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Protection from fraud

One common baseline cited for libertarians to agree on is that government power should be limited to only the power to defend against force and fraud.

Anarchist libertarians, or anarcho-capitalists, believe in shrinking government as we know it to zero. There would no longer be a single institution claiming jurisdiction over all people within a certain geographic region as its citizens. People would still be permitted to form their own institutions for protection (and these institutions might be called governments), so long as these institutions did nothing immoral, that is, anything that would infringe the right to life, liberty, or property of anyone, such as theft (including taxation as we know it), enslavement (including conscription, compulsory schooling, compulsory citizenship, regulation, licensing), etc. Anarcho-capitalists are generally agreed that there IS a law, and that under a system of true freedom anyone whose rights were violated would be morally authorized to punish the violator, or delegate the right to do so.

In an anarcho-capitalist world, what could be done about fraud? Who is watching businesses to make sure they don't take advantage of people? Who will punish them if they do something wrong?

The answer is that these protections under anarcho-capitalism are stronger than they are under our system of monopoly government. Even if you don't assume that people actually go out and threaten justified force against perpetrators of fraud to reclaim their losses.

Under today's system, the government promises to eliminate fraud through regulation and legal action. Of course, then can never be accomplished perfectly. There will always be fraudsters who get away. The resources the government has to go after them will always be limited, so they will always have to pick and choose who to prosecute. Richer people will be more able to afford to navigate the expensive and unwieldy government system to get their rights protected.

If things don't go perfectly, the government won't admit failure. Instead they will promise that with a few changes (a new election with new officials, getting the "right" people in office who can "make a difference" (by ignoring something else that should be a priority), adding a few regulations, giving government a few more powers), eventually the problem can get better and better and axiomatically approach being fixed. The cry will not be "look at the bad job government does because of centralization"; instead it will be "look how bad things are with all this help we're providing; think how bad it would be without us! The market would never make it without this kind of protection."

All the while, government is promising that most fraud problems will be eliminated, and therefore people conclude that they can trust businesses that the government has allowed to exist, either through licensing, regulation, certification, or simply by virtue of not being shut down. How many times have you heard someone say, "If this business were doing something wrong, the government would shut them down?" When people say this, they are according a business a higher level of trust than they would in a completely free market with no big government promising to protect them.

An environment with these unnaturally elevated levels of trust makes fraud worse.

Without government promising to make all businesses trustworthy, people would realize that they shouldn't trust someone without a good reason. That good reason might be a proven track record. For example, people will trust someone they've had a longstanding positive business relationship with. Or they will check with their contacts, friends, and acquaintances when seeking out a new service provider to find someone trustworthy. Or they will look for an accreditation agency or professional organization with a good reputation (checking out its trustworthiness, first), then find a business certified by that agency.

In our system, we try to make trust start at 100% and fix the problem later if something goes wrong. In the real world, the world that would exist without government pretending it can offer us perfect protection, trust would start at zero and build from there.

A new business trying to get established will have little trust. It will need to compete in some way: by offering services that cannot be provided elsewhere, by offering a lower price, etc., until it is established with a reputation for trustworthiness. If they want to last, they will not be able to afford to commit fraud.

Everyone will think of new businesses with no history and no reputation as having trustworthiness zero. Everyone will know not to contract with such businesses unless they are getting a deal so good it makes it worth the risk of finding out that the new business is untrustworthy. It will simply be common knowledge.

If you think this sounds very similar to ebay's feedback system, then you are right. On ebay, your feedback starts at zero. Check out auctions for a commonly available item on ebay sometime. Watch the prices these auctions close at. Observe that sellers with five-digit feedback scores sell their wares at higher prices than sellers with one-digit feedback scores. Sellers with a proven track record are considered more trustworthy. Sellers without this proven track record need to compete to build one, and one way they compete is by selling at lower prices, at prices so low that some buyers (not all) believe that transacting with them is worth the low amount of money risked. You'll also observe that new sellers have trouble selling, or have to sell at lower prices, if they don't accept credit cards (through paypal, or otherwise).

