Art Carden  

The Use of Force in Society: Defining The State in Introductory Economics

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This is an edited version of my comment on this Reddit thread. OP had offered this quote from his microeconomics professor: "Government is the only institution which is allowed to hold a gun to your head and force you to pay for its services. That's the only way it can do business."

James Gwartney has tried and measured the leading textbooks in economics, and he has found them wanting. There is a lot of discussion of market failures and how governments can address them, but there is relatively little discussion of how people respond to incentives when they work for the government. Moreover, I don't think there's enough discussion of exactly what a state is and what it does.

When we're saying "the government should intervene," we're saying "an organization with guns should threaten to lock people in cages if they don't comply with its dictates." Yes, it would be very nice if governments were bargaining or just making suggestions, but we shouldn't be naive about the fact that governments are holding guns under the table--and in some cases, above the table.

Maybe we've all agreed to delegate authority to that organization, but violence is at the heart of what it means for an organization to be a state. Last week, I gave my principles of macro students Douglass North's definition of the state from "Structure and Change in Economic History": "an organization with a comparative advantage in violence, extending over a geographic area whose boundaries are determined by its power to tax constituents." Unpacking this just a little bit carries students toward a richer understanding of the world we actually observe, and it will be of primary importance when we talk about different economic systems and the ultimate causes of the wealth of nations.

Here are examples of standard material where defining and discussing the state is relevant:

Trade. There are multiple ways of encouraging cooperation; coercion is one, persuasion is another. Assumptions about property rights are embedded in exchange, though no textbooks of which I'm aware make this point. If you're going to trade with someone, then you are recognizing that your trading partner has the right (or the ability, backed up by force) to say "no" to your offer.

Price Controls. Who decides that we're going to have price ceilings or price floors? How do governments enforce them?

Externalities & Public Goods. Who taxes the bad ones and subsidizes the good ones if not a state? As Coase showed, the fundamental problem in these cases is that property rights are poorly-defined or poorly-enforced. With well-defined and well-enforced property rights Pigovian solutions are superfluous. John Nye explored this in detail in a 2008 article in Regulation.

Market structure and monopoly. Who does the regulating? How do they regulate? Is it wise to treat these regulations as free lunches (which most treatments do)?

Taxes and Subsidies. How do governments collect taxes?

Any market failure. If we treat the possibility of market failure as prima facie evidence that the government can intervene advantageously without giving serious thought to the possibility of government failure, we aren't thinking about the problem correctly and doing our students a disservice.

Public Choice. Public Choice gets the short shrift from most books and courses, to the detriment of all. Students can get a richer understanding of their world if we don't treat the state as a deus ex machina and instead seek to understand it as an organization comprised of people with their own goals, incentives, and bits and pieces of information.

I tell my students that economics as such cannot tell you which values to have or what is objectively right and objectively wrong. Economics is essential to careful moral and social reasoning, however, because it brings the trade-offs we're making--and the assumptions we're making about what we can and cannot do unto others--into high relief.


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COMMENTS (14 to date)
JKB writes:

I recently read, Civil Government in the United States (1902), by John Fiske. He opens the book with a story of a siege to illustrate the fundamentalism of taxes in government and society. He also points out a government is not long for this world if it cannot tax. The paragraph below highlights the impact of taxes upon all of history.

pg 2

The questions as to how much the taxes shall be, and who is to decide how much they shall be, are always and in every stage of society questions of most fundamental importance. And ever since men began to make history, a very large part of what they have done, in the way of making history, has been the attempt to settle these questions, whether by discussion or by blows, whether in council chambers or on the battlefield. The French Revolution of 1789, the most terrible political convulsion of modern times, was caused chiefly by " too much taxes," and by the fact that the people who paid the taxes were not the people who decided what the taxes were to be. Our own Revolution, which made the United States a nation independent of Great Britain, was brought on by the disputed question as to who was to decide what taxes American citizens must pay.

