A Hayekian Case Against Anarcho-Capitalism: Of Street Grids, Lighthouses, and Aid to the Destitute

Murray Rothbard and other anarcho-capitalists would abolish all governments. Individuals instead would voluntarily subscribe to the services of one of a number of competing private protective associations. This vision is a pipe dream. Building on the ideas of small-government classical liberals such as Friedrich Hayek and Milton Friedman, I first identify some utilitarian programs that, on account of transaction costs, overlapping protective associations could not realistically provide. These include the assembly of land for major public works and the control of air pollution. Second, and more fundamentally, competition among rival protective associations within a given territory would not long endure. On account of efficiencies of scale and scope, the provision of governance services is a natural territorial monopoly. Anarcho-capitalists, by imagining a stable system of competing private associations, ignore both the inevitability of territorial monopolists in governance, and the importance of institutions to constrain those monopolists’ abuses.