Anarcho-Capitalism & Benevolent Libertarianism

On a recent video episode of mine, I talked with the brilliant anarcho-capitalist economist Dr. David Friedman about his views on economics and the state. David Friedman believes that everything that the state provides can be provided by the market, but he acknowledges that such a transition would take some time to materialise, as we gradually wean ourselves off state services and onto market-based provision. I’m fairy sure he and I agree on virtually everything to do with the benefits of capitalism and the inefficiencies associated with state provision, but I’m not as confident as Dr. Friedman that his ultimate no-state model is realistic – I think it is more complex than most anarcho-capitalists think.

In my eponymously titled book Benevolent Libertarianism, I tried to come up with an original term that perhaps most accurately summarises my economic and political ethos – and it’s one that gets to the heart of the complexity better, in my view, than the anarcho-capitalist model. Below is a rough post-it-note summary of my views on this matter.

Good economic principles are based on the successes of the free market - trade, innovation, supply, demand, prices, labour, productivity and consumerism - but also in using that framework to take it to an even higher level of personal responsibility and benevolence towards others. That, I think, is the biggest challenge in the modern globalised market, where the world is interconnected and economically unbound by national, cultural or ethnic boundaries; it is to conflate the qualities of the free market with the virtues of loving one's neighbour as oneself, on top of charity, prodigious generosity, and helping the poor become self-sufficient and with a greater standard of living. My economics book attempts to factor in all the social elements, and people's other incentives too.

Humans face a tension between choices which serve ourselves and family, and choices which serve the social group, and sometimes the zero-sum decisions create competing forces between self and community. Humans are motivated by social relationship factors even more than they are material wealth – once material wealth goes above a certain threshold of utilitarian functions (food, drink, safety, shelter, warmth, health etc), then material acquisition becomes bound up with the complex social world of status and impression on others. Even status has a significant social value for many. That is one of the blind spots of the raw capitalists – they miss the chaotic perturbations of feedback capitalism, especially the division and tension in the social aspirations around identity and belonging.

Humans emerged from the complex biological world of adaptive systems, which rely on both central and decentralised methods of adaptation. This requires complex informational signals that cannot always be effectively distributed bottom-up, because the Smithian ‘invisible hand’ method of local incentives and trial & error processing is too computationally protracted to deal with large-scale problems that require some coordinated top-down intelligence. If Benevolent Libertarianism is to have any influence, it must concede that the decentralised market patterns are sometimes inadequate to the task of factoring in all the complex social motivations that feed into status, group identity and community cohesion.

Although I’m not at all party political, it’s obvious from observing party politicians that the great chasm between the left and right is that the right believe society does best by innovation and self-determination, and the left believe in the ideals of community and wealth distribution. It’s clear to me that one’s group affiliation is the key driver in who one prefers, and the policies and economics come second. In reality, a successful society is a complex blend of community ideals and market competition, but both sides are naturally suspicious of the other, and are unlikely to ever change, because capitalists don’t touch base enough with people's social motivations, and the socialists live in an idealised delusion about how the world actually works.

A centralised democratic government, if it has one useful function, would be one that bridges the gap between the two polarities – offering the best of innovation and self-determination, and what the left believes in the ideals of community and wealth distribution – but it usually fails, because almost all voters are in one camp or the other, with few being able to balance the two.

The challenge, therefore, is to find a way to incorporate the qualities of a kind of socialist-individualist-libertarian triumvirate at the personal level with the qualities of the free market and its concomitant mechanism for price theory to efficiently balance supply and demand. Otherwise, we won't make any significant inroads into the deep-seated prejudices, indelibly stamped cognitive limitations and exiguity of epistemic resources available to the individual mind.

Humans are not adroit processing machines like computers, they are adaptive systems that are fed from the minds of other humans, and this communication is replete with incentives and blind spots around status, self-preservation, security, social connection, tribal biases, and individual persona and identity. This means that humans can subject their data to an honest enquiry to the best of their ability and still end up reasoning poorly and getting their facts wrong.

Groupthink and community in-group biases can be advantageous for the individual agent because it short cuts some of the cognitive processing functions and spreads them more thinly across the group. Just as this can be advantageous in learning how to cook, hunt, codify ethics and tell stories, it can also mean that some of the views we have are not subjected to enough individual scrutiny and remain unchallenged, as we become a little more dehumanised by being embroiled in the mistakes and cultural taints of the wider community. We are creatures who incur both costs and benefits of distributing computational power too readily among other minds and both costs and benefits of distributing computational power not readily enough.

Markets contain non-linear feedback systems, which are likely to yield chaotic market instability that brings about stress and insecurity for humanity. The first part of this problem is that humans are only cognisant enough to operate within a set of values that place the individual self, the family, and other strong ties at a primacy, which makes it harder to factor in the global effects of their decision-making.

My big personal problem with the state, as it has evolved in the past few hundred years, is that I find it profoundly difficult being governed by people who are so incompetent at the things they manage, and by people who are so self-serving, partisan and narrow minded that they do not deserve the power they have, and operate within a system that makes it nearly impossible for it to be radically undermined or peacefully overthrown. This is a big philosophical and moral problem. But the other side of the philosophical and moral problem is that most people in most nations do not want to live in a world without the state. The state would not exist with such prominence if the majority of individuals had not empowered its proliferation in size and scope – but if the state’s existence is a central part of our socio-personal psychological make up, then the increased freedoms enjoyed from its eradication would likely encroach on the freedoms of those who value it and deem it necessary. Of course, we could contend that if only people just became a lot smarter and understood how fraught the state model is, they would join the libertarians in desiring its diminution, but the “If only things were x, then y” propositions are usually not very robust arguments.

The thing that I think anarcho-capitalists neglect to understand most is that, being complex adaptive systems, humans are continually caught between the lines of an ex ante (before the event) assessment of the world and a post facto (after the event) projection of how things will play out - and bottom up systems do not always contain the foresight and central intelligence to simultaneously plan for varying eventualities and at the same time adapt fast enough as the situations evolve. For example, things like welfare provision, disease research and virus prevention seem to require a delicate balance between centralised and decentralised information structures, and it is hard to imagine how pure market initiatives could administer the foresight and central intelligence to allocate resources efficiently and with adequate execution time to keep the institutions up to speed with changing environments.

Centralised intelligence also keeps in check the chaotic perturbations that emerge from feedback loops and non-linear instabilities, and create hazards and distortions. It’s true that politicians are hopelessly incompetent at managing these situations, but it’s also the case that leaving all this to market mechanisms would be an inadequate solution for the top-down complexity of the task. Markets with too much freedom underwhelm the necessary big picture thinking, and governments with too much power overwhelm big picture thinking – and therefore, the optimum balance is likely to occur with a much freer market than we have now, with a much smaller state than we have now.

I’m not even sure it’s realistically possible to get rid of the state. Given the inevitable power law distribution of wealth, and the natural hierarchies that emerge from differentiated power and competence and status mongering, I suspect that even a concerted attempt to produce the hypothetically ideal anarcho-capitalist society would soon find itself succumbing to the formation of a structure where acquisition of authority and rule was at the heart of the society, because it will probably always be the case that there are a majority of humans who wish to delegate responsibility to those who promise to govern them according to their wishes and principles. In most cases, central planning will never have the knowledge, incentives or resources to act on our behalf better than we can ourselves from a bottom-up standpoint; but on the other hand, in some cases, bottom up decision making also lacks the knowledge, incentives or resources to centrally plan and distribute resources with the foresight and big picture thinking required to support the free market. The upshot of all this is that a healthy combination of market and state is highly likely to be an inevitable coaction on the journey of human progress.