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Why Not a Private National Defense
System?
A Discussion of the Modern Argument
By: Andrew Deckert
ASSC 2012 Essay
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Abstract
The paper at hand looks to the modern arguments as to why privatizing national defense
is not only improbable, but impossible. This paper not only looks to refute these arguments, but
goes further to explain why a state system is certainly not a better alternative to a private system.
The scope is strictly limited to the claims made by mainstream economists with very little
discussion on the possibility of the system. We know the system is possible and is far more
efficient, but the task at hand is to refute the fallacious claims made against the system.
Introduction
Since the founding of the United States, there has always been a great emphasis on civil
liberties as seen throughout the establishing documents. The inspiration of John Locke‟s
characterization of the state as the protector of life, liberty and estate, or property, made the
United States the first nation founded on such principles. Because of the foundation on such
liberties, the country became a very powerful nation in a time when only authoritative
monarchies existed that facilitated mediocre prosperity. As Locke writes, the reason why men
enter into society is “the preservation of their property; and the end…choose a legislative that
there may be laws made…it can never be the will of the society that a legislative should have
power to destroy that which everyone designs to secure by entering into society” (Locke 1988, p.
412). The Declaration of Independence echoes this principle of protecting the citizens of the
United States from such a legislature; Thomas Jefferson writes:
Whenever any form of government becomes destructive of these ends
[life, liberty, and the pursuit of happiness], it is the right of the people to
alter or abolish it, and to institute new government, laying its foundation
on such principles, and organizing its powers in such form as to them
shall seem most likely to affect their safety and happiness….it is in their
right, it is their duty to throw off such government, and to provide new
guards for their future security.
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We offer the suggestion that the Jefferson makes—to “throw off such government, and to
provide new guards for future security”—and explain the realities of this statement. The scope of
the paper is restricted to only the national defense system, and how it relates to foreign nations,
rather than discussing defense from within. More specifically, we seek to answer the question: Is
there any real truth in the claims made against a private national defense system, or is the world
greatly overdue for restructuring in this respect? There is no consensus amongst Austrians that a
privatized national defense system is possible—Mises writes, “government ought to protect the
individuals within the country against the violent and fraudulent attacks of gangsters, and it
should defend the country against foreign enemies” (2006, p. 37). Mises is perfectly justified in
saying this, but on the basis of what Thomas Jefferson set out in the Declaration of
Independence, our government has failed in these duties and must be replaced.
We believe that the basic economic principle of free markets being able to produce the
best possible good or service demanded by the market applies to national defense systems, and
that the Molinarian-Rothbardian explanation of privatized national defense would provide
efficiencies in all areas where state-run systems fail. We will look at several general arguments
that are made against a privatized system and look to explain where the claims go wrong, while
also answering many questions that arise through skepticism of the privatized system.
The Claims and Refutations for a State-Run National Defense System
Before we begin this discussion, we should first mention the most perverse fact regarding
state national defense systems that most readily refutes any claim for them. In themselves, state
defense systems are great contradictions, and as Walter Block writes as the thesis of his essay,
“To argue that a tax-collecting government can legitimately protect its citizens against
aggression is to contradict oneself, since such an entity starts off the entire process by doing the
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very opposite of protecting those under its control” (2003, p. 304). He goes on to explain that the
state does two things that contradict its role: (1.) it forces its citizens to participate and (2.) it
prevents all competition. This statement at the very outset catches all who claim the necessity of
a state system in an impenetrable contradiction.
