given geographical area) carefully omit to mention what kind of monopoly
such an institution would be, and for obvious reasons. To claim that a government is a market
monopoly is patently absurd, since competition must be prohibited; with competition, it would
not be a monopoly, and, therefore, it would not be a government (according to their
“definition”). If they admit that government is a coercive monopoly, they could not fail to see that
they were advocating an institution which is inherently evil and that to advocate that which is
wrong is, itself, evil. It is perfectly clear that every government which ever existed, including
today’s governments, has maintained its existence by initiated aggression against its citizen-
subjects and, further, could not continue to exist without such aggression which violates human
rights. To claim, therefore, that government holds a monopoly on the use of retaliatory force is to
surrender to and condone initiated force; an institution of initiated force can hardly, by any stretch
of rational imagination, hold a monopoly on the use of retaliatory force. Such a notion is worse
than absurd, as it helps to maintain the idea that government is good.

Government, being a coercive monopoly, must maintain its monopoly position by the initiation of
force, which requires that government be a repository of power. Because of this concentration of
power, it is held that some restraint must be put on government to prevent it from riding
roughshod over its citizens. Since government is a monopoly with which its citizens must be
forced to deal, it can allow no competition which would furnish external restraints, as there are
with free-market institutions. Any outside force strong enough to effectively check the power of
government would destroy its monopoly position. Restraints must, therefore, be internal, in the
form of so-called checks and balances. But any system of governmental checks and balances is
necessarily large, unwieldy, and expensive, which puts a far heavier burden on those who must
support it than its functions would warrant (even if one overlooks the fact that governmental
functions are coercive).

Further, a position with even a small amount of power over others is attractive to men who want
to wield power over others. A rational man - a productive man with a high degree of self-esteem -
will have no desire for such power; he has more interesting and rewarding things to do with his
life (and he abhors slavery . . . of any kind). But a man who has failed to set and reach productive
goals, a man who has never done anything worthwhile by his own standards, will often seek to
disguise his feelings of inadequacy by taking a position of power in which he can experience the
pseudo-self-esteem of telling others how to live their lives. So government, by its very nature,
tends to attract the worst of men, rather than the best, to its ranks. Even if a government were
started by the best of men with the best of intentions,18 when the good men died off and the good
intentions wore off, men with a lust for power would take over and work ceaselessly to increase
government influence and authority (always for the “public good,” of course!).

18
We do not, of course, concede such a possibility. We use this argument only for the purpose of illustration.

Because government attracts the type of men who desire power over others, no system of checks
and balances can keep government permanently limited. Even with an extremely strict
constitution, it is impossible to impose limitations which some other men cannot eventually find a
way to get around. The best that can be hoped for from constitutional checks and balances is to
limit the government for a longer period of time than has yet been achieved. The U.S.A. holds the
record to date - around two centuries . . . to degenerate to a mixture of fascism and socialism, a
new brand of sophisticated totalitarianism.

It has been said that the price of liberty is eternal vigilance. But such vigilance is a constant non-
productive expenditure of energy, and it is grossly unreasonable to expect men to keep expending
their energy non-productively out of “unselfish idealism.” There is no area of the free market
which requires the constant vigilance of the entire population to keep it from going awry. We
would all be shocked and indignant if we were admonished to give such attentions to, say, the
dairy industry in order to have, our milk delivered unsour.

Government consists of men who govern, or rule over, others by initiated force. This means that
government inevitably sets men against each other as each interest group seeks to be among the
rulers, or at least on good terms with the rulers, instead of among the ruled. Such conflict between
interest groups is most pronounced in a democracy, because in a democracy the course of
government is determined largely by pressure groups who have special pull and/or can deliver
votes and money. Each pressure group fights to gain control of the government long enough to
force the passage of legislation favoring it or crippling its opponents. The constant and inevitable
political warfare makes each interest group a threat to anyone outside itself and prompts
otherwise non-aggressive groups to pressure the government for legislation favorable to them, as
an act of self-defense if for no other reason. Thus, government creates a situation in which each
man must fear everyone who belongs to a different interest group or has a different life-style.
Black people fear suppression by whites, while whites are apprehensive about blacks gaining “too
much” power. Middle-class, middle-aged, “straight” people dread the day when young hippies
will be old enough and strong enough to seize power and force legislation favoring the “hip”
culture. Hippies, meanwhile, resent the “straight” life-style which the present laws attempt to
force on them. It’s labor vs. management, urbanites vs. suburbanites, tax-payers vs. tax-
consumers, in an endless, costly, and totally unnecessary battle. Without government, no one
would need to fear that someone else’s group would gain the upper hand and use the power of
law to force its will on him. People of vastly different occupations, interests, and life-styles could
live peacefully together, because none would be capable of using a politician to threaten the
others. It is the power of government which causes most of the strife between various groups in
our society.

Governments have always found it necessary to use force against both their own citizens and
other governments. This isn’t surprising when one realizes that any government can continue to
exist only by maintaining a monopoly in its area of operations and that it can only maintain this
monopoly permanently by the use of force. Wars and repressions are an inevitable by-product of
government - they are simply the coercive monopoly’s normal reaction to external and internal
threats to its position. The more areas within its boundaries a government seeks to monopolize
(that is, the more totalitarian it is), the more repressions it will have to use against its citizens, and
the more bloody and violent these repressions will be. The more areas outside its boundaries a
government seeks to control (that is, the more imperialistic it is), the more wars it will have to
engage in, and the more prolonged and destructive these wars will be. Some governments are far
more totalitarian and imperialistic than others and are, consequently, more cruel and bloody. But
every government must initiate force because every government is a coercive monopoly. Wars
and repressions are inevitable so long as governments continue to exist. The history of
governments always has been, and always will be, written in blood, fire, and tears.

In addition to all the rest of its defects, the structure of any government is incurably arbitrary and,
therefore, without reason. Any institution which is not a part of the free market and, therefore, not
subject to the rules of the market, must be set up and operated on the basis of arbitrary rules and
thus cannot be just and reality-oriented. Private business is guided by reality in the form of the
market. A successful entrepreneur operates his business in accordance with the law of supply and
demand and so has reality-centered reasons for the decisions he makes. But government is outside
the market, unguided by the realities of the market, and thus can only be operated by arbitrary
decisions. The truth of this can be seen when one honestly tries to determine just how the
institution of government should be implemented (which also explains why few advocates of
liberty have attempted this impossible task). For example, how should judges be chosen - by
election or appointment? If elected, to what terms and by what electorate (local, state, or
national)? Bipartisan or non-partisan designation? If appointed, by whom and with what controls?
What are the rules for voting, who decides what they shall be, and what are the objective criteria
for such decisions? Arguments over such matters are both endless and fruitless, because there are
no non-arbitrary answers.

For a private business, the primary purpose of its existence is to make profits (which it can only
do by pleasing its customers). Profit is the “success signal” for any businessman operating in a
free market - the signal which tells him he is succeeding in the job of satisfying his customers.
When a businessman begins to suffer losses, he knows he has made mistakes and that consumers
are dissatisfied with his product or service. The profit signal unerringly guides businessmen
toward those actions which produce the most consumer satisfaction.

But a government is a “non-profit,” extra-market organization, maintaining itself, not by willing

exchange, but by the forcible seizure of goods (taxation). The success signal for a politician or
bureaucrat is not profit, but power. A government official succeeds, not by pleasing customers,
but by increasing his sphere of control over the lives of others. This is why each politician
struggles so hard to win elections, pass dozens of new laws, and increase the amount of patronage
he has to give out. This is why each gray and faceless bureaucrat toils incessantly to increase the
size, powers, and budget of his department, and the number of men working under him. The
power signal unerringly guides government officials toward those actions which produce the
most control over other men.

Private enterprise maintains and expands itself by continually offering people things they want.
Government maintains and expands itself by depriving people of things they want, by means of
forcibly seizing their goods (taxation) and forcibly preventing them from trading and living as
they choose (regulation). Thus, private enterprise continually increases the prosperity and well-
being of its customers, while government continually decreases the prosperity and well-being of
its citizens.

But worse than anything else it does to its citizens is the fact that government cannot avoid
forcibly sacrificing the just interests of at least some of them. Any government must make
decisions and act on them, since it could claim no justification for its existence if it did nothing at
all. Theoretically, the leaders should always act “in the interest of the people” because it would be
immoral to impose on the people actions which were contrary to their interests. But, since not all
the individuals who make up “the people” will find the same things to be in their interest, it
follows that at least some of them must have proper, just interests which are different from or
even in opposition to the supposed “public interest.” This means that some citizens (those without
political influence) must sacrifice their interests, hopes, ambitions, and even property and lives to
further the “national interest.” Since people should not and usually do not give up such values
willingly, any group not based on totally voluntary membership must employ coercion to force
the sacrifices which its leaders and rulers consider to be in the group’s interest.

Limiting a government to the functions of protection and arbitration would lessen the sacrifices
demanded of the citizens but could never eliminate them. The wastefulness of checks and
balances and the inefficiency of an organization beyond the reach of competition makes
governmental services far costlier and less effective than those provided by business. Thus, being
forced to buy “protection services” from government is certainly a sacrifice. Any government, if
it is to remain a government, must hold its monopoly status by coercion, which means it must
force sacrifices on its citizens.

Every individual person has the responsibility to discover what his interests are and to work
toward their achievement. When government takes some of this responsibility away from the
individual, it must also take away some of his freedom of action - i.e., it must violate human
rights. Further, when government forces an individual to act against his proper interests, it is
forcing him to act against his own rational judgment. Such an action, in effect, puts the opinions
and whims of others between a man and his perception of reality and, thus, compels him to
sacrifice his basic tool of survival - his mind!
Government has always been a ball-and-chain holding back human progress and welfare. This
shackle was bad enough in primitive times when life was relatively simple. In a complex society
with a complex technology and nuclear weapons, it is suicidal idiocy. Government is simply
inadequate to the complexities of modern life, a fact which is becoming increasingly apparent in
the blundering ineptitude of governmental “solutions” to social problems, the perennial confusion
and contradictions in governmental policies, and the successive breakdown of governmental
programs. Government, at best, is a primitive anachronism which the human race outgrew
somewhere around the time when men moved out of their caves, and which we should have
dispensed with long ago.

The majority of people firmly believe that we must have a government to protect us from
domestic and foreign aggression. But government is a coercive monopoly which must demand
sacrifices from its citizens, It is a repository of power without external check and cannot be
permanently restrained. It attracts the worst kind of men to its ranks, shackles progress, forces its
citizens to act against their own judgment, and causes recurring internal and external strife by its
coercive existence. In view of all this, the question becomes not, “Who will protect us from
aggression?” but “Who will protect us from the governmental ‘protectors’?” The contradiction of
hiring an agency of institutionalized violence to protect us from violence is even more foolhardy
than buying a cat to protect one’s parakeet.

In view of the real nature of government, why have the majority of men throughout history
accepted and even demanded it? Perhaps the most obvious reason is that the vast majority of men
have not developed much ability to generate or even to accept new ideas, particularly those
radically different from the familiar ones comprising the cultural status quo. There have been
governments as far back as recorded history reaches, and to picture, with some detail, how we
would manage without one requires more mental effort than many of the people are willing to
expend. Besides, that which is new, strange, and unknown is frightening, and it’s more
comfortable to push the whole matter out of one’s consideration by simply declaring that it
wouldn’t work anyway (“You Wright brothers will never get that contraption off the ground!”).

Government officials have used every possible tool to convince people that government is
necessary. One of their most effective weapons has been government supported education, which
brainwashes the young into patriotism before they are capable of judging for themselves and
creates a class of pro-State intellectuals, whose ideas create a pro-State populace. Another trick
has been to invest government with tradition and pomp and to identify it with “our way of life” so
that to be against government is seen as being against everything which is familiar, noble, and
good.

Another factor contributing to the acceptance of government is that a great number of people
have a nagging, and usually un-admitted, fear of self-responsibility - of being thrown completely
on their own resources. This goes far deeper than just the knowledge that with no government
there would be no welfare checks or plush bureaucratic jobs. It is a deep fear of the responsibility
and risk of having to make one’s own decisions and accept the consequences, with no ultimate
authority to appeal to for guidance and to blame in case of failure. This is the reason for such
cries as “We must have strong leadership in this time of crisis,” “We need new and better
leaders,” and “God, give us a leader!” People who fear responsibility find it easier to call for
leaders, even when those leaders may become tyrants, than to accept the risk and effort of looking
for solutions to the problems that beset them (remember the “Heil Hitler” patriotism of Nazi
Germany and the horror and atrocities it led to). Without a government to furnish this leadership,
such people would feel hopelessly lost and adrift.
But even with all this, the majority of people might have accepted the idea of a government-free
society long ago if they hadn’t been sold the notion that the only alternative to government is
chaos. Government may be evil, they feel, but, after all, it’s a necessary evil.

Aside from the fact that there no necessary evils, when one considers all the chaos governments
have caused with their violations of men’s liberty, arbitrary interferences with the market, and
wars for plunder and power, the assumption that government prevents chaos appears more than a
little ridiculous. The free market is quite capable of preventing chaos, and would do so without
violating men’s liberty or carrying on wars of aggression, as this book will demonstrate. The
actual choice is not government versus chaos, but the chaotic rigidity generated by governmental
aggressions versus the peaceful, evolutionary progress which naturally results from free men
trading in an open market.

Government isn’t a necessary evil - it’s an unnecessary one.

PART II
A LAISSEZ-FAIRE SOCIETY
“Liberty - the mother, not the daughter, of order.” - Proudhon

5
A Free and Healthy Economy
Imagine a feudal serf, legally bound to the land he was born on and to the social position he was
born into, toiling from dawn to dusk with primitive tools for a bare subsistence which he must
share with the lord of his manor, his mental processes enmeshed with fears and superstitions.
Imagine trying to tell this serf about the social structure of the Twentieth Century America. You
would probably have a hard time convincing him that such a social structure could exist at all,
because he would view everything you described from the context of his own knowledge of
society. He would inform you, no doubt with a trace of smug superiority, that unless each
individual born into the community had a specific and permanently fixed social place, society
would speedily deteriorate into chaos.

In a similar way, telling a Twentieth Century man that government is evil and, therefore,
unnecessary, and that we would have a far better society if we had no government at all, is likely
to elicit polite skepticism … especially if the man is not used to thinking independently. It is
always difficult to picture the workings of society different from our own, and particularly a more
advanced society. This is because we are so used to our own social structure that we tend to
automatically consider each facet of the more advanced society in the context of our own, thus
distorting the picture into meaninglessness.

Many undesirable conditions which people take for granted today would be different in a society
totally free of government. Most of these differences would spring from a market liberated from
the dead hand of government control - both fascist and socialist - and thus able to produce a
healthy economy and a vastly higher standard of living for everyone.

In any society, unemployment is the product of government intervention in the market. A society
free of government would have no unemployment problem. Labor, being scarcer than resources,
would be in demand, and everyone who wanted a job could have one. When faced with a demand
for labor produced by new prosperity and soaring sales, industry would be eager to hire minority
group members, institute on-the-job training for the uneducated, set up plant nurseries for
mothers of small children, hire the handicapped, etc., to tap every source of competent labor.
Wages would be high because businesses could keep what bureaucrats call their “excess profits”
and invest them in machinery to increase the productivity of their labor (and wages are
determined by productivity).

There will always be large differences in the amount of income earned by different people, but in
a free-market society there would be no class of jobless, hopeless poor as we have today. Instead
of being abandoned to starve in a government-less society, the poor would at last be given all the
opportunity and help they needed to raise themselves out of their poverty.

Of course, there will always be people temporarily or permanently unable to support themselves
due to extreme mental or physical handicaps, financial bad fortune, or other causes. Such people
would be helped by private charities, as there would be no government dole. Gathering enough
money to help them would present no problem - we have never suffered from a lack of people
willing to go into the business of collecting and dispensing charitable funds, and the people of
this semi-free nation, even with over a third of their income looted by taxation, have been
wealthy enough to be generous to scores of charities each year. Private charity is vastly more
economical and efficient than government welfare, since it is in a much better position to
distinguish those deserving of help from phonies who just want a free ride, and to dispense its
funds accordingly. This practical superiority derives from the moral fact that private charity is
based on voluntary contributions while government welfare payments come out of monies
confiscated at the point of a legal gun from productive taxpayers.

Many people feel that charity would break down, however, when faced with the task of educating
children without government schools. They believe that there could never be enough charity to
take care of all the children whose parents neglected or were unable to send to school. Such an
opinion is the result of failing to consider the context of a free society.

It has already been shown that poverty is a result of government interference in the economy, and
that a modern industrial society need have no poverty as we understand it. This means that, while
lower income people would certainly have to do without other desirable goods in order to educate
their children, they would not be in the position of having no money at all to spare for schooling.
Furthermore, when parents knew that there was no government to pick up the tab for them, they
would be likely to think twice before taking on the responsibility of having a greater number of
children than they could adequately care for and educate. With birth control devices free of
hampering prescription laws and their manufacturers free to advertise in the mass media, family
size among the poorly educated lower income groups could be expected to drop sharply. When
freed of the economic burden of large families, lower income parents could not only afford a
better standard of living, they could also afford a better education for the children they did have
so that the next generation could raise itself to a better socio-economic position.

Of course, education itself would be vastly improved if placed on the free market. At present,
most students waste a considerable amount of each school day. This is chiefly due to two factors:
first, “democratic” insistence on forcing everyone through the same educational mill regardless of
ability or previous upbringing, and second, the rigidity of a socialized system which has no
competition and can thus tolerate a large measure of stagnation. Free-market educational
institutions in competition with each other would take quick advantage of every new advance in
educational methods and materials and would undoubtedly do a far better job in a shorter time
and for much less money. It is probable that this free-market application of new educational
techniques would enable all but the slowest students to finish school anywhere from months to
years earlier than they now do, providing a tremendous saving of the young person’s time and his
parents’ money, as well as increasing his years of productivity (and everyone’s standard of
living).

A laissez-faire system of competing, free-market education would provide a tremendous variety

of schools to meet the needs of people with various interests, aptitudes, beliefs, and life-styles.
Devout Christians could send their children to religious schools which held prayer before every
class without infringing on the right of atheists to have their children educated by the use of
reason exclusively. Black Panthers could send their children to all-black schools, white
segregationists to all-white schools, and integrationists of all races could patronize integrated
schools (forced integration is as bad as forced segregation). There would be schools for
exceptionally bright youngsters, for those with special educational problems, and for those with
great aptitudes in various fields (music, mathematics, writing, etc.). These various schools would
charge different amounts of tuition and operate under varying conditions and educational
methods. Some would be strict, some permissive. Some might have a 12- month school year,
some a 6-month year. Virtually every kind of education which consumers wanted would be
offered, and selection of a school would be strictly on the basis of individual free choice. No
longer would every child be forced through the same educational machine, a machine geared for
the great “average” majority and, therefore, harmful to minorities of all kinds.

Although the schools in a free economy would be paid for by tuition rather than by the theft of
taxation, it is not necessarily the case that parents would have to stand the entire expense of their
children’s education, especially in high school and college. Even today, scores of companies in
search of well-trained and competent mathematicians, engineers, chemists, etc., offer generous,
no-strings- attached scholarships to any talented student in hopes of luring him to work for them
when he graduates. In the healthy economy of a totally free-market society, companies would be
looking for even more employees (and, also, for independent sub-contractors) in an even greater
variety of skilled fields. Not only would such companies put promising students through college,
they might very well even pay their high school tuition. And many of them might also offer free
high school curriculums to any ambitious student of average competence in return for his
contractual guarantee to learn some skill useful to the company and work for them exclusively for
a stated period of time.

Many firms are already manifesting a great and speedily growing interest in education, in spite of
its rigidly socialized condition. They are particularly interested in research in better teaching
methods, including the use of computers and other mechanical aids to improve the speed and
quality of instruction. It is difficult to imagine the extent of the beneficial influence such
businesses would have on the field of education if it were free of the rigor mortis of government
control.

Of course, education doesn’t necessarily have to take place in a classroom. One of the least
expensive and most promising of educational tools is television. At present, most educational TV
is undeniably poor in quality and interest level. This is largely due to lack of competition
resulting from the stultifying regulations imposed by the Federal Communications Commission,
which has virtual dictatorial control over who may enter the field and what kind of programs they
may telecast. In a laissez-faire society, anyone who could find an unused channel could go into
the business of telecasting, and he could air any type of material he wished. If his programs were
offensive to his audience, he would, of course, soon go out of business for lack of viewers.
Competition, as always, would impel toward excellence.

With television freed from governmental meddling, many groups would go into the business of
educational TV. Educational broadcasters could offer their programs free and still make profits
by charging for texts and tests (a charge which would be small, with student-viewers numbering
in tens of thousands). Or, texts and tests could be furnished free, with support coming from
commercials, just as it now does with entertainment TV.

Sponsoring companies might advertise not only for customers but for employees with the
knowledge and skills taught in their TV courses. This would have the happy effect of providing
both a pool of potential employees for the company and readily accessible job opportunities for
the student-viewers. Also, with stiff competition for student-viewers, educational broadcasters
would develop the most efficient and “fun” ways of learning possible in order to capture and hold
their audiences.

In spite of lower cost, more efficient and higher quality education, the role of industry in
providing scholarships, and educational TV, it is probable that some children would get very little
education, and a few might go through life as illiterates. These would be children who lacked
either the capacity or the desire for learning, since children who had both ability and desire would
tend to attract help even if their parents did neglect them. Before calling for a government to
educate these unschooled and illiterate few, however, one should consider the shockingly high
rate of illiterates graduated from government high schools. Sitting in a school room for a period
of years is not equivalent to receiving an education. In fact, children who are forced to sit through
years of schooling which they find painfully boring are far more likely to rebel against their
imprisonment and “society” in general than to develop a love of knowledge. No one can be taught
unless he has a genuine desire to learn, and forcing schooling on a child against his will is hardly
likely to increase this desire.

Competing educational systems would offer the consumer a free choice in his purchase of
education for himself and/or his children. This would end forever squabbles over curriculum
(more athletics? more academics? Black Studies programs?), student body (segregated or
integrated? - shall we bus to integrate?), control of education (should it be in the hands of parents,
teachers, voters, the school board, or the colleges?), and all the other insoluble questions which
plague government’s coercive control of education. If each consumer were free to choose among
competing schools the type of education he valued most, all these problems would be solved
automatically to the satisfaction of everyone. Competition in education would protect students
and parents from exploitation by a coercive governmental monopoly.

In a similar manner, competition would protect the consumer in every other field. If any firm
tried to exploit its customers or employees, it would be signaling other firms to enter into
competition with it in order to reap some of the profits it was enjoying. But this competition
would quickly bid prices down, quality up, or wages up, as the case might be, and eliminate the
exploitation.

In a free market, consumers always have alternatives. Only force or fraud can compel a man to
act against his judgment, but a firm which initiated force or used fraud in a free market would
drive away its customers. Coercive monopolies are the product of government and can’t exist
without government support. In a laissez-fake society, the economy would be free of exploitation,
both by government and by business seeking to establish and maintain market control by force or
fraud.

It has been objected that a very large firm could afford to use force and fraud to at least a limited
extent, because the breadth of its market would prevent the news of its aggressive actions from
reaching enough of its customers and competitors to do it serious damage. This is to overlook the
role of the news media in a laissez-faire society.

As a test, take the front page of any metropolitan daily and count the headlines which have
nothing at all to do with any government - national, state, or local. Unless there has just been
some natural disaster, you will probably find no more than two or three, sometimes none.
Newsmen must write about something, since that’s how they make their living. If there were no
government, they would have to shift their emphasis to the doings of outstanding individuals,
business, and industry. Not only inventions and medical and scientific discoveries would be
news, so would any aggression or fraud, especially when committed by large and well-known
companies. It’s very hard to hide things from hotly competing newspapermen looking for a
“scoop,” not to mention the representatives of radio, television, movies, magazines, and the wire
services. In a laissez-faire society, where there was no government to claim the lion’s share of the
spotlight, it would be considerably more difficult to keep any departure from integrity hidden.

Of course, stiff competition between businesses is the consumer’s best guarantee of getting a
good product at a reasonable price - dishonest competitors are swiftly “voted” out of business by
consumers. But, in addition to competition, the market would evolve means of safeguarding the
consumer which would be vastly superior to the contradictory, confusing, and harassing weight of
governmental regulations with which the bureaucrats claim to protect us today. One such market
protection would be consumer rating services which would test and rate various products
according to safety, effectiveness, cost, etc. Since the whole existence of these rating services
would depend on their being right in their product evaluations, they would be extremely thorough
in their tests, scrupulously honest in their reports, and nearly impossible to bribe (which is not
always true of government officials!).

Businesses whose products were potentially dangerous to consumers would be especially

dependent on a good reputation. Drug manufacturers, for example, would know that if their
products caused any illness or death through poor quality, insufficient research and preparation,
or inadequate warnings on the labels they would lose customers by the thousands. The good
reputation of a manufacturer’s brand name would be its most precious asset, an asset which no
firm would knowingly risk. Besides this, drug stores would strive for a reputation of stocking
only products which were high quality, safe when properly used, and adequately labeled. In place
of the present inflexible, cumbersome, and expensive prescription system, they might employ
pharmacists for the sole purpose of advising customers who wanted to know which medicines to
take (and not to take) and whether theft ailments were serious enough to require the attention of a
physician (a practice which would take a great load of minor complaints off the shoulders of
overworked doctors and sharply reduce the cost of medical service).

A good reputation would also be important to doctors in the absence of government-required

licensing. Of course, any man would be free to hang out a shingle and call himself a doctor, but a
man whose “treatments” harmed his patients couldn’t stay in business long. Besides, reputable
physicians would probably form medical organizations which would only sanction competent
doctors, thereby providing consumers with a guide. Insurance companies, who have a vested
interest in keeping their policyholders alive and healthy, would provide another safeguard in the
field of drugs and medical care. Insurance companies might well charge lower rates on life and
health insurance to policyholders who contracted to use only those medicines and to patronize
only those doctors sanctioned by a reputable medical association. This free-market system of
consumer protection would end the doctor shortage and drastically reduce the cost of most
medical care, since anyone could practice medicine in any area in which he was competent,
regardless of the number of years he’d spend in college (or not spent in college, as the ease might
be). A brain surgeon might require 12 years of formal training, while a doctor who treated colds,
flu, and ingrown toenails might need only 2 - or none. The free-market system wouldn’t commit
the absurdity of requiring the same basic training for the colds-and-ingrown toenails man as for
the brain surgeon, thereby putting their fees on nearly the same level.

The efficiency of these free-market safeguards contrasts sharply with the way the Food and Drug
Administration “protects” us. The FDA doesn’t want anyone to be killed by drugs (that would
look bad for the FDA’s record). But they don’t care how many people die of diseases because
governmental restrictions prevented the development and sale of curative drugs ... those deaths
can’t be blamed on the FDA, effectively (yet). Insurance companies, on the other hand, are
deeply concerned with keeping their policyholders from dying for any reason at all. They would,
therefore, not only discourage the use of harmful medications, but they would also encourage the
discovery and development and sale of helpful ones. The free-market way of doing things is
always superior to the only method government can use - coercion, as freedom is always superior
to slavery.

When government sets out to protect the consumer, it does so by formulating a series of standards
and attempting to enforce them. These standards must be artificial, since the decision as to how
high to set them depends on nothing more than a bureaucrat’s whim. But even if the standards fit
the situation to begin with, they seldom stay appropriate for long. Conditions on the market
change with research, the introduction of new products, and changes in consumer demand; but
the bureaucrat’s rules remain rigid and become outdated. For these reasons, governmental
“consumer protection” can only result in the prevention of real consumer protection made
available in a competitive, free market. It is an observable fact that government regulations
reduce consumer safety by setting standards lower than the unhampered market would have set
(or by enforcing standards which are inapplicable to the product). Many businessmen accept
these low standards because doing so relieves them of further responsibility. Consumers accept
them because they feel secure in the belief that a wise government is protecting them from the
predations of greedy businessmen (which they learned in government schools). Actually,
consumers are served well by the actions of profit-seeking businessmen; they are only taxed,
regulated, and harassed by power-seeking politicians.

The area in which the consumer is probably most in need of protection, and in which government
most endangers him, is in maintaining the value of his money. Money is the lifeblood of any
industrial economy - if the money loses its value, the entire economy must collapse.

Money is the commodity which, because of its high marketability, is used as a medium of
exchange. In order to become money, a commodity must have high marketability - that is, people
must be eager to accept it for its own value. This means that the money commodity must have a
high value as a commodity, in addition to its exchange value, in order to become and remain
money.

Over the centuries, two commodities have become prominent as money throughout the civilized
world - gold and silver. They have high marketability because of their value for ornamental and
industrial uses, and because of their relative rarity. They are homogeneous, divisible into equal
units, non-spoilable, and fairly easy to transport. For these reasons they have gained a wider
acceptance for exchange than any other commodities.

Money, then, is at present gold and silver. It is not, and cannot be, merely pieces of paper,
because paper doesn’t have enough value to be highly marketable. Pieces of paper can be money
substitutes if, and only if, there is a stock of gold and/or silver for which they can be freely
exchanged at any time.

Governments can’t give any value to pieces of paper, and pieces of paper have no value except as
they have a gold/silver backing and any holder of such paper notes may exchange them for gold
and/or silver at any time. A government which uses paper for money without holding a freely
accessible gold and/or silver reserve is forcing its economy to live on borrowed time. When some
crisis causes its monetary fraud to become apparent, the value of its worthless paper money will
sink to zero and the economy will collapse into ruin and starvation. This is what happened to
Germany in 1923, when it took a basketful of paper Mark notes to buy a loaf of bread (which was
one of the main factors in Hider’s rise to power). It is also what must happen to America if the
politicians continue their present course.

In a laissez-faire society, only gold would be accepted as the standard of monetary value - there
can be only one standard (and the free market has established gold as the commodity which is the
standard of value). There would be no government to issue paper “fiat” notes, call them “money,”
and pass laws prohibiting people from using any other media of exchange. Since it is most
convenient to use gold when it is minted into coins of a known weight and fineness, private
enterprise minting companies would arise. They would mint coins, stamp them with their
trademark, and guarantee their value. The companies whose value-guarantees were most reliable
and whose minting services were most satisfactory would acquire a majority of the coin business.
(Counterfeiting - which is a form of fraud - would be dealt with in the same manner as any other
initiated aggressive action. See Chapters 9 and 10.)

Some critics of the free market have contended that private coinage would lead to a confusion of
brands and values of coin, all exchanging at different ratios, making trade impossibly
cumbersome. But the market always moves toward the greatest consumer satisfaction. If
consumers found the varying coin values cumbersome to deal with, they would soon stop
accepting coins of “oddball” value, thus forcing merchants to standardize.
Governments have always made a practice of debasing their legally enforced media of exchange
in order to divert extra wealth into the national treasury. In earlier times, the sovereign would call
in all coins and clip their edges, keeping the gold thus obtained and returning the smaller coins to
the people. In our modern and enlightened era, the same goal is accomplished through inflation,
which enables the government to spend more “printing press money” and so debase the value of
the currency already in the economy.

Because a government has a legal monopoly over the media of exchange in its country, it can
make a practice of gradually reducing monetary value with very little to stop the process until the
eventual and inevitable financial catastrophe. No free-market minting company could get away
with such a fraud. If it issued devalued coins, people would simply refuse to accept them
(Gresham’s Law in reverse - good money drives out bad). Then the dishonest company would go
broke ... but it wouldn’t take a whole nation of innocent people into ruin with it. The free market
would, at last, give consumers protection in an area where they have never had it (because of
governments) and desperately need it - the value of their money and, with it, the strength of their
economy.

