A PDF version of A Penrose Stairway is available here.

A Penrose Stairway: Why the Free Market
and Limited Government Are Incompatible,

by Ronald N. Neff

Table of Contents for A Penrose Stairway

January 6, 2017


Chapter Six

Arguments from History and Fiction


IN PART 5 (THE JULY 2016 ISSUE) OF HIS PRESENTATION, Jacob Hornberger attempts to undergird his case by citing a couple of articles by Emily Kadens purporting to show that the law merchant — cited by some free-market anarchist writers as evidence that the state is not necessary for the adjudication of disagreements — in fact arose within the context of state authority to defend and enforce the outcomes. He infers, “The law merchant judicial systems that existed within a governmental framework provided the means by which businessmen could peacefully — that is, without war and bloodshed — litigate their differences in those instances where they were unable to arrive at a mutually beneficial agreement.”

To be sure, it is a matter of historical fact that some form of the state has existed throughout the civilized world. Therefore, every advance in civilization — art, technology, commerce, philosophy, the science of justice, understandings of ethical behavior — all occurred within that context. What connection is there?

Hornberger asserts that there was a very strong connection, indeed:

By the time the 1700s arrived, the English people had developed a very sophisticated judicial system in both criminal and civil law, one that involved countless judicial opinions that provided precedence and guidance. All of this was setting the stage for the Declaration of Independence, the U.S. Constitution, the Bill of Rights, a free-enterprise economic system, the Industrial Revolution, and the most advanced and sophisticated judicial system in history.

I will not attempt to refute the Kadens articles. For all I know, she is correct in every detail. But I think that her arguments do not imply what Hornberger would have us believe they imply. For whenever a state exists, there will certainly be people and institutions that turn to it to solve whatever problems the state claims it can solve. Their turning to it does not imply its necessity or its goodness, or even its competence. We see also from our own experience that when a state exists claiming to provide any services whatever, there is little if any incentive for others to attempt to find or create needed services. It crowds them out, so to speak. What free-market anarchist (or night-watchman limited government exponent, for that matter) has not been met with the challenge, “But who will build the roads?”

Moreover, Hornberger’s argument — and perhaps Kadens’s — proves too much for his case. After all, if the merchant law arose in the context of tyrannical states, are not it and similar ideas sure to arise in the context of true liberty? Must men be subject to tyrannies in order to develop such ideas? Or are free men perfectly capable of the same feat?

Or perhaps Hornberger is again relying on the final arbiter? Is he saying that it is only when there is a final arbiter that such ideas can develop and be employed?

In any case, there is an extreme intellectual danger in embracing the inference Hornberger draws from the arguments Kadens makes and the examples that she gives.

To begin, we must note that counterfactuals are simply not within the expertise of any historian. We may say that if Stuart had arrived at Gettysburg on July 1 rather than on July 2, the outcome of the battle would surely have been different (“if things had been different, things would be different”), but we are unable to say with certainty in just what way the outcome would have been different. Similarly, we may say that the law merchant developed within the context of state activity, but it is not legitimate to infer that it required that activity. We might just as well wonder whether its dependence on state activity stunted its development.

Let us work our way backwards and see what reliance on this argument would suggest. Hornberger and indeed many libertarians have argued that a welfare state is unnecessary, in part because a free people are a generous people. Most libertarians are confident that in the absence of a welfare state the generosity of a free people would be more than adequate to provide for the unfortunate of society. That generosity, it is to be noted, is different from the participation of Americans in the so-called friendly societies that existed before the New Deal drove them into extinction. I am talking here not about the charitable giving that has as at least part of its basis the purchase of a kind of insurance, but rather the kind of giving that expects little or no tangible return.

