Hoppe's insurance agencies as would-be states

[davery]

Hi All,

I’ve listened to a few of Hoppe’s audio lectures and read Private Production of Defense the other day, and i have a concern that i’d like to know if anyone has answered.

In the world Hoppe paints, insurance companies compete to provide some measure of protection from aggression, including from states, so that some of the companies must be very well armed. Hoppe explicitly says this. It follows that all insurance companies must be well armed in order to protect against aggression from not only states, but also well armed insurance companies. Moreover, market players have historically tried to create cartels, but they largely failed because of the ability of new players to compete on price and quality, and the cartels that have succeeded have done so because government force keeps new players out. In the case of Hoppe’s insurance companies, though, a voluntary cartel would have most of the force in a given region, so it could keep new players out of the insurance market. Those that tried to undercut or leave the cartel would either be destroyed or forced retreat to defensible territory, and the cartel would be left to raise prices, change trade rules, and by and large use its force to eliminate other force and expropriate property, as it would have no reason not to. That is, the insurance companies would more or less become states. What would counter this? Private weapon ownership hasn’t done the job in the US.

Cheers.

[ClaytonB]

In the world Hoppe paints, insurance companies compete to provide some measure of protection from aggression, including from states, so that some of the companies must be very well armed. Hoppe explicitly says this. It follows that all insurance companies must be well armed in order to protect against aggression from not only states, but also well armed insurance companies. Moreover, market players have historically tried to create cartels, but they largely failed because of the ability of new players to compete on price and quality, and the cartels that have succeeded have done so because government force keeps new players out. In the case of Hoppe’s insurance companies, though, a voluntary cartel would have most of the force in a given region, so it could keep new players out of the insurance market. Those that tried to undercut or leave the cartel would either be destroyed or forced retreat to defensible territory, and the cartel would be left to raise prices, change trade rules, and by and large use its force to eliminate other force and expropriate property, as it would have no reason not to. That is, the insurance companies would more or less become states. What would counter this? Private weapon ownership hasn’t done the job in the US.

If you think about it, what you’re essentially describing is the State. Hoppe’s theory does not depend in any way on some kind of “self-restraint” on the part of the owners of aggression-insurers… specifically, it does not depend on such insurers not attempting to cartelize or seize monopoly control over territories, etc. Rather, it relies on the illegality of such arrangements (in a free market of law) which would put the rule-breakers in a bind… if you attempt to monopolize insurance in a territory through use of force, you open yourself to innumerable lawsuits and no one will make contractual agreements with you because you’re acting like a shady, fly-by-night operation, etc. You will face a collapse in voluntary consumer demand for your services (leaving only the captive consumers) and a spike in the costs of doing business which will eventually result in one of two outcomes: change your ways or watch your insurance “company” fall to pieces as your enforcers leave to go work for another insurance company that issues its paychecks on time, and not made of rubber.

There is nothing preventing insurers from “going rogue” in private law society except bankruptcy and legal liability.

Clayton -

[Aristippus]

Two more points to consider:

Cartels fail on the free market not only because of newly competing firms but mostly because it is in the interest of the more efficient firms within the would-be cartel to compete against the less efficient firms.

Hoppe’s insurance agencies do not necessarily have territorial monopolies - what makes you think they would? Does everyone in your city take insurance from the same company?

[Wheylous]

I love to employ an infinitely useful tool in analyzing chaos scenarios in anarchy: “Compare to democracy.”

How does it work in democracy? We have separate police forces in each city loosely controlled by the states. How come they don’t fight it out for power while they have a monopoly on defense (giving them a huge edge)? Perhaps one would answer “the federal army.” Yet then you have an even bigger question: How come the army doesn’t go evil on us and try to enslave us? We arrive at the conclusion “Humans aren’t inherently evil and immoral.” If they were, we would be living in a state of constant tribal warfare. How come our present system generally works? Well, it just does - we find it much more convenient to follow the law and be peaceful than not to be. The same incentives remain when the state is removed.

