The State as a Business and Incentive Structure

During the millennia governments have existed, the core of their nature appears to hardly ever have been properly investigated or their legitimacy questioned. It’s no rare phenomenon to see objections that the institution holds too much power at a given moment, or that it should not take on additional functions, but that’s usually where the questioning ends. Even the American founders were deemed revolutionary for seeking to establish a government solely limited to the protection of life, liberty and the pursuit of happiness, and they did, in fact, go far enough with this as to open up for the possibility of abolishing it if it ever grew beyond these functions. It’s a tragic occurrence, therefore, to witness that same nation taking on more and more characteristics in line with historical empires like Rome rather than a society based on tort law like Celtic Ireland and the Commonwealth of Iceland.

Few libertarian movements existed before the most recent centuries – mostly religious ones like the Taoists and Quakers – and for every Lysander Spooner, H. L. Mencken and Murray Rothbard, there have been at least a thousand Platos, Hobbes’, and Keynes’. It thus appears that Mencken’s assertion that “It takes quite as long to breed a libertarian as it takes to breed a racehorse [1]” rings at least metaphorically true. The short list of actual concise and clear-cut analyses of the nature of government have, however, been increasing greatly since the 19th century, including No Treason, Notes on DemocracyAnatomy of the State, The Most Dangerous Superstition, and Democracy: The God That Failed, as well as anthologies like Anarchy and the Law with great scattered pieces of writing, while most others are composed of incomprehensible jargon and obfuscation or pure fallacies attempting to legitimatize the State. Given the extensive influence of government into numerous spheres of people’s lives, it’s a curious fact that the institution is so rarely questioned and sought to be understood at a deep level. To see why that is, we may first to analyze the nature of the State and how its incentive structure affects its participants. 

So, what is the State ultimately? Is it the people, buildings, and/or processes constituting it? Naturally, these are all parts of how the State operates, but its very nature is more akin to a special type of social organization – even a business – based upon certain prerequisites. The main feature that distinguishes the State from other businesses and social organizations is that it has a monopoly on force. As such, it is almost the sole institution  financed through extortion and whose main operations include various manifestations of coercion or the threat thereof, though a few others, like the mafia, utilize similar tactics (hence the free market Anarchist Dave Smith’s apt characterization of the State as “a mafia masquerading as a human rights organization”).

Despite this similarity, the State is still widely thought of as a more legitimate and moral institution than the mafia and has so for millennia. The reason for this can actually be found in the very etymology of the word “government” – describing the organs of the State. It can be divided into two Latin words: gubernare and mentis, meaning “to govern/control” and “mind”, respectively [2]. It is rather fitting that the etymology of this institution would spell out the meaning “to control the mind”, for that is exactly what is needed to get people to consider it as legitimate. The State itself is a fiction – it doesn’t exist in itself; it is entirely reliant on people perceiving it as having a legitimate “authority” to do what it does [3]. Therefore, as Rothbard put it: “The greatest danger to the State is independent intellectual criticism [4],” because

If the bulk of the public were really convinced of the illegitimacy of the State, if it were convinced that the State is nothing more nor less than a bandit gang writ large, then the State would soon collapse to take on no more status or breadth of existence than another Mafia gang [5].

It is thus directly contrary to the interests of the State to have the “citizens” they govern to become independent, critical thinkers who are intelligent and healthy. For that reason alone it appears to be an especially horrific idea to have it take over functions like healthcare and education: they have a significant incentive to make people number and more unhealthy. The caveat is that those “in power” of the institution have to pretend to look out for the interest of the people in order to maintain the perception that they have some legitimate “authority” acquired by the people through democratic elections.

The degree to which the democratic process works as a constraint on negative behavior by the State’s participants I’ve explained in Hoppe on the Problems with Democracy and the Monopoly of Force based on Hans-Hermann Hoppe’s Democracy, where he shows that the substitution of Democracy for Monarchy has had more of an effect of making citizens number and more acceptant of the State as having some legitimate authority. The main fallacy behind this conception is that it assumes democratic elections provides a meaningful way for people to delegate others the right to act on their behalf. People have, however, no inherent right to extort, kidnap, murder, etc., and there is thus no “right” to delegate away to commit these acts, whether to politicians or private actors [6].

To better understand the significance of the incentive structure in the State we may first investigate how incentive structures operate and affect people’s psychology and behavior (as an aggregate often labeled “human nature”). Human nature is established mainly from three components: biology, environment, and psychology. The genes (biology) we are endowed with from birth are, in a sense, probabilistic functions that determine what characteristics we are more and less likely to develop, and the situations (environment) we find ourselves in throughout our upbringing affect how these probabilities ultimately play out. The psychological part is in essence what constitutes our “free will”, allowing us to change certain characteristics regarding behaviors and attitude (which I’ve delineated in more detail in What The Matrix Can Teach Us About Choice, Free Will and Human Action).

