Scars of a whipped slave (April 2, 1863, Baton Rouge, Louisiana, USA. Original caption: “Overseer Artayou Carrier whipped me. I was two months in bed sore from the whipping. My master come after I was whipped; he discharged the overseer. The very words of poor Peter, taken as he sat for his picture.” (Photo credit: Wikipedia)
I’ve been working on these ideas for a long time and I’ve finally reduced them to writing.
Governments arise because increased production makes theft and chattel slavery profitable. Both depend on violence, so violence becomes valuable and a competitive market for violence emerges.
Chattel slavery becomes economically inefficient, but new forms of slavery, such as wave slavery, are invented to meet market needs.
Theft continues to be profitable but the dynamics of a free and open market for violence leads market participants to strategies the reduce both wealth and theft opportunities. As a result participants come to prefer monopoly violence and theft over free market violence and theft, and thus to accept tax theft rather than outright theft as the cost of that preference.
Thus do governments arise through the invisible hand of the market for violence.
Now the long version.
Back in the old, old days people were organized in small tribes. Most were governed by consensus. The people in such tribes took what they needed to survive and retained relatively little surplus. In those days thievery was not a big business because theft is an economic enterprise with costs and benefits and no one had much that was worth the cost of stealing–except perhaps territory. But taking territory was not theft, it was conquest.
Slavery was also unprofitable. To be profitable, the cost of capturing and then supervising a slave had exceed the value that a slave could produce beyond its cost. As rational economic agents, primitive people killed or drove off people so they could take their land. Captives might be tortured for entertainment, there being no Internet at the time. But slavery and theft made no economic sense.
Improvements make theft and slavery profitable ================================== As humans developed agriculture and other technologies and learned better ways of organizing themselves, they were able to increase individual productivity. This changed the economic balance. Slavery could now be profitable because individuals could produce substantially more than subsistence. Groups improved their standard of living by taking territory, enslaving the territory’s former occupants, and having those slaves produce wealth which their masters took, leaving the slave just enough to survive.
Over time a robust slavery market emerged. Market participants specialized and specialization led to increased efficiency and increased profits. Some people specialized in changing production processes so that they could efficiently use slaves to generate wealth. Others specialized in capturing people and making them slaves. Others specialized in transporting slaves from places where the supply was plentiful to places where the supply was low and the demand was high.
The slavery market still exists, but it has changed over time. Traditional slavery, called chattel slavery, which makes a person a piece of property is most profitable when you can make slaves significantly more profitable than free people. This is usually done by measuring their output and threatening physical punishment if they don’t meet quotas. In the past many jobs could be carried out by slaves, and slavery was widespread.
But chattel slavery is inefficient when slaves need to be skilled, when they can’t be closely supervised, when they need capital equipment to make them productive and could maliciously destroy the equipment. Modern economics have changed the balance. Women (and men) can still be cost-effectively made sex slaves because they don’t have to be particularly skilled to meet the market need and there’s little capital needed. Slaves can still carry out dangerous, unpleasant, low-skill jobs in primitive mining or primitive field work; but chattel slaves can not be made profitable in offices, or in capital and technology intensive mining operations, or in more advanced agriculture where care and capital are needed.
But markets never sleep, and the market for slavery has developed new, more sophisticated kinds of slavery. One of them is called “wage slavery.” Free people keep all the value produced by their labor. Slaves keep very little–enough for them to survive and continue to work. Like chattel slaves and unlike free people, wage slaves keep little of what they produce, and they must produce or starve. And through the magic of modern marketing, many wage slaves think they are free.
The violence market
Increased productivity let people accumulate portable wealth–in the form of stored food or goods that could be traded. Portable wealth made banditry profitable. Bandits could roam through the countryside looking for groups who had enough wealth to make theft worth considering. Of course no one would simply hand over wealth to bandits on request. Violence was required. Economically efficient banditry required economically efficient violence and this led to a market for violence.
A violence market has competing producers and multiple consumers. Producers deliver violence services to consumers in return for being given (or taking) things that the violence producers find valuable. An early violence service was murder: a violence producer kills a violence consumer and takes what the consumer had. A more advanced violence service is an agreement by a producer to abstain from violence against a consumer for a period of time in return for taking some of what they have. Or even all of it. Violence marketers learned to call this service a “protection service” not a violence service. A violence provider might offer protection not only from their own violence, but from the violence of competitors as well.
Violence markets, like slavery markets, continue to this day, and have become quite sophisticated, with their own logic and rules. And from them, through the invisible hand of markets, governments have come into being.
If you are a consumer in the violence market and bandits kept swooping down and using violence or the threat of violence to steal what you’ve accumulated, you might choose to change the economic balance by becoming better at defending yourself against violence. You might build a wall around your town, and defend it with some low cost low quality violence of your own. This would raise the bandits’ cost of delivering violence directed at you. A rational bandit will make the economic calculation that provides the best return and attack your neighbor, rather than you.