Ebay's feedback system is just one of many possible free market mechanisms that can arise to allow buyers on the market to swap information about sellers and make the trustworthiness of a seller visible. Entrepreneurs will be able to design thousands more, and can make a lot of money serving people in this fashion. But since the government claims to be the answer to all fraud, this market is stifled. These better mechanisms have no reason to come into being when we all think we don't need them.

In a free market, retailers will be an important line of defense against fraud. If you purchase Dr Pepper at Target, and Target provides an inferior product, you'll quit buying at Target. And some entrepreneur somewhere will be able to make a profit by serving you in your desire for quality Dr Pepper. In a free market, to make money long term you have to consistently serve people well. Untrustworthy or low quality sellers can start over and over again at feedback/trustworthiness zero, but they'll never be able to cater to those who want to spend more money with retailers who have a proven track record for quality and honesty.

Boycotts have been organized over and over again to try to influence the marketplace. Many of these have had wonderful effects, including winning liberty in some cases. But far, far more of these boycotts fizzle and die out, forgotten. It's hard to motivate people to quit purchasing a product or service that serves their needs or desires. BUT, if a seller is providing an inferior product, defrauding its customers, the response will be more powerful than any boycott. That fraudster will see demand for its service or product plummet as people go to someone else who can do the job honestly. He'll either go out of business entirely, or cater only to people who are willing to deal with cheap quality knockoffs or shoddy work in order to save a few bucks.

I mentioned credit cards in conjunction with ebay, above. Credit cards have given another great example of market-based protection against fraud. Most credit cards have an agreement with their cardholders whereby they guarantee purchases. Get ripped off online by someone who accepted your card, and your card company will often give you your money back and get it back from the fraudster themselves. They have an incentive to be honest in these matters: if they allow cardholders to get away with fake claims, there will be a market among merchants for a more honest service. On the other hand, if they allow merchants to get away with fraud, there will be a market for a more honest service to cardholders. This is a spectacular example of how justice (the service our courts claim to provide and our government monopolizes) can be provided on the free market!

It's nice to think that government can provide us a world where we can trust everybody, but it's a pipe dream. In case you haven't noticed, we can't even trust our government. When we swallow the lie involved here, we trust people more than we should. Maybe this means we buy Dr Pepper that isn't as good. Or maybe it means something more serious: maybe we trust that since the childcare provider we are contracting with is licensed by the state, they are trustworthy. If we're trusting them at unnaturally high levels, we're going to find more childcare providers that molest children than we would in the real world, where we know that government can't solve all our problems.

Should we agree when people say that because people are untrustworthy we must have government to protect us? No! The very opposite is true: because people are untrustworthy, we need to eliminate monopoly government and allow the free market to build better mechanisms of establishing trust and fighting fraud.


If everyone did this

If every single person laid down their arms and followed the law of Jesus Christ, He would be king, and we would obviously have no need of governments. There would be no evil to punish. There would be no evildoers to defend against. Every single person could submit to the rule of Christ, placing themselves in His kingdom, the Church, under the guiding authority of Godly shepherds (also called bishops, overseers, pastors, or elders) to watch for their souls and warn them if they began to go wrong.

It's obvious that what I say in this blog could work, if only everyone would follow it.

But it's also obvious that not everyone will. This world will always contain evil people, probably always predominantly evil people.

So in the meantime, should Christians lay down their arms and stop using government force? Or do they have an obligation to use government as a tool to try to make this fallen world as livable as possible?

Remember that God is in control. If God has commanded that we not govern non-Christians, then we must submit even if it looks like this does not work, just as Abraham submitted to God when required to kill his son, the only possible ancestor of the great multitudes of descendants God had promised him. Faith means trusting God even when it seems obvious that God's wisdom is flawed, because we know the truth, that God's wisdom may appear foolishness (I Corinthians 2), but God is trustworthy.

