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Foreign. Principles of Economics. My complete guide to understanding Economics is now available in hardcover, audiobook and ebook from seifeddin.com, amazon and many more booksellers worldwide. And now I am also teaching a course based on this book on my website seyfeddin.com Principles of Economics will run the whole academic year from September to June and will have a new lecture every two weeks as well as weekly live online discussion seminars open to learners from all over the world and from all walks of life. Whether you're a student, a professional, or a retiree, you are making economic decisions every day and this course will arm you with the wisdom of centuries of economists to improve your economic decision making. You'll also get a free book of Principles of Economics. If you sign up for the course, go to seifedin.com and sign up now. Hello and welcome to Lecture 17 of the Principles of Economics online course on seifedeen.com Today's lecture's topic is defense. So in the Previous lecture, lecture 16, we presented the problem of violence. We started discussing the issue of course, of non consensual interaction between humans and the economics of these questions. And so we began with a question of violence. And we explained that violence is the opposite of a good. It's a bad. It's something that people don't want to happen to them. And generally we said that traditionally most economists and most classical liberals and most statists and most people would view the role of the state as being the prevention of violence, as being the security of the citizens. But I presented the idea of the Austrian school. Applying the ideas of the Austrian school to the actions of the state shows that the state itself is not the the thing that prevents violence. In fact, the state itself carries out violence because everything the state does ultimately has to be financed by money that is acquired violently. People are threatened and if they don't pay their taxes, they go to jail. So ultimately government is an institution that commits violence and the actions that government carries out are a problem of violence. And I think it makes sense to think of protection from government in the same way that we think of protection from violence by regular individuals rather than just governments. So in this chapter we're going to look at the economics of how humans protect themselves from violence, in other words, the economics of defense. And we begin with the idea that the state is not the solution to the issue of defense. The state is the problem. As we said 19th century and early 20th century classical economists and liberal philosophers used economic reasoning to argue against the initiation of violence in the economic sphere, but argued that the state was the way to stop it. But late 20th century and 21st century economists, people like Hans Hermann Hoppe and Murray Rothbard, extended economic analysis to the state itself and argued against it. And I think this is very powerful analytical tool which most people cannot make. Most people cannot make the intellectual jump necessary to turn the tools of economic analysis onto the state itself. But that's what Rothbard and Hopper have given us. So if the state isn't the answer to violence, then what is? Well, it's important to remember, as I said, defense is just an economic good. People value defense. It has utility. It's not being subject to coercive and unwanted violence is something that people value and it is scarce. Aggression is an infinite series of potential threats. But defense consumes real resources and is finite and must be economized. So it's not something that you can just afford infinitely. Defense is not like water on the river shore. It's not plentiful, it is scarce. You need to hire people to carry guns and walk around, and you need to buy guns, and you need to build fortifications. All of those things cost money or resources. So if it has utility and if it has scarcity, then it's just an economic good. And there's no reason why it needs to be treated differently from any other economic good. So like any good, individuals can produce it for themselves, or they can acquired from others on the market. Now here there's a very, very important distinction to understand. The defense might involve violence. In other words, if you're defending your house and somebody breaks into your house, you might have to use violence to subdue them, but it does not involve the initiation of violence. This is the key distinction to keep in mind here. So initiating violence is not an economic good. It cannot be an economic good because there is person on the receiving end of the violence is not somebody who wants to be part of that violence. He's not consensually taking part of it. And so therefore this is not an economic good. But defense against violence is an economic good because it does not violate anybody's property rights. It violates the property rights of people who already violated property rights. And therefore it is perfectly legitimate and perfectly acceptable. Once you aggress on somebody's property, you are effectively forsaking your right to safety, because if they find you, then they are well within their rights to inflict violence against you. So violence employed defensively is not a moral problem, and it is not something that prevents defense from being an economic good. Just because it's violent doesn't mean it's not an economic good. If it's initiation of violence, then yeah, it's not an economic good. But if it is defensive violence, then it is. So the market for defense, like any good in this modern, modern capitalist economy, is a highly developed, diverse and sophisticated market. It includes things like safety locks, alarm systems, surveillance cameras, drones, fences, personal guns, armored vehicles, security guards, private investigators. All of these things are the first things that come to mind when you think about private defense. These are the things that most people resort to if they want to try and secure themselves. You get locks for your house, you get an alarm system, surveillance camera, drones, fences, personal guns, etc. But even beyond that, I think we start to see that this is not just a small industry. Initially you might think, well, it's just a bunch of locks and alarm systems and so on. But then when you start looking into it, you start realizing, really know. The world of free market defense is an enormous, enormous world. And it is actually larger and probably bigger than the world of government based market defense. So the most startling fact of this chapter, perhaps the most startling fact of the book, something that really shocked me when I found out about it, is that there are more private security personnel in the world today than state security personnel. There are more private security guards than there are police in the world today, which is an enormously significant fact because it shows that for the majority of people, most of their security needs are being secured from private guards. The majority of humanity lives in countries with twice as many private security guards as police. And I think this is a trend that's going to likely amplify in the future. Even without having to willingly earn its money, the state provides a lot less defense than the market does. So private security guards, they need you to pay them willingly. And if you stop paying them, they stop working. So you have to willingly pay them. They have no way of forcing you to pay. And yet there are more of these private security guards than there are government security guards. Because government security guards are just not good at doing their job and they're not efficient and they waste a lot of resources when they do them. So the reality is that private defense, or private provision of defense is not some techno utopian fantasy. This isn't a fictional chapter where I'm talking about an imagined state of the world in which private security is dominant over government security. This is the reality already. The majority of people rely on private security in order to secure themselves. And look around you and think, what does the local bank branch next to you have. Do they rely on police? No, they have their own security. What does the local jewelry shop rely on? They also have their own security. And the more you think about it, every company that has valuable inventory will hire its own security guards. And this makes a lot of sense, because how else do you solve the calculation problem? How can you allocate the sufficient resources that people need for their protection? Or when there is no property rights, when there is a central command, when there is a central planner who is in charge of deciding who gets what, you cannot solve that problem. So we go back to chapter 12, perhaps the most pivotal chapter of this book, which is on the capitalist calculation problem. Remember that capitalist markets function because entrepreneurs are able to perform economic calculation when they have property rights. The examples usually given for the calculation problem usually involve physical goods like cars and shoes. But the same problem applies for abstract goods like defense and all the individual goods that make up the issue of defense. Let's think about it a little bit more concretely. How many policemen should protect the bank, the billionaire's house, the school, the poor neighborhood? Who should get more police? Should the billionaire get a lot more police because he's a billionaire, so obviously a lot more people are going to want to steal from him. But then why should the poor people have to pay to secure the money of the billionaire? Why shouldn't those police be allocated to the school to protect the children who are more important than the billionaire in the minds of their parents? Why should the parents of poor children who go to school pay more money for the protection of the billionaire? Why shouldn't the billionaire just get his own protection? And so you see, all of these questions emerge, and there is no way of answering these questions except through prices and private property. Just like there's no way of answering the question of allocation of production, production and allocation of goods. Police and all defense goods are scarce. The answer can't be that everyone gets all the defense he wants. It's scarce. We can't give the billionaire all the police he needs and the school all the police it needs, and the poor neighborhoods all the police they need because everybody would like to have their own private army to protect them. If it was, if it wasn't scarce, then yeah, I'd like to have a private army that just protects me. Should rich people get more protection because they are more likely to be targets. But then why should poor people pay to protect the rich? Why shouldn't the rich pay for their own protection? There's no satisfactory answer to the allocation of defense resources without private property and economic calculation, because without private property there is no objective unit against which to measure the utility from individual allocation decisions. For the parents of the kids in the school, the safety of the child in school is infinite and the safety of the billionaire is worth nothing. They don't want to pay anything for the billionaire. For the billionaire, the safety of himself is infinite. It's worth infinity. He'll pay everything to secure himself, whereas he doesn't care much about the safety of kids in the school. So who decides who gets the police? There's no easy answer. There's no correct answer. There's no way to answer except if you have private property. And then the billionaire can afford to get whatever he wants to get. And then the parents of the school children have to figure out how to secure the resources that they need. And they can do it. They can pull together resources and hire the police that they want, rather than paying taxes that go toward allocating security to the billionaire and to the school and to all kinds of other things that they don't want. If they have their own resources, they have their own property rights. They can perform economic calculation and decide how they want to spend their money. Now for a quick word from our sponsors. 