Roderick Long deals with that critique here:
(6) Property Law Cannot Emerge from the Market
Another popular argument, also used often by the Randians, is that market exchanges presuppose a background of property law. You and I can’t be making exchanges of goods for services, or money for services, or whatever, unless there’s already a stable background of property law that ensures us the property titles that we have. And because the market, in order to function, presupposes existing background property law, therefore, that property law cannot itself be the product of the market. The property law must emerge – they must really think it must emerge out of an infallible robot or something – but I don’t know exactly what it emerges from, but somehow it can’t emerge from the market.
But their thinking this is sort of like: first, there’s this property law, and it’s all put in place, and no market transactions are happening – everyone is just waiting for the whole legal structure to be put in place. And then it’s in place – and now we can finally start trading back and forth. It certainly is true that you can’t have functioning markets without a functioning legal system; that’s true. But it’s not as though first the legal system is in place, and then on the last day they finally finish putting the legal system together – then people begin their trading. These things arise together. Legal institutions and economic trade arise together in one and the same place, at one and the same time. The legal system is not something independent of the activity it constrains. After all, a legal system again is not a robot or a god or something separate from us. The existence of a legal system consists in people obeying it. If everyone ignored the legal system, it would have no power at all. So it’s only because people generally go along with it that it survives. The legal system, too, depends on voluntary support.
I think that a lot of people – one reason that they’re scared of anarchy is they think that under government it’s as though there’s some kind of guarantee that’s taken away under anarchy. That somehow there’s this firm background we can always fall back on that under anarchy is just gone. But the firm background is just the product of people interacting with the incentives that they have. Likewise, when anarchists say people under anarchy would probably have the incentive to do this or that, and people say, “Well, that’s not good enough! I don’t just want it to be likely that they’ll have the incentive to do this. I want the government to absolutely guarantee that they’ll do it!” But the government is just people. And depending on what the constitutional structure of that government is, it’s likely that they’ll do this or that. You can’t design a constitution that will guarantee that the people in the government will behave in any particular way. You can structure it in such a way so that they’re more likely to do this or less likely to do this. And you can see anarchy as just an extension of checks-and-balances to a broader level.
For example, people say, “What guarantees that the different agencies will resolve things in any particular way?” Well, the U.S. Constitution says nothing about what happens if different branches of the government disagree about how to resolve things. It doesn’t say what happens if the Supreme Court thinks something is unconstitutional but Congress thinks it doesn’t, and wants to go ahead and do it anyway. Famously, it doesn’t say what happens if there’s a dispute between the states and the federal government. The current system where once the Supreme Court declares something unconstitutional, then the Congress and the President don’t try to do it anymore (or at least not quite so much) – that didn’t always exist. Remember when the Court declared what Andrew Jackson was doing unconstitutional, when he was President, he just said, “Well, they’ve made their decision, let them enforce it.” The Constitution doesn’t say whether the way Jackson did it was the right way. The way we do it now is the way that’s emerged through custom. Maybe you’re for it, maybe you’re against it – whatever it is, it was never codified in law.
(7) Organized Crime Will Take Over
One objection is that under anarchy organized crime will take over. Well, it might. But is it likely? Organized crime gets its power because it specializes in things that are illegal – things like drugs and prostitution and so forth. During the years when alcohol was prohibited, organized crime specialized in the alcohol trade. Nowadays, they’re not so big in the alcohol trade. So the power of organized crime to a large extent depends on the power of government. It’s sort of a parasite on government’s activities. Governments by banning things create black markets. Black markets are dangerous things to be in because you have to worry both about the government and about other dodgy people who are going into the black market field. Organized crime specializes in that. So, organized crime I think would be weaker, not stronger, in a libertarian system.
(8) The Rich Will Rule
Another worry is that the rich would rule. After all, won’t justice just go to the highest bidder in that case, if you turn legal services into an economic good? That’s a common objection. Interestingly, it’s a particularly common objection among Randians, who suddenly become very concerned about the poor impoverished masses. But under which system are the rich more powerful? Under the current system or under anarchy? Certainly, you’ve always got some sort of advantage if you’re rich. It’s good to be rich. You’re always in a better position to bribe people if you’re rich than if you’re not; that’s true. But, under the current system, the power of the rich is magnified. Suppose that I’m an evil rich person, and I want to get the government to do something-or-other that costs a million dollars. Do I have to bribe some bureaucrat a million dollars to get it done? No, because I’m not asking him to do it with his own money. Obviously, if I were asking him to do it with his own money, I couldn’t get him to spend a million dollars by bribing him any less than a million. It would have to be at least a million dollars and one cent. But people who control tax money that they don’t themselves personally own, and therefore can’t do whatever they want with, the bureaucrat can’t just pocket the million and go home (although it can get surprisingly close to that). All I have to do is bribe him a few thousand, and he can direct this million dollars in tax money to my favorite project or whatever, and thus the power of my bribe money is multiplied.
