By Justin Williams
When most people think of anarchy, they think about chaos but the classic definition simply means “without government.” For example, we do not have a world government. There is not an overarching powerful sovereign force that can do anything to us that they want in the world. Dr. Peter Leeson has an article publish in the journal of Public Choice (2006) 130:41-53 called “Efficient Anarchy” that evaluates this question.
The social contract theory which explains the “good” possible reason why we agree to have government in our lives is that fact that “government enables individuals to realize gains from exchange they could not capture if the state were absent.” Of course, we seem to forget that the institutions of government are very costly. So when is it optimal and not optimal to have a government?
Since many educated people live under government today, we often “forget that numerous societies were stateless for most of their histories and that many remained so well into the 20th century.” Some examples of this are the “African groups such as the Tiv, which included over one million individuals” and many others like international anarchy mentioned before.
Dr. Leeson explores a simple model with two people trading. H is the payoffs when government is present, L is relatively lower trade without government, and G be the cost of government. Government is an efficient solution when G < H - L. Where G > H - L anarchy is efficient. G could be greater than H-L either because government is expensive or there is a big gap from high level of trade to low level. The costs of government include simple organizing costs, cost of enforcement of rules, how many public goods they have (the cost of those) and I would even add the potential growth of government.
So the African tribes are considered “small H-L anarchy” meaning that government could not increase trade that much due to relatively small societies. There is also “big G anarchy” which like having a world government would be very costly. This is where low cost private institutions come into today to make international trade possible. In fact, these private institutions have been around for a long time including 12th century Medieval Europe with the law merchant.
In my opinion, the interesting part is when does it become inefficient and then is it truely inefficient. In the short-run, a limited government may seem very attractive but often the cost of it growing to the size it is today is not taken into account. Mostly because none of the founders are here today to be effected by the growth of government. So if government is efficient for a period of time and G grows causing it to be inefficient, can we get out of it and if so how? I personally believe we are well beyond the point of government being the more efficient solution, but if you do not believe that then you must ask yourself when? When does a government’s costs exceed it benefits?