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Because of this, they are able to allocate their scarce resources to where they would produce the most value. When you get rid of private property and private individual allocation decisions, then you get a misallocation of resources because it's not possible to perform economic calculation. The reality is that defense is provided on the market already. Government defense is mostly about defending the government, not the people. Even the weapons industry is mostly private, and even government weapons manufacturers have to operate in free markets for resources, and much of their sales go to open international markets. If it wasn't for private property, capital accumulation, profits, division of labor, and economic calculation, we simply wouldn't produce weapons much more sophisticated than rocks and arrows. I think this is an enormously important point. Think about everything that is being produced anywhere in the world, whether it's defense goods or regular goods, laptops, cars, pencils, even remember the old example of eye pencil which we mentioned in chapter 11? I think about how markets coordinate economic activity. There are no sophisticated products that are the result of capital accumulation and economic production and division of labor and monetary economy. None of these things would be possible without the system of private property, economic calculation, entrepreneurship, and capital accumulation. And that applies also to weapons. So even though we think of defense as being the purview of government, the reality of the matter is that we wouldn't have any weapons more sophisticated than rocks and arrows if we didn't have economic calculation, if we didn't have private property, if we didn't have capital accumulation, if we didn't have the division of labor. Just like we couldn't have anything more sophisticated than a pencil. Anything as sophisticated as a pencil, we wouldn't have all of the modern weapons of today. And it's important to understand that what makes these weapons important is the fact that they are able to deliver large amounts of kinetic energy over brief bursts. That's what we call power. Remember chapter eight A lot of energy divided on a small period of time, or energy divided by time is equal to power. So power, the higher power means higher Amounts of energy concentrated over small periods of time. And that is what military power ultimately is all about. The reason that a military can defeat another military. Is that they can channel more kinetic power to destroy the enemy. And so how do you manage to do that? Well, I think you look around at history and you see that it is no coincidence that the most productive economies and the richer economies Generally win wars against poorer economies and less productive economies. It's not a coincidence. It's simply the result of the fact that the more advanced economy, the more capitalist economy, has more capital, has more resources, and is able to coordinate economic production across larger circles, Is able to divide labor and specialize across more scale, and is therefore able to engage in a large division of labor with high productivity, Accumulating capital and producing the economic goods that can produce a lot of power. So, just like in the chapter on energy and power, we explained how it was only through capitalist economic production. That it was possible to develop modern industrial society and modern industrial technology and modern industrial energy and power sources. The same applies for power in the sense of weapons. The most advanced weapons of the world Were developed by private companies. Or by societies that have access to large markets. Even when you have governments in charge of the defense industry, as is the case in many cases, There is still an enormous amount of freedom in the market. Because ultimately, defense industry relies on goods and services that are available on the market. And so, even if one company is owned by the government, it is still able to operate on a free market where it can secure the resources, the raw iron and nickel and copper that they need to manufacture their munitions. All of that is produced on the market. And the reason it is able, the reason it is possible to produce it in large scale. Is because the military industries are able to be part of this market. They're able to perform economic calculation. Because they are faced with real prices on these markets for these resources. On the other hand, if you're isolated from these markets, you're unable to perform economic calculation. And you're unlikely to develop sophisticated weapons. Therefore, you're unlikely to develop weapons that can deliver large amounts of power. And you're likely going to be at the mercy of company of countries that can, or governments that can. So the only way to produce a lot of power in any context, including military, Is through private property, Capital accumulation, and the division of labor. And we see this everywhere. Without a productive, modern capitalist economy financing it. Even the world's strongest army Would degenerate into slave labor camps. You can't run a large, successful army without A capitalist economy, financing it and sustaining it. You need the financing from the capitalists because they work and they produce real goods and services. And so the surplus can be appropriated in order to finance the military. And if you expropriate too much, you kill the productive capitalist economy, you kill the military. Similarly, you cannot have economic production unless they that there is private property. And so the world's sophisticated weapons systems could never be developed without the extreme degree of specialization, division of labor, capital accumulation and technological advancement that is only possible in a free market economic system. It is the market economy that has produced all the most amazing innovations in weapon making, which public sector and private sector criminals use daily for violent aggression. The uncivilized and violent may take pride in their aggression and rejection of peace and cooperation, but their choice of weaponry in aggression speaks louder than their words. They do not choose to live in isolation from civilized society, produce their own weapons and use them to aggress against civilians. They choose to acquire the most advanced products of the division of labor to increase the productivity of their violence. They may not have the mental capacity to understand how peaceful division of labor is so valuable to them, but their actions do. I think this is a very, very important point. I've not heard it mentioned elsewhere, but I think you see this. The people who don't understand economics and people who like to trash talk economics present this idea that, okay, well, all of these economic ideas are nice and dandy when it comes to making money, but it's irrelevant when it comes to the serious things like politics and government and armies and militaries. For all of those things you. All of this stuff about cooperation and peace and division of labor has to go out the window. When violence is here, then violence is all that matters. And so a lot of these people tell you, you know, these ideas of cooperation and peace and division of labor are. 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If you want to give someone the gift of bitcoin, get them this professional service that will ensure they start off knowing exactly how to manage their coins and not lose them. Go to thebitcoinway.com and start bitcoining more confidently. Pathetic Ideas Real men believe in violence, but this is ridiculous. Because all of the people who say this idiotic nonsense, they don't really believe it. They're just dumb to think that. They're just dumb enough to think that they believe it because they're incapable of understanding why civilization is what makes their life possible. And the best evidence for this is that they do not believe choose to isolate themselves from civilization in order to become criminals. So when a criminal says I'm going to do criminal things because the world is not based on peace and cooperation, that criminal is going to use a gun today. Or even if they use a knife. They didn't make that knife on their own. They didn't build that gun on their own. They got it from the market. And that gun was manufactured by a company that hires hundreds of people. And it draws on the services of millions of people all over the world who produce the raw materials and transport the raw materials that are needed to make that gun. Think of the example of the pencil. The gun is more sophisticated than the pencil. So how does that gun get made and get sold for such a small price. Why is it possible to go pick up a gun for a few hundred dollars? That's compare that to how much it would cost you to try and build your own gun without relying on civilization. You go out into the wild, away from human civilization because you know, you don't believe in peace and cooperation. You're a tough guy. So get out into the wild, Mr. Tough Guy and show us how you can build your own gun and show us how good it is and then show us how you're going to take on human society that has the division of labor and capital accumulation and peace and, and cooperation. How you're going to be taking them on with your self made gun that frees you from having to rely on civilization and capitalism. You can't, you'll spend your entire life trying to make an actual gun from scratch. And you probably wouldn't be able to because again, you know, if you want to get your own, if you want to get ready made iron and then try and weld it into guns, that's not from scratch. You're still relying on the iron factory that produce the iron that you're using. So you need to milk, make your own iron, you need to make your own gunpowder, you need to make your own bullets. Good luck with that. Obviously it would probably take years, maybe decades for somebody to try and build that gun on their own. And yet that same criminal, instead of spending all those decades trying to make that gun on their own so that they don't rely on peace, cooperation and civilization, that same criminal will realize, you know, you know what, I could just get a gun for a few hundred dollars. And so either they work to gain a few