Economics of Martial Security

If you don’t want to get hit in the face, you may want to understand why someone else wants to do it anyway!

Christoph Fleischer

Published in

Coinmonks

29 min readJun 6, 2024

People strive.

They strive for a prosperous life.

In many cases, we imagine the application of economic decision-making as a way of fulfilling needs and desires concerning this striving, first, of course, in consideration of the most crucial ones that pose a threat to our sustenance and bare survival, then also secondly concerning the management of a potential overproduction that can be saved and consequently speculated by trying to transform it into capital to continuously increase our individual prosperity.

All this implies action directed towards the future, but unfortunately, the future is inherently contaminated by uncertainty.

Understanding the economic meaning of security means understanding that there is an argument to be made for someone to be interested in investing a certain amount of his resources in mitigating this threatening uncertainty inherently related to all future-directed action.

Protection means protecting against uncertainty.

In this sense, there is no principal difference between carrying a gun in the forest, putting a lock on one’s door, employing heavy-duty security measures to guard a bank vault, using elaborate security measures to protect data, or hedging one’s investment by purchasing suitable financial products.

Security is something that is sought after and scarce, just like any other economic good.

There are also professional security players on the market. Think of them conceptually as insurance companies.

As security is just another economic good, the security market should be just the same as any other, right?

Unfortunately, or not, depending on your political convictions, this is far from being the case.

Today, security is primarily monopolized by the state, and this basically all over the world.

Whether you like this to be the case or not, it is how it is.

Still, the issue has vast implications, and it is worthwhile to understand what underlies the success story of state-dictated security monopolies!

Who Ordered This State-Thing Anyway?

At first glance, it is not obvious why a monopolistic security supplier is needed in the first place.

The state security apparatus leaves behind a plethora of security niches occupied by individual actors who base their actions on economic decision-making and market optimizations.

For example, people shut their doors and pay attention to using safe locks. Most companies with a reason to employ guards or technology in the form of alarm systems or camera observation do this deliberately, only using services and goods provided by the private sector.

G4S or similar companies might come to mind, as they employ more than 350,000 people and deliver security services for high-risk environments in more than 100 countries worldwide.

On more minor scales, one can think of some regions of the United States (e.g., Alaska, Arizona, Idaho, Kansas, etc.) where people are allowed to openly carry firearms without requiring a permit. This establishes a certain degree of safety and decentralizes the demand for security, while not completely, still to a large degree.

While states deliver other forms of security (e.g., social security), the most apparent and consequential ones are of martial nature, in the form of police and military for inner and external protection.

It is no coincidence that the state-dictated security monopoly is most developed in this domain. While private insurance companies are definitely a reality worldwide, private police or military that economically competes with state-run security forces are practically unimaginable.

This has not always been the case. Think only of the great plague of pirating during the 17th and early 18th centuries, when private security forces, often referred to as privateers, were authorized by governments through “letters of marque” to capture and combat pirate ships. These privateers were equipped with the latest naval technology and employed them with great success. Another example from recent history would be the private military forces employed by the East India Company.

Only with the fin de siècle have the private militias been basically entirely substituted by formal state military forces.

Especially during WWI, things took a turn for the difference: while there were basically no private military contractors involved, approx. 65 million soldiers fought during the war (e.g., Russia employed approx. 12 million, the USA approx. 4 million, Germany approx. 11 million, France approx. 8,6 million, the British Empire approx. 8,6 million, etc.).

The strong nationalization movements since the French Revolution, in particular, and the post-30-year-war era, in general, led to further centralization of political and martial powers, steadily siphoning resources for security away from the private sector.

Especially Thomas Hobbes’ idea of the Leviathan as sovereign leaves its mark in the movement to monopolize martial violence by a central authority. Hobbes’ argument follows the logic that as humans act based solely on their selfish interests, conflicts of interest necessarily follow, leading to a perpetual state of war. Only an agreement in the form of a social contract could put an end to this by legitimizing a central authority with the necessary resources and moral justifications to ensure peace and prevent a return to the state of nature.

Hobbes’ idea of the Leviathan is a concrete 17th-century version of a perspective on organization and governance that is as old as mankind itself.

