The Case for Private Security

Hans-Hermann Hoppe

Having reconstructed the myth of collective security—the myth of the state—and criticized it on theoretical and empirical grounds, I now must take on the task of constructing the positive case for private security and protection. In order to dispel the myth of collective security, it is not just sufficient to grasp the error involved in the idea of a protective state. It is just as important, if not more so, to gain a clear understanding of how the non-statist security alternative would effectively work. Rothbard, building on the path-breaking analysis of the French-Belgian economist Gustave de Molinari,9 has given us a sketch of the workings of a free-market system of protection and defense.10 As well, we owe Morris and Linda Tannehill for their brilliant insights and analyses in this regard.11

Following their lead, I will proceed deeper in my analysis and provide a more comprehensive view of the alternative-non-statist-system of security production and its ability to handle attacks, not just by individuals or gangs but in particular also by states.

There exists widespread agreement—among liberal-libertarians such as Molinari, Rothbard, and the Tannehills as well as most other commentators on the matter—that defense is a form of insurance, and defense expenditures represent a sort of insurance premium (price). Accordingly, as Rothbard and the Tannehills in particular would emphasize, within the framework of a complex modern economy based on a worldwide division of labor the most likely candidates for offering protection and defense services are insurance agencies. The better the protection of insured property, the lower are the damage claims and hence an insurer’s costs. Thus, to provide efficient protection appears to be in every insurer’s own financial interest; and in fact even now, although restricted and hampered by the state, insurance agencies provide wide-ranging services of protection and indemnification (compensation) to injured private parties. Insurance companies fulfill a second essential requirement. Obviously, anyone offering protection services must appear able to deliver on his promises in order to find clients. That is, he must possess the economic means—the manpower as well as the physical resources—necessary to accomplish the task of dealing with the dangers, actual or imagined, of the real world. On this count insurance agencies appear to be perfect candidates, too. They operate on a nationwide and even international scale, and they own large property holdings dispersed over wide territories and beyond single state boundaries. Accordingly, they have a manifest self-interest in effective protection, and are big and economically powerful. Furthermore, all insurance companies are connected through a network of contractual agreements of mutual assistance and arbitration as well as a system of international reinsurance agencies, representing a combined economic power which dwarfs that of most if not all existing governments.

I want to further analyze and systematically clarify this suggestion: that protection and defense are insurance and can be provided by insurance agencies. To reach this goal, two issues must be addressed. First, it is not possible to insure oneself against every risk of life. I cannot insure myself against committing suicide, for instance, or against burning down my own house, or becoming unemployed, or not feeling like getting out of bed in the morning, or not suffering entrepreneurial losses, because in each case I have full or partial control over the likelihood of the respective outcome. Risks such as these must be assumed individually. No one except myself can possibly deal with them. Hence, the first question will have to be what makes protection and defense an insurable rather than an uninsurable risk? After all, as we have just seen, this is not self-evident. In fact, doesn’t everyone have considerable control over the likelihood of an attack on and invasion of his person and property? Do I not deliberately bring about an attack by assaulting or provoking someone else, for instance, and is not protection then an uninsurable risk, like suicide or unemployment, for which each person must assume sole responsibility?

The answer is a qualified yes and no. Yes, insofar as no one can possibly offer unconditional protection, i.e., insurance against any invasion whatsoever. That is, unconditional protection can only be provided, if at all, by each individual on his own and for himself. But the answer is no, insofar as conditional protection is concerned. Only attacks and invasions that are provoked by the victim cannot be insured. However, unprovoked and thus accidental attacks can be insured against.12 That is, protection becomes an insurable good only if and insofar as an insurance agent contractually restricts the actions of the insured so as to exclude every possible provocation on their part. Various insurance companies may differ with respect to the specific definition of provocation, but there can be no difference between insurers with regard to the principle that each must systematically exclude (prohibit) all provocative and aggressive action among its own clients.

As elementary as this first insight into the essentially defensive—non-aggressive and non-provocative—nature of protection-insurance may seem, it is of fundamental importance. For one, it implies that any known aggressor and provocateur would be unable to find an insurer, and hence, would be economically isolated, weak, and vulnerable. On the other hand, it implies that anyone wanting more protection than that afforded by self-reliant self-defense could do so only if and insofar as he submitted himself to specified norms of non-aggressive, civilized conduct. Furthermore, the greater the number of insured people—and in a modern exchange economy most people want more than just self-defense for their protection—the greater would be the economic pressure on the remaining uninsured to adopt the same or similar standards of non-aggressive social conduct. Moreover, as the result of competition between insurers for voluntarily paying clients, a tendency toward falling prices per insured property values would come about. At the same time, a tendency toward the standardization and unification of property and contract law would be set in motion. Protection contracts with standardized property and product descriptions would come into existence; and out of the steady cooperation between different insurers in mutual arbitration proceedings, a tendency toward the standardization and unification of the rules of procedure, evidence, and conflict resolution (including compensation, restitution, punishment, and retribution), and steadily increasing legal certainty would result. Everyone, by virtue of buying protection insurance, would be tied into a global competitive enterprise of striving to minimize aggression (and thus maximize defensive protection), and every single conflict and damage claim, regardless of where and by or against whom, would fall into the jurisdiction of exactly one or more enumerable and specific insurance agencies and their mutually defined arbitration procedures.

9Gustave de Molinari, The Production of Security (New York: Center for Libertarian Studies, 1977).

10Murray N. Rothbard, Power and Market, chap. 1; idem, For A New Liberty (New York: Collier, 1978), chaps, 12 and 14.

11Morris Tannehill and Linda Tannehill, The Market for Liberty (New York: Laissez Faire Books, 1984), esp. part 2.

12On the “logic” of insurance, see Ludwig von Mises, Human Action (Chicago: Regnery, 1966), chap. 6; Murray N. Rothbard, Man, Economy, and State (Auburn, Ala.: Mises Institute, 1993), pp. 498 ff.; Hans-Hermann Hoppe, “On Certainty and Uncertainty, Or: How Rational Can Our Expectations Be?” Review of Austrian Economics 10, no. 1 (1997), reprinted chapter 14 herein; also Richard von Mises, Probability, Statistics, and Truth (New York: Dover, 1957); Frank H. Knight, Risk, Uncertainty, and Profit (Chicago: University of Chicago Press, 1971).

13On the relationship between state and war, and on the historical transformation from limited (monarchical) to total (democratic) war, see Ekkehard Krippendorff, Staat und Krieg (Frankfurt/M.: Suhrkamp, 1985); Charles Tilly, “War Making and State Making as Organized Crime,” in Peter B. Evans, Dietrich Rueschemeyer, and Theda Skocpol, eds., Bringing the State Back In (Cambridge: Cambridge University Press, 1985); John F. C. Fuller, The Conduct of War (New York: Da Capo Press, 1992); Michael Howard, War in European History (New York: Oxford University Press, 1976); Hans-Hermann Hoppe, “Time Preference, Government, and the Process of Decivilization,” in John V. Denson, ed., The Costs of War (New Brunswick, N.J.: Transaction Publishers, 1997); Erik von Kuehnelt-Leddihn, Leftism Revisited (Washington, D.C.: Regnery, 1990).

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