The Free Rider and Public Good Issue
The claim states that because national defense service is a good that is nonexclusive and
nonrivalrous in nature, it is not possible to fully capture the benefits that a national defense
system provides, and that there is a natural “spill-over” that tends to occur for those who have
not helped to pay for it. These people are said to be free riders. There are many problems with
the free rider argument in itself and whether it regards to national defense or not. However,
because the issue at hand is regarding this topic, there is a refutation that is unique to national
defense itself.1 Two problems arise here. First, this creates forced riders of those who believe
they do not require the services of a defense system, and that they are perfectly capable of
defending themselves. If this is the case, one might imagine an interesting scenario where
defense agencies designate targets for terrorists for whom the defense agency will not intervene
if the terrorists were to attack such target. On a national level, this could be a village, state,
country, etc…, but the fact is, if this case were to occur, it provides a greater incentive for more
individuals to be under defense contract with the defense agency.
The second problem, which the United States might not mind, but then again, should
anger the citizens being coerced, is the very claim for a state-run system to prevent “free riders,”
creates more than would otherwise exist. Recent studies have actually shown that foreign nations
have reduced their state spending because of the incredible U.S. military presence around the
1
(Rothbard 2009b.) has taken up the issue of the free rider problem as it relates to public goods. He explains that
entrepreneurs are always able to find ways to distinguish between customers and non-customers, and can always
gain a revenue. He uses the Coase-lighthouse example to prove this is so.
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world (Bandow 2006, p. 31), (Preble 2009, pp. 94-95). So if this is the case, to be consistent,
should the United States then be able to collect some compensation fee from these nations for the
spending that makes domestic defense budget cuts possible? We would never think it possible to
tax other nations, but to be consistent in the free rider claim and prevent this externality from
“spilling over,” they must somehow contribute financially.
Defense Services are Too Expensive
There is a very common claim that many individuals hold to when debating the issue of
how defense services should be provided that the incredible cost associated with production is far
too great for a private firm to bare. What this claim greatly misunderstands is how excessively
large the national defense systems around the world have become and that a privatized system
would not be nearly as large. In beginning this discussion, we look to Molinari‟s work, originally
published in 1849, mentions many of the recurring inefficiencies associated with a state-run
national defense system being emphasized in popular literature today (Murphy 2002), (Block
2003), and (Hoppe 2003). Molinari writes, “You forthwith see open up a large profession
dedicated to arbitrariness and bad management. Justice becomes slow and costly, the police
vexatious, individual liberty is no longer respected, the price of security is abusively inflated and
inequitably apportioned” (2009, p. 58 emphasis added). More so, we see a trend that as the state
grows in size and becomes more centralized, as it has over the past century, these inefficiencies
grow along with it.
The reason why the many issues exist is because of centralized governments‟ lack of
ability to engage in economic calculation. Economic calculation is the whole process in which
determines what a profitable investment is and what it is not. It determines how resources should
be allocated in order to achieve the greatest efficiency and return on inputs. This is the main and
most severe consequence of a state-run defense system. The government cannot engage in
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economic calculation to determine how much security should be provided, what type of security
should be provided, or how resources should be allocated to achieve these desired levels. The
state always ends up being inefficient in all three categories: producing too much, not producing
the right type, and squandering a great deal of resources in the process. To summarize this
concept we look at what Hoppe (2003, p. 344) has written:
The further question of how much security to provide would arise. Motivated by
self-interest and the disutility of labor but with the unique power to tax, a
government‟s answer will invariably be the same: to maximize expenditures on
protection...and at the same time to minimize the production of protection.
Furthermore, a judicial monopoly must lead to a deterioration in the quality of
justice and protection.
This whole process creates a significant misallocation of resources as revenue is taken out of
private hands, where the market would have freely determined these three questions, and into
state hands, causing distortion of the market. Industries that would be invested in, in the free
market, are reduced due to the lack of investment, and industries that would not be invested in as
much, would grow. Such is the case in the armament industry and its ancillary industries to it,
where incredible growth exists at the cost of the other industries.