As long as sin exists in this world, God can and does use governments as His agent to punish evil (Romans 13). "The king's heart is like channels of water in the hand of the Lord; He turns it wherever He wishes." (Proverbs 21:1) God will still use evil rulers to bring about His perfect will, just as He used evil Nebuchadnezzar of wicked Babylon to punish His rebellious people in the Old Testament. (And tried desperately to save Nebuchadnezzar in the book of Daniel, I might add, before finally executing vengeance on Babylon for their sins.) He certainly does not need our participation in the evil deeds that governments inherently commit!

In fact, the Bible explicitly teaches us to leave all of these things in the hand of the Lord: "Never take your own revenge, beloved, but leave room for the wrath of God, for it is written, 'Vengeance is Mine, I will repay,' says the Lord." (Romans 12:19) Strangely enough, God goes on to talk about government in the next chapter. So God has specifically told us to trust Him to protect us from evil, and not to attempt to punish evil ourselves. What could be more clear? Stop governing. Leave room for the wrath of God.



My morning Psalms reading encompassed Psalm 53. I'm accustomed to the King James Version translation of this, which in verse one reads, "The fool hath said in his heart, There is no God. Corrupt are they, and have done abominable iniquity: there is none that doeth good." But I read the New American Standard Bible translation, which reads, "The fool has said in his heart, 'There is no God,' They are corrupt, and have committed abominable injustice; There is no one who does good."

That word "injustice" surprised me this morning. I knew that Psalm talked about people committing iniquity: lawlessness, breaking the laws of God. But today I'm reading a translation that says this Psalm talks about people committing a particular type of iniquity: injustice.

Injustice is denying people the justice that is due to them.

And let me tell you that there is no bigger source of injustice in this world today than governments.

Governments take what does not belong to them. This is the sin of stealing, but they call it taxation. The Bible commands us to pay taxes when required of us. Romans 13:6 says that our taxes are rightfully collected from us when government defends us from those who do evil, whom verse 10 refers to as those who "do harm to a neighbor." But this verse does not authorize us to force others to pay for our defense! It does not authorize us personally to take the action of taxing others! In the complete absence of government force, human institutions would still exist that punish evildoers. They would just be funded without the sin of stealing. These funds could probably also be called "taxes," but they would not involve the injustice that exists today, where people authorize agents to commit the sin of stealing in their behalf. God has placed a sword into the hands of government, not into the hands of His Son's Church, which is explicitly commanded not to judge anyone outside of its number (I Corinthians 5).

Governments punish people for doing things that are not wrong. Isaiah pronounced "Woe to those who call evil good, and good evil; Who substitute darkness for light and light for darkness; Who substitute bitter for sweet, and sweet for bitter!" (Isaiah 5:20) Governments authorize themselves to perform evil actions, such as counterfeiting, restricting the liberty of free speech (this may not seem like a big deal, but did you know that our government revokes a church's tax exempt status if they start preaching specific actions which people must take about politics?), manstealing, and raising other people's children. In so doing, they are calling evil things good. (Only when they do it, though.)

Meanwhile, governments punish people for doing things that are not wrong. You need look only to the early modern homeschoolers who went to jail for trying to take control of the education of their children. Or the civil rights activists of the 1960's. Or anyone who ever practiced civil disobedience. Or anyone who gets fined in my town for holding a sale on his own property without paying the government for authorization, or for holding a fifth sale (I think we're allowed only four). Or the myriads of sinful and unjust licensing and regulatory requirements, such as the electrical code which I was told currently requires an electrical outlet in a strange, unsafe, and nearly unreachable place behind sinks when they are installed a certain way, and authorizes the local government to fine violaters (at its option, which means this can be enforced completely capriciously and arbitrarily, or even used as a tool against people who aren't favored by the local authorities for some reason). Thus, government calls good evil.

Nowhere in Scripture is government authorized to make law. And certainly nowhere are Christians authorized to participate, even though we are commanded to submit. As A.B. Dada says, "Personally, I think the 'live by their rules' [teaching of Romans 13] is far different from 'make the rules, and cheer when they're enforced.'"