Let’s pay the lair of the Leviathan a brief visit.

In the Lair of the Leviathan

When it becomes clear to us that there is neither a logical nor an economic necessity for a centralized state-run security monopoly, and we realize it to be just one of many possible attempts to address the problem of security, the question naturally arises, why centralized security happens to appear over and over in civilized history, and probably even before that, only cumulating in its latest implementation in today’s martial violence monopoly by contemporary nation-states.

So, let’s get abstract for 1,0x10¹ seconds:

Imagine yourself in the absence of civilization. You are just operating on blockchain existence. No police, no state, no nothing.

Think of yourself existing long ago. Like, really long ago!

Ok, well done!

So, what’s up?

Even though you find yourself in a radically different situation in our Gedankenexperiment than you are in now, your needs stay basically the same.

You try to do good for yourself. You try not to die. Ideally, you are thriving. Most importantly, you try to protect yourself as well as possible from different sources of danger.

You may have managed to build a tiny shelter to protect against the elements or to settle near a reliable source of food and water.

Sounds not so bad anymore, right?

But you are not alone!

There are others as well!

Basically, everyone tries to stay afloat as good as possible.

And for that, work has to be done.

Somebody has to build shelters, acquire food, fall some trees, and hack ’em up for a nice cozy crackling bonfire.

If nobody puts in the work, everybody dies, and nobody wants to die, so some work will have to be done.

Now, everyone is confronted with deciding a strategy on how to acquire resources. Resources, in general, necessitate work to be acquired. Ideally, you want to work as little as possible for your resources or get as many resources as possible for your work.

We can intuitively imagine now that there will be actors — apparently, you are one of them — who work diligently to provide themselves with some resources to come by. You could even produce a surplus with your work. You could use this then to exchange it with somebody else, save it for worse days, or attempt to invest it by trying to build something that helps you increase your productive capacities from then on.

Something like that, at least, will be the situation you find yourself in.

Look at you: You are thriving!

Well done!

And you, for sure, will not be the only one who follows such a strategy of diligent work to increase your prosperity.

Some will be more successful, while others will not.

But!

There is also one completely different strategy that is open to everyone.

Instead of working diligently to increase your prosperity, you could try to coerce production out of diligent workers.

This is just another form of working for your resources, and if you chose this strategy, you would do it because you hope to be more successful than an alternative strategy would have been.

A person going rogue like this, a robber or a marauder, might successfully employ force to coerce resources from others, but at the moment, it is still a one-on-one battle.

Let’s say the chances are 50–50.

Of course, a premeditating attacker might gain an advantage by employing an element of surprise. Still, word will quickly travel around, warning everyone to be careful of the corrupt individual, resulting in people preparing themselves accordingly.

What you and all the others realize rather quickly is that you have a splendid time trading and cooperating with one another, everyone profiting from the particular characteristics of everyone’s skill set.

Unfortunately, the same logic holds true for corrupt actors.

They themselves soon begin to organize into groups of marauders ready to strike with the advantage of numbers.

So, what do you do now?

Very unclear!

I am sorry to be the harbinger of bad news, but:

You might find yourself in a genuinely problematic circumstance!

This realization inspires the most important insight of this analysis:

The core problem underlying the demand for martial security is neither the potential appearance of bears nor wolves but the fundamental asymmetry between the organized group effort and the individual.

Play Stupid Games, Win Stupid Prizes!

Economic analysis usually concerns itself with the game-theoretical constraints put upon a group of individuals looking forward to cooperating. More often than not, the most common interest of such analysis is the concern for what we earlier coined “diligent workers”.

It is crucial, though, to understand that the organization of corrupt individuals follows the same principles and economic constraints as any other form of organization, institution, or individual actor.

The laws describing the evolutionary behavior of economic systems do not recognize categories of good and evil. They are, to use the words of German philosopher Friedrich Nietzsche, beyond good and evil.

As they apply and help us to describe, anticipate, and understand the behavior of diligent actors, they equally prove their worth in explaining the behavior of corrupt actors.

Being concerned with the evolution and decision-making of diligent workers mostly means being interested in how economic selection works on the level of individual actors, their interests, and their problems.

