Private Defense vs Government Defense – Who is incentivized for wars?

Posted by Jason | Posted in Foreign Policy, Government | Posted on 05-02-2010

4 has a fascinating post today (actually a chapter from a book) about how the market could better handle defense from foreign agression than government. As I said in my post the other day, defense whether domestic with police or foreign with military, can be defended as a government role, because government’s role is supposed to be defending individual liberty and protecting us from coercion.

While I think it is hard for most people to believe that the free market can provide policing and military defence (even I questioned military), this post makes a great argument for the free market. As I was reading, lights were going off in my head as to downfalls of government defense and the benefits to the people of it being handled in the free market. Here are some highlights. I highly recommend reading the entire post. Whether you agree or disagree, it is fascinating.

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.

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.

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.

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.

Foreign Aggression by Morris and Linda Tannehill.

The one part that really struck out at me was paying for defense like an insurance policy. As I stated the other day, insurance companies could provide fire services to their subscribers instead of having it handled through government and taxation. Insurance companies have the incentive to minimize their outlays, so they will are motivated to get fires are put out quickly and make steps to minimize the chances of having fires. The less fires they have, the higher their profits. On the other hand, the more fires (or other services delegated to a fire dept.) the bigger the department comes, and the bigger their budgets become. This is the goal of a government organization. Anyways, they explained how insurance could address defense in a similar manner.

While insurance companies have been demonized in our media and government, they provide valuable services when government isn’t involved. I don’t hear too many people complaining about their evil life and home owner insurance companies. Instead they complain about health insurance companies who are heavily regulated and where government accounts for 50% of all expenditures.

While I haven’t worked through all the details of whether I think this could work or not, here are some of the first thoughts that came to mind when I read this:

1. Insurance companies would not want war. It would cost them too much money. Since their contract is to defend their client, they would pursue diplomacy better than a government would who gets more money and control if there is a war.

2. Insurance companies in looking to reduce the chances of expensive reconstruction costs, would invest heavily in defensive measures that would dissuade agression. Instead of going out looking for dragons to slay, they would do what the people(clients) want, which is to be defended only. Most people do not want their government going out starting wars.

3. While the defense agencies might be incentized to have wars in order to grow, insurance companies, who would be the client or owner of the defense agency has the exact opposite incentive. Because of that, the insurance company would keep the defense agency in check. If the defense agency was stirring up trouble in order to get more business, they would lose the largest clients, insurance companies. Instead their incentive would be to develop lower cost technologies and to become more efficient. That would increase their profits without the need for increased warfare.

Again, this is just off the top of my head as I’m reading this myself, so I may be missing some incentives and some possible downfalls. I’d love to hear thoughts from everyone else.

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Comments (4)

I agree with the entire concept in theory, but I don’t see it as a practical reality. I generally feel defense is not something the private market could provide for a few reasons:

1. If defense is treated like an insurance policy, then you have the choice of whether or not to purchase said policy. From the insurance company’s standpoint, how can you provide for the defense from foreign aggressors for some citizens without providing for all? I have a feeling people would pick up on that point real quick, therefore few would have the incentive to purchase a policy.

2. Competition (or lack thereof) between insurance companies. Realistically it would be almost impossible to have multiple insurance companies selling defense policies because of the delivery of service. Defense works best in a collaborative effort. Having multiple suppliers of service and that would lead to an inevitable passing of the buck to prevent a payout.

I will concede that different suppliers would invariably lead to multiple approaches to defensive measures, which would be highly beneficial, however the downside would be attempting to figure out which measures worked if every house had a different insurance policy.

I’d love to hear your followup thoughts on the matter though, as it’s a very interesting topic.

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John, glad you commented. This is an interesting topic, and I was afraid no one would challenge it. I don’t necessarily even buy into it yet, but I haven’t figure out if it’s for good reason I haven’t bought into it or if because gov’t has always provided defense, I assume it’s the only one who can do it.

The article did mention the problem of people looking for a free ride when it came to insurance, and I thought they had a good point. They said most of the insurance would be purchased by businesses, since businesses have much more in value to lose if there was an attack. Because businesses aren’t people, they would pass that cost on to the general public through prices. The end result would be a pretty even distribution of the cost amongst the population.

Also, the insurance company’s policy is to protect you. It is still possible that there could be an attack. If that is the case, the insurance company would have to pay out claims. If you tried going for a free ride, you may have your freedom protected, but you will not have claims paid for destroyed property, life, etc. That may be incentive for a good amount of people. Considering the death toll that could come from an attack, maybe it would be part of life insurance. Just thinking out loud here. I think the business angle would be the likely scenario. Too bad you couldn’t buy insurance now to protect you from our looting gov’t.

As far as the second one goes, I don’t see any reason there would be a lack of competition unless one company just does it better and cheaper than another. Remember gov’t won’t be there to pick winners and losers, so these companies will have to compete. If you look at some of the insurances where there isn’t huge gov’t involvement, there is a ton of competition (life, business, etc). The only insurance sector that seems to really lack competition is health insurance, and that is completely at the feet of government.

Also, I think when we think of defense, we think of our national military. When this country was founded, we were supposed to have state militias. I don’t see why the insurance and defense agencies would function any different than state militias. They would function at a lower level protecting areas that they cover under their policies. Also, don’t forget that in a free society citizens’ rights to protect themselves will be without question. A heavily armed citizenry will be enough of a deterrent to begin with. The insurance companies and defense agencies would probably function more at the intelligence, diplomatic, and advanced technology level that individuals would not be able to afford themselves. No country wants to invade the US, when there is already 1 gun per person, and that’s under all this gov’t gun control. The only threat I really think you would have to worry about is complete destruction, but like the article said with private defense, we wouldn’t have a gov’t out stirring up trouble in the world that would create blowback.

While this is fun to discuss, we both know it would never happen. If ever attempted, it would challenge the idea of gov’ts world wide, which means it would probably be destroyed before it was ever implemented. While it’s interesting to think about, I’d be happy to just go back to how we were setup at our founding with state militias, individual freedom, and a very strictly limited gov’t. That’s about as likely as the private defense though.

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I agree the first deterrent is an armed nation. You noted a youtube video a while back that asked why gun-related crime was lowest in Switzerland, and it was primarily because everyone was armed, and knew how to use them.

I also agree that if we didn’t go outside our borders looking for as much trouble as we do, we wouldn’t be as big a target as we are. I’m still struggling a little bit with that though because there are tyrants in the world, and I don’t know that we should let them run roughshod invading other countries and such, but if the target countries can’t defend themselves against attack, then we’ll be forced to be their big brother on the playground forever. That does neither country any good. I don’t know, maybe that’s up to the UN to deal with, but somehow I don’t think they’re up to the task.

It’s fun to dream I suppose, but like you said, not a likely scenario.

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Look to see what country Hilter avoided during WWII as well. I’m not saying he eventually wouldn’t have gotten to Switzerland, but the cost benefit analysis on Switzerland obviously didn’t make sense since they would have had citizens firing at them from all directions.

As far as not letting tyrants run roughshod, first people need to defend themselves first before asking someone else to do it. Right now Americans subsidize the rest of the world with money and blood to defend them even when our security is not in question. If they aren’t willing to fight for their freedom, then they must not want to be free bad enough.

I think we actually had a bigger effect with expanding freedom before based on our example than we do now based on our might.

Also, tyrants are kind of like monopolies. They may last in the short term, but in the long term they will fail. Tyrants typically are too arrogant, and they do something stupid. Look at Napoleon and Hilter going into Russia leading to their downfall.

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