I am not unmindful of the extraordinary gifts made by the rich in the past — one thinks of the libraries created by the charitable giving of Andrew Carnegie. Neither am I unmindful of those gifts made by ordinary people today, or, for that matter, of certain extraordinary gifts — say, those made by Bill and Melinda Gates. It is incontrovertible that those modern gifts were made (and similar gifts continue to be made) within the context of a tax system that rewards such giving. Just as we can never say precisely what the market in defense would look like in the absence of government, so also we cannot say precisely what the market in charitable giving would look like in the absence of tax incentives. We have our hopes. The Tannehills and the Perkinses have given us some ideas about how defense would look or work in a free market, but, to be honest, we cannot know that what they describe is what would actually emerge. The same is true of charitable giving in a free market, for it is dependent not on the natural laws of economics, but on the particular character and virtue of the people in the economy.

Shall we infer that a complicated income-tax system with deductions for charitable giving is necessary for a robust system of charitable gift-giving in a society? Or even that it stimulates gift-giving beyond what we would see in a free society?

It is not sufficient to point to the past — say, the period immediately following the end of the Revolutionary War — when there was no income-tax system, but when Americans formed countless aid and friendly societies. To answer questions about present possibilities by referring to past accomplishments presupposes that the people of the present are made more or less “of the same stuff” as those of two centuries ago. And surely a cursory look at our social problems in comparison with those experienced by eighteenth-century men will convince anyone that such is not the case. It may be that the welfare state is in large measure responsible for that transformation — “electing a new people,” as it were — but if the collapse of the Soviet Union and its satellite governments can teach us anything, it is that recovery from tyranny and from a welfare state is a tricky business. When any people — even the American people, maybe even especially the American people — have lived under a casually cruel and paternalistic government for just a few generations, the knack of being free is easily lost and not easily recovered, if it is ever recovered.

In many ways, the Revolutionary War generation had acquired that knack before they cast off their chains. Our generation certainly has not.

Let us now look at the performing arts. I daresay that every major symphony in the world, every opera house, is supported by government funds. Libertarians will argue that such delights could exist in a free market, and I am confident that they are right. But, in fact, they exist within the framework of government support. Using Hornberger’s logic, we should conclude that they would not exist if the market had been free all along.

The major medical advances in the modern age have been made in the context of government funding, and, indeed, by government agencies, such as NIH. While it is true that in the past certain advances were made without government support, in today’s modern and complicated interconnected world, with science no longer the purview of the individual researcher working in his basement laboratory, how confident can we be that government is not necessary for such advances? Oh yes, there are the criticisms of the foot-dragging of the FDA, and there are the inexplicable differences in policies from one government to the next, but on the whole, doesn’t history (as Hornberger’s hasty inference would have it) suggest that we really do need government to finance and oversee medical research?

Every libertarian who has discussed environmental policy has at one time or another probably pointed to the reduction in factory and auto emissions today compared with what they were 20 or 30 years ago, and perhaps compared them with what was found after the Soviet Union broke up into the 15 countries that had made up the USSR. But can it not be rebutted that the improvements in the United States were not the result of market developments, but rather of the regulations that had been passed and enforced by the EPA? Did not auto safety improve within the context of imposed NHTSA standards? And similarly, did not the safety workers now enjoy in factories and other workplaces develop in the context of compulsory OSHA standards? And even those improvements that can be certainly identified as purely market developments — did they not occur within the context of a state regulatory system? Can we say for certain that they were not preemptive attempts in the marketplace to avoid regulation, and therefore might very well not have occurred without that looming threat?

Taking a few major leaps further into the past, what historical evidence can Hornberger provide that transcontinental railroads could be built without government incentives and support, to say nothing of cronyism and bribery? Or that international air lanes would be safe without government regulation?

Leaping further, what historical evidence can Hornberger — or anyone else, for that matter — provide to show that the flourishing of culture in seventeenth-century England would have been possible without Elizabethan despotism? that the New World would have been discovered without financing by Spanish, Portuguese, Genoese, or French monarchical funding?