To properly understand the problem of martial violence and security on the level of economic analysis means to thoroughly grasp that the analysis cannot be adequately developed when it only concerns itself with individual-to-individual relationships. It must necessarily dive into the dynamics of individual-to-group, smaller-group-to-larger-group, and finally, group-to-group relationships.

For the purpose of this particular analysis, the first two cases will be handled synonymously, if not emphasized differently, as in the logic of groups, an individual can be regarded as the smallest possible group. Following this line of thought, the problems of individual-to-group and smaller-group-to-larger-group dynamics will converge in many circumstances.

Just as psychology throughout its modern development over the 19th and first half of the 20th century had to understand that there are phenomena concerning individual psychology (e.g., Freud, Jung, etc.) and those that concern group psychology (e.g., Le Bon, Jung, etc.), economic analysis equally must differentiate between analyses on the level of individuals as well as those on the group level.

When discussing with different people the logic and problems underlying economic decision-making and their divergence from the results of the daily political discourse, people often arrive at a state of disbelief. In most people’s view, the political elites couldn’t possibly come to such easily disprovable and ignorant conclusions in questions concerning economics. This is even the case when one manages to make the same people susceptible to the merit of the arguments mainly put forward by analysts of the Austrian tradition of economic thinking (e.g., Menger, von Mises, Rothbard, etc.), as one quickly runs into a common argument that, in my opinion, needs specific addressing. Colloquially speaking, the argument goes something like this:

Even if everything you say is true and a decentralized free-market economy is the way to go to maximize prosperity for everyone, while at the same time accepting the premise put forward by game theoretical analysis that the more efficient systems will outcompete the less efficient ones over time, why are there still, after approx. 500,000 years of _homo sapiens sapiens_ as well as approx. 12,000 years of civilization, new formings of centrally planning organizational bodies carrying authority by the merit of brute force worldwide?

Fair question!

And one you can, in my opinion, not quickly swipe away.

Indeed, everyone interested in rooting for liberty, self-determination, and free organization must seriously confront the problem that reality doesn’t converge with one’s utopian fantasies.

Of course, people who are interested in such topics are serious people. Therefore, I believe that there is a great eagerness to properly think this problem through and come up with valuable and insightful conclusions we can all learn from.

Those same serious people usually enjoy flirting with their individualism, but the problem at hand necessitates understanding the motivation behind groupthink.

Economy of the Masses

Usually, we put ourselves in the shoes of the victim, not the victimizer, so we might intuitively ask ourselves how, being diligent workers ourselves, we might better protect ourselves from the barbaric interventions of marauding groups organizing to coerce resources out of honest and hardworking people.

But who, I shall ask, thinks of the problems of the common marauder, basically equally only acting upon incentive structures that everyone only tries to adjust one’s behavior for?

The organization of corrupt individuals to bandit groups is merely the analog of diligent workers organizing in cooperation.

As we realized earlier, size actually matters, at least for groups!

As the strength of corrupt groups primarily arises from them overpowering diligent individuals in numbers, the amount of participating individuals should only be beneficial, right?

This is not the case, though. Two different constraints, in principle, limit the size of a marauding gang.

First, we can quickly realize that the concept of a marauding group can only be meaningful if there exists something to coerce. While game theoretically speaking, the diligent worker’s strategy and the corrupt individual’s strategy arise simultaneously, the diligent worker is ontologically prior, as the product of their labor is the condition for the possibility of the marauder coercing it.

Following this logic, we understand that not everyone can be a marauder in a limited population. From this insight, certain less principled observations follow that equally constrain the maximum number of supportable marauders in a population, like there being enough people diligently working to support themselves as well as the marauders. If people are coerced to such a degree that they cannot sustain themselves, they won’t be able to continue supporting the marauders, quickly destabilizing the marauders’ economic strategy.

But even beyond such considerations, there exists a second principle limitation on the marauders’ group size concerning marginal utility. As groups essentially gain their strength through numbers, additional members should stricto sensu increase the group’s potential. And this is, of course, the case.