In addition to gold (and possibly silver) coin, money substitutes would be used in a free market
because of their convenience, particularly for large transactions. These money substitutes would
be in the form of bank notes, certifying that the bearer had on deposit in a certain bank a specific
amount of gold. The banks would have to hold a 100% reserve of gold against these notes,
because not to do so would be fraud and would cause them to lose their customers to banks with
less risky policies. Since the banks would hold a 100% reserve of gold, these money substitutes
would not inflate the currency as do un-backed government notes. Nor would there be any danger
of runs on banks, leaving the banks insolvent and many of their customers ruined. Such runs are
the product of fractional reserve banking, which exists because it is legally condoned and
enforced by governments.

With competition to guarantee that only gold was used as a monetary standard of value and that
all money substitutes had 100% gold backing, a laissez-faire society would be permanently safe
from monetary crises. The free society’s healthy economy would remain strong because its
money would be of permanent value and, therefore, unassailable.

6
Property - The Great Problem Solver
Most social problems which perplex national leaders could be solved fairly simply by an increase
in the amount and type of property owned. This would entail the equally important, general
recognition that ownership is and must be total, rather than merely a governmental permission to
possess and/or manage property so long as certain legal rules are complied with and “rent” in the
form of property taxes is paid. When a man is required to “rent” his own property from the
government by paying property taxes on it, he is being forbidden to fully exercise his right of
ownership. Although he owns the property, he is forced into the position of a lessee, with the
government the landlord. The proof of this is that if he fails to pay the taxes, the government will
take his property away from him (even though it is his property and not the government’s), just as
a landlord would kick out a tenant who failed to pay the rent. Similarly, if a man must comply
with laws dictating the use or upkeep of his property (or any other rule except that of not using
the property to initiate force or fraud against others), he is being forbidden to fully exercise his
right of ownership. Because a man must use his time - which is part of his life - to acquire, utilize,
and care for property, he has a right to own and control that property fully, just as he has a right to
fully own and control his life (so long as he doesn’t use it to coerce any other man). Any form of
property tax or regulation denies the individual’s right to fully control his own property and,
therefore, his own life. For this reason, taxation and regulation of property is always wrong -
taxation is theft and regulation by initiated force is slavery.

In a governmentally controlled society, the unrestricted enjoyment of property ownership is not

permitted, since government has the power to tax, regulate, and sometimes even confiscate (as in
eminent domain) just about anything it pleases. In addition, much potential property is not
permitted to be owned. In a laissez-faire society, everything which was valued and rationally
claimed would be owned, and this ownership would be total.19

19
in the case of joint ownership, each owner would have total ownership of a part of the whole, and his part would be
specified in the voluntary agreement with the other owner or owners.
Property is anything which is owned. Ownership is the right to possess, use, and/or dispose of
anything to which one has a moral claim. Property may be acquired by producing it, by exchange
with others, as a gift, or by claiming an un-owned value. The claiming of un-owned values is the
way in which all property originally came to be owned.

An un-owned value cannot become one’s property simply because one makes a verbal (or
written) statement claiming it. If it could, you could say right now, “I claim the ocean bottoms of
the entire earth and all the surface of the moon,” and, provided you were the first to make the
claim, they would be yours. Obviously, this would lead to a welter of contradictory and
unenforceable claims.

In addition to making a verbal claim, something must be done to establish that claim as having a
basis in reality. In the case of portable items, there is no problem. Anything which can be
transported by either hand or machine can simply be moved by the new owner and placed within
the confines of some other piece of his property - his suitcase, car, house, or land. The newly
claimed item may also be marked in some way to furnish more evidence of ownership (the
owner’s name, initials, or some sort of serial number or symbol is frequently used).

Non-movable items, such as a fully grown tree, a dam, or a piece of land, present a different kind
of situation. All non-movable items may be considered as land, since even if the item itself is not
land it cannot be separated from the land on which it stands. Since a non- movable item can’t be
carried away, it must be marked as the new owner’s property where it stands. Because a non-
movable item always occupies some land space, the land, too, must be marked.

All land is contiguous to other land (including islands, as can be seen if one considers the fact that
submerged land is ownable). This means that the most important things to mark are the
boundaries. This may be done by fencing, by a series of signposts at intervals, or in any other way
which leaves a clearly visible evidence of possession on the land itself. Obviously, the better job
of marking one does, the less likely one is to have trouble from someone with a conflicting claim.

Conflicting claims would be settled by bringing them before private arbitration agencies for
binding arbitration. Since neither disputant would be able to sell the land, have much chance of
renting it or even any security of possession so long as his claim was in dispute, both parties
would be impelled to bring the matter to arbitration. The free-market arbitration agency, if it
wanted to stay in business, would have to make as fair a decision as it possibly could, Both
disputants would then be impelled to abide by the arbiter’s decision, since a man who contracted
to abide by the results of arbitration and then broke his contract would be announcing him- sell as
unreliable, and no one would want to risk having any business dealings with him.20

20
The nature and function of arbitration agencies, as well as the market forces which would impel the disputants to
bring their claims to arbitration and to abide by the decision of the arbiters, will be discussed fully in the next chapter.

The fact that conflicting claims could arise and that they would have to be settled before impartial
arbiters provides the answer to the question, “How well does a piece of property have to be
marked to establish a man’s claim to it?” Obviously, if the new owner wants his property to be
secure, it has to be bounded (in the case of land) and marked clearly enough to establish his claim
in the face of all possible conflicting claims. Suppose an eager prospector claimed a square mile
of land in hilly, heavily wooded territory and marked it by erecting a six-foot tall signpost at each
of the four corners. Six months later, a student who wanted the privacy of a quiet re- treat came
and fenced in two acres, part of which lay within the prospector’s claim. When the conflict was
discovered and the matter brought to arbitration, the arbiters would very likely decide in favor of
the student, even though his claim had been made later in time. It could reasonably be held that
the student should not have been expected to know of the existence of the four signposts hidden
in the woods and that, therefore, the prospector’s “bounding” of his land had been insufficient to
clearly establish his claim. Similarly, a man could land on a new planet, fence in a square mile,
and then claim that, since the planet was a closed sphere, he owned all the territory outside the
fence (that is, all the planet except the square mile enclosed by his fence). But he would find that
no arbitration agency would decide in favor of his ridiculous claim if it were contested by a group
of colonists who later landed on the other side of the planet (who could be expected to know
nothing of the claim).

Different kinds of claims would have to be established by different kinds and degrees of
bounding and marking, and each claim would be an individual case to be decided on its own
merits. But the fact that all conflicting claims could be submitted to arbitration and that the
integrity of the arbitration would be guaranteed by competition in a free market would insure the
maximum justice humanly possible.

In a laissez-faire society, there would be no government to pre-empt the field of registering deeds.
Businesses in a free market would take over this function, since it is a salable service. These
companies would keep records of titles and would probably offer the additional service of title
insurance (a service already offered by specialized insurance companies today). Title insurance
protects the insured against loss resulting from a defect in the title of the property he buys (as, for
example, if the long-lost niece of a deceased former owner shows up and claims the property by
inheritance). It would substantially reduce problems of conflicting claims, since title insurance
companies would be unlikely to insure a title without first checking to make sure there was no
conflict. In a free society, title insurance might also protect the insured against loss of his
property due to aggression or fraud committed against him. In this case, the aggressor would be
dealt with in the same manner as would any other aggressor (a subject which will be covered in
Chapters 9 and 10).

There would probably be a plurality of companies competing in the field of title registration and
insurance, so they would no doubt find it in their interest to maintain a computerized central
listing of titles in the same way that other agencies now keep extensive files on the credit rating
of consumers. In this way, they would be in the same relationship of cooperative competition as
are present-day insurance companies.

Because they would have competition, title insurance companies would have to be extremely
careful to maintain a good business reputation. No honest person would jeopardize the value of
his property by registering it with a company which had a reputation for dishonest dealing. If he
made use of a shady company, other individuals and firms would have doubts about the validity
of his tide and would be reluctant to buy his property or to loan money on it. In a totally free
market, companies would usually act honestly because it would be in their interest to do so. (The
question of dishonest companies will be dealt with in Chapter 11.)

An old and much respected theory holds that for a man to come into possession of a previously
un-owned value it is necessary for him to “mix his labor with the land” in order to make it his
own.21 But this theory runs into difficulties when one attempts to explain what is meant by
“mixing labor with land.” Just how much labor is required, and of what sort? If a man digs a large
hole in his land and then fills it up again, can he he said to have mixed his labor with the land? Or
is it necessary to effect a somewhat permanent change in the land? If so, how permanent? Would
planting some tulip bulbs in a clearing do it? Perhaps long-living redwood trees would be more
acceptable? Or is it necessary to effect some improvement in the economic value of the land? If
so, how much and how soon? Would planting a small garden in the middle of a 500-acre plot be
sufficient, or must the whole acreage be tilled (or put to some other economic use)? Would a man
lose title to his land if he had to wait ten months for a railroad line to be built before he could
improve the land? What if he had to wait ten years? And what of the naturalist who wanted to
keep his land exactly as it was in its wild state in order to study its ecology?

21 In this quote, “land” is used not in the common sense of real estate but in the economic sense of any nature-given
original factor -of production.

Of course, making visible improvements in the land would certainly help to establish a man’s title
more firmly by offering further proofs of ownership. It is also true that very little of the potential
economic value of most land could be actually realized without some improvements being made
(even a scenic wilderness area must have roads or helicopter landing fields or something to make
it accessible to tourists before any profits can be made from it). But mixing one’s labor with the
land is too ill-defined a concept and too arbitrary a requirement to serve as a criterion of
ownership.

It has been objected that simply having to mark the boundaries of newly claimed property would
permit a few ambitious people to acquire far more property than they could use. It is difficult to
understand, however, what would be so objectionable about this situation. If the first comers were
ambitious, quick and intelligent enough to acquire the property before anyone else, why should
they be prevented from reaping the rewards of these virtues in order to hold the land open for
someone else? And if a large chunk of land is acquired by a man who is too stupid or lazy to
make a productive use of it, other men, operating within the framework of the free market, will
eventually be able to bid it away from him and put it to work producing wealth. As long as the
land is privately owned and the market is free, the land will come to be allocated to its most
productive uses and its prices will be bid down to market level.

Intangible property may also be marked in various ways. For example, a man may claim a certain
radio wave length by broadcasting his claim to ownership on that frequency (provided, of course,
that no one else has beaten him to it). Ideas in the form of inventions could also be claimed by
registering all details of the invention in a privately owned “data bank.” Of course, the more
specific an inventor was about the details of his invention, the thought processes he followed
while working on it, and the ideas on which he built, the more firmly established his claim would
be and the less would be the likelihood of someone else squeezing him out with a fake claim
based on stolen data. The inventor, having registered his invention to establish his ownership of
the idea(s), could then buy insurance (from either the data bank firm or an independent insurance
company) against the theft and unauthorized commercial use of his invention by any other
person. The insurance company would guarantee to stop the unauthorized commercial use of the
invention and to fully compensate the inventor for any losses so incurred. Such insurance policies
could be bought to cover varying periods of time, with the longer-term policies more expensive
than the shorter-term ones. Policies covering an indefinitely long time-period (“from now on”)
probably wouldn’t be economically feasible, but there might well be clauses allowing the
inventor to re-insure his idea at the end of the life of his policy.

One of the most far-reaching differences in a free-market society would spring from the fact that
anything which had the potential for being property would be owned. In our present society, there
is an enormous amount of potential property which does not, in actual fact, belong to anyone.
Such un-owned potential property falls into two categories - 1 - things that remain un-owned
because the legal system does not recognize the possibility of their becoming property, and 2 -
”public property.”

Today’s legal system, having been developed in pre-scientific times, recognizes that a man can
own a piece of land beside an ocean but does not recognize that he can just as well own a piece of
land under that ocean. And yet, as companies drilling for off-shore oil have proved, there is no
reason why a piece of land cannot be owned and used simply because it is covered by water. In a
similar manner, lake bottoms, and, in fact, the lake itself, can be owned by one or by several
individuals. Rivers are also potential property, as is the air space above and around your home,
and, further up, the “corridors” of air space which airliners use in flying theft regular routes.

Granted, new rules would have to be figured out governing the rights of, say, the owner of a
section of river in relation to owners of portions of that same river upstream and downstream
from him, but if a man can own something as nonmaterial as the copyright to a song, surely he
can own a river! The problem is not that such things are by their nature un-ownable but that the
legal system, trapped in its own archaic rigidity, prohibits them from being owned. In a free
society, a man who could mine a section of ocean bottom could claim and use it without having
to wait for a legislature to pass a law saying that it could be owned. This would remove a
tremendous barrier to progress and to the production of wealth.

The other type of un-owned potential property is what is usually known as “public property.” The
concept of “public property” has come down from the days when the king or local feudal noble
owned the land and all those under his jurisdiction were merely allowed to hold pieces of it “in
fief.” Gradually, as feudalism and monarchy gave way to democracy, such royal property came to
be thought of as belonging to the public as a whole and as being administered for the public by
the government.

Ownership necessarily involves the right of use and disposal as the owner sees fit, barring
coercion against others. Since the king was an individual, he could actually exercise control over
royal properties, using them and disposing of them according to his desires. But “the public” is
not an individual - it is merely the aggregate of all the individuals who happen to be living in a
certain area at a certain time. As such, “the public” has no mind or will or desires of its own. It
cannot make decisions, and so it cannot decide how to use or dispose of a piece of property.
“Public property” is, in fact, a fiction.

Nor can the government morally claim to own “public property.” Government does not produce
anything. Whatever it has, it has as a result of expropriation. It is no more correct to call the
expropriated wealth in government’s possession its property than it is to say that a thief rightfully
owns the loot he has stolen. But if “public property” doesn’t belong to either the public or to the
government, it doesn’t actually belong to anyone, and it is in the same category as any other un-
owned values. Among the items in this classification are streets and highways, schools, libraries,
all government buildings, and the millions of acres of government-owned lands which comprise
the major portion of many Western States. 22

22
The land area of the State of Nevada was 86.4% “owned” by the Federal Government (U. S. A.) in June, 1968,
according to the Statistical Abstract of the United States of 1969.

In a laissez-faire society, all property formerly “belonging” to government would come to be

owned by private individuals and would be put to productive use. The economic boom this would
be can be glimpsed from the following illustration: recently, several companies have sought to
develop low-cost and plentiful power sources by tapping the energy of hot, underground water
(the same thing that causes geysers and hot springs). There are several promising sources of this
geothermal power, but most are on government land and the entrepreneurs were stopped because
there are no laws permitting them to carry on such activities on “public property”!

As the laissez-faire society matured, it would eventually reach a state in which all potential
property was actually owned. In the process of claiming un-owned potential property and
government “property,” the present poor and dispossessed elements of our population would have
plenty of opportunities to “homestead” on rural lands and in urban buildings formerly “owned”
by various branches of government. This would give them a proprietary interest in something for
the first time and teach them, as nothing else can, to respect the products of their own labor and of
the labor of others - which means, to respect themselves and other men.

This situation of total property ownership would automatically solve many of the problems
plaguing our present society. For instance, shiftless elements of the population, who had acquired
no property and were not willing to work in order to earn enough money to rent living quarters,
would be literally pushed to the geographic edge of the society. One can’t sleep on park benches
if the private owner of the park doesn’t permit bums on his property; one can’t search the back
alleys for garbage if he is trespassing on alleys belonging to a corporation; one can’t even be a
beachcomber if all the beaches are owned. With no public property and no public dole, such
undesirables would quickly “shape up or ship out.”

Total property ownership would also lower crime rates in the same manner. A private corporation
which owned streets would make a point of keeping its streets free of drunks, hoodlums, and any
other such annoying menaces, hiring private guards to do so if necessary. It might even advertise,
‘Thru-Way Corporation’s streets are guaranteed safe at any hour of the day or night. Women may
walk alone with perfect confidence on our thoroughfares.” A criminal, forbidden to use any city
street because all of the street corporations knew of his bad reputation, would have a hard time
even getting anywhere to commit a crime. On the other hand, the private street companies would
have no interest in regulating the dress, “morals,” habits, or life-style of the people who used their
streets. For instance, they wouldn’t want to drive away customers by arresting or badgering
hippies, girls in see-thru blouses or topless bathing suits or any other non-aggressive deviation
from the value-standards of the majority. All they would ask is that each customer pay his dime-
a- day and refrain from initiating force, obstructing traffic, and driving away other customers.
Other than this, his life-style and moral code would be of no interest to them; they would treat
him courteously and solicit his business.

Another aspect of total property ownership is that it would make immigration laws unnecessary
and meaningless. If all potential property were actually owned, any “immigrant” would have to
have enough money to support himself, or a marketable skill so he could go right to work, or
someone who would help him out until he got started. He couldn’t just walk into the free area and
wander around - he’d be trespassing. Those who were skilled and ambitious would come; those
who were lazy wouldn’t dare to. This is much more just and effective than the present “national
quota” system.

The pollution problem would also be well on its way to being solved. If I own the air space
around my home, you obviously don’t have the right to pour pollutants into that air space any
more than you have a right to throw garbage onto my lawn. Similarly, you have no right to dump
sewage into my river unless we have a contract specifying that you may rent the use of my river
for such purposes (and that contract would have to include the consent of all those individuals
who owned sections of the river downstream from me, too). Since pollution is already a problem
in many areas, it would have to be understood that anyone buying a piece of property, by his act
of buying it, consented to the average pollution level at the time of the sale but had the right to
see that others kept it free of any further pollution. Initially, this would mean that established
companies could not increase the level of their pollution, nor could new companies begin
polluting. But as pollution control methods and devices became common and relatively
inexpensive, the established companies would seek to reduce and even to eliminate their pollution
in order to keep from losing their employees to new industries operating in pollution-free areas.
Pollution problems could not continue to exist in a competitive, laissez-faire, free-market
environment - an environment which governments destroy.

Total property ownership, contrary to the current popular belief, is the only feasible way of
conserving natural resources. The conservation of resources is a subject badly befogged by
misconceptions and unclear thinking. For example, it is contended that the market wastes scarce
resources, thus robbing future generations of their use. But by what criterion does the critic
decide which employments of resources are permissible and which are merely waste? If it is
wrong to use up resources to produce some things consumers value, how can it be right to use
them to produce any such things? And if natural resources must be saved for future generations,
how can they ever be used at all, since each future generation still has a theoretically infinite
number of future generations coming after it, for which it must save? The only answer to the
problem of scarce resources is to leave it up to free men trading in a free market. This will insure
that resources are used in the most value-productive way possible and that they are used at the
rate which the consumers desire. Besides this, the technology stimulated by a free market
continually uses natural resources to discover new natural resources. This means more than just
the discovery of new deposits of previously valuable resources, such as vast new oilfields. It also
includes the discovery of how to use previously valueless resources, often to replace a scarcer
resource in some area of use, thereby conserving it. An example of this is the many new uses of
glass and plastic, some of which can replace steel and other metals derived from scarce resources.

There is a curious misconception that to prevent the wholesale waste of natural resources it is
necessary to remove control of them from the hands of “greedy capitalists” and give it to “public-
spirited government officials.” The ridiculous fallacy of this position becomes obvious when one
considers the nature of the control exercised by a government official.
To the extent that he has control over a natural resource (or anything else), a government official
has a quasi-ownership of it. But this quasi-ownership ends with the end of his term in office. If he
is to reap any advantage from it, he must make hay while his political sun shines. Therefore,
government officials will tend to hurriedly squeeze every advantage from anything they control,
depleting it as rapidly as possible (or as much as they can get away with). Private owners,
because they can hold their property as long as they please or sell it at any time for its market
price, are usually very careful to conserve both its present and future value. Obviously, the best
possible person to conserve scarce resources is the owner of those resources who has a selfish
interest in protecting his investment. The worst guardian of scarce resources is a government
official - he has no stake in protecting them but is likely to have a large interest in looting them.

Among the resources which would be conserved best under a system of total property ownership
are wild-life and scenic recreation areas. Consumer demand for parks, campgrounds, wild-life
sanctuaries, hunting grounds, natural scenery, etc., is evident from a study of recreational
patterns. In a free-market society, just as much land would be set aside for these purposes as
consumer demand warranted.
A system of total property ownership would be based on the moral requirement of man’s life as a
rational being,23 as man’s survival is sub-human to the extent that the right to own property
(beginning with self-ownership) is not understood and respected. (As a matter of actual fact, life
itself would not be possible if there were no right to own property.) A system of total property
ownership in a free society - i.e., in a society in which the right to own property is generally
understood and respected - would produce a peaceful environment in which justice was the rule,
not the exception (as it is today). An environment of justice is based on the moral principle of
“value for value” - that no man may justifiably expect to receive values from others without
giving values in exchange (and this in- eludes spiritual values, such as love and admiration, as
well as economic values). Some people express shock and even horror at the thought of having to
make some sort of payment for every value they receive. They seem to prefer, for example, to pay
for their use of roads via taxation (even though this method is demonstrably more expensive) in
order to be able to pretend to themselves that they are actually getting the service free, Upon
examination, such people usually prove to be suffering from a deficiency of self-esteem - lacking
a sense of personal efficacy and worth, they feel a sneaky, un-admitted doubt about their ability
to survive in a world where they will never be provided with the unearned. But their
psychological problems do not alter the nature of reality. It still remains a fact that the only moral
way for men to deal with one another is by giving value for value, and that the man who seeks the
unearned is a parasite. The man of self-esteem realizes this and takes pride in his ability to pay for
the values he receives.

23
That man is a rational being means, simply, that he is capable of rational thought and behavior; it does not mean that
be will automatically think and behave rationally since, for this, be must make the choice to do so. Since man’s
consciousness is volitional, he is free to 1 - not choose and to 2 - choose not to think, as well as being free to choose to
think. To survive, man must think; the choice to do so must be made by each person, individually and independently -
by himself, alone. The choice to think or not can only be made by individuals - society does not have a brain to think
with.

From an examination of the areas covered in this and the preceding chapter, it is clear that a non-
governmental, free-market society would, by its very nature, foster responsibility, honesty, and
productivity in the individuals who lived in it. This would cause a substantial improvement in the
moral tone of the culture as a whole and a sharp drop in the crime rate. Nevertheless, since human
beings are creatures with a volitional consciousness and are thus free to act irrationally if they so
choose, there can be no such thing as a Utopia. A free-market society would still have to have
means for the arbitration of disputes, the protection and defense of life and property, and the
rectification of injustice. In the absence of government, institutions to provide these services
would arise naturally out of the market, The next few chapters will examine these institutions and
their functioning in a free-market environment.

7
Arbitration of Disputes
Whenever men have dealings with one another, there is always a chance for disagreements and
disputes to arise. Even when there has been no initiation of force, two persons can disagree over
such matters as the terms and fulfillment of a contract or the true title to a piece of property.
Whether one party to the dispute is trying to cheat the other(s) or whether both (or all) are
completely honest and sincere in their contentions, the dispute may reach a point where it can’t be
settled without binding arbitration by a disinterested arbiter. If no mechanism for such arbitration
existed within a society, disputes could only be resolved by violence in every situation in which
at least one person abandoned reason - man’s only satisfactory means of communication. Then,
that society would disintegrate into strife, suspicion, and social and economic breakdown, as
human relationships became too dangerous to tolerate on any but the most limited scale.

Advocates of “limited government” contend that government is necessary to maintain social

order because disputes could never be satisfactorily settled without a single, final court of appeal
far everyone and without the force of legal rules to compel disputants to submit to that court and
to abide by its decision(s). They also seem to feel that government officials and judges are
somehow more impartial than other men because they are set apart from ordinary market
relations and, therefore, have no vested interests to interfere with their judgments.

It is interesting to note that the advocates of government see initiated force (the legal force of
government) as the only solution to social disputes. According to them, if everyone in society
were not forced to use the same court system and particularly the same final court of appeal,
disputes would be insoluble. Apparently it doesn’t occur to them that disputing parties are
capable of freely choosing their own arbiters, including the final arbiter, and that this final arbiter
wouldn’t need to be the same agency for all disputes which occur in the society. They have not
realized that disputants would, in fact, be far better off if they could choose among competing
arbitration agencies so that they could reap the benefits of competition and specialization. It
should be obvious that a court system which has a monopoly guaranteed by the force of statutory
law will not give as good quality service as will free-market arbitration agencies which must
compete for their customers, Also, a multiplicity of agencies facilitates specialization, so that
people with a dispute in some specialized field can hire arbitration by experts in that field ...

instead of being compelled to submit to the judgment of men who have little or no background in
the matter.

But, the government advocates argue, there must be an agency of legal force to compel disputants
(particularly those who are negligent or dishonest) to submit to arbitration and abide by the
decision of the arbiter, or the whole arbitration process would be futile. It is true that the whole
process would be meaningless if one or both disputants could avoid arbitration or ignore the
decision of the arbiter. But it doesn’t follow that an institution of initiated force is necessary to
compel the disputants to treat the arbitration as binding. The principle of rational self-interest, on
which the whole free-market system is built, would accomplish this end quite effectively. Men
who contract to abide by the decision of a neutral arbiter and then break that contract are
obviously unreliable and too risky to do business with. Honest men, acting in their rational sell-
interest, would check the records of those they did business with and would avoid having any
dealings with such individuals. This kind of informal business boycott would be extremely
effective in a government-less society where a man could acquire nothing except what he could
produce himself or get in trade with others.

Even in cases where the pressure of business ostracism was insufficient to insure compliance with
arbiters’ decisions, it doesn’t follow that government would be necessary to bring the contract-
breaker to justice. As will be shown in Chapters 9 and 10, free men, acting in a free market, are
quite capable of dealing justly with those few who harm their fellowmen by any form of coercion,
including contract-breaking. It’s hardly necessary to institutionalize aggressive violence in order
to deal with aggressive violence!

Perhaps the least tenable argument for government arbitration of disputes is the one which holds
that governmental judges are more impartial because they operate outside the market and so have
no vested interests. In the first place, it’s impossible for anyone except a self-sufficient hermit to
operate completely outside the market. The market is simply a system of trade, and even Federal
judges trade with other men in order to improve their standard of living (if they didn’t, we would
have to pay them in consumable goods instead of money). In the second place, owing political
allegiance to government is certainly no guarantee of impartiality! A governmental judge is
always impelled to be partial . . . in favor of the government, from whom he gets his pay and his
power! On the other hand, an arbiter who sells his services in a free market knows that he must be
as scrupulously honest, fair, and impartial as possible or no pair of disputants will buy his
services to arbitrate their dispute. A free-market arbiter depends for his livelihood on his skill and
fairness at settling disputes. A governmental judge depends on political pull.

Excluding cases of initiated force and fraud (which will be dealt with in later chapters), there are
two main categories of disputes between men - disputes which arise out of a contractual situation
between the disputing parties (as disagreements over the meaning and application of the contract,
or allegations of willful or negligent breach of contract) and disputes in which there was no
contractual relationship between the disputants. Because of the importance of contractual
relationships in a laissez-faire society, this type of dispute will be discussed first.

A free society, and particularly an industrialized one, is a contractual society. Contracts are such a
basic part of all business dealings that even the smallest business would soon collapse if the
integrity of its contracts were not protected. (Not only million dollar deals between industrial
giants, but your job, the apartment you lease, and the car you buy on time represent contractual
situations.) This creates a large market for the service of contract- protection, a market which is at
present pre-empted by government. In a laissez-faire society, this market would be best served by
professional arbitration agencies in conjunction with insurance companies.

In a free-market society, individuals or firms which had a contractual dispute which they found
themselves unable to resolve would find it in their interest to take their problem before an
arbitration agency for binding arbitration. In order to eliminate possible disputes over which
arbitration agency to patronize, the contracting parties would usually designate an agency at the
time the contract was written. This agency would judge in any dispute between them, and they
would bind themselves contractually to abide by its decisions. If the disputing parties had lacked
the foresight to choose an arbitration agency at the time their original contract was made, they
would still be able to hire one when the dispute arose, provided they could agree on which agency
to patronize. Obviously, any arbitration agency would insist that all parties involved consent to its
arbitration so that none of them would have a basis for bringing any action against it later if
dissatisfied with its decision(s).

It would be more economical and in most cases quite sufficient to have only one arbitration
agency to hear the case. But if the parties felt that a further appeal might be necessary and were
willing to risk the extra expense, they could provide for a succession of two or even more
arbitration agencies. The names of these agencies would be written into the contract, in order
from the “first court of appeal” to the “last court of appeal.” It would be neither necessary nor
desirable to have one single, final court of appeal for every person in the society, as we have
today in the United States Supreme Court. Such forced uniformity always promotes injustice.
Since the arbitration agencies for any particular contract would be designated in that contract,
every contracting party would choose his own arbitration agency or agencies (including the one
to whom final appeal was to be made if more than one was wanted). Those who needed
arbitration would thus be able to reap the benefits of specialization and competition among the
various arbitration agencies. And, since companies must compete on the basis of lower prices
and/or better service, competition among arbitration agencies would lead to scrupulously honest
decisions reached at the greatest speed and lowest cost which were feasible (quite a contrast to the
traditional governmental court system, where justice is often a matter of clever lawyers and lucky
accident).

Arbitration agencies would employ professional arbiters, instead of using citizen-jurors as

governmental courts do. A board of professional arbiters would have great advantages over the
present citizen-jury system of “ignorance times twelve.” Professional arbiters would be highly
trained specialists who made a career of hearing disputes and settling them justly. They would be
educated for their profession as rigorously as engineers or doctors, probably taking their basic
training in such fields as logic, ethics, and psychology, and further specialization in any field
likely to come under dispute. While professional arbiters would still make errors, they would
make far fewer than do the amateur jurors and political judges of today. Not only would
professional arbiters be far better qualified to hear, analyze, and evaluate evidence for the purpose
of coming to an objective judgment than are our present citizen-jurors, they would also be much
more difficult to bribe. A professional arbiter who tried to “throw” a case would be easily
detected by his trained and experienced colleagues, and few men would be so foolish as to
jeopardize a remunerative and highly respected career, even for a very large sum of money.

Justice, after all, is an economic good, just as are education and medical care. The ability to
dispense justice depends on knowledge and on skill in assessing people and situations. This
knowledge and skill must be acquired, first as medical knowledge must be acquired before
medical advice can be dispensed. Some people are willing to expend the effort to get this
knowledge and skill so that they can sell their services as professional arbiters. Other people need
their services and are willing to buy them. Justice, like any other good or service, has economic
value.

The reason for the superiority of professional arbiters over citizen-juries can be readily seen by an
examination of the moral basis for each system. The citizen-juror’s “service” is based on the
concept of performing a duty to the state or to his fellow citizens - another variation of the
irrational and immoral belief that the individual belongs to the collective. The professional
arbiter, on the other hand, is a trader, selling his specialized services on the free market and
profiting to the degree of his excellence.

Because arbitration agencies would be doing business in a free market, they would have to attract
customers in order to make profits. This means that they would find it in their interest to treat all
disputants who came to them with every courtesy and consideration possible. Instead of taking
the authoritarian stand of a governmental judge and handing down arbitrary rulings with little or
no regard for the interests and feelings of the disputants, they would make every effort to find a
solution which was, as nearly as possible, satisfactory to both of the conflicting parties. If a
disputant disagreed with the arbiters’ proposed solution, they would first attempt to sell him on it
by reasoning with him (which means that it would have to be a reasonable solution to begin
with). Only as a last resort would they invoke the clause in the contract between disputants and
arbitration agency which made the arbitration binding. Arbitration agencies, because they would
obtain their customers by excellence of service rather than by coercion, would have to act like
arbiters helping to settle a dispute ... rather than like judges handing down a sentence.

Insurance companies, looking for new fields of business, would offer contract insurance, and
most individuals and firms would probably take advantage of this service. (In fact, insuring the
monetary value of contracts is common practice today. Nearly all installment contracts carry
insurance against the debtor’s failure to pay because of death or some default.) This insurance
would be sold to the contracting parties at the time the contract was ratified. Before an insurance
company would indemnify its insured for loss in a case of broken contract, the matter would have
to be submitted to arbitration as provided in the contract. For this reason there would be a close
link between the business of contract insurance and the business of arbitration. Some arbitration
agencies would probably develop as auxiliary functions of insurance companies, while others
would arise as independent firms.