hundred dollars, or even if they engage in crime to gain the few hundred dollars, they'll still go and resort to the market economy to get that gun. They'll still go and spend a few hundred dollars and give them to the very sophisticated structure of production that was built around this gun. And the people who will benefit from it will be thousands of workers around the world and capitalists who invested in it. And all of these people cooperated peacefully in order to produce that gun and for that criminal to come and use it. And then the criminal turns around and turns it against society and uses it to commit crime. He may think of himself as, you know, falsifying the ideas of economics, falsifying the idiotic notion that Austrian economists have about society being something achieved through peaceful cooperation, but he's just an idiot because he is reliant on this cooperation. None of these idiots, whether they are private sector criminal idiots or public sector criminal idiots, is intelligent enough to understand how even their aggression is reliant on a civilized market order. So these criminals do not choose to live in isolation from civilized society, produce their own weapons and use them to aggress against civilians. They choose to acquire the most advanced products of the division of labor to increase the productivity of their violence. They may not have the mental capacity to understand how peaceful division labor is so valuable to them, but their actions do so as a defense. Good is just like any other good. And if you're able to engage in a free market, in a division of labor, in capital accumulation and long term provision, and longer and longer and more sophisticated structures of capital production, you're able to produce it with more efficiency and more productivity. And if you don't, then you can't. The same analysis, I think applies for the issue of law and order. Law and order are also economic goods. They also are valuable. People prefer to live in a world in which they don't get robbed and in which they thieves, don't get away with crime. And it has a market, people supply it. It does not need a violent monopoly to exist. You don't need a violent monopoly to enforce law and order. I think this is the major lie where most people who don't understand economics think, well, okay, you need a free market in things, but the rules of the free market cannot be a free market. And a lot of Keynesians, Communists, Marxists and so on have these perceptions. But also a lot of, a lot of people who identify as libertarians would say this. They'll tell you libertarianism, free markets is great for production of goods. Up until you get to the issue of law and order. That's where you need a government and you need a monopoly. But that's not true. There's no reason why it would be true any more than any other good benefits from being a monopoly. An example is, look at British common law. In fact, it's not just a useful example, it is the most important example because British common law is an enormously powerful set of laws that has. Well, it's not even a set of laws, it's just the emergent law of the land that emerged out of independent courts with no special privileges from the state. This is something that not a lot of people like to talk about because it's very, very, very subversive to current government propaganda. But the British legal system under which the industrial development, industrial revolution came about, the British economic miracle that took Britain, that made Britain, the first industrialized country in the world, all of that happened under a legal. And of course, it's very common that people will tell you that the legal system is important and the legal institutions really matter for economic development. Well, it's very telling that in the first place, to have the industrial revolution, the first place, to have an increase in productivity and living standards, it did not have a monopoly on the legal system. It did not have a monopoly on law and order. Courts were private entities. Anybody could set up a court. I could go and set up a court and just build a court outside my house and tell people, hey, this is a court. And anybody is free to come and present their case to the court. And anybody is free to sign a contract in the court. And so when people have a problem with one another, when people get into conflict, they seek out the court. Now, why would anybody come and use my court? Who the hell am I? Exactly the question. That's the challenge. The challenge is for me to be able to prove to people that it is worthwhile for them to come to me. I don't have a government monopoly because I don't have a government saying every conflict needs to go to this court. My only way for getting people to come to my court to give me business is to do my business properly. So I will have an incentive to be just. I will have an incentive to be fair. I will have an incentive to do what's best for both parties so that they both come out of it feeling as little injustice as possible, so that they want to come back. And to make my decisions, I'm free to resort to any decisions by any other court previously. And so out of this world of three judges deciding for themselves and three individuals deciding to go to those judges, you get the emergence of sets of laws. A judge makes a ruling on something and then other judges look at it, and then they implement it on other cases, and then they alter it a little bit and they amend some of the aspects of it. And over time, you get very clear rules and boundaries of how people need to behave within this court system to stay on the right side of the law. And people have an incentive to use those courts because you want an incentive, you do have an incentive to resolve conflict. So this story of the British common law is an enormously, enormously useful one to understand why you don't need a violent monopoly on law and order. These courts. One very important point to keep in mind is that these courts didn't have monopoly, did not have jurisdictional monopolies. They did not have territorial monopolies. So it wasn't as if this was the court. This was the only court for this town. So let's say Sheffield has one court and this is the Sheffield court. And then everybody in Sheffield needs to go to that court when they have a problem. No, anybody in Sheffield could go to any court in Sheffield or outside of Sheffield. If you didn't like the Sheffield courts, you could go to a court in, say, Leeds, and just you and the other person could go and use that court. And over time, the better courts get more business, expand, hire more judges, hire more lawyers, hire more staff, and the worst courts go out of business. And because of the fact that they didn't have any legal monopoly, that helped the law develop in a way that I believe has been a lot more conducive for human prosperity and human civilization than it would in places where you had a monopoly. So these courts would offer their services to people who would willingly hire them. So they had to succeed by being fair and just. Judges could look at precedents to make better decisions. And that's how common law came about. This is common law in Britain, but this is also how the law merchant, or as it's called in Latin, lex mercatoria and admiralty law, this is how these developed as well. There was no central monopolistic authority that set the law for the sea or the law for traders across medieval Europe. These laws just emerged from private courts and from people willingly choosing those courts and agreeing to their rulings, and those courts trying their best to stay in business. So British industrial revolution and modern capitalism were born under this emergent free market law system. And in fact, we still see it today. So in the 20th century, we witnessed that the court system and the legal system became heavily state controlled all over the world. But we see cracks of light appearing. We're getting a much better system of law through private arbitration. Private arbitration continues to grow and become more and more and more significant because these private arbitrators are private companies, and therefore they have a better basis for private economic entrepreneurial calculation than state courts. So the same problem of calculation applies in the court system. Without property rights in the capital goods, there is no way of performing entrepreneurial economic calculations of profit and loss to decide where and how to allocate resources and to what end. But with private courts, you can. And so it's difficult for governments because they don't own private resources and because they don't have to make profit and loss decisions on these resources. And because there is no free market in these resources, when they have a monopoly on the court system, they are the only people who hire judges, they're the only people who hire lawyers, and they're the only people who make laws. So there is no possibility for economic calculation of how to best utilize the resources available for the law system in order to achieve the best outcome that people want. In a free market where private arbitrators are able to make their own decisions, and where private arbitrators have to compete for judges, lawyers, and experts in order to get them to court, they do have the ability to make economic calculations. They can think about what it would cost to hire a world expert on a particular topic and see if this would help them acquire a part of a business related to that topic. And so because of that, they start becoming more and more efficient. And that's why a lot more companies are headed toward private arbitration. A lot of contracts today contain clauses for private arbitration because it is exactly as efficient as you want it to be. You want this particular court because they have that particular expert who knows exactly the arcane details of my field of business. And so if I get into trouble, I, I don't have to go to a state court where I need to explain to a lawyer who doesn't understand anything about my business, my business from scratch. I'm going to go to this private arbitration court that is specifically focused on our industry, that specifically has the exact experts I need. And so this kind of division of labor and specialization and allocation of resources is only really possible when you have economic calculations. So that's why private arbitrators will all will seek to hire industry experts, lawyers, judges, legal scholars, all of these people, they can provide their expertise outside of the state monopoly. The contracts don't need a judiciary monopoly. And a great book to discuss this is a book called Private Governance by Edward Stringham. And I've also hosted Edward Stringham on my podcast. So I urge you to look it up and listen to it. I think it was a very good episode and it's very eye opening for people who have never really thought of applying free market ideas to ideas of government. We've seen so far how defense against violence is just another economic good. And we've seen how law and justice are also just other economic goods, and they are in fact being increasingly provided by the free market because the free market provides them more efficiently, because it performs economic calculation. But what happens when the provision of