Remember the beginning of our line of thinking. Groups form from the realization that one individual trying to coerce resources out from another is risky as the strength is comparable between the coercer and their potential victim. We can clearly see that adding a second corrupt actor brings a tremendous advantage. With every additional corrupt actor, the gained advantage decreases, as the difference between one-on-one and two-on-one is greater than the difference between two-on-one and three-on-one, for example. At the same time, the bounty must always be shared between all members of the raiding group. So, the return decreases linearly to group size. Smaller groups promise higher returns for every individual corrupt actor.

Of course, secondary factors also play a role, like the cost of maintaining the marauder gang’s organizational structure and the increasing problem of keeping anyone content and loyal from the gang leader’s perspective.

At the end of the day, it is important to understand that while it is true that while every additional member indeed strengthens the group, it still might be irrational at some point to let additional members join as the costs they incur to the group outweigh the benefits they deliver.

Why should anyone expect a raiding group to act rationally, anyway?

Economic analysis does neither care nor know of any categorical analysis of the contents of the human psyche, nor of group psyche for that matter. Appropriately done, it merely tells you what happens when different actors make different decisions under different circumstances.

In this sense, there is no difference between analyzing an individual or a marauding group; the only thing that matters is that there is selection pressure.

And an actor either adheres to it, for whatever reason, or they are out!

Survival of the Fittest

Every one of us, for better or for worse, has only a limited time on this planet.

I hate to break it to you:

But we are all going to die!

We all have our preferences for how we want to spend our time, but unfortunately, resource constraints limit us from doing whatever we please.

So, our lot is work, at least for most of us.

We work because we want or need goods to consume.

Our work can be more or less fruitful depending on the capital that is available to us.

Capital goods are merely goods that aid us in producing more.

By acquiring increasingly more capital over time, we can make our time worthwhile when adequately invested in production.

Theoretically, there is no limit to this. Adding more capital makes us more efficient. But what no amount of capital can ever result in is for you to have only a second more time added to your life.

So, time is of the essence, and more insightfully:

Time is the only scarce resource.

As time is unchangeably constant for us, at least for the time being, how we use our time is the crucial parameter for optimizing our prosperity over the course of our lives.

It is very similar to chess. If, at the end of a game, you find yourself confronted with someone having won and someone having lost the game, only a fool would try to learn something about the game and its strategies by investigating the player with more moves. Both players had, of course, the same number of moves, as one plays after the other. So, the winner simply employed their unchangeably constant “chess time” more efficiently than their opponent.

And they say chess is full of life’s lessons!

So, we can conclude something important here:

For all types of economic activity, optimizing the use of time is key to determining an actor’s success and evaluating the success of their strategy, especially in comparison to all their competitors.

This is obviously true for individuals striving for a prosperous life, and it is equally true for a marauding group trying to do well for themselves and all their gang members.

Therefore, it is of no concern whether a particular group acts significantly reflected and rationally based on proper analysis and concludes worthwhile investments of their limited lifetime or not. Either way, you will see strategies that do exhibit such behavior, for whatever reason, may it be due to cultural mimetics, religious creed, or arbitrary decision-making: they thrive, succeed, and outcompete their competitors.

As we already realized, coercion is a viable strategy based on its own economic and, dare I say, entrepreneurial calculating. The business of marauding groups is no different in terms of selection for behavior that exhibits competitiveness than any other industry.

The same thematic array of questions has to be addressed and reflected in action: Who acquires more capital? Who employs this capital more prudently? Who makes the right decisions to maximize profit?

After all, profit is the difference between an investment of resources and the output it yielded.

As with companies, we can imagine there to be more than one marauding enterprise competing for market shares. If the initially smaller one constantly outcompetes the bigger one in terms of its efficiency in the investment of its time, it is only a matter of said time until the smaller brother takes over and becomes the bigger one.

For such reasons, the enterprise of marauding is certainly one that will, similar to the private sector, optimize its organizational structures and employment of technology over time.

Only those groups that managed to keep up with the competition or even outcompete them will be able to sustain their existence over time, establishing themselves as bona fide marauding enterprises.

