from The Psychology of Liberty
by Wes Bertrand © 2000, copylefted 2007

Laissez-faire, A More Enlightened View Of Capitalism—And Its Contradictions

With knowledge of our present political conditions, we now address the only governmental system that has plausibility: Laissez-faire capitalism. As one might know, the French phrase laissez-faire (literally “let do”) means let people do as they please, especially in economic matters. Necessarily, the entity that is being told to keep from meddling in the affairs of the people is government.

Laissez-faire capitalism means a free market system that has a totally voluntarily funded government; taxation is ruled out, on account of its coercive nature. Government is instituted to ensure that justice is served and rights are protected from potential violators within the country’s boundaries and from foreigners. Thus, citizens acquire a new right: the “right” to have their rights protected by someone else. In this situation, the guaranteed protector of rights is monopolistic government.

Government would consist essentially of a military, a police force, and law institutions. Selection of employees for these services is not thoroughly outlined. Perhaps it would follow the U.S. Constitution’s procedures; a voting system of majority rules might be used, and then the elected officials would appoint assistants.

Laissez-faire does not firmly establish how the country’s boundaries would be determined in the free market area. Since everything would be privately owned, such determination might be left to all the various property owners. Of course if unanimity were not reached, the problem of a severed country and consequently a severed government would present itself. Because this outcome is unacceptable to Laissez-faire, most likely either the majority of property owners would determine the boundaries, or governmental officials would (following the Constitution again).

As stated, government would ask for voluntary donations in order to function and provide its services. One would have the choice to make contributions, but not the choice to seek governmental services elsewhere—unless one moved to a location with a different government, that is, to a different country (where one would still face the same situation). This obviously creates a “free-rider” problem. Some individuals may decide not to pay for the government’s services. Although some writers have tried to resolve this problem, it proves irresolvable.

By putting discretionary use of retaliatory force in the possession of one group—government—Laissez-faire capitalism supposedly ensures objective authority. Government is deemed the ultimate arbitrator of disputes. Political theorist Robert Nozick described it this way:

Presumably what drives people to use the state’s system of justice is the issue of ultimate enforcement. Only the state can enforce a judgment against the will of one of the parties. For the state does not allow anyone else to enforce another system’s judgment. So in any dispute in which both parties cannot agree upon a method of settlement, or in any dispute in which one party does not trust another to abide by the decision...the parties who wish their claims put into effect will have no recourse permitted by the state’s legal system other than to use that very legal system.(p.14)

        A state claims a monopoly on deciding who may use force when; it says that only it may decide who may use force and under what conditions; it reserves to itself the sole right to pass on the legitimacy and permissibility of any use of force within its boundaries; furthermore it claims the right to punish all those who violate its claimed monopoly.69(p.23)

So, citizens would be essentially forced to use the services of this one group regardless of how poor, corrupt, wasteful, inefficient—and hence expensive—they are. Any business student who has done his or her homework knows that a legalized monopoly (i.e., a monopoly in which laws protect it from competition) has serious economic consequences. It will never provide the best service or product at the lowest price possible in a free market. In terms of moral consequences, though, any legalized monopoly will always commit injustice by its use of governmental force to keep others out of the market. When that force is used for its very own perpetuation—that is, when government itself is the monopoly—we witness a double crime.

But Laissez-faire holds that people are not forced to choose this state of affairs. Government is considered not to be in violation of rights because it is devised to protect them. Laissez-faire maintains that government is in a class by itself—the class that protects rights. Further, government offers its services in a voluntary manner—that is, one can choose not to have one’s rights protected by this monopoly of protection.

Who could claim the right to choose someone other than the “supreme” adjudicator of rights? Such a choice, according to Laissez-faire, would be equivalent to defying authority—supposed “objective” authority. This form of the State also contends that the term monopoly only applies to the market. Because the services of government are considered in a different class, they are thought to be exempt from market scrutiny.

Ostensibly, this system is for the people’s own good, because Laissez-faire maintains that the idea of “competing governments” is incompatible with objective law. Therefore, those who proceed to offer similar services that enforce the fundamentals of human freedom and the inviolateness of individual rights should immediately be declared frauds and criminals. Because the State postures as the final authority on all matters of right and wrong, legal and illegal, only it is allowed to convict people of fraud and criminality. In order to prevent others from encroaching on governmental domain, any newly formed “criminals” must be immediately forced to stop their actions, and their customers must be considered criminals too. Thus Laissez-faire coercively establishes a monopolized court of final appeal.