these goods is not allowed to happen by the free market? Or what happens when these goods are provided coercively where a monopolist takes money from people, forces them to pay for those goods, and then provides them those books goods, whether they want it or whether they want them or not. This is what state monopoly does of defense. And this is what this is the state monopoly of defense and law. And it's the situation that we see almost all governments seek to impose, even though they have varying degrees of success at imposing it. One very important concept here to keep in mind and in defense of Mises, even though in the previous chapter I sort of criticized Mises because he spoke about, you know, the role of the state in the classical liberal definition. In his defense, when Mises talks about the state and the reasons and the important things for the state to do, he is discussing the state that grants the right to people to have the grants people the right to have self determination and grants the right of secession. In other words, if you have a state where people are able to freely opt out of the state by voting themselves out, so one city or neighborhood or one part of the country decides that they don't want to be part of the country anymore, and then they hold a plebiscite referendum and then they decide to leave. If the central government will respect that, if the central government makes it clear to all parts of the state that anybody is welcome to join, anybody is welcome to leave, at least maybe not necessarily join, but anybody is welcome to leave if they want, then you are not really dealing with a system where you have a monopoly. Because in this situation you can just opt out of being part of that government and join another government with the right of secession granted, the state cannot take for granted the allegiance and revenue from its citizens and needs to work for them. This is a great quote by Mises. Mises says the right of self determination in regard to the question of membership in a state thus means whenever the inhabitants of a particular territory, whether it be a single village, a whole district, or a series of adjacent districts, make it known by a freely conducted plebiscite that they no longer wish to remain united to the state to which they belong at the time, but wish either to form an independent state or to attach themselves to some other state, their wishes are to be respected and complied with. This is the only feasible and effective way of preventing revolutions in civil and international wars. However, the right of self determination of which we speak is not the right of self determination of nations, but rather the right of self determination of the inhabitants of every territory large enough to form an independent administrative unit if it were in any way Possible to grant the right of self determination to every individual person. It would have to be done. I think this is really interesting for Mises, and it's pretty anarchist because ultimately what he's saying is that the only real political unit is an individual. And if it were possible to grant the individual the right of secession and self determination, then he would support it. I would say over the last century, since Mises wrote these things, likely, well, this is human actions. This was in 1940. So 80 years, not a century. But over the last 80 years, I would say the technology has made it so that it is actually more and more practical for smaller and smaller units to become more and more independent, because administrative issues are becoming easier and easier to manage, and technology and information and coordination through tech makes it easier to secure whatever good that you want. So therefore, I think we're headed more and more toward a world in which we have more and more entities capable of becoming independent and seceding from central governments. With secession, governments cannot take for granted the allegiance of their citizens. They need to work for it. And so if they work, they have to work for it. They are essentially back in a market system. So even though you are called the government, but you are in a market system because your customers are citizens and they are not held at gunpoint having to pay taxes for you. At any point in time, they can opt out and say, we don't want to pay taxes to you, we want to become independent and pay taxes to our own government, or we want to join this other government and pay them our taxes. So you're just like a restaurant operator now. You can no longer take people for granted. So you need to give them enough quality and you need to give them food that's good enough for them to willingly pay for it. So as a government now, you need to offer people services that are worth the taxes that they pay. Effectively, taxes stop being taxes and become just service fees and government just becomes a service provider. So they collect the trash, they build the roads, and they provide police and say a military. And you look at those services and you look at how much you pay for them, and then you decide whether you like it or not. And if the country next door happens to be able to offer these services at a much better price, then maybe you secede and you join the country next door. Without secession, government is a territorial, coercive monopoly. It cannot perform economic calculations since it acquires its resources without an opportunity cost. It just passes a law that says, we need this piece of land, and then they can take that piece of land, and they can turn it into whatever stupid idea they have. They don't have to perform economic calculation to guarantee that this land is actually worth being used in whatever form of use they are looking to use it at. Without economic calculation, the incentive is, first of all, there's no possibility for rational allocation. But also the incentive is there to mess things up. The incentive is there to do things incorrectly. Now, fiat economists will have many stories about why it is good that these goods need to be a monopoly, that these goods have to be monopolies, and that there's no alternative but to have a monopoly which happens to be the same people that pay the fiat economists salaries. Funny coincidence. And the argument here is that without a monopoly frame of reference for just claims of property, there is no possibility of defining property rights in a way that avoids conflict. This is, I think, the key of the misunderstanding among many statists, including a lot of libertarians, a lot of people who call themselves libertarians, particularly objectivists and Randians. They have this idea that you need the state as the frame of reference for just claims of property. And if you don't have the state to do that, then you don't have a way of adjudicating who has the right to this piece of property and has the right to that piece of property. And so you end up in conflict. And then you cannot have a free market. I think this is just a cognitive limitation on understanding how the market really works. The state does not determine property and it does not determine the legitimacy and justness of property. The state enforces the principles of legitimate or ownership to disputes on property. Property is not legitimate because the state says property is legitimate. It's the other way around. The state gets its legitimacy from the extent to which protects property in most people's minds. Property is something that we can only get if we have a government. Once we have a bunch of criminals who are protected from competition, who are able to take our money without any need to convince us with it, and who can pass laws and who can initiate violence and who have a monopoly on violence. Once we do that, then we're able to develop a system of private property. And this is completely nonsensical. It's exactly as idiotic as saying you need the government in order for there to be money. As we saw in the chapter on money, money emerges without the government. The government gets its legitimacy by attempting to enforce the monetary choice of the market. Gold did not become money because governments chose gold as money. Government money became money only when it Was made with gold, which was the choice of the market. And the same is true with property. You do not own a piece of land because the government says you own this piece of land. The government is a government that is in power because it respects your right to property on that piece of land, which you may have owned from before the government existed, or your family owned it from before this particular government existed. So it's the legitimacy of property itself that allows for the legitimacy over the government, not the other way around. Just like it's the emergence of money itself that makes the government choose whatever it wants to use as its money. It's not the government that dictates what money is. And so if you were able to understand that, then you can see why you don't want a monopolist provided justice and defense. Some others will argue that property is the function of the state, since it is essential to all economic activity, and without it there would be no economic activity. And that, you know, you need to just have property secured and it doesn't matter who owns what, as much as what matters is that everything is owned. And then once everything is owned, people can have economic activity, can trade. So even if government might be a little bit unjust in how it determines property rights, what matters is that they do determine property rights. But that again, doesn't really make sense, because many other goods like food and land are also essential, but they are better provided through private enterprise, and private enterprise does a much better job. There's no reason why this can't apply to defense or security, because they are just goods. At the end of the day, Coercive monopoly over defense and law are not an inevitability. They are the cause of the failures we see in these goods. Without a marketing capital in any good, A coercive monopoly creates shortages, reduces quality, and raises prices. This is exactly what is happening in defense and law today. The monopolist government benefits at the expense of the people. And once you see it that way, once you get over the insane rationalizations for why you need to accept a violent monopolist provider of security, which is a contradiction in terms, then you start seeing, oh well, actually, all these problems that we find in security are just the manifestation of what happens in any other good. When you have a violent monopoly is in charge of that good. So the struggle for civilization in my mind is the struggle for humans to deal with each other based on the principle of non aggression, where everyone agrees to respect the property rights of everyone else in their person and justly acquired property and we defined how property is justly acquired in chapter four earlier. And there's simple ways you can acquire property. Either you homestead property, so you get something that nobody owns, and then you make it your own, or you acquire something from somebody who owns it willingly with their acceptance. Those things are what make for private property. So if we have this concept of property and we have the concept of non aggression, then