McMafia

It is time to confront ourselves with a very fundamental question essential for understanding the economics of security, particularly martial security:

Is there any benefit for the diligent worker by being coerced by a marauding group?

Yes, there is!

There is!!!

And this is key to understand.

This is why libertarian argumentation oftentimes bricks when confronted with the factual existence of central martial violence monopolies while arguing for the sovereign efficiency of the free market and the benefits of the absence of state monopolies.

In my opinion, a libertarian has to be very careful here not to sound as naïve as a pro-state interventionist who argues in the spirit of the blessings of centralized collectivism and coordinated cooperation where everyone only needs to give their fair share for everything to be amazing.

But somehow, it never and nowhere is so amazing, is it?

Ok, why?

Because people arguing in such a manner, even, or rather particularly, in educated and elaborate circles, don’t seem to understand that they not only have to sketch out how everything would work if everything would work but also need to pay attention to and respect incentive structures, feedback loops, and the potential for corrupt actors to take over.

The interventionist, socialist, or communist is apparently blinded by their own ideological commitment, or for some other reason, to see the potential danger of corruption of their stipulated top-down coordination.

Equally, the libertarian oftentimes falls victim to a similar kind of blindness when they fail to address not the potential but the actual and factual existence of corrupt actors having taken over top-down coordination.

When we start to understand that marauding is actually a viable strategy for individuals to acquire resources and that marauding is the main threat motivating a demand for martial security in the first place, isn’t it simply the case that the mere existence of marauding groups actually creates the demand for martial security?

How, then, could there possibly be a benefit for the diligent worker?

Actually, the benefit the diligent worker gets from the marauder gang is martial security.

Seriously?

Yepp!

You heard me right!

What type of pulling a rabbit out of a magician’s hat type of bullsh*t is going on here?!

How can the benefit of the marauder gang be martial security when the main reason for there being a demand for martial security in the first place is the mere existence of said gangs?

Can the gangs create demand for themselves basically out of thin air?

Yes and no!

Of course, from the perspective of the individual diligent worker, the arrangement with the concrete marauding group threatening them may appear to result in a very lopsided affair. And this is an entirely fair assessment!

The market for marauding groups entails the totality of diligent workers, and the different groups compete like in any other industry for a maximum gain in market shares. Over time, this leads to a selection of gangs that are particularly suited to solving all relevant optimization problems idiosyncratic for their particular success.

Chances are that if you are a diligent worker, you will be exploited by a successful gang. And if not, you will probably soon be.

When you think of exploitation, you can understand how you can be exploited in all kinds of manner. For the successful marauding gang, the diligent worker is an important asset as they are the source of their income.

For this reason, a gang will, while still, of course, exploiting, deliver certain services to the diligent workers in the form of protection from all other competing gangs.

A bad strategy for a gang would be, for example, to pillage a village, killing everyone and stealing everything. Or maybe not stealing everything, but leaving everyone with nothing left so the danger of imminent death becomes your most urgent threat and possibility.

Such a gang will, of course, gather a lot of resources in the short run. In the long run, though, you are out of their list of suppliers, as you have, at least economically speaking, ceased to exist.

A marauding group exploiting diligent workers is ultimately comparable to an entrepreneur consuming their capital. In the short run, you increase your consumption, but as less capital remains, you pay for your increased consumption in the presence with a decreased consumption in the future.

For this reason, a successful marauder will employ a more long-term strategy that is content with only requiring a regular tribute from their constituents.

This enables diligent workers to continue to produce and sustain their exploitation over a long period.

Basically, it comes down to the difference between milking and butchering a cow (And yes, you are the cow!). The milk you receive today is, of course, lesser in nutritional value than the meat of the whole cow, but you can have it over a long period of time, securing your need for a source of food long-term.

While you might want to make an argument for not being exploited at all to be the most preferable situation to find yourself in, it might not be an option considering that you as an individual are always outnumbered by a coordinated group effort and the coordinated group effort being a viable strategy for individuals to acquire resources.

If no coercion is not an option, then you could try to make a second argument claiming that it might be preferable for a diligently working individual to be exploited by a particular successful gang as they optimized for behavior that protects you and your production for others, as they identified you correctly as their capital and therefore long-term supplier of resources.