However because private defense agencies are businesses, they have incentives to
minimize costs in order to maximize profits, as opposed to a state-run defense agency that acts
only under a virtual budget that freely fluctuates according to the policies and campaigns being
pursued. This being said, the revenue that is used to ultimately cover costs must be created by
satisfying consumer preferences, not by endlessly generating it through coercion tactics of
taxation, inflation, and debt. The government has a moral hazard that would not exist on the free
market, to constantly overextend production beyond what capital investment would allow for. In
doing so, private agencies are naturally kept in check through limiting the extent of their
operations by the amount of revenue they are able to produce. Through economic calculation,
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entrepreneurs are able to answer the three questions that the government cannot: How much to
spend on defense? What type to provide? And most importantly, how much to provide? These
are all determined by the market for defense services, and the most successful entrepreneurs will
supply the service demanded at the lowest price for consumers. On this, Hülsmann (2003, pp.
404-405) writes:
Moreover, since in a free society, there would be various defense
organizations competing for the same human and material resources,
these organizations would be embedded in a system of market prices.
Hence, they could use the precious yardstick of economic calculation to
select the most efficient technology and the most efficient form of
military organiation for any defense problem at hand.
Entrepreneurs will never fall victim to the same failures that engulf the government when trying
to provide defense services. Market principles ensure that productivity prospers and resource
squandering is removed from the market, thus ensuring an efficient market for defense.
Defense Services are Unlike Other Goods in the Market
Another popular claim is that defense services by their very nature are unlike any other
product or service, and therefore must be provided by the government who alone has a monopoly
over the production process. The main problem here is what we have briefly explained already
regarding what happens when a government should fail in its duties—that it must be replaced
with a more efficient system that satisfies the needs of society. If the government is given
monopolistic privileges, Rothbard writes, “The State then uses this monopoly to wield power
over the inhabitants of the area and to enjoy the material fruits of that power” (2003, p. 70), or in
other words, the government exercises its ability to engage in whatever it pleases free from
consequences, while using the resources violently coerced away from its citizens. Mises
elaborates on this claim and explains the interventionist idea that the market economy is only a
system during peacetime, but when war comes, government control is required (2008, p. 821). If
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this is the case, then the government will necessarily engage in perpetual war in order to
maintain this power.
The underlying claim to this argument is that defense services do not behave like any
other goods in the market. On this, we turn to the first individual to offer the idea of a privatized
defense system from a Libertarian perspective, Gustave de Molinari. He begins by claiming the
necessity for free competition in national defense. We quote Molinari (2009, pp. 22-24) at great
length:
The production of security should, in the interests of the consumers of
this intangible commodity, remain subject to the law of free competition.
Whence it follows: That no government should have the right to prevent
another government from going into competition with it, or to require
consumers of security to come exclusively to it for this commodity…One
economist who has done as much as anyone to extend the application of
the principle of liberty, Charles Dunoyer thinks “that the functions of
government will never be able to fall into the domain of private activity.”
Now here is a citation of a clear and obvious exception to the principle of
free competition.
Molinari (2009, pp. 25-26) breaks down this claim on the basis of natural laws and economic
laws when he writes:
It offends reason to believe that a well-established natural law can admit
exceptions. A natural law must hold everywhere and always, or be
invalid. I cannot believe, for example, that the universal law of
gravitation, which governs the physical world, is ever suspended in any
instance or at any point of the universe. Now I consider economic laws
comparable to natural laws, and I have just as much faith in the principle
of the division of labor as I have in the universal law of gravitation. I
believe that while these principles can be disturbed, they admit of no
exceptions…The production of security should not be removed from the
jurisdiction of free competition; if it is, society as a whole suffers a loss.
Either this is logical and true, or else the principles on which economic
science is based are invalid.
Molinari has sufficiently demonstrated the flaws regarding the claim that defense services
are unlike any other product in the free market, in that they require the government to have a
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monopoly over production to ensure the most capable production possible.2 The last claim that
we will address here is the belief that the United States has the responsibility to ensure global
stability given its unique position as an economic super power. On this issue, we refer back to
what we mentioned earlier about free riders existing around the world as a result of the United
States‟ dominant military presence. Nowhere in the Constitution does it talk about the necessity
of engaging in global hegemony in order to protect domestic liberties.