everybody respects everybody else's property, right? And we're able to live in a civilization. We're able to have capitalism, we're able to have the division of labor, and we're able to increase our productivity. However, if the principle of non aggression is overturned specifically for law and defense, then we're not going to have civilization. In fact, we're going to see that the principle of non aggression is going to eventually be overturned everywhere. Because if the government can overturn the principle of non aggression when it comes to law and order, why can't it overturn it for everything else? If we're essentially, I mean, minarchists and small state libertarians who argue for a monopoly on violence and defense are arguing a very incoherent position because they're saying all of these very unimportant things like shoes and computers and books and tables and beds and houses, these are not so essential. So we can leave them for the market. But all these really important things like law, defense and security, they are really important, so we can't leave them for the market. But if not leaving them for the market makes them better, then why don't we just let the government handle everything? Apples, oranges, cars, TVs, houses. Then if they can do law and order better, then why can't we? Why can't they just do apples and oranges better as well? And the answer is they can't. They can't do law and order better. They can't do everything else better. And the, the propaganda that makes people believe that the government can do this is likely going to seep into everything else. If the government can decide the laws and can violently impose laws and it has a monopoly and everybody has to go along with it, what makes you think they're going to enforce just laws? They're going to pass laws that are going to overreach into every aspect of life. And so what Rothbard and Hopper did is that they exploded in my mind the contradiction at the heart of modern classical liberal thought and offered a coherent anarcho capitalist alternative congruent with the principles of economics as the study of human action. They offered the idea of Capitalism applied to government rather than peaceful cooperation under the rule of law applicable to all society under government eventually degenerates into competitive conflict and aggression between people seeking to gain control of the power to dominate each other. In other words, once you've made it so that whoever gets on top in society has an exemption from the non aggression principle, has an exemption to allow them to initiate violence, guess what? You're going to get an infinity of violent conflict over who gets to be the one who gets to use violent violence legitimately. And so instead of living in a society that fights violence, you end up enforcing and enhancing violence more and more effectively. Whereas civilization and capitalism and capital accumulation and lowering of time preference and hard earned money are constantly driving us toward more cooperation, more peace, more civilization, and more acceptance of the concept of private property and the concept of the non aggression principle. If we have all of that, the more we have that, the more civilized we become, the more peaceful we become. When we move toward the situation where we believe that one group of society has the right to violate everybody else's property and has the right to initiate aggression against everybody else, we are sliding back toward barbarism. We are sliding back toward more conflict, less cooperation, less belief in property rights, more belief in the legitimacy of aggression against people's property. And this is what we see around us everywhere. In other words, understood correctly, the state is the largest gang of thugs. And the progress of human civilization depends on minimizing the damage from this gang, not on commandeering it for the impossible tanks of using its license for evil to do good in people's minds. We need to just use this power of evil, of the government in order to enforce good. I think a much more coherent and consistent view is that you don't need to give somebody an exception to allow them to commit violence in order to not have violence. If you want to avoid violence, you need to make it so that everybody follows the same abstract rule. You cannot initiate violence. And that applies to everybody. And so simply by calling yourself a government or by saying that we are the ones responsible for security or defense, does not allow you to initiate violence. And if you just had a world in which all of these services are produced through people who don't initiate violence, then these services will be infinitely inferior, infinitely superior. I apologize. So the purpose of state security we see, is to protect the state, not the people. So a lot of people have this idea that the state is needed to protect us from the largest gang just taking over or. But in reality, that's what the state is the state is the largest gang. And so the question is not whether we need the state to get rid of the largest gang. The question is if you don't want to be have a gang out there taking advantage of everybody, then stop supporting the state, stop being part of the state. Ultimately, the state is the violation of property rights. And it exists to the extent that it is able to violate property rights by forcing people to pay for its services when it doesn't give them the choice. And so once you normalize that, that in the case of the state, it's possible for the state to do this, then it becomes possible for everybody to foresee scenarios where they can get to yield the power of coercive force against everybody else's society to their benefit. And that is when essentially all of civilization begins to fall apart. Because all of civilization, as we've discussed, relies on the concept of respecting property right. But if the state can violate property rights, then the sky's the limit. The state is going to end up violating property rights everywhere. And you see this because when given an actual monopoly on forced, you look around the world and you see that for the majority of the countries in the world, you see there really is a strong case to be made that the state security apparatus is not out there to protect the citizens of the country. It is out there to protect the state itself, the institutions of the state and the individuals who are in that state. So individuals must still work and pay to secure themselves through the various avenues of defense available on the market. If you want to protect your shop, you hire private security, you buy yourself your own gun, you get an alarm system, you hire a security company, a free market insecurity is not hypothetical. This is still taking place around us in the world. What is really more hypothetical is this idea that you can have a coercive tax funded monopoly in the provision of security and have it actually succeed in providing security. Because look around you. In most places in the world where there is that kind of monopoly, we see there is a big security problem. Of course there are some exceptions around the world. There are many places that are in fact secure and safe. But I think there's something interesting about these places. Some of these places, for instance, thinking of the Arab Gulf, where there is very high level of security and safety and there is very little crime and very low taxation, government does not violate people's property rights as it does in say, Europe, for instance, where taxes are very high and crime is very prevalent. It's interesting that in the places where we see that the Government is able to have this kind of positive influence on the security of property rights. A couple of noticeable things I notice about these places. Number one, a lot of them are monarchies. And as monarchies, they tend to have absolute authority vested in a monarch who's able to think in the long term, which we're going to discuss in a bit. And the other thing is that these, many of these places, the majority of their population is actually foreign. They have foreigners for their population. So what makes these economies function is the fact that people freely opt into them. That's ultimately why these places work. Because if you look at, say, a place like Qatar or the United Arab Emirates or Bahrain or Saudi Arabia or Kuwait, I think a majority of the population in maybe all of these countries, I'm not entirely sure, but I would say likely all of them, a majority of the residents of the country are foreigners who have migrated to those places. So when you have a majority of the population being foreigner, that means these people chose willingly to come and work in this place. They willingly applied, got a visa, got on an airplane, signed a contract with a company and moved in and started working in that place. So they bought into the laws that that country implements. And I think the fact that they have this majority foreign population means that these examples are more of a. More of an example of a security provision and law and order provision on the market, in a sense, because they're out there competing for people from all over the world. And on the global market, there is no monopoly effectively on security and police and justice and defense and law, because people can just move around. And so in places where people are able to move and travel, these places are competing against each other in terms of their legal framework. And so in these places, you see places that have a lot of migrants as part of their population, are only managing to do that by offering some kind of good deal. So there is a competitive element, and there is more importantly, the process of economic calculation taking place that is allowing these countries or these governments to act as market agents because they treat the country as if it is property, as monarchs. And so therefore they're able to calculate what they can do with this property while looking at the global market for talent and for companies and for all kinds of industries that they might want to attract there. So what happens when we have state monopoly? How does state monopoly fail? Well, it fails in many, many, many, many ways. And we see them all around us. When you have government monopoly of defense, law and security, there is no market in the resources and the capital goods that go into these goods. Without a free market in the goods and services of the defense industry, there can be no prices and no economic calculation. Defense is not some on off switch. It is a marginal good. I think this is really the most pivotal point in this chapter to understand it and why all of this chapter. We keep going back to the earlier chapters, to the first three chapters where we laid the foundations of how we're going to think about the topic of economics defense. In the mind of statistic economists, it's thought of as this aggregate good that is either purchased for the entire society in order to secure the entire society in completely foolproof manner, or it is not purchased. There is no sense of it being a marginal good. But of course, in reality, like all goods, it is marginal. And the value that we get from it is determined at the margin how much of each good, how much more of each good we benefit we get from