Re: The Sovereign State and Its Competitors

anonymous (
Tue, 1 Apr 1997 15:10:12 -0800 (PST)

Robin Hanson:
> It seems to me we are far from the point where the losses from
> moving are less than the losses from defending via central military
> coordination.

Since the free rider effect occurs in governmental as well as private
solutions to the public goods problem, the cost of a central military may
only need to be a significant fraction of the cost of a military loss for
defunding of the military to occur. That fraction is merely
somewhat smaller for the voluntary as opposed to
the coerced centralized solutions, but smaller enough so that
coercion has usually triumphed. Decentralized security will, when
it is a viable and widely recognized technological option, have far greater
funding, and thus the possibility of winning even in the face of substantial
battlefield inferiority.

Think of regulatory arbitrage, with taxpayers using various kinds of
mobility, in some cases of their investment funds, in some cases of their
persons. A person evading taxes incurs negligible increase risked of foreign
invasion due to the absence of their own tax payments in the pot. They do
incur increased personal risk from the tax collector. If they can use
decentralized security services to make that risk small enough to be worth
the savings, they will come out ahead of the game. Enough people come
out ahead of the game, and centralized coercively funded militaries are

In the U.S., tax rates are typically 30-40%, but military funding
represents less than 4% of GDP. So we have a 10:1 advantage for excludable
military technology, even before accounting for the efficiency gains to be had
from a competitive market instead of a legal monopoly, and before taking
into account the free rider effect, that in the decentralized case the customer
benefits directly from their expenditure, rather than benefiting at the
insignificant margin.

So, the question for futuristic analysis is how a decentralized voluntary "military",
which might take the form of cryptography, untraceable payments and
communications, cooked books, offshore corporations, hit squads to deter
tax audits, and so on, can fare against tax collectors. We see right away
that traditional centralized military solutions are useless in combatting this
decentralized threat. You won’t make a tax-evading Wall Street investor
pay by nuking New York City in front of the world’s TV cameras. Whether tax
collectors can find other solutions in this futuristic scenario is an interesting
question. The mortgage deduction is one powerful solution that has been
found for pinning people down on big chunks of fixed capital.

Of course, I don’t expect very many people working for a taxpayer-funded
institutions argue in favor of such tax defunding scenarios. There will
be a substantial lag between technological capability and cultural