9. National Defense and the Theory of Externalities, Public Goods, and Clubs

Walter Block

Levin¹ wrote a wonderful little essay showing “How Philosophical Errors Impede Freedom.” His “skim milk” fallacy² is the mistake of assuming that the truth is the very opposite of what appears to be the case based on logic, careful consideration, and observation.

The history of political economy is positively littered with examples of this sort. Perhaps the most famous is Hazlitt’s³ hoodlum⁴ who “heaves a brick through the window of a baker’s shop.” Ordinarily, this would seem to be economically harmful. Levin’s philosophical fallacy concludes the very opposite.

This, however, is but the tip of the iceberg. In this vein, Murray points out tongue-in-cheek that “discrimination against white men is to be encouraged because it is the discrimination to end discrimination.”⁵ Commenting on a U.S. standing army during the Cold War, Flynn trenchantly stated, “It makes no sense to militarize the economy in the name of fighting a militarized economy.”⁶

The liar paradox, also called Epimenides’s Paradox, is another case in point. This is the paradox that if “This sentence is not true” is true, then it is not true, and if it is not true, then it is true. This example shows that certain formulations of words, though grammatically correct, are logically nonsensical. For example, the statement, “I am lying” is true only if it is false, and false if it is true. Epimenides, a sixth-century B.C. Cretan prophet, first recorded such a paradox.⁷

Yet another example takes place in the context of sociobiology. Wilson⁸ maintains that the social sciences can be reduced to the physical ones; particularly, “that the distinctively human quest for unity of knowledge” can be reduced to, ultimately, physics. Hassing’s reply is worth quoting at length:

The problem of self reference is posed as soon as we ask the question “what caused E.O. Wilson to write his book?” Suppose we answer that higgling molecules in E.O. Wilson’s brain are the complete and sufficient causes of all the activity, physical and mental, involved in writing Consilience. Now we know a lot about the properties of molecules. Truth seeking is not one of them. If jiggling brain molecules are the whole cause of E.O. Wilson’s production of his book, then there is nothing more than a chance connection between human knowledge and the array of letters on the pages of Consilience.… Applying his universal reductionist principles of explanation to his own act of explaining—referring his explanation to himself—leads to a certain type of contradiction: what he says contradicts his credibility as a truthful speaker. He fails the test of self reference.^9,10

I myself have contributed in a small way to this literature of internal self-contradiction. In a debate with a Malthusian concerning the argument for population control, I stated,

even its advocates do not take it seriously. If one were seriously worried about overpopulation, the advocate of that view has one option, and that is suicide. The fact that (my opponent in this debate) is still here, talking, arguing, breathing and living, is contradictory to his stated position. It is, further, hypocritical. It is evidence that he is not convinced by his own arguments. If he were, he has it within his power to lower the population by at least one.¹¹

Perhaps the most profound utilization of this insight was offered by Hoppe in his “argument from argument.”¹² Hoppe demonstrates that while it is of course possible for one man to initiate violent aggression against another man and his property, he cannot upon pain of contradiction argue that he has a right to do any such thing, for by its very nature, the essence of discourse is to concede to one’s opponent the right to use his vocal chords, chest cavity, tongue, throat, etc., and to stand or sit on a certain piece of property. Thus, in arguing for the right to throttle people or steal their possessions, one cannot pass the test of self-reference.

No matter what you call it—the skim-milk fallacy, the problem of self-reference, the difficulty of committing a pragmatic or logical contradiction—this problem is widespread in the literature of what passes for social scientific thought. But nowhere does it form more of the very basis of an entire philosophical outlook than in the case of national defense provided by governments. To put the thesis of this paper in a nutshell, to argue that a tax-collecting government can legitimately protect its citizens against aggression is to contradict oneself, since such an entity starts off the entire process by doing the very opposite of protecting those under its control. The government, by its very essence, does two things to its citizens incompatible with this claim. First, it forces the citizenry to enroll in its “defense” activities, and second, it prohibits others who wish to offer protection to clients in “its” geographical area from making such contracts with them, in preference to the one it itself offers to them, under duress. If true protection from violence includes the government itself, and there is no reason it should not, then it is this entity which is the prime rights violator. The state, here, is indistinguishable from the Mafia chieftain who tells his victim he will protect her from himself.¹³ What are the specifics?

EXTERNALITIES

The first attempt to justify the levying of compulsory taxation in order to “protect” the citizen that we will consider is the argument from externalities. Many economists maintain that national defense is the sort of thing which, while it indubitably helps those who pay for it (they would scarcely consent to be billed were it otherwise), these benefits cannot be fully captured by them. Rather, a part of the good effect “spills over” onto those who have not paid for it. Each person thinks: “If others pay for protection from external enemies, then I, instead of undertaking the defrayment of these costs, can be a ‘free rider’ on their expenditures.” But if all go through this exercise of logic, then each will wait for the others to finance this operation; they will all operate under the hope that the other guy will pay the freight, and they will be passive beneficiaries. As a result, no one will recompense the private providers of this service, there will be no national defense, and relatively weak foreign armies will be able to overrun us.

What is the solution to this conundrum? For mainstream economists, it is that the government force the citizenry—all of it—to pay taxes for national defense. In this way the cycle of externalities can be broken. No one will ever need fear that others are riding on his coattails. They, too, will be forced to bear their fair share of the common defense.

The problem here is one of self-reference. If the whole point of the exercise is to protect the people against the violent incursions of others, how can this be attained if at the very outset the government does to them precisely what it is supposed to be protecting them from? That is, according to the logic of this externalities argument, the system is to defend them against aggression. How can this possibly be attained if the government starts off the process by attacking them, e.g., by compelling them to pay for their protection, whether they wish to do so or not?

Another difficulty is that this argument is “too good.” It proves too much—far too much. Were it true, it would apply not only to individuals but also to groups of people: to cities, states, even entire nations. Consider Mexico, the United States, and Canada in this regard. During the Cold War, if America arms to protect itself against the Russian imperialist bear, then according to this argument, this benefit will of necessity spill over to its two neighbors, to the north and south of it. Therefore, the U.S. will not invest in a military establishment. Similarly, for Canada and Mexico. But the Soviets, too, will face the same dilemma. If they prepare to fight the imperialistic warmongering Americans, the Chinese, the Indians, the Pakistanis, the Afghanis, Hungarians, etc., will all be the passive recipients of spillover benefits emanating from the Russian military might. They will thus wait, with bated breath, for the Soviets to do just that. But the minions of Stalin and Lenin will refuse to do so. Why should they undertake the necessary expenditures, if their neighbors refuse to contribute their fair share?¹⁴

In point of fact, the Soviets and the Americans did build vast military establishments during the Cold War. Furthermore, the Mexicans and Canadians, to say nothing of the countries surrounding Russia, all saw fit to raise armies. So we know there is something wrong with this argument from externalities—or, at least, that this argument somehow cannot be made to apply to groups of people such as nations. But there is no reason given for the inability to generalize this argument. On the contrary, for its adherents,¹⁵ there are no limits to its applicability.

