Something all libertarians can agree on

The question in libertarian circles is: what does the ideal libertarian society look like? Such a simple question devolves to: how big should the government? What can it tax and how much? What is the government allowed to do? Who chooses the government? Should there even be a government at all?

As many questions there are, the amount of answers are greater. Some argue to go back to the original federalism of James Madison’s constitution, some believe we should create a confederacy, and others say that all forms of government are illegitimate and that there should be none at all. I think all answers have been drawn from the wrong approach. I’ll argue in this essay my political theory that all libertarians on the right can get behind.

None of what I’m about to say are my ideas, but rather a collection of ideas from Murray Bookchin, Henry George, and principally Tom W Bell and Spencer Heath. These ideas are: polycentric law, corporate republicanism, backwards democracy, libertarian municipalism, and a land value tax. All of which will be explained in that order

Consent Matters

At the heart of every anarchist’s belief is the rejection of a “social contract”, a metaphysical contract that one hypothetically signs upon birth or when taking residence in the government that they are in. I talked about this months ago, you can read about that here. Whether you believe such a contract does exist, we can all agree that if it does it has very weak consent from us, the party being governed. The objective of this paper is to find a form of government that individuals can more strongly consent to.

This implies two things, firstly a strong system based entirely on property rights. As John Locke said “every Man has a Property in his own Person. This no Body has any Right to but himself.” Private property is what allows voluntary exchange, exchange that we consent to. Strong property rights give us consent not only over our possessions but also ourselves, thus we cannot be coerced to live where do we not choose to. Which leads us to point number two, we need a society where we can opt out of laws we don’t like and one that allows us to opt in to those that we do. In other words a free society requires freedom of exit and freedom of entry.

This is why need polycentric law. Whereas monocentric law is defined as law coming from one node or center; polycentric law comes from multiple, overlapping nodes. In a FEE article, Tom W Bell puts it like this:

Do you like having options when you look for a new bank, dry cleaner, or veterinarian? Of course you do. You want to find the service that will best satisfy your particular demands, after all, and you know that when banks, cleaners, and vets have to compete they have a powerful incentive to make you happy. A monopoly, in contrast, can take its customers for granted.

Polycentric law simply extends that observation from commercial services to government ones. Just as competition makes life better for those who seek banking, cleaning, and pet care services, it can benefit those seeking fair and efficient legal systems. Competition helps consumers and citizens alike.

An objection to polycentric law is that location is fixed; we can’t take our home, walk up, and leave (unless you’re Carl Fredricksen). How could one person live under one legal system and his neighbor live in another? Well not all laws are tied to geographical location. Take for example religion, a practicing Catholic adheres to the rules and dogmas set by the Catholic Church while a his Jewish neighbor does the same for his religion; yet neither will find themselves in conflict with each other. This works the same for more practical legal issues like commerce, two companies located in different countries decide upon a legal system such as a British court or maybe a private arbitrator, to settle disputes.

Nevertheless, geography still places limits. It’s difficult to imagine how criminal law wouldn’t be tied to area, assault can’t be illegal on your yard and legal on your neighbors. Not all law can be completely decentralized to the individual, doing so such as in the case of criminal law would create negative externalities within communities.

Therefore since we all live in and interact with a community then a polycentric system  requires low “switching costs”. Law requires that jurisdictions have some degree of uniformity so in order to maximize choice, we need an array of a various areas with different legal systems. Lowering switching costs means giving more autonomy to communities to differentiate themselves to others; thereby increasing the gains of switching. And secondly, by making jurisdictions smaller and easy to move between. This second one is very important in order to maximize consent, to reiterate Tom W Bell from my old post:

People live in countries for many reasons – family relations, cultural preferences, economic opportunities – that have nothing to do with the government. Indeed, most citizens seem to put up with their governments only grudgingly, for want of better options.

Moving across states carries a high switching cost because you will no longer get to see your friends and families, enjoy the same local customs, and etc. But moving between neighborhoods or maybe between towns has a much lower switching cost.

What Will Communities Look Like?