Increasing your defensive potential has problems. It makes you less productive. Some of the resources that you would have spent producing wealth must now be spent building a wall and whatever weapons and armaments you will need to defend it. If your neighbors become roughly as effective as you are as resisting violence then your market advantage is gone: rational bandits will see violence transactions you as cost-effective as with your neighbors. So like it or not, you’ll be back in the violence market again.
And if your neighbors don’t create their own defenses, bandits will take what they have, and once they have nothing to steal, then you become a cost effective target. Unless your ability to withstand violence makes theft from you unprofitable.
Violence professionalism and competition
But this is unlikely, because bandits are professionals, specialists in delivering effective, high quality violence at low cost. You’re a part time producer–an amateur. They don’t waste time farming or fishing or building houses. They can spend all their time getting better at delivering violence.
Talent, temperament and training all make a difference. People who become effective members of a band of bandits start with some talent and temperament for delivering violence. Then undergo a difficult period of apprenticeship to improve the skills they have and to develop new ones. Internal market forces ensure that those who deliver violence most effectively move to the top. External market forces ensure that bands that deliver violence more effectively prosper at the expense of their competitors.
Here’s how the logic of the violence market plays out.
Suppose a group of roving bandits discusses how much to plunder from a town they’ve targeted. One says: “Let’s take half of what they have. If we leave them with half, they can build it back up, and we can steal it again in a year or two. If we take it all it will take them many more years tho recover.”
Another counters: “That might be a good idea if we were the only bandits in the local violence market. But we’re in a competitive market for violence and thievery. If we leave something behind, then one of the other bandit groups can steal it. When we come back there will be nothing for us. And it will make them stronger. So we should take it all.”
“That’s right,” the band agrees.
So the competitive market for violence rewards efficient violence production and maximum theft by violence providers. And it does not reward wealth-creation by violence consumers because bandits prefer to attack consumers with substantial wealth rather than those who merely subsist.
The logic of the violence market encourages behavior that is bad for everyone, producers and consumers alike.
Violence market incentives
To be a market-effective violence provider, your cost of delivering violence services must not only be less than the value of what you take in return it must be better than the services provided by your competitors. The violence market will reward providers who deliver violence services more efficiently over those that deliver them less efficiently.
Since threatening to carry out a violent act takes less work than actually committing the violent act, proving protection against violence can be more cost-effective than delivering actual violence.
But why would a mere threat of violence be an effective substitute for actual violence? The answer comes from marketing and advertising. The violence market rewards those who demonstrate their ability to produce extreme amounts of violence and who let other participants know about it.
To return to our band of bandits:
“Since we’re going to take everything,” someone else says, “I’ve got an idea that will make our pillaging more cost effective at the next town.”
“What’s that?” asks someone else.
“Well, it’s simple,” comes the answer. “This town resisted briefly. This took time, and caused some injuries. But we finally prevailed. Suppose we rape all the women in front of the men. Then we kill everyone in the most painful way we can imagine. Then we burn everything. And then we let everyone knows that this is what we do to anyone who resists us. So the next town will be less likely to resist, increasing our return..”
“That’s not just good economics,” says another. “It’s good marketing. We not only reduce resistance, which then lowers our costs, we also encourage people who might be thinking of violence as a profession to join us rather than some other violence provider. That will make us stronger”
So that’s what they do.
Once again, the logic of the violence market works against violence consumers and also destroys the people who might create future wealth for the bandits to steal.
Stationary bandits versus roving bandits
But a bandit group could make the following proposal to a town they were about to sack: “We propose to become the monopoly provider of violence and theft for your town. We will use our violence skills to protect you from the rest of the market, which includes other, less effective violence providers.
“In return we will steal from you, because well, we’re bandits and that’s what we do. But we won’t steal everything. We’ll leave you enough to build up what you have. Of course we’ll steal some of that, too. But not all of it.
“And we won’t call what we do theft anymore. We’ll call it taxes. And we won’t call ourselves bandits. We’ll call ourselves ‘the government.'”
Now given the choice between continuing to participate in a competitive market for theft and violence and making a deal with a group that wants such a monopoly, a rational citizen will ask the following questions: “Would we rather have everything we own stolen, have our women raped and then everyone tortured and killed, or would we rather subject ourselves to tax theft and government?”
The answer is pretty obvious: you get a government.
And now the town will prosper. Or it will as long as it’s subject to the static bandits’ violence and tax theft monopoly and protected from free-market violence and theft.
Tax-theft by stationary bandits is an improvement over free-market theft. It does not take everything the people produce, so the townspeople have an incentive to keep producing. Over time a town that chooses monopoly tax-theft over free market violence and theft becomes more wealthy.
And thus, sadly, it becomes a more attractive target for other roving free-market bandits.
Such is the working of the market for violence.
Stationary bandits can succeed as long as they are strong enough to hold out against the violence providers in the local market. But distant violence providers can choose to enter the local market. When they do, the market disruption can be catastrophic.