God appointed kings and judges in His Old Testament nation, but it was clear that they were not permitted to take any action they wanted with impunity. They were required to render just verdicts in disputes. They were told they would be punished by God Himself if they accepted bribes, let the guilty go free, or sided against the innocent. God knew full well that a multitude might get together and choose to do evil and pervert justice (Exodus 23:2), might give unfair favoritism to poor people over rich people (Exodus 23:3), might sin against property owners because of covetousness, or might favor those who could afford to buy exemptions from the law (Exodus 23:8). Then as now, rulers could bow to the will of the people, or choose to abuse power for their own desires.

People think the "rule of law" was a great modern invention, where nobody is above the law and even governing officials are accountable to it, rather than simply changing the law as they please. But God invented this. It was revealed in Scripture, in both the Old Testament and the New. In fact, God's Law predated everything; I believe it is written into the very fabric of the universe in such a way that if we do not obey it, we will face inescapable natural consequences. We have no need of human institutions that can define law. We have no need of legislatures. What is wrong is wrong, and always has been; what is right is right, and always has been; and these are immutable truths which can be revealed by God and discovered by man, but never altered by human agency! And where is our rule of law now? Are our rulers also accountable to the law? Or are they permitted to make it up and modify it as they choose?

I'm not being outlandish in saying that government is the biggest perpetrator of injustice in this world. That does not mean it is the only source of injustice. But it does mean that it should be treated like any other.

What is my responsibility when I see other people sinning in this manner? Firstly, to warn them (Ezekiel 33). I am to be preaching the Gospel of Jesus Christ, including the moral standards He laid down for all people to follow. But second, my responsibility includes recognizing that any mandate to judge them ends outside of the church: I Corinthians 5 specifically says that God will judge those outside. So I warn those involved in the evil that God is going to judge them, and if they do not listen and seek forgiveness in Jesus Christ, I eventually have a responsibility not to waste any more time with them and to protect myself from retaliation (Matthew 7:6, Matthew 10:14-15). Finally, I have the responsibility to make sure that I myself do not participate in their evil deeds! (Galatians 6:1) It should be obvious from the get-go that even if God allows people to persist in these sins of injustice, even if He works it to His own positive ends, I am not permitted to be a part of it. There is only one person I can control, and that is me. When I stand before the Lord at the end of my life, I will give an account for the actions I took. If I cooperated in perpetrating injustice, I will discover that I was a fool, a man who may not have been an atheist, but who effectively said in my heart "there is no God" by breaking God's law and believing that God would not hold me accountable.


How to fix American healthcare

The following is shamelessly copied from The Ultimate Pro-WalMart Article, by Paul Kirklin, at The Ludwig von Mises Institute. Google says I've accessed this article from search results five times since August 14th. :) Today makes the sixth.

We're dealing with insurance problems right now. Our employer-provided insurance doesn't want to pay claims they are obligated by agreement to pay. I'm spending way too much unproductive time researching what they've done and calling them back.

I know that the reason insurance companies can be like this is because of government intervention. YES, insurance companies seek profit, as do all people, including people who complain about "evil, greedy" insurance companies. The difference is that with government help, you can often make profit by exploiting people, but without the mighty sword of government, in a free market, the only way to make sustainable profits is to serve people. If all civil laws related to medical care were repealed, including all laws related to medical insurance, the behavior of insurance companies would improve more than one thousand fold. Of course, a completely different class of more honorable people might be attracted to the industry as the change occurred. :)

Here's the excerpt. Below this paragraph, nothing is my own words:

Healthcare Benefits

Wal-Mart improves access to healthcare by raising the real incomes of all the millions of people who are its customers or the customers of its competitors, whose prices are lower because of its powerful competition. This allows people to be able to afford healthcare more easily than they otherwise could.