Private property has been the cornerstone of economic prosperity. Nations with a strong protection of private property rights enjoy the welfare it gives, economic efficiency, rule of law, and wealth that extends to even the lowest members of society who would not enjoy the same riches in similar positions in countries that lack property rights. Weak property rights leave property up to dispute, it’s practically unowned, wasting its potential.

There is of course public property. Yet while it may have the legal legitimacy of private property, but it acts similarly to it being unowned.

Ownership necessarily involves the right of use and disposal as the owner sees fit, barring coercion against others… the public is not an individual – it is merely the aggregate of all the individuals who happen to be living in a certain area at a certain time. As such, “the public” has no mind or will or desires of its own. It cannot make decisions, and so it cannot decide how to use or dispose of a piece of property. “Public property” is, in fact, a fiction.

Nor can the government morally claim to own “public property.” Government does not produce anything. Whatever it has, it has as a result of expropriation. It is no more correct to call the expropriated wealth in government’s possession its property than it is to say that a thief rightfully owns the loot he has stolen. But if “public property” doesn’t belong to either the public or to the government, it doesn’t actually belong to anyone, and it is in the same category as any other unowned values.

Since politicians do not own the “public” property, there’s no incentive to take care over it. The conventional democratic republic that we have today has come with regulators who can be corrupted and politicians that only represent the narrow self-interest of their constituencies at the expense of other groups.

Consequently a libertarian society means completely privatized government. But how would it work? It would start by making government a business, a corporation really. It has shareholders, administrators, executives, investors, and etc. Such an idea seems far fetched, but there’s many examples that we can draw upon.

Sandy Springs is one example where it decided to completely privatize most of their services, the result:

Oliver Porter demonstrated when he helped establish the town of Sandy Springs, Georgia, cities may benefit from the same plug-and-play business model routinely used by general contractors. Sandy Springs uses an open bidding process to hire outside parties willing and able to fulfill most of the obligations that the city owes to the public—street repair, park maintenance, etc.—keeping only a lean supervisory team on the city’s payroll. Other cities have started following Sandy Springs’ lead, much to the benefit of their budgets, operations, and residents

Co-op City in the Bronx is a private community of middle class residents with a population of 55,000 people. They have their own housing, parks, schools, businesses, and many more amenities you would find in a conventional city.

Corporate Republicanism would generally work like this. The city would be a corporation with equity divided up by property owners; for every piece of property owned (property defined as land) you would get one share. The city could also give shares to investors in order to fund large projects. And just like any corporation, each share would equal one vote in setting policy. This way it ensures that those who are most invested (and therefore have the greatest incentive for things to run properly) are in charge.

Although such a system for a fairly large area that is a city which has many different interests or “factions” as James Madison would call them, could be abused by greedy rich oligarchs. And government isn’t typically viewed as a business for a reason, cities are more than just profitable service; people live in them.

Everyone knows how annoying HOA’s can be, yet they are an example of private governance. It is as the name says, an association of homeowners (property owners), and they do their job fairly well. They keep the financial value of the neighborhood high. But that doesn’t mean they can’t be annoying, people know how stupid and strict their rules can be.

Hoppe characterizes Democracy as a “god that failed” but I think he’s wrong. Democracy in the way most countries have it today suffer from uniformed voters and therefore bad policies that arise out of short sighted self interest. But I believe as Bell does that democracy can be “fixed” so that it protects liberty rather.

While corporate shareholders that have the most shares of votes are able to create legislation, there can be a democratic mechanism where every citizen gets one vote, to counterbalance it; a mechanism where people, instead of voting on creating law, will just vote on removing them. It’s democracy but backwards. So if a city ordinance is passed but the majority of the people feel it’s too strict, they have the ability to remove it but they cannot replace it.

Democracy works best at correcting mistakes.

A Higher Level of Order is Still Necessary

Polycentric law has many merits, notably being immune from large scale failures. But this is due to it not being a large scale system and therefore it suffers from being able to address large scale problems, namely national defense. I don’t believe, like many anarchists do, that private mercenaries would be able to defend the nation. There are many problems that come with it like high switching costs, free riding, lack of transparency, capability of resisting other countries, and political fragmentation.