Suppose the inventor of a Handy-Dandy Kitchen Gadget entered into a contract with a small-time
factory owner concerning the manufacture of the Kitchen Gadget, and they had the contract
insured. Suppose that the factory owner then changed the design of the Kitchen Gadget and began
making and selling it as his own invention, in order to avoid paying royalties to the inventor.
After appealing to the manufacturer unsuccessfully, the inventor would take his complaint to the
company insuring the contract. The insurance company would then arrange a hearing before the
arbitration agency named in the contract as “first court of appeal.” Here the dispute would be
submitted to one or more professional arbiters for a judgment to resolve it. (The number and
general composition of the arbiters, if more than one arbiter were called for, would have been
specified in the original contract.)

If the decision reached by the professional arbiters was satisfactory to both the Kitchen Gadget
inventor and the manufacturer, their ruling would be observed and the disputed matter would be
settled. If the ruling were not satisfactory to either the inventor or the manufacturer and the
dissatisfied party felt he had a chance of obtaining a reversal, he could appeal the decision to the
next arbitration agency named in the contract. This agency would consent to hear the case if it felt
the dissatisfied party had presented enough evidence to warrant a possible reversal. . . And so on,
up through the arbitration agency named as “final court of appeal.”

When a contract is willfully or carelessly broken, the principle of justice involved is that the party
who broke the contract owes all other contracted parties reparations in the amount of whatever his
breach of contract has cost them (such amount to be determined by the arbitration agency
previously specified by the parties to the contract) plus the cost of the arbitration proceedings.

If the arbiters of the final arbitration agency to whom appeal was made decided that the factory
owner had, in fact, breached his contract with the inventor, they would set the reparations
payment as close as humanly possible to the amount which the facts warranted
- i.e., they would attempt to be as objective as possible. If the manufacturer were either unable or
unwilling to make the payment, or to make it immediately, the insurance company would
indemnify the inventor for the amount in question (within the terms of the policy). With the
inventor paid according to the terms of the insurance policy, the insurance company would then
have the right of subrogation - that is, the insurance company would have the right to collect the
reparations in the inventor’s place and the manufacturer would now owe the insurance company
rather than the inventor (except for any valid claim for damages the inventor might have for an
amount in excess of what the insurance company had paid him).

If the inventor didn’t have insurance on his contract with the manufacturer, he would take much
the same steps as those described above, with two exceptions. First, he, himself, would have to
make all arrangements for a hearing before the arbitration agency and for the collection of the
debt, and he would have to stand the cost of these services until the manufacturer paid him back.
Second, he would not be immediately indemnified for his loss but would have to wait until the
manufacturer could pay him, which might be a matter of months or even years if, for example,
the manufacturer had gone broke because of his shady dealings and had to make payment on an
installment basis.
Because those who were guilty of breaches of contract would pay the major costs occasioned by
their negligent or improper behavior, the insurance companies would not have to absorb large
losses on contract insurance claims, as they do on fire or accident claims. With only minimal
losses to spread among their policyholders, insurance companies could afford to charge very low
premiums for contract insurance. Low cost, plus the great convenience afforded by contract
insurance, would make such insurance standard for almost all important contracts.

Before examining what steps an insurance company (or the original offended party if the contract
were uninsured) could morally and practically take in the collection of a debt, it is necessary to
examine the concept of “debt” itself. A debt is a value owed by one individual to another
individual, with consequent obligation to make payment. A condition of debt arises when:

1 - an individual comes into possession of a value which rightfully belongs to another individual,
either by voluntary agreement, as in a purchase made on credit, or by theft or fraud;

2 - an individual destroys a value which rightfully belongs to another individual.

A debt is the result of an action willingly or negligently taken by the debtor. That is, even though
he may not have purposed to assume a debt, he has willingly taken some action or failed to take
some action which he should have taken (as in the case of what is now termed “criminal
negligence”) which has directly resulted in the loss of some value belonging to another
individual. A debt does not arise from an unforeseeable or unpreventable circumstance, such as
an accident or natural disaster. (In such cases, insurance companies would act just as they do
now, indemnifying the insured and spreading the loss among all their policyholders.)

When a debt is owed, the debtor is in either actual or potential possession of a value (or of values)
which is the rightful property of the creditor. That is, the debtor is in possession of either:

1 - the original value-item(s), e.g., a refrigerator which he bought on time and for which he has
defaulted on the payments, or

2 - an amount of money equal in value to the original item if he has disposed of or destroyed that
item, or

3 - the ability to earn the money with which to make payment (or at least partial payment) for the
item.

Since the debtor is in actual or potential possession of a value(s) which rightfully belongs to the
creditor, the creditor has the right to repossess his property because it is his property. And he has
the right to repossess it by any means that will not take or destroy values which are the rightful
property of the debtor. If the creditor, in the process of collecting his property, does deprive the
debtor of values which rightfully belong to the debtor, the creditor may well find that he has
reversed their roles, that he is now the one in debt.

To return to the insurance company and its collection of the debt owed by the manufacturer in the
Handy-Dandy Kitchen Gadget case, the insurance company would have the right to repossess the
amount of the debt, which was now its property due to the right of subrogation. It could do so by
making arrangements with the manufacturer for repayment, either immediately or in installments,
as he was able to afford. If, however, the manufacturer refused to make payment, the insurance
company would have the right to make whatever arrangements it could with other individuals or
companies who had financial dealings with him, in order to expedite collection of the debt. For
example, the insurance company might arrange with the manufacturer’s bank to attach an
appropriate amount of his bank account, provided the bank was willing to make such an
arrangement. In the case of a man who was employed, the insurance company might arrange with
his employer to deduct payment(s) for the debt from the man’s wages, if the employer was
willing. Practically speaking, most banks would no doubt have, a policy of cooperating with
insurance companies in such matters, since a policy of protecting bank accounts from just claims
would tend to attract customers who were undependable, thus increasing the cost of banking and
forcing the bank to raise its charges. The same would be true of employers, only more so. Most
employers would hesitate to attract undependable labor by inserting a clause in their employment
contracts guaranteeing protection from just claims against them.

Such drastic means of collection as these would rarely be necessary, however. In the great
majority of cases, the debtor would make payment without direct, retaliatory action on the part of
the insurance company, because if he failed to do so he would be inviting business ostracism.
Obviously, a man who refused to pay his debts is a poor business risk, and insurance companies
would undoubtedly cooperate in keeping central files listing all poor risks, just as credit
associations do today. So if the manufacturer refused to pay his debts, he would find all insurance
companies he wanted to deal with either rating his premiums up or refusing to do business with
him altogether. In a free society, whose members depended on the insurance industry for
protection of their values from all types of threat (fire, accident, aggressive violence, etc.) and
where, furthermore, insurance companies were the force guaranteeing the integrity of contracts,
how well could a man live if he couldn’t get insurance (or couldn’t get it at a rate he could
afford)? If the insurance companies refused to do business with him, he would be unable to buy
any protection for his values, nor would he be able to enter into any meaningful contract - he
couldn’t even buy a car on time. Furthermore, other businesses would find it in their interest to
check the information in the insurance companies’ central files, just as they check credit ratings
today, and so the manufacturer’s bad reputation would spread. If his default were serious enough,
no one would want to risk doing business with him. He would be driven out of business, and then
he might even find it difficult to get and keep a good job or to rent a decent apartment. Even the
poorest and most irresponsible man would think twice before putting himself in such a position.
Even the richest and most powerful man would find it destructive of his interests to so cut himself
off from all business dealings. In a free society, men would soon discover that honesty with
others is a selfish, moral necessity!

If, in the face of all this, the manufacturer still remained adamant in his refusal to pay the debt,
the insurance company would have the right to treat him in the same manner as a man would be
treated who had taken another man’s property by aggressive force. That is, the insurance
company would have the right to use retaliatory force against the manufacturer, since he would be
in wrongful possession of property which actually belonged to the insurance company. But, since
this problem falls into the area of aggression and the rectification of injustices, which is covered
in subsequent chapters, the manufacturer’s case will be dropped at this point.

The moral principle underlying the insurance company’s actions to collect from the manufacturer
is this: When a man is willfully or negligently responsible for the loss of value(s) belonging to
another individual, no one should gain from the default or aggression, but the party responsible
for the loss should bear the major burden of the loss, as it was the result of his own dishonest and
irrational behavior.

Neither the inventor nor the insurance company should profit from the manufacturer’s dishonesty,
as this would be to encourage dishonesty. And neither does profit. While the inventor is not
forced to bear the financial burden of the manufacturer’s default, he does suffer some
inconvenience and probably also the frustration of some of his plans. The insurance company
loses to some degree because it indemnifies the inventor immediately but must usually wait some
time and perhaps even go to the expense of exerting some force to collect from the manufacturer.
This principle is the same one which causes present day insurance companies to write deductible
clauses into their coverage of automobiles, in order that none of the parties involved will profit
from irrationality and carelessness and so be tempted to make a practice of such actions.

Neither the inventor nor the insurance company was responsible for the manufacturer’s default,
however, so neither the inventor nor the insurance company should bear the burden of paying for
it. Especially should the insurance company not be left holding the bag if it is at all possible to
collect from the guilty party, as the insurance company will simply be forced to pass the loss on
to its other policyholders who are innocent of the whole affair. The manufacturer is guilty of the
default, and the manufacturer should pay for it - in accordance with the moral law that each man
should reap the reward or suffer the consequence of his own actions. Actions do have
consequences.

It will be argued by statists that the free-market system of contract insurance would leave helpless
individuals at the mercy of the predatory greed of huge and unscrupulous insurance companies.
Such an argument, however, only demonstrates the statists’ ignorance of the functioning of the
free market. Insurance companies would be forced to be scrupulously just in all their dealings by
the same forces which keep all businesses in a free market honest - competition and the value of a
good reputation. Any insurance company which failed to defend the just interests of its
policyholders would soon lose those policyholders to other, more reputable firms. And any
insurance company which defended the interests of its policyholders at the expense of doing
injustice to non-policyholders with whom they had dealings would soon lose its policyholders.
No one would want to risk dealing with the policyholders of such a company as long as they held
that brand of insurance, thus forcing them to change companies. Business ostracism would work
as well against dishonest insurance companies as it would against a dishonest individual, and
plentiful competition, plus the alertness of news media looking for a scoop on business news,
would keep shady dealers well weeded out.

Disputes which did not involve a contractual situation (but which didn’t arise out of the initiation
of force or fraud) would be much rarer than contractual disputes in a laissez-faire society.
Examples of such disputes would be conflict over a land boundary or the refusal of a patient to
pay for emergency medical care administered while he was unconscious - on the grounds that he
hadn’t ordered that particular kind of care. Non-contractual disputes would usually not involve
insurance, but they would be submitted to arbitration in much the same manner as would
contractual disputes.

In a non-contractual dispute, as in a contractual one, both parties would have to agree on the
arbitration agency they wanted to employ, and they would have to bind themselves, contractually
with the agency, to abide by its decision. If the disputants couldn’t settle the matter themselves, it
is unlikely that either one would refuse to submit to arbitration because of the powerful market
forces impelling toward dispute-settlement. Disputed goods, such as the land in the boundary
conflict, are less useful to their owners because of the lack of clear title (for example, the land
couldn’t be sold until the dispute was settled). But, more important than the reduced usefulness of
disputed goods, the reputation of a man who refused arbitration without good reasons would
suffer. People would hesitate to risk doing business with him for fear that they, too, would be
involved in a protracted dispute.
As in the case of contractual disputes, the threat of business ostracism would usually be enough
pressure to get the dispute submitted to arbitration. But occasionally, the accused might want to
refuse arbitration; and he could be guilty, or he could be innocent. If an accused man were
innocent, he would be very foolish to refuse to submit evidence of his innocence to
representatives of the arbitration agency and, if necessary, defend himself at an arbitration
hearing. Only by showing that his accuser was wrong could he protect his good reputation and
avoid being saddled with a debt he didn’t deserve. Also, if he could prove that he had been falsely
accused, he would stand a very good chance of collecting damages from his accuser. If, however,
the accused man were guilty, he might refuse arbitration because he feared that the arbiters would
rule against him. If the accused did refuse arbitration and the injured party had good grounds for
his case, he could treat this recalcitrant disputant just as he would treat a man who had stolen
something from him - he could demand repayment (for details of how he would go about this and
how repayment would be made, see Chapters 9 and 10).

In the matter of arbitration, as in any other salable service, the free-market system of voluntary
choice will always be superior to government’s enforcement of standardized and arbitrary rules.
When consumers are free to choose, they will naturally choose the companies which they believe
will give them the best service and/or the lowest prices. The profit and loss signals which
consumer-buying practices send businesses guide these businesses into providing the goods and
services which satisfy customers most. Profit/loss is the “error signal” which guides businessmen
in their decisions. It is a continuous signal and, with the accurate and sophisticated methods of
modern accounting, a very sensitive one.

But government is an extra-market institution - its purpose is not to make profits but to gain
power and exercise it. Government officials have no profit and loss data. Even if they wanted to
satisfy their forced “customers,” they have no reliable “error signal” to guide their decisions.
Aside from sporadic mail from the small minority of his constituents who are politically
conscious, the only “error signal” a politician gets is the outcome of his re-election bids. One
small bit of data every two to six years! And even this tidbit is hardly a clear signal, since
individual voters may have voted the way they did because of any one of a number of issues, or
even because they liked the candidate’s sexy appearance or fatherly image. Appointed
bureaucrats and judges, of course, don’t even get this one small and usually confusing data signal;
they have to operate completely in the dark.

This means that even the best intentioned government officials can’t possibly match the free
market in generating consumer satisfaction in any area, Government doesn’t have, and by its
nature can’t have, the only signal system - profit and loss - which can accurately tell an
organization whether it is giving consumers what they want. Because he lacks the profit/loss
signal, no government official - including a government judge - can tell whether he’s pleasing the
“customers” by preserving or increasing their values, or whether he’s harming them by
destroying their values.

The best conceivable government, staffed by the most conscientious politicians, couldn’t possibly
handle the job of arbitrating disputes (or any other task) as can private enterprise acting in a free
market.

8
Protection of Life and Property
Because man has a right to life, he has a right to defend that life. Without the right to sell-defense,
the right to life is a meaningless phrase. If a man has a right to defend his life against aggression,
he also has a right to defend all his possessions, because these possessions are the results of his
investment of time and energy (in other words, his investment of parts of his life) and are, thus,
extensions of that life.

Pacifists deny that man may morally use force to defend himself, objecting that the use of
physical force against any human being is never justifiable under any circumstances. They
contend that the man who uses force to defend himself sinks to the same level as his attacker.
Having made this assertion, they offer no evidence based on fact to prove it but merely treat it as
an arbitrary primary, a given standard by which everything else must be judged.

To say that all use of force is evil is to ignore the moral difference between murder and sell-
defense and to equate the actions of a crazed thrill-killer with those of a man defending the lives
of himself and his family. Such an absurd view, though supposedly based on a moral principle,
actually completely disregards the moral principle of justice. Justice requires that one evaluate
others for what they are and treat each person as he objectively deserves. One who has an
uncompromising regard for justice will grant his respect and admiration to men of virtue, and his
contempt, condemnation, and rational opposition to men whose behavior is harmful to human
existence. To object verbally while non-violently submitting to an aggression is the behavior of a
hypocrite whose talk and actions are diametrically opposed. In fact, hypocrisy is the pacifist’s
only real protection against his “moral” code.

To ignore the principle of justice is to penalize the good and to reward the evil. Pacifism
encourages every thug to continue his violent ways, even though the pacifist may devoutly wish
he wouldn’t (wishes don’t create reality). Pacifistic behavior teaches the aggressor that crime
does pay and encourages him to more and bigger aggressions. Such sanctioning of injustices is
immoral, and because it is immoral it is also impractical. A “free society of pacifists” would be
short-lived, if it could come into existence at all. Such a society of helpless sheep would
unwittingly call every wolf in the world to come and dine at their expense. Justice is
indispensable to the perpetuation of a free society.

Since pacifism’s failure to actively oppose injustice is immoral, it follows that every man has not
only the right but the moral obligation to defend his life and property against aggression
whenever it is feasible for him to do so. This is a personal obligation, because only the individual
himself can know just what he values, how much he values it, and what other values he is willing
to part with in order to defend it.

The fact that self-defense is a personal responsibility doesn’t mean that every man must turn his
home into an armed fortress and wear a six-shooter whenever he steps outside. Taking care of
one’s health is a personal responsibility, too (certainly no one else is responsible for seeing that I
remain healthy), but this does not mean that every individual must take an extensive course in
medical school, build his own hospital and perform surgery on himself whenever he needs an
operation. A man assumes his responsibilities by either taking care of the matter himself or, if
that is impossible or impractical, hiring someone else to do it for him. This means that a man’s
right and responsibility to defend himself and his other values can be exercised for him by a hired
agent so long as he, himself, designates that agent. The agent may take any actions which the man
himself would have the right to take but may not do anything which the man would not have the
right to do (such as the initiation of force against someone else).
Several advocates of liberty have proposed that this agent should be (or even must be) a
“voluntary” government. By this they mean that the individuals in a society, seeing that they
needed an agency of self-defense, would band together and set up a government which would be
limited to acting as an agent to defend them. Each would then agree to forgo using retaliatory
force on his own behalf (except in emergency situations) and to let the government defend him
and be the final arbiter in any disputes he might have. Such a “voluntary” government, acting as
nothing more than an agent of individual self- defense, may sound good on the surface but on
examination proves to be unworkable because government, even the most limited government, is
a coercive monopoly. An institution cannot at the same time be both coercive and voluntary.
Even if it could manage to support itself without taxation, and even if it did not force people to
buy its services, it would still have to prohibit competition in its area or it would cease to exist as
a government. This “voluntary” government would be in the same position as a grocer who said
to the people in his town, “You may voluntarily buy your groceries from me; you are free not to
buy your groceries from me; but you may not buy them from anyone else,” Thus, a “voluntary”
government would “defend” its citizens by forcing them (either openly or subtly) to forgo
defending themselves and to buy their defense only from it at which point the citizens might be
badly in need of someone to defend them from their “defenders.”

The right to self-defense and the responsibility to defend oneself go hand in hand. A man can
enter into a voluntary transaction, hiring someone else to do the job for him, but he cannot cede
the responsibility to a coercive monopoly and still be free to exercise the right. The man who
“hires” a government to be his agent of self-defense will, by his very act of entering into a
relationship with this coercive monopoly, make himself defenseless against his “defender.” A
“voluntary government, acting as an agent of sell-defense,” is a contradictory and meaningless
concept.

Advocates of government have objected that self-defense could not be the object of a market
transaction because “force is different from all other goods and services - it is by its very nature
an extra- market phenomenon and can never be a part of the market.” This claim is based on two
factors - when force is used, 1 - the exchange is not a willing one, and 2 - there is no mutual
benefit to those involved in the exchange.

The error in this assertion springs from a failure to distinguish between initiated force and
retaliatory force. A market phenomenon is a willing exchange of goods and/or services which
does not involve the use of coercion by the parties to the transaction against anyone. It is true that
initiated force is not and can never be a market phenomenon because it acts to destroy the
market. But, retaliatory force not only does not act to destroy the market, it restrains aggressors
who would destroy it and/or exacts reparations from them.
When an individual uses retaliatory force on his own behalf, his action is, of course, not a market
phenomenon, any more than it is a market phenomenon when he fixes his own car. But if he hires
an agent to protect him (with the use of retaliatory force if necessary), this action is a market
phenomenon, just as the hiring of a mechanic to fix his car is.

For example, suppose a hard-working, private enterprise coin minter believes that he may be
attacked and his business robbed. The minter performs a market transaction - he hires a big,
husky guard. The contract between the minter and the guard involves the willing exchange of the
minter’s money for the guard’s services. The guard’s services consist of protection and, if
necessary, active defense of the minter’s person and property; that is, the guard agrees to take
whatever retaliatory action is feasible to protect and defend his new employer from possible harm
whenever force may be initiated against him. The next night an armed burglar breaks into the
mint and attacks the minter, who is working late. The guard successfully wards off the attack by
the use of retaliatory force and captures the burglar. In doing so, the guard fulfills in this
particular instance his contractual agreement with the minter. It is obvious that the retaliatory
force used by the guard is a part of a market phenomenon, by virtue of his contract with the
minter.

Those who claim that “force is not a market phenomenon” consider the “exchange” of force
between the guard and the burglar in complete isolation from the other circumstances of the case
(they are guilty of dropping the context). It is true that the “exchange” between the guard and the
burglar is not a willing one and that there is no mutual benefit derived from it - in fact, it is not
even an exchange in the market sense. The exchange which is a market phenomenon is the coin
minter’s money for the guard’s services; this exchange is a willing one, there is mutual benefit to
both parties to the transaction, and neither of them initiates the use of physical force against
anyone. The relationship between the minter and the guard is clearly a market phenomenon - a
willing exchange of values which does not involve the use of coercion by the parties to the
transaction against anyone.

Though force per se is not a market phenomenon, the hiring of an agent for self-defense is. The
claim that “force can never be a part of the market” is so unclear that it has no intelligible
meaning.

In a laissez-faire society, there would be no governmental police forces, but this does not mean
that people would be left without protection except for what they could furnish for themselves.
The market always moves to fill customers’ needs as entrepreneurs look for profitable
innovations. This means that private enterprise defense agencies would arise, perhaps some of
them out of the larger private detective agencies of today. These companies have already proved
their ability to provide efficient and satisfactory service, both in protection of values and the
detection of crooks.

Compared (or contrasted) with a governmental police force, how well would a private enterprise
defense agency perform its functions? To answer this question, one must first determine what are
the functions of a private defense agency and of a governmental police force.

The function of a private defense service company is to protect and defend the persons and
property of its customers from initiated force or any substitute for initiated force. This is the
service people are looking for when they patronize it, and, if the defense agency can’t provide this
service as well or better than its competitors, it will lose its customers and go out of business. A
private defense service company, competing in an open market, couldn’t use force to hold onto its
customers - if it tried to compel people to deal with it, it would compel them to buy protection
from its competitors and drive itself out of business. The only way a private defense service
company can make money is by protecting its customers from aggression, and the profit motive
guarantees that this will be its only function and that it will perform this function well.

But, what is the function of a governmental police force? In dictatorships, it is obvious that the
police force exists to protect the government. What little protection (if it can be called that) the
citizens are given from private thugs is only to keep the society on an even keel so the rulers
won’t be shaken out of their comfortable positions. And, of course, the citizens aren’t protected
from their government at all.
It is commonly held that in democratic countries the function of the police is to protect the
citizens. The police, however, don’t actually protect people (except high ranking government
officials - e.g., the President) - they only apprehend and punish some of the criminals after an act
of aggression has been committed. If you suspect that a thug is planning to rob your home, the
police will tell you, “Sorry, but we can’t do anything until a crime has been committed.” Only
after you’ve been robbed and beaten can you call on the police to take action. And then, if they
catch the thug, they won’t even make him pay your hospital bills they’ll just lock him up for a
...

while in a “school for crime,” where he’ll learn to do the job of robbing you more successfully
next time.

Still, it is held that the police do protect honest citizens in an indirect way, because their very
presence discourages crime (although the rapidly rising crime figures are beginning to make
people wonder about this, too). But this theory fails to take into account the fact that
governmental prohibitions, enforced by the police, create black markets, and black markets foster
large-scale, organized crime (see Chapter 11). A black market is nothing more than a normal area
of trade which the government has forbidden (usually under the pretense of “taking care of the
people,” who are presumably too stupid to look after themselves). People who trade on a black
market are simply doing what they should never have been forbidden to do in the first place -
they are trading for goods and services which they believe will increase their happiness, and they
aren’t bothering to ask permission from the politicians and bureaucrats. But a black market,
though there is nothing intrinsically wrong with the goods being traded, is a forbidden market,
and this makes it risky. Because of the danger, peaceful individuals are driven out of this
forbidden area of trade, and men of violence, who dare to take the risks for the sake of the high
profits, are attracted to it. Black markets attract, create, and support criminals, and especially
large criminal gangs. In fact, organized crime finds its main support in black markets such as
gambling, prostitution, and drugs. By enforcing laws which forbid men to trade peacefully as they
please, the police create a social environment which breeds crime. The small-time burglar who is
frightened away by the police is far outweighed by the Mafia boss who makes millions off the
black market in prostitution and gambling, which activities are fraught with violence because of
government prohibitions.

Not only do governmental police make possible more crime than they discourage, they enforce a
whole host of invasive laws designed to make everyone behave in a manner which the lawmakers
considered morally proper. They see to it that you’re not permitted to foul your mind with
pornography (whatever that is - even the courts aren’t too sure) or other people’s minds by
appearing in public too scantily clad. They try to prevent you from experiencing the imaginary
dangers of marijuana (in the ‘20s they protected you from liquor, but that’s not a no-no any
more). They even have rules about marriage, divorce, and your sex life.

No, the police don’t offer the citizen any protection from such invasions of privacy they’re too
...

busy enforcing the invasive laws! Nor do they protect him from the many governmental
violations of his rights - if you try to evade being enslaved by the draft, the police will help the
army, not you. The police prevent the establishment of an effective, private enterprise defense
system which could offer its customers real protection (including protection from governments).
In fact, they often prevent you from protecting yourself, as in New York City, where women,
even in the most crime-ridden areas, are forbidden to carry effective self-defense devices. Guns,
switch-blade knives, tear gas sprayers, etc., are illegal. Of course, the criminals ignore these laws,
but the peaceful citizens are effectively disarmed and left at the mercy of hoodlums.
In addition to failing to protect citizens from either private criminals or the government, making it
almost impossible for the citizens to protect themselves, encouraging crime by creating black
markets, and invading privacy with stupid and useless “moral” laws, the police compel citizens to
pay taxes to support them! If a citizen requests to be relieved of police “protection” and protests
by refusing to pay taxes for the upkeep of the government and its police, the police will initiate
force by picking him up and the government will fine and/or imprison him (unless he attempts to
defend himself against the police’s initiated violence, in which case his survivors will be forced
to bury him at their expense). With the entire weight of the law behind them, this gives the police
the safest protection racket ever devised.

If the police in a democracy don’t exist to protect the citizens, what is their function? It is
essentially the same as that of the police in a dictatorship - to protect the government. Since in a
democracy the current government is always the product of the established social order, the
function of police in a democracy is to protect the government by protecting the established social
order - the Establishment - whatever it may be. And the police usually perform this function very
well.

The superiority of a private enterprise defense service company springs from the fact that its
function - its only function - is to protect its customers from coercion and that it must perform
this function with excellence or go out of business.

Since the main aim of defense service companies would be to protect their customers, their
primary focus would be on preventing aggression. They would furnish guards for factories and
stores, and men to “walk the beat” on the privately owned streets. They would install burglar
alarms with a direct connection to their office in both businesses and private homes. They would
maintain telephone switchboards and roving patrol cars and perhaps even helicopters to answer
calls for help. They would advise customers who felt themselves to be in danger on the most
efficient and safest protective devices to carry in their particular case (from tear gas pens to
pistols) and would offer help in obtaining them. They would probably eventually offer any client
a small, personal alarm device which could be carried about in a pocket and would sound an
alarm at the defense service’s offices when activated. Besides these more ordinary services, each
company would strive to develop new protective devices that were better than anything its
competitors had which would lead to tremendous frustration for would-be crooks.

For a private enterprise defense agency, prevention of aggression would be a profitable business,
whereas punishment of aggressors in jails, government-style, would be a losing proposition.
(Who would pay for the convicts’ food and other upkeep if the revenues couldn’t be forced out of
taxpayers?24) But in a governmental society, the police don’t reap any extra profits from the
prevention of crime. In fact, too much crime prevention would reduce the police department’s
business (since their business is to apprehend and punish criminals, which requires a good supply
of criminals). In spite of propaganda to the contrary, the police can hardly be expected to be too
eager to get rid of the high crime rate and overflowing jails - after all, a lot of police jobs are at
stake.

24
The correctional institutions which would develop in a laissez-faire society will be examined in Chapter 10.

But, because no amount of protection, no matter how excellent, can prevent all aggression, the
defense service companies would have to be prepared to deal with initiated force and fraud. So,
they would maintain detective bureaus, excellent criminal laboratories, extensive files on all
known aggressors, and they would keep staffs of experts in all fields of scientific crime detection.
They would also have the men and equipment to apprehend dangerous aggressors, as well as
secure facilities for holding and transporting them. They might also have a part in running the
correctional institutions, Ml these services would not only be efficient and effective, in contrast to
those forced on us by governmental police, they would be considerably less expensive, too.
Companies competing in a free market would be forced to produce at the lowest feasible cost -
i.e., they would keep their prices at market level - or their competitors would run them out of
business. This is in sharp contrast to socialized institutions which have no competition. Also,
private defense service companies would not have to waste their resources enforcing all those
foolish and tyrannical laws designed to compel everyone to “live a decent and moral life” (as, for
example, the laws against liquor, drugs, gambling, prostitution, and nudity), to “protect the
public” (licensing and anti-trust laws), or to support the vast structure of bureaucracy itself (tax
laws).

Private defense service employees would not have the legal immunity which so often protects
governmental policemen. If they committed an aggressive act, they would have to pay for it, just
the same as would any other individual. A defense service detective who beat a suspect up
wouldn’t be able to hide behind a government uniform or take refuge in a position of superior
political power. Defense service companies would be no more immune from having to pay for
acts of initiated force and fraud than would bakers or shotgun manufacturers. (For full proof of
this statement, see Chapter 11.) Because of this, managers of defense service companies would
quickly fire any employee who showed any tendency to initiate force against anyone, including
prisoners. To keep such an employee would be too dangerously expensive for them. A job with a
defense agency wouldn’t be a position of power over others, as a police force job is, so it
wouldn’t attract the kind of people who enjoy wielding power over others, as a police job does. In
fact, a defense agency would be the worst and most dangerous possible place for sadists?

Government police can afford to be brutal - they have immunity from prosecution in all but the
most flagrant cases, and their “customers” can’t desert them in favor of a compete9t protection
and defense agency. But for a free-market defense service company to be guilty of brutality
would be disastrous. Force - even retaliatory force
- would always be used only as a last resort; it would never be used first, as it is by governmental
police.

In addition to the defense agencies themselves, there is one type of business which has a
particular, vested interest in seeing that values are protected and aggressive violence held to a
minimum, and which would, in a laissez-faire society, have a natural connection to the business
of defense. This is the insurance industry.

There are two main reasons for the insurance companies’ interest in the business of defense: 1 -
acts of aggressive violence result in expenses for insurance companies, and 2 - the more secure
and peaceful the society, the more value-production there will be, and the more value-production
there is, the more things there will be which require insurance coverage, which means more
insurance sales and more profits (which is the primary business aim of insurance companies).
Furthermore, the concern of the insurance companies for a secure and peaceful environment is
economy-wide; that is, their interest extends as far as their market is or is likely to be.

In a laissez-faire society, insurance companies would sell policies covering the insured against
loss resulting from any type of coercion. Such policies would be popular for the same reason that
fire and auto insurance are - they would provide a means of avoiding the financial disaster
resulting from unexpected crises. Since the insurance companies couldn’t afford to insure poor
risks at the same rates they charged their other customers, insurance policies would probably
specify certain standard protective measures which the insured must take in order to buy the
policy at the lowest rates - burglar alarms connected to the defense service company’s office, for
example. Policies would also state that the insured must buy his protection from a defense agency
which met the standards of the insurance company, to avoid having him hire an inefficient or fly-
by-night defense agency at a cheap price while counting on his insurance to make up for any loss
which their ineffectiveness caused him.