How perverse is it that our government says we have a “global responsibility” to ensure
stability for the rest of the world, and then it increases taxes to make this possible? Many more
problems exist outside of this moral realm, but the main issue that will be addressed is the moral
hazard that exists in this. The government produces the propaganda idea that “there is impending
catastrophe if U.S. military spending is cut” and “the United States must act as the lynchpin of
the international order” (Preble 2009, p. 66). An article by the Cato Institute elaborates on the
excessiveness of government attempts to maintain global stability; the authors write, “these days
policy makers want the U.S. military to contain China; transform failed states into stable
democracies; chase terrorists; train various foreign militaries to chase terrorists; protect sea lanes;
keep oil cheap” and many other policies (Friedman and Preble 2010). The United States does not
and will never have a global responsibility to maintain stability; any claim to do so has some
other interest in mind that is fueled by moral hazard.
Laissez-faireist Claims
The following three claims made by laissez-faireist Rothbard (2009) addresses and
critiques. The first suggests that there a free market system of exchanges must first presuppose a
system of property rights that underlie the whole process. Moreover, this system must be
2
(Röpke, 2007b. pp. 177-195) goes through the analysis of how states fear competition. This directly supports
Rothbard‟s claim regarding governments exercising monopolistic privileges to reap the fruits of the privilege.
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overseen and defined by the State in order to have an understanding amongst all participants. It is
right to say that there are principles of a free society that do imply such a theory of property
rights, namely, self-ownership and the ownership of natural resources under an individual‟s
labor. These rights are inherent for members of a society and are recognized by all as it is in
every member‟s interest to have such rights (Rothbard 2009, p. 1049). Therefore, the suggestion
that a state is needed to define such rights is greatly misleading as the market can determine this
by itself. The process by which the market does determine these rights is far better than a system
defined by the state as there would be no arbitrariness in the system, but rather only content that
is for the advancement of society.
A similar claim made by the laissez-faireists is that defense is a necessary precondition to
market activity, and if there is to be a free market for trade, then the state must first supply
defense services so the market economy can exist. Rothbard writes in response to this claim,
“This argument is a non sequitur that proves far too much. It was the fallacy of the classical
economists to consider goods and services in terms of large classes; instead, modern economics
demonstrates that services must be considered in terms of marginal units” (2009, p. 1049
emphasis Rothbard‟s). All actions in the market are marginal. If whole classes of goods were
treated otherwise, then an entire selection of goods could be written off as “preconditions” to
market activity (i.e. land, food, clothing, and shelter). This claim narrow mindedly believes that
these goods can only be provided by the state and completely disregards their availability and
production in the free market. As we quoted Molinari before, defense services are no exception,
and follow the same principles.
The final claim the laissez-faireists make is the assumption that there must be a single
compulsory monopoly of coercion and decision-making in society. This must be the case or else
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there would be endless contradictions between agencies over what the law is. What the laissezfaireists fail to recognize in this claim is the idea of how the world has managed throughout
history without the existence of such an institution. Rothbard uses the Argentinian as an example
when he writes, “He lives in a state of „anarchy,‟ of nongovernment, in relation to the citizen of
Uruguay—or of Ceylon. And yet the private citizens…live and trade together without getting
into insoluble legal conflicts, despite the absence of a common government ruler” (2009, p.
1050). It has become too widely accepted that society requires a Supreme Court-like institution
that oversees all the law that people can no longer imagine a world without it. Moreover, people
fail to see the failures that are inherent in such an institution and do not understand the need to
find a solution that they can benefit from. On a national level, there would not need to be such an
institution that oversees international law if societies were left to create their own systems that
defend property rights and allow development.