From 1037 to 1194 the Seljuk Turks were the principal violence providers for a large swath of Asia. Then Genghis Khan, who developed a number of violence innovations, broke their hold. One of his innovations was the compound bow and horse-archery: the ability to accurately shoot arrows from a fast-moving horse. Another innovation was his form of organization. When the city of Merv surrendered after token resistance, Genghis Khan’s armies killed an estimated 800,000. Other cities capitulated with no resistance. Khan’s innovation was not killing, but scale.
Over time market forces have rewarded those bandit bands that discovered more efficient ways to secure their position and maintain their tax theft monopolies. They learned to form alliances with other stationary bandits and tax thieves. They learned that by providing public goods like roads, clean water, court systems, and police they could increase total wealth, and thus the amount they could steal.
They launched marketing campaigns to convince people that these public goods justified their existence, and created demand for more services, and thus more tax theft.
Tax thief marketing can be so effective that people choose to risk their lives for the tax thieves. Tax thieves around the world use an effective marketing program called “patriotism” which incents people to risk their lives for the sake of the tax thieves by appealing to high moral principles (“keeping the world safe for democracy” for example) and by giving them “well deserved” shares of the tax theft (military pay, and pensions, for example).
Tax theft markets
Markets never sleep. Simple tax theft was a market response to the markets for violence and theft. Those markets grew out of markets that produced technologies, organization, and wealth. But tax theft as practiced by kings, aristocracies, and dictatorships provide public goods but are not very efficient. So better forms of tax theft have evolved to replace them.
One strategy has been to expand the set of beneficiaries of tax theft. In olden days this included the ruling class and their functionaries. Government was small and limited to the principal tax thieves and their allies. The majority of people got only indirect benefit through public goods.
Today, as a market response, tax thieves have been more inclusive. Direct beneficiaries–those who receive tax theft dollars in the United States right now–include current and retired military, police forces, government employees along with suppliers to the government–defense contractors and non-employee contractors who deliver the public goods that the tax thieves pay for. Indirect beneficiaries include the people who use the growing array of public goods that the tax thieves supply and the beneficiaries of benefits that they supply: like social security, medical care, unemployment and welfare payments. Over time the line between the tax thieves and the victims of tax thievery becomes blurrier. And this is not by accident, but because blurring the line is good business. It’s an evolved strategy based on the logic of the modern tax theft market.
Today there are tax theft markets where groups of tax theft participants attempt to convince tax theft consumers to prefer their vision of tax theft over those of their rivals. Like all modern markets the tax theft markets are heavily marketing driven.
Tax theft marketers, like marketeers everywhere, try to gauge the temper of market participants and then manipulate their perceptions toward choices that benefit the marketer’s employer. Of course. Among other things, tax theft marketers try to convince participants that they want things they do not need and which, in fact, might be bad for them, both individually and collectively.
And of course tax theft marketers work long and hard to convince market participants that the marketers’ employers have the participants’ interests at heart. That might even be true. But first, they have their own interests at heart. This is a marketplace, after all, and much good comes from the invisible hand, not from the intentions of the participants.
Free markets and government
It is true that all governments are tax thieves. But it is also true that all governments have arisen and evolved as a market response driven by free markets which rely, ultimately on the freest market of all: the market for violence. You may not have thought of the violence market as a market, but if you examine it carefully, you will find that it satisfies all the requirements for a markets. According to one definition, a market is:
…any medium through which two or more parties can engage in an economic transaction, even those that do not necessarily need to involve money. A market transaction may involve goods, services, information, currency or any combination of these things passing from one party to another in exchange for one of these or another combination.
In violence market some parties offer either protection or violence in exchange for other goods, services, or information. I claim it meets the test.
And by one definition of freedom, violence markets (before government monopolies were granted) were the most free of all markets. Any exchange between market participants that is valid on any other market is also valid in a violence market; and many trades that are not valid elsewhere (for example, “buy this service at this price or I will kill you”) are valid only in a violence market.
Violence markets are truly free. I am free to make any offer. You are free to accept my offer or not. And I am free to kill you if I don’t like your answer. Or even if I do like it.
So truly free.
Government monopolies on violence and theft are not accidents. They are the result of the logic of markets and of centuries of consumer choices.
In liberal democracies the vast majority of consumers continue to prefer the quality and cost of the violence that their government theft and violence monopolies provide. Some seek to modify how the theft is carried out and who it benefits; some seek to use monopoly power to restrict the forms of theft and violence that others can engage in.
But few seek to change violence monopolies for the alternative: the theft and violence that the free market delivers in the absence of those government theft and violence monopolies.
My thinking was recently stimulated by Mancur Olson’s “Dictatorship, Democracy, and Development” and earlier by the logic of the violence market as elaborated by Tony Soprano and company. On Slavery, this Economist Article is a good summary. Others are not so sure about the significance of slavery. The Mises Institute says “Confining our attention to large scale slavery, we find that it is historically quite a rare phenomenon.” They have a longer essay on the subject, but I’m not about to pay for it. Unless they threaten to kill me. Then, yes.