Could it instead be the case that the military is really an external diseconomy? That instead of spilling benefits over to neighbors, those who arm on a massive scale are engaging in the creation of what the latter deem as harms? This seems to be the explanation of the U.S. gun control laws. For, if it cannot be denied that countries invest in military hardware, this is also true of local citizens. And yet, instead of giving subsidies to those who purchase pistols—and to their organization, the National Rifle Association—the government penalizes such activities to the extent permitted by the Second Amendment to the Constitution.

The point is, individual citizens are attempting to arm themselves, and the left-wing intellectuals who buy into the national defense externality justification or the state, instead of applauding this refutation of their theory, support governmental interferences with it. This, again, is self-refuting. Advocates of the externality argument defend state coercion against innocent citizens on the ground that the latter will not defend themselves, due to spillover leakages. Yet, as it happens, when individuals do this (e.g., invest in private armaments), instead of seeing this as the refutation of their theory that it is, they busy themselves weaving apologetics for governmental interferences with these occurrences.

So, which is it? Are guns, pistols, rifles, tanks, rocket launchers, jet fighters, etc., external economies or diseconomies? To ask this question is to expose the fallacies of the entire distinction, for it is not grounded in human action.¹⁶ Rather, it is based on the subjective speculations of the court historians who want to weave apologetics for the governmental initiation of violence against innocent taxpayers by use of the externalities argument, and who support statist gun controls on those attempting to protect themselves without help from politicians or bureaucrats, contrary to this argument.

Rothbard’s¹⁷ analysis is definitive. Basing his framework on the choices of actual individuals who engage in choice, his concept of demonstrated preference sheds light on this quandary: While most economists, and men in the street under their malevolent tutelage, may claim national defense as an external economy, there are those—pacifists, those who ban guns, were they but logically consistent—who see it from the very opposite perspective, as external diseconomies. The explanation for this gulf is clear: “One man’s meat is often another man’s poison.”¹⁸ For Rothbard, however, both are mistaken. This is because neither grounds its analysis in terms of human action: actual choices made in markets.

The positive externalitists may object that they cannot base their analytic framework on existing markets since, at least according to their own perspective, there cannot be any market for national defense. In this, they are very much mistaken, as a matter of fact. A large and thriving gun, private-detective, locksmith, cyclone-fence, and insurance industry puts paid to the notion that positive externalities are so powerful (or even that they exist) that they can preclude people from defending themselves, organized through markets. But even were there no such industry in existence, the objection that advocates of positive externalities might launch at Rothbard comes to naught. For in the absence of any demonstration that people who do not pay for a good or service value it nevertheless, at best this claim must be considered unproved.

At worst, however, it can be considered “bloody cheek,”¹⁹ in the British expression. For, armed with the idea, I can approach you with the following claim: “You, gentle reader, have never hired me as an economic consultant. You have not taken advantage of this marvelous opportunity open to you. However, whether you know it or not, whether you realize it or not, whether you appreciate it or not, you actually benefit from my economic analysis.²⁰ You are thus a selfish, chiseling free-rider on these multifaceted benefits I have long provided for you, gratis. But now it is time to stop you from exploiting me regarding these spillover gains you have long enjoyed for free. It is time for you to pay your fair share! Accordingly, I am hereby presenting you with this bill for $100,000, a bargain at the price. If you refuse to pay, I will then initiate violence against you.”

Not only is this “bloody cheek,” but you could reply in the same vein to me. All of us could bill each other for services rendered to any extent we wished. Once we have left the Rothbardian world of demonstrated preference, anyone can make whatever claim he wishes. We are at sea without a rudder.

III. PUBLIC GOODS

Another doctrine that has been used in an attempt to defend governmental provision of national²¹ defense is based on the concept of public goods. As Chart 1 makes clear, two considerations give rise to an item being considered a public good or not: excludability and rivalrousness. Since either of these conditions admits only of a positive or a negative, this system generates into a two-by-two matrix. If all people apart from the purchaser can be excluded from the enjoyment of a good, e.g., a hamburger, and if the cost of serving an extra customer is positive, then we have a pure private good. In category A, there is no market failure and thus no case for governmental intervention into the economy.

CHART 1

		EXCLUDABILITY (Can Exclude?)
		Yes	No
	YES	A	B
RIVALROUSNESS		(hamburger)	(crowded street)
(Should Exclude?)	No	C	D
		(television)	(defense, lighthouse)

In category B, it is difficult, impossible, or very expensive to exclude those who have not paid for the service, and there is rivalrousness, in the sense that each new entrant onto an already crowded street slows down, or imposes costs upon, all others who are attempting to move from place to place.

The crowded city street, then, is a semi-public good; semi-, because while it passes one criterion of the two-pronged test, it fails the other. Nevertheless, it is an instance of market failure according to this argument; hence, government should provide for, create, and manage this facility. A similar conclusion applies to category C, only here the causal antecedents are reversed. In this case goods and services are nonrivalrous, not nonexcludable, since nonpayers can easily be prevented from obtaining the service (e.g., jamming devices for TV broadcasts). But the absence of rivalrousness is a serious problem. Even though those who do not pay can be cheaply excluded from benefits, efficiency considerations mandate that they not be prevented from consuming, since their doing so imposes no marginal costs on anyone else.²² In category D, we arrive at the pure public good, which “offends” against market efficiency on grounds of both rivalrousness and excludability. Once a defensive army has been put into place, or a credible threat of nuclear retaliation in response to an attack, it costs nothing to add one more person under this protective umbrella. Therefore, not only is it the case that markets cannot provide national defense, but they should not, even if they could, since this would violate strictures against economic inefficiency. And it is the same with the lighthouse. Once it has been erected and its light turned on, it costs nothing to ward off from the dangerous shoals one additional boat; nor can a ship be excluded from this benefit, since if the paying captain is to see the light beam, then so must those who did not contribute financially to this enterprise.²³

Perhaps this schema is easier to perceive if we focus on only one type of service. In chart 2, we illustrate it solely with auto travel corridors.

CHART 2

		EXCLUDABILITY (Can Exclude?)
		Yes	No
	YES	A	B
RIVALROUSNESS		(crowded highway)	(crowded street)
(Should Exclude?)	No	C	D
		(empty highway)	(empty street)

We incorporate the fact that it is easy to exclude motorists from limited access (A and C) highways (e.g., with toll booths), but well nigh impossible to do so for city streets (B and D.) Similarly, when a thoroughfare of either type is crowded (A and B), there is rivalrousness. The marginal traveler imposes costs on all others, slowing them down, whether on street or highway. If empty (C and D), then not. Category D offends the niceties of market failure on both grounds: it is difficult to exclude people even from empty city streets, and there is no economic efficiency reason to do so in any case.