[davery]

Clayton: you’re missing my point. What’s to define illegality? Who argues law when a gun is pointed at him? The law existing in the abstract does not enforce itself in the face of overwhelming force. The insurer-rulebreakers would not be in a bind because they would wield the force. They would have soverign immunity, if you will. They would have the force to expropriate property from anyone residing in territory to which they have access. They would have no trouble paying checks on time with this ability. In fact they could always necessarily offer the highest wages if they liked. In short, yes, of course i’m describing the state, hence the subject of the post. What i want to know is whether Hoppe (or anyone else in the anarcho-capitalist camp) has recognized Hoppe’s description of so flagrant a backdoor for the state to resurrect itself in an anarcho-capitalist system, and whether anyone has described a remedy or argument as to why one is unnecessary.

On Aristippus’s points:

1. They would conspire to create such a territorial monopoly.

2. Again, those willing to undercut the cartel would be destroyed by the bigger fish. It might be rough going at first, but the employees of each company would know that to the victor go the spoils, so each would have strong incentive to fight if his company is dominant and to surrender (with hopes of being hired by the victor) when not so dominant.

[davery]

Wheylous: name one year in history when one political entity was not violently assaulting another for control of its property.

[Wheylous]

And how does this affect my day to day life of not being assaulted as I go around the corner? The reality is that the system works without any apparent reason for it to work. We have monopolies of force which do not enslave us (figuratively). How come?

[Wheylous]

Furthermore, you cannot simply view AnCap in a void. You have to consider how the society arrives there. There must be a large cultural shift to go to AnCap which would produce an aware public that wouldn’t be easily duped and that wouldn’t allow another state to rise up.

[Autolykos]

@davery

In the world Hoppe paints, insurance companies compete to provide some measure of protection from aggression, including from states, so that some of the companies must be very well armed. Hoppe explicitly says this.

For the purposes of this thread, could you please point out where in Hoppe’s audio lectures and where in The Private Production of Defense that he explicitly says that?

@davery

It follows that all insurance companies must be well armed in order to protect against aggression from not only states, but also well armed insurance companies.

How does that follow?

@davery

Moreover, market players have historically tried to create cartels, but they largely failed because of the ability of new players to compete on price and quality, and the cartels that have succeeded have done so because government force keeps new players out. In the case of Hoppe’s insurance companies, though, a voluntary cartel would have most of the force in a given region, so it could keep new players out of the insurance market.

How? Or do you intend your subsequent sentences to serve as an answer?

@davery

Those that tried to undercut or leave the cartel would either be destroyed or forced retreat to defensible territory, and the cartel would be left to raise prices, change trade rules, and by and large use its force to eliminate other force and expropriate property, as it would have no reason not to.

You don’t know that they necessarily would be either destroyed or forced to retreat to “defensible territory”. This is an argument from ignorance.

[Autolykos]

@davery

Clayton: you’re missing my point. What’s to define illegality? Who argues law when a gun is pointed at him?

Some people might. How do you know that no one ever would?

@davery

The law existing in the abstract does not enforce itself in the face of overwhelming force.

What makes the force necessarily “overwhelming”, exactly?

@davery

On Aristippus’s points:

1. They would conspire to create such a territorial monopoly.

How would they necessarily do so?

@davery

2. Again, those willing to undercut the cartel would be destroyed by the bigger fish. It might be rough going at first, but the employees of each company would know that to the victor go the spoils, so each would have strong incentive to fight if his company is dominant and to surrender (with hopes of being hired by the victor) when not so dominant.

If a state can arise and thrive simply by bullying everyone (or worse), why do states in the here and now spend so much time and effort on non-bullying tactics? Why do they bother to cultivate such auras of legitimacy about themselves?

Even among states, war is a huge expense - both for the victors and the vanquished.

[Autolykos]

@davery

Wheylous: name one year in history when one political entity was not violently assaulting another for control of its property.

This seems to be just another argument from ignorance. Furthermore, anatomically modern Homo sapiens has been around for much longer than recorded history.

[Amanojack]

Davery, you’re taking for granted that (1) states are huge and rule by overwhelming force, and (2) that they can do so even without being considered legitimate by the population. Neither are necessarily the case.

However, to everyone else in this thread, the point must be raised that a territorial monopoly has to exist at some geographic level, be it the family household, the extended family, or the local tribal territory. The question is how small the territorial monopoly can be made and what the role of competing defense contractors would be over larger territorial areas.