In spite of this fact, another one of the Wal-Mart critics' favorite complaints is that Wal-Mart "reduces access to healthcare." The Wal-Mart critics believe this because Wal-Mart does not offer substantial healthcare benefits to all its employees. Employees who don't have substantial healthcare benefits are often unable to afford healthcare on their own, and thus they are left with little or no access to healthcare. Wal-Mart is blamed for their plight since the company is allegedly capable of offering more healthcare benefits but chooses not to. In part the critics are right; access to healthcare is becoming more problematic, but this is not caused by Wal-Mart or by "corporate greed." It is the result of an irrational healthcare system that causes us all to suffer, including Wal-Mart.
"Wal-Mart has made the system ingenious so its employees don't have to be."

This is not an article on the problems in our healthcare system. So I can only deal with that subject very briefly here. Many people are under the false impression that employers are responsible for the healthcare costs of their employees. The reason that so many people have this misconception is due to government intervention. For several decades, the government has put pressures — mainly powerful tax incentives — on companies to offer healthcare as a fringe-benefit. It has artificially created a system in which it is cheaper for an employer to purchase healthcare for an employee than for that employee to buy healthcare for himself with take-home wages. This has caused healthcare fringe-benefits to become so widespread for so long that most people have forgotten that they are fringe-benefits (i.e., an alternate way to pay wages.) Instead, many people incorrectly believe that healthcare benefits for employees are a moral duty of employers in addition to wages. But healthcare costs are not the responsibility of employers any more than the costs of food or clothing or anything else are.

The disastrous byproduct of healthcare fringe-benefits being offered on such a widespread basis is that healthcare costs have become collectivized. Employers cannot directly pay unlimited amounts for all the healthcare any employee would ever desire, so instead they routinely contribute amounts into employee health "insurance" policies. Employees spend money for healthcare out of giant pools of these contributions. If employees bought healthcare with take-home wages, they would have no reason to collectivize all their healthcare costs in health insurance policies. Many employees would get health insurance for catastrophic events, but not for routine health expenses.

Unfortunately, collectivization turns economic progress on its head. Healthcare is a product of human labor. Just as we can improve our ability to produce all other products through increases in productivity, we can improve our ability to produce healthcare. The same market mechanisms that caused television sets to become increasingly better and more affordable can cause all healthcare to become increasingly better and more affordable. But instead of becoming more and more inexpensive as time goes by, healthcare in our country is becoming more and more expensive, a typical result of collectivization. Since money for healthcare is spent out of giant pools of contributions, for the most part, people don't feel any direct financial effects from their healthcare expenditures. Therefore, an individual has little reason to show any restraint in his healthcare spending, and few people do when they know "insurance is paying for it." Furthermore, there is no limiting force on prices of healthcare. Healthcare providers want prices going up higher and higher without limit, and healthcare buyers who don't feel the direct financial effects of buying healthcare have no reason to exert pressure on providers to keep prices down. Mainly for these reasons, healthcare costs are sharply rising.
"Many people are under the false impression that employers are responsible for the healthcare costs of their employees."

The fundamental problem with access to healthcare in this country has nothing to do with employers who may or may not choose to offer healthcare fringe-benefits in the face of sharply rising healthcare costs. The fundamental problem is: healthcare costs are sharply rising.

As healthcare costs rise, it will become increasingly difficult for companies and individuals to afford, and paying for it will become more of a drag on the rest of the economic system. The sensible solution is not to pressure companies like Wal-Mart to attempt to clean up the government's mess by dumping more and more money into the bottomless pit of healthcare collectivization as it gets more expensive. The sensible solution is to eliminate healthcare collectivization altogether, the cause of sharply rising healthcare costs. We must get the government out of healthcare, and we must expose as false the idea that employers have a moral duty to provide for their employees' healthcare costs. In the absence of government pressure, healthcare collectivization would end. Healthcare fringe-benefits would be dramatically reduced, take-home wages would increase, health insurance would be used primarily for catastrophic events, and most people would buy healthcare with take-home wages just as they buy almost everything else with take-home wages. Most importantly, the healthcare industry would get back on a path of economic progress, and healthcare would become increasingly better and more affordable for everyone as time went by.