A man who carried insurance against coercion could call on a defense company for help in any
emergency covered by the policy, and his insurance would pay the bill. Even if a man had no
coercion insurance and no contractual arrangement with any defense company, if he were
attacked by a thug he would be helped by any nearby defense company agent and billed later.
This is no more a problem than is emergency medical care. Accident victims are always rushed to
a hospital and given emergency care, regardless of whether they are able to ask for help and to
pay for it. Victims of hoodlum attack would be aided by defense companies in much the same
manner, both because of a respect for human life and because it would be good publicity for the
defense companies involved.

Because of the close connection between insurance and defense, some of the larger insurance
companies would probably set up their own defense service agencies in order to offer their clients
the convenience of buying all their protection needs in the same package. Other insurance
companies would form close ties with one or more independent defense service agencies which
they had found to be effective and reliable, and they would recommend these agencies to their
insurance customers, This close affinity between insurance and defense would provide a very
effective check on any defense agency which had an urge to overstep the bounds of respect for
human rights and to use its force coercively - i.e., in a non-defensive manner. Coercive acts are
destructive of values, and value-destruction is expensive for insurance companies. No insurance
company would find it in its interests to stand idly by while some defense agency exercised
aggression, even if the values destroyed were insured by a competing company - eventually the
aggressors would get around to initiating force against their own insureds . . . with expensive
results!
Insurance companies, without any resort to physical force, could be a very effective factor in
bringing an unruly defense agency to its knees via boycott and business ostracism. In a laissez-
faire, industrialized society, insurance is vitally important, especially to business and industry,
which are the most important segment of the economy and the biggest customers for any service.
It would be difficult, indeed, for any defense company to survive if the major insurance
companies refused to sell insurance not only to it, but to anyone who dealt with it. Such a boycott
would dry up the major part of the defense company’s market in short order; and no business can
survive for long without customers. There would be no way for a defense agency to break such a
boycott by the use of force. Any threatening or aggressive actions toward the insurance
companies involved would only spread the boycott as other businesses and individuals attempted
to stay as far away from the coercive agency as possible. In a laissez-faire society, where
individuals are always free to act in their own rational self-interest, the gun cannot win out over
the mind.

Of course, insurance companies would be reluctant to undertake such a boycott because it would
be troublesome and would be likely to lose them a few customers. This means they would not
take such a course unless they could clearly show that the defense agency in question was really
at fault; if they could not prove its guilt, the boycott might turn against them instead, and they
would have sawed off the limb they were sitting on. But where there was clear evidence of
coercive intent, their fear of further aggressions would sooner or later overwhelm their caution
and they would make an investigation, marshal their facts, and take a stand. The news media
would be eager for the story, of course, and would be a great help in spreading the word.

The powerful insurance companies, with their vast and varied resources and their vested interest
in seeing values protected and aggressive violence held to a minimum, would act as a natural
check upon the defense service agencies. (Other such checks will be examined in Chapter 11.)
This is an example of how the market, when left unhampered, constantly moves toward a
situation of maximum order and productivity. The market has its own built-in balancing
mechanism which automatically keeps it running smoothly with the best long-range results for
every peaceful individual. This mechanism would work as well in the area of value protection as
it does in any other market area … government is only so much sand in the gears.

9
Dealing With Coercion
Throughout history, the means of dealing with aggression (crime) has been punishment.
Traditionally, it has been held that when a man commits a crime against society, the government,
acting as the agent of society, must punish him. However, because punishment has not been
based on the principle of righting the wrong but only of causing the criminal “to undergo pain,
loss, or suffering,” it has actually been revenge. This principle of vengeance is expressed by the
old saying, “An eye for an eye, a tooth for a tooth,” which means: “When you destroy a value of
mine, I’ll destroy a value of yours.” Present day penology no longer makes such demands; instead
of the eye or the tooth, it takes the criminal’s life (via execution), or a part of his life (via
imprisonment), and/or his possessions (via fines). As can be readily seen, the principle -
vengeance - is the same, and it inevitably results in a compound loss of value, first the victim’s,
then the criminal’s. Because destroying a value belonging to the criminal does nothing to
compensate the innocent victim for his loss but only causes further destruction, the principle of
vengeance ignores, and in fact opposes, justice.

When an aggressor causes the loss, damage, or destruction of an innocent man’s values, justice
demands that the aggressor pay for his crime, not by forfeiting a part of his life to “society,” but
by repaying the victim for his loss, plus all expenses directly occasioned by the aggression (such
as the expense of apprehending the aggressor). By destroying the victim’s values, the aggressor
has created a debt which he owes to the victim and which the principle of justice demands must
be paid. With the principle of justice in operation, there is only one loss of value; and, while this
loss must initially be sustained by the victim, ultimately it is the aggressor - the one who caused
the loss - who must pay for it.

There is a further fallacy in the belief that when a man commits a crime against society, the
government, acting as the agent of society, must punish him. This fallacy is the assumption that
society is a living entity and that, therefore, a crime can be committed against
it. A society is no more than the sum of all the individual persons of which it is composed; it can
have no existence apart from, or in contradistinction to, those individual persons. A crime is
always committed against one or more persons; a crime cannot be committed against that
amorphous non-entity known as “society.” Even if some particular crime injured every member
of a given society, the crime would still have been committed against individuals, not society,
since it is only the individuals who are distinct, separate, independent, living entities. Since a
crime can only be committed against individuals, a criminal cannot be rationally regarded as
“owing a debt to society,” nor can he “pay his debt to society:” the only debt he owes is to the
injured individual (s).

Every dispute is between aggressor(s) and victim(s); neither society nor its members as a group
have any direct interest in the matter. It is true that all honest members of a society have a general
interest in seeing aggressors brought to justice in order to discourage further aggression. This
interest, however, applies not to specific acts of aggression but to the total social structure which
either encourages or discourages acts of aggression. An interest in maintaining a just social
structure does not constitute a direct interest in the solution of any particular dispute involving
aggression.

Because crimes cannot be committed against society, it is fallacious to regard government as an

agent of society for the punishment of crime. Nor can government be considered to be the agent
of the individual members of society, since these individuals have never signed a contract naming
the government as their agent. There is, therefore, no valid reason for government officials to be
designated the arbiters of disputes and rectifiers of injustice.
Granted, we are used to the governmental punishment-of-crime, so that to many people it seems
“normal” and “reasonable,” and any other means of dealing with aggression seems suspicious and
strange; but an unbiased examination of the facts shows that this governmental system is actually
traditional rather than rational.

Since neither “society” nor government can have any rational interest in bringing a specific
aggressor to justice, who is interested? Obviously, the victim - and secondarily, those to whom
the victim’s welfare is a value, such as his family, friends, and business associates. According to
the principle of justice, those who have suffered the loss from an aggressive act should be
compensated (at the aggressor’s expense), and, therefore, it is those who have suffered the loss
who have an interest in seeing the aggressor brought to justice.
The steps which the victim may morally take to bring the aggressor to justice and exact
reparations from him rest on the right to property, which, in turn, rests on the right to life. A
man’s property is his property, and this fact of ownership is not changed if the property comes
into the possession of an aggressor by means of an act of force. The aggressor may be in
possession of the property, but only the owner has a moral right to it. To illustrate: Suppose that
as you come out of a building you see a stranger in the driver’s seat of your car, preparing to
drive it away. Would you have the moral right to push him out and thus regain possession of your
car by force? Yes, since the thief’s temporary possession does not alter the fact that it is your
property. The thief used a substitute for initiated force when he attempted to steal your car, and
you are morally justified in using retaliatory force to regain it.

Suppose that instead of catching the thief immediately you are forced to chase him and your car
for two blocks and only catch up with him as he’s stopped by a train. Do you still have the right
to push him out and regain your car? Yes, since the passage of time does not erode your right to
possess your property.

Suppose instead that the thief gets away, but that two months later you spot him downtown
getting out of your car. You verify by serial number that it is, indeed, your car. Do you have the
moral right to drive it away? Yes; again the passage of time makes no difference to your property
rights.
Suppose that instead of yourself it is the detective you have hired to recover the car who spots the
thief getting out of it. The detective, acting as your agent, has the right to repossess your car, just
as you would.

You find that a front fender and headlight of your car are smashed in, due to the aggressor’s
careless driving. Repairs cost you $150. Do you have the right to collect this amount from the
aggressor? Yes, you were the innocent victim of an act of aggression; it is the thief, not the
victim, who is morally obligated to pay all costs occasioned by his aggression.

To summarize: the ownership of property is not changed if the property is stolen, nor is it eroded
by the passage of time. The theft, damage, or destruction of another person’s property constitutes
an act of coercion, and the victim has a moral right to use retaliatory force to repossess his
property. He also has a right to collect from the aggressor compensation for any costs occasioned
by the aggression. If he wishes, the victim may hire an agent or agents to perform any of these
actions in his place.

It should be noted that aggression often harms not only the victim but also those who are closely
associated with him. For example, when a man is assaulted and seriously injured, his family may
be caused expense, as well as anxiety. If he is a key man in his business, his employer or his
partners and/or his company may suffer financial loss. All this destruction of value is a direct
result of the irrational behavior of the aggressor and, since actions do have consequences, the
aggressor has the responsibility of making reparations for these secondary losses, as well as for
the primary loss suffered by the victim. There are practical limits to the amount of these
secondary reparations. First, no one would bother to make such a claim unless the reparations he
hoped to be paid were substantial enough to offset the expense, time, and inconvenience of
making the claim. Second, the total amount of reparations which can be collected is limited by
the aggressor’s ability to pay, and first consideration goes to the victim. For the sake of
simplicity, only the victim’s loss will be dealt with here, but all the principles and considerations
which apply to him apply as well to any others who have suffered a direct and serious loss as a
result of the aggression.

In the process of collecting from the aggressor, the victim (or his agents) may not carelessly or
viciously destroy values belonging to the aggressor or take more from him than the original
property (or an equivalent value) plus costs occasioned by the aggression. If the victim does so,
he puts himself in debt to the aggressor (unless, of course, the aggressor has made the destruction
inevitable by refusing to give up the victim’s property without a fight).
If the accused aggressor claims he is innocent or that the amount of reparations claimed by the
victim is excessive, a situation of dispute exists between them which may require arbitration. The
conditions of such arbitration, the forces impelling both parties to accept it as binding, and the
market guarantees of its justice will now be examined.

In a laissez-faire society, insurance companies would sell policies covering the insured against
loss of value by aggression (the cost of the policy based on the worth of the values covered and
the amount of risk). Since aggressors would, in most instances, pay the major costs of their
aggression, the insurance companies would lose only when the aggressor could not be identified
and/or apprehended, when he died before making full reparations, or when the reparations were
too great for him to be able to pay in his lifetime. Since the companies would recover most of
their losses and since aggression would be much less common in a free-market society, costs of
aggression insurance would be low, and almost all individuals could afford to be covered. For this
reason, we shall deal primarily with the case of an insured individual who becomes the victim of
aggression.

Upon suffering the aggression (assuming that immediate self- defense was either impossible or
inappropriate), the victim would, as soon as possible, call his insurance company. The company
would immediately send an investigator to determine the validity of his claim and the extent of
the loss. When the amount was ascertained, the company would fully compensate the victim
within the limits of the terms of the insurance policy. It would also act where feasible to minimize
his inconvenience - e.g., lend him a car until his stolen one is recovered or replaced - in order to
promote customer good will and increase sales (anyone ever heard of a government police
department doing this?).

When the terms of the policy had been fulfilled, the insurance company, exercising its right of
subrogation, would attempt to identify and apprehend the aggressor in order to recover its losses.
At this point, the victim would be relieved of any further responsibilities in the case, except
possibly appearing as a witness at any arbitration hearings.

If necessary, the insurance company would use detectives to apprehend the aggressor. Whether it
used its own company detectives or hired an independent defense service would depend on which
course was more feasible under the circumstances. Obviously, a competitive private enterprise
defense agency, whether an auxiliary of a particular insurance company or an independent firm
hired by several insurance companies (as are some claims adjusting companies today) would be
far more efficient at the business of solving crimes and apprehending aggressors than are the
present governmental police departments. In a free market, competition impels toward
excellence!

Upon apprehending the aggressor, the insurance company’s representatives would present him
with a bill covering all damages and costs. Their first approach would be as peaceful as the
situation permitted, since force is a nonproductive expenditure of energy and resources and is,
therefore, avoided by the market whenever possible. First, the insurance company’s
representatives would attempt a voluntary settlement with the accused aggressor. If he was
obviously guilty and the amount of reparations requested was just, it would be in his interest to
agree to this settlement and avoid involving an arbitration agency, since the cost of any
arbitration would be added on to his bill if he lost in his attempt to cheat justice.
If the accused aggressor claimed innocence or wished to contest the amount of the bill and he and
the insurance company’s representatives could come to no agreement, the matter would have to
be submitted to binding arbitration, just as would a contractual dispute. Legislation forcing the
parties to submit to binding arbitration would be unnecessary, since each party would find
arbitration to be in his own self-interest. Nor would it be necessary to have legal protection for
the rights of all involved, because the structure of the market situation would protect them. For
example, the insurance company would not dare to bring charges against a man unless it had very
good evidence of his guilt, nor would it dare to ignore any request he made for arbitration. If the
insurance company blundered in this manner, the accused, especially if he were innocent, could
bring charges against the company, forcing it to drop its original charges and/or billing it for
damages. Nor could it refuse to submit to arbitration on his charges against it, for it would do
serious damage to its business reputation if it did; and in a free-market context, in which
economic success is dependent on individual or corporate reputation, no company can afford to
build a reputation of carelessness, unreliability, and unfairness.
It is worthy of note here that the notion of always presuming a man innocent until he is proved
guilty by a jury trial can be irrational and sometimes downright ridiculous. For instance, when a
man commits a political assassination in plain sight of several million television viewers, many of
whom can positively identify him from the films of the incident, and is arrested on the spot with
the gun still in his hand, it is foolish to attempt to ignore the facts and pretend he is innocent until
a jury can rule on the matter. Though the burden of proof always rests on the accuser and the
accused must always be given the benefit of the doubt, a man should be presumed neither
innocent nor guilty until there is sufficient evidence to make a clear decision, and when the
evidence is in he should be presumed to be whatever the facts indicate he is. An arbiter’s decision
is necessary only when the evidence is unclear and/or there is a dispute which cannot be resolved
without the help of an unbiased third party.

The accused aggressor would desire arbitration if he wanted to prove his innocence or felt that he
was being overcharged for his aggression, since without arbitration the charges against him
would stand as made and he would have to pay the bill. By means of arbitration, he could prove
his innocence and thus avoid paying reparations or if guilty he would have some say about the
amount of reparations. If innocent, he would be especially eager for arbitration, not only to
confirm his good reputation, but to collect damages from the insurance company for the trouble it
had caused him (and thereby rectify the injustice against him).

A further guarantee against the possibility of an innocent man being railroaded is that every
individual connected with his case would be fully responsible for his own actions, and none could
hide behind legal immunity as do governmental police and jailers. If you knew that a prisoner put
into your custody to work off his debt could, if innocent, demand and get reparations from you for
holding him against his will, you would be very reluctant to accept any prisoners without being
fully satisfied as to their guilt.

Thus, the unhampered market would, in this area as in any other, set up a situation in which
irrationality and injustice were automatically discouraged and penalized without any resort to
statutory law and government.

The insurance company and the accused aggressor, as disputing parties, would mutually choose
an arbitration agency (or agencies, in case they wished to provide for an appeal) and contractually
bind themselves to abide by its decision. In the event they were unable to agree on a single
arbitration agency, each could designate his own agency preference and the two agencies would
hear the case jointly, with the prior provision that if they disagreed on the decision they would
submit the case to a third agency previously selected by both for final arbitration. Such a course
might be more expensive.

The insurance company could order its defense agency to incarcerate the accused aggressor
before and during arbitration (which would probably be only a matter of a few days, since the
market is always more efficient than the bumbling government), but in doing so they would have
to take two factors into consideration. First, if the accused were shown to be innocent, the
insurance company and defense agency would owe him reparations for holding him against his
will. Even if he were judged guilty, they would be responsible to make reparations if they had
treated him with force in excess of what the situation warranted; not being government agents,
they would have no legal immunity from the consequences of their actions. Second, holding a
man is expensive - it requires room, board, and guards. For these reasons, the defense company
would put the accused aggressor under no more restraint than was deemed necessary to keep him
from running off and hiding.
It would he the job of the arbitration agency to ascertain the guilt or innocence of the accused and
to determine the amount of reparations due. In settling the reparations payment, the arbiters
would operate according to the principle that justice in a case of aggression consists of requiring
the aggressor to compensate the victim for his loss insofar as is humanly possible. Since each
case of aggression is unique - -involving different people, actions, and circumstances, reparations
payments would be based on the circumstances of each case, rather than on statutory law and
legal precedent. Although cases of aggression vary widely, there are several expense factors
which, in varying combinations, determine the amount of loss and, thus, the size of the
reparations.

A basic expense factor is the cost of any property stolen, damaged, or destroyed. The aggressor
would be required to return any stolen property still in his possession. If he had destroyed a
replaceable item, such as a television set, he would have to pay the victim an amount of money
equal to its value so that the victim could replace it. If the aggressor had destroyed an item which
couldn’t be replaced but which had a market value (for example, a famous art work like the Mona
Lisa), he would still have to pay its market value, even though another one couldn’t be bought.
The principle here is that, even though the value can never be replaced, the victim should at least
be left no worse off financially than if he had sold it instead of losing it to a thief. Justice requires
the aggressor to compensate the victim insofar as is humanly possible, and replacing an
irreplaceable value is impossible.

In addition to the basic expense of stolen and destroyed property, an act of aggression may cause
several additional costs, for which the aggressor would be responsible to pay. An aggressor who
stole a salesman’s car might cause the salesman to lose quite a bit of business - an additional
financial cost. A rapist who attacked and beat a woman would be responsible not only for paying
medical bills for all injuries he had caused her and reparations for time she might lose from work,
but be would also owe his victim compensation for her pain and suffering, both mental and
physical. Besides all debts owed to the primary victim, the aggressor might also owe secondary
reparations to others who had suffered indirectly because of his actions (for example, the victim’s
family). In addition to these expenses, occasioned by the aggression itself, the aggressor would
also be responsible for any reasonable costs involved in apprehending him and for the cost of
arbitration (which would probably be paid by the loser in any case).

Since the arbitration agency’s service would be the rendering of just decisions, and since justice
is the basis on which they would compete in the market, the arbiters would make every attempt to
fix reparations at a fair level, in accordance with market values. For instance, if the defense
company had run up an excessively high bill in apprehending the aggressor, the arbiters would
refuse to charge the aggressor for the excessive expense. Thus, the defense company would be
forced to pay for its own poor business practices instead of passing the buck to someone else.

In case the reparations amounted to more than the aggressor could possibly earn in his lifetime
(for example, an unskilled laborer who set a million dollar fire), the insurance company and any
other claimants would negotiate a settlement for whatever amount he could reasonably be
expected to pay over time. This would be done because it would be no profit to them to set the
reparations higher than the aggressor could ever hope to pay and thus discourage him from
working to discharge his obligation. It is worth noting here that quite a large percentage of a
worker’s pay can be taken for a long period of time without totally removing his incentive to live
and work - at present the average American pays out well over a third of his income in taxes and
expects to do so for the rest of his life, yet those who go on the government “welfare” dole are
still in the minority.
Many values which can be destroyed or damaged by aggression are not only irreplaceable, they
are also non-exchangeable - that is, they can’t be exchanged in the market, so no monetary value
can be placed on them. Examples of non-exchangeable values are life, a hand or eye, the life of a
loved one, the safety of a kidnapped child, etc. When confronted with the problem of fixing the
amount of reparations for a non-exchangeable value, many people immediately ask, “But how
can you set a price on a human life?” The answer is that when an arbitration agency sets the
reparations for a loss of life it isn’t trying to put a monetary price on that life, any more than is an
insurance company when it sells a $20,000 life insurance policy. It is merely trying to
compensate the victim (or his survivors) to the fullest extent possible under the circumstances.

The problem in fixing reparations for loss of life or limb is that the loss occurred in one kind of
value (non-exchangeable) and repayment must be made in another kind (money). These two
kinds of values are incommensurable - neither can be measured in terms of the other. The value
which has been destroyed not only can’t be replaced with a similar value, it can’t even be
replaced with an equivalent sum of money, since there is no way to determine what is equivalent.
And yet, monetary payment is the practical way to make reparations.

It is useful to remember here that justice consists of requiring the aggressor to compensate his
victims for their losses insofar as is humanly possible, since no one can be expected to do the
impossible. Even a destroyed item which has a market value can’t always be replaced (e.g., the
Mona Lisa). To demand that justice require the impossible is to make justice impossible. To
reject the reparations system because it can’t always replace the destroyed value with an
equivalent value is like rejecting medicine because the patient can’t always be restored to as good
a state of health as he enjoyed before his illness. Justice, like medicine, must be contextual - it
must not demand what is impossible in any given context. The question, then, is not how arbiters
can set a price on life and limb; it is, rather, “How can they see that the victim is fairly
compensated, insofar as is humanly possible, without doing injustice to the aggressor by requiring
overcompensation?”

In attempting to reach a fair compensation figure, the arbitration agency would act, not as a judge
handing down a sentence, but as a mediator resolving a conflict which the disputants can’t settle
themselves. The highest possible limit on the amount of reparations is, obviously, the aggressor’s
ability to pay, short of killing his incentive to live and earn. The lowest limit is the total amount
of economic loss suffered (with no compensation for such non-exchangeables as anxiety,
discomfort, and inconvenience). The reparations payment must be set somewhere in the broad
range between these two extremes. The function of the arbitration agency would be to aid the
disputants in reaching a reasonable figure between these extremes, not to achieve the impossible
task of determining the monetary value of a non-exchangeable.

Although the limits within which the reparations payment for a non-exchangeable would be set
are very broad, the arbitration agency could not capriciously set the amount of reparations at any
figure it pleased. An arbitration agency would be a private business competing in a free market,
and the action of the market itself would provide guidelines and controls regarding the “price” of
aggression, just as it does with any other price. Any free-market business, including an arbitration
agency, can survive and prosper only as customers choose to patronize it instead of its
competitors. An arbitration agency must be chosen by both (or all) disputants in a case, which
means that its record of settling previous disputes of a similar nature must be more satisfactory, to
both complainant and defendant, than the records of its competitors. Any arbitration agency
which consistently set reparations too high or too low in the opinion of the majority of its
customers and potential customers would lose business rapidly. It would have to either adjust its
payments to fit consumer demand or go out of business. In this way, arbitration agencies whose
levels of reparation displeased consumers would be weeded out (as would any other business
which failed to satisfy customers). Arbitration agencies which wanted to stay in business would
adjust reparation levels to meet consumer demand. In a relatively short time, reparations
payments for various non-exchangeable losses would become pretty well standardized, just as are
charges for various kinds and amounts of insurance protection.

The manner in which the amount of reparations for a non-exchangeable value would be set by the
action of the free market is very similar to the way in which the market sets any price. No good or
service has an intrinsic monetary value built into it by the nature of things. A commodity has a
particular monetary value because that amount of money is what buyers are willing to give for it
and sellers are willing to take for it. “Value” means value to the people who trade that commodity
in the market. All the traders determine what the price will be. In a similar way, the people who
bought the services of arbitration agencies would determine the levels of reparations payments -
the levels they considered just and fair compensation for various kinds of losses. It is impossible
for us to foresee, in advance of the actual market situation, just where these levels would be set.
But we can see, from a knowledge of how a free market operates, that the market would
determine them in accordance with consumer desires.

Each reparation claim would be a complex combination of compensations for losses of various
kinds of exchangeable and non-exchangeable values. For example, if a hoodlum beat a man and
stole $100 from him, the aggressor would be required not only to return the $100 but also to pay
the victim’s medical bills, his lost earnings, compensation for pain and suffering, and reparations
for any permanent injuries sustained. If the victim were a key man in his business, the aggressor
would also have to pay the business for the loss of his services. Each reparation claim is also a
highly individual matter, because the destruction of the same thing may be a much greater loss to
one man than to another. While the loss of a finger is tragic for anyone, it is a much more
stunning blow to a professional concert pianist than to an accountant. Because of the complexity
and individuality of reparations claims, only a system of competing free- market arbitration
agencies can satisfactorily solve the problem of what constitutes just payment for losses caused
by aggression.

Murder poses a special problem in that it constitutes an act of aggression which, by its very
nature, renders the victim incapable of ever collecting the debt owed by the aggressor.
Nevertheless, the aggressor did create a debt, and the death of the creditor (victim) does not
cancel this debt or excuse him from making payment. This point can be easily seen by supposing
that the aggressor did not kill, but only critically injured the victim, in which case the aggressor
would owe reparations for injuries sustained, time lost from work, physical disability, etc. But if
the victim then died from his injuries before the debt could be paid, the debtor obviously would
not be thereby released from his obligation.

In this connection, it is useful to recall what a debt actually is. A debt is property which morally
belongs to one person but which is in the actual or potential possession of another. Since the debt
occasioned by the attack on the victim would have been his property had he survived that attack,
his death places it, together with the rest of his property, in his estate to become the property of
his heirs.

In addition to the primary debt owed to the estate of the victim, the aggressor also owes debts to
all those whom the victim’s death has caused a direct and major loss of value (such as his family),
even though such people may also be his heirs. (Not to pay reparations to heirs simply because
they will also inherit the reparations which would have been paid the victim had he survived,
would be like refusing to pay them because they would inherit any other part of the victim’s
property.)

But suppose an aggressor murdered a grouchy old itinerant fruit picker who had neither family,
friends, nor aggression insurance. Would the aggressor “get off scott free” just because his victim
was of value to no one but himself and left no heirs to his property? No, the aggressor would still
owe a debt to the fruit picker’s estate, just as he would if there were an heir. The difference is
that, without an heir, the estate (including the debt occasioned by the aggression) becomes un-
owned potential property. In our society, such un-owned potential property is immediately
expropriated by the government, as is much other un-owned wealth. Such a practice can be
justified only if one assumes that the government (or “the public”) is the original and true owner
of all property, and that individuals are merely permitted to hold property by the grace and at the
pleasure of the government. In a free-market society, un-owned wealth would belong to whatever
person first went to the trouble of taking possession of it. In regard to the debt owed by an
aggressor to the estate of his victim, this would mean that anyone who wished to go to the trouble
and expense of finding the aggressor and, if necessary, proving him guilty before professional
arbiters, would certainly deserve to collect the debt. This function could be performed by an
individual, by an agency specially constituted for this purpose (though it seems unlikely that there
would be enough situations of this nature to support such an agency), or by a defense agency or
an insurance company. Insurance companies would be most likely to take care of this kind of
aggression in order to deter violence and gain customer good will.

Before taking up the means by which an aggressor would be forced to pay reparations (if force
were necessary), the position of an uninsured victim of aggression will be examined briefly.
Whenever a demand for a service exists, the market moves to fill it. For this reason, a man who
was uninsured would also have access to defense services and arbitration agencies. But, although
he would have a similar recourse to justice, the uninsured man would find that his lack of
foresight had put him at a disadvantage in several ways.

The uninsured victim would not receive immediate compensation but would have to wait until the
aggressor paid reparations (which might involve a span of years if the aggressor didn’t have the
money to discharge the debt immediately and had to pay it off in installments). Similarly, he
would run the risk of being forced to forgo all or most of his compensation if the aggressor were
not caught, died before being able to complete payment, or had incurred a debt too large to pay
during his life. Also, the uninsured victim would have to bear all costs of apprehending the
aggressor and, if necessary, of arbitration, until the aggressor was able to pay them back.

In addition to these monetary disadvantages, he would be put to extra inconvenience. If he wished

to collect reparations, he would have to detect and apprehend the aggressor himself or (more
likely) hire a defense agency to do it for him. He would also have to make his own arrangements
for arbitration. Taking everything into consideration, a man would find aggression insurance well
worth the expense, and there is little doubt that most people would have it.

10
Rectification of Injustice
Since aggression would be dealt with by forcing the aggressor to repay his victim for the damage
caused (whenever the use of force was required), rather than by destroying values belonging to
the aggressor, the free market would evolve a reparations-payment system vastly superior to and
different from the present governmental prisons.

If the aggressor had the money to make his entire reparations payment immediately or could sell
enough property to raise the money, he would do so and be free to go his way with no more than
a heavy financial loss. Situations of this kind, however, would probably be very rare, because
aggression is expensive. Even a small theft or destruction can quickly pile up a fairly large debt
when related expenses, secondary payments to others who suffered because of the victim’s loss,
cost of defense and arbitration, etc., are taken into account, In a totally free society, men tend to
be financially successful according to their merit. Few successful men would desire to commit
aggression. Few unsuccessful men could afford to make immediate payment for it.

Assuming the aggressor could not make immediate payment of his entire debt, the method used
to collect it would depend on the amount involved, the nature of the aggression, the aggressor’s
past record and present attitude, and any other pertinent variables. Several approaches suggest
themselves,

If the aggression were not of a violent nature and the aggressor had a record of trustworthiness, it
might be sufficient to leave him free and arrange a regular schedule of payments, just as would be
done for any ordinary debt. If the aggressor could not be trusted to make regular payments, a
voluntary arrangement could be made between the insurance company, the aggressor, and his
employer, whereby the employer would be compensated for deducting the reparations payment
from the aggressor’s earnings each pay period.

If the aggressor were unable to find or hold a job because employers were unwilling to risk hiring
him, he might have to seek employment from a company which made a practice of accepting
untrustworthy workers at lower than market wages. (In an economy of full employment, some
companies would be motivated to adopt such a practice in order to reach new sources of labor.
Although the price of their product would remain close to that of their competitors, as prices are
determined by supply and demand, the wages they paid would necessarily be lower to
compensate for the extra risk involved in hiring employees of dubious character.)

If the facts indicated that the aggressor was of an untrustworthy and/or violent nature, he would
have to work off his debt while under some degree of confinement. The confinement would be
provided by rectification companies - firms specializing in this field, who would maintain debtors
workhouses (use of the term “prison” is avoided here because of the connotations of value-
destruction attached to it). The labor of the men confined would be furnished to any companies
seeking assured sources of labor, either by locating the debtors workhouses adjacent to their
plants or by transporting the debtors to work each day. The debtors would work on jobs for
wages, just as would ordinary employees, but the largest part of their earnings would be used to
make reparations payments, with most of the rest going for their room and board, maintenance of
the premises, guards, etc. To insure against refusal to work, the reparations payment would be
deducted from each pay before room and board costs, so that if a man refused to work he would
not eat, or at most would eat only a very minimal diet.

There would be varying degrees of confinement to fit various cases. Many debtors workhouses
might provide a very minimum amount of security, such as do a few present-day prison farms
where inmates are told, “There are no fences to keep you here; however, if you run away, when
you are caught you will not be allowed to come back here but will be sent to a regular prison
instead.” Such workhouses would give the debtor a weekly allowance out of his pay, with
opportunities to buy small luxuries or, perhaps, to rent a better room. Weekend passes to visit
family and friends, and even more extended vacations, might be arranged for those who had
proved themselves sufficiently trustworthy.

Other workhouses would provide facilities of greater security, ranging up to a maximum security
for individuals who had proved themselves extremely violent and dangerous. A man whose
actions had forced his confinement in such a workhouse would find himself at a disadvantage in
several ways. He would find he had less liberty, less luxuries, limited job opportunities, and a
longer period of confinement because, with more of his earnings spent on guards and security
facilities, it would take him longer to pay off his debt, Since there will be cases of mental
imbalance even in the most rational of cultures, it is probably that there will be an occasional
individual who will refuse to work and to rehabilitate himself, regardless of the penalties and
incentives built into the system. Such an individual would be acting in a self-destructive manner
and could properly be classified as insane. Obviously, neither the rectification company, the
defense service that brought him to justice, nor the insurance company or other creditor has any
obligation to go to the expense of supporting him (as victims are forced through taxation to do
today). Nor would they wish to turn him loose to cause further destruction. And if they allowed
him to die, they would cut off all hope of recouping the financial loss he had caused. What, then,
could they do?