So much for the argument. What are its flaws? They are many, and they are all serious.²⁴ Consider first, category A. There is no denying that the marginal costs of an ex ante hamburger are indeed greater than zero, in that there are alternatives forgone when one devotes resources in this direction (e.g., that cannot be invested for other opportunities). However, the same does not apply to ex post or already cooked burgers, for example the ones waiting for purchase at McDonald’s, between the time they are placed on the shelf and when someone purchases them. Indeed, not only are the costs of these foodstuffs not greater than zero, they are not even equal to zero. Instead, they have a negative value, in that it costs something positive to dispose of them. This means that rather than placing the hamburger in category A, it must be relegated to C, along with all other goods which are nonrivalrous. But the excludability of this fast food item can also be called into question. Yes, if I eat it, then, by definition, you cannot avail yourself of it. But there is “many a slip between cup and lip,” and also between purchase and actual consumption. How many children (mainly in public schools, not private ones) have been forced to give their lunch up to the playground bully? In all of these cases, the nonpayers (e.g., the bullies) have not been excluded from enjoying the good in question. Thus, the burger moves not only from A to C, but also from A to B, whereupon it arrives in D.

In like manner, we can collapse B into D. All we need note is that there are more costs to traffic than crowding costs. The average truck carries many tons of weight, both in its frame and in its cargo bay. This negatively impacts the roadbed even in nonpeak load conditions, at great expense in terms of repairs and replacement, all of which further slows down all travelers. And yes, to be sure, at off-peak hours no motorist retards the speed of any other on average, but suppose you get stuck behind a slowpoke at 3 A.M. on a one-lane road when it is otherwise empty. You are still victimized by the costs of a slower trip.

Yes, nonsubscribers can be excluded from pay TV, but only at a cost (which is a function of the “arms” race between “offensive” [e.g., hacker] and “defensive” [property owner] electronic technology). This cost can vary further, depending upon the honesty of the populace, the ease of constructing counterfeit descramblers, and satellite-dish technology. Conceivably, this can be extensive.

Even if we for the moment accept the coherence of these distinctions, there are difficulties with B and C. The assumption of most economists who buy into this model is that even though there are four separate categories, they do not at all account for an equal 25 percent of the entire GDP. Rather, for most commentators, A contains the overwhelming majority of goods and services, D encompasses little if anything more than national defense and lighthouses, while B and C even together are far smaller than A.

However, it is possible to expand the coverage of B and C in the direction of D. For example, it might be claimed that marginal cost equals zero in cases where the entire stock is not sold or rented, e.g., where there are vacancies or excess supplies. It is of course true that surpluses tend to be diminished by the falling prices they themselves engender, but this process never works perfectly. We are never at full equilibrium. There are vacant seats in most movie theaters, ballparks, rock concerts, circuses, airline flights, and classrooms, and empty spaces in hotels, apartment houses, office buildings, shopping malls, and industrial parks. Given, then, that A, B, and C can be reduced to D, we must confine our further critical comments to the latter.

One basic difficulty with the entire public-goods schema is that whether or not there are costs at all, and whether or not they are positive or negative if they exist at all, is entirely a subjective matter.²⁵ Costs, essentially, are opportunities forgone; specifically, the next best alternative not chosen. Who but the chooser himself can ever be acquainted with any such thing? Certainly not the outside observer-mainstream economist, the one responsible for the public-goods dogma in the first place.

Another fundamental error concerns exclusion. It is a basic axiom of economics that private enterprise can be counted upon, ceteris paribus, to accomplish any task more easily, effectively, and cheaply than government. The market tends to “weed out” the creator of Edsels, for example. This tendency is greatly attenuated to say the least—and virtually nonexistent, to be more accurate—in the public sector. The public-goods argument, illustrated by this four-part matrix, claims that excludability is an important criterion of whether a task should be relegated to the market or government. Yet the ability of the market to exclude nonpayers (or to do anything else) is very different than that which prevails for the state. We arrive, then, at the circular reasoning that, since it would be very costly or impossible for the government to prevent noncustomers from enjoying a good or service, therefore it is justified that this selfsame entity, the state, provide it in the first place. To see the fallacy behind this argument, we could start off from the very opposite direction. That is, since it is easy for the private entrepreneur to exclude, this wipes out categories B and D in one fell swoop. Excludability, that is, is a function of markets in the first place; it is thus illegitimate to use this concept as a stick with which to beat the market, since the inability to exclude is a government, not a market, failure.

It is a mistake to count the lighthouse as a pure public good in category D.²⁶ The private lighthouse owner had a credible threat to hold over the head of the boat owner who refused to pay the fee: the next time he was in need of this service, it would be turned off if there were no other ships in the area. The nonpayers could of course try to ride on the “coattails” of others in the industry. But this would unduly increase the risks of collision, either with other vessels or with rocks on shore. Further, the nonpayer would have to tailor his schedule to match those of other travelers, which might be more costly than the lighthouse fee. Alternatively, he could trim his sails to try to disguise himself as another boat. This, too, however, would be expensive and even dangerous. And, in the era of steamships, this became all but impossible.

Also ignored is the phenomenon of “internalizing externalities.” The problem with the lighthouse is that there is a vast unowned resource interfering with the analysis of markets. To wit, the ocean has not yet been fully privatized. Were this to occur,²⁷ the owner would likely provide lighthouses in much the same manner as other entrepreneurs (e.g., grocers, bowling-alley owners) commonly offer lighting services to their customers.

In a similar vein, some economists claim that street lighting is a pure public good, to be placed in D, since it is well nigh impossible to restrict this service to those pedestrians who pay for it. The simple answer is to make it a package deal: combine access to the sidewalk with the lighting, and charge for both. Restaurant owners, after all, never charge separately for lighting; this is figured into the price of the meal. And as to restricting entry to sidewalks to customers, it may well be that when all such thoroughfares are privatized, access to them will be offered for free, as a loss leader, in exactly the same manner that mall owners do not now charge for use of their passage ways.²⁸

What of national defense? With these preliminary remarks, we are now ready to tackle this challenge. First of all, it is relatively easy to exclude nonpayers from these sorts of benefits.²⁹All that need be done is for the Acme private defense company to issue signs to its clients, a large plaque for their homes, stores, and factories, and a small lapel version for their persons. Any person or property not sporting one of these (it would be fraudulent, and punishable by law, to counterfeit these posters) would be “fair game,” as far as this protection agency is concerned. The corporation may even go so far as to tell the Cubans, or the Russians, or the Ayatollah—whoever is the “bad guy” du jour—that Jones has not paid for protection, and thus if he or his property is attacked, no resistance will be offered by this particular private police force.³⁰ Of course, it would be illicit for Acme to demand of Jones that he pay them under the threat that they themselves will engage in an uninvited border crossing against him. Were Acme to do this, it would sink to the level of a governmental protection racket.

