How Could We Be Protected From Foreign Invasion in a World Without "Government"?

Economist Bob Murphy Breaks Down The Market for Military Defense

Many wonder how they would be protected from foreign invasion in a world without "government." Could the free market and insurance companies protect people and companies from an invading State? In this bonus video from Liberty on the Rocks - Sedona - The Voluntaryism Conference, Bob Murphy, Senior Fellow at the Mises Institute, breaks down the Market for Military Defense for a Mises University audience.

FULL TRANSCRIPT

Bob Murphy: I got two o'clock on my clock. There's a lot of material. Let me just clarify, because I know a lot of people watch all the stuff on MisesU, the lectures that are made publicly available. So what I'm covering here, normally at MisesU for the last several years, I've given this talk called The Market for Security. And in that talk, I first cover private law, like how could, in a free society, how could there be courts, and police and judicial services, what would prisons look like, if anything, in a genuinely free society of the type that we're talking about here at Mises U. And then, like in the last 15 minutes or so, I would try to cover the private production of military defense. And I thought, okay, I'm being too cocky. I need to take at least 45 minutes to explain how could a free society possibly provide military services. So that's what we're doing here. So the little bit of this, if you've seen the other talks I've given on the market for security, is a bit redundant, but you'll see here I elaborate. So this is the first time that I've given this standalone talk here at Mises U.

And of course, just to clarify, again, what we're doing here is I want to say, in a society without a coercive state, how could it defend itself? How could those people defend themselves? Wouldn't they be sitting ducks for some neighboring state, for example? And that's one of the standard objections people might say. Yeah, sure, you guys could build roads. I could even possibly see police and so forth. Come on, some neighboring state comes in with its modern military, and you guys would be sitting ducks. And so that's the kind of thing I want to address right now. Let me let the cat out of the bag. I think that's a huge misconception. Even many committed anti-state, you know, libertarians, they still, you know, well, sometimes they give these throwaway lines like, oh, yeah, the government can't get anything right except killing people. And I get where they're coming from, but actually, no, the government's not even very good at killing people, all right? And so what I mean is compared to if private business had the right incentives to do that.

So normally that doesn't come up because private business isn't legally allowed and blah, blah, blah. But you'll see what I'm saying when I go through here. Just like you wouldn't say, oh, well, I mean, if the apparatus of the state really threw itself behind wheat production, you know, then the USSR would have really outproduced a capitalist society in terms of just, you know, tonnage or bushels of wheat. And no, in general, that's not true just because the government government really sets itself to some aim, that doesn't mean it actually satisfies it better than a private sector alternative would if it made economic sense to do so.

So that's what I'm going to say here. I'm going to try to get you to see that this presumption, even on the part of many libertarians, that, oh yeah, the state, the one area where they're really good is organizing militaries and blowing up other countries. The only reason you think that is because right now it's states that dominate military services. We don't really have something to compare it to. Okay. Let me alleviate any, I don't know what you guys are laughing at. This is a very serious post.

So a lot of you may know that I personally call myself a pacifist and in fact Tom Woods and I recently had a debate on the Contra Cruz where we were debating pacifism. I'm not going to be sort of cheeky and tell you who won that debate. I will say, however, that I didn't lose, all right? And so, and let me just tie that. So, what I'm doing in this talk, I wanted this to be one for a more general audience. So, it's true, I personally would not contribute funds if we're in a free society. I would not patronize businesses that, you know, used missiles and things and were trying to actually end the lives of foreign soldiers trying to invade. That's just against my personal preferences.

But what I'm talking about here is I know most people don't share those preferences. And so here I'm giving, as an economist, a libertarian economist, my vision of how the market for military defense would operate in a society that was composed of people who were largely like we are in so-called Western countries today, except that everybody believes we can't initiate aggression. And so this thing, take the cultural norms the way they are and how people feel about, OK, if somebody invades us, we certainly are morally justified in hitting back, that sort of thing, and just saying how would that play out with those people in a society, though, where there's no institution that can take money from people against their will, because that's what taxation is. And also, the agencies providing military defense, they can't, for example, conscript labor, all right, because that would be slavery. You're not allowed to do that, period, even if you're doing it for a noble cause like repelling a foreign invader.

Okay, so that's what I'm doing here. As an analogy, I personally don't use heroin, and yet, as an economist, you say, OK, what would happen if we legalized drugs tomorrow? I can sit there and walk through the market for heroin, even though I personally wouldn't engage in it and don't want my kid to. Likewise here, I happen to be a pacifist personally, but that's not really relevant for this lecture. So in this lecture, I'm going to talk about a hypothetical libertarian society and how they would, I think, handle issues like what if some neighboring state is massing its troops on the border and getting ready to invade us? What would we do? That's the kind of thing I'm talking about.