And, of course, all other government actions beyond the basic law and order, defense responsibilities of government are taxes in kind

Tom West writes:

"Government is the only institution which is allowed to hold a gun to your head and force you to pay for its services. That's the only way it can do business."

I'm not certain what the point is about government being the only entity that has the right to violence to enforce its dictates.

*Any* entity (including an individual) that makes rules must do the same. That I have something to pay with means that a government has made a rule that I have some right to my property and my safety, and enforces that dictate upon others with violence.

A government is simply the entity that is successful enough in its enforcement of its dictates that all other entities back down.

This is almost tautological. Even if I choose "not to have rules", all it really means is an on-the-spot violent enforcement of my personal dictate "I should not be killed and have my stuff stolen".

Pointing out that a successful government has a monopoly on violence maybe useful in making people think about what dictates they'd like to see government have, but in any meaningful sense, it's meaningless (so to speak).

The only thing that really matters is what dictates a government chooses to have, not its means for enforcing it.

Pajser writes:

One can reduce the notion of the state on the notion of the landlord. More exactly, as hierarchy of landlords is possible, the state is one on the top. The taxes are form of rent. The government is the management. Democratic states have additional, specific properties. State uses the violence, but every landlord (and every owner) uses it to defend his property. I once made citizen arrest of pickpocket.

You can ask your students what is the difference between state and landlord. Maybe the leftists will tend to agree and the rightist will protest. I guess there are very few leftist students of economics.

ThomasH writes:

I am still waiting for an explanation of how proper definition and enforcement of property rights will make the need for Pigouvian taxation of the externality of CO2 emissions "superfluous."

That said, I agree we would certainly get better policy making if we could build in more consideration of government failure and public choice into legislative and regulatory rule making.

Andrew_FL writes:

The difference, Pasjer, is that the Landlord has legitimate claim to his property, while the state does not.

Tom West writes:

The difference, Pasjer, is that the Landlord has legitimate claim to his property, while the state does not.

Real question here. Isn't *any* claim to property only 'legitimate' because it's enforced by a government (i.e. the organization which holds a monopoly on violence)?

As far as I can see, any moral or philosophical basis for property rights is only relevant because our current government is roughly simpatico with my moral or philosophical outlook.

Robert writes:

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Andrew_FL writes:

@Tom West-A legitimate claim to property is grounded in the labor theory of property or in the voluntary transfer of the initial claim to the property through succession of owners. It would be legitimate whether the state recognized it or not. The real problem is that without the government, others can violate your property claim with impunity. But the fact that they can do so, does not make it legitimate for them to do so. We are talking about Natural Law, to be sure-moral beings would recognize that to damage or steal someone else's property is wrong, ie against Natural Law. But recognizing that something is unlawful in this sense, is not the same as being compelled not to do it.

The Government isn't what makes your claim to property legitimate, it's what forces others to recognize your already legitimate claim to property.

Pajser writes:

I don't think that homesteading is enough to legitimize claim on property over territory. But, for those who do: homesteading is not necessarily individual. It can be organized by state or tribe as well. So, there is no reason for a priory denial of legitimacy of the state property.

Tom West writes:

Thanks.

I think the term Natural Law is a better one:

The difference, Pajser, is that the Landlord has claim to his property in accordance with Natural Law, while the state does not.

It makes it clear that you're referring to a philosophical concept, rather than the arbitrariness of legal principle.

Blissex writes:

«the Landlord has claim to his property in accordance with Natural Law, while the state does not.»

That's just senseless verbiage. Replace "Landlord" with "God", "King", or with "Society" for some amusement, as all such statements have been the basis for political systems that have lasted a long time.

But instead of focusing on the «claim to his property» side of things, I would focus on the «allowed to hold a gun to your head» and «force you to pay for its services» story, because it is completely false from a libertarian point of view in nearly every modern state.