The Claims Against and Refutations for a Privatized National Defense System
In this section we address the paper‟s sole purpose—to assess how a privatized national
defense system would be superior to a state-run national defense system, and how individuals‟
wellbeing is actually better under the privatized system. In doing so, we fulfill Jefferson‟s call to
replace any system of government that is not fulfilling its duties. At the very outset of this
argument, we must first address certain claims against a private national defense system—claims
that say it could never work. These claims differ from the ones previously addressed because
they are focused on specifically attacking the claim of a privatized system, rather than the
previous ones that just supported a state-run system. Eland makes the comparison between now
and when the Constitution was written, claiming that the single greatest complaint was that the
citizens were the ones who ultimately paid for the kings‟ foreign military adventures (Eland
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2001). Now, history has reverted back to the mid-1700‟s where individuals once again pay for
the government‟s military campaigns, yet people hardly recognize that this is the case.
The Isolationist Myth
The first claim to be addressed is one that began in the early 20th century and has
developed with every conflict since then. It is the claim that engaging in a private defense
system, which implies little intervention in foreign affairs, creates a sense of isolation of the
nation. So, to put this in other terms, the claim is that because under a private national defense
system there would no foreign intervention, the nation ultimately is put in a state of isolation
where little trade occurs and the division of labor is highly restricted. Let us take the example of
World War I, when the United States was able to maintain a state of neutrality in the early part of
the war.3 In this state of “isolation” as the critics would call it, the United States was able to take
advantage of trade blockades amongst the fighting nations, and reaped all additional trade to be
had. In doing so, the economy grew greatly and the United States gained a greater market share
in the world market for many different products (Higgs 1987). Contrary to the critique of
isolation, this proves that adopting a non-interventionist strategy actually boosts the economy, as
a greater market presence is earned and more trade is conducted.
Moreover, Paul has written a great deal regarding a policy of isolation. He writes that, in
regard to the critique, “Nothing could be further from the truth. The image of a nation walling
itself off from the rest of the world is impossible in a free society and, ironically, is exactly what
eventually happens under interventionism” (2007b., p. 58). A privatized military system in all
cases would remain neutral and only engage militarily in the case of being attacked domestically.
3
There is discussion that exists that the U.S. actually favored the allies from the beginning, but that is irrelevant for
the point being made. Additionally, the point being made is that a non-interventionist policy facilitates a greater
division of labor as the market is much greater and the economy is able to grow. We recognize that a state-run
military still existed during this time period, but the method in which it was conducted is in no way symmetric to
how it would function during the war.
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In this case, it is not isolationism to destroy the nation, it is “strategic independence” to allow the
nation to maintain trade relations with the rest of the world—relations that ultimately are cut off
when national defense is organized under the state.
Monopolization Under a State-figure is Inevitable
The next claim is made by a critic of Rothbard‟s, Robert Nozick. Nozick makes the claim
that ultimately in the long run, defense services will shift towards a monopoly firm that can
always produce the service at a lower cost than multiple firms. So, without interfering with
private property at all, a state naturally arises. This follows the Hobbesian-Leviathan argument,
but conceptually is not sound, as it lacks economic theory. One problem with this argument that
Rothbard addresses is that if it was a monopoly, people could withdrawal from their contracts
because there is still a voluntary society that allows so. If this were true of monopolies, then the
concept of consumer sovereignty would not exist and producers would be able be able to take
advantage of a perfectly inelastic demand curve and abuse consumers with ever increasing
prices. Another problem exists in Nozick‟s suggestion of the end result being a “monopoly,” as
we know that monopolies only truly exist as a result of government privileges as is the case with
the current military system. This whole claim crumbles under this very assertion of a monopoly
arising in the free market. As Rothbard has explained, if a monopoly were to occur, then its
existence would only be temporary as competing entrepreneurs enter into the market and steal
away a certain part of the market share (Rothbard 2009, pp. 661-702).