Last bit of housekeeping, let me just mention, even though for a lot of people and some of you came up here just before this lecture to tell me and saying that, yeah, this is the most difficult question as far as the advocate of a free society to explain military defense. In terms, I mean, I get why that seems like the most pressing because you get invaded by some foreign country and, you know, that's kind of a bummer. But, you know, as opposed to like the under provision of education or something like that, you know, like if the literacy rate's a little bit lower than what it ought to be, that's one thing, but you get conquered by some neighboring state, that's pretty much a deal breaker for a lot of people. So, I get why that's the case, but in terms of conceptually, actually, as you'll see as I go through, I think this is actually pretty straightforward.

The real issue, I think, the conceptual hurdle for explaining how could a genuinely free society work is when it comes to, well, how could there be the rule of law? Like, that's tricky, and that's why, like, someone Read even thought, no, you can't have anarcho-capitalism. That doesn't make any sense, she thought, because if you're going to have the rule of law, you've got to have one agency in charge of promulgating or at least codifying what the law is. Otherwise, you'd have competing. So that's the kind of thing that I handle. If you want to know more about that, that's the market for security. I talk about that question.

But once you have the legal framework in place, so for this talk now going forward, let's just stipulate for the sake of argument in this free society, everybody knows what the property rights are, and then now the issue is just, OK, what do we do about the possibility that some foreign army might come in or some Air Force might start bombing us? That's the kind of thing we're going to talk about.

A lot of what I'm covering in this lecture, if you want to learn more about that and read more about it, look up my article. The journal is called Libertarian Papers. So it came out in 2017. The title is Libertarian Law and Military Defense. So that's where I elaborate. Stuff I'm going to touch on for this talk.

Okay. So before we get into the real fun stuff about anarcho-capitalism, let me just bring you up to speed even in terms of conventional government militaries going to war with each other, even on those terms, it's still the case that the less government intervention you have, the better off your country will be and the better you will be in a military capacity.

So this is a quote from Mises, this comes from Human Action, and I had to abbreviate this, you know, the block quotes that are the paragraphs that I grabbed this from, the whole thing is great, but I didn't want to get bogged down here in too long of a quotation, but let me just read you this from Mises. He says:

"Capitalism is essentially a scheme for peaceful nations, but this does not mean that a nation which is forced to repel foreign aggressors must substitute government control for private enterprise. If it were to do this, it would deprive itself of the most efficient."

Okay, so let me just give you some examples of the kind of thing Mises has in mind here. So number one, for some reason, even people who nominally understand the benefits of free enterprise think that when it comes to war, oh wait, that's the one situation where you definitely need the government to come in and nationalize industry. Like you need the government in charge of the steel because you can't have too much steel go into frivolous uses when we got to be cranking out battleships and bombers and things like that. And you certainly, you know, you don't want there to be nylon stockings being made when there's a war on, right? So that's the mentality even among people who are typically, you know, not authoritarian. They think that, oh yeah, when it comes to a life and death issue such as World War II, then you needed the government and they think that the Roosevelt administration in the United States did the right thing by, you know, wartime planning, all right? And so that's what Mises is rebelling against here.

So Mises was a minarchist in our language. He would have just called himself a liberal. In the classical, you know, 19th century sense of that term. But, so Mises did think that you needed the state to tax and then spend money on military defense, but he thought that was it. That if the government needs to spend $100 billion building tanks and bombers and getting troops and equipping them and so forth, then go ahead and tax the public and do it that way, or you can borrow the money and do it that way. He didn't want them to run the printing press because he thought that was undemocratic.

Mises argued that if the public wouldn't tolerate the amount of taxes and or borrowing that was necessary to finance the war effort, then that just shows the war was too costly and that, you know, the government, so if instead they financed the war by running the printing press, Mises thought that was like a sneaky way of funding something that the public really wasn't prepared to shoulder the burden of.

As far as the actual military effort though, Mises' point was nationalizing industries and having central planners dictate, OK, this much steel is going to go here. It's going to go here. That's sabotaging the beauty of the market economy. And so, yes, it's true, going into a major war, like the US going into World War II, what needed to happen, clearly, fewer automobiles for personal use had to be produced because you got to start making tanks. And fewer luxury cruise liners needed to be made because you got to make battleships. And aircraft carriers.

But Mises' point was you don't need central planners to micromanage that, just like if the public all of a sudden decides they don't like cigarettes anymore, you don't need central planners to tell the farmers stop planting tobacco, you just let the market price system and profit and loss signals guide all that and do it in the most efficient way possible to deal with the new situation.

So likewise, if you're in peacetime, everything's great, the economy is correctly calibrated to using the resources given technological know-how to what consumer preferences are, and now all of a sudden there's a big change in the data, namely that the Japanese bomb Pearl Harbor and the U.S. wants to get ready for a war. How do you get all the businesses to switch over and start operating in light of this new information? Well, Mises' point was you rely on the market system, profit and loss test.