how much benefit we get from each extra unit of these goods as a marginal. So the marginal analysis applies in the case of defense. And so we see this in all practical questions related to the issues of defense and law and order. So for instance, should each neighborhood get a 24 hour police patrol? Or should each street, or should each household. Should police spend more time protecting rich houses and neighborhoods because they are more likely to be the target of burglary? But why should poor taxpayers pay to protect the rich? How many policemen does a certain neighborhood need? Should some people get bodyguards? Should sporting events and concerts get extra police patrols to prevent trouble? Or should the organizers of these event handle their own security? All of these questions can only be answered at the margin because they all involve valuation and they all involve valuation that is dependent on the margin at which it is made. In other words, it's dependent on the quantity of goods that you have. How many policemen do you need outside your house? Well, it depends. And it's not a question that can just be answered in the abstract. You need to actually make a decision on how many policemen put in how many shifts. And that is a question that requires economic calculation. Because in a free market, individuals would be able to calculate the best allocation of resources and property to meet these needs in the best way they can without a free market. In these resources, allocation is made without calculation. That's why private security officers are a lot nicer than police. When you are dealing with resources that are valuable, because you're an entrepreneur who's having to make a profit because otherwise you lose your capital stock, then you find yourself in a situation where you need to deal with your resources in a very intelligent way. And if you are not able to do that, then you're going be driven out of business because you're going to, your place is going to be taken by people who are able to use these resources in a better way. And that's why I think I always used to ask this to students in my university when this topic would come up, which is if you look around you, how many, how many people do you know who have been harassed by real police versus how many people have been harassed by private security at shopping malls or at universities or at schools or at any kind of facility where private security exists? A lot fewer incidents, I would wager, happen with private security. And the reason for that is that private security are working for entrepreneurs who are performing economic calculation on these resources in a way that is valuable. So they hire them in a way that seeks to economize, that seeks to use them in the most effective way, that doesn't put them in the way of harm, that doesn't make them harm customers, because then there are very serious legal implications for it. But if you have a monopoly on security and if you have a monopoly on justice, which means that any problems with your security provision are going to be tried against the same state that is running the, that has a monopoly on the Justice Department and on the court system, well, you've got a little bit of a problem there because now they have the, an incentive that is different from serving their customers. Their incentive now is to look out for themselves. And I think that's that explains a lot of the problems that you hear about the police. So effectively, the simple point ultimately remains that tax funded security providers have no incentive to care about customer satisfaction or resource conservation. Ultimately they're getting their paycheck whether you like it or not. You can't choose to opt out of paying them. You're going to be paying your taxes. And so you can make all kinds of noises, and they'll make all kinds of noises about what kind of changes they need to make, but you still have to pay. And so as long as you have to pay anyway, then doesn't matter, your satisfaction is something that we can negotiate. And also since they're getting paid anyway, and since they have the resources anyway and then they have access to these resources, they're also not extremely concerned about conserving those resources. And that's why they end up not take, not conserving them. And you see this reflected in terms of how governments treat their police and their military in that they have access to free human labor and therefore they find it that it's okay. Well, these people have signed up for this job and therefore it's okay to sacrifice their lives. It's okay to make them do dangerous things and unpopular things that put them in danger because it helps us increase our power. But in a free market, entrepreneurs who provide these services would have the incentive to conserve resources and provide the best product. The same thing happens with the judicial monopoly. No market test means no rational allocation of resources. The concept of justice shifts away from legitimate property rights to government given grants. If one part of the population has the right to initiate violence against others, they would likely use that to their benefit. And that is how politics descends into a war of all against all. As long as there is this notion of legitimate coercion out there, someone with the legitimacy to initiate aggression, it's going to be nasty in the long term because the politics is going to be a fight between who wants to have more aggression. So without property, national militaries also cannot calculate and fail in their state admissions. So the US military, my favorite example, they spend more than a trillion dollars a year. And yet you walk around an American city and you see that it is not a safe place for a child to walk around. An 8 year old child cannot walk around in the vast majority of streets in places like Chicago and New York unsupervised by an adult. And it's pretty striking because you think about how much money the US government spends on keeping that child supposedly secure with all of their military spending, with all of their security and police spending and all that. And it's quite startling, you know, I mean, think about it. If all of that money was kept with the, the American citizen to spend on security as a free market good. If you didn't have to pay taxes and instead you could go take your, all of your taxes and buy your own security for yourself. Just think about how much better security they could buy. I mean, I think the average taxpayer maybe, well maybe not the average taxpayer, but a very large number of taxpayers would be able to afford 24 hour bodyguards with the amount of taxes that they pay, perhaps. And I think they get nowhere near that level of protection from paying all of that money to the US Government. Because the US government is a monopoly and therefore it doesn't care about your customer satisfaction. So therefore it doesn't care about your safety. It pursues its own means, its own ends. And so because of this, the U.S. military and its associated parasites do not have an incentive to provide Actual security. They have an incentive to manufacture conflicts, to extract more money from tax cattle because there's no competition, there's no opting in to this or opting out of it. You're born into the tax farm, you have to pay for it. And guess what? You're going to get terrible service because if it's, if you're paying anyway, they have no reason to care about your satisfaction and they're going to be co opted toward meeting the needs that benefit them as people in power. And in many countries around the world you see this where the smaller country, the smaller military essentially becomes a puppet of its outside financial bankers. Because now foreigners in a small country, a foreigner from a bigger country with more resources or foreign government can effectively control everything in society if they are able to control the government. And that becomes perhaps the most profitable use of the government. If you're allowing government to have this legitimate access to coercion, then everybody else in the government is going to want everybody or all of the potential enemies of the country or all the people who benefit from it are going to make a good return on finding a way to just take over the few people that are in charge of the government and just subvert this monopoly agency that has a monopoly on violence to use that monopoly of violence in the favor of a foreign country. So security and defense are like any other good. They are best provided through the division of labor, capital accumulation and entrepreneurial calculation in an extended market market order. In practice around the world, most of security is provided by the market. But it would be a lot better if we didn't have a monopoly that was able to take so much money from people in terms of taxes and inflation in order to finance its continued mass murder and purveying of evil around the world. So Americans pay enormous sums to police and military, but they are very unsafe. Now imagine if the people of Chicago had all their wealth, as this is the point I mentioned earlier, that goes to the police and army available to them to spend on security services that were responsible to them, had no monopoly, no special legal protections under the law, no right to initiate aggression, and no ability to extract tax. So in conclusion then, how can the market handle defense? If we did indeed not have a monopolist able to go around rob people, go around robbing people in order to finance its own spending, how would we have the defense on a free market? What would it look like? I mean, as I said, we have a lot of it around us. But let's think of a world in which we have A really more free market in defense. Well, first of all, I think the most important manifestation of a free market in defense would be that self defense would be considered very legitimate and would be expected from most people and everybody would treat it as if it was not criminal. So there would be a clear distinction between aggression and the initiation of aggression, or I should say between violence and the initiation of violence, because aggression is the initiation of violence. And so property rights enforcement would be encouraged in a free society. If there was a free market in property, you wouldn't just be, you wouldn't have a lot of people who are, as we see today, resigned to this idea that it is the state that decides what it is property and therefore it is up to the state to defend the property and enforce property laws. There would be a lot more of a hands on approach to property rights wherein people feel it is up to them to enforce property rights and that they have no problem with people who enforce property rights. As long as people are acting with the concept of legitimate property, then they are within their rights and they don't do anything wrong. In other words, they don't aggress against others. The other thing that you would imagine is that there would be mutually agreed contracts deferring to mutually agreed courts. People would sign up for contracts and sign up for courts as we see in the kind of arbitration courts that we see today. But I think that would be a lot more prevalent rather than the state monopoly courts. And it would be a lot more efficient and it