On Stefan Molyneux’s Proof of Anarchism

In a recent podcast interview, Molyneux, in the course of expounding on anarchism, seemed to imply that the actions of the State implicitly proved anarchism because State actors had no means to self-enforce their own contracts. I’ve heard this argument before from Molyneux. But it’s not one that particularly holds up under an economic and/or rational choice analysis.

A public choice analysis of the State begins by assigning it rational agency. The possible commitment problem that arises from this rational agency is not the dissolution of the State as a DRO, but rather that the State, as a firm, will compete against it’s supposedly “socially contracted” ends. In plain terms, what we mean by this is that the State primarily becomes a DRO firm enforcing an ends of State Capitalism.

That State actors do not have explicitly enforceable contracts between themselves is not proof of an implicit anarchy within the political class. This assumption is debunked by Nobel prize winner Oliver Williamson’s treatment of the firm. The existence of a firm is a hard thing to explain in economic theory. Williamson, however, solved this problem by identifying the firm as a form of economic governance, a DRO that supplants mutually enforceable contracts among trading partners with a type of hierarchy as means for a more efficient pursuit of an economic end. We explain the firm, even in a “free market,” as a form of economic governance to reduce bargaining costs among trading partners in the pursuit of economic rents.

The firm, then, explicitly eliminates the contractual bargaining between trading partners. Absence of these contracts then is hardly evidence of anarchy. Rather, it’s simply evidence of “the firm.” Anyone who doubts the efficacy of the US Government as a DRO firm only has to look at TARP and the bailouts to empirically verify the actual effectiveness of this agency. Molyneux simply mistakes the functioning of the firm with that of an implied anarchy.

Indeed, my contention is that if actually take Public choice seriously, you are eventually forced to confront a rather chilling conclusion: explicit attempts to introduce strong friction into the State, for example, Madisonian Constitutionalism, essentially guarantees an oligarchical, total state firm outcome, one largely shielded from reform. How is this so? The flaw with the idea of competition of powers within the State is that competitive entry in a rent-seeking game with a high degree of institutional costs can massively waste real resources for a transfer of no real rents(the costs >> total rent). Competitive entry of equal players will not be the equilibrium in this game. The players will adjust by colluding around an (State Capitalist) institutional pattern to reduce the institutional costs of rent-seeking. Madisonian Constitutionalism, in a sense, incentivizes the formation of the “State as a Firm.” “The Firm” gets around the obstructions put in place. But these same obstructions make any possibility of a democratic reform/correction fairly remote. The United States, as it turns out, is a great blueprint for an eventual and inevitable “total state firm.”