Necessarily, the Laissez-faire system of politics begins to fall apart in the bright light of logic. Logic is still needed to properly apply the basic political premise of non-initiation of force. Determination of the final, noncontradictory political system for human beings on planet Earth (and wherever else we may venture) demands the use of logic.

Let us examine the meaning of objective law under the Laissez-faire system. Objective law can only occur by examining the facts of existence and making judgments accordingly. Two facts of existence are that human beings have a volitional capacity and a right to exist as they see fit (while respecting the rights of others). Therefore, any individual or group of individuals must be able to choose any other individual or group of individuals to serve as a rights-protecting agent—to ensure that the right to exist (and all it entails) is not diminished.

Indisputably, in an advanced civilization individuals would prefer to hire professionals in the service of justice; it would be immensely more convenient and effective for citizens. Citizens could dedicate their time and resources to fields of work that truly interested them, and professional agents would be objective third parties. Such professional third parties could validate and objectify the circumstances of any incident or contract, as well as make a resolution legally binding and publicly known.

The principle here is the freedom to delegate one’s right to exact justice—making sure that the facts of reality are not betrayed. While one could personally try to correct whatever wrong had been done based on the right to self-defense and the laws of justice, such an action (depending on the situation) might not be in one’s best interests. As mentioned, one could not publicly objectify the conflict. And, one might not be able to prove who was, in fact, innocent or guilty or liable. A professional third party competing in the market of dispute resolution and restitution would be more capable.

Under any system of justice, we have to scrutinize the idea of someone else protecting our rights—and what this demands of such an agent, as well as this agent’s rights.

No person or government has the right to forcibly act as an agent for another person or persons, for this would be the master/slave relationship. An agent not voluntarily chosen is a contradiction. By claiming a certain geographical area all to its own, government holds sovereign dominion over people—even if it asks for payment instead of demands it.

The notion of national boundaries constituting monopolistic governments exposes more of the problems of Laissez-faire. As noted, the borders for various potential Laissez-faire countries would be drawn either by unanimity among property owners, or by government. Of course, contracts among individual property owners are violated when government (through official decree or majority vote of property owners) determines the “country.” The rights of the minority of dissenters are not upheld because an unsolicited government is imposed on them.

If a group of property owners were all to agree about a particular monopoly of force, the size of it would likely be small. Due to the nature of knowledge acquisition and decision-making, widespread agreement concerning such services would be enormously difficult to achieve. Whenever someone decided against such a monopolistic government, however, he or she would have every right to establish or utilize another professional service of justice.

As a legal concept, what does “country” mean? In the presently confused condition of politics, it means an area where a distinctive government and its non-objective laws dominate. But, in a Laissez-faire society, a country would represent an area where logical, objective laws of a single government preside. Consequently, laws in various Laissez-faire societies would be basically the same. They all would reflect the use of logic—at least up to the point of the concept of Laissez-faire itself. No basic difference would exist between governments, for all supposedly act as upholders of justice. Therefore, the idea that no more than one organization (here no more than one government) can properly uphold justice is invalid.

Furthermore, the idea that no more than one organization can uphold justice in the same area is called into direct question. That a single government must have sole jurisdiction and must be the final arbiter among a population simply defies logic. Such a notion even defies how the presently corrupt system operates. In any dispute or conflict, for example, some court has to take the case. The question is: Which one? In the United States, the judicial branch of government has multitudes of court systems. Each has the task of determining which system should hear certain cases. Although the Supreme Court is commonly thought to be the “final court of appeal,” it judges only a fraction of the particular cases that were screened for review, which were drawn from a larger pile of cases still.

In the United States, residents of the various states are involved in commerce that is governed by differing laws of cities, counties, and other states (as well as other countries). Yet people usually are able to conform to these numerous jurisdictions and abide by the laws of other areas in which they travel and do business. When they encounter conflicts or commit crimes, they may be subject to different police and different courts depending on the zone of occurrence. And ironically, these laws and organizations are quite far from being either objective or consistent (or accountable to the consumer). Few of the laws in the assorted states have been devised and enforced in accordance with a rational moral code of individual rights (i.e., a proper code of justice).

In spite of these facts, Laissez-faire still asserts that “competing governments” within any country will always encounter or provoke irreconcilable conflicts. Of course, this also means that various governments throughout the world (Laissez-faire or otherwise) must inexorably conflict—for they are competing too, albeit on a wider scale. In other words, conflict and war are inevitable.

Should we then have a one-world government instead? Or better yet, a one-galaxy government, or best of all, a one-universe government? Such an idea does not deal with the main premise and problem of statism: unsolicited and forced agency. Although disagreements are inevitable under any political system, war and violent conflicts are not. By perpetuating monopolistic government, the statist ideology merely avoids dealing with issues of rights and justice.