In order  to protect the interest of these sovereign municipalities, they would need to come together into a confederate system to address large scale problems such as national defense & security or enforcing resolutions between two cities. In this sense, our society can be see a free market version of Murray Bookchin’s Libertarian Municipalism where the power is decentralized to cities that are (partly for us) directly democratic and they’re all bound together by a confederacy.

We can also look to our friend from the left to answer how the confederation would function. (Disclaimer: I’m speaking broadly and generically here, personally I think there should be slight variations for every country, including the US). First, Bookchin maintains that policy making would remain at the municipal level, this is completely necessary for polycentric law as well. The Confederation instead is meant to be administered by councils made up by deputies from each city. In Bookchin’s communalist municipalism, just like policy, council members are directly elected. Our corporate municipalism would act the same, shareholders would elect the deputies but the people would be able to recall them.

Another objection that one could argue against corporate municipalism is that backwards democracy may not be enough, a bill of rights is necessary to ensure that people are not deprived of their life, liberty, or property. Communalist libertarians posit that:

If particular communities or neighborhoods — or a minority grouping of them choose to go their own way to a point where human rights are violated or where ecological mayhem is permitted, the majority in a local or regional confederation has every right to prevent such malfeasances through its confederal council. This is not a denial of democracy but the assertion of a shared agreement by all to recognize civil rights and maintain the ecological integrity of a region. These rights and needs are not asserted so much by a confederal council as by the majority of the popular assemblies conceived as one large community that expresses its wishes through its confederal deputies. Thus policy-making still remains local, but its administration is vested in the confederal network as a whole.

So if a community in corporate municipalism had done an injustice of violating someone’s property rights, the confederation has a duty to rectify that wrong out of the common agreement of recognizing property rights and the rule of law.

Taxes…

Investors is one way of raising revenue, but it also needs to be paid back. Libertarians are not fond of paying taxes but that’s mostly because they of how unconsensual they are in our current state of affairs. Yet they are still necessary, a libertarian society should then have a tax that’s the least distortive to the marketplace. A land value tax

The least bad tax is the property tax on the unimproved value of land; the Henry George argument from many many years ago. (Milton Friedman)

Henry George a century ago created probably the most underrated idea in politics and economics of all time. The land value tax is supported by many people on both sides of the spectrum. Progressives like it because it generally reduces inequality and stops urban sprawl. Free marketeers like it because it does not distort the marketplace and according to some econometric models, it actually creates more economic efficiency!

Most taxes distort economic decisions and suppress beneficial economic activity. LVT is payable regardless of how well or poorly land is actually used. Because the supply of land is essentially fixed, land rents depend on what tenants are prepared to pay, rather than on landlord expenses, preventing landlords from passing LVT to tenants.

The direct beneficiaries of incremental improvements to the area surrounding a site are the land’s occupants. Such improvements shift tenants’ demand curve to the right. Landlords benefit from price competition among tenants; the only direct effect of LVT in this case is to reduce the amount of socially generated benefit that is privately captured (as an increase in the land price).

LVT is said to be justified for economic reasons because it does not deter production, distort markets, or otherwise create deadweight loss. Land value tax can even have negative deadweight loss (social benefits), particularly when land use improves. Nobel Prize-winner William Vickrey believed that “removing almost all business taxes, including property taxes on improvements, excepting only taxes reflecting the marginal social cost of public services rendered to specific activities, and replacing them with taxes on site values, would substantially improve the economic efficiency of the jurisdiction.” A positive relationship of LVT and market efficiency is predicted by economic theory and has been observed in practice (Wikipedia)

Conclusion

I do hope that by now I created an political theory that we can generally all agree on. Maybe some of you anarchists believe that some of things I said was too statist. Well I think Heathian Anarchism is what you’re interested; it’s has the same goal of creating voluntary corporate towns. Or maybe there are some of you who care a lot about socioeconomic issues. Maybe what you guys want to see is something like company towns from the 20th century  where companies privately owned a town but gave jobs and welfare benefits to their residents.

So we may disagree on some of the specifics but in the end we at least believe in a completely private property based society.

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Manu Belmonte

Senior Editor at The Credible Hulk Magazine and writer at my personal blog learninghayek.wordpress.com

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