Another sort of privatization would likely occur³¹ as the same sort of “package deal” that tied together street, highway, and sidewalk usage, along with lighting. Under a system of pure laissez-faire capitalism, all property (no exceptions) would be privately owned. This includes, preeminently, roads, highways, and streets.³² Who, then, will protect people as they go about their daily routines of living at home, commuting back and forth to their jobs,³³ with daily side trips to stores and movies, weekly ones to bowling alleys, golf courses, and shopping malls, monthly ones to downtown, and annual vacations to faraway places? Why, the owners of these amenities, that is who. Remember, unlike at present, wherever a person goes he will still be on private property. Each owner thereof will be highly motivated to ensure that no crimes occur on his premises, because if they do, there goes the present discounted value of his property.³⁴

Moreover, unlike the public police and governmental soldiers, in addition to having a patriotic or esprit-de-corps motivation for guarding life and limb, they will also have a financial incentive to do so. It is no accident that the thoroughfares in Disneyland are far safer than those in New York’s Central Park. Let one or a few rapes and murders occur in the former establishment, and profits will begin to plummet, as customers stay away in droves. Allow a few more, and bankruptcy looms, and with it the threat that the present owners will lose their property to entrepreneurs able to maintain a safety level consistent with a healthy bottom line. In very sharp contrast, when Central Park becomes a quasi militarized zone where criminals run riot, no one in a position to do anything about it loses money. Fees for the upkeep, maintenance, and safeguarding of this park are derived from taxes, that is, compulsorily. No bankruptcy is possible. The only feasible remedy is a political one. But for that, the park users may have to wait as long as four years. Even then, they have no way to directly express their dissatisfaction with park safety. They must choose between two mayoral candidates who are responsible for far more than the protection of a few acres of land.

The police, too, instead of confining their activities to guarding innocent people against criminals, actually themselves engage in the behavior associated with the latter. First and most basic is that the revenues raised to pay their very salaries and to purchase their uniforms, vehicles, weapons, etc., are based on compulsion. To wit, they engage in the very action against which they are sworn to protect their “customers.” It is hard to imagine a more blatantly self-contradictory system. But in addition to that outrage, they partake in a whole host of ancillary aggression. For example, they arrest people for buying or selling pharmaceuticals that have been arbitrarily declared illegal. They act likewise with regard to capitalist acts between consenting adults concerning sex, reading material, wages, working conditions, hours of labor, building codes, and the list goes on and on. While the police do indeed also spend time stopping murderers, rapists, and robbers, in none of the previously mentioned victimless “crime” cases are they by any stretch of the imagination protecting person or property. Instead, they are interfering still further with private, voluntary contractual arrangements.

Given that it would be feasible for private police to exclude nonpayers or noncustomers from the safety they afford (that is, we must move this service from D to C), what of the other part of the argument, that concerning rivalrousness? Do cops have a positive marginal cost? (That is, can we also transfer police services from C to A?) A moment’s reflection will convince us that we can. For surely a bodyguard can more effectively protect one client than he can 100, or 1,000. If so, it costs more to ensure the safety of additional people. Consumers of protection, then, are rivalrous with regard to one another.

When we move from the arena of internal police protection to the external region of armies and international relations, the story is much the same. National defense, too, cannot be categorized in D. It is neither impossible to exclude nonpayers nor it is true that bringing in an additional person under the safety umbrella costs no additional resources. Take the latter claim first. If it were indeed the case that it were costless to protect additional people, once an army and, say, a credible nuclear threat of retaliation, were in place, then Rhode Island alone could fight all our wars. Why bring in additional tax revenues from Texas or Alaska or Hawaii or Florida? They would be unnecessary. Second, in like manner, there would be no reason the entire continents of North and South America could not be safeguarded from external aggression, not by the U.S., which conceivably is powerful enough to accomplish this task, but by any smaller, weaker political jurisdiction, the international equivalent of Rhode Island—Canada or Uruguay, for example. If these contentions are preposterous, which they are, then the same assessment must be placed on the argument that there are no extra costs for protecting additional people.

Take another case. Suppose two armies invade the U.S. at the same time, one from the Atlantic and the other from the Pacific. Surely our defense forces could do a far better job if they were able to focus their entire attention on only a “one-front” war. That they are charged with the obligation to defend both east and west coasts at the same time cannot help but put a crimp in their overall efforts.

Now consider the former claim. Is it possible to exclude nonclients from protection? It is easy to see this is the case when it comes to conventional weaponry. If no one in Arkansas pays for protection from Muammar Khadaffi, then the private XYZ firm offering to keep this worthy at bay simply will not interfere with the latter’s plan of conquering Arkansas. Instead, XYZ will limit itself to ensuring that this Eastern assassin keeps his mitts off of customers in, say, New York and New Jersey, the areas from whence it draws its revenue. Suppose now that one-third of the inhabitants of Arkansas sign up with XYZ, and that they are spread throughout this state. Again, no problem. The international protection agency borrows a lead from its purely domestic counterpart: it gives out medallions only to its clients, and Khadaffi (as well as local villains) is given to understand that XYZ will look the other way if a noncustomer is attacked.

At first blush it is more difficult to see how this might work with the nuclear umbrella. After all, if a threat of mass assured destruction—if need be—will protect Arkansas from the Russians, those in the surrounding states of Missouri, Tennessee, Mississippi, Louisiana, Texas, and Oklahoma need not help finance the intercontinental ballistic missile system, which is intended to “lob one in to the men’s room of the Kremlin.” Those cheapskates can allow the Arkansans to do this all by themselves. The problem is, this argument proves far too much. For if their ploy will work for the front-line states contiguous to Arkansas, it will function anywhere in the world. If one can in this way place the sword of Damocles over the head of every Russian in a position of authority (and, of course, all others residing in that country), then there is in principle no limit to the demands that may be made of them. There is, then, no reason to confine the nonexcludable area to that surrounding this one state. Theoretically, the entire world is the realm to which the area of nonexcludability extends.³⁵ If this is so, then there is no case for the defense of the various national governments in the nuclear club constituting public goods in category D. Rather, what we have here is an argument for a world government, encompassing all of the peoples of the earth.

VOLUNTARY CLUBS³⁶

In addition to the externalities and public-goods arguments in defense of government, there is also the view that this institution is really part of the market in that it really doesn’t initiate violence against its members. Rather, the bottom line is that government is similar to a private club; since the latter is not guilty of the initiation of violence, then neither can this apply to the former. If this is so, then statist-organized national defense is no more problematic than any other private initiative, e.g., a hot dog stand. It is imperative, then, if the argument for government protection is to be critically analyzed, that these claims be exposed for the tissue of fallacies they are.

Consider in this regard the following:

One way to think of government is that it is like a club. Just as a tennis club exists to advance the interests of its members playing tennis, government exists to advance the common interests of its citizens. The club analogy is also useful in thinking about the question of secession. Just as the right to withdraw from a club, if it no longer serves one’s interests, seems reasonable, so too under certain circumstances is the right to secede.

The withdrawal of an individual from a club can adversely affect the other club members. Suppose, for example, that the club’s facilities were built under the assumption that 1,000 members would cover amortization of construction and maintenance costs. If membership fall below 1,000, the remaining members must pay higher annual fees than originally planned. With this in mind, the founding members of a club may agree to impose a penalty on those who withdraw, or require that they put up a bond to be forfeited upon withdrawal, unless they can find a new member to take their place.³⁷

Of course, if the club can determine the penalty to be imposed upon those who secede, it can also, like a government, prohibit this from occurring in the first place.³⁸

Another author with similar views is Charles Blankart:

The state can be viewed as an organization similar to a club. Clubs are formed by individuals who want to pursue a common goal. Similarly a state can be defined as a club formed by citizens, and designed to serve goals that its members have in common, like the provision of public goods such as law and order, national defense, streets and highways, etc.³⁹

He also delivers himself of this opinion: “A state is a peculiar kind of club in that its dimensions are (generally) defined geographically.”⁴⁰

The idea that government is analogous to a private voluntary club—or, better yet, is nothing more or less than a private voluntary club—is widely associated with, or credited to, James Buchanan.⁴¹ We shall, however, pursue Randall Holcombe’s version of this doctrine. It is very confused and contradictory, but its twists and turns, its contradictions and obfuscations, can serve as a good foil. Although this author specifically states, “Few people would be willing to argue that the government is nothing more than a large club”⁴² —and indeed, this is wildly mistaken—this is precisely his view, I shall argue. Only instead of maintaining merely that the state is at bottom a voluntary organization, Holcombe believes, in addition, that voluntary clubs are really coercive!