What historical evidence is there that Virginia could have been colonized without the sponsorship of a government investment monopoly? Or that the rebuilt Jamestown colony could have survived without being a military dictatorship? I do not doubt that there are theoretical arguments that could be brought to bear on these questions, but none that can be tested empirically. By the nature of things, there can be no empirical, historical evidence for the counterfactual.

What historical evidence can be offered to suggest that the Renaissance could have taken place and on so wide a scale without the extorted funds provided by a Julius II or a Lorenzo the Magnificent? Does not the patronage system itself suggest that art requires the support of wealth that was not available on the market? Even Nadezha von Meck, a non-governmental patroness of the arts and often described as a “businesswoman,” was the heiress to her husband’s vast fortune acquired as a Russian railroad magnate and monopolist. Shall we say that without monopoly, we should never have heard of Tchaikovsky? Alas, there is no historical evidence to the contrary.

Let us delight in the Greek tragedies, poetry, and philosophy and the sculpture and architecture of Athens. But let us never forget that it was a society that, at least in historical terms, depended on the existence of slaves. And let us acknowledge that there is no historical evidence that it could have existed without slavery.

We may further speculate that without publicly financed religious festivals, the Greek dramas presented on those occasions might never have been composed at all. Certainly, we can see that dramas were later written and performed independently of such festivals, but without any historical evidence to the contrary, may we speculate that without that context, the idea of the dramatic arts as we know them would never have been born? that the most we could hope for would be the kinds of reenactments we see among the savage tribes of Africa, South America, and Papua New Guinea — or for that matter, in films such as King Kong?

My point, of course, is not that historical evidence has no merit. Of course it has merit, but we must not require of it more than it can supply. We can “learn from history,” of course. But we cannot use history to answer counterfactual questions. And the relevant question to Hornberger’s discussion of the law merchant is, “Could the law merchant have been developed without state enforcement?” To that question there is no answer given by history.

My point also is not that I would agree with the positions suggested by my examples, a position summed up by the glib “taxation is the price we pay for civilization.” Rather, I merely want the reader to have a grasp of what a tenuous basis for philosophical argument can be found in the resort to history, whether that resort comes from night-watchman limited-government advocates or free-market anarchists. The fact that a given idea or practice arises in a certain historical context (e.g., the existence of a state) is not evidence that it could not have arisen in a different historical context (e.g., the absence of a state).

Learning from fiction

We have no better success when we turn to contemporary fiction to inform the case. While there are innumerable treatments in science fiction of what life is like after civilization collapses — one thinks of the cannibalistic tribes and dictatorships that arise in Lucifer’s Hammer or the Mad Max movies — Hornberger turns his sights on the highly popular AMC series The Walking Dead. He writes,

Does a peaceful, harmonious society come into existence where people are working together to protect themselves from the zombies and, in the process, develop the sophisticated system of competing courts and police forces that anarchists envision?

On the contrary, in The Walking Dead, society quickly devolves into a collection of competing gangs or tribes, with no one trusting anyone else and with groups warring against each other. The more powerful the gang or tribe, the greater the chance it’s going to survive the mayhem.

One could with equal justification ask why, if limited government is so good, it never seems to occur to Rick Grimes or Negan to set up a Congress or an Electoral College. Neither one seems the least bit interested in habeas corpus or the protections afforded by the Third Amendment. These defects are the more telling in that both lived in a pre-zombie world and are fully aware of the existence and possibilities for such institutions. Rick, in particular, a law officer, never seems to have thought of incorporating any of his knowledge of due process into his dealings with others. Even when Deanna Monroe — a former congresswoman — ran Alexandria, she didn’t exactly model her governance on anything found in the Magna Carta or in the writings of George Mason. We can hardly fault people for not establishing free-market anarchism, a social system they have never heard of, except in the pages of criticisms such as Hornberger’s, if they will not attempt to establish one with which they are familiar and which, according to Hornberger, has so much to offer civilization.