Incentive structures play an important part in the environmental component of human nature. Someone wired biologically to be more aggressive is likelier to escalate situations and such, for instance, but is by no means “doomed” to become that way. If, as he enters school, recognizes that he can gain social status by bullying certain students without much a threat of negative consequences outweighing the incentives, such people will naturally tend to end up doing so as long as they acquire positive results [7]. As an incentive structure, the State is quite similar in the sense that it, too, tends to increase the prevalence of negative behavior in the participants. This was clearly recognized by John D. Acton, who wrote the memorable dictum “Power tends to corrupt and absolute power corrupts absolutely.” He further wrote:

Great men are almost always bad men, even when they exercise influence and not authority; still more when you superadd the tendency of the certainty of corruption by authority.

Politicians are funded through extortion and have more or less influence over how and what to be mandated, restricted, and prohibited, from which coercion is initiated accordingly. They earn more money by increasing the magnitude of the extortion fees, and more power and influence by means of manipulation and having the State continually usurp control of further spheres of human interaction. We can only expect that they’ll act accordingly, and the reason this is often done in secrecy is that people actually do understand the vice of corruption, though most fail to realize that this is the rule rather than the exception with the State.

Regarding the question of whether politicians theoretically can be “morally good”, despite the corruption the incentive structure provides, Robert LeFevre paraphrases Isabel Paterson:

What good does it do to have a saint of every conceivable virtue operating a guillotine? He may have the highest of morals and ethics. He may be imbued with a passion for doing good. But the mechanism he is hired to operate cuts off heads [8].

The best he can do may be to sabotage the metaphorical guillotines of his colleagues, the closest practical example of which may be Ron Paul: trying to reduce the extortion fees, end pointless wars, and cut bureaucracy and red tape, and so on. Changing the system from the inside is an arduous and challenging task, however, and the most one tends to accomplish from such is only to slow the expansion of such an institution due to the inherent incentive structure – reversing it is near impossible (though this also depends somewhat on the culture of the majority of voters). Hence many are pessimistic about the efficacy of this tactic and believe along with Mencken that “all government is evil, and that trying to improve it is largely a waste of time.”

“However are we to defeat this Leviathan then?” I hear the concerned reader objecting. The suggestions are many and I will not go much into depth about them here [9], but it all starts by freeing one’s mind from the mythology of State authority and beginning to investigate and question anew everything one had previously accepted as fact. We as a species have been endowed with this remarkable organ – the brain – allowing us to organize and make sense of our surroundings and act accordingly to improve the conditions of ourselves and others. The potential that each and every one of us thereby has is of gigantic magnitude, and we can all achieve great things if we only begin tapping into it.  By instilling in ourselves discipline and a sense of responsibility for ourselves and the people we love, we’ve taken a good first step in becoming less reliant on the State. We ought all thus to start utilizing our potential, by always learning, always questioning, and teaching our family, friends, and children that they have an inherent self-ownership which the State violates at a continual basis. 

Therefore, I now assert along with Howard Beale:

All I know is that first, you’ve got to get mad. You’ve got to say: I’m a human being God damn it! My life has value! […] I want you to get up right now and go to the window, open it, and stick your head out and yell ‘I’m as mad as hell, and I’m not gonna take this anymore!’

When enough people simply realize that they own themselves, and will not tolerate being treated as slaves by politicians and bureaucrats any longer, we’ll have reached a level of perceptual evolution as a society,  from which we can finally start to develop legitimate institutions in law [10], money [11], and other functions based on voluntary cooperation regulated by market competition and reputation rather than reliant on a coercive monopoly of force, rendering the State obsolete. The emperor has no clothes, and it’s far past the time that we open our eyes and recognize that fact. 

Footnotes

  1. Mencken, H.L. (1926) Notes on Democracy, p. 60
  2. Kudos to Jeff Berwick of Anarchast for pointing this out.
  3.  Even many mainstream political scholars have caught onto this fact and, as a result, actually disregarded it as an object of political analysis. See Bartelson, J. (2001) The Critique of the State
  4. Rothbard, M. (2000 [1974]) Egalitarianism as a Revolt Against Human Nature, and Other Essays, https://mises.org/library/egalitarianism-revolt-against-nature-and-other-essays, p. 67
  5. Rothbard, M. (2005 [1982]) The Ethics of Liberty, https://mises.org/library/ethics-liberty
  6. This point is laid out excellently in Spooner’s No Treason, later superseded by Larken Rose’s The Most Dangerous Superstition 
  7. The degree to which he does this may in that way be regulated by the law of diminishing marginal returns, i.e. that his gain of social status and positive recognition decreases the more he bullies.
  8. LeFevre, R. (1959) The Nature of Man and His Government, https://mises-media.s3.amazonaws.com/The_Nature_of_Man_and_His_Government.pdf, p. 14
  9. Some good resources on this include The Fifth Column’s video “How to make the state obsolete” and Rachels, C. (2015) A Spontaneous Order, p. 278-286
  10. Many informative essays and excerpts about theoretical and historical examples of this are included in Stringham, E. (2007) Anarchy and the Law. Other literature on the topic worth reading includes Murphy, R. (2002) Chaos Theory and Tannehill, M. & Tannehill, L. (1970) The Market for Liberty. Both of the two latter works also discuss the role of private defense/military.
  11. See especially Hayek, F. (1990) Denationalisation of Money: The Argument Refined and Maloney, M. (2015 [2008]) Guide to Investing in Gold and Silver
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