If you are unsatisfied with this response, see the link in my sig as well.

[ClaytonB]

Clayton: you’re missing my point.

No I’m really not.

What’s to define illegality?

What defines illegality now? The State? I think not.

Who argues law when a gun is pointed at him?

Someone who also has a gun pointed at the other guy.

The law existing in the abstract does not enforce itself in the face of overwhelming force.

The law is not about decision-making under duress.

The insurer-rulebreakers would not be in a bind because they would wield the force.

And so do their competitors.

They would have soverign immunity, if you will.

Not in a private-law society… there is no such thing as sovereign immunity.

They would have the force to expropriate property from anyone residing in territory to which they have access.

OK, and so does any criminal gang… yet why do gangs have such a hard time of it?

They would have no trouble paying checks on time with this ability.

And neither does the State for precisely the same reason.

In fact they could always necessarily offer the highest wages if they liked. In short, yes, of course i’m describing the state, hence the subject of the post.

What you’re missing is the root source of the power of the State: the anti-property attitude of the masses. A private law society is not even possible unless the attitude of the masses changes with regard to property rights. If people do not accept organized expropriation by a law and security monopoly as a matter of principle, then the State (or any pretenders thereto) is fighting gravity.

What i want to know is whether Hoppe (or anyone else in the anarcho-capitalist camp) has recognized Hoppe’s description of so flagrant a backdoor for the state to resurrect itself in an anarcho-capitalist system, and whether anyone has described a remedy or argument as to why one is unnecessary.

This is, perhaps, the single most common objection raised against private law society and is frequently and thoroughly refuted on this forum and elsewhere.

Clayton -

[Wheylous]

What you’re missing is the root source of the power of the State: the anti-property attitude of the masses. A private law society is not even possible unless the attitude of the masses changes with regard to property rights. If people do not accept organized expropriation by a law and security monopoly as a matter of principle, then the State (or any pretenders thereto) is fighting gravity.

[davery]

Wheylous: And how does this affect my day to day life of not being assaulted as I go around the corner? The reality is that the system works without any apparent reason for it to work. We have monopolies of force which do not enslave us (figuratively). How come?

You may not be assaulted. But you are forced to pay the protection fee to the protection racket. Which monopolies of force exist that do not enslave us?

Wheylous: Furthermore, you cannot simply view AnCap in a void. You have to consider how the society arrives there. There must be a large cultural shift to go to AnCap which would produce an aware public that wouldn’t be easily duped and that wouldn’t allow another state to rise up.

I would like to believe this. But i don’t know that a public has existed which isn’t easily duped. Even the US in post WWI shock let FDR dupe it.

[davery]

Autolykos:

@davery

In the world Hoppe paints, insurance companies compete to provide some measure of protection from aggression, including from states, so that some of the companies must be very well armed. Hoppe explicitly says this.

For the purposes of this thread, could you please point out where in Hoppe’s audio lectures and where in The Private Production of Defense that he explicitly says that?

The Private Production of Defense, 2009 LvMI paperback, p. 50 (chapter 9, Insuring against state aggression):

“Other things being equal, the risk of an attack – and hence the price of defense insurance – would be higher in location adjacent or in close proximity to state territories than in places far away from any state. To justify this higher price, insurers would have to demonstrate defensive readiness vis-a-vis any possible state aggression to their clients, in the form of intelligence services, the ownership of suitable weapons and materials, and military personnel and training.”

@davery

It follows that all insurance companies must be well armed in order to protect against aggression from not only states, but also well armed insurance companies.

How does that follow?

I would buy insurance to protect against threat of aggression, as i specialize in a trade other than defense. Aggression is possible from any party with “sufficient” (I know this is loose) armament. Insurers near states are such parties. They offer services within a territory. Parties in or near that territory must therefore be prepared as if they bordered state territories. They would prepare because their livelihood depends on it.

@davery

Moreover, market players have historically tried to create cartels, but they largely failed because of the ability of new players to compete on price and quality, and the cartels that have succeeded have done so because government force keeps new players out. In the case of Hoppe’s insurance companies, though, a voluntary cartel would have most of the force in a given region, so it could keep new players out of the insurance market.

How? Or do you intend your subsequent sentences to serve as an answer?