Rogue Agencies
Another argument Rothbard addresses is the possibility of rogue agencies, or, rather the
question of what prevents a defense agency from going rogue? The market is a grand
counterexample to this. Firms do not intentionally do destructive things to those who purchase
their goods or services. It would decrease profits in the long run and further decrease the overall
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wellbeing for society. Going rogue, could only work if legal rights were not violated, and the
firm could not be adjudicated for harming other‟s rights. The incentive to engage in such an
action as going rogue implies that entrepreneurs would find it to their advantage to use coercive,
rather than market, means to achieve their ends. Aside from immediately being put down by
other defense agencies, the firm would not exist in the long run. Once it performs a coercive
action against consumers, it resembles that of the government, and will then no longer be able to
attract consumers, causing their market share to be distributed among the rest of the competition
(Tannehill and Tannehill 2007, pp. 139-141). The bottom line is that it is never more profitable
to act outside of the principles of the free market.
It should be noted that in an absolute free society, war would not exist. In a society of
national and international private defense agencies, there would be no incentive to aggress
against another agency because (1.) it would immediately cause the isolation of society and
imminent removal from the international division of labor—Molinari writes, “Under free
competition, war between the producers of security entirely loses its justification. Any aggressors
would be put down because that is where the incentive lay” (2009, p. 59). And, (2.) it is costly,
and no incentive could possibly exist to squander resources on such an effort. To support this
second idea Mises writes, “within a world of free trade and democracy [the form Mises means
here is a very limited democracy, very different from what is claimed to exist today] there are no
incentives for war and conquest” (1985, p. 3). We end our analysis comparing the two systems of
national defense with another quote from Molinari that supports our notion of peace; Molinari
writes, “Just as war is the natural consequence of monopoly [or defense services under the
government], peace is the natural consequence of liberty” (2009, p. 59). If the privitization of
national defense were to occur on an international level, we would see the end of war as we
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know it, and the rise of peace would emerge with a fully integrated division of labor in a world
market along with it.
Private Organizations are Mercenaries and are therefore Ruthless and Unethical
Regarding the topic of what investment for the private agencies would look like, the
weapons and technology used would be defensive-oriented—long-range high precision laser
guns to take out the aggressor specifically—as opposed to weapons of mass destruction that
destroy the entire area around the aggressor‟s location (Hoppe 2003, p. 359).4 Joesph Stromberg
(2003) cites an incredible amount of historical scenarios where different guerrilla militias
defending their homelands adopted strategic warfares that triumphed over opposing state
militaries. He writes, “there is no absolute distinction between militias and guerrillas. „Guerrilla
warfare‟ refers to tactics and style rather than to preexisting force-structure…Militias, with their
smaller size and greater mobility, are well suited for such warfare” (Stromberg 2003, p. 223). He
goes on to explain how, when a more defensive strategy is adopted, the private military is able to
adopt tactics that are conducive to the landscape in which they are fighting, such as the Viet
Cong guerilla fores in the Vietnam War.
There is great criticism that because guerrilla militias do not respond to an authority
figure, they are savages and do not follow the “laws of war” developed by states over centuries
of fighting. Firstly, they do respond to a higher authority—the one whom they are employed by,
but also there is a natural law inherent in their actions that cause them not to act contrary to the
civilization they desire to live in. The militias cannot freely aggress and violate non-aggressors,
or they too would need to be put down. Secondly, why does it matter if they act “savagely” in
4
Robert Murphy (2002) mentions that in anarchist societies, there would never be the development or ownership of
nuclear weapons. Rather, it is recognized that there is nothing to gain from foreign conquest. Instead, the same high
precision weaponry that Hoppe suggests would exist. Also, Murphy mentions that defense agencies would possess
the smartest code breakers and the most powerful computers to collect intel legally, and have the best pre-emptive
defense strategies compared to a state-run system.
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war? Mises writes, regarding modern war, “it does not spare pregnant women or infants; it is
indiscriminate killing and destroying. It does not respect the rights of neutrals. Millions are
killed, enslaved, or expelled from the dwelling places” (2008, p. 828). Yes, the members
conducting war in a privatized system may act savagely, but they are far less savage than the
operatives of statist warfare.
