ABSTRACT
Caplan and Stringham (2002) attempt to rebut the “paradox of cooperation (Cowen and Sutter 1999) as it applies to libertarian anarchy. The paradox in the context of anarchy implies that if private defense agencies can cooperate to avoid conflict they can also collude to reestablish coercion. Caplan and Stringham argue that arbitration is self-enforcing while collusion requires solution of a prisoner’s dilemma. We agree that collusion requires more cooperative efficacy than arbitration, but maintain that arbitration requires considerably more organization than a simple coordination game. If a network of protection agencies can organize sufficiently to arbitrate disputes, they can also create a barrier to entry by refusing to arbitrate with entrants.
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Cowen and Sutter (1999) outlined a “paradox of cooperation.” If civil society can use norms to enforce cooperative solutions, that same society will be prone to certain kinds of cartels. In other words, cooperation-enhancing social features will bring bad outcomes as well as good outcomes. To provide a simple example, the Nazis relied on cooperation in addition to their obvious coercive elements in perpetrating their crimes. The ability to organize therefore is a mixed blessing. In the context of libertarian anarchy, this argument implies that private defense agencies are likely to collude and reestablish coercion. We refer the reader to our original paper for the details of the argument (see also Cowen 1992, 1994).
Caplan and Stringham (2002) attempt to rebut the argument as it applies to libertarian anarchy. They maintain that inter-agency collusion requires solution of a prisoner’s dilemma problem, while private defense agencies face only a coordination problem in resolving disputes peacefully through arbitration. They view membership in an arbitration network of agencies as self-enforcing and believe that such a network will not evolve into a cartel. Self-interested individuals will defect from a cartel in the absence of a sufficiently vigorous punishment mechanism. Private defense agencies supposedly have enough cooperative efficacy to overcome the coordination problem but cannot collude. Thus the arbitration network will not devolve into government.
316Caplan and Stringham have advanced the debate on cooperation and anarchy. We accept their contention that collusion requires greater organization among network members than establishing a system of arbitration. We remain skeptical though about the likelihood of benevolent noncollusive anarchy. Establishing an arbitration mechanism we contend brings us closer to collusion than their arguments suggest. An arbitration scheme requires far more organization than a simple convention, like driving on the right hand side of the road, which significantly narrows the space between cooperation and collusion. An arbitration network should have sufficient organization to create a barrier to entry by refusing to arbitrate disputes with an entrant agency. Even if the network initially lacks the organization necessary to collude, entry barriers create conditions likely to lead to the evolution of government.