Whereas, if you were the head of some private protection agency and I’m trying to get you to do something that costs a million dollars, I’d have to bribe you more than a million. So, the power of the rich is actually less under this system. And, of course, any court that got the reputation of discriminating in favor of millionaires against poor people would also presumably have the reputation of discriminating for billionaires against millionaires. So, the millionaires would not want to deal with it all of the time. They’d only want to deal with it when they’re dealing with people poorer, not people richer. The reputation effects – I don’t think this would be too popular an outfit.
Worries about poor victims who can’t afford legal services, or victims who die without heirs (again, the Randians are very worried about victims dying without heirs) – in the case of poor victims, you can do what they did in Medieval Iceland. You’re too poor to purchase legal services, but still, if someone has harmed you, you have a claim to compensation from that person. You can sell that claim, part of the claim or all of the claim, to someone else. Actually, it’s kind of like hiring a lawyer on a contingency fee basis. You can sell to someone who is in a position to enforce your claim. Or, if you die without heirs, in a sense, one of the goods you left behind was your claim to compensation, and that can be homesteaded.
(9) Robert Bidinotto: The Masses Will Demand Bad Laws
Another worry that Bidinotto has – and this is sort of the opposite of the worry that the rich will rule – is: well, look, isn’t Mises right, that the market is like a big democracy, where there is consumer sovereignty, and the masses get whatever they want? That’s great when it’s refrigerators and cars and so forth. But surely that’s not a good thing when it’s laws. Because, after all, the masses are a bunch of ignorant, intolerant fools, and if they just get whatever laws they want, who knows what horrible things they will make.
Of course, the difference between economic democracy of the Mises sort and political democracy is: well, yeah, they get whatever they want, but they’re going to have to pay for it. Now, it’s perfectly true that if you have people who are fanatical enough about wanting to impose some wretched thing on other people, if you’ve got a large enough group of people who are fanatical enough about this, then anarchy might not lead to libertarian results.
If you live in California, you’ve got enough people who are absolutely fanatical about banning smoking, or maybe if you’re in Alabama, and it’s homosexuality instead of smoking they want to ban (neither one would ban the other, I think) – in that case, it might happen that they’re so fanatical about it that they would ban it. But remember that they are going to have to be paying for this. So when you get your monthly premium, you see: well, here’s your basic service – protecting you against aggression; oh, and then here’s also your extended service, and the extra fee for that – peering in your neighbors’ windows to make sure that they’re not – either the tobacco or the homosexuality or whatever it is you’re worried about. Now the really fanatical people will say, “Yes, I’m going to shell out the extra money for this.” (Of course, if they’re that fanatical, they’re probably going to be trouble under minarchy, too.) But if they’re not that fanatical, they’ll say, “Well, if all I have to do is go into a voting booth and vote for these laws restricting other people’s freedom, well, heck, I’d go in, it’s pretty easy to go in and vote for it.” But if they actually have to pay for it – “Gee, I don’t know. Maybe I can reconcile myself to this.”
In other words, the rich cannot rule because it is in the interest of lawyers to work on behalf of the poor. If the poor can successfully sue Company X for property rights violation, then it is in the interest of lawyers to either represent the poor and get a cut of the reparations or to buy the law suit claims from the poor and get the entire reparations.
Let’s use a more concrete example. Person A has a law suit worth $5 million in reparations against Company X. Lawyer Z will willingly fight for Person A for a cut of the $5 million. Company X has to hire lawyers at a cost (at least a couple hundred thousand) in order to fight a law suit that they will most likely lose ($5 million). It is a more profitable move on Company X’s part to just pay reparations, perhaps they’ll be able to pay less since the case was not taken to court and instead settled between Person A, Lawyer Z, and Company X.