The one caveat there, though, is that the buyer of the military hardware is going to be the U.S. And they're going to get that purchasing power through taxes and or borrowing is the way Mises thought it ideally would happen. So there, you know, the government spends a lot more on tanks and bombers. That pushes up the price of steel and the other inputs and those necessary for those things and so that makes private automobiles really expensive because now the inputs that would go into a car are a lot more expensive because of the government buying and that's how you know automatically people would ration the use of frivolous things or resources going into so-called frivolous purposes, civilian uses would be curtailed and expansion of the wartime industries would happen automatically, as it were.

So that's where Mises is coming from. And to do things like putting in place a wartime profits tax, for example, that's something that's very typical that Western nations would have done going into the World Wars. That just cripples the ability of private enterprise to respond to new situations, right?

So, Mises' point is, what is it that profits mean? It means those entrepreneurs correctly anticipated the change in the data, and they adjusted their production decisions better than their peers did. And so, in a situation where it's your country's survival is literally on the line, you need to switch over industry as quickly as possible in light of the new situation.

You want entrepreneurs who are making profits, because that shows they anticipated the change better than other people did. So you want them to be rewarded. You don't want to cripple that mechanism, which is what a wartime profits tax would do. Same thing, too, with meatless Tuesdays and stuff like that, if you're familiar with US history, where they would ration consumer goods. And so in addition to having money, they also had price controls and then explicit rationing with coupons. Again, that just cripples the economy's normal ability to ration things. We have a rationing system. It's called money and prices.

And so, if the government is buying up meat to put in, you know, packages for the troops, that pushes up the price of meat and people naturally economize on that. It doesn't mean the whole country just stops eating meat, though. Maybe some people really want it, in which case you can still get it, right? You just have to pay the market price for it. So, that's how the price system works in general. And Mises' point was that's what you want to have happen here.

Now, beyond just these sort of abstract economist remarks, Mises also has a lot of history. So he has a few remarks in Human Action and some of his other works where he says things along the lines of no capitalist country has ever lost a war. And he's saying even despite the much-touted war socialism of Germany, let us not forget that it lost both world wars. And he even argues that Germany would have easily defeated the Russians except that they were aided by Lend-Lease and other US support, okay?

So I've talked to military historians who think maybe Mises is stretching there, but the point being Mises does go through and try to supplement these theoretical remarks with history, and Mises was in the First World War also, so I mean he saw some of this with his own eyes. So in any event, if you haven't read that stuff, it's pretty interesting to see Mises as a military historian just commenting on some of these things.

But his point being that it's not correct to say, oh yeah, one area where explicit government intervention in central planning works is when it comes to fending off a military invasion. No, he says that that's exactly where you want people to be nimble. You need to be able to adapt quickly in a situation where events are changing daily or even hourly, and so how do you do that? How do you maximize the adaptability of your society, if you want to think in those terms?

It's certainly not by channeling it and turning it into a system where just a few people at the top make all the decisions and everybody else just waits for orders to trickle down, that's the last thing you want to do in a situation like that. If you wouldn't rely on that kind of a system to make TVs or radios, why would you do it, you know, why would you rely on that kind of a system to defend your nation from being conquered?

Okay, so that's the baseline for just even a regular, you know, two states going at it and just saying, okay, given that the state’s going to fund the military defense and it's illegal for private companies to do it without the state's permission. You know, Mises is showing you still would want to limit it just to that, okay, in terms of the classic functions of government, night watchman state. You wouldn't have the government do a bunch of other stuff on the side to try to supplement the war effort. That would be counterproductive.

But now let's move into, okay, the real thorny question. Well, suppose you have a totally free society. There is no state apparatus. Now, how would they defend themselves from a military attack? So here, and I outlined this again in the paper that I pointed you to, also my booklet, Chaos Theory, if you've seen that. And this is an elaboration. Rothbard talks about it in For New Liberty. I know Hoppe has an essay on the private production of defense.

So the consensus seems to be that at least in a modern, let's call it Western society of the types most of us are familiar with, if those group of people suddenly turned ANCAP, how would they defend themselves? It would probably, the primary funding mechanism would probably come from the insurance sector. So just imagine a city like New York City, okay, so there's all these skyscrapers, there's hundreds of billions, if not trillions of dollars worth of property in a small area, and so just like, well gee, what if there's a fire? How would a free society protect itself in case there's a fire? Well, there's fire insurance, okay, and that's the way you spread the possibility of that loss among the whole population, that sort of thing.