Exhibit “A” in this contention of mine is his “exchange model of government.”⁴³ Now, for most people, “exchange” implies voluntary interaction. A pie delivery man gives one of his pies to the milk delivery man, and the latter reciprocates, in kind, as the very famous Norman Rockwell drawing illustrates. But Holcombe is having none of this. Instead, he maintains, in an “exchange” scenario from hell:

One possibility would be for the strong person to enslave the weak one and force the weak person to work for her (sic). The strong person is the residual claimant in this case, but … the weak person has little incentive to be productive … the weak person has no incentive to produce things that he knows will just be stolen from him later …

Another possibility from the starting point of anarchy is for the strong person to agree to take only a predetermined share of the weak person’s output. For example, if both people agreed that that weak person would give the strong one-third of his output, both could be better off. The weak person now has an incentive to produce, knowing that he will be able to keep two-thirds of his output, and the strong person gets one-third of the weak person’s output. Under anarchy, the weak person would be unlikely to produce anything that could be taken by the strong, reducing the output that could be produced by both persons. The two-person society is more productive, and both people are better off under the agreement that the weak person shares a specified percentage of his production with the strong.⁴⁴

The difficulty here, is not that Holcombe ascribes coercion to statist institutions. On the contrary, this is entirely correct. The problem is the perversity of language used to describe such a relationship: in terms of exchange⁴⁵ and agreement. If this be “agreement” it is the “agreement” of the holdup victim to be robbed, rather than shot and then robbed; it is the “agreement” of a woman to be raped, rather than raped and killed, when she really “agrees” to neither. In short, it is no agreement at all. Such confusing language seems almost purposefully obfuscatory.

Holcombe goes on to describe government as the “exchange of protection for tribute,” and to claim that this “benefits both citizens and their government.” The former is merely the idiosyncratic language we have come to expect from this author. When one side “protects” the other from depredations emanating from itself, this is only “protection” in the Mafia or protection-racket sense of that term. It is, to be crystal clear, not protection at all but rather invasion or theft. And to say that both sides of this transaction “benefit” is to add insult to injury. If this were really a mutually beneficial trade, as in the case of the barter of the pie and the bottle of milk, both sides would enter into it voluntarily. But here, as even Holcombe admits, one side enters into the “agreement” under duress. Some contract.⁴⁶

For an author who sees a strong parallel between government and clubs, Holcombe is guilty of a bit of inconsistency. For example, he states,

If clubs are fundamentally voluntary organizations, then one can have little reason for wanting to interfere with the club’s activities. People who do not like the club’s activities do not have to join. If governments a(re) (sic) fundamentally coercive organizations that force people to abide by the government’s rules, then everyone in the group has an interest in the government’s activities.⁴⁷

But this is more than passingly curious. He just finished admitting that governments are indeed coercive, in that they force people into “contracts” with them. Why the delicacy here? Second, parallel construction would have forced him to conclude the quote above, not as he did, but rather by saying, “then everyone in the groups would have much reason for wanting to interfere with the government’s activities.” Why shrink back from the implications of one’s own premises?

Then, too, Holcombe resists the equation of taxation and theft. He states, “Even if one regards taxation as theft, one would hardly say that a thief becomes a government as the result of his thievery.”⁴⁸ Very much to the contrary, starting from Holcombe’s premises, one would be compelled by the laws of logic to assert this very thing, apart from the fact that a government is defined as a thief with legitimacy.⁴⁹

But government, as I say, is not the main problem for Holcombe. At least this author admits, in his own befuddled language, that the government is indeed guilty of threatening violence against the citizens unless they “agree” to pay tribute,⁵⁰ even though he fails to fully carry through on this insight.

In contrast, the real difficulty is that Holcombe sees coercion in voluntary organizations such as clubs. Take what some would consider as the rather inoffensive bridge club, which provides that its members host the meeting once per month:

The bridge club taxes its members by requiring that they pay for refreshments every fourth week. There is also a certain amount of work involved in hosting the group, such as setting up a place to play, preparing refreshments … and cleaning up afterwards. This forced labor is similar in concept to a military draft.⁵¹

This author would not like to be interpreted as seriously maintaining that the bridge club is coercive. This, it might be thought, is too contrary to common sense, even for him. Instead, he might like to be interpreted as merely using this example as an entering wedge, to show that there is no real difference in principle between coercive and voluntary arrangements. He specifically states that there is a “continuum from clubs to governments,”⁵² but he cannot be allowed to escape that easily. For Holcombe maintains in effect that the bridge club is partially coercive.⁵³ But this is a monstrous and presumably purposeful use of misleading language, at least on the part of a native speaker of English. If the bridge club, forsooth, is a coercive institution, even partially so, then there is no hope at all for clarity in this field.

His heavy artillery in this regard is the distinction—or, rather, lack of distinction—between the neighborhood association swimming pool, which arises out of covenant, or contract, and the municipal pool, which is of course based on taxation. He is fooled by the superficial similarities in the two cases into thinking that there is no relevant difference between them. He states:

Surely the [difference between them] cannot be related to coercion. Both the neighborhood pool organization and the municipal government have the ability to force its residents to contribute to its coffers. In both cases the individual cannot escape the organization without moving away, but in both cases it is possible to move away.⁵⁴

The obvious difference between the two cases, clearly apparent to anyone who understands even a smattering of political philosophy, is that in the former case, the swimming facility is privately owned, while in the latter case it is not. According to Holcombe,

the subdivision was once a farm and was bought by a developer who divided the farm into individual lots and built houses on the lots. In the center of the subdivision the developer built a neighborhood pool.⁵⁵

To avail oneself of access to this facility without paying is thus actually to commit theft of services from the private condominium association which now owns the pool. In very sharp contrast indeed, the municipal pool is under the auspices of the town council. There are no private-property rights involved. Very much to the contrary, there is a local government, with the power to compel citizens who have signed no contract with it whatsoever. This elementary distinction, so basic to public-policy analysis, seems to have entirely escaped notice of this author. According to Schumpeter, “The theory which construes taxes on the analogy of club dues, or of the purchase of the services of, say, a doctor only proves how far removed this part of the social sciences is from scientific habits of mind.”⁵⁶ This reads as if Schumpeter had Holcombe specifically in mind.