One solution that suggests itself is to sell his services as a subject of study by medical and
psychiatric doctors who are doing research on the causes and cures of insanity. This should
provide enough money to pay for his upkeep, while at the same time advancing psychological
knowledge and ultimately offering hope of help for this aggressor and his fellow sufferers. If such
an arrangement were made, it would be in the interests of all concerned to see that the aggressor
received no ill treatment. In a rational culture, severe mental illness would be much rarer than it is
in ours, and the medical-psychiatric team would not wish to damage such a valuable specimen.
The rectification company in charge of the aggressor would be even more eager to protect him
from harm, since no arbitration agency could afford the reputation of sending aggressors to a
debtors workhouse where there was ill treatment of the inmates.

This free-market system of debtors workhouses would have numerous practical advantages over
the Dark Ages barbarity of the present governmental prison system. These advantages are a
necessary consequence of the fact that the system would be run for profit - from the standpoint of
both the insurance companies and the rectification companies operating the workhouses. In a
laissez-faire economy, it is impossible to make consistent profits over a long-range period unless
one acts with maximum rationality, which means: with maximum honesty and fairness.

A practical example of this principle can be seen in the results of the insurance company’s desire
to recoup its loss quickly. Because it would be in the insurance company’s interest to have the
aggressor’s reparations installments as large as possible, it would have him confined to no greater
degree than his own actions made necessary, since closer confinement means greater expense,
which means less money left for reparations payments. Thus, it would be the aggressor himself
who would determine, by his character and his past and present behavior, the amount of freedom
he would lose while repaying his debt and, to a certain degree, the length of time it would take
him to pay it. Furthermore, at any time during his confinement, should the aggressor-debtor show
himself to be a good enough risk, the insurance company would find it in their interest to
gradually decrease his confinement - an excellent incentive to rational behavior.
Because both the insurance companies and the rectification companies would want to run their
businesses profitably, it would be in their interest to have debtors be as productive as possible. In
an industrialized society, a laborer’s productivity depends not on his muscles but on his mind, his
skills. So the debtor would be allowed to work in an area as close to the field of his aptitudes as
possible and encouraged to develop further productive skills by on-the-job training, night school
courses, etc. All this would help prepare him for a productive and honest life once his debt was
paid. Thus, the application of free-market principles to the problem of aggression provides a
built-in rehabilitation system. This is in sharp contrast to government-run prisons, which are little
more than “schools for crime,” where young first offenders are caged with hardened criminals
and there is no incentive or opportunity for rehabilitation.

A system of monetary repayment for acts of aggression would remove a great deal of the “profit”
incentive for aggressors. A thief would know that if he were caught he would have to part with all
his loot (and probably quite a bit of his own money, too). He could never just stash the booty,
wait out a five year prison term, and come out a rich man.

The insurance company’s desire for speedy repayment would be the aggressor-debtor’s best
guarantee against mistreatment. Earning power depends on productivity, and productivity
depends on the use of the mind. But a man who is physically mistreated or mentally abused will
be unwilling and even unable to use his mind effectively. A mistreated man is good for little more
than brute physical labor - a situation of prohibitively low productivity.

Another strong guarantee of good treatment for the aggressor- debtor is that, in a laissez-faire
society, every man would be fully responsible for his own actions. No guard in a debtors
workhouse could beat a debtor and get away with it. The mistreated debtor could complain to a
defense service agent or to the insurance company to whom he was making reparations. If he
could prove his assertion of mistreatment, the guilty guard would soon find himself paying a debt
to his former prisoner. Furthermore, the guard’s employers would never dare to support their
guard if the debtor had a good case, because if they knowingly permitted the guard’s sadism the
debtor could bring charges against them, too.

A guard in a government prison can treat the prisoners as less than animals and never be brought
to account for it, because he is protected by his status as part of the policing arm of the
government. But a guard in a debtors workhouse couldn’t bide behind the skirts of the
rectification company which employed him, the way the prison guard hides behind the skirts of
the government. The debtors workhouse guard would be recognized as an individual, responsible
for his own actions. If he mistreated a debtor in his custody, he would be held personally
responsible, and he couldn’t wriggle out of it by putting the blame on “the system.”

A free-market system of dealing with aggression would operate with a maximum of justice
precisely because it was based on the principle of self-interest. The entirety of a man’s self-
interest consists of rational thought and action and the rewards of such behavior; the irrational is
never in man’s self-interest. As long as a man is behaving rationally, he cannot intentionally harm
any other non-coercive person. One of the reasons for the success of a laissez-faire society is that
the free-market system impels men to act in their own rational self-interest to the extent that they
wish to successfully participate in it. It thus rewards honesty and justice and penalizes dishonesty
and the initiation of force. This principle would work just as well if the market were free to deal
with the problem of aggression as it does when the market deals with the supply of food or the
building of computers.
There have been several questions and objections raised concerning the proposal that payment for
aggression be made in monetary terms. For instance, it has been objected that a thief could “get
off the hook” simply by voluntarily returning the stolen item. But this is to overlook two
important facts - additional expenses and loss of reputation. First, as long as the thief held the
item in his possession he would be causing its owner inconvenience and expense, plus the ever-
mounting cost involved in the owner’s attempt to recover the item, all of which would be part of
the debt created by the thief’s act of aggression. In aggressive acts of any seriousness at all, it
would be almost impossible for the aggressor to return the stolen item quickly enough to avoid
incurring additional costs. For example, suppose a man stole $20,000 at gunpoint from a bank,
but, regretting his action a few minutes later, came back and returned the money. Could he get by
without paying any further reparations? No, because his irrational actions interrupted the bank’s
business and may have caused a financial loss, for which he is directly responsible. In order to get
the money, he had to threaten force against the teller and possibly other bank employees and
customers, so he would owe them reparations for endangering their lives and safety. Also, as
soon as he left the bank, the teller undoubtedly tripped an alarm, summoning the bank’s defense
agency, so the aggressor is responsible for paying the cost of the defense agency’s coming to
answer the call, plus any other related expenses.

But the second factor, loss of reputation, would be even more damaging to the aggressor. Just as
specialized companies would keep central files, listing poor contractual risks, they would also list
aggressors so that anyone wishing to do business with a man could first check his record.
Insurance companies in particular would make use of this service. So our bank robber would find
insurance companies listing him as a very poor risk and other firms reluctant to enter into
contracts with him. Thus, if a man were foolish enough to engage in such a whim-motivated
action as this bank robbery, he would find that he had caused himself considerable expense and
loss of valuable reputation but had gained absolutely nothing.

In a similar vein, it has been objected that a very rich man could afford to commit any number of
coercive acts, since all he would lose would be a little of his vast fortune. It is a bit difficult to
imagine such a mentally ill person being able to continue existing uncured and unchallenged in a
predominantly rational culture, but, assuming that he did, he would immediately find that money
was hardly the only loss his actions cost him. As soon as his career of aggression was recognized
for what it was, no honest man would take the chance of having anything to do with him. The
only individuals who would not avoid him like The Plague would be those who felt they were
tougher or craftier than he, and their only purpose in risking an association with him would be to
part him from as large a share of his money as possible. Furthermore, he would run an immense
risk of being killed by some victim acting in self-defense. Considering his reputation for
aggression, a man would probably be justified in shooting him for any threatening gesture. So, in
spite of his ability to pay, his life would be miserable and precarious, and his fortune would
probably dwindle rapidly.

Again, it has been said that if a man confined himself to thefts so petty that the recoverable
amount would be smaller than the cost of recovering it, thus making prosecution of the case
economically unfeasible, he could get away with a career of aggression (of sorts). But such a
“bubblegum thief” would lose much more than he could possibly gain, because he would lose his
good reputation as his acts of aggression were discovered and recorded.

In each of these incidents, it is obvious that the aggressor’s loss of reputation would be at least as
damaging as his financial loss and that his lost reputation could not be regained unless he made
reparations for his aggressive act and showed a determination to behave more reasonably in the
future. He might shrug off the financial loss, but the loss of a good reputation would force him to
live a substandard life, cut off from insurance protection, credit, reputable business dealings, and
the friendship of all honest persons.

All the foregoing objections to a monetary payment assume that it would not be sufficiently
costly to deter aggression, or, in other words, that it is severity of punishment which deters
aggression. The untruth of this assumption should be evident from an examination of such
historical eras as Elizabethan England, in which punishments of extreme severity prevailed,
including physical mutilation and hanging for petty theft. Yet in spite of the great loss of value
imposed on criminals, crime rates were very high. The reason for this is that it is not severity, but
justice, which deters aggression. To punish the aggressor with more severity than his actions
warrant - that is, to impose on him a greater loss of value than that which is necessary for him to
make reasonable reparations to the victim - is to commit an injustice against him. Injustice cannot
be a deterrent to injustice. The aggressor who is treated with such excessive severity feels, quite
rightly, that he has been victimized. Seeing little or no justice in his punishment, he feels a vast
resentment, and often forms a resolve to “get even with society” as soon as possible. Thus, in
dealing with aggression, excessive severity, as much as excessive laxity, can provoke further
aggressive acts. The only valid answer to injustice, is justice! Justice cannot be served by
excessive severity or by taking revenge against the aggressor, or by pacifism, but only by
requiring the aggressor to pay the debt which he has created by his coercive action.

Dealing with a man justly helps him to improve himself and his life by inducing him to act in his
own self-interest. In the case of an aggressor, justice induces him to want to, and be able to, live a
productive, honest, non-coercive life, both while he is paying the debt he owes to his victim, and
afterwards. Justice helps a man get on the right track by sending him the right signals. It penalizes
him for his misdeeds - but only as much as he actually deserves. It also rewards him when he
does the right thing. Injustice sends out incorrect signals which lead men astray. The injustice of
letting an aggressor get away without paying for his aggressions teaches him to believe that
“crime pays,” which induces him to commit more and bigger crimes. The injustice of punishing
an aggressor by making him pay more than he really owes the victim teaches the aggressor that
he can’t expect justice from others, so there’s little point in his trying to treat them justly. He
concludes that this is a dog-eat-dog world and that his best course is to “do it unto others before
they do it unto him.” Only justice sends the aggressor the right signals, so only justice can be a
satisfactory deterrent to aggression.

It may be objected that some men will attempt to take advantage of a free-market system of
dealing with aggression. This is true, as it is true of any other social system. But the big
advantage of any action of the free market is that errors and injustices are self-correcting. Because
competition creates a need for excellence on the part of each business, a free-market institution
must correct its errors in order to survive. Government, on the other hand, survives not by
excellence but by coercion; so an error or flaw in a governmental institution can (and usually
will) perpetuate itself almost indefinitely, with its errors usually being “corrected” by further
errors. Private enterprise must, therefore, always be superior to government in any fleld,
including that of dealing with aggressors.

11
Warring Defense Agencies and Organized
Crime
Some opponents of a laissez-faire society have contended that, because a governmentless society
would have no single, society-wide institution able to legitimately wield superior force to prevent
aggression, a state of gang warfare between defense agencies would arise. Then (as they argue),
brute force, rather than justice, would prevail and society would collapse in internecine conflict.
This contention assumes that private defense service entrepreneurs would find it to their
advantage, at least in some circumstances, to use coercive, rather than market, means to achieve
their ends. There is a further, unstated assumption that governmental officials would not only
prevent coercion but would themselves consistently refrain from initiating force (or that the force
they initiated would be somehow preferable to the chaos it is feared would result from an
unhampered market).
The second of these assumptions is obviously groundless, since (as was shown in Chapter 4)
government is a coercive monopoly which must initiate force in order to survive, and which
cannot be kept limited. But what of the first assumption? Would a free market system of value-
protection lead to gang warfare between the competing defense companies?

The “gang warfare” objection has been raised in regard to theories advocating a system of
competing governments. When applied to any type of governments, the objection is a valid one.
A government, being a coercive monopoly, is always in the position of initiating force simply by
the fact of its existence, so it is not surprising that conflicts between governments frequently take
the form of war. Since a government is a coercive monopoly, the notion of more than one
government occupying the same area at the same time is ridiculous. But a laissez-faire society
would involve, not governments, but private businesses operating in a free market.

All actions have specific consequences, and the nature of these consequences is determined by
the nature of the action and by the context in which it takes place. What would be the
consequences for a free-market defense company which committed an act of aggression in a
laissez-faire society?

Suppose, for example, that the Old Reliable Defense Company, acting on behalf of a client who
had been robbed of his wallet, sent its agents to break into and search every house in the client’s
neighborhood. Suppose further that the agents shot the first man who offered resistance, taking
his resistance as proof of guilt.

The most immediate consequence of the aggression is that the defense company either does or
does not realize its objective (in this case, the return of the wallet, together with damages),
depending on the circumstances and the amount of counter-force it meets with. But this is only
the first of several important consequences springing directly from the aggression.
Not only has Old Reliable’s action put it in the precarious position of being a target of retaliatory
force, it has also made the company the subject of severe business ostracism. All honest and
productive individuals and businesses will immediately dissociate themselves from Old Reliable,
because they will fear that any disagreement which may arise in their business dealings with it
may turn its aggressive force against them. Further, they will realize that, even if they manage to
remain on good terms with Old Reliable, they are in danger of becoming accidental casualties
when retaliatory force is exercised by some indignant victim of Old Reliable’s aggressions.

But there is an even stronger reason which will persuade Old Reliable’s customers and business
associates to quickly sever all relations with it, in a laissez-fare society, as has been pointed out, a
good reputation is the most valuable asset any business or individual can have. In a free society, a
man with a bad reputation would have a hard time getting customers, business associates, or
credit and insurance at rates he could afford. Knowing this, no one would wish to risk his
personal reputation or the business reputation of his firm by having any dealings with a known
aggressor.

Insurance companies, a very important sector of any totally free economy, would have a special
incentive to dissociate themselves from any aggressor and, in addition, to bring all their
considerable business influence to bear against him. Aggressive violence causes value loss, and
the insurance industry would suffer the major cost in most such value losses. An unrestrained
aggressor is a walking liability, and no insurance company, however remotely removed from his
original aggression, would wish to sustain the risk that he might aggress against one of its own
clients next. Besides, aggressors and those who associate with them are more likely to be
involved in situations of violence and are, thus, bad insurance risks. An insurance company
would probably refuse coverage to such people out of a foresighted desire to minimize any future
losses which their aggressions might cause. But even if the company were not motivated by such
foresight, it would still be forced to rate their premiums up drastically or cancel their coverage
altogether in order to avoid carrying the extra risk involved in their inclination to violence. In a
competitive economy, no insurance company could afford to continue covering aggressors and
those who had dealings with aggressors and simply pass the cost on to its honest customers; it
would soon lose these customers to more reputable firms which could afford to charge less for
their insurance coverage.

What would loss of insurance coverage mean in a free economy? Even if the Old Reliable
Defense Company (or any other business or individual) could generate enough force to protect
itself against any aggressive or retaliatory force brought against it by any factor or combination of
factors, it would still have to go completely without several economic necessities. It could not
purchase insurance protection against auto accidents, natural disasters, or contractual disputes. It
would have no protection against damage suits resulting from accidents occurring on its property.
It is very possible that Old Reliable would even have to do without the services of a fire
extinguishing company, since such companies are natural outgrowths of the fire insurance
business.

In addition to the terrific penalties imposed by the business ostracism which would naturally
follow its aggressive act, Old Reliable would have trouble with its employees. Government
employees are legally protected from suffering any personal consequences as a result of all but
the most blatant of the aggressive acts which they perpetrate “in the line of duty.” Such
functionaries as police officials, judges, and Internal Revenue and narcotics agents can initiate
force with immunity simply by taking protection under such cliches as “I don’t write the law; I
just enforce it,” or “That’s a matter for a jury to decide,” or “This statute was passed by the duly
elected representatives of the people.” But employees of a free-market defense company would
have no such legal immunity from retaliatory force; they would have to assume responsibility for
their own actions. If a defense service agent carried out an order which involved the intentional
initiation of force, both the agent and the entrepreneur or manager who gave him the order, as
well as any other employees knowledgeably involved, would be liable for any damages caused.
Since he could not take refuge in “the system,” no honest defense service employee would carry
out an order which involved the initiation of force (nor would an honest employer give such an
order or sanction such action on the part of his employee). Thus, if Old Reliable managed to keep
any employees at all, or to hire any new ones to replace those who had left, it would have to settle
for people who were either terribly stupid or desperate enough to believe they had nothing to lose
by being associated with aggression - in other words, simpletons and hoodlums.
In a laissez-faire society, a defense company which committed aggression, unless it acted
speedily to rectify the injustices, would be left with no customers, associates, or employees
except for undesirables. This raises the question of whether the criminal element in a laissez-faire
society would, or even could, support their own “Mafia” defense company for the purpose of
defending them against the retaliatory force of their victims.

Only a man who was willing to be openly identified as an aggressor would buy the services of
such a “Mafia” defense agency, since the nature of the activities and clients of such a defense
agency could not be kept hidden. This open aggressor would have to support himself entirely by
aggression, because no honest man would take the chance of having business dealings with him.
Furthermore, he would have to be existing very well financially, since the cost of protecting a
man continually involved in acts of violence would be extremely high.

It is reasonable to conclude, therefore, that the only clients of such a “Mafia” defense company
would be highly successful, big time, open aggressors. Since an aggressor could hardly hope to
obtain that much money all by himself, the existence of such men presupposes the existence of a
fairly extensive, well organized network of lesser hoodlums working for the “big operators.” In
other words, organized criminal gangs would be required to provide sufficient support for a
“Mafia” defense company.

Although such an organized criminal gang may enter into many fields, organized crime finds its
basic support in black market activities. A black market is any area of the market which is legally
prohibited. If left unprohibited, it would be an area of trade involving peaceful, willing exchanges
between sellers and buyers. But when government initiates force by forbidding this area of trade
to honest men, it throws it open to men who are willing to take the risk of violating bureaucratic
dictates and the statutory laws of the politicians. The violence and fraud associated with any
black market do not spring from the nature of the good or service being sold; they are a direct
result of the fact that entrepreneurs have been legally forbidden to deal in this area of the market,
leaving it open to men who dare to ignore prohibitions and who are willing to resort to violence
in order to do business without getting caught. Unless prohibited, every market activity is
operated, on the basis of willing exchange, without the initiation of force, because this is the only
way a business can be operated successfully, as force is a nonproductive expenditure of energy.

An excellent example of a black market occurred during the Prohibition era of the 1920s. When
government prohibited the manufacture and sale of liquor, an area of the market was arbitrarily
closed to anyone who wished to remain law-abiding. Since there was still a market demand for
liquor, hosts of criminals were attracted and created to fill the vacuum. Numerous gangs,
including the Mafia, were founded and/or grew into organizations of immense power on the basis
of the black market afforded by the Prohibition Amendment of the U. S. Constitution. Many of
these organized criminal gangs are still with us; although they lost a great deal of their base with
the repeal of Prohibition, they were able to survive by shifting the major part of their activities to
other governmentally forbidden areas, such as gambling and prostitution. (It is interesting to note
that the two organizations which fought hardest against the repeal of Prohibition were the
Women’s Christian Temperance Union and the Mafia!)

There is a compelling reason why organized crime must base its support in black market
activities. Wealth does not exist in nature but must be created. The only means of creating wealth
is value - production and free exchange - the manufacture and trade of some desired good or
service. One may obtain wealth directly, by productive work, or one may obtain it indirectly, by
looting it from a producer, but the wealth must be created by production in the first place in order
to exist at all. The looter is a parasite who will not create his own wealth and its consequent
power but is dependent on some producer to furnish it. This means that looting cannot be a
profitable business in the long run (to the extent that producers are not disarmed by a false
ideology - such as pacifism - or by being legally prohibited from acting in their own defense).
Producers are the ones who hold the source of wealth and power, and in any long- range contest
between looters and non-disarmed producers the weight of wealth and power must be on the side
of the producers.
This is the reason that an organized hoodlum gang cannot support its large size and relatively
complex structure by acts of aggression alone; the risk inevitably outweighs the profit (and this
would be particularly true in a society where value-protection was a service sold in a competitive,
free market). Such a gang can only support itself by obtaining its wealth directly, through
production and trade in some black market. Thus, organized crime depends for its existence on
black markets which are the result of government prohibitions. Without government-
...

caused black markets, criminals would have to operate singly or in small groups because they
would have no area of production and trade to furnish support for large and complex
organizations. So it is clear that the criminal element in a laissez-faire society couldn’t possibly
support a “Mafia” defense company.

It is also worth noting that much of the success of organized crime in our present society is due to
the alliances which crime bosses are able to make with government officials On nearly all levels.
From the $50 pay-off to the local cop, clear up to the $10,000 contribution to the senator’s
campaign hind, organized crime regularly protects itself by buying off governmental opposition.
In a laissez-faire society, aggressors would not only be scatteted, weak, and unorganized, they
would find it next to impossible to buy off free-market protection and arbitration agencies. The
customers of a defense company don’t have to keep patronizing it if they find out that some of its
employees have been accepting payoffs from aggressors. They are free to do what citizens can
never do - find some other agency to protect them. A free-market agency, unlike a government,
couldn’t afford to have underworld connections, even with the small and unimportant
“underworld” of a free society. When the news media revealed its shady dealings, its customers
would all desert it, and the aggressors wouldn’t be able to keep it in business for the simple
...

reason that the criminal element in a laissez-faire society would be too small and weak to support
a “Mafia” defense company.

But even though a “Mafia” defense company could not exist in a free-market society, wouldn’t it
be possible for some respectable defense agency to attain a position of monopoly and then begin
exercising its powers in a tyrannical manner? Of course thcre is some possibility that any social
structure can be subverted - anything which some men can build, other men can find a way to
destroy. What obstacles would a would-be tyrant (or group of tyrants) have to overcome in order
to gain control of a free society?

First, the would-be tyrant would have to gain control of the defense company he intended to use,
and it would have to be one which controlled a fairly strong army or had the means to build one.
Even if he inherited the business lock, stock, and bankroll, he would still not control it in the
same way that a government controls its bureaucrats and armies, because he would have no way
of guaranteeing his employees immunity from retaliation if they committed coercive acts for him.
Nor would he be able to hold his employees (as a government can with its conscript soldiers) if
they objected to his orders or feared to carry them out.

But if this would-be tyrant were clever and subtle enough either to gain the loyalty of his
employees or to keep them from realizing what he was about, he would still have only begun his
task. In order to have sufficient power to carry out his schemes, he would have to gain monopoly
or near-monopoly status. He could only do this by becoming the most efficient and excellent
entrepreneur in his field; and he would have to continue this excellence, even after he had gained
monopoly status, to prevent other large businesses from diversifying into his field to reap the
benefits of higher profit margins. This means that our would-be tyrant couldn’t charge his
customers high prices in order to amass a fortune to buy weapons and hire soldiers to further his
schemes of conquest.

In fact, the would-be tyrant’s customers would probably be more of an obstacle to his ambitions
than his employees would. He couldn’t extract taxes from them, as a government does, and, at
least until he reached the stage of full power, he couldn’t even force them to buy his service and
support his company at all. A market relationship is a free relationship, and if a customer doesn’t
like a company’s service or mistrusts its goals, he is free to take his business elsewhere, or to start
his own competitive company, or to do without the service altogether and just provide for
himself. Furthermore, customers aren’t imbued with the citizens’ spirit of patriotic fervor and
obedience and are, thus, much harder to lure into foolish collectivistic endeavors (such as
“national unity”). Free men aren’t in the habit of leaping like fools and sheep to “defend the Flag”
or to “sacrifice for the Cause.” In these vitally important respects, the free-market system differs
fundamentally and completely from a government system of any sort.

The would-be tyrant might try to build his forces in complete secrecy until he was ready to make
his coup, but he would find this far from easy. Imagine amassing the cash to buy guns, tanks,
airplanes, ships, missiles, and all the other paraphernalia of modern warfare. Imagine finding such
items and making deals to purchase them or have them manufactured. Imagine hiring and
equipping a large force of soldiers and training them for months. Then imagine doing all this in
complete secrecy while alert members of the news media were continually nosing around for a
big story! If you can imagine such a thing, your ability at fantasizing is remarkable, indeed.

The fear of a tyrant is a very real one, and, in the light of history, it is well justified. But, as can
be seen from the foregoing examination, it applies to a governmentally run society rather than to
a free society. The objection that a tyrant might take over is actually a devastating argument
against government.

12
Legislation and Objective Law
It has been objected by advocates of government that a laissez-faire society, since it would have
no legislative mechanism, would lack the objective laws necessary to maintain social order and
justice. This is to assume that objective law is the product of the deliberations of some legislative
body, and this assumption, in turn, springs from confusion about the meaning and nature of law.

The adjective “objective” refers to that which has an actual existence in reality. When used to
refer to the content of one’s mind, it means ideas which are in accordance with the facts of reality.
Mental objectivity cannot be “apart from the human mind,” but it is the product of perceiving the
facts of reality, integrating them in a non-contradictory manner into one’s consciousness, and,
thereby, reaching correct conclusions. The truth to be noted here is that the mind does not create
reality; the function of human consciousness is to perceive reality - reality is the object, not the
subject, of the reasoning process. (As students of philosophy will recognize, this paragraph notes
the distinction between metaphysical objectivity and epistemological objectivity.)
Objective laws, then, are rules, or principles, which are expressions of the nature of reality; they
are not the expressions of the subjective whims and prejudices of some person or group of people
or of the culture as a whole. An objective law is reality-centered. It springs from the nature of the
entities and processes to which it relates and can never conflict with that nature. For this reason,
an objective law always “works,” while a law based on subjective whim, not firmly tied to reality,
contradicts the nature of that to which it relates and so leads to confusion and destruction.

Because it is reality-centered, an objective law is always understandable to a man using his

reason - that is, it always makes sense. It is also moral when regarding a principle of human
behavior, because it operates in accordance with the nature of man and so acts to further his life,
his welfare, and his interests as a rational being. With regard to human behavior, objective law,
because it springs from the nature of reality - from things as they really are - must be practical,
rational, and moral.

It is true that objective laws governing the nature of human relationships are necessary for the
maintenance of societal order, but to conclude from this that statutory laws formulated by some
legislative body are necessary for societal order is to be guilty of a non sequitur. In order to
understand the nature of this non sequitur, it is necessary to examine two kinds of law - statutory
law and natural law.

A natural law is a causal attribute which governs an entity’s actions, which attribute is inherent in
that entity’s specific nature (the adjective “natural” means “of or pertaining to the nature of” - to
what a thing is in reality). Since it is inherent in the nature of the entity to which it relates, natural
law is always objective. It cannot help being reality-centered, because it is inherently inseparable
from the nature of a real thing. This means that it’s practical - it must always “work,” because it
relates to things as they really are (it could hardly relate to things as they really aren’t). Natural
law can’t be repealed, nor does it have any loopholes. A man who “breaks” a natural law does so
at his own peril. Immediately or eventually, it will break him.

A familiar example of natural law is the law of gravity. It is the nature of the earth to attract other
bodies to itself, so when you drop something, it falls. This law is objective, universal, and
inescapable. You may fly an airplane by making use of the natural laws of aerodynamics, but you
have not thereby contradicted or repealed the law of gravity - the earth is still pulling downward
on your plane, as you will discover if your engine fails.

Natural law applies to man as well as to his environment, because man is also an entity with a
specific nature. Some actions are possible to man, and some are not. He can walk and run, but he
can’t turn into a pine tree. Since he is a being with a specific nature, man requires a specific
course of action for his survival and well-being. He must eat or he will starve. His body requires
certain substances to remain healthy - vitamin C to prevent scurvy, for example. If he wants to
know something, he must use his senses and his mind to learn it. If he wants the great survival-
values of friendship, trade, division of labor and sharing of knowledge, he must seek and merit
human companionship.

While it is generally recognized that man’s physical and even his mental nature are subject to the
rule of natural law, it is just as generally assumed that the area of morality, and specifically moral
human relationships, is completely outside the scope of natural law. This assumption is held
tacitly, rather than being identified and defended, simply because it can’t be rationally defended.
It is completely foolish to assert that man is a being with a specific nature and therefore subject to
the rule of principles derived from that nature in all areas except when he deals with other men.
..
Do men cease to have a specific nature when they come into relationship with other men? Of
course not!

Natural law does apply to human relationships, and it is just as objective, universal, and
inescapable in this area as in any other. The proof of this is that actions have consequences in
...

the area of human interaction as surely as in the area of human medicine. A man who swallows
poison will become ill (even if he has complete confidence that the poison is nothing more than
vitamin pills). A man who aggresses against others will be distrusted, avoided, and probably
made to repay his victims (if some government doesn’t interfere). A man who cheats his
customers will be driven out of business by his more reputable competitors. The consequences of
“breaking” natural law cannot be avoided. No matter how cleverly a man schemes, he will suffer
if he insists on acting in a manner which contradicts the nature of human existence. The
consequences may not be immediate, and they may not be readily apparent, but they are
inescapable.

The free market is a product of the working of natural law in the area of human relationships,
specifically economic relationships. Because man’s survival and well-being are not given to him,
but must be achieved, men act to maximize their welfare (if they didn’t they couldn’t keep on
living). To maximize their welfare, they trade with other men, and when they trade, each man
tries to get the best possible “deal.” Buyers bid against each other and push prices up. Sellers bid
against each other and push prices down. At the point where the two forces meet, the market price
is set, and everyone who wants to trade at that price can do so without creating surpluses or
shortages. Thus, the law of supply and demand, and all other market laws, are really natural laws,
directly derived from the nature and needs of that specific entity, man. The fact that market laws
are natural laws explains why the free market works so well without any outside regulation.
Natural law is always practical - it always “works.”

Government is an artificial construct which, because of what it is, is in opposition to natural law.
There is nothing in the nature of man which demands that he be governed by other men (if there
were, then we would have to find someone to govern the governors, for they, too, would be men
with a need to be governed). In fact, the nature of man is such that, in order to survive and be
happy, he must be able to make his own decisions and control his own life . . . a right which is
unavoidably violated by governments. The ruinous consequences of government’s inescapable
opposition to natural law are written in blood and human degradation across the pages of all
man’s history.

The operations of natural law in human relationships are much less apparent in a governmental
society than in a laissez-faire society, because government, in an effort to get something for
nothing, tries to dissolve or ignore the laws of cause and effect and so obscures the consequences
of many actions (particularly bad ones). Politicians want power which they have no right to and
plaudits which they have not earned, so they promise money which isn’t theirs and favors they
have no business granting. For instance, they promise to raise the wages of labor (a thing which
only an increase in production can do, since the money for wages can’t come out of nothing).
When they pass a minimum wage statute, they seem to have bypassed natural- economic law, but
actually they’ve only obscured it. Employers are forced to compensate for the wage increases to
some of their employees by laying off others, which creates a class of jobless, hopeless poor.
Wage rates go up for some at the expense of falling to zero for others. Natural law can’t be
legislated out of existence, no matter how hard the politicians try, because it is inherent in the
nature of things. Natural law is just as operative in a governmental society as it would be in a
laissez-faire one; it is simply harder to trace because of the complicated meddling of the
bureaucrats.

The tacit assumption that natural law does not apply to human relationships has led men to the
belief that society must have a system of statutory laws to “fill the gap” and maintain social order.
At the very least, it is believed that statutory law is necessary to codify natural law so that it will
be objective, of universal application, and easily understood by all.
Statutory law is a code of rules established and enforced by governmental authority. Any
particular statutory law may be based on an objective principle, or it may be based on a principle
which is contrary to the nature of reality. It may even be a range-of-the-moment measure with no
basis in any sort of principle at all (such laws are characteristic of governments when they feel
themselves to be in crisis situations). There is nothing which can be built, into the nature of a
government which will guarantee that all, or even a majority, of the laws it passes will be based
on objective principles - in fact, history shows that the reverse is usually the case; most laws are
based on the subjective whim of some politician.