Likewise, I think there would be insurance contracts that would indemnify the owners of major pieces of property in the case of war damage or, you know, being conquered by some outside army. So you've got major life insurance, or sorry, major insurance companies putting out these policies, collecting premiums on them, and now instead of just sitting back and saying, well, let's hope we don't get invaded, or just running the and charging a really high premium, the insurance companies would realize we can lower the probability of a successful foreign invasion or this property being destroyed by bombers or tanks if we engage in defense.

Just like, you know, this isn't sci-fi stuff. Right now, fire insurance companies, if you have a large building, they'll give you lower premiums if you do things like show them that you have, you know, sprinklers set up and you have fire extinguishers in strategic locations, you have smoke alarms, stuff like that so that the fire insurance company knows the chance of this particular property being destroyed by a fire and then us, the insurance company, having to indemnify the owner, that probability goes down if they have things in place like smoke alarms and sprinkler systems and if we have a deal with the local fire department so that if our sensors go off, we can have a truck there in 30 seconds or whatever.

You get the idea. And they'll pass those premium savings along to the customer to induce them to be willing to fund those sorts of things. So something real obvious, like putting in a sprinkler system for a huge skyscraper, you're not going to need government fire codes or building codes to ensure that happens. It's not that people in a free society don't know how fire works. And something that's obvious, like spending whatever it is, a couple thousand dollars to put in a sprinkler system for a multimillion-dollar apartment complex, you don't need government codes to force private owners to spend a few thousand dollars for something that might avoid them millions of dollars in fire damage, right?

And so that, so I'm saying in practice, the way that kind of outcome would happen, absent government coercive fire codes is something like the fire insurance company just, you know, having in their contracts built-in things saying you do the X, Y, and Z, and we send inspectors periodically, right? Because the private owner might just say, oh yeah, we have a sprinkler system, go ahead and give us a lower premium. But maybe they really don't. Or maybe they installed it, but they're not staying on top of keeping it up with maintenance and so forth. So maybe the fire insurance company also has inspectors that just show up unannounced and do routine checks, and that's part of the contract. They have the right to do that and so forth.

So a lot of the stuff that happens under the guise of government building regulations with fire codes and things like that, you could have analogs of that in a free society, I think the insurance sector would provide a lot of that. So likewise here, if there's a chance that some other country's going to send bombers and cause a billion dollars worth of property damage, the first people that are going to suffer that would be the insurance companies.

And so now they have the incentive to say, okay, instead of us just sitting here as sitting ducks, what if we instead paid some money to firms to set up surface-to-air missiles, okay, and they could knock down incoming bombers, that greatly reduces the probability that these skyscrapers are going to be taken out by foreign bombers if we have SAM sites set up at strategic locations.

So the first hurdle to understand how could a free society exist without a political state engaging in large-scale taxation and then expenditures on military defense is I think the insurance sector would step up and they would be the ones who would have the incentive and the ability because they're taking premiums from all the property owners or at least all the large property owners in the community to make payments to private firms that engage in what we would call military defense. So that's the first thing I'll say here.

And then you can imagine things like this. I don't think there would be large standing armies, just in terms of just picturing it. Because for one thing, that's expensive to have a huge standing army just sitting around in general. So I think that's expensive. They wouldn't have swastikas. That would be bad for PR. They wouldn't do that. But in general, I don't think it would make sense. In general, too, just like cities and northern cities can be ready in case there's a bad snowstorm, and they don't have thousands of people just sitting around all year on the off chance that there might be a really bad snowstorm. They have people that are doing other stuff that they could call up perhaps. Maybe a lot of the equipment they have in reserve, but they don't have people just sitting around for years on end on the off chance something happens.

So likewise, too, I just think in practice, large standing armies wouldn't make sense just business-wise. And we'll see as we go through this why I don't think they'd also be necessary for military purposes. But to alleviate the concern, because that's a standard thing to say, oh, wouldn't these large, you know, these firms that are providing private defense, why wouldn't they just turn into a state? Well, one reason, I think, is that they wouldn't have large standing armies. Millions of people in a given society would be serving this function, for one thing.

Okay. Another thing I think we need to recognize here, and this is a strength, so the private defense firms are not allowed to just violate property rights and get away with it because, hey, there's a war on. And so I've talked to some people, even those who are sympathetic to libertarianism, and they think that this is a constraint, right? They think that, oh yeah, a neighboring state that wants to go to war with our free society, they have an advantage, military-wise, because they can just requisition property. If their armies want to build a bridge or something, they can just conscript local workers. They can just grab the steel or the wood or whatever it is, the nails they need. They don't have to pay for it. They can just do all sorts of things like that.

And that's supposed to be an advantage to them, whereas we're talking about private firms embedded in this voluntary framework of a free society where there's no institutional violation of property rights. So it can't be that some firm systematically commits crime or destroys things, violates property rights in general. That would be a criminal activity. And they can't just say, well, we need to defend ourselves.