In my opinion, this is also a line of reasoning that is compatible with American philosopher and economist Hans-Hermann Hoppes’s game theoretical analysis of different forms of governance and his concluding preference for monarchies over democracies. For monarchs, their land and subjects are private property, so they have a straightforward and natural incentive to see them flourish, which is not equally the case for democratic leaders and elites.

We start to see here that what we have been calling marauders or corrupt individuals are actually, operationally speaking, what is commonly referred to as a mafia.

Mafias!

Yes, we are in the market for Mafias.

Not that diligent working individuals want to be coerced by a mafia, but they even less want to be coerced by inefficient mafias.

As it is unclear at first glance how there could be a situation in which no mafia exists, the next best thing is coercion by the most efficient mafia possible.

Following the motto: The most efficient coercer is the best protector.

At least with there being no alternatives.

I’m Gonna Make Him an Offer He Can’t Refuse

So far, we have understood the dynamics between individuals and groups through the lenses of economic analysis.

This leaves us only with the group-on-group relations, _ergo_ the competition between different mafias.

American economist Murray Rothbard wrote already in his seminal pocket read, The Anatomy of the State (1974), a beautiful and easily accessible treatise about the constraints a mafia is put under.

Everything that exists, and particularly continues to exist, has to meet certain expectations based on the behavior it exhibits. Otherwise, it would simply cease to exist.

For a mafia, this can be summarized rather neatly by two major external constraints.

The mafia can either discontinue its existence through internal or external pressures.

Mafias, in this functional sense, are as old as mankind itself:

They originated from the very first Kane-type of dodgy individual that is up to no good, continued to evolve through the banding together of such individuals to form coercing robbing gangs, refining their structure throughout history due to the selective pressure arising from the need to become efficient in coercing to outperform competitors, creating, for example, proto-bureaucracies to become more efficient, escalating themselves to found ancient kingdoms, and other types of centrally controlled principalities, and appearing in the form of authoritarian religious institutions or dictatorships all over history and the whole globe, while, of course, continuing to exist in its latest forms and manifestations in our today’s day and age.

We are now at a point where we can intuitively introduce contemporary organizational terms.

The nation-states as we know them today are functionally speaking mafias that managed to establish a mafia monopoly for their constituent domain of sovereignty.

Internal pressure that leads to the endangering of the structural integrity of the state institution is referred to as revolution. External pressure is conquest by another competing mafia, therefore, another state.

Every state is now confronted with a particular optimization task:

Coerce as many resources as possible from your constituents so they don’t revolt while at the same time having access to this maximized loot to protect and influence against external competitors.

Rothbard already argues for, and I hope my analysis only adds weight to this conclusion, that modern nation-states thought of as contemporary forms of centrally organized authority are but the latest technological installment of optimized systemic coercers that functionally do not differ in their economic role from mafias or any other type of coordinated group effort to violently prey upon diligently working individuals.

Of course, this optimization constraint is very complicated in detail and delicate to manage.

One of the state’s most significant cost reduction factors is its perceived legitimacy by its constituents.

For this reason, every state propagates certain narratives about its alleged inevitability and usefulness. It is also always interested in exerting significant influence on schools, universities, and other types of education facilities to employ indoctrination on its youth and potential future elites.

When you always keep in mind that a state, just as any other business, operates on cost-benefit-analysis while having to make sure to not stir up a revolt, several facets of state behavior become more transparent, like the organization of the legal system (e.g., disproportionate punishments for crimes against the state especially in the case of tax fraud), the quality of the education (e.g., does it really take four years to learn reading, writing, and simple forms of calculating), or the social systems (e.g., long waiting times, exorbitant cost explosions, mediocre service at best), and lastly, of course, the organization and usage of security forces for the employment in internal (e.g., securing and enforcing state interests) and external affairs (e.g., continuing endless wars for influence over certain resource depots, trading routes, and geopolitical locations).

Of course, this list is not exhaustive, but I hope you get the picture.

While in the past, central authorities used practices like slavery, today’s state-of-the-art coercive apparatus knows better how to maintain a positive branding.