Statutory laws which are not based on objective principles are immoral and inescapably harmful;
anything which is in opposition to reality - to things as they really are - can’t work. Laws which
are based on objective principles are merely a legal restatement of natural law, and are thus
unnecessary. A man can identify a natural law, and he can even write it down in a textbook for
other men to understand, but he cannot “pass” it because it already exists - inescapably. Once the
natural law has been identified and understood, nothing more can be added by restating it in legal
form and “making it compulsory.” It already is compulsory, by its very nature.

A statutory law, even one based on an objective principle, must be written before the occurrence
of the crimes which it is designed to inhibit or punish. Since every crime is committed by a
different individual in a different set of circumstances, the law cannot possibly be made to fit all
cases (except, perhaps, by making it so flexible as to nullify it altogether). This means that,
although the principle behind the law was objective (reality-centered), the application of the law
to specific circumstances cannot be objective. An objective principle is firm and unchanging
because it is rooted in the nature of things, but the application of this unchanging principle must
vary to fit the circumstances of various cases. Unless the application fits the case, it is non-
objective and, therefore, unjust.

No matter how learned a body of legislators or how long and assiduously they debate, they can
never reach the state of omniscience necessary to predict and allow for every circumstance of
every individual case which will ever come within the jurisdiction of their law. In fact, by the
very act of writing down the provisions of the law and making them binding on everyone in an
equal manner regardless of individual variations, legislators freeze the application of their law so
that it cannot be objective. Thus, no statutory law, even if based on objective principle, can be
objective in its application.

Legislators are aware of the necessity of making laws flexible to fit a range of cases, and they do
their best to solve this problem. They try to foresee and provide for as many situations as possible
as they write each law, and they usually stipulate flexible punishments (a prison sentence of from
two to ten years, for instance) which leaves the final decision up to the judge of each case. This
sincere attempt, however, has the inevitable effect of making the law voluminous, complex,
unwieldy, and difficult to interpret or even read. Legislation becomes bogged down in reams of
words and men are often convicted or released on the basis of nothing more than the technical
interpretation of an obscure wording in some statute. In an effort to be sufficiently flexible and
yet totally precise, legislators often write laws of such appalling and complicated intricacy that
even lawyers (who prosper in direct proportion to the size and complexity of the legal system) are
confused. There are tens of thousands of complicated statutes, each in legal terms so specialized
that it might as well be in a foreign language, and yet the puzzled citizen is curtly told that
ignorance of the law is no excuse!

The attempt to make legislation flexible enough to fit individual cases also nullifies the
universality of the law. A judge who has the option of giving a sentence which may be anywhere
from two to ten years has nothing to guide him in his choice except his own private beliefs. Some
judges are habitually lenient, and some habitually harsh, so that the fate of the accused usually
depends as much on the personality and mood of his judge as on the actual circumstances of the
case. Changing from a system of punishment in the form of prison sentences to a system of
justice in the form of reparations payments to the victims would do nothing to solve this problem
as long as the legal-judicial mechanism remained a function of government rather than of the free
market. Free-market arbiters are guided in their choices by the desires of consumers, with profit
and loss as a built-in “correction mechanism.” But government judges have no signals to guide
their decisions. Even if they wanted to please their “customers,” they would have no signals to
tell them how to do so. A government judge. faced with a flexible penalty, can have nothing to
guide him but his own opinions and whims.

Natural law, as applied to human relationships in a free-market context, is objective in both its
principles and its application. While the principles of natural law are unchanging, the application
of these principles always fits each case, because the natural law involved in any case is derived
from the nature of each individual and the unique situation in that particular case. When an
aggression is committed, it results in a loss to the victim. This loss is specific and individual for
each case. The victim lost a sum of money, or his car, or a leg, and reparations payments are
based on the worth of that specific value. In setting the worth of losses (particularly non-
exchangeable ones) the arbiters are governed by the value-structure of the consumers who
purchase their service, and they have profit and loss signals to guide them. Each case is decided
on its own merits. The aggressor’s fate is determined on the basis of his own past and present
actions - it isn’t arbitrarily decided by a group of elected strangers acting without any knowledge
of the particular case (and even before it happened).
Natural law, as applied by the free market, is also very short, simple, and easily understood.
There is only one basic rule of just human relationships: No man or group of men may attempt to
deprive a man of a value by the initiation of physical force, the threat of force, or any substitute
for force (such as fraud). All other rules, such as prohibitions against murder, kidnapping, theft,
counterfeiting, etc., are merely obvious derivatives of this one basic natural law. A man who
wants to know whether he is acting properly toward his fellow man doesn’t need a library of legal
tomes and a university education. All he needs to do is ask himself one simple question, “Am I
causing anyone a loss of value by an act of coercion?” As long as he can honestly answer no to
that one question, he need fear no law or retaliatory force.

This basic natural law of human relationships is already tacitly understood by almost everyone
throughout the world. It finds common expression in such terms as, “It’s always wrong to start
the fight.” It is the widespread and almost automatic compliance with this natural law by the
majority of people which accounts for the fact that human relationships have not completely
disintegrated into bloody chaos in spite of the constant push of governments in this direction.
Most people live with their neighbors quite peacefully on the basis of this natural law, and they
very rarely call on a policeman or judge to take care of their disagreements. And they do so, for
the most part, without even consciously identifying the natural law which guides their actions.
The assumption that statutory law is necessary to a society involves the more basic assumption
that a legislative body has the moral right to pass laws which are binding on the rest of the
population. Advocates of democracy claim that the fact that legislators are elected by the people
gives them the right to “represent the people” in matters of legislation. But “the people” is a
collectivistic concept; there is no such entity as “the people” which lives, breathes, has interests,
opinions and goals. There are only individuals. Do legislators, then, have a moral right to
represent the individuals “under their jurisdiction?”

In a democracy, the function of the legislature is, theoretically, to discover what is in “the public
interest” and to pass legislation governing people accordingly. But just as there is no such entity
as ‘the people,” there is no such thing as “the public interest.” There are only the multitude of
individual interests of all the great variety of people who are subject to the government. So when
legislators pass a law “in the public interest,” they are actually favoring the interests of some of
their citizens while sacrificing the interests of others. Since legislators, being elected officials,
need money and votes, they usually favor the interests of those with political pull and sacrifice
the interests of those without it. Also, since government’s only source of gain is its productive
citizens (the non-productive ones have nothing for government to take), the competent are usually
sacrificed in favor of the incompetent, including the politicians.

This type of injustice is inescapably built into the structure of government. A government is a
coercive monopoly which forces everyone in its geographical area to deal with it. As such, it
must prevent its citizens from freely choosing between competing sellers the services which suit
them best. Every citizen is forced to accept government services and live by government
standards, regardless of whether they are in his interest or not.

No matter how “democratic” and “limited” a government is, it cannot actually represent the
interests of each one of the multitude of diverse individuals who are its citizens. But these
individual interests are the only interests which really exist, because there is no such entity as “the
public” and, therefore, no such thing as “the public interest.” Since government can’t represent
the interests of each of its citizens, it must exist by sacrificing the interests of some to the alleged
interests of others; and sacrifice always decreases the total store of value,

In a free market, there is no such thing as a coercive monopoly. Every man is free to pursue his
own interests as long as he accords the same right to everyone else, and no one’s interests are
sacrificed to “the public good” or “the will of the majority.” In a laissez-faire society, a man who
wants to buy a good or service may patronize any business whose merchandise or service pleases
him. If he prefers Brand X, he is not forced to buy Brand Y because 51% of his fellow consumers
prefer Y and the system allegedly can’t be run without unanimity.

But even if they could avoid sacrificing the interests of citizens, elected legislators still wouldn’t
be justified in making laws which were binding on anyone other than themselves. Opinions, even
majority opinions, don’t create truth - truth is true, regardless of what anyone thinks about it.
Fifty million Frenchmen can be wrong, and frequently are. So, if the majority of voters are
completely wrong in their support of a candidate, or the majority of legislators are terribly
mistaken in their judgment of a law, their majority opinion doesn’t change the fact that they are
wrong. It is sheer superstition to believe that if enough people (or, perhaps, enough learned and
influential people) think a thing is so, this will make it so. A law may be passed by a majority of
legislators who were elected by a majority of citizens, and yet it may very well be immoral and
destructive despite the majority’s collective delusions to the contrary. And no group of people,
even if they are in the majority, have the right to force an immoral and destructive law on anyone.
Some advocates of “limited government” have attempted to get around this problem by
stipulating that the government must be limited to a very strict constitution to keep it confined to
its “proper” functions and prevent it from passing immoral and destructive laws. But this is to
ignore the fact that those who write the constitution and those who enforce it must be elected by
majority vote (or else appointed by those who are elccted). A constitution is only as good as the
men who write and enforce it, and if majority opinion can’t create truth in matters of legislation,
It can’t create truth in matters of constitutional formulation and interpretation, either. If it is
wrong to employ the mass opinion-mongering method of voting to determine the policies of a
government, it is even more wrong to use it to determine the form and structure of that
government.

Besides, the idea of a written constitution as a social contract between the people and their
government is a myth. A contract is only binding on those who sign it, which means that a
contract between the people and the government would have to be signed by every citizen in
order to be binding on “the people.” The Constitution of the United States wasn’t even signed by
the citizens who were alive at the time it was written, let alone by all the millions born later who
are supposedly bound by it.25 if one were to institute a constitution and have it signed by every
individual who wished to be bound by it, one would also have to admit the right of those who did
not agree to refuse to sign and even to make their own arrangements for their protection, in which
ease one would have, not a government, but a business In competition with other businesses in a
free market.

25
For an excellent development of the invalidity of the U. S. Constitution, see NO TREASON: The Constitution of No
Authority, by Lysander Spooner. Available from Rampart College, 104 West Fourth St., Santa Ana, Calif. 92701.

Government laws and constitutions can never be either right or practical. Statutory law, which is
supposed to codify natural law in order to make it objective, of universal application, and easily
understood, does just the opposite of all three. Natural law is objective in both its principles and
its application because it is reality-centered and derived from the nature of the entities involved in
each case. Statutory law, even when based on objective principles, cannot possibly be objective in
its application because it can’t vary with varying cases. Natural law is universally applicable
because it is part of the very nature of things, and nothing can be separated from its own nature.
Statutory law cannot be universally and equally applicable because if written inflexibly it won’t
fit individual cases, and if written flexibly it leaves judges with nothing to guide their decisions.
The natural law of human relationships is easily understood and can be stated in one brief
sentence. Statutory law is a writhing mass of impenetrable complexity, and it cannot avoid being
so because it must attempt to fit a multitude of varying circumstances which haven’t even
happened yet.

Because the free market is a product of the working of natural law, it facilitates the application of
natural law to any field in which it is involved. The rules which would govern the businesses of
protecting values, arbitrating disputes, and rectifying injustice are merely outgrowths of general
economic law, which is an outgrowth of natural law. The same economic rules which would
guarantee consumers in a free market the best possible products, service, and prices in their
grocery stores and which would protect them from dishonest and unscrupulous drug
manufacturers, would work in the areas of protection, arbitration, and rectification. Natural law
doesn’t give up in puzzled helplessness just because some particular area has always been
controlled by political bureaucrats.
Free men, acting in a free market, would manage their affairs in accordance with natural law. The
market is, itself, a product of natural law and, therefore, acts to penalize those who “break” that
law. Statutory law is a clumsy, anachronistic, and unjust hindrance and is no more necessary to
regulate the affairs of men than are kings and tribal witch doctors.

13
Foreign Aggression
Many people ask, “But how in the world could a laissez-faire society deal with aggression by
foreign nations, since it would have no government to protect it?” Behind this question are two
unrealized assumptions: first, that government is some sort of extra-societal entity with resources
of its own - resources which can only be tapped for defense by the action of government - and,
second, that government does, in fact, defend its citizens.

In reality, government must draw all its resources from the society over which it rules. When a
governmentally controlled society takes defensive action against an aggression by a foreign
power, where does it get the resources necessary to take that action? The men who fight are
private individuals, usually conscripted into government service. The armaments are produced by
private individuals working at their jobs, The money to pay for these armaments and the pittance
doled out to the conscripts, as well as the money to pay the salaries of that small minority
comprising the other members of the armed forces, is confiscated from private individuals by
means of taxation. Government’s only contribution is to organize the whole effort by the use of
force - the force of the draft, taxation, and other, more minor coercions, such as rationing, wage
and price ceilings, travel restrictions, etc. So, to maintain that government is necessary to defend
a society from foreign aggression is to maintain that it is necessary to use domestic aggression
against the citizens in order to protect them from foreign aggression.

In spite of the obvious immorality of forcing men to protect themselves against force, some
people still maintain that a coerced defense is more efficient than a willing one and is, therefore,
permissible or even necessary in an emergency situation such as war. A brief examination will
show the fallacy of this variation of the moral/practical dichotomy. The success of any endeavor,
including war, depends on the amount of thought and effort put into it by those involved. Under
the pressure of force, a man may be induced to put forth a great deal of effort and even a little
thought, but his reluctant, fear-driven exertions can’t compare in efficiency and productivity with
the ambitious and tireless efforts of a free man striving to accomplish something he really wants
to get done. The man who works enthusiastically not only works more efficiently, he also uses his
mind to discover new and better ways of reaching the goal, and such innovation is the key to
success.

Furthermore, a system of force is always wasteful of resources, because the more unwilling is the
victim of the force, the more energy must be diverted to keeping him in line and the less is left to
accomplish the task. Men who are forced to do what they don’t want to (or not to do what they do
want to) are amazingly good at devising devious and complicated ways to cheat on the system
which enslaves them. This is why even the most totalitarian of governments find that they cannot
wage war without huge propaganda efforts aimed at convincing their own people of the justice
and necessity of the war.

Freedom is not only as moral as governmental slavery is immoral, it is as practical as government

is impractical. It is foolish to suppose that men would not organize to defend themselves, and do
so very effectively, if they were not forced to. Men are not so blind that they can’t grasp the value
of freedom, nor so indifferent to life that they will not defend their values. Nor are they so stupid
that they need politicians, bureaucrats, and Pentagon generals to tell them how to organize and
what to do. The freer people are, the more efficiently they will perform. This being true, a free-
market system of defense against foreign aggression can be expected to be very effective, in
contrast to a governmental system of comparable size, resources, and maturity.

The belief that society couldn’t be defended without a government also assumes that government
does, indeed, protect the society over which it rules. But when it is realized that government
really has nothing except what it takes by force from its citizens, it becomes obvious that the
government can’t possibly protect the people, because it doesn’t have the resources to do so. In
fact, government, without the citizens on whom it parasitizes, couldn’t even protect itself!
Throughout history, people have been talked into submitting to the tyrannies of their governments
because, they were told, their government was vitally necessary to protect them from the even
more terrible depredations of other governments. The governments, having put over this bit of
propaganda, then proceeded to cajole and coerce their citizens into protecting them! Governments
never defend their citizens; they can’t. What they do is make the citizens defend them, usually
after their stupid and imperialistic policies have aggravated or threatened another government to
the point of armed conflict. Governmental protection against foreign aggression is a myth (but a
myth which, sad to say, most people actually believe in).

Government can’t defend its citizens, and it is foolish and sacrificial for the citizens to defend a
coercive monopoly which not only enslaves them but makes a practice of provoking conflicts
with other coercive monopolies - i.e., with other governments. In the matter of foreign
aggression, government is far more of a liability than an asset, and people would be much better
-off with a free-market system of defense.

The free-market means of defense against foreign aggression would differ in scope and intensity,
but not in principle from the free-market means of defense against domestic aggression (such as a
gang of local hoodlums). In either case, the principle involved is that each man has both the
liberty and the responsibility to defend his own values to the extent he considers it to be in his
own self-interest. Morally, no man may be prevented from defending himself and his values, nor
may he be forced to defend them if he doesn’t want to do so. If some of the people in an area feel
that one of their neighbors is not “carrying his fair share of the - defense burden,” they are free to
use rational persuasion to attempt to convince him that it would be in his interest to assume his
own responsibility of self-defense. They may not, however, extort his compliance by any use or
threat of force . . . even if they are clearly in the majority. Nor would it be practical for them to do
so. A man -who is coerced into defending his neighbors against a foreign aggressor may decide to
spend part of his efforts on defending himself against his coercive neighbors instead.

In a laissez-faire society, defense against foreign aggression would be offered for sale on the -free
market, just as would any other type of defense. Because of the close natural connection between
insurance companies and defense agencies, it would probably be most feasible to sell defense
against foreign aggression in the form of insurance policies. That is, insurance companies would
sell policies agreeing to protect their insureds against foreign aggression and to indemnify them
for losses resulting from such aggression (the contract - to be void, of course, if the insured
provoked the conflict by his own aggressive actions). The insurance companies would see to it
that whatever defenses were necessary to prevent-the losses were provided, and they would make
sure that a very efficient job of defense was done, since any losses would cost them large sums of
money.26
26
This is similar to the relationship which would prevail in a laissez-faire society between fire insurance and fire
extinguishing companies. Insurance companies would sell fire insurance and would then either maintain their own
facilities to put out fires or buy the services of independent fire extinguishing companies for their insureds (and anyone
else who wanted to pay a fee for the services when used). Because the various insurance companies would find it
convenient to- have contractual agreements to buy each other’s fire extinguishing services when more - feasible than
using their own, it would not be necessary to have -a fire - station for each insurance company in every area.

Critics have questioned whether insurance companies• could afford to pay off all the claims
caused by the widespread destruction of a modern war, should their defenses be overpowered. If
the war were lost, of course, neither the insurance company personnel, nor their insureds, nor
anyone else would be in a position to carry on normal financial dealings. If it were won, the
insurance companies would have to either pay off or go out of business. In determining whether
an insurance company would be financially able to pay, there are two important considerations -
the extent and intensity of the damage, and the extent of the insurance company’s assets.

The amount of damage is impossible to predict in advance of the actual situation, but there is no
reason to assume that it would necessarily be so severe as to include the total destruction of all
major cities. Governments usually launch wars of destruction only against areas which, because
of the actions of their own governments, pose a threat to the attacker. A laissez-faire society,
having no government to make imperialistic threats, would be unlikely to become the object of a
war of destruction. A foreign government might decide to enrich itself by annexing the free
territory, but it would attempt to do so by a war of conquest rather than by a war of destruction.
Wars of conquest are much less devastating and call for the restrained use of conventional
weapons rather than the use of nuclear weapons. The simple reason for this is that the conqueror
stands to reap a great deal less profit from rubble and corpses than he does from factories and
slaves.

Another reason to assume that a war against a laissez-faire society would not be totally
destructive of that society is that effective defenses against modem warfare undoubtedly can be
devised. The fact that governments have not yet devised such defenses only proves that
governments are both profoundly inefficient and more interested in imperialistic power grabs
than in defending their citizens. Given the efficiency of the free market and the incentive of the
profit motive (because people would be willing to pay for effective defense “hardware” if they
were allowed to buy it), innovators would doubtless come up with many defensive devices far
superior to the military war machine now imposed upon us.

The second consideration in determining insurance companies’ ability to pay claims arising from
foreign aggression is the extent of their assets. Even in our society, where they are hamstrung by
governmental regulations, insurance companies manage to hold vast and varied assets, spread
over wide financial and geographic areas. They also make a practice of dividing large risks
among various companies so that a sudden, extensive amount of destruction can be paid for
without bankrupting any of them. This is the reason that insurance companies can pay out the
millions of dollars in claims which arise from major hurricanes, tornadoes, earthquakes, etc., and
can do so again and again without being driven out of business. In a laissez-faire society,
insurance companies should be even better based financially than they are in our governmentally
crippled economy. This means that an attacker would have to succeed in wiping out a large
portion of the assets of the whole society in order to put the insurance companies out of business.
But there is no reason to assume that a foreign government would attack the whole free area at
once (since, without a government, it wouldn’t be a single political entity) or that it would
succeed in destroying most of it if it did. Although there is no absolute guarantee that insurance
companies would be financially able to pay off the claims arising from an attack by a foreign
power, the chances that they would are very good.

The actual defense of a laissez-faire society would be furnished by defense companies (both
independent ones and those which were subsidiaries of insurance companies). These defenses
would consist of whatever military personnel and materiel were necessary to defeat the forces of
any nation threatening (or potentially threatening) the insureds. Such defenses would vary in size
and type according to the threat posed, and they could include anything from spies and foot
soldiers to radar networks and defensive missiles.

Since the development and maintenance of modem weaponry is quite expensive, all but the
largest insurance companies would probably pool their efforts and resources under competitive
pressure to provide the best possible protection at the lowest cost. For the same reasons of
efficiency, they would tend to purchase all their foreign-aggression defense needs from a few
outstanding companies which could cooperate closely with each other. Competition between the
defense companies to get such profitable business would foster the development of the most
powerful and efficient defense system rationally warranted. Technological innovations which are
at present unforeseeable would constantly upgrade its safety and effectiveness. No governmental
system, with its miles of red tape and built-in politicking, pork-barreling, wire-pulling, and
power-grabbing could even remotely approximate the potency and efficiency naturally generated
by the free-market forces (which are always moving to meet demand).

Those who doubt that “the private sector” of the economy could sustain the expense of a free
enterprise defense system would do well to consider two facts. First, “the public sector” gets its
money from the same source as does “the private sector” - the wealth produced by individuals.
The difference is that “the public sector” takes this wealth by force (which is legal robbery) - but
it does not thereby have access to a larger pool of resources. On the contrary, by draining the
economy by taxation and hobbling it with restrictions, the government actually diminishes the
total supply of available resources. Second, government, because of what it is, makes defense far
more expensive than it ought to be. The gross inefficiency and waste common to a coercive
monopoly, which gathers its revenues by force and fears no competition, skyrocket costs.
Furthermore, the insatiable desire of politicians and bureaucrats to exercise power in every
remote corner of the world multiplies expensive armies, whose main effect is to commit
aggressions and provoke wars. The question is not whether “the private sector” can afford the
cost of defending individuals but how much longer individuals can afford the fearsome and
dangerous cost of coerced governmental “defense” (which is, in reality, defense of the
government, for the government . . . by the citizens).

A major portion of the cost of defense against foreign aggression in a laissez-faire society would
be borne originally by business and industry, as owners of industrial plants obviously have a
much greater investment to defend than do owners of little houses in suburbia. If there were any
real threat of aggression by a foreign power, businessmen would all be strongly motivated to buy
insurance against that aggression, for the same reason that they buy fire insurance, even though
they could save money in the short run by not doing so. An interesting result of this fact is that
the cost of defense would ultimately tend to be spread among the whole population, since defense
costs, along with overhead and other such costs, would have to be included in the prices paid for
goods by consumers. So, the concern that “free riders” might get along without paying for their
own defense by parasitically depending on the defenses paid for by their neighbors is groundless.
It is based on a misconception of how the free-market system would operate.
The role of business and industry as major consumers of foreign-aggression insurance would
operate to unify the free area in the face of any aggression. An auto plant in Michigan, for
example, might well have a vital source of raw materials in Montana, a parts plant in Ontario, a
branch plant in California, warehouses in Texas, and outlets all over North America. Every one of
these facilities is important to some degree to the management of that Michigan factory, so it will
want to have them defended, each to the extent of its importance. Add to this the concern of the
owners and managers of these facilities for their own businesses and for all the other businesses
on which they, in turn, depend, and a vast, multiple network of interlocking defense systems
emerges. The involvement of the insurance companies, with their diversified financial holdings
and their far-flung markets would immeasurably strengthen this defensive network. Such a
multiple network of interlocking defense systems is a far cry from the common but erroneous
picture of small cities, businesses, and individuals, unprotected by a government, falling one by
one before an advancing enemy horde.

Note, however, that such a defense network would not obligate any individual to contribute
money or effort to any defensive action in which his values were not threatened. Under the
present governmental system of collectivistic defense within arbitrary boundaries, a Californian
would be forced to sacrifice his values and possibly his life in order to defend the State of Maine,
even though he had no interest at all in the matter. At the same time, a man a few miles away in
Quebec, because he was on the other side of a particular river, would have to sit idly by unless his
own government decided to take some action. This is because governmental defense, like any
other governmental action, is and must be collectivistic in nature. With a free-market defense
system, each man acts to defend his own values to the extent he wishes to have them defended,
regardless of what piece of real estate he happens to be occupying. No man is forced to sacrifice
for the defense of the collective system of a coercive gang called government.

A free-market defense system would also make it very difficult for an attacker to obtain a
surrender. Just as a laissez-faire society would have no government to start a war, it would have
no government to capitulate. The defenders would fight as long, and only as long, as they
believed was in their sell-interest. Even the insurance companies and defense agencies couldn’t
negotiate a surrender, because their agreements could bind no one but the persons who actually
signed them. It is interesting to speculate on what an aggressive foreign nation would do if
confronted with such a situation.

In a free-market defense system, the size of the armies and the expenditures for armaments would
be automatically regulated according to the need for them. Consumers, kept informed of the
world situation by the news media and by insurance advertising, would buy more insurance when
aggression threatened, and less when the tensions eased. This would be particularly true of the big
businesses and industries constituting the largest single insurance customers, They would be very
foresighted in their purchase of foreign-aggression insurance, just as they must be foresighted in
all their other dealings. Furthermore, competition would force defense costs to be held down, so
that all armaments would have to be either engaged in necessary defensive uses or disposed of, as
idle armaments would not be worth their keep. No army could grow beyond what the market
would support; and the market would never support an army larger than was actually necessary
for defense, because force is a nonproductive expenditure of energy.

This automatic responsiveness of arms to world situation, with a built-in arms limitation, would
offer several important advantages. First, it would avoid the economic drain of maintaining
standing armies larger than necessary, yet still allow for quick increase in arms when needed.
Second, it would put an end to the dangerous irritations and provocations to foreign nations
which are always incident to maintaining large, imperialistic armies around the world and, thus,
would remove a major source of hostility and tension. Third, it would prevent all the various
meddlings, aggressions, and “brushfire wars” which result from trying to play “world policeman”
and regulate the affairs of everyone on the globe. And fourth, it would guarantee that an
overgrown military machine could never be seized by a would-be dictator and used against the
people of the laissez-faire society themselves (a guarantee which no constitution can possibly
make).

A free-market defense system would also permanently end the danger that some careless or
power-mad politician might “push the button” and bring down on the hapless citizens all the
retaliatory violence of “the other side.” A free-market business wouldn’t gain power by “pushing
the button;” it would lose a tremendous amount of assets, Consequently, any military action by
the free-market protection agencies would be strictly defensive, and undertaken only when all
other means of meeting the threat had failed.

And, along with all its other advantages, a free-market defense system would put a permanent end
to the blood-spattered immorality of the draft. The professional, voluntary defense forces of the
market would be far superior to governmental conscript forces, Conscript armies are terribly
expensive to maintain because of the constant need for training new conscripts to fill the places of
that great and sensible majority who leave as soon as their term is up. Furthermore, conscripts are
notably ineffective and unwilling fighters as compared with volunteers, for obvious reasons Once
again, it is the moral approach which is practical.

Many prophets of doom have cried that there can be no defense against modem missile warfare.
In fact, the danger of such a war is one of the chief arguments advanced in favor of a strong
government. It is said that only by maintaining a strong government can we hope to deter an
enemy attack or successfully meet it when it comes, And, since hundreds of missiles are already
aimed at various parts of the globe and don’t seem likely to be dismantled in the foreseeable
future, we are told that we had better plan on keeping that government strong for a long time to
come and not dream of experimenting with radical ways to improve our society, such as freedom.

Since life doesn’t give any automatic guarantees of safety and success, it is true that even a strong
free-market defense system might be overpowered by an au-out atomic-biological-chemical
attack, should such an attack be launched. But so might a governmental “defense” system, so this
statement doesn’t really say anything about the relative merits of free-market defense vs.
governmental “defense.”

An examination of governmental “defense” shows that it depends on the use of initiated force
against its own citizens and on much propaganda about government-fabricated foreign “dangers,”
and it requires citizens to sacrifice themselves for whatever government officials deem to be the
good of the “public.” The free market permits each man to defend his own values, uses no
initiated force against and requires no sacrifice from customers, and penalizes those who refuse to
live non-coercive lives. Governmental “defense” is unavoidably wasteful and a drain on the
resources of the society. It is also ineffective in protecting the citizen against modern warfare and
is likely to stay that way, because without competition and the profit motive it lacks sufficient
incentive to innovate effectively. In the free market, competition forces businesses to cut costs
and eliminate waste, and it also brings about continual improvements in effectiveness through
technological innovation as businesses struggle to “keep ahead of the competition.”
But worse than its waste and ineffectiveness, governmental “defense” is actually little more than
an excuse for imperialism. The more government “defends” its citizens, the more it provokes
tensions and wars, as unnecessary armies wallow carelessly about in distant lands and
government functionaries, from the highest to the lowest, throw their weight around in endless,
provocative power grabs. The war machine established by government is dangerous to both
foreigners and its own citizens, and this machine can operate indefinitely without any effective
check other than the attack of a foreign nation. If such a war machine is unopposed by the armies
of other nations, it is almost inevitably used to promote rampant imperialism. But if it is opposed
by a war machine of equal strength and deadliness, then a balance of terror ensues, with the
constant threat of a holocaust. Businesses in a free market can’t spare the cash for such perilous
follies, because they gain customers by offering values to free men rather than by threatening
force against disarmed subjects.

Governments don’t really defend their citizen-subjects at all. Instead, they provoke wars, and then
they force the citizens to sacrifice their money, their freedom, and often their lives to defend the
government. Such “defense” is worse than no defense at all!

It is true that the missiles, the deadly chemicals, and the plagues of modem warfare constitute a
very real threat. But these implements of mass destruction were ordered to be constructed by
governments, and these same governments are continually bringing new and more deadly
weapons into existence. To say that we must have a government to protect us as long as these
products of government are around is like saying that a man should keep his cancerous tumor
until sometime in the future when he gets better, because it would be too dangerous to remove it
now!

If collectivism has proved itself inefficient, wasteful, and dangerous in such areas as
transportation and medicine, surely the worst place of all to have it is in the vital area of defense
against foreign aggression. Wars and many other, less destructive kinds of human conflicts are
the natural consequence of institutionalizing man-made violence in the form of governments!

14
The Abolition of War
A few hundred years ago, the devastation of periodic plagues and famines was unthinkingly
accepted as a normal and inescapable part of human existence - they were held to be either
visitations from an indignant God or nature’s means of wiping out “excess population.” Today, in
spite of the volumes of frantically hopeful talk about peace, many people accept the necessity of
wars in the same unthinking manner; or at least they feel that wars will be necessary for the rest
of the foreseeable future. Are wars an unavoidable part of human society? And if not, why have
all the years of negotiations, the reams of theories, the solemn treaties and unions of nations, and
the flood of hopes and pious prayers failed to bring peace? After all the talking, planning and
effort, why is our world filled with more brutal and dangerous strife than ever?

War is a species of violence, and the most basic cause of violence is the belief that it is right or
practical or necessary for human beings to initiate force against one another - that coercion is
permissible or even unavoidable in human relationships. To the extent that men believe in the
practicality and desirability of initiating force against other men, they will be beset by conflicts.
But war is a very special kind of violence - it is “open, armed conflict between countries or
factions within the same country” (Webster), which means an organized use of force on the
largest scale possible and devastation of a breadth and thoroughness which cannot be matched by
any other man-made catastrophe. Such carefully organized, massive, and deliberately destructive
conflict cannot be accounted for simply by men’s belief in the permissibility of initiating force
against other men. There must be some further factor in human beliefs and institutions which
causes millions of people to put such effort into the destruction and subjugation of other millions.