That the two establishments have some superficial resemblances to each other cannot be denied. But according to Holcombe’s own theory of the creation of the state, individuals came first. Because they suffered under the Hobbesian state of nature, they agreed to “exchange” this state of affairs for one of civilization, and government. But they did not agree to any such thing. As Spooner⁵⁷ shows, there is simply no evidence for this contention. No one, not under duress, signed any contract inaugurating the government, and no one ever paid any tax on a voluntary basis. This being the case, the status of the government swimming pool, despite outward appearances, is actually entirely different from the purely private one. The government did indeed “exchange” tribute for regularity in theft, but Holcombe is in grave error when he likens this to the private-property relationships underlying the condominium swimming pool.

Even after careful attention, and several rereadings, it is unclear to me whether Holcombe sees small units of government (e.g., towns and villages) as voluntary, or private condominium developments as coercive, or both. It is unclear because he prevaricates on these two views.⁵⁸ The correct position, I maintain, is that both of these are wrong. That is, government, no matter at how “local” a level, is always coercive. This is the essence of the institution. This holds unless there is unanimous agreement at the outset; but if this is so, then we are no longer discussing statism. Rather, we have edged into the private realm. In sharp contrast, it cannot be doubted that private, voluntary communal arrangements must of necessity be noncoercive. If somehow they are or become coercive, then they are properly to be interpreted as an aspect of the government, not the voluntary sector. Private criminal gangs, individual robbers, and rapists, for instance, are necessarily governmental, albeit unofficial.

CONCLUSION

We have considered several arguments on behalf of governmentally organized national defense: externalities, public goods, and club theory. We have found all of them wanting. We conclude, therefore, that the case for these institutional arrangements is unproved.

¹Michael Levin, “How Philosophical Errors Impede Freedom,” Journal of Libertarian Studies 14, no. 1 (Winter 1998–99): 125–34.

²Based on Gilbert and Sullivan’s Pinafore character, Little Buttercup, who sang, “Things are seldom what they seem, Skim milk masquerades as cream” (ibid., p. 129).

³Henry Hazlitt, Economics in One Lesson (New York: Arlington House, 1979), p. 23.

⁴See also on this Frédéric Bastiat, The Law (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1962); idem, Economic Harmonies, W. Hayden Boyers, trans. (New York: Van Nostrand, 1964).

⁵Hugh Murray, “White Male Privilege: A Social Construct for Political Oppression,” Journal of Libertarian Studies 14, no. 1 (Winter 1998–99): 136.

⁶John T. Flynn, As We Go Marching, (New York: Free Life Editions, 1944 [1973], cited in Llewellyn H. Rockwell, Jr., “Buckleyism, RIP,” Triple R. Rothbard-Rockwell Report 10, no. 7 (July 1999): 11.

⁷See William Kneale and Martha Kneale, The Development of Logic, (Oxford: Clarendon Press, 1962), p. 228; Bible, New Testament, Titus 1:12–13; Douglas R. Hofstadter, Gödel, Escher, Bach: An Eternal Golden Braid (New York: Basic Books, 1979), p. 17. I owe this point and reference to William Friedman.

⁸Edward O. Wilson, Academic Questions (Summer 1998); idem, Consilience: The Unity of Knowledge (New York: Random House, 1998.)

⁹Richard F. Hassing, “And Furthermore …” Academic Questions (Winter 1998–99): 6.

¹⁰States John C. McCarthy, “The Descent of Science,” Review of Metaphysics 5, no. 4 (June 1999): 851–52.

Consilience violates a logical rule so basic that it holds for any speech whatsoever: it fails the test of self-reference. The ontological reductionism that purports to be the substance of his speech undermines the rational presuppositions underlying his act of speaking. One must therefore say of his book what was once said by a man whom Wilson credits as “the grand architect” of modern natural science regarding science in its pre-modern signification: it is “like some magnificent mass without any foundation.”

¹¹Walter Block, “Population Growth: Is It a Problem?” Resolving Global Problems into the 21st Century: How Can Science Help? Proceedings of the Fourth National Conference of Canadian Pugwash, Peter S. Ross, Sheila Riordon, and Susan MacArtney, eds. (Ottawa: CSP Publications, 1989), p. 43.

¹²Hans-Hermann Hoppe, The Economics and Ethics of Private Property: Studies in Political Economy and Philosophy (Boston: Kluwer Academic Publishers, 1993), pp. 204–07. See also Stephan Kinsella, “Punishment and Proportionality: The Estoppel Approach,” Journal of Libertarian Studies 12, no. 1 (Spring 1996): 51–74.

¹³Don Corleone of The Godfather famously told his victims he would make them “an offer they couldn’t refuse.” The point, of course, is that if they couldn’t refuse, it was hardly an offer; rather, it was a threat. All of this is crystal clear to the entire audience. Unfortunately, this point has eluded generations of economists, at least when it comes to the government, as the very same “offer” is made to the citizenry.

¹⁴If I start a government, then according to this argument, it will benefit you; if you begin one, I will free-ride on it. Therefore neither of us, that is, no one, will undertake this task. In other words, we can use an argument, ostensibly proving the state necessary, to prove that, according to it, this institution could not arise. For more on this see Hans-Hermann Hoppe, “Fallacies of the Public Goods Theory and the Production of Security,” Journal of Libertarian Studies 9, no. 1 (Winter 1998): 27–46; idem, “Private Production of Defense,” Journal of Libertarian Studies 14, no. 1 (Winter 1998–99): 27–52; idem, The Private Production of Defense (Auburn, Ala.: Ludwig von Mises Institute, 1998); Murray N. Rothbard, For a New Liberty (New York: Macmillan, 1973); Jeffrey Rogers Hummel, “National Goods versus Public Goods: Defense, Disarmament and Free Riders,” Review of Austrian Economics 4 (1990): 88–122.

¹⁵Ordinarily at this point, I would feel obligated to offer several citations. This is unnecessary in the present context, in that virtually all economists accept this argument. There is not a single mainstream text dealing with the subject which demurs from it. Here is a sample: Dennis C. Mueller, Constitutional Democracy (Oxford: Oxford University Press 1996); Todd Sandler, Collective Action: Theory and Applications (Ann Arbor: University of Michigan Press, 1992); Richard Cornes and Todd Sandler, The Theory of Externalities, Public Goods and Club Goods (Cambridge, U.K.: Cambridge University Press, 1986).I owe this and the previous reference to Randy Holcombe. James M. Buchanan, The Limits of Liberty: Between Anarchy and Leviathan (Chicago: University of Chicago Press, 1975); Mancur Olson, Jr., The Logic of Collective Action: Public Goods and the Theory of Groups (New York: Schocken Books, 1971); Geoffrey Brennan and James M. Buchanan, The Reason of Rules: Constitutional Political Economy (Cambridge, U.K.: Cambridge University Press, 1985).

¹⁶Ludwig von Mises, Human Action, Scholar’s Edition (Auburn, Ala.: Ludwig von Mises Institute, 1998); Murray N. Rothbard, Man, Economy, and State (Auburn, Ala.: Ludwig von Mises Institute, 1993).

¹⁷Murray N. Rothbard, “Toward a Reconstruction of Utility and Welfare Economics,” in idem, The Logic of Action I (Cheltenham, U.K.: Edward Elgar, 1997).