If we were to put Pentagon generals against professional military tacticians, the fallabiilty
of the former will immediately be recognized (Murphy 2002). Where the government cannot
justify its actions to aggress other nations, the free market can, but only in the case where
liberties have first been violated. Generally, this justification is called “Just War.” It is possible
for the free market to engage in “Just War” because of the five principles instituted by
Augustine, and the two that came later by Aquinas. In fact, the Pope, although he has severe
opposition to war in the first place, has made similar statements regarding the AugustininanThomist doctrine that war must be defensive (Rockwell 2003).
Larger States would Easily Overwhelm the Private Organizations
This brings us to the final issue we address—that foreign state governments could easily
overwhelm small private defense organizations, and that a centralized state is the only way to
prevent hostile takeover. At the outset of this argument, people who make this claim confuse the
entire claim of a privatized national defense system over a statist system. There is no
disagreement that a large state could easily overwhelm a small private organization; the point we
are making is that the method in which the organization is conducted will always be more
efficient than that of a state-run system. If we do choose to refute the claim though, one can
imagine the scenario Hans-Hermann Hoppe suggests regarding the collaboration of private
organizations. Hoppe (2003, p. 347) writes:
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They [private defense agencies] 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 existing governments.
In short, if there is an aggressive state that exists to destroy private national defense
organizations, then it is in the interest of all the organizations to collaborate, pull resources, and
put down the aggressor. Any claim to be made against a privatized system has to first reject that
the free market always provides the most efficient goods or services that satisfies consumer ends.
It is generally recognized that privatizing national defense actually precludes foreign aggression,
thus making the likelihood of these attacks from larger states very unlikely (Stromberg 2003),
(Hoppe 2003), (Hülsmann 2003), and (Murphy 2002).
Concluding Remarks
There has been a great deal set out in this paper regarding state-run national defense
systems and privately run national defense systems. We have addressed several claims by
mainstream politicians and economists as to why a private system could not exist, and claims to
why only a state system can exist. In both categories of claims, their validity is called into
question given certain scenarios, economic theory, or just plain inconsistencies. There are several
inefficiencies that exist when the government is in charge of planning the defense system, the
most severe being the government‟s inability to engage in economic calculation. This causes the
government to provide national defense in ways that are not demanded by the market, and in
amounts that do not meet the market demands, thus causing further inefficiencies. The
government overextends its resources and maximizes its expenditures only to have production of
real defense minimized. Most importantly, when the state is in control, liberties are put in great
danger.
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However, a privatized national defense system, which determines all its decisions
through economic calculation, is the only way that the market demand for security can be met.
More so, the system would be geared towards defending its customers domestically instead of
engaging potential enemies abroad. In no way is there any incentive to even engage aggressors
abroad because there can never be a reason to go to war. Rather, if engaging an aggressor were
necessary, the defense agencies would have invested in long-range precision defense weapons
that allow engagement without leaving domestic territory. Moreover, in a world that has become
fully integrated by an international division of labor, it would be in everyone‟s interest to
maintain that trade relation. It is as Mises has written, “the emergence of the international
division of labor requires the total abolition of war,” and it is only through an international
division of labor that social welfare can be maximized (2008, p. 831).
In summary, the theories we have set out are by no means improbable, but rather, are
required if society is to ever truly develop. Wilhelm Röpke has written two books (2007a.) and
(2007b.) that present in-depth analyses of what a world of disintegration looks like versus a
world of integration. Only the latter can exist in a world of private national defense systems, and
until the world reaches that point, it will never be as productive as it could be.5
5
Ron Paul made a comment (2007a. 367-368) that the United States will not change its foreign policies around the
world unless a financial collapse occurs. The coming years provide a great amount of potential for the world to
move towards the state we set out in this paper, and as more scholars write on the possibility of privatizing national
defense, the closer it will be to becoming a reality.
Page 19
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