So in particular, the one where a lot of people think this would be a constraint is when it comes to the draft. So foreign armies, they would be allowed to draft their citizens into the army and they could have huge armies that way. In a free society, there would be no analog. Private firms could not get people to work for them and defend the free society against their will because that would be slavery or kidnapping. You can't do that. So what I'm trying to tell you here is that's a good thing. You don't want them to be able to do that, that historically it hurts those societies where they tolerate their government drafting people.

Okay, and so just think of it, I'll do like a sort of economic argument first, and then I'll try to make it more practical and appeal to history. So as far as the economics of it, labor is a resource just like anything else. And especially as we get into more modern warfare, it's not obvious that the best thing for every single human being to do is to just go to the front lines and get shot at or shoot at somebody else, right? There's all sorts of roles that people play in the modern division of labor to supplement the war effort.

And so when you start thinking of it that way, just all the standard problems of central planning, just like if you're saying, hey, we want to maximize food production, we've got millions of people at our disposal, how do we do it? You wouldn't want central planners just telling all the people where to go and say, okay, you guys over there, you go work on farms, you people work at a distribution center, you people build 18 wheelers because we need to be able to transport the food around. You guys work on refrigeration units.

You see what I'm saying? There's a lot that goes on as you get into a modern economy, even for something like just food production, and the same holds for something like defending the society from military attack. It's not obvious, for example, how many people should be snipers, how many people should be working in demolition, how many people should be doing R&D making new weapons? How many people should be working in the factory that makes bullets? How many people should be working on making new types of body armor, right? There's all sorts of things going on, and it's not at all obvious who should go into what occupation.

And so when you have a draft, that just sort of swamps all that information that the market process and signals we're giving to entrepreneurs, and you've got a few central planners who work for the military just deciding this is how it's going to be. So, in any other area, we would see that would be crazy, and that would stifle and cripple the effort, and there's nothing special or intrinsic to military attack or defense that all of a sudden, you know, flips that on its head, and all of a sudden, central planning is a really smart thing to do.

Okay, so there's that element. Another way, let me motivate with some historical examples. So, Jeffrey Rogers Hummel has a book called Emancipating Slaves, Enslaving Free Men, and he's talking about the U.S. War between the states or Civil War. And he quotes some historians who are saying that on the eve of the Civil War in the United States, a lot of military historians and other experts thought that the South was going to be fine, the Confederate States would be fine, because after all, the U.S. itself had defeated the greatest empire in the world, you know, when they fought off the British during the war for American independence, and so they thought, okay, if the South engages in the same type of warfare, right, where they have, you know, guerrilla tactics, they're just hiding out in the woods, and if the Northern Union armies come in and they just take pot shots and run away and they know the terrain better because it's, you know, it's their home, they thought the North's not going to be able to win, right?

And yet the South did lose, and let me just mention, in the war for independence, you know, when the U.S. Colonies fought the British, part of what was happening there, and you see the problem with conscription, is the British troops, they were famously wearing red coats. So, they'd be marching through the woods and sticking out like a sore thumb. These guys in these bright red coats marching through, whereas the colonials, they were, you know, dressed either, you know, in green things or stuff that blended in. They were in civilian clothes, and they could take pot shots and then run away into the town. You wouldn't know who was who. Partisan or not.

And so you might wonder, well, why didn't the British adopt similar tactics? Why didn't they have their troops dressed, you know, in civilian clothes? And one of the reasons was because then they might defect. Okay, so because again, those British troops were not there voluntarily, at least a lot of them weren't. They were conscripts. They didn't want to be there getting shot at. They might not have cared about keeping the colonies for the king. And so if they're there, part of the function of having those bright red uniforms was so that if they ran away, their commanders could find them, and also the people in the town would know, wait, you're not one of us, get out of here. You're an enemy, a soldier invader.

So that was partly for the discipline and just maintaining the ranks of the invading force. And so you can see in a situation like that, whereas the partisan colonials who were taking shots at them in the woods like snipers and running away, they were defending their homeland. Nobody was forcing them to fight like that. They were just trying to repel invaders. So that just gives you an idea of how that works, and so if some historians think if the South, if the Confederate States had adopted similar tactics, they would have been able to withstand the invasion from the Union forces, but that's not what the South did. The South had a draft, they got their troops in line, they gave them uniforms, and what did they have them do?

Just think about it, they had them line up and march right into Union cannons and, you know, rifle fire. Okay, so it's perverse. It's like if the Confederate government just sat around thinking, how can we maximize how quickly our able-bodied men are slaughtered? I know. Let's line them up and have them march right in front of Union firepower. And if we catch anybody not trying to do that, trying to do something that would allow them to live, we ourselves will shoot them. We'll use our police and say, hey, get over there.