One might even ask Hornberger, who, like me, is a Catholic, if Catholicism is the true faith why isn’t there any Catholic Church? We see the occasional Rosary, with no indication that the person holding it has any awareness of the Mysteries, or knows any of the prayers associated with it. The figure of “Father” Gabriel Stokes — with his fragmented knowledge of theology, indeed, even of Biblical texts — suggests that what Christianity still exists is a deformed and degraded sort.

Such “moral compasses” as we find in the world of The Walking Dead offer little reason to believe that Christianity as we know it has survived. Dale Horvath subjected his fellows (and us) to what seemed would be a never-ending (at least until we were relieved of them by his death) blather of liberal and collectivist sentiments. Herschel Greene’s quiet “faith” was never well defined. And about Morgan Jones, perhaps, the less said the better. Will Hornberger question the validity of his religious beliefs on the basis of a TV series in which such examples are the only morality the world has to offer? I doubt it.

There are a few other points worth considering. The first is that even absent anything resembling limited government, within the tribes Hornberger refers to, the early beginnings of a property civilization have made their appearance. One thinks of Joe and the Claimers, with their Lockean view of property rights and their application of the death penalty for exactly the kind of misdeeds (theft and dishonesty) that make a commercial society impossible. One remembers Joe’s remark to Daryl Dixon: “When men like us follow rules and cooperate a little bit, well, the world becomes ours.” It’s almost a primitive statement of constitutional government with its empire-building.

But one of the most important lessons of a work such as The Walking Dead is surely that when they are reduced to a state of nature, men are not free. They are subject to the needs of the moment, even to their passions. They have no principles beyond the range of the moment to guide them; they can only attempt to make calculations of expediency based on some apparent short-range, ad hoc advantage or utilitarian considerations of what will count as “being safe.” In other words, they are slaves. The characters, if they ever were free men, have forgotten how to be free, and they must learn it all over again.

Then there is the question of how all this happened in the first place. Where was the limited government that was supposed to protect people from a collapse such as the one depicted in this series? If limited government is so strong, so vital, how could it and all society collapse in a matter of months?

Part of the answer may be found in the sister-series, Fear the Walking Dead, where it becomes clear that the military not only was unable to defend society, but actually abandoned the civilians. Whether the military was able to save itself in any form anywhere remains uncertain. What is certain, however, is that the artform Hornberger has chosen to rely on to make his case against free-market anarchism has instead echoed the insight of Morris and Linda Tannehill in The Market for Liberty, to wit, “Governments don’t defend people; people [such as Jacob Hornberger?] defend governments.”

* * *

It is important to note Hornberger’s failure to consider the importance of time in his discussions of social upheaval and recovery.

Even if Walking Dead characters Rick Grimes, Shane Walsh, Deanna Monroe, and Dawn Lerner — all characters associated with government or law enforcement before the collapse of society — had been Jeffersonian types inclined to rebuild a representative republic, they would have required years in which to do it. Moreover, then we must set aside the fact that among them only Rick has managed to stay alive for the two or three years since the zombie outbreak.

Even more to the point: There is no money in the society of The Walking Dead, even though all the characters at one time used it and had at least a passing understanding of the role it played in society. Clearly if a society is so degraded that even the institution of money has not yet arisen, we can scarcely draw any conclusions from the absence of a free-market arbitration agency or judicial system.

But why is there no money? Shall we consider the possibility that without the government, there can be no money? Shall we allow ourselves the suspicion (contra Carl Menger, Ludwig von Mises, F.A. Hayek, and Murray Rothbard) that money does not arise spontaneously in a society, but is the creation of the state? And if it does arise spontaneously in a society, why hasn’t it shown up in this one?

The short answer, of course, is that in the world of The Walking Dead, there really is no society to speak of. But surely Hornberger is not prepared to argue that society cannot exist until there is a government.

I suppose it is important here to note that a society can be free without there being a free market. It will necessarily be a primitive society, but its members can nevertheless enjoy a high degree of freedom, if not prosperity. All that is necessary for a people to be free, after all, is for them to live in a society where coercion has been rejected as a proper means of solving problems. In that respect, a free society can appear overnight.