Much like the [substitute gov’t agency] keeps [substitute appropriate product] out of the market.

CEO of insurer A, a human being with a preference for most wants satisfied with least expenditure of labor, calls CEO of insurer B, also a human with similar preferences, and says “Let’s turn this into a racket. You charge x/person. I will do the same. We’ll ask C to join, and if he refuses, we blow up his buildings and bases. We offer to hire his soldiers. If they refuse we shoot them.”

@davery

Those that tried to undercut or leave the cartel would either be destroyed or forced retreat to defensible territory, and the cartel would be left to raise prices, change trade rules, and by and large use its force to eliminate other force and expropriate property, as it would have no reason not to.

You don’t know that they necessarily would be either destroyed or forced to retreat to “defensible territory”. This is an argument from ignorance.

Of course i don’t. But it stands to reason that in light of aggression, they’d either fight or retreat. If they fight against overwhelming odds (the majority cartel), they would likely lose.

[davery]

@davery

Clayton: you’re missing my point. What’s to define illegality? Who argues law when a gun is pointed at him?

Some people might. How do you know that no one ever would?

I don’t. But the goal is a society where people are secure in their persons and property, and they are only obliged to act when they consent to do so. I’m arguing that what he describes cannot be such a society, as the person who does argue law in that situation would not be safe.

@davery

The law existing in the abstract does not enforce itself in the face of overwhelming force.

What makes the force necessarily “overwhelming”, exactly?

Yes, i know it’s loose, but the insurance company force would have to be sufficient to defend from state attacks. As most people do not specialize in defense, they do not expend labor or money on such armament or training and are therefore “overwhelmingly” outgunned.

@davery

On Aristippus’s points:

1. They would conspire to create such a territorial monopoly.

How would they necessarily do so?

The same way people have attempted cartels in the past. It’s not rocket science, and there will always be motive to do so. Many people don’t recognize the long term disutility of it. Many would be induced to by avarice or a high time preference. Read ancient history for a examples of (often seemingly ridiculous) motives to invade or destroy.

@davery

2. Again, those willing to undercut the cartel would be destroyed by the bigger fish. It might be rough going at first, but the employees of each company would know that to the victor go the spoils, so each would have strong incentive to fight if his company is dominant and to surrender (with hopes of being hired by the victor) when not so dominant.

If a state can arise and thrive simply by bullying everyone (or worse), why do states in the here and now spend so much time and effort on non-bullying tactics? Why do they bother to cultivate such auras of legitimacy about themselves?

Even among states, war is a huge expense - both for the victors and the vanquished.

Because the expenditure necessary to create that aura is less than the expenditure of expropriating by force. If every person who got a letter from the IRS demanded a hearing and so forth, yes, the IRS would lose. But most people pay rather than risk the use of force against them.

I agree that war and conflict generally is a huge expense and a greater expense than cooperation. That is why often simply objecting and demanding available procedural protections will get a bureaucrat off your back.

[Autolykos]

@davery

The Private Production of Defense, 2009 LvMI paperback, p. 50 (chapter 9, Insuring against state aggression):

“Other things being equal, the risk of an attack – and hence the price of defense insurance – would be higher in location adjacent or in close proximity to state territories than in places far away from any state. To justify this higher price, insurers would have to demonstrate defensive readiness vis-a-vis any possible state aggression to their clients, in the form of intelligence services, the ownership of suitable weapons and materials, and military personnel and training.”

Thank you.

In all honesty, I don’t understand why Hoppe conflates insurance with defense here. Insurance is a financial concept - defense is not.

@davery

I would buy insurance to protect against threat of aggression, as i specialize in a trade other than defense. Aggression is possible from any party with “sufficient” (I know this is loose) armament. Insurers near states are such parties. They offer services within a territory. Parties in or near that territory must therefore be prepared as if they bordered state territories. They would prepare because their livelihood depends on it.

It’s loose to the point of being in pieces. So the conclusion is that aggression is possible from any party, period. Now what?

@davery

Much like the [substitute gov’t agency] keeps [substitute appropriate product] out of the market.

Can you explain to me just how you think that’s done?