Any system of government raises questions about its composition and functions. Since government is simply an institution that coercively claims the sole “right” to govern, it is inherently contradictory. Individuals govern themselves. Individuals have the right to choose whom they want to protect their rights. Their choices cannot be made for them by force—in the case of Laissez-faire society, by virtue of their place of residence. Mere geography ought not mandate who provides justice services.

The idea that governmental services are somehow exempt from natural market consequences also needs to be examined. Even though they involve (among many other tasks) the use of retaliatory force, they are still services. Incidentally, the degree of integrity of the individuals working in government is not, in principle, important. Even if they were the most virtuous individuals in the world, they still would be operating within a contradictory political system.

How people should treat each other is important. Should it be by force or by voluntary means, by authoritarian measures or by freedom of choice? The words of advocate of absolute freedom Jarret B. Wollstein are succinct here:

There is nothing necessary or moral about a limited government. What defines the morality and practicality of any organization of retaliatory force in a free society is not whether its agencies are one or many, but whether they are just and objective. A ‘social monopoly of retaliatory force’ whose existence depends upon the initiation of force is worse than a contradiction in terms—it is an epistemological absurdity.103(p.17)

This leads us to another very important question. Who determines the concept of rights and the corresponding laws of justice in a society? Does the government or do the individuals in the populace? Herein lies the main basis for Laissez-faire government: By legalizing a monopoly on its services, it can keep centralized control and “objectivity” in an arbitrarily selected geographic area. Naturally, this implies that the individuals in the populace are incapable of determining what is proper. Only those with the title “government” (sanctioned by the majority of voters) are proficient enough to interpret the fundamental principle of rights. The general public is considered unqualified to implement the non-initiation of force principle.

Hence, the capitalistic market cannot be relied on or trusted to form the correct legal system. Individuals should not be allowed the foundational choice to entrust their rights to someone they think is reputable. Do not these imperious declarations eerily remind one of all the collectivistic and statist systems that we have studied? All of them result in the subordination the individual mind and judgment to the group and the rulers.

The main psychological premise for monopolistic government apparently is that people cannot be trusted. Yet, even if this were true, those in government would have to be distrusted too. Though some might believe single government keeps untrustworthy people in check and oneself safeguarded, it merely begs the question. The real problem is not with people. It is with the system itself.

Even though human beings can choose to act differently at any time, free will does not make them undependable or untrustworthy. Such a view of human nature would imply that happiness, integrity, and justice are not sought and maintained for greatly beneficial reasons, but rather on a whim.

Since those in government are certainly part of the populace, we can conclude that laws arise from the commonly accepted principles of human conduct—what is thought permissible and impermissible. Obviously, devastating legal repercussions result when humanity lacks knowledge of human nature. Logical explanation of the fundamental characteristics and faculties of human beings is crucial.

The particular form of government is an inescapable consequence of the basic thoughts and mentalities in a culture. It is merely a reflection of the dominant ideas in a society—its political beliefs, its ethics, its psychology, and so forth. Ideas outline the form, role, and existence of government. So, under the weight of logical analysis by an enlightened populace, even the best-intentioned Laissez-faire government would eventually fall to pieces. The mistaken ideas about the nature of government and the nature of laws would be recognized.

But some theorists take a backdoor approach to the Laissez-faire system. They contend that competing agencies of justice—rather than remaining diverse and in the same area—would eventually form into one unified State agency. This would produce a monopoly in any given area. Though competing agencies are allowed to exist, they nonetheless cannot or will not occupy the same geographical area; a State monopoly is therefore most feasible. Political theorist Tibor Machan wrote about this scenario:

So it appears that the nature of the service implies some type of geographical homogeneity among the areas to be serviced by the agent that is hired to protect human rights. The same goes for preserving human rights. In this case the courts which would hear cases of dispute would have to be accessible to those who have employed them. By breaking up the area served by each court and each police unit, the identification of the violation of human rights and the corresponding enforcement of the remedies would be rendered impossible; that is, without violating the rights of those not party to the relationship between citizen and government, the government (Rothbard’s defense agency [speaking of Murray Rothbard, a proponent of competing agencies]) could not function for the citizenry.(p.149)

        One can call this a defense agency system if one likes, but it would still be true that the only moral means by which people could delegate to others the authority to protect and preserve their human rights is by uniting into homogeneous human communities, with one legal system per community, administered by a given ‘firm’ or government.60(p.150)

Such a system supposedly seeks to do away with challenging issues of different agencies (being in the business of instituting justice) and their various clients (the seekers of justice) potentially not agreeing with each other. Yet, it simply raises more questions. For instance, who devises such a system, and how does one attain unanimous consent of property owners? As Wollstein stated, such agencies must be just and objective. They have no right to exclude other justice agencies from the market. Today’s monopolized governments certainly give sufficient indication of the scale of incompetence and corruption that can be foisted on citizens.