Get over there and get shot. What are you doing? OK? And so it's kind of perverse. But that's, if you think through, that's what happens with conscription. Or especially if you read about the battles of World War I, you know, when it really got going and you'd have the different, you know, the trenches set up and some of those horrible killing fields where tens of thousands of casualties were happening per day, depending on which battle you're talking about. Again, the only reason such mass slaughter was possible was that both sides were conscripting their men and sending them into these killing fields, okay?

That if you had had a free society, they wouldn't have done that, and so they wouldn't have lost one of their most valuable resources so easily. So that's partly what I'm getting at here, is that when there's conscription, what happens is, among other ways of thinking about it, besides the moral horror of just millions of people being taken against their will and forced to be either kill or be killed, besides the moral problem, just economically, just think of it dispassionately as a robot or something, those are very valuable resources, right? When you're getting invaded, one of your most valuable resources is the people at your disposal.

And the last thing you want to do is have people in charge of them and their allocation, thinking they have virtually a zero price. And yet, that's what the infantry are to military commanders. They're almost free. And yeah, they're not just going to sacrifice tens of thousands of troops for no reason, but they're not fully internalizing the cost of that. And they're certainly not recognizing, oh, wait a minute, we just killed somebody who was a great chemical engineer. He might have been able, if he had been out working in a lab somewhere, he might have come up with a better bomb. But instead, we, you know, gave him a rifle and told him, go take a hill, and he got mowed down with machine gun fire.

And now we, you know, not only is that guy dead, but now we don't have the new bombs that he would have invented had he been placed somewhere else where he should have been. OK, so that's the kind of thing that, in general, market prices do, is they ensure resources go to where they're most urgently needed. And so in the kind of framework I'm talking about here, again, it's those life insurance companies that would be paying bounties.

So just to talk a little bit more about that, the insurance company might say you're faced with an incoming invader. They might say, OK, for every enemy helicopter you knock down, we'll pay your firm $10,000. For every infantry that you take out of commission, whether you kill them or just shoot their kneecap or something, so that they're out for the fight, we'll give you whatever, $800. They would set prices, and they wouldn't be arbitrary. They would run calculations, just like actuaries can figure out if you're a smoker, how much more does that cost?

This is a life insurance company, and the premiums are adjusted. Likewise, you've got an incoming army. They could figure out, at least come up with some estimate as to say, how valuable is it? How much would we be willing to pay to take out one of those incoming bombers? And they would give bounties accordingly. And so then the private firms hiring workers voluntarily would figure out, you know, what's this person's marginal revenue product in terms of this particular occupation and this line, right?

So, that's the way you would have so-called rationality and economic calculation in something as esoteric as military defense. So, again, a draft means the people running that operation think that the workers are basically free when, no, they're very valuable and you want them to know what the opportunity cost is. Likewise, when it comes to something like, you know, blowing up infrastructure inside your own society.

So this is a common technique that if you're retreating and the invaders are coming in, you do stuff like blow up bridges, like just to hamper the enemy's ability to quickly cover terrain. So they might do that. The private firms, you know, especially if it doesn't go well the first couple days and the outside states coming in and penetrating, they might do stuff like blow up roads. In a free society, who would blow up the roads? The companies would, the private companies. We've got that question handled, too.

And so, blow up bridges, stuff like that, that's fine, but they would have to pay the owners. They couldn't just blow up stuff and say, well, we're defending from this foreign invasion. They would have to pay for it.

Just like right now, if a plane's flying and crashes and takes out a house somewhere, the airline company or their insurers or somebody has to compensate the owner for that. You can't just say, well, we've got to have air travel. Occasionally, some people's houses get blown up, and that's not our fault. It doesn't, you don't ban air travel, but the point is if your business operation entails the loss of other people's property, you got to indemnify them in a free society. So that would happen here.

And again, that's a good thing. We don't want agencies that have the power to just go around blowing up property. For all we know, that bridge is more important so that the munitions being made in the factories can get brought to the front lines somewhere else, right? So maybe by blowing up that bridge, that one firm thinking it was helping actually is crippling the defense effort, right? And so how do you know? Market prices, that's how you know.

So the other firm that's really relying on that bridge, maybe they're paying so much to the owner, and the other firm comes along and says, you know, I actually think we'd be willing to pay you $800,000 to take this bridge out, because we've got these plans, this operation we're doing to stop these invading tanks, and your bridge is really a pain, a thorn in our side. Let's take it, we'll pay you $800,000.

But the other factory might say, no, we'll pay you $900,000 to keep that thing in operation. That's the way the different firms that have different ideas for how to defend, that's how they compete and that's how it gets settled through the market price system.

Okay, and here's one that's even more esoteric. Even when it comes to blowing up the enemy hardware or killing enemy troops, it's not clear to me what the legal status would be. So we've got a free society, judges make rulings and it's clear cut in the boundaries of the free society, what the legal system is, and who owns what, but it's not as obvious to me what is the legal status in the Rothbardian courts of outside, like, US government assets, right?