The decisive step toward improving public perception regarding coercion stems from the observation that people generally find it easier to accept having the fruits of their labor taken away rather than being directly enslaved.

This is done in the form of taxes, which are usually communicated as an unfortunate necessity. If everyone pays their fair share, services could be rendered possible to help the helpless and implement the unimplementable (e.g., public infrastructure projects, telecommunications, canalization, national defense, etc.).

So, who wouldn’t gladly want to pay his fair(!) share?

That sounds amazing! Where can I pledge to pay extra?

While people seem to accept taxes more than straightforward slavery, they still don’t really enjoy taxes.

For this reason, the attempts to evade taxation are as old as the daydreaming fantasies of lynching tax collectors themselves.

When a state collects taxes, it has to apply the same type of rational optimization that operates throughout its whole acting.

For this reason, a state will try to choose types of taxes that are easily implementable (e.g., income tax) while at the same time regulating the rate in a way that yields maximal returns without people revolting.

While people do not enjoy taxation, its mechanism is at least transparent.

Throughout history, central authorities have also tended to inflate the money base as a hidden form of additional taxation.

With proper taxes, your money balance decreases. With inflation, your shopping basket becomes emptier while your cash balance stays the same.

To protect oneself against inflation is hard.

Credit: Illustrated by the Author. Data from macrotrends.net

At least during most times of history.

Even though the employment of inflation is one of the most untransparent and infamous ways for a central authority to coerce resources, it might actually serve us a lesson well-taught in our progressing understanding of individual-to-group relations and dynamics, and even further:

It actually can inspire us to come up with the individual’s first, only, and ultimate line of defense!

You Either Join Them or You Fight Them

Ok, what’s the big deal?

Just organize diligently working individuals for a common cause, as they are obviously all suffering from the same problem of being victimized by group-originating coercion!

Brilliant!

And so, we conclude!

Or do we?

While at first glance, this might appear to be a viable option, it is not only destined to fail but also to fail in a nightmarish fashion, as is the case with every type of Rousseauian pseudo-enlightened dream.

In one way or another, such a scenario necessitates the (s)election of a sentinel type of class that operates through task-justified privileges.

It is of no principle concern if those sentinels are breaded specimens only brought into existence for this particular task (e.g., according to the lines of Plato’s utopian thinking) or selected over a fixed period of time as it is the case in modern Western democratic statesmanship (e.g. according to an enlightened end of history as promoted by intellectuals like Francis Fukuyama et al.), a certain entity of society results that due to its isolated functioning and privileged position has different interests in mind than those that are supposed to be protected by it.

Looking particularly at the facts that Western democracies participate in what is seemingly endless warfare, particularly in the Middle East and lately at the puffer zone between the respective European and Russian spheres of influence, the equally bottomless inflating of currency that has been occurring since WWI permanently putting a strain on the capabilities of its citizens to put themselves in economically sound circumstances (e.g., when central banks were founded and monarchies turned democracies), the blatant failings of social security and social politics (e.g., historically low birthing rates threatening population collapses in the not too distant future), and the general tendency of bureaucratization accompanying cultural and societal disintegration (e.g., attempting to make explicit what culture integrates implicitly), one might be a little hesitant to triumphantly proclaim that we got it all figured out.

And hesitant one should be!

Properly thinking through the viability of the proposed solution of founding one’s own sentinel class concludes with nothing less than the creation of one’s very own central coercion apparatus.

From the perspective of economic analysis, there is no principal difference between coercion by a foreign group and one of one’s own origin.

Psychologically speaking, though, there is usually a difference in perceived legitimacy.

Foreign coercers are usually referred to as colonizers, a notion that carries a heavy, and rightfully so, negative connotation. Operating one’s own sentinel class in the form of a modern democratic nation-state, for example, allows propaganda and indoctrination, for mainly psychological reasons, to often flourish more easily.

To sum up: It becomes easier to bullsh*t oneself (e.g., in the technical sense of Frankfurt).