One must also take into account the implications of the fact that everything is privately owned in a capitalistic market. This includes the services that justice agencies offer. Excluding logically patented property, monopolization can remain viable only in two ways: when government prevents others from entering the market (a coercive monopoly), or when prices are so low and the product or service so good that no one else can gain a competitive foothold (a market monopoly). In the latter instance, if prices rise or the service or product becomes less desirable, other enterprises may offer their products or services; this is one of the basic principles of the law of supply and demand.

The contention that every person in a “homogeneous” area will choose the same justice agency is simply unfounded. It runs counter to a free market. A person seeking a certain agent cannot inhibit another (by virtue of mere geographic proximity) from seeking a different agent. The nature of contracts allows this freedom. And likewise, an agent operating in one area cannot inhibit a different agent from operating in the same area. However, this is commonly done today to property owners through, for example, governmental zoning. Zoning laws clearly are instruments of force. In contrast, voluntary covenants among real estate owners, which sometimes give rise to “gated communities,” are rights-respecting. All community members agree to certain policies and rules. Conceivably, they could also agree to a specific police and court system.

Yet even gated communities cannot insulate themselves from issues of justice. Anyone has the right, based on a rational moral code, to ensure that objective laws remain so. Additionally, other agencies have the right, based on the principles of justice, to pursue alleged criminals (just as government does today). Naturally, disagreements would occur among agencies concerning jurisdiction and enforcement. However, since they would be agencies of retaliatory force—not initiatory force—such disagreements would be settled peaceably.

Enlightened people and a free market would encourage competition (or the possibility of it) not so much to foster honesty and scrupulousness (although these tend to be beneficial byproducts). Competition provides a continuous contrast and comparison of business perspectives. Each customer and area is essentially a different business context. Competition also keeps a constant check on prices, so that a business does not isolate itself. A free market presents a wide variety of supply and demand avenues and resources, which affect cost alternatives.

We should keep in mind that businesses are not in the business of “competing.” Rather, businesses create and maintain values. Since the implementation of justice is the paramount political value in a free society, businesses will provide accordingly. The nature of individual rights grants them this capacity.

Yet many Laissez-faire supporters believe that if no final and sole authority is present to uphold rights and enforce laws, individuals would take law into their own hands, or violent inter-agency conflicts would erupt. They believe that society would degenerate into chaos or mass vigilantism reminiscent of stories of the Wild West.76 In a sense, to forecast that competing agencies of retaliatory force will do battle with each other is to lack trust in human beings to do what is just. If one cannot be confident about others, one cannot be confident specifically about those in government either. As mentioned, the problem is not with people; it is with the system. A monopolized State, no matter how minimal, does not fully respect individual rights.

Even in today’s political world, government is not what keeps most individuals on a daily basis from killing and maiming each other, or from defrauding each other, or from breaking agreements and violating contracts. Rather, people’s basic premises about human relationships do. Contrary to statist ideologies, the declared legality or illegality of an act does not determine the conduct of people. Conduct is determined by people’s views of such an act as well as its consequences for self and others. Laws serve to outline and reinforce particular political consequences.

Yet again, some maintain that, instead of being forced on the people, single government must arise inevitably out of a market of competing agencies. Nozick wrote about this:

Out of anarchy, pressed by spontaneous groupings, mutual-protection associations, division of labor, market pressures, economies of scale, and rational self-interest there arises something very much resembling a minimal state or a group of geographically distinct minimal states. Why is this market different from all other markets? Why would a virtual monopoly arise in this market without the government intervention that elsewhere creates and maintains it? The worth of the product purchased, protection against others, is relative: it depends upon how strong the others are. Yet unlike other goods that are comparatively evaluated, maximal competing protective services cannot coexist; the nature of the service brings different agencies not only into competition for customers’ patronage, but also into violent conflict with each other. Also, since the worth of the less than maximal product declines disproportionately with the number who purchase the maximal product, customers will not stably settle for the lesser good, and competing companies are caught in a declining spiral.69(p.16)

We have already addressed many of these ideas, of course. These agencies provide services that involve the implementation and enforcement of justice. Customers necessarily would judge the proficiency or “strength” of such services, and make decisions accordingly. But it does not follow that businesses that institute justice cannot coexist, and further that they will violently conflict. Under capitalism both customers and businesses would seek justice. To project onto them the behavior of an unprincipled person who seeks to accomplish injustice in his dealings with others is misguided. An enlightened populace would not tolerate such behavior. Defying rational principles is simply too costly—economically and psychologically.