Like, does the US government, is it its own corporation, and it owns all of its tanks? You know, it's not clear to me how that would be true, or is that, like, the taxpayers in the US own that, and, you know, you see what I'm saying? So it's not obvious to me exactly how that would play out, but for sure what would happen if it is the case like, let's say that the defending forces want to do a preemptive strike and so like, let's say it's the British or the US for whatever reason are about to invade and they're saying, you know, if we knocked out some of their spy satellites and some of the reconnaissance aircraft like the drones and whatever, that would really help us when they pull the trigger and they really invade us if we have first neutralized some of that stuff, you know, knock out their recon or whatever.

So maybe they have to, you know, take out some of that stuff before the war officially starts, they would be able to do that, but they'd have to pay for it, right, because you're blowing up property. And I think the way they could do it fairly cheaply is if they go to U.S. taxpayers and say, hey, in our legal system, you have been, you know, the U.S. government stole $100,000 from you over the last three years. They owe you that money plus interest plus, you know, pain and suffering. We all know you're not getting that money anytime soon. So why don't you give us your claim against the U.S. government for $106,000, and we'll give you 2% of the face value for that, because you know you're not ever seeing that money.

And so maybe they would do it that way, so that the private defense firms could load up with a lot of claims against the invading forces just vis-a-vis their own taxpayers. And that's how legally they could show, yeah, we caused $600 million of damage to them, and here we go, and this is how we compensate for it. They've caused $600 million of damage to their own people that we've acquired for a $5 million payment. And here you go.

So again, that might seem like quibbling. And oh my gosh, you're worried, Bob, about violating the property rights of these invaders? Yes, I am. And that's a good thing. That's our strength, is that we respect property rights. And so even in a situation like this, where the courts rule, no, technically, they didn't send a cruise missile over our border yet, so you can't really knock out their surveillance satellite, or else that's aggression. Well, we could compensate them for that.

So that's the kind of thing I'm talking about, where that actually is our strength. That's why we would have such a potent military defense, is because we would be guided by profit and loss signals.

Okay, let me, in the time I have left here, just try to deal with some objections people might have or ways to help clarify thinking through this process, because I know it's tricky when you first encounter it.

Okay, so one thing is just make sure you're always doing an apples-to-apples comparison. So yes, if everybody in this room just reads Rothbard, and then I took you back in time, and it's you guys versus Nazi Germany, I'm pretty sure Nazi Germany's gonna beat us in this room, okay? But likewise, Nazi Germany defeated France, right? And they had a state military at their disposal, okay?

So you can't just say I can dream up a scenario where a private society of free individuals would lose to a state, therefore private defense doesn't work. That doesn't work, because likewise, I can think of countless examples where state militaries failed to defend their country from an outside invasion. So therefore, I guess state provision of defense doesn't work either.

So it's always an apples-to-apples comparison. The claim is not that private defense makes you invulnerable, but that other things equal, it's the best way to defend yourself. Just like if you're saying, hey, we want to have the best automobiles, or the best computers, or the best food, how do you do it? You don't say, oh, well, let's put the state in charge of that, really important for our society. So we want to have government running it. No, you'd say leave it to private enterprise. That's the way, given whatever our skill set is and our natural resources and so on, that's the best way to maximize quality in that particular sector.

So it's likewise here. Another way of just, again, seeing the advantage that the free society has, there's no monopoly on the ideas. So the insurance companies, for one thing, there's multiple ones. So maybe some of them have different ideas about the relative value of foreign targets, so they might set different prices accordingly. It's not just going to be a case of groupthink. But also, there's competition.

And so you wouldn't have all your eggs in one basket, like in France, famously in World War II, you know, they had the Maginot Line, and Hitler just went right around that, okay? And so here, since there's not just one group of people in charge of defending the society, but there's competition. So, some people might try conventional methods.

You know, a lot of people might be ex-military from other countries, but there might be some people that are totally new, and they just come up with a brand new idea that will totally shock the, you know, the state militaries.

Also, by the way, the, let me see if I put it in here. Yeah, the ANCAP society is going to be fantastically wealthy. So, for a lot of this stuff, don't think of it as this relatively tiny little country against a big, bad United States. Think of it as, like, Jetsons versus the United States, okay? And as much of a bumbling fool as George Jetson is with all that technology, they could probably fight circles around them.

So just as an example, probably if you had a firm and it had 10 years to do it and had $10 billion to spend, they could probably come up with a system where they could have a bunch of drones. So some enemy comes in, a bunch of drones get deployed, they go and attach themselves to treads of tanks and just have minor explosions, not to blow the whole tank up, but just to incapacitate it, and little things that go and go in the necks of the invading infantry. And so they can track them, right, like little things that they can, so they know where they are, and if they get near sensitive targets, you press a thing and it releases something in their bloodstream and just knocks them out.