¹⁸This is obvious and literally true in the case of the vegetarian. According to Richard Cornes and Todd Sandler, Theory of Externalities, Public Goods and Club Goods: “In the case of a pure public good, voluntarism may be absent, since the good may harm some recipients (e.g., defense to a pacifist, fluoridation to someone who opposes its use)” (p. 159). But how can it be a “pure public good” if it is a bad for at least some people?

¹⁹At worst it deserves Rothbard’s curt dismissal:

A and B often benefit, it is held, if they can force C into doing something … any argument proclaiming the right and goodness of, say three neighbors, who yearn to form a string quartet, forcing a fourth neighbor at bayonet point to learn and play the viola, is hardly deserving of sober comment.

Murray N. Rothbard, “The Fallacy of the ‘Public Sector,’” in idem, The Logic of Action II: Applications and Criticism from the Austrian School (Cheltenham, U.K.: Edward Elgar, 1997), p. 178.

²⁰This goes particularly for those to whom I have made explicit offers of my services; their very refusal indicates they need it the most.

²¹Actually, this is a bit of an artificial construct for our analytic purposes. For the neighbor who lives next door to a man in Seattle may be far more of a threat to him than someone living in St. Johns, Canada, even though the latter, it is claimed, owes allegiance to a different country and the former is a fellow citizen. Therefore, we will consider both national defense against foreigners and, perhaps more important, protection against violent incursions whatever their geographic or political source.

²²To anticipate our critique below, we can state “No marginal costs, eh? What about property owners who resent being forced to allow noncustomers to consume for free, at their expense?”

²³In the view of William J. Baumol (see his review of Robert Alan Dahl and Charles Edward Lindbloom, Politics, Economics and Welfare, [1953], which appeared in Economic Theory and Operations Analysis [Englewood Cliffs, N.J.: Prentice-Hall, 1961], p. 268): “The price system’s shortcomings are equally well described. Its inability to provide for communal wants like defense, roads and lighthouses because of the high costs to any one individual of providing such shareable goods and services.” For rejoinders to Baumol’s position on defense, see footnote 14, above; on roads, see footnote 32, below; and on lighthouses, see footnote 26.

²⁴For further elaboration, see Walter Block, “The Justification of Taxation in the Public Finance Literature: An Unorthodox View,” Journal of Public Finance and Public Choice 3 (Fall 1989): 141–58; idem, “Canadian Public Finance Texts Cannot Justify Government Taxation: A Critique of Auld and Miller; Musgrave, Musgrave, and Bird; McCready; and Wolf,” Canadian Public Administration 36, no. 2 (Fall 1993): 225–62.

²⁵James M. Buchanan and G.F. Thirlby, L.S.E. Essays on Cost (New York: New York University Press, 1981); James M. Buchanan, Cost and Choice: An Inquiry into Economic Theory (Chicago: Markham, 1969); Mises, Human Action; Rothbard, Man, Economy, and State.

²⁶Ronald H. Coase, “The Lighthouse in Economics,” Journal of Law and Economics 17 (1974): 357–76; for a critique of the former, see David E. Van Zandt, “The Lessons of the Lighthouse: ‘Government’ or ‘Private’ Provision of Goods,” Journal of Legal Studies 23, no. 1 (1993): 47–72; for a criticism of both previously mentioned articles, see William Barnett and Walter Block, “Coase and Van Zandt on Lighthouses” (unpublished manuscript, 2003).

²⁷Walter Block, “Institutions, Property Rights and Externalities: The Case of Water Quality,” Agriculture and Water Quality: Proceedings of an Interdisciplinary Symposium, Murray H. Miller, J.E. FitzGibbon, Glenn C. Fox, R.W. Gillham, and H.R. Whiteley, eds. (Guelph Center for Soil and Water Conservation: University of Guelph Press, 1992), pp. 191–208; Roy Whitehead, Catherine Gould, and Walter Block, “The Value of Private Water Rights: From a Legal and Economic Perspective,” Albany Law Environmental Outlook Journal (forthcoming); Roy Whitehead and Walter Block, “Environmental Takings of Private Water Rights: The Case for Full Water Privatization,” Environmental Law Reporter (October 2002): 11162-–76.

²⁸Indeed, the very opposite is the case. In the Edmonton Mall, located in frozen northern Alberta, the facility opens up early, before the stores are even ready for business, solely for the convenience of joggers. (There are even quarter-mile markings for their convenience.) The hope, presumably, is that those who make use of these inner “streets” will later come back to shop.

²⁹We now assume this for the sake of argument. This is debatable not only because of subjectivity, but also due to the fact that governments have killed more of their citizens than have died in wars. On this, see R.J. Rummel Death By Government (New Brunswick, N.J.: Transaction Publishers, 1996), who calculates the total number of noncombatants killed by their own governments during this century as 169,198,000. See also The Black Book of Communism: Crimes, Terror, Repression, Stephane Courtois, Nicolas Werth, Jean-Louise Pauné, Andrzej Paczkowski, Karel Bartošek, and Jean-Louis Margolin, eds. (Cambridge, Mass.: Harvard University Press, 1999); Robert Conquest, The Great Terror (Edmonton, Alberta: Edmonton University Press, 1990); idem, The Harvest of Sorrow (New York: Oxford University Press, 1986).

³⁰Jones of course may employ another firm for this purpose, or engage in self-help to ward off his enemies. In an era with no gun controls, it would be a brave criminal indeed who would attack him with impunity.

³¹It is very difficult to anticipate how a market would work in an arena from which it has long been banished. We can only speculate as to the free functioning of this industry. It is as if bananas were always provided for by the government, and now some radical was advocating the privatization of this product. The questions and objections would come thick and fast: Who would sell them? How many banana stands would there be on each block? How would their easy rotting be prevented? How would the poor be able to obtain bananas? Would they be sold in bunches or individually? We can look askance at all such remonstrances based on the hindsight afforded us by an actually functioning banana industry. Some countries are not so fortunate.

