Ludwig von Mises Institute

Private defense

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This page lists some examples and thoughts on the topic of private defense.

Theory[edit]

Defense from foreign aggression is considered a classic "public good" and as such seems the perfect candidate for government provision. Without the ability to extort revenues from all citizens, how could private firms raise the funds required by modern militaries? (After all, any individual citizen could refuse to buy the "product," yet still enjoy the security made possible by his neighbors’ contributions.) On a practical level, hundreds of small, decentralized armies would surely be wiped out by a consolidated attack from a neighboring State.

According to Robert Murphy, in a free society, it is not the average person, but rather the insurance companies, that would purchase defense services. Every dollar in damage caused by foreign aggression would be fully compensated, and thus insurers would seek to protect their customers’ property as if it were their own. Because of economies of scale, coverage for large geographical regions would likely be handled through a few dominant firms, ensuring standardized pricing and a coordinated defense.

Murphy also points out, that the market for defense is not homogeneous. Large firms could provide the bulk of revenue for the insurance industry. The policies taken out on apartment complexes, shopping malls, manufacturing plants, banks, and skyscrapers would dwarf those taken out by individuals. Consequently, there wouldn’t be the nightmarish bargaining problem that so worries the skeptics of private defense. If necessary, the insurer would write only long-term contracts, and would make them conditional on the acceptance of a minimum threshold of clients. In other words, he would offer a package deal to the major companies, but the special, low rates would only apply if a sufficient number of these policies were sold.

Furthermore, certain types of property—airports, bridges, highways, power plants, and of course, military equipment—would be far likelier targets of foreign attack, and their owners would thus constitute an even smaller group to benefit disproportionately from defense expenditures. This heterogeneity would weaken further the "spillover" character of defense services, making an efficient arrangement all the easier to achieve. The highest contributors might even advertise this fact, much as large corporations make ostentatious donations to charity in order to curry goodwill.

Also, wars can remain in stalemate for many years. During such protracted struggles, insurance companies would certainly be able to deploy their military forces so as to limit gratuitous protection for non-clients.

Most obvious, naval escorts would only protect convoys of paying customers. All other shipping would be at the mercy of foreign fleets. Antiaircraft and missile defenses would only protect those regions in which paying customers owned property. And of course, the owners of real estate on the border would always pay for its protection, lest the defense agencies pull their tanks and troops back to a more defensible position.[1]

References[edit]

  1. ↑ Robert P. Murphy. Chaos Theory (document page), Second Edition, p. 43-50. Referenced 2013-01-30.

Links[edit]

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