@davery

CEO of insurer A, a human being with a preference for most wants satisfied with least expenditure of labor, calls CEO of insurer B, also a human with similar preferences, and says “Let’s turn this into a racket. You charge x/person. I will do the same. We’ll ask C to join, and if he refuses, we blow up his buildings and bases. We offer to hire his soldiers. If they refuse we shoot them.”

What made CEO A suddenly want to run a racket instead of a business?

Are the “soldiers” (I didn’t know they were members of a military organization) armed when they’re given the “offer they can’t refuse”?

How long would it take to blow up C’s buildings and “bases” (I didn’t know C was running a military organization)? What’s the probability for these efforts being detected beforehand, let alone halted?

In essence, you’re assuming near-Godlike power to CEO of insurer A. Top military officers themselves have stated countless times that logistics is a major lynchpin, if not the lynchpin, of wars and military operations in general.

@davery

Of course i don’t. But it stands to reason that in light of aggression, they’d either fight or retreat. If they fight against overwhelming odds (the majority cartel), they would likely lose.

My point is that it doesn’t stand to reason, because it’s an argument from ignorance. You phrased your claim in a deterministic sense, i.e. you made a claim about what would necessarily happen. If you’re backing away from that phrasing now, then you’re necessarily making a different (and much weaker) claim.

[davery]

@davery

Wheylous: name one year in history when one political entity was not violently assaulting another for control of its property.

This seems to be just another argument from ignorance. Furthermore, anatomically modern Homo sapiens has been around for much longer than recorded history.

No, i think it’s from reason. A wants maximum preference satisfaction at least cost. B has resources A wants. A considers it (whether correctly or incorrectly) easier to take them by force than create them on his own. History has born out the expected outcome.

[Autolykos]

@davery

I don’t. But the goal is a society where people are secure in their persons and property, and they are only obliged to act when they consent to do so. I’m arguing that what he describes cannot be such a society, as the person who does argue law in that situation would not be safe.

No one is ever safe - in the sense of being “completely safe”. There’s no guarantee for anything, ever. Also, that society may be your goal, but who’s to say that it’s “the goal”?

So it seems like your implicit claim that “no one argues law when a gun is pointed at him ever” falls flat on its face.

@davery

Yes, i know it’s loose, but the insurance company force would have to be sufficient to defend from state attacks. As most people do not specialize in defense, they do not expend labor or money on such armament or training and are therefore “overwhelmingly” outgunned.

Again, this is loose to the point of being in pieces. Who’s to say exactly what kinds of force, and how much of each, are “sufficient”, let alone “overwhelming”?

@davery

The same way people have attempted cartels in the past. It’s not rocket science, and there will always be motive to do so.

Please provide your logical reasoning for why there will always be motive to attempt cartels. Otherwise, this is just another argument from ignorance.

@davery

Many people don’t recognize the long term disutility of it. Many would be induced to by avarice or a high time preference. Read ancient history for a examples of (often seemingly ridiculous) motives to invade or destroy.

I don’t think I have to read ancient history. There are such people among us even today. They’re often referred to by terms such as “thieves”, “vandals”, “rapists”, “murderers”, and “psychopaths”.

If you’re implicitly arguing that a territorial monopoly on ultimate decision-making authority is necessary because “men aren’t angels”, then I think you’re committing the nirvana fallacy.

@davery

Because the expenditure necessary to create that aura is less than the expenditure of expropriating by force.

Are you sure about that? Can you prove it?

But in any case, this seems to go against your notion that a state can arise by literally eliminating or subjugating all opposition.

@davery

If every person who got a letter from the IRS demanded a hearing and so forth, yes, the IRS would lose. But most people pay rather than risk the use of force against them.

That’s up to them, isn’t it? And strictly speaking, they don’t know that force would necessarily be used against them otherwise - they simply believe it.

@davery

I agree that war and conflict generally is a huge expense and a greater expense than cooperation. That is why often simply objecting and demanding available procedural protections will get a bureaucrat off your back.

Here you again seem to be contradicting what you wrote earlier. If a state can not only arise and survive, but also thrive, by literally eliminating or subjugating all opposition at every turn, why would any of its agents back down so easily? Indeed, why wouldn’t its agents simply enslave everyone else? Then they wouldn’t have to worry about pesky objections and procedural protections, right?