would be a lot cheaper and a lot faster. And so people would be able to sort out their differences and find resolutions for their problems in a lot simpler way. And it would probably be a lot more corrupt because it would just be answerable to the customers. I also expect in that kind of world there would be a bigger role assigned for industrial individual initiative in this. And that doesn't just mean in terms of defending property rights with the resort to defensive violence, but also in being kind of proactive about it by not with violence, but through boycotts and ostracism and shaming. I think in this kind of society you may not want to engage in violence against people who initiate violence, but you could shun them and boycott them and shame them. And I think that would be very, very effective. Because think about in a small society, if a small society decides to expel a member from it and just stop dealing with him, I mean, nobody has to hurt him in any, any way and people should just simply start refusing to trade with them. And then that Person could very well die because being self sufficient is very difficult. And so this, I think without a state monopoly that sells us the illusion that they are out there to provide security, you would expect that in this kind of world people would be more proactive about it. And so they would go out of their way to make sure that they ostracize people who do the wrong things and that they try and get others to be aware of it. And I think this would be a positive thing because it would strongly discourage violent behavior. And more generally, I think you see those things emerge in a free market anyway with things like credit ratings, expert reviews of products, third party specialists in supervision of production. You know, it's, it's very common that you hire people to supervise and rate production processes. There are agencies existing out there that go around and give their ratings of things and they sell these reports to anybody interested. And you see this in a wide variety of industries because ultimately these industries benefit from their customers being able to have more confidence in their products. So you see this kind of voluntary resort toward being part of all of these voluntary arrangements for ensuring people get what they want out of interactions that we are programmed in a sense to think of as being the purview of the state. And finally, I think insurance was probably, is probably going to have a bigger incentive to providing security in a free society because insurers benefit from security. And so therefore they, you know, the fewer crimes take place, the less they have to pay out. And so you would imagine the defense and police would be linked to an insurance policy. And this might even be part of what you pay as a fee. So effectively, instead of paying taxes, you would be paying money to a defense and insurance company. And that defense and insurance company takes the money from you on a periodic basis and commits to securing you. And if they fail to secure you, if something bad were to happen to you, they would pay out a certain sum of money to your, either to you or to your family and descendants. So I think all of these are very strong institutions that we can see working on doing the things that we are programmed to think of as being the purview of the state. But I think they are really just a function of normal human society and we don't need the state for them. So it's difficult to predict what defense and law would look like in a modern capitalist free society. Forms of allocating capital which succeed at providing security will grow and evolve. Whatever people want from their government can be provided with property rights respected. This doesn't mean the freedom to do anything without consequences, it means the freedom to reap consequences. It means people can choose to disassociate with you. And so I think there's a common idea of thinking of, of libertarianism as if it is an ideology of people getting to do whatever they want. And there is an element of that. But I think people sometimes take it in a sense that necessarily implies that you are going to have a world in which everybody's out there doing drugs and engaging in all kinds of hedonistic behavior without any kind of regard for others thoughts about it. Because ultimately what we're really thinking about here is not individual liberty in the sense of being able to be free from consequences. I think the important thing here is property rights. The important idea that we understand from studying economics is the importance of property rights. And so what I think is more likely to be the shape of a free society that prioritize property rights is not necessarily one where people get to necessarily engage in all of these kind of drugs or alternative lifestyle choices that are maybe illegal in many parts of the world today. And people think that if you are pro liberty, if you're pro freedom, then necessarily you're going to be ending up in living in a society that decriminalizes those things and where these things are prevalent. But I think there's a distinction here. You don't have to criminalize things in a sense of a violent political monopoly being able to punish you for using them, but you can exclude those things through mutually agreed private contracts. This is, I think, the important distinction that many people miss. And you see it in how many people characterize libertarianism, but you also see it in how many libertarians think of themselves. I think there's a significant number of people who identify as libertarian, who call themselves libertarianism, who don't quite understand it as an idea of property rights, but they think of it as more of a concept of personal liberty and personal freedom. And this is, I believe, is the wrong take from it, because personal liberty and personal freedom are the fruits of a world in which we respect property rights. But if personal liberty and freedom violates the property of others, then it becomes, in a sense, a violation of property rights. If personal liberty is a hampering other people's property right, on the other hand, then it is not necessarily going to be part of a free society. And I think this, this is a kind of a more nuanced understanding of how a free society could function. So free society, in my mind, wouldn't really be the libertarian society in which people are just free to do whatever they want. I think it would be a society in which people are free to sign into whatever forms of social arrangements that they want. But that might mean that some forms of behavior are not going to be tolerated in some of these societies, in some of these contractual arrangements. And I think it could well be the case that we'll see these kind of restrictions survive over time, because if they have a benefit to the society in terms of the economic productivity of the society, it would become a popular thing to do, and then people would want to willingly sign up for it. So in other words, I guess if I wanted to think about it in terms of an, in terms of a concrete example, the example of drugs, would it necessarily be the case that a free society would be a society in which everyone is going around on the street and shooting up heroin? No, not necessarily. In fact, it could be a society in which doing heroin in the street subjects you to serious consequences. Why? Because there are several possibilities of how this plays out. And I'm not saying that this is necessarily the way in which it's going to play out, but one possibility of how a free society functions with relation to drugs is that some societies, some communities, some contractual arrangements are built around the idea that if you join this community and this governance structure voluntarily, then you are going to accept that you will not be doing heroin, you will not be consuming these kind of drugs, these specific substances. And that if you do, there are certain consequences that maybe you get expelled from the city, maybe your property gets confiscated, or maybe you just pay a fine. But there are different kinds of punishments and consequences that follow. Now you might say, well, why would you want to join that? Because it might be the case that joining one of those places ends up being a lot safer and a lot cheaper than being in the places that allowed that behavior. And so therefore you have the choice. You can join the town that has all of the liberal approach to drugs, and so everybody can do whatever drugs they want. But then in that town, your cost of police is higher because the police are constantly dealing with drug addicts. And so you need a lot of police and your cost of insurance is higher and all kinds of other extra related expenses are associated with it. So in that case you'll see how people would have the incentive to move to societies that impose restrict rules against this kind of behavior, because these societies would be a lot cheaper and safer if this kind of drug that we're talking about in this situation does indeed have that effect. So the important thing in my mind is not that people are going to have the freedom to smoke drugs per se. For me, it's that people can have the freedom to smoke drugs, but also the freedom to choose to dissociate from people who smoke drugs. And that if that ends up being a sustainable, profitable choice on the market, then maybe that succeeds. It may be the other way around. It may be that these societies where they impose strict laws on drug abuse, maybe it ends up making no difference in terms of the cost of policing because it doesn't end up really mattering much. Symptoms of drug addiction and drug use don't end up costing more in terms of policing, but what ends up costing more in terms of policing are the trying to enforce the prohibition. If that were the case, then you would see that prohibition over time would die away from these communities. And people choose to go to the places that are cheaper and safer, where they're not going around and checking whether you're smoking crack or heroin every day and you don't get searched and you're not paying for those police to harass you and check your drug use. So it's for me, I'm agnostic about which choice gets chosen. And I think we in a more free world, what would happen is that more and more jurisdictions would experiment with those things and then people would willingly sort themselves out into kind of jurisdictions that have different values. And so you would expect that in a place like the U.S. i would imagine there wouldn't be one answer fit all. There would be areas where you'd have a more liberal approach to, say, drugs and areas where you have a less liberal approach to drugs. And over time, people reap the consequences of these choices and other people are able to evaluate and decide, you know, do you want to go with this method or that method of organization? I think a key concept here is the distinction between libertarianism and libertinism. In that libertinism is this idea of just indulging a person's desires and not thinking about the consequences. So libertarianism isn't really about indulgence of desire. Libertarians is about the initiation of violence and respect of property rights. This is for me, the key thing. Once you understand economics, you believe in