But for more sophisticated understandings of freedom and free societies, no matter what one may think of the night-watchman limited government or free-market anarchism, the emergence of such systems takes time. And in the case of the latter, it, like money itself, cannot be designed. It will grow spontaneously over the course of many years, perhaps centuries, and then only if people are of a proper character. The nomadic groups of The Walking Dead cannot even be described as a “hunter/gatherer” society. So far — with the exception of the short period at the prison, and the little bit of hunting that only some of the characters undertake — none of the characters of The Walking Dead has even been doing much in the way of productive work. They all — even the Alexandria community — live on the remaining capital of their society, mostly by scavenging, completely dependent on the remains of a productive society that has ceased to exist. There can be and will be no civilization until the nomads settle down near a water source and start to produce food and other necessities for themselves. (We see these beginnings, perhaps, in the “realm” of “King” Ezekiel.)

And, of course, even then, they may be subject to endless raids from gangs, along the lines of a Magnificent Seven character like Calvera. Even under those circumstances — and so far, Negan seems to be fairly successful as raiders go — sooner or later, the raiders learn that it is more advantageous to “tax” their victims than to steal from them and kill them. And the state is born — as it always is — in conquest. (Negan has set the “tax rate” at 50 percent.)

Obviously there are ethical underpinnings that are necessary for a free and productive society to exist — there can be no such a society, for example, in which theft is taken to be an ordinary staple of life, as it is in some Eastern countries (even 2,000 years after they have been exposed to Christianity). But there are also what may be called the “technological” underpinnings. Can a free market exist in a society without double-entry bookkeeping? Can it exist in a society that uses letters as numbers (as nearly all civilizations have done at one time or another)? Can it exist if there is no alphabet? No doubt, commerce can exist, but can a free market?

I doubt it. (It is worth insisting that the absence of double-entry bookkeeping in the world of The Walking Dead is also not an argument for the necessity of government.) I will even make the stronger claim that although free-market anarchism operates as it does because it is based on the natural laws of ethics and economics, it probably cannot emerge except in a Western-type society. It is entirely possible that even the night-watchman limited government as Hornberger conceives it could not emerge outside that context. (I leave to others to deal with the question whether it had to await, per Max Weber, a Protestant Reformation.) There is certainly no historical evidence that it can.

But aside from all that, I return to the earlier point: no one establishes a free-market anarchism. It appears spontaneously, to be perfected, to be sure, when writers turn their attention to its nascent forms, discovering the natural laws at work in it — such as Ricardo’s Law of Comparative Advantage and Say’s Law that there cannot be demand without supply — and arguing for the goodness of such a system. Intellectuals such as Frédéric Bastiat and Gustave de Molinari must appear on the scene to help make explicit what is implicit in whatever noncoercive society might emerge, giving people confidence in the freedom they naturally possess.

For free-market anarchism (and the kind of night-watchman limited government Hornberger champions, for that matter) represents the triumph of the intellect. And intellectual triumphs do not come easily or all at once. The importance for free-market anarchism of the writings of a Murray Rothbard or a Roy Childs or the Tannehills, is not that they provide a blueprint for a society that could be erected overnight — or even over the course of years. Rather, they highlight for us what errors we are currently making in our thinking. And as those errors are corrected, little by little freedom can expand. If we cling to our errors, it will not.

And surely one of the errors most persistent in the West is that we need some kind of “final arbiter” with a monopoly of force to settle our disputes, to enforce moral principles (such as the One Law), and to embroil us in an endless attempt to overcome the Law of Contradiction.

January 6, 2017


Chapter Seven:
Somalia: Grasping at Straws


© 2017 Ronald N. Neff. All rights reserved.
Published in 2017 at The Last Ditch by Croatoan Books, a division of WTM Enterprises.

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