Because whether *you* allow a State to «hold a gun to your head» is your personal choice.

Payment of taxes for state services is entirely voluntary in the USA and most other states: all you have to do is TAKE PERSONAL RESPONSIBILITY and live in another State.

If you don't like the price that the USA State asks you to pay for its services, get out of the USA and buy services from a State that offers you a better bargain you are willing to take. Shop around! There is a market in State membership.

it is like with condo management: you don't like yearly fees for the condo? Shop around and buy an apartment in another condo. If you *choose* to stay in that condo but you refuse to pay the yearly fees, you are STEALING THEIR PROPERTY.

Living in a first-world state and paying whichever level of taxes are agreed for its services is purely a VOLUNTARY BARGAIN OF MUTUAL ADVANTAGE, with NO COERCION whatsoever, because you can leave that State anytime you want, respecting any contractual exit clauses, just like in any voluntary bargain of mutual advantage, just like you can leave that condo.

A State only can only «force you to pay for its services» by «hold[ing] a gun to your head» when you try to leave. If they are not holding a gun to your head to prevent you from leaving, then staying is a voluntary bargain of mutual advantage. It may be not one you like, but it is still voluntary you may feel paid too little by working at McDonalds as a server, but it is still a voluntary choice.

If you can leave a State and thus refuse to buy the services it offers, there is simply no coercion.

Just like nobody forces you to shop at Wal*Mart or work for McDonalds: if you don't like the voluntary bargain of mutual advantage that you are offered by them just TAKE PERSONAL RESPONSIBILITY and leave their premises without buying or selling anything.

Froma libertarian perspective only moochers and looters eefuse to TAKE PERSONAL RESPONSIBILITY and instead of walking away from bargains that don't suit them and instead blamethe party who offered them a bargain that they can quite easily reject by leaving the vendor's premises and going to make a voluntary bargain in another one.

Blissex writes:

«force you to pay for its services.»

Put another shorter way...

Well, moochers and looters don't want to pay for services, and forcing them to pay for services they buy is anybody's right, to prevent moochers and looters from stealing other people's property.

What the State does not do in the USA and many countries is to force you to *buy* their services.

If you do not want to buy and pay for USA services, shop around and buy citizenship from another State. If you don't want to buy from the USA State shop, close down your account them, pay any contractual early termination fees, and open a citizenship account somewhere else.

Just take personal responsibility for living in the State that gives you the best bargain that you can afford.

cmprostreet writes:

"If you don't want to buy from the USA State shop, close down your account them, pay any contractual early termination fees..."

I can't reconcile the claim that staying is purely voluntary with the admission that you'd be required to pay "contractual early termination fees" on something for which no contract was signed by you.

Had Verizon placed a phone in my hand without my consent and with no contract, and then:
1) Charged me an early termination fee when I attempted to give it back or discard it
2) Required the dispute to be settled via VZWJustice, a subsidiary of Verizon,
3) Added credible threats to send me to VZWPrison if VZWJustice ruled in Verizon's favor and I still refused to pay, and/or
4) Ensured VZWEnforcement prevented me from traveling freely,
Would you agree the entire exchange had been voluntary and with no coercion?

Blissex writes:

«on something for which no contract was signed by you»
«Had Verizon placed a phone in my hand without my consent»

Really? So the jackbooted thugs of USA property owners held a gun to your parents for all 18 years of your minority to force them to reside in the USA with you, imposing on them residence in the USA without their consent?

Not only were your parents forced to reside in the USA but the same jackbooted enforcers of the USA property owners put a gun to your head on your 18th birthday to force you to be a resident in the USA and you were made to use the services of the USA like courts, police, army protection, roads, etc. without your consent?

Your parents and you absolutely refused to buy the residence product being sold by the USA, but you were both forced to buy it, gun to your head, for decades?

That sounds monstrous... :-)

Or perhaps "take personal responsibility" is something that moochers and looters really don't understand.

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