individual liberty in the terms of property rights. That's what ultimately matters. People have the right to own property legitimately and nobody has the right to aggress against a property rights owner. And that is ultimately what in my mind is the, the insight that Austrian economics gives us into libertarianism and libertarian ideas. It's not about individual freedom in the sense of people having the freedom and liberty to do whatever they want. Because a lot of things that you do can aggress on the property rights of others. The correct specification of it is that it is a system of property rights and respect of property rights and not initiating aggression against other people's property rights. So for me, in terms of governance, the way that I think about it, having approached this topic for writing this book, is that what really matters is not so much the form of governance. Whether it is democracy or a monarchy or any other form of government. That's not what really matters the most per se. What matters the most is whether people are able to opt into or out of these arrangements. That's ultimately what it is. It doesn't matter if you can opt in, it doesn't matter if you get a vote, as much as it matters that you can opt in and out. Because if you opt in and out, then whoever is providing that arrangement has to perform market calculation. And this brings us to the topic of a book called the State in the Third Millennium by Prince Hans Adam of Liechtenstein. And Prince Hans Adam, in this book, I think, presents a very, very compelling idea of what the role of the state can be in the third millennium. And he thinks of it essentially as service provision. The state should be out there providing services and it has more of an executive authority in how it provides the services, but it grants its people the right to secession. So whereas most of political history has been about giving people more voting rights, more representation, more ability to choose who their government is and what their government gets to do, more ability to micromanage more and more of the government, Prince Hans Adam is essentially headed in the opposite direction. He's saying no, you get less say in what the government does and the executive gets more of an authority in what it does. But in exchange, you get to choose to secede. You get to have the right to self determination. Going back to the Misesian idea. And so in. And this is not just something that he writes in a book, it's something that he applies in practice in his country in Liechtenstein. Every hamlet in Liechtenstein or every village in Liechtenstein has the right to secede out of the country or to join a neighboring country, Austria or Switzerland. So in that country it is essentially a voluntary contract wherein the citizens enter with the prince because they can choose to leave that country. And this is something that he is providing as his vision of how the state can function in the third millennium. And I think if you want to think about freedom, this is a much more or if you want to think about a political governance structure that is more compatible with property rights and with civilization, with the ability of capitalist development to happen, I would say this is an excellent idea because this goes back again to the issue of calculation. And in this situation where the government or the prince or the king or the president is unable to count on the tax revenue of any particular part of the population because anybody can at any point in time tell him that they don't want to. They don't want to be part of the government anymore. In that kind of arrangement, the government has no choice but to try and become good at what they do. They need to win over customers. And so think about this model as essentially being the concept of political freedom through exit, not voice, rather than having people get together and argue and have parliaments discuss things and have everybody think that they get to choose what happens. The government does what it does, and people get to choose if they want to be part of it or not. And this is effectively how market institutions function. The reason that your laptop works is, is not because you voted for who gets to be the engineer, and it's not because you voted on designs. You only had one choice to do in your laptop's design. You could buy it or not buy it. That's it. Everything else was decided by professionals. They know how to design laptops better than you, and so they do it. And then you know how to use a laptop for your own uses better than them. And then you choose whether their laptop is the one you want or whether it's the laptop of somebody else. And that's all that there is to it. And because of this, market institutions are very efficient because they need to always figure out exactly how to give the customer what the customer wants. And so they work very hard on that, and they're constantly improving their quality of production and reducing the cost. That's why we see things always getting better in the market. Yet in government, we see the opposite happen, because people have no right of exit. People can't just choose to stop paying taxes to this government and choose to join another government. But I think this is really the model that Prince Hans Adam presents. And I think we are going to see the world head toward this direction inevitably, because the higher our productivity, the freer people become, the more people are able to think about issues of their own personal property and understand their need for property, and the more they are going to be want to join political structures to protect their property. And that's why I think these places that respect this Kind of thing. The governments that respect property rights and the governments that give more and more right to self determination and secession to their populations, they may pay a small price in it in the short term in that you lose a tax cow or region that decides to secede or join a neighboring country. But I think in the long term you will reap great benefits from it because it will force you to function with efficiency. It'll force you to work with a straight market efficiency on everything and focus on increasing your productivity. And so therefore that's going to increase your productivity at providing services like defense and justice and security. And over time that's just going to make you better and better at it. And so I think these governments that do this are going to get better at it and they're going to out compete the governments that rely on monopoly. Just like in any business, you know, whenever you have a government agency that is run with a monopoly, protected from protection, sorry, protected from competition versus private agencies, you see it across countries or within countries. Anytime this happens, you see that the private agencies run rings around the state monopoly. And I think we're going to start seeing this more and more on an international scale. As travel and communication increases, people can move around between countries more and more. You're going to see the countries that are able to attract talent, that are able to offer a mix of security and law and justice that is attractive enough for people to get on an airplane and leave their home country and go somewhere else. These countries are going to thrive. Whereas the places that rely on their local tax capital because you know, these people are stuck here, they've been born here and they're going to stay here and they have no choice but to give us their money. These countries are going to stagnate significantly. So I think what Prince Hans Adam offers also is, and I think the thinking about monarchy, it might be the naturally emergent outcome of this election process. If we have more and more of a freedom in governance and defense and law, maybe that ends up being looking like a monarchy. I think this is a possibility worth considering because think of monarchy or think of law and defense and these goods that we discussed in this chapter as being goods that are best provided in the long term and that the best provider for this is not somebody who does it over a scale of 4 years and 5 years and then retires and is not held accountable. The best scale of operation is something that is the longer the scale the better. The longer the time horizon of the operator, the better. And a monarchy has the longest time Horizon of all. Because effectively the monarch expects to be in power for decades or centuries, so expects his children and grandchildren and great, great, great, great, great grandchildren to be ruling after him. And so therefore he has an incentive to preserve property rights, to preserve the kingdom, so that he is able to pass it on. And that creates a congruence of incentives between the consumers of defense and security, in other words, the citizens or the subjects and the king. And I think this explains the survival of monarchy throughout history. And maybe this is the, this is a way in which things unfold over time. I mean, I can see how it could be monarchy based because of the long term. But I can also see the case for why this could be run as a corporate thing. That you have governments as corporations that manage cities and areas and people voluntarily sign up for them. That is also possible. But I think perhaps monarchy is also something worth worth discussing. So this is my discussion of defense and security as economic goods and law. And I think this is my understanding of how these things can work in a free society. And that was the point of this chapter, chapter 17, to essentially answer all the objections, or all of the more common objections about why you can't just have a free market system. And I think, I hope this answers this. And now in the next chapter, the final chapter of the book, we come to the question of what is human civilization? And all of this, all of the, everything that we've been building up here, from the concept of property, chapter four, to labor, or sorry, labor in chapter four, and then property in chapter five. So we start with labor, we go with property, with capital, technology, energy, power, trade, money, the market process, all of that. Being able to build the market and have an extended monetary order, which we Discuss in chapters 13, 14, 15. All that allows us to build what is essentially human civilization. This is what human civilization is about. We aren't able to have civilization stable, stable structures and stable political organization to last for centuries, and an improvement of our economic and material well being over centuries, except through the development of all of these aspects of human civilization. And in these last chapters, we discussed the concept of violence and the problems of civilization. How civilization faces the constant threat of aggression and violence and aggressive people and violent people. And not just violent people, also violent animals. Or maybe that is redundant. If you're violent, you're an animal anyway. But you know, overall, the discussion here is whether we are able to maintain the civilization that we discussed from chapters 4 to 15. Or whether violence is something that is going to constantly destroy civilization. And that is the discussion of the next chapter. Thank you for joining.