In searching for the cause of war, men have put the blame on everything from a supposed natural
human depravity to the “dialectical necessities of history.” The most popular current scapegoat is
Big Business. We hear of war profiteers, economic imperialism, and the military-industrial
complex, and we are told that businessmen need wars of conquest to gain markets.

It is perfectly true that there is a fascistic alliance between government and many businesses in
our present society and that this league results in the military-industrial-university complex which
firmly supports the government and its imperialistic policies. The question is, what is the cause of
this unholy alliance? Is it a perversion of normally peaceful and non-aggressive government by
greedy businessmen, or is it a perversion of business by government?

The military-industrial complex came about as a result of government’s power to use stick-and-
carrot methods to rule business (which was just one part of the politicians’ efforts to rule
everyone). For a stick, the politicians use anti-trust laws, interstate commerce laws, pure food and
drug laws, licensing laws, and a whole host of other prohibitions and regulatory legislation. Many
years ago, the government succeeded in making regulatory legislation so complex, contradictory,
vague, and all-encompassing that the bureaucrats could fine and imprison any businessman and
destroy his business, regardless of what he did or how hard he tried to obey the law. This legal
chicanery gives the bureaucrats life-and-death control over the whole business community, a
control which they can and do exercise on any whim, and against which their victims have very
little defense.

For a carrot, the politicians hold out large and lucrative governmental contracts. By crippling the
economy with regulations and bleeding it by taxation, the government has drastically cut the
number of large and profitable contracts available from the private sector, which forces many
businessmen to get such contracts from the government or do without them. To stay in business,
businessmen must make profits, and many of them have simply accepted government contracts,
either without bothering to delve into the ethical questions or with the comforting thought that
they were being patriotic. Government’s stick-and-carrot control of business has been going on
for so long that most businessmen accept it as normal and necessary (just as most people accept
taxes as normal and necessary).

During the last hundred years or so, many businessmen have shortsightedly aided the growth of
such fascism. Big industrialists, who saw government intervention as a quick and easy way to
eliminate threatening competition and gain unearned advantages, were often in the forefront of
the forces demanding regulation and control of the market. Government, after all, is an instrument
of force. It can be used by anyone, who can gain temporary control of it, to extort advantages
from his fellowmen. Businessmen have made use of this instrument of force - so have labor
leaders, social planners, racists, pious religionists, and many other societal forces. As long as such
an organized institution of force exists, individuals and pressure groups will use it - if not to gain
an unfair advantage, then to protect themselves from other advantage-seekers.
The present fascistic alliance between government and business, which definitely is aggressive
and imperialistic, is a forced alliance - forced by government and by those who use government’s
power to extort advantages from legally disarmed victims. But if they were separated, which
partner in this would be the aggressively malicious and imperialistic one? Is business or
government the basic cause of aggressions?

Business, when separated from government, is not only non- imperialistic - it is strongly and
uncompromisingly anti-coercive. Men who trade have nothing to gain and everything to lose
from destruction. Wars of conquest do not gain markets for business. The most significant effect
of war on markets is to damage and destroy them by killing and impoverishing multitudes of
people and disrupting the economic life of entire areas. Private enterprise wins markets by the
excellence of its products in competitive trading; it has nothing to gain from imperialism.

Nor does business as a whole gain from war profiteering. Wars are expensive, and the burden of
supporting wars falls heavily on business, both directly and by taking spending money out of the
pocket of the consumer. The vast amount of money poured out to support a war is permanently
gone without bringing any economic return. After you have exploded a hundred thousand dollars
worth of bombs, you have nothing to show for it except a hundred thousand dollars worth of
bomb craters and rubble. Thus the gains made by munitions makers and government suppliers are
more than swallowed up by the losses suffered by business as a whole. Those few who do make
huge fortunes from war do so not because they are businessmen operating in a free market, but
because they have political pull. And their profiteering from war harms all producers (as well as
the consuming public) by hurting the economy as a whole.

Business is a natural opponent of war because businessmen are traders, and you can’t trade amid
falling bombs. An industrialist can gain nothing from the ruins and poverty which are the chief
results of war. Furthermore, businessmen are a society’s producers, and it is always the producers
who must foot the bills.

It is not business which gains from war, but government. Successful wars leave governments with
more power (over both their own citizens and those of the conquered nations), more money (in
the form of plunder, tribute, and taxes), and more territory. The more totalitarian a government,
the more booty it attempts to squeeze from its wars, but all governments, even relatively limited
ones, gain large amounts of power and plunder from successful warfare. Besides this, war is often
ideologically useful to unite the populace behind the government in the face of a “common
enemy.” People can be made to sacrifice more, with less resistance, if they believe they are in
danger of being overrun by the terrible Russians (or the Red Chinese, or Krauts, or Japs, or
“common enemies” ad infinauseum!).

Wars are initiated and carried on by governments. Governments, not private individuals, provoke
massive conflicts by arms buildups and imperialistic territorial grabs. It is rulers, not businessmen
and citizens, who declare wars, draft soldiers, and levy taxes to support them. There is no societal
organization capable of waging a war of aggression except government. If there were no
governments, there would still be individual aggressors and possibly even small gangs, but there
could be no war.

It is not surprising that governments are the source of war when one considers the nature of
government. A government is a coercive monopoly - an organization which must initiate force
against its own citizens in order to exist at all. An institution built on organized force will
necessarily commit aggressions and provoke conflicts. All wars are, in the final analysis, political
wars. They are fought over the question of who is to rule.

So, to abolish war, it is not necessary to attempt the impossible task of changing man’s nature so
that he can’t choose to initiate force against others - it is merely necessary to abolish
governments. This doesn’t mean that the establishment of one or even several laissez-faire areas
will immediately end warfare, because as long as there is one viable and potent government left,
the threat of war will remain and the free areas will need to keep up theft guard. But if a laissez-
faire society were to become a reality throughout the civilized world, war would cease to exist. Is
there any practical hope of such a government-free, war-free situation coming into existence
throughout the world after the establishment of one free area? To answer this question, it will be
necessary to examine the effects which a laissez-faire society would have on the rest of the world.

A laissez-faire society could not have “foreign relations” with the nations of the world in the
same sense that a government does, because each inhabitant would be a sovereign individual
speaking only for himself and not for a collective aggregate of his fellows. Yet in spite of this, a
laissez-faire society would have a profound and inescapable effect on the rest of the world as a
result of its mere existence.

A laissez-faire society would, by virtue of its freedom, be superior to any governmental society in
three key economic areas - scientific research, industrial development, and its monetary system. It
is obvious that the more men are free to pursue any non-coercive interest, to realize the rewards
of their research, and to fully own any property thus earned, the more intelligent effort they will
put into research and the more discoveries will be made. And since the market rewards only
productive research, a free society avoids the tremendous waste of effort and resources inherent
in government-sponsored research programs. Similarly, freedom provides the greatest incentive
to industrial development, as any governmental interference at all constitutes a distortion of the
market. As to the monetary system, government currencies are seldom out of trouble for long,
and the more closely they are controlled, the deeper and more perplexing become their problems.
It is no exaggeration to say that, in a modern industrial society, a banking firm operating on the
free market and issuing money in competition with other such firms would not dare to experiment
with the sort of absurd and disastrous fiscal policies in which governments continually engage.
Any free-market firm which issued a currency as undependable as that issued by most
governments would speedily be run out of business by its more financially sound competitors.

In short, free men can and will build a stronger economy than men who are taxed, harassed,
regulated, legislated, bound - that is, held in some degree of slavery by governments. This
principle can be seen in operation even today in the contrast in economic strengths between the
totalitarian, governmentally controlled Communist bloc natiqns and the less enslaved nations of
the West. Soviet propaganda and the adulations of statist-minded Westerners to the contrary
notwithstanding, the Soviet economy is continually beset with gross mismanagement, critical
shortages, poor quality products, agricultural crises, severe unemployment, and general
confusion. Russia’s “rapid economic growth” is nothing but a myth.27 In fact, it is extremely
doubtful that the Communist tyranny could have survived at all without substantial aid from
governments of the West, especially the U.S.A.28
The American economy, although crippled by government interferences and bilked of billions of
dollars for “foreign aid,” still manages to far surpass the stumbling economy of the Soviet Union,
even though the Soviets have obtained from conquered European countries and American
Governmental aid entire factories, hordes of technicians, streams of strategic goods, and
shiploads of foodstuffs. A comparison of the American and Soviet economies gives a hint of the
vast superiority which a laissez-faire economy would enjoy over any un-free economy. And
military strength is necessarily based on economic strength.

27
For verification, see WORKERS’ PARADISE LOST, by Eugene Lyons.
28
For documentation of this incredible aid, see ROOSEVELT’S ROAD TO RUSSIA, by George N. Cracker.

Because of its economic strength, a laissez-faire society would exercise a profound effect on the
nations of the world even though it would have no government to formulate and carry out a
foreign policy. First, the existence of a free area would cause the rest of the world to experience a
brain drain of such tremendous proportions as to make the brain drain which currently worries the
British look laughable by comparison. As the economy of the laissez-faire society expanded
almost explosively in response to freedom, it would produce a great demand for men of
intelligence and ability, and it would be able to offer such men more - in terms of money, ideal
working conditions, opportunity to associate with other men of ability, and (most important)
freedom - than would any governmentally controlled society. Producers in every nation would
want to move to the laissez-faire society. Many might decide to move not only themselves but
their entire businesses to the free area. They would see that, by escaping taxation and regulation,
they could make greater profits even if they had to pay additional shipping costs and higher
wages. Such an influx of business would cause a high demand for competent labor in the free
area, which would raise wages. It would also tend to make the nations which lost producers and
businesses economically dependent on the laissez-faire society for necessary goods and services
and, therefore, reluctant to attack it.

Governments wouldn’t be able to offer the men of ability in their countries enough to keep them
from flocking by the thousands to the exciting opportunities in the laissez-faire society. If they
wanted to hold such men, the governments would have to hold them by force, as the iron curtain
countries do now, and the experience of these iron curtain countries has shown that men of ability
do not function well under constraint. A brain drain of this magnitude would constitute a
crippling hemophilia for the nations of the world, and the only response the governments could
make to it would be to institute restrictive measures - a move toward tyranny which would also be
crippling - or to disband (which is unlikely, considering the nature of politics).

But a brain drain is not the only hemophilia which the governments of the world would
experience as their citizens became aware of the opportunities in the free area - there would also
be a capital drain. Investors always try to place their capital in areas of maximum profit and
minimum risk (that is, minimum future uncertainty), and one of the greatest sources of future
uncertainty is the power of bureaucrats to issue directives and regulations on any whim. This
means that businesses in a laissez-faire society would be tops on the list of attractive investments
for investors all over the world. Like the brain drain, the capital drain would strengthen the free
area at the expense of the nations; and again, the only response their governments could make
would be further restrictive legislation - which would further weaken their economies - or to
disband.

The existence of a laissez-faire society would also have a profound effect on governmental
monetary systems. Governments commonly sap the strength of their currencies by engaging in
inflationary practices. (They do this because inflation is a sort of sneaky tax which allows the
government to spend more money than it takes in, by putting extra currency into the economy,
thus stealing a little of the real or supposed value of every unit of currency already there.) As tax
burdens become more oppressive, few governments can resist the temptation to circumvent
citizen protest by resorting to inflation. They then protect their shaky currencies from
devaluation, as long as possible, by international agreements which fix the relative value of
currencies and obligate nations to come to each other’s aid in financial crises. In a sense, the main
protection which an inflated currency has is the fact that all the other major currencies of the
world are inflated, too. But the currencies of a laissez-faire society, being subject to the rules of
the market, could not be inflated (inflated currencies would be driven off a free market by sound
ones). Holders of capital naturally want to hold it in the form of the most sound money available,
so they would move to sell government currencies and buy free-market money. This move itself
would further weaken unsound governmental economies, as it would cause a de facto devaluation
of their currencies. It might well precipitate a series of near-fatal financial crises among the
nations. Thus, a government would have to choose between maintaining a sound currency
(necessitating a strict limitation of government functions) or attempting to hedge its currency
about with a wall of restrictive legislation which would paralyze its economy and, at best, would
do little more than postpone its collapse.

These examples show how a sizable laissez-faire society, simply by existing, would amplify
stresses within the nations and compel them to move rapidly toward either complete freedom or
tyranny. The laissez-faire society wouldn’t create these stresses; its presence would merely
aggravate tensions created long ago by the irrational and coercive policies of governments. These
stresses would destroy the precarious equilibrium of all the nations at the same time.

In every nation, there is some degree of conflict between citizens and government. In nations with
relatively limited governments, this conflict may be only minor; but in totalitarian countries it can
amount to a latent civil war between the ruled and the rulers.29 To the extent people realize that
freedom is practical but that it is being denied to them, this conflict is intensified. It is also
intensified by the government’s addition of new restrictive measures, especially if the measures
are passed suddenly without much prior propaganda to prepare the citizenry. The existence of a
successful laissez-faire society would both demonstrate the practicality of freedom and force
governments to take sudden new restrictive measures, thus further amplifying their internal
stresses by setting the people consciously against their governments.

29
See Eugene Lyons’ WORKERS’ PARADISE LOST, page 105.

By demonstrating that government is not only unnecessary but positively detrimental, a

successful laissez-faire society would strip all governments of their mystical sanctity in the eyes
of their citizens. The reason the institution of government has persisted into modern times is that
people submit to its depredations, and they submit because they believe that without a
government there would be chaos. This nearly universal belief in the necessity of government is
tyranny’s strongest defense. Once the idea of the nature of full liberty has been let loose in the
world and its practicality demonstrated, governments will lose the respect of their citizens and
will be able to evoke no more allegiance from them than they could obtain by force. It is ideas,
after all, which determine how human beings will shape their lives and societies.

But government officials don’t give up their power and patronage easily, even when there is a
great popular demand for a reduction in government. In some countries, the idea of freedom
might be strong enough and government weak enough for popular opinion to force a series of
cutbacks in government size and power until the government was a figurehead and finally non-
existent. It is probable, however, that the majority of governments would fight back by becoming
more restrictive and tyrannical; and this is particularly true of countries well along on the road of
government control. So most of the non-free world would degenerate into various combinations
and degrees of tyranny, revolt, and social chaos.

Popular misconception to the contrary, notwithstanding, the degree of a government’s tyranny is

the degree of its vulnerability, particularly in the sphere of economics. Totalitarian governments,
in spite of their outward appearance of unconquerably massive solidarity, are inwardly rotten
with ineptitude, waste, corruption, fear, and unbelievable mismanagement. This is, and must be,
so … because of the very nature of government control.

Government control is control by force, since coercion is the source of government power (the
source of market power is excellence of product and performance). The more totalitarian a
country, the more its citizens must be motivated, not by the incentive of expected rewards (the
profit motive), but by fear. Without freedom to enjoy the rewards of his productivity, a man has
no incentive to produce except his fear of a government gun. But a threat will evoke only that
minimum performance necessary to avoid the threatened harm, and that only insofar as the
threatener is constantly watching.

Even more crippling is the fact that threats don’t produce innovative ideas. A man’s mind can
only belong to him; he is the one person who can order that mind to produce ideas. Fear is
paralyzing; if a threat is strong enough to motivate a man to try to produce an innovative idea, it
will usually generate too much fear for him to think clearly. This is why dictatorships find it
necessary to permit their scientists and other intellectuals a special privileged status with extra
liberties and incentives. They must do this, even though it is extremely dangerous to a tyranny to
harbor intellectuals who are free to think and express even mild condemnation of their rulers.
Any dictatorship must walk a constant tightrope between giving its intellectuals too much
freedom so that they become rebellious, and giving them too little so that they stop producing
ideas. And what is true of intellectuals is true to a lesser degree of all the millions of ordinary,
hard-working individuals whose little ideas of “how to do it better” contribute so much to
economic advancement.

In addition to the initiative-smothering effects of replacing freedom with fear, the inevitable
governmental rules and regulations enmesh and strangle the economy. When free from
interference, the market is always in motion toward equilibrium - that is, toward a condition
which eliminates shortages and surpluses and minimizes economic waste. To the degree the
market is interfered with by governmental controls, it can no longer respond to economic reality
and becomes distorted. Then shortages, surpluses, delays, waste, queues, ration books, high
prices, and shoddy merchandise become the order of the day.

Nor is central planning the answer to such problems. The assumption that someone, or even a
group of someones, could regulate an economy is absurdly naive. The biggest computer ever built
couldn’t begin to handle the volume of data which is automatically dealt with by individual
choices made in the market every day.

Furthermore, this data is based on millions of individual value-choices all made from separate,
individual frames of reference, so the items cannot possibly be measured and compared as
required by a computer. “Central planning” only distorts the market by forcing it into
configurations it would not normally assume and preventing it from being self-correcting. There
is no way for a planned economy to work. The more completely it is planned, the more distorted
and inflexible it will be, and the weaker will be the nation.
Tyranny is, by its very nature, counterproductive and full of internal stresses. The Soviet Union,
for example, has derived its strength almost entirely from the massive amounts of aid furnished it
by the relatively less enslaved countries of the West, particularly the United States of America.
Without this aid provided by taxes confiscated from producers in less tyrannical nations, the
Soviet dictatorship would have collapsed long ago.30

30
This claim is adequately borne out by Werner Keller’s excellent book. EAST MINUS WEST EQUALS ZERO.

Tyranny by itself is impotent because looters don’t produce and producers can’t produce unless
they’re free to do so. The belief that totalitarian nations are naturally stronger than freer ones is an
outgrowth of the moral/practical dichotomy. If that which is moral were, because of its morality,
unavoidably impractical, then the good would necessarily be helpless and disarmed, since the evil
would have all the practicality on its side.
Those who persist, in spite of all evidence to the contrary, in believing that totalitarianism makes
a nation strong are revealing a sneaky admiration for dictatorship. Such an admiration springs
from a psychological dependency which cannot conceive of having to be free and thrown on
one’s own uncertain resources. The psychologically dependent man longs either to be led and
directed in order to escape the responsibility of decision-making, or to dictate to others in order to
convince himself of an efficacy he doesn’t possess.

Because tyranny is necessarily weak and vulnerable, the stresses created within the
governmentally controlled nations by the existence of a laissez-faire society would force them to
move toward either complete liberty or toward impotence and chaos. At the same time, the
dazzling idea that real freedom is both possible and practical would create a surging groundswell
of popular demand for this freedom in nations throughout the world. Governments would lose
support as their citizens lost their irrational patriotism. Thus, the laissez-faire society, by its mere
existence, would weaken its enemies and promote the rise of freedom outside its boundaries,
causing the dismantling of governments and the rise of new free areas.

But the laissez-faire society would spread liberty throughout the rest of the world, not only in a
passive way via the conditions caused by its existence, but actively - by trade relationships. Free
individuals trading with natives of foreign countries would be under no obligation to recognize
the validity of their governments, any more than they would be to recognize the validity of other
kinds of hoodlum gangs. Because they would see governments for what they really were, they
would be psychologically free to defend themselves against these governments. They would obey
the trade restrictions of foreign states only insofar as it was in their interest to do so and would
ignore and disobey them whenever it proved advantageous. They would have no compunctions
about seeing governments topple, since an end of governments always means an increase in
liberty and prosperity.

When free individuals entered into business in territories still under the control of governments,
they would want their foreign holdings protected, just as were the rest of their properties.
Insurance and defense companies, ever on the lookout for new sales opportunities, would offer
this protection (at rates and with stipulations commensurate with the amount of danger involved
in each separate nation, of course). Protection and defense services could apply simply to the
depredations of private criminals. Or, if the government were not particularly strong, they could
also safeguard the protected company from the threat of nationalization, and even from taxation
and regulation.

Picture a small South American dictatorship, weakened by economic stresses and a popular
demand for more freedom, resulting from the existence of a laissez-faire society nearby. What
would the dictator of such a country do if faced by a large and powerful insurance company and
its defense service (or even a coalition of such companies) demanding that he remove all taxes,
trade restrictions, and other economic aggressions from, say, a mining firm protected by the
insurance company? If the dictator refuses the demand, he faces an armed confrontation which
will surely oust him from his comfortable position of rule. His own people are restless and ready
to revolt at any excuse. Other nations have their hands full with similar problems and are not
eager to invite more trouble by supporting his little dictatorship. Besides this, the insurance
company, which doesn’t recognize the validity of governments, has declared that in the event of
aggression against its insured it will demand reparations payments, not from the country as a
whole, but from every individual directly responsible for directing and carrying out the
aggression. The dictator hesitates to take such an awful chance, and he knows that his officers
and soldiers will be very reluctant to carry out his order. Even worse, he can’t arouse the
populace against the insurance company by urging them to defend themselves - the insurance
company poses no threat to them.

A dictator in such a precarious position would be strongly tempted to give in to the insurance
company’s demands in order to salvage what he could (as the managers of the. insurance
company were sure he would before they undertook the contract with the mining firm). But even
giving in will not save the dictator’s government for long As soon as the insurance company can
enforce non-interference with the mining company, it has created an enclave of free territory
within the dictatorship. When it becomes evident that the insurance company can make good its
offer of protection from the government, numerous businesses and individuals, both those from
the laissez-faire society and citizens of the dictatorship, will rush to buy similar protection (a
lucrative spurt of sales foreseen by the insurance company when it took its original action). At
this point, it is only a mailer of time until the government crumbles from lack of money and
support, and the whole country becomes a free area.

In this manner, the original laissez-faire society, as soon as its insurance companies and defense
agencies became strong enough, would generate new laissez-faire societies in locations all over
the world. These new free areas, as free trade made them economically stronger, would give
liberty a tremendously broadened base from which to operate and would help prevent the
possibility that freedom could be wiped out by a successful sneak attack against the original
laissez-faire society. As the world-wide, interconnected free market thus formed became stronger
and the governments of the world became more tyrannical and chaotic, it would be possible for
insurance companies and defense agencies to create free enclaves within more and more nations,
a sales opportunity which they would be quick to take advantage of.

It is obvious that, while a laissez-faire society might be vulnerable in its infancy, it would rapidly
gain strength as it matured. At the same time, the nations of the world would become weaker and
more chaotic, opening the way for the establishment of free enclaves which would destroy
governments and form a world-wide free market. In the final maturity of this free market, there
would be no more governments left, and so … no more wars. The only way this condition of
world-wide peace and freedom could be lost is if a large number of people reverted to the “give
us a leader” superstition and demanded a return of governments all over the world. There are
strong safeguards against this disaster, however. Not only would it be hard to get such a
movement going all over an enlightened world, but capable individuals tend not to want a leader,
and incapable ones tend to be uninfluential in the just environment of a laissez-faire society.

The length of a laissez-faire society’s possibly vulnerable infancy and the possibility and severity
of any wars during this period depend on variable factors beyond our present foresight. For
instance, the size and location of the original free area would have a great deal of influence on its
strength and its consequent safety and rate of spread. A large, well industrialized country with
adequate natural resources is obviously preferable, while a small island would run the risk of
being overrun before is got well started.

Another important variable is the amount of economic deterioration present in the world as a
whole at the time the laissez-faire society is established. Governmental fiscal policies are leading
the world down on one-way street to economic disaster. It would be ideal to have the
governments as economically weak as possible, but at tho same time if the laissez-faire society
arises in a time and place of financial ruin, much valuable energy will have to be expended just to
bring fiscal order and sanity out of the resulting social disorder.

Probably the most important variables are involved in the extent to which the idea of the nature
and practicality of liberty is spread. If an overwhelming majority of the people in the free area are
firmly convinced of the personal benefits of liberty, they will obviously be a force to be reckoned
with. In addition, the spread of the idea throughout the major nations would go far toward
undermining their strength. It is useful to remember that ideas know no boundaries.

Since the governments of the world are largely controlled by men who have a profound disrespect
for the importance and efficacy of ideas, it is somewhat questionable whether they would be able
to recognize the threat which the idea of liberty poses to them in time to avert it. To men who live
on the basis of range-of-the-moment pragmatism, ideas can be almost invisible. Furthermore, the
leaders of the world are paralyzed by their cynical allegiance to the worn- out and bloodstained
philosophy of statism, which has long ago proved its inability to effect any human happiness.
They have no idealistic fervor to spur them on and excite their followers, but only a tired and
frightened clinging to a familiar status quo. The wave of progress has already passed them by.

Since life offers no automatic guarantees of safety and success, there is no guarantee that a
laissez-faire society would survive and prosper. But freedom is stronger than slavery, and a good
idea, once spread, is impossible to stamp out. The idea of liberty is the inoculation which can kill
parasitical governments and prevent the disease of war.

PART III
HOW DO WE GET THERE?
“If the revolution comes by violence, and in advance of light, the old struggle will have to be
begun again.” - Benjamin R. Tucker

15
From Government to Laissez Faire
The prospect of real freedom in a laissez-faire society is a dazzling one, but how can such a
society ever be brought about? Through the decades, government has silently grown and spread,
thrusting insidious, intertwining tentacles into nearly every area of our lives. Our society is now
so thoroughly penetrated by government bureaucracy and our economy so entangled in
government controls that dissolution of the State would cause major and painful temporary
dislocations. The problems of adjusting to a laissez-faire society are somewhat like those facing
an alcoholic or heroin addict who is thinking of kicking the habit, and the difficulties and
discomforts involved may make some people decide that we’d be better off just staying as we are.

It is naive, however, to assume that we can “just stay as we are.” America, and most of the rest of
the world, is caught in a wave of economic decay and social upheaval which nothing can stop.
After decades of governmental “fine tuning,” our economy is now so distorted and crippled that
we have a tremendous and ever growing class of hopeless and desperate poor. These poor and
dispossessed feel a very well-justified (if usually misdirected) resentment which they express in
demonstrations and riots. Governmental attempts to aid them, even if such attempts could be free
of bureaucratic pork-barreling and pocket-lining, merely make the situation worse. After all,
government can only get its “aid” money by bleeding it from our already sick economy, thereby
weakening the economy still further and creating more poor to be aided. As the poor see their
lives becoming increasingly miserable in spite of all the political promises of help, their
resentment must grow more violent.

Meanwhile, the bureaucrats’ attempts to save an economy dying of governmental controls by

imposing more and more controls are pushing us swiftly down the path of financial ruin. If they
aren’t stopped in their frantic efforts to cure our collectivist poisoning by forcing us to swallow
more collectivism, they will sooner or later push us over the brink into total economic collapse -
the kind of collapse where government money loses all its value and people starve to death in the
streets.

The choice is not laissez-faire vs. the status quo, because we cannot possibly keep the status quo
anyway. Tremendous socioeconomic forces, set in motion long ago by governmental plundering
and power-grabbing, are sweeping the present order out from under our feet. We can only choose
whether we will allow ourselves to be pushed into economic chaos and political tyranny or
whether we will resist the bureaucratic tyrants and looters and work to set up a free society where
each man can live his own life and “do his own thing.” Whichever we choose, the road ahead will
probably be rough; but the important question is, “What kind of society do we want to arrive at in
the end?”

How soon a laissez-faire society can be established and exactly what conditions may accompany
a transition from government to freedom are impossible to predict because of two important
variables - the rapidity with which the idea of freedom can be spread and how much longer our
economy can withstand the effects of governmental meddling.

The economies of all the major nations are in various states of disintegration. For decades,
governments have been inflating their currencies in order to siphon more money into the
government treasuries than they could get by taxation alone. But the extra paper money pumped
into the economy by inflation distorts the economy by causing malinvestments. This is the
“boom” part of the dreaded business cycle. Governments don’t mind a boom at all, since inflation
enables them to collect more revenue without antagonizing the taxpayer (the bureaucrats can
always lay the blame on “the wage- price spiral” or “Big Business” or “greedy unions”). But as
soon as the effects of an inflationary input wear off, people see the error of the malinvestments
and abandon them and the “boom” is replaced by a “bust.” The only way a government can avoid
the painful readjustment of a “bust” is to continually increase inflation, which continually
decreases the value of each monetary unit in the economy. When the value of the paper dollar
falls below the value of the gold dollar, the people are forbidden to own gold and the government
sets an artificial “price on gold,” which eventually leads to recurring gold crises. When the value
of the paper dollar falls below the value of the silver in four quarters, people hoard the quarters
and the government has to put out low-value cupro-nickel coins to alleviate the “coin shortage.”

In this way the value of your money is gradually eroded until all you have in your pocket is
unbacked paper and low-value cupronickel. (Although the dollar is nominally backed by gold,
this does us no good, since the Government forbids us to own that gold!) The economy continues
to operate on this fake money simply because people are used to believing that it has real value.
But, as the government is forced to inflate more and more to avoid an ever more severe
depression, hyper-inflation sets in and the value of the monetary unit falls with increasing speed.
The resulting soaring prices force people to recognize the shrinking value of the money. Then
there is a mad scramble to spend money quickly before it loses any more of its value. People rush
to buy durable goods of any kind as storers-of-value in the place of the nearly worthless money.
These frantic attempts to get rid of money and hold onto goods quickly reduce the trading value
of the dollar to zero, and the economy is left without any medium of exchange and must fall back
on barter. Since barter is completely insufficient to support an industrialized economy (how
would General Motors pay its employees on a barter basis? how would your grocer pay the
wholesaler from whom he buys the food?), there is mass unemployment, destitution and
starvation.

So the bureaucrats’ attempt to avoid the depression caused by their inflationary policies only
succeed in making the depression far more severe when it does come. If they resort to hyper-
inflation, the ensuing depression will involve the complete collapse of the monetary structure of
the country, as in Germany after World War I. Germany was able to recover from its monetary
collapse fairly quickly because many of the other nations still had fairly sound currencies to
which Germans could turn for media of exchange. The collapse toward which we are slipping
will be much harder to recover from. Most of the currencies of the world have no more actual
value behind them than does America’s, and furthermore, the major currencies are all tied to each
other and to the dollar, so that if the dollar goes, they all go. Such a world-wide monetary
collapse would leave us without any medium of exchange except for the gold and silver which a
few far-sighted individuals have horded, and even this might have to be exchanged on a black
market basis due to governmental prohibitions. Before this gold and silver could become
sufficiently spread through the economies of the world to lift them from barter back to a
monetary basis, millions may have starved to death. Governments can’t create money out of
paper, ink, and promises. Once they destroy their currencies, they can only wait for the processes
of the market to re-establish a medium of exchange.

Since the state of our economy depends largely on the whims of bureaucrats and politicians, it is
impossible to predict whether our currency will continue to function for several more months or
for several years before going into hyper-inflation and final collapse. Similarly, it is impossible to
say whether the collapse will happen rather suddenly, as in 1929-32, or whether it will come as a
long- drawn-out series of fiscal crises, each worse than the last. The only thing we can say with
certainty is that a day of reckoning must come for the badly inflated dollar and for all the other
shaky currencies of the world, and that governments will inevitably pursue policies designed to
put off that day of reckoning, thereby making it far more disastrous when it does come.

In making the transition from government control to a laissez-faire society, then, our first concern
should be to minimize the effects of the inevitable economic breakdown caused by the
politicians’ fiscal meddlings. There are several measures which would greatly help, all of which
involve abolishing existing laws and regulations - that is, they involve a return to freedom of the
market.
First and foremost, the economy should be provided with media of exchange to replace the dying
dollar. Since gold and silver have proved themselves through centuries of trading to be the most
acceptable monetary media, this means that we must get as much gold and silver into the hands of
as many private individuals as quickly as possible. All restrictions on the ownership and
importation of gold in any form whatever should be gotten rid of as soon as possible, and
Americans should be encouraged to exchange their dollars for all the gold and silver left in the
Treasury at whatever price ratio the free market sets. All the many restrictions on gold mining
should be dispensed with so that the demand for hard money could be partially met with newly
mined gold.