Okay, so I'm not saying that's the whole thing, but that took me 15 minutes to think of, right? And so if you have a society of a million people or more, and it's not like, especially if it's like the U.S. or something, I mean, they would have to first have a propaganda campaign before they could just start dropping bombs on some other, you know, society. So, people would know it was coming. They would have time to prepare. And again, the funding would be there. And they would be, if you don't think they would be fantastically wealthy compared to the other state-controlled societies, then I don't think you've understood the case for freedom, right? You don't understand how much, even like in the United States, which is relatively free compared to a lot of places, how poor we are because of what the state does. Easily, we'd be three times as wealthy in a few years, I think, if you got rid of all the state apparatus, okay?

So with that much margin for error, I think it's clear. It would be like the US versus Vietnam with the technological roles reversed, okay? So to think through a part of how it was hard for the US forces to beat them was because of the guerrilla warfare. The Viet Cong, in addition to having those tactics that made them tricky to snuff out, also had technology that was way more advanced than what the U.S. troops had. That's the kind of way to think about it. You can see that the U.S. probably would not have persisted in trying to conquer them.

Okay, another thing, too, is I think a lot of people don't realize just how inefficient state militaries are. And this kind of goes back to that earlier thing I said when sometimes libertarians, and you get how they're trying to be funny when they'll say stuff like, oh yeah, the government's awful and everything except blowing things up and killing people, ha ha.

No, this is what I'm saying is no, actually, if it really came down to it, the private sector could kill people way more efficiently, okay? Now, I actually don't think in practice they would. Like, other things equal, if you want to cripple an invading force, you actually don't want to kill their infantry, you just want to make it so they can't fight and just have a bunch of people there, you know, that they still have to take care of and feed and house and the other troops see them, like, you know, if you somehow could make it so they couldn't walk or whatever. Like, that's actually more militarily effective than killing them.

And so that's, I'm just showing you that the way militaries think is not correct in terms of the overall strategy.

But just to give you an idea here, anyone know Dan Carlin, the Hardcore History podcast? So if you, I was listening to his thing on World War I, and it was amazing that he was, he was saying that up so that, you know, it starts in the summer of 1914, and up through late 1915, most of the armies, they were still issuing felt caps to their soldiers.

Okay, so something as little as that, something as, you know, the governments, they could have, instead of drafting, let's say 10,000 of those troops and sending them to the front lines where many of them were slaughtered within weeks, instead of having an extra 10,000 people just being back home, cranking out steel helmets. That would have made much more sense, just that little tweak they were running their operations. So I'm saying just imagine that times a thousand over the course, especially if it's a long, drawn-out campaign.

Also, the more you, like something like World War I, that was largely a logistical supply issue, like which nations could outproduce the other ones. It didn't come down to tactics. It came down to how much material could they produce. So again, just showing you in modern warfare, this idea that a free society is a sitting duck with a bullseye compared to a state is crazy.

Okay, last point here I'll make, and then I'll wrap up. The classic question people say, wouldn't warlords take over? And so it's ironic that people say, all right, I'm really worried about one of these defense agencies getting so large that maybe they start taking money from their customers against their will, and they start killing people that they shouldn't. And so that's why we have a state. It's like saying, the worst thing that could happen is that one of these companies would turn into a state, and therefore we should have a state. I don't want to have anxiety about it. Let's just get it over with. Rip the Band-Aid off.

So there's that element. Beyond that, though, to be a little bit fairer, what they have in mind, the person who makes this argument, is to say, well, no, if we have a constitutional system and we agree ahead of time on the framework for these periodic elections and the role of the government, the kind of government we get under that setting or in that setting is going to be more humane and controllable than one that emerges from your ANCAP system sort of accidentally.

And there I would just say, and I have an article with this title if you want to go look at it, but there I just make the point that the type of people who could contain a government, so for which a constitutional limited government system would work, the kind of people necessary to make that happen, and thus far in history no such people have existed, right, because there has been no government that's been contained, but the kind of people that could make that work, also if you had multiple competing defense agencies, if one of them started getting aggressive, they would just switch their business elsewhere.

So if you're the kind of person that once you saw a dictatorship emerging, you would go vote for somebody else next election, well then you can just switch your business too. So if limited government would work for a given set of people, preventing tyranny would work so much better if they were totally free in the Rothbardian sense.

Okay, that's my time, thanks everybody.

About Bob Murphy

Robert P. Murphy is a practicing economist, a former research assistant professor with the Free Market Institute at Texas Tech University and a Senior Fellow with the Mises Institute. He is currently the chief economist with Infineo.ai. He is also host of InFi: The Future of Finance, The Human Action Podcast and The Bob Murphy Show. His website is: https://consultingbyrpm.com/

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