³²For an explication of how this might function, see Walter Block, “Public Goods and Externalities: The Case of Roads,” Journal of Libertarian Studies 7, no. 1 (Spring 1983): 1–34; Walter Block, “Roads, Bridges, Sunlight and Private Property: Reply to Gordon Tullock,” Journal des Economistes et des Etudes Humaines 8, no. 2/3 (June–September 1998): 315–26; Walter Block and Matthew Block, “Roads, Bridges, Sunlight and Private Property Rights,” Journal Des Economistes Et Des Etudes Humaines 7, no. 2/3 (June–September 1996): 351–62; Walter Block, “Road Socialism,” International Journal of Value-Based Management 9 (1996): 195–207; idem, “Theories of Highway Safety,” Transportation Research Record, no. 912 (1983): 7–10; idem, “Congestion and Road Pricing,” Journal of Libertarian Studies 4, no. 3 (Fall 1980): 299–330; idem, “Free Market Transportation: Denationalizing the Roads,” Journal of Libertarian Studies 3, no. 2 (Summer 1979): 209–38; Michelle Cadin and Walter Block, “Privatize the Public Highway System,” The Freeman 47, no. 2 (February 1997): 96–97; John M. Cobin, “Market Provisions of Highways: Lessons from Costanera Norte,” Planning and Markets 2, no. 1 (1999); Gerald Gunderson, “Privatization and the 19th-Century Turnpike,” Cato Journal 9, no. 1 (Spring/Summer 1989): 191–200; W.T. Jackman, The Development of Transportation in Modern England (Cambridge, U.K.: Cambridge University Press, 1916); Dan Klein, “The Voluntary Provision of Public Goods? The Turnpike Companies of Early America,” Economic Inquiry (October 1990): 788–812; Dan Klein, J. Majewski, and C. Baer, “Economy, Community and the Law: The Turnpike Movement in New York, 1797–1845,” Journal of Economic History (March 1993): 106–22; Dan Klein, J. Majewski, and C. Baer, “From Trunk to Branch: Toll Roads in New York, 1800–1860,” Essays in Economic and Business History (Conference Proceedings for the Economic and Business Historical Society, 1993), pp. 191–209; Dan Klein and G.J. Fielding, “Private Toll Roads: Learning from the Nineteenth Century,” Transportation Quarterly (July 1992): 321–41; Dan Klein and G.J. Fielding, “How to Franchise Highways,” Journal of Transport Economics and Policy (May 1993): 113–30; Dan Klein and G.J. Fielding, “High Occupancy/Toll Lanes: Phasing in Congestion Pricing a Lane at a Time,” Policy Study, no. 170, Reason (November 1993); Gabriel Roth, The Private Provision of Public Services in Developing Countries (Oxford: Oxford University Press, 1987); idem, Paying for Roads: The Economics of Traffic Congestion (Middlesex, U.K.: Penguin, 1967); idem, A Self-financing Road System (London: Institute of Economic Affairs, 1966); Murray N. Rothbard, For a New Liberty (New York: Macmillan, 1973); William C. Wooldridge, Uncle Sam the Monopoly Man (New Rochelle, N.Y.: Arlington House, 1970).

³³A common ploy of apologists for the state is the claim that just as we need rules of the road, otherwise there would be many fatalities, so do we need governments to set up the “rules,” not only for the road, but in general. See for example Geoffrey Brennan and James M. Buchanan, The Reason of Rules: Constitutional Political Economy (Cambridge, U.K.: Cambridge University Press, 1985), pp. 7–12. In the context of government roads, there is a certain low cunning to this argument. But the concept of highway privatization shows this line of reasoning for the fallacy that it is.

³⁴Edward Stringham, “Market Chosen Law,” Journal of Libertarian Studies 14, no. 1 (Winter 1998–99): 53–78, shows that the owners of roads, malls, gated communities, and insurance companies, would safeguard those living in or passing through their property, not out of benevolence, but based on profit considerations.

³⁵Of course, a similar case obtains with regard to the Russians living in one small area—Moscow, for example.

³⁶The writing of this section was prompted by discussions with my colleague at the University of Central Arkansas, William H. Friedman.

³⁷Dennis C. Mueller, Constitutional Democracy (Oxford, U.K.: Oxford University Press, 1996), p. 81. Mueller also writes (p. 301):

A state is like a club formed to fulfill common interests of its members. Like other clubs it will be better able to fulfill these interests the closer they are in common. Just as the optimal membership of a club is unlikely to include every person who could possibly be a member, the optimal membership (citizenry) of a polity does not necessarily include every person who could possibly be a citizen.

I owe this reference to Ed Stringham.

³⁸For the case on behalf of secession, see Robert W. McGee, “The Theory of Secession and Emerging Democracies: A Constitutional Solution,” Stanford Journal of International Law 28, no. 2 (1992): 451–76; idem, “A Theory of Secession for Emerging Democracies,” Asian Economic Review 33, no. 2 (August 1991): 245–65; Robert W. McGee and Danny Lam, “Hong Kong’s Option to Secede,” Harvard International Law Journal 33, no. 2 (1992): 427–40; Secession, State, and Liberty, David Gordon, ed. (New Brunswick, N.J.: Transaction Publishers, 1999).

³⁹Charles B. Blankart, “Club Governments versus Representative Governments,” Constitutional Political Economy 5, no. 3 (1994): 273. I owe this source to Ludwig Van den Hauwe.

⁴⁰Ibid.

⁴¹See James M. Buchanan, “An Economic Theory of Clubs,” Economica (February 1965): 1–14. This claim is made by Randall G. Holcombe, The Economic Foundations of Government (New York: New York University Press, 1994), p. 73; and by Richard Cornes and Todd Sandler, The Theory of Externalities, Public Goods and Club Goods (Cambridge, U.K.: Cambridge University Press, 1986), p. 161. (In the view of the latter authors, this attribution should be shared by Mancur Olson, Jr., The Logic of Collective Action: Public Goods and the Theory of Groups ( New York: Schocken Books, 1971).

⁴²Holcombe, Economic Foundations of Government, p. 73

⁴³Ibid., p. 32.

⁴⁴Ibid., p. 33; emphasis added.

⁴⁵Ibid., p. 36; emphasis added.

⁴⁶One more example of Holcombe’s internal inconsistency: He maintains (p. 34) that “no rights have been established … in anarchy.” But if so, how can any “stealing” take place? For surely theft is a concept dependent upon there being rights in existence. If none exist, then by definition it is impossible for there to be stealing. All such acts would have to be described as “transfers” of goods, or some such, from one person to another. If no rights have been established in anarchy, what, then, gives anyone the right to leave this state of affairs, and to set up a government? With no rights at all, it would appear that any such action should be precluded.

⁴⁷Ibid, p. 72.

⁴⁸Ibid., p. 73.

⁴⁹See on this Murray N. Rothbard, For a New Liberty, p. 51, who states that “anyone who persists in thinking of taxation as in some sense a ‘voluntary’ payments can see what happens if he chooses not to pay.” Holcombe, Economic Foundations of Government (p. 83), takes Rothbard (For a New Liberty) to task for “exempt[ing] criminals from the realm of government.” He does not appear to realize that for Rothbard, there is simply no difference at all between a robber gang and a government, apart from the better public relations of the latter, courtesy in large part of suborning the intellectual classes.

⁵⁰When the Barbary pirates demanded agreement to this sort of thing, the cry went out, “millions for defense, not a penny for tribute.” In Holcombe’s exasperating terminology, this would not be wise or unwise, just or unjust, but rather completely incomprehensible.

⁵¹Holcombe, Economic Foundations of Government, p. 75.

⁵²Ibid., p. 74.

⁵³He makes a similar point (p. 85) with regard to private restaurants that impose dress codes, characterizing this, too, as the use of “coercion.” I submit that this is also perverse.

⁵⁴Ibid., p. 77.

⁵⁵Ibid., p. 76.

⁵⁶Joseph A. Schumpeter, Capitalism, Socialism and Democracy (New York: Harper, 1942), p. 198

⁵⁷Lysander Spooner, No Treason (Larkspur, Colo.: Pine Tree Press [1870] 1966).

⁵⁸It is thought by wags that the best way to win fame, prizes and recognition in economics is to write unclearly. Keynes is surely a case in point. If so, Holcombe is headed for great celebrity.