Along with getting monetary metals into the hands of private individuals, there should be an end
to all laws preventing private coinage of money. Businessmen should be as free to manufacture
coins for exchange as they are to manufacture vacuum cleaners. In both cases, the processes of
the free market will encourage those with the best products and eliminate the frauds.

The monopoly of the Federal Reserve System on banking should be broken so that entrepreneurs
could set up completely private banks regulated by nothing but the processes of the market. It is
through the mechanism of the Federal Reserve that the Government inflates the currency, and
special privilege laws permitting banks to hold only fractional reserves against their demand
deposits add to the problem. Private coinage and private banking will put a permanent end to
inflation, depression, and monetary crises.

Critics will object that without the restrictions preventing private individuals from owning gold
and coining their own money, nearly everyone would rush to exchange their paper dollars for
gold and silver coins and certificates backed by such coins. This would precipitate a crisis for
governmental money and a severe de facto devaluation of the dollar. And the critics are right -
this is what would happen. But an economic crisis will come anyhow; the politicians have already
made it inevitable. The crisis will be far less severe, and recovery far more rapid, if it comes as a
result of people deserting the dollar for a truly valuable medium of exchange than if the dollar
collapses from hyper-inflation, leaving them no money commodity at all. By forcing us to use an
inflated and increasingly devalued currency, the bureaucrats are denying us our only chance to
rescue our economy and our own private savings from the government-created fiscal chaos. The
dollar can’t be saved - it’s already dying of governmental interference. Let’s not let the
bureaucrats kill the whole economy along with it in the name of trying to save their decaying,
totalitarian monetary system.

The preceding discussion has assumed that the transition to a laissez-faire society can be gotten
well underway before the economy collapses. If the economy collapses first, all of the above
measures will still apply in order to facilitate recovery, but, of course, the recovery will be much
more difficult and slower.

In making the transition to a laissez-faire society, many governmental institutions which have
been an integral part of society for years or decades or centuries will have to be abolished. Taxes
present the least problem - obviously, they should be abolished immediately. Taxation is theft,
and there is never any justification for continuing theft. The abolition of all taxes would stimulate
an immediate and rapid spurt of growth throughout the whole economy as money formerly
drained into bureaucratic boondoggles and political pocketbooks became available for productive
use. Imagine what it would do for your own personal prosperity to have your real income almost
doubled overnight (taxes, including all hidden taxes, take over one- third of the average man’s
income). This same prosperity would be felt by the whole economy. As each productive man’s
real income shot upward, there would be a sharp increase in both consumption and investment.
The consumption would mean a greater demand for all products and services, and the investment
would provide the capital structure necessary to meet that demand. New products would be
marketed, new jobs created, and the general standard of living would rise. (It is true that
government both spends and invests tax revenues, but it always allocates these revenues
differently from the way their rightful owners would have allocated them, thus distorting the
market. Also, government investments are notably wasteful and counterproductive. For example,
the U. S. Government once formed an Abaca Production and Sales bureau to take over the
growing of hemp in four Central American countries, on the theory that hemp, which is used for
the manufacture of rope, was vitally strategic. But this government-produced hemp was of such
inferior quality that it couldn’t be sold, even to the Government’s own rope factory. To get out of
its embarrassment, Abaca Production and Sales sold the worthless hemp to another Government
agency, the Strategic Stockpile. The hemp was then stored, at taxpayers’ expense, in specially
built warehouses. Each year the previous year’s crop was shoveled out and destroyed to make
room to store the new crop. Total loss to the taxpayers averaged $3 million a year.31

31
For this and other examples of ridiculous government waste, listen to “Hayfoot, Straw-foot,” an LP record by Willis
Stone, available from Key Records, Box 46128, Los Angeles, California.

Government employees would have to find jobs in private enterprise if they wanted to work.
There are two major kinds of governmental employees - those whose services would be in
demand in the free market (teachers, librarians, secretaries, firemen, etc.) and those who perform
no useful function but simply keep the governmental machinery running (lawmakers, tax
collectors, bureaucratic record keepers and paper shufflers, executives in the military-industrial
complex, the President and the Vice President, etc.). The first kind would probably find only
minor difficulties in adjusting to a free society. A forest ranger in Yellowstone National Park
might find his job almost unchanged, as the Park was taken over by a private corporation to be
run for profit. Those lawyers and judges whose minds were young and flexible enough to adjust
to freedom instead of statutory law could sell their services to free enterprise arbitration agencies.
On the other hand, men who had spent their lives as tax collectors for the Internal Revenue
Service or as Federal narcotics agents would find no demand for their “services” and would have
to change careers in order to survive - perhaps even to that of garbage collector or janitor
(honorable work, for a change). In a sense, this would be a partial penalty for having been willing
to make a career of ruling over others.

Switching to a laissez-faire society would certainly require large adjustments in the lives of many
people. It’s amazing, though, how swiftly and efficiently adjustments can be made in a free-
market situation. When some men want to sell their services, other men want to buy services to
manufacture a product, and still other men want to buy the product, nothing can stop them from
getting together in a mutually beneficial exchange except the interference of government. So,
while the birth of a free society would bring temporary hardships to many, the period of
adjustment would be fairly brief. In the end, all would be better off than they had been when
ruled by government (with the possible exception of such parasites as Presidents, White House
advisors, and Pentagon Generals).

But what about government obligations such as the national debt - who will see that they are met?
Those who ask this question have never stopped to analyze what is meant by “government
obligations.” Morally, the government is no more than a well-organized band of robber barons. In
order to maintain itself in power, it borrows money, grants special privileges, and makes promises
to certain groups and individuals. But where does it get the money to pay its debts and keep its
promises? By the theft of taxation. Obviously, the victims of a hoodlum gang cannot be morally
required to give up their honestly earned money in order to pay debts incurred by the gang in its
attempts to stay in power over them. No government obligation of any sort is morally binding on
the citizen-subjects (or former citizen-subjects) of that government. Those who voluntarily loaned
money to the government were at fault for sanctioning and supporting the activities of the
hoodlum gang, and justice demands that they must take their losses and make the best of it.

Of course, many who have “loaned” money to the government, expecting to be paid back later,
have had no choice in the matter (Social Security is the prime example of this point). Others who
have never voluntarily paid into government treasuries have been made dependent on
governmental welfare payments when political meddling strangled the economy and denied them
decent jobs. These people are among the most tragic victims of the power-grabbers. But to
continue collecting money by force in order to make payments to them would simply be to
perpetuate the system which enslaved them in the first place. In a newly born laissez-faire
society, these people would have to either find jobs (which would be plentiful after the
adjustment period) or depend on private charity. This may seem harsh, but it is far less terrible
than what will happen to the, poor, the sick, and the old if we allow, government, to continue in
power until it brings us to economic collapse and mass starvation.

When considering the hardships which people such as Social Security recipients would undergo
during the transition to a laissez-faire society, it is well to remember that most of these people are
guilty of at least passively consenting to the politicians predations. If enough of them had raised a
protest a few decades ago, we wouldn’t be facing this governmentally induced crisis today.
People who meekly consent to wrongs because no one else is objecting to them, instead of
identifying and condemning the corruptions, are filling up a reservoir of hardship. If the dam
breaks and they are engulfed in the flood, they shouldn’t be too surprised. The hardships, after all,
are partly due to their guilt of consent.
One of the most important considerations raised in connection with the abolition of government is
what should be done with government wealth and property. As far as monetary wealth goes, this
is no problem … since the government doesn’t have any (as a look at the national debt figures
will show). The government does, however, possess a tremendous amount and variety of
“property” in the form of land, buildings, roads, military installations, schools, businesses such as
the Post Office, Government Printing Office, and hundreds less well-known, prisons, libraries,
etc., etc. Though these items are in the temporary possession of whatever bureaucrats happen to
be in charge of them, they are not actually owned by anyone. “The public” is unable to own them,
since nothing can be owned by a collective myth like “the people.” Politicians and bureaucrats
don’t own them for the same reason that a thief doesn’t rightfully own the property he has stolen.
“Public property” is actually un-owned potential property.

Since valuables in the possession of government are not actually owned, it would be perfectly
proper for anyone to take possession of any piece of “public property” at any time that the
government became too weak or careless to prevent him from doing so. The man who took
possession of a piece of former “public property,” claiming it and marking it as his own for all to
see, would become the rightful owner of that property.

It has been proposed that the process of disposing of “public property” should be made orderly by
selling the items to the highest bidder, rather than simply allowing them to be claimed by any
comer. The money thus collected, it is held, could then be given back to the taxpayers in the form
of income tax rebates, or it could simply be destroyed (assuming it to be in the form of paper
currency or similar fiat money) in order to reverse the process of inflation and restore some value
to the dollar.

Several objections can be raised to this plan, however. First it would be next to impossible to
prevent a great deal of graft as the money from “public property” sales rolled in. Given a stream
of money, a bureaucrat can always figure out a way to divert some of it into his own pocket, and
who would there be to police the bureaucrats and politicians except other bureaucrats and
politicians? Second, this system is definitely biased toward large firms and wealthy individuals.
This would not be objectionable if the rich were rich largely because of their own merit and the
poor were poor solely because of their incompetence and laziness, as would be the case in a long-
established laissez-faire society. But in our governmentally controlled society, many of the poor
are poor because bureaucratic regulation and taxation robbed them of a chance, and many of the
rich are rich because of political pull.
Finally, selling “public property” to the highest bidder would inevitably involve a long delay
before many of the items could be put to productive use. This delay would make the transition
period to a laissez-faire society longer and more difficult, since a delay in production means a
delay in available jobs and in produced items to consume. And if the process were not to be
dragged on indefinitely, many items would have to be abandoned, to be simply claimed in the
future (how many people do you know who want 100 acres ten miles from the nearest road in the
middle of the Mojave Desert?). Of course the politicians would try to keep the sale business
going indefinitely, in order to prolong their power and would thereby make themselves harder to
get rid of.

From a moral point of view, items which aren’t owned can’t be rightfully sold, anyway. Sale is
one means of disposing of property, and property is that which is owned. If something isn’t
owned, it can’t be sold, and “public property” isn’t owned by anyone, either the public or the
politicians.

It has been objected that if “public property” were thrown open to ownership by anyone who
claimed it, there would be a welter of confusing, contradictory claims, and possibly violence and
bloodshed. It is true that this might happen initially, especially if government lost its power to
hold onto its possessions all at once. Societies have survived a sudden flood of claims to some
particular wealth on a smaller scale (gold rushes being a notable example). While there is a great
deal of confusion and some injustice in the beginning, things usually settle down in a fairly short
period of time, especially when there is a large amount of desirable, potential property to be
claimed, as is the case with present “public property.” And, it must be noted that such a situation
of conflicting claims would certainly stimulate the growth of private enterprise services of
protection, defense, and arbitration. This positive side effect would help the infant laissez-faire
society get underway and gain strength quickly.

It has also been objected that if anyone could lay claim to any piece of former “public property,”
many valuable items might be claimed by undeserving bums and bureaucrats. Again, it’s
certainly true that this might happen in many cases. But the operations of the free market always
penalize the incompetent, causing them to lose properties which they are incapable of operating
effectively. If a drunken bum claimed the Chicago Main Post Office, what would he do with it? If
he lacked the skill to operate the facility, he would have to simply hold on to it while someone
else started a profitable private mail service in some other Chicago building, or he would have to
sell it. If he sold it, it would then be put to productive use and he would be left with a sum of
money to squander on liquor. Either way, the market would soon reach a condition of maximum
productivity and the fate of the bum would become irrelevant to everyone but himself.
But, while incompetents would be shunted aside by the workings of the free market, those with
ability and initiative would be given a chance to make their fortunes, regardless of their previous
social and financial status. Not only would this wide-open claiming system at last give
worthwhile opportunities to the poor and victims of discrimination, it would also help counteract
the effects of eliminating welfare and government jobs.

There would certainly be difficulties and temporary dislocations involved in making the transition
from government slavery to laissez-faire freedom, but they could be overcome by free men acting
in a free market. And when the transition has been made, new opportunities would open up for
everyone. There would be more and better jobs, better pay, a multitude of new ideas, inventions
and business opportunities, and countless chances to “strike it rich.” Inflation could not threaten
society, because there would be a sound monetary system. Consumer goods would multiply,
living standards rise, and the hopeless and degrading poverty of today’s slums become a thing of
the past. Most important of all, there would be freedom. No one would be taxed, or regulated, or
forced to live his life according to someone else’s standards. No one would need to fear that his
peaceful and private pastimes would bring the police with a warrant for his arrest. No one would
be forced to bow to the whim of a power-hungry bureaucrat.

On the other hand, if our society continues to be governmentally controlled, we can expect a
steady increase in economic troubles, unemployment, inflation, crime, poverty, and, eventually, a
complete collapse of the governmental monetary system, bringing widespread starvation. We can
also expect a steady decrease in our government- permitted “freedoms” as more and more
bureaucrats find more and more ways of taking care of us and exercising power over us.

A laissez-faire society is worth the thought, effort, and struggle necessary to achieve it, because
liberty is the answer to all of our societal problems.

16
The Force Which Shapes The World
But a discussion of how government could be dismantled and how free men could then build a
laissez-faire society out of the pieces still doesn’t answer the question, “How do we get there?”
Politicians are politicians because they enjoy wielding power over others and being honored for
their “high positions.” Power and plaudits are the politician’s life, and a true politician will fight
to the death (your death) if he thinks it will help him hold on to them. Even the gray, faceless
bureaucrats cling to their little bits of power with the desperate tenacity of a multitude of leaches,
each squirming and fighting to hold and increase his area of domination. How can we
successfully oppose this vast, cancerous power structure? Where can we find a force strong
enough to attack, undermine, and finally destroy its power?

Some people, gazing up at the fearsome might of the American Leviathan, have decided that our
only hope lies in an eventual armed revolution. So they work to recruit revolutionaries, provoke a
spirit of aggressive hostility toward The Establishment and promote violent confrontations with
government representatives and police. Most of these people are quite sincere in their desire to
increase liberty by overthrowing a government which insists on taxing us, regulating us, and
“taking care of us” until it smothers us. Many of them even realize that we can’t have real
freedom so long as we have any government at all. But few, if any, of them have thought through
the necessary implications of violent revolution.
Armed revolutions, whether they occur on a massive, organized scale or as disconnected, hit-and-
run confrontations, are very destructive. Quite apart from the immorality of destroying the private
property or life of an individual who has not aggressed against you, destruction is foolish and
short-sighted. It often takes years to build what it may take only moments to destroy; and once
destroyed, an object can never again be of benefit to anyone. Destruction reduces the total amount
of goods available to everyone and, hence, reduces the welfare of every individual in the society
(naturally, the poor feel this welfare reduction first and worst). The destroyed object can be
rebuilt, but only at the cost of much time, money, and intellectual and physical effort. It usually
will not be rebuilt at all until the destruction is over so that the builders feel it will be safe.
Meanwhile, the economy (which means all the individuals who try to improve their lot by trading
goods and services with others) is weakened. To weaken a healthy economy would be bad
enough, but to bleed our economy - which is already tottering on the brink of collapse - is suicidal
folly.

Not only is violent revolutionary action destructive, it actually strengthens the government by
giving it a “common enemy” to unite the people against. Violence against the government by a
minority always gives the politicians an excuse to increase repressive measures in the name of
“protecting the people.” In fact, the general populace usually joins the politicians’ cry for “law
and order.”

But far worse than this, revolution is a very questionable way to arrive at a society without rulers,
since a successful revolution must have leaders. To be successful, revolutionary action must be
coordinated. To be coordinated, it must have someone in charge. And, once the revolution has
succeeded, the “Someone in Charge” (or one of his lieutenants, or even one of his enemies) takes
over the new power structure so conveniently built up by the revolution. He may just want to “get
things going right,” but he ends up being another ruler. Something like this happened to the
American Revolution, and look at us today.

Even if a revolution could manage to avoid setting up a new ruler, the great mass of people
themselves would probably call for one. Revolution causes confusion and chaos, and in times of
distress and disorder the first thought of the majority of people is, “We must have a leader to get
us out of these troubles!” When people cry frantically for a leader, they always get one; there’s no
shortage of men with power-lust. Furthermore, the leader they get will be a dictator with power to
“restore law and order” in accordance with the citizens’ demands. Unless people know what
laissez-faire freedom is (and that’s the only kind of freedom there is), and unless they know that it
is far preferable to a system of governmental slavery, the odds are that any violent revolution will
only pave the way for a new Hitler. Thcn we will be far worse off than we are now, because we
will be saddled with physical destruction and its resultant poverty, with economic collapse, and
with a dictatorial state with popular support.

Knowing the dangers and drawbacks of violent revolution, a few advocates of laissez-faire have
proposed that we get “our people” into government and dismantle it from the inside. The
difficulty with this proposal is that only men of integrity, who have no desire to rule over others,
could be trusted to dismantle government instead of joining the power elite once they got into
official positions. But men of integrity could hardly be expected to make the sacrifice of wasting
their lives in government jobs, surrounded by looters. And once again, if people didn’t understand
the desirability of a laissez-faire society, dismantling the government might only confuse and
alarm them into calling for new leadership.
It has also been suggested that the way to win out over government in the long run is to withdraw
all sanction from it and refuse to have any dealings with it; to avoid voting, accepting government
subsidies, or using government services. The problem here is that government can compel us to
deal with it, either by force of law or by holding a monopoly on some vital service. You may
refuse to vote, but try refusing to use the government roads and mail system, to pay taxes, or to be
drafted! Withdrawing our sanction from the looters by refusing to deal with them would be a very
effective tactic … if the looters would permit us to do so!

Despair has caused some to decide that the battle, at least in America, is already lost, and that our
only hope of some freedom for our own lives lies in building a new society on some remote
island or in retreating into a wilderness to escape “Big Brother.” Settling and industrializing a
small island outside the tax-grip of any government (if such a place could be found) might be an
interesting and even profitable venture, but it’s no way to defeat governments. As soon as the free
island became an attractive enough prize, some government would gobble it up. Founding a free
island is not a step toward victory - at best, it’s merely a postponement of defeat.

Similarly, a well-prepared wilderness retreat could be a lifesaving shelter in case of a really

severe socio-economic breakdown, but “opting out” is no way to defeat governments so we can
have a free and secure world to live in. A retreat is just what its name implies - retreat, not
victory.

The advocates of revolution, of dismantling the government from within or refusing to deal with
it, or of “opting out” have failed to realize that if one wants to change society, one must first find
out what makes society the way it is. Society is nothing more than a group of individuals living in
the same geographical area at the same time. The values and the actions of each of these
individuals are determined by the ideas he holds - by what he believes is right or wrong,
beneficial or harmful for himself and others. This means that the customs, institutions, and life-
style of any society are determined by the ideas held by the majority of influential people in that
society. Just as the form of a man’s life is the result of the ideas he holds, so the form of a society
is the result of the ideas which prevail in that society.

Ideas, even seemingly insignificant ones, can have earth-shattering results when they are widely
believed in a culture. For example, in the Middle Ages, a minor religious dogma held that cats
were agents of the devil. Since religion was a very important factor in almost everyone’s life at
that time, almost the whole society participated in the religious duty of killing cats. As the cat
population dwindled, the rodent population increased rapidly. The rats carried the fleas which
carried the germs which caused the Black Death. Between one-fourth and one-third of Europe’s
people died and almost one-half of the people of England died within two years, all because of
one stupid, bad idea (though a seemingly harmless one)!

Good ideas can be just as powerful as bad ones. The realization that diseases are caused by micro-
organisms and not by demons, the will of God, or the bad night air, has saved more lives than the
Black Death destroyed. This one good idea has improved the health and increased the life-span of
every one of us. The partial realization that man has rights which no government is entitled to
take away led to nearly two centuries of the greatest progress and happiness men had yet known.

Mistaken ideas kept man cowering in superstitious fear of the gods … smeared stone altars with
human blood … caused living children to be thrown into sacrificial fires. Correct ideas - the result
of reason - have freed man to stand proud and erect … to understand nature instead of fearing it
… to achieve a better life for his children instead of sacrificing them to the gods of his insane
fears.

Ideas are the forces which shape our lives and our world!

But because ideas are invisible, most people think of them as unimportant (if they think of them
at all). You can see a city, but you can’t see the multitude of plans that had to be drawn for each
building, each street, each park. Nor can you see the millions of ideas that made possible the
electricity, the automobiles, the supermarkets, the lawnmowers, the playground equipment, etc.,
etc. It’s easy to observe a government (the bureaucrats won’t let you ignore it), but you can’t see
the idea that makes it possible - the belief in millions of minds that it’s right for some men to
govern, or coercively rule over, others.

Because the forms of men’s lives and of their societies depend on what they believe, ideas are
the most powerful force in the world, If you want to get a man to change his life-style, you will
have to get him to change his ideas about what sort of life-style is possible and desirable for him.
Similarly, if you want to change a society, you will have to get the majority of influential people
to change their ideas about what their society can and should be.

In a cannibal society, the reason men eat human flesh is that it is considered proper, or perhaps
even necessary, to use human beings for food. In order to get rid of the cannibalism, it is only
necessary to change the prevailing idea that eating people is proper or necessary. In a
governmental society, the reason some men rule over others is that the vast majority of opinion-
molders in that society consider it proper or even necessary for men to be ruled by force. In order
to get rid of government it is only necessary to change the prevailing idea that men must or
should be kept in some degree of slavery by their rulers. In a society dominated by the idea that
no man has a right to govern anyone else, government would be impossible - no would-be ruler
could muster enough gunmen to enforce his will.

Not only can a society be changed by changing the ideas which prevail in it, this is the only way
it can be changed (except by enslaving, impoverishing, or killing all the members of the society
in order to forcibly prevent them from living in the way their ideas dictate). Government is only
the concrete expression and result of the prevailing idea that it is right for men to be governed by
force. At present, the American government has the sanction and support, or at least the apathetic
acceptance, of the majority of its citizen- subjects. So long as the majority of men believe that
government is right and/or necessary, they will have a government. If their government is
destroyed before they understand the desirability and practicality of freedom, they will rush to set
up a new one, because they believe they must be governed in order to have a civilized world.
Until we change this idea, we can never have a free society.

Bringing about a laissez-faire society by changing the ideas which prevail in our culture may
seem like a difficult, centuries-long task, but opinion-molding isn’t really that hard. In any
society, only a very small minority - perhaps one or two per cent - do any original thinking. A
somewhat larger percentage act as transmission belts, passing the thinkers’ ideas on to the rest of
the population. The vast majority of the people simply absorb their ideas from the culture around
them, accepting the word of authorities or the opinions of their social circle, with little question or
thought. In order to change the ideas in a society, it is only necessary to change the ideas of the
tiny minority of thinkers and then watch while they filter down through the commentators,
writers, editors, teachers, and all the other “influential men,” to be echoed by everyone else. It is
the thinkers who control a society’s future course - Presidents and other politicians are merely the
actors who pass across the stage, mouthing the lines which they have absorbed.

Furthermore, it isn’t even necessary to change the opinions of the men who are our present
thinkers. Today’s opinion molders are the remnants of a confused, exhausted, cynical past. Once,
their ideas of a big, fatherly government watching over its citizens, regulating their economic
affairs, protecting them from fear, want, hunger, pornography, liquor, and marijuana, and insuring
the “general welfare” seemed new and promising. Now, however, the mess of poverty, slavery,
and conflict resulting from their belief in forced welfare, forced socialism, and forced morality is
beginning to become apparent to all. These thinkers of the past have not only failed to solve our
problems, they’ve made them incalculably worse, and because the mess is beginning to stink so
badly, their time is running out. They’ll have to make way for a new breed of thinkers - for the
libertarians (mostly young people) who don’t have much influence yet but who will have in just a
few years. Many of the thinkers of the future are already beginning to realize the meaning and
necessity of freedom. When enough of them understand laissez-faire, the future is ours!

The idea we have to spread is very easy to understand - it is simply that government is an
unnecessary evil and that freedom is the best and most practical way of life.

Throughout history, most men have considered government to be a given fact of life - as
unavoidable as devastating storms and fatal illnesses. Of the few who thought about it at all, most
concluded that, while government might be evil, it was a necessary evil because the nature of man
demanded that he be ruled … for his own good (!). And the majority of men went along with this
in an unthinking way because having a leader seemed to eliminate the awful need of being
responsible for their own lives and decisions in an uncertain world. So the fear of self-
responsibility became a fear of freedom, and rulers encouraged this by vesting government with
all the authority, legitimacy, pomp and tradition they could muster, while keeping the populace
ignorant and superstitious. We can still see this fear of self-responsibility in the demands for laws
to protect the people from gambling, drugs, prostitution, misleading packaging, “unfair
competition, guns, sub-minimum wages, monopolies, and countless other imaginary menaces.

But government means some men governing - ruling over - others by force, and this is what we
must tell the people we want to convince. When some men rule over others, a condition of
slavery exists, and slavery is wrong under any circumstances. To advocate limited government is
to advocate limited slavery. To say that government is a necessary prerequisite for a civilized
society is to say that slavery is necessary for a civilized society. To say that men cannot protect
their freedom without a government is to say that men cannot protect their freedom without a
system of slavery. Slavery is never either right or necessary . . . and neither is that form of slavery
called government. We must tell people that government isn’t a necessary evil; it’s an
unnecessary one.

We must also tell them that freedom, because it is the right way for men to live, is practical. A
laissez-faire society would work, and work well. The social problems that perplex almost
everyone are the result, not of too much freedom, but of government meddling in our lives with
its compulsions, prohibitions, and ever-growing taxes. We must tell people that a laissez-faire
society wouldn’t degenerate into chaos, that instead it would solve most of our problems. And we
must be ready to show just how such a society would maintain itself and why it would solve the
problems.
There are an infinite number of ways to tell people about liberty - as many ways as there are
individual ideas about how to do it. We can do everything from talking to friends to writing
articles and giving speeches, to organizing huge street demonstrations against government
injustices. Government has a great deal of power over us, but it doesn’t have any right to dictate
our actions. This means that, so long as we are careful not to initiate force against the person or
property of any innocent bystander, we may oppose government in any way which we consider
practical and reasonably safe. If we were in Russia or China, our tactics would probably have to
be quite different, but in America people are used to a large measure of freedom of speech, so
such activities as the publication of this book are permitted and still safe.

Fighting government with ideas of freedom has an interesting built-in safety factor - most of our
politicians and bureaucrats, like most other people, can’t see the importance of ideas. What
counts with them is votes, tax money, and political deals. Such esoteric things as philosophical
concepts about the nature of a free society will never become visible to them until the votes, the
revenues, and the law enforcement begin to be effected; at which point it will be too late to stop
the idea of freedom. If you throw a bomb, the police will come after you and the terrified public
will cry for “law and order.” But if you disseminate a constructive idea, people who are receptive
will catch it, understand it, and pass it on, while the power structure will blindly ignore it.

To understand the importance of spreading the idea of freedom, think of what would happen if a
majority (or even a large minority) of the people in America came to believe that government was
an unnecessary evil and that freedom was the best and most practical way of life. Already, even
with the support of most people, government bureaus are beginning to creak and falter and break
down under the weight of their own incompetence. The Post Office cries for help, the courts have
such an incredible backlog that “the right to a speedy trial” is a mockery, jails are packed, roads
are crowded, schools never have enough money, and inflation spirals. Government is inadequate
to cope with the complexities of modern life, and it’s becoming apparent to all but the willfully
blind. Along with this private businesses are beginning to grow in areas which were formerly the
exclusive domain of government. The private mail delivery company, booming in spite of being
forbidden to deliver first class mail, and private arbitration services and protection agencies are a
hopeful beginning.

In a few years, government will be even more overburdened, confused, and more obviously
inadequate. The progressive breakdown of many more “governmental functions” will be opening
the way for daring entrepreneurs to gain a foothold and offer superior services to the public. What
if, at the same time, millions of Americans lost all respect for government? What if they saw
government for what it really is - an annoying and dangerous band of looters, power-mad
bureaucrats, and publicity-hungry politicians? What if the government, which is supposedly
founded on the consent of the governed, no longer had that consent. What if the governed by the
millions refused to be guilty of consent any longer?

If millions of Americans no longer regarded government as necessary, they would revoke “the
consent of the governed.” Then, with the strength of numbers, it would be quite feasible to refuse
to deal with government and to openly disobey its stupid and unjust laws. What could the
bureaucrats do if 50% of the population ignored all trade restrictions - including tariffs, price
controls, minimum wage laws, sales taxes, and even oughtright prohibitions? What if they simply
bought and sold whatever they pleased, from gold bullion to bricks, for whatever prices and under
whatever conditions they wanted, regardless of political regulation? What would the Internal
Revenue Service do if three million of their subjects simply didn’t bother to send in any income
tax forms, and what if fifty thousand employers stopped bothering to deduct withholding taxes?32
What could the army do with a million men who refused to be drafted? What could they do if
most of the men in a regiment just quietly quit and went home, leaving their officers red-faced
and screaming behind them?

32
“In a recent conversation with an official at the Internal Revenue Service, I was amazed when he told me that, ‘if the
taxpayers of this country ever discover that the Internal Revenue Service operates on 90% bluff, the entire system wilt
collapse’.” This statement was made by U. S. Senator Henry Bellmon of Oklahoma, as quoted from the printed copy of
hearings in the Senate Finance committee on October 2. 1969.

Such mass scale, passive disobedience to unreasonable laws wouldn’t need to be organized if the
majority of people saw government for what it is and believed in freedom. It would start secretly
and quietly, with individuals doing things they felt they couldn’t be caught for. (In fact, it already
has started.) But as disrespect for government increased, the practice of ignoring laws would
become increasingly open and widespread. At last it would be a great, peaceful, de facto revolt,
beyond any power to stop.

If faced with such a massive, peaceful revolt, the government would have only two choices - to
retreat, or to try to impose a tighter police state. If the politicians decided on retreat, they would
be forced to sit by and watch their powers crumble away, piece by piece, until their government
collapsed from lack of money and support. If they tried to impose a police state, they would
arouse not only the original revolters but most of the rest of the people as well to open rebellion.
The bureaucrats would find it very hard to whip up any popular support against people who had
done no damage to any innocent person but were obviously only living their own lives and
minding their own business. At each new repressive measure, the looters would find their popular
support ebbing away, their armies and police forces torn with dissent and bled by desertion, their
jails too full to hold any more rebels.

In such a crisis, the politicians would almost certainly vacillate. They have enough trouble
making up their minds in ordinary dilemmas. This policy of vacillation would shake the tottering
government apart even more surely and quickly, leaving the stage open for freedom.

We can bring about a laissez-faire society, but only through the tremendous, invisible power of
ideas. Ideas are the motive power of human progress, the force which shapes the world. Ideas are
more powerful than armies, because it was ideas which caused the armies to be raised in the first
place, and it is ideas which keep them fighting (if this weren’t true, political leaders wouldn’t
have to bother with their tremendous propaganda machinery). When an idea gains popular
support, all the guns in the world cannot kill it.

Throughout history, the vast majority of people have believed that government was a necessary
part of human existence ... and so there have always been governments. People have believed
they had to have a government because their leaders said so, because they had always had one,
and most of all because they found the world unexplainable and frightening and felt a need for
someone to lead them. Mankind’s fear of freedom has always been a fear of self-reliance - of
being thrown on his own to face a frightening world, with no one else to tell him what to do. But
we are no longer terrified savages making offerings to a lightning god or cowering Medieval serfs
hiding from ghosts and witches. We have learned that man can understand and control his
environment and his own life, and we have no need of high priests or kings or presidents to tell us
what to do. Government is now known for what it is. It belongs in the dark past with the rest of
man’s superstitions. It’s time for men to grow up so that each individual man can walk forward
into the sunlight of freedom … in full control of his own life!
Ludwig von Mises Institute 518 West Magnolia Avenue
Auburn, Alabama 36832-4528