In today’s monopolistic systems of force, the scale of corruption and injustice is immense precisely because no alternative systems of justice exist. Though greatly effective and beneficial, the widely-used enterprises of private arbitration and mediation function within a contradictory political context. Government is still the final authority with regard to the law.

As a result, unprincipled people readily bribe or make deals with those in government. They try to evade wrongdoing and obtain what they want at the expense of more law-abiding and respectful people. Coercive monopolies will always lead to injustices, and monopolies of retaliatory force will lose sight of justice when they are coercively imposed.

Rather than cause violent conflict, competition enables the most reputable agencies to exist and coexist. To do otherwise is to lose business. Such agencies profit by being fair and reasonable, not irrational. Again, it is not government—or even agencies—that creates justice, but rather the premises of individuals desiring it. Other than in the case of a temporary market monopoly, various people in the same city or region would not all do business with the same company forevermore. Such a notion would be contrary to basic knowledge of economics.

Moreover, a temporary market monopoly is unlikely, due to the multifaceted nature of justice services. In fact to monopolize any market in the service industry is nearly impossible. Most temporary market monopolies that have existed have been of products (such as ALCOA aluminum).

In market monopolies, initial capital investment for others is too high and the efficiency and prices of the current business cannot be matched (thus yielding little profit for new companies). Still, others usually begin to offer alternatives. Products of different composition or design or with new functions may catch the attention of consumers. For instance, though many have described Microsoft Corporation as a market monopoly, it is not. The important fact is that Microsoft has competitors actively seeking to gain market share. If the company becomes less efficient, less customer-oriented, and its products more expensive or less functional, it will lose its strong competitive position (and maybe even fall by the wayside).

Lastly, some advocates of Laissez-faire might say that the notion of competitive justice services is a moral issue, not an economic one, because it involves the use of force. Certainly, they are correct. But no contradiction should exist between the two. To say that these agencies will be fraught with irreconcilable conflicts among each other is to entertain some major fallacies about human nature. This, in short, represents the moral/psychological issue of obedience over autonomy, or subjugation over choice: The omnipotent State demands obedience; hence, there can be no “conflicts,” because no one can disagree with the “ultimate” arbiter of disputes. Mindless people who unquestioningly accept the judgment of others are what any State seeks. It does not seek justice.

Justice agencies would arise because psychologically healthy people want to reach agreement and continue stable and fulfilling relationships; such values are in their self-interest. To see strangers as potential enemies not to be trusted and dealt with in a benevolent fashion is the stance of the xenophobe—which incidentally is the kind of person that governments (inadvertently or otherwise) spend much of their energy cultivating throughout the world.

If individuals cannot come to an agreement on their own, their recourse should be any person or institution that will assist them in finding agreement by applying the laws of justice. In such situations, either of the two individual’s justice agencies could handle the case. However, if neither individual desired the other’s court to have final jurisdiction, then they would either appeal the judgment or refer the case at the outset to an outside court. Either this court would have final say on the matter, or another appeals process would be devised.

Alleged criminals would face the same situation. No individual would be immune from principles of justice. Objective law plainly does not require the consent of an alleged violator of rights in order to be administered. Hence, no individual could prevent immediate or outside courts from administering justice—for that would be a double crime, and dealt with accordingly. Of course, rational due process would ensure that rights are protected—and if violated, restored.

Jurisdiction of objective law courts must stem from contracts to enforce the principles by which people live safely, peacefully, and intelligently. Justice agencies would operate voluntarily with the will of individuals doing business with them. Government courts, in contrast, maintain their jurisdiction by forcing it on the populace—regardless of the rationality of their judgments or the size of the dissenting minority.

Law courts of the future will be concerned with defending and upholding individual rights. This necessarily includes the rights and responsibilities of individuals who have contracted with other justice agencies. Anything else would be contradictory.

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80 ———. Philosophy: Who Needs It. New York: Signet, 1984.

81 ———. Introduction To Objectivist Epistemology. New York: Meridian, 1990.

82 ———. Atlas Shrugged. New York: Dutton, 1992.

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91 Sagan, Carl. Cosmos. New York: Ballantine, 1985.

92 ———. The Demon-Haunted World. New York: Ballantine Books, 1996.

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