Nietzsche expresses this wonderfully in his usual outrageous and pointed manner:

State is the name of the coldest of all cold monsters. Coldly it lies, too; and this lie creeps from its mouth: ‘I, the state, am the people.’ It is a lie! It was creators who created peoples and hung a faith and a love over them: thus they served life. It is destroyers who set traps for many and call it the state: they hang a sword and a hundred desires over them. Where there is still a people, there the state is not understood, but hated as the evil eye and as sin against laws and customs.

So, is it all lost and gone?

Of course not!

Don’t throw the towel in too early!

As we already alluded to earlier, one ultimate defense exists for the individual in their long fight for independence and sovereignty.

Of course, it is noteworthy to emphasize, for one last time, that the original demand for martial security arises from the asymmetry in strength between the individual and the adversarial coordinated group effort.

Only understanding this one line of thinking already leads us to the possible solution of strengthening the individual in an attempt to level the playing field.

This is a good idea, though it only accounts for a kind of sideshow solution.

Ok, and what does it mean to strengthen the individual?

Politically speaking, there exists a very straightforward litmus test:

When considering a political proposal, you only need to ask yourself if it results in an economic strengthening of the individual or not.

Increase taxes? Well, that takes away economic resources from the individual, so no.

Compulsory/mandatory education? No, because this takes away economic decision-making from the individual.

Increase of the social security apparatus? No, because it uses resources that otherwise would have been available to individuals.

You get the idea!

However, the main event concerns a different hill to be defended.

Remember a core insight of our analysis: an efficient coercion apparatus values its subjects as a form of capital.

You are valuable to the coercer because you function as a resource supplier.

Fighting coercion means draining the supply of resources from central authorities to enterprises of free association and free market activity.

What, in principle, sounds pretty easy in reality can still pose significant problems, I know.

And again, we can derive a litmus test as a kind of moral code for action-guidance:

Divest resources as much as possible from the central coercion apparatus to actors organized by free association.

This, of course, is not unheard of in the libertarian scene. Quite the contrary.

The Bitcoin community is especially entrepreneurially active in establishing new types of structures and rendering services for individuals, intending to fix corrupt incentive structures and redirect resources from corrupt to diligent actors.

A good example of this might be CrowdHealth, a service that reestablishes individual independence in the domain of health concerns while at the same time building up a freely associated community ready to help each other in dire times. The service is based on a reputational system that incentivizes diligent behavior by all participants, including suppliers of health services like clinics, hospitals, and individual doctors.

Of course, Bitcoin’s mere existence as a decentralized money technology could serve as the cleansing orange sun radiating away corruption with continuously increasing adaptation.

The reason is quite simple.

A core problem with the technological implementation of hiding your resources away from central authority is the problem of logistical practicality.

Think of it like this:

The central coercer taxing you costs you resources.

But equally, trying to hide away resources also costs you resources.

Imagine having gold coins you want to hide away.

When you go about your hiding business, people might spot you, or you might forget where you put them, or people might stumble upon them by accident, or you die, and your children might lose their inheritance.

Of course, you could manufacture a map to find your hidden treasure in the future or to enable your inheritors to do so, but then again, this map might be discovered with dire consequences.

In the end, the wealth you hide away is difficult to employ in your daily economic activity, as you always have to go and get it, each time taking the risk of somebody seeing you going about your tressure-hiding business.

And lastly, what if you have to flee in case of imminent martial threats?

If there were only a little time to run, there probably wouldn’t be time to unbury your coins. Of course, you will still try, but … yeah. Good luck!

Of course, the digital revolution and your ability to employ Bitcoin’s blockchain technology to comfortably lock away resources while still being able to use them anywhere in the world mitigate all this significantly.

Let the sun shine, baby!

Key Insights

To coerce resources is a potential strategy for the acquisition of resources.
The demand for martial security originates from the asymmetry in number and power between individuals and groups.
Most economic analysis focuses on individual decision-making and incentive structures in free association.
Economic analysis of the rationality of coercion must be conducted on the group level, addressing the dynamics of individual-on-group and group-on-group relationships.
The coordinated group effort of coercing resources is in permanent competition and must, therefore, improve (e.g., coercion rationalism).
The business of systemic coercion is the business of mafias.
If independence is not an option, an individual benefits from being coerced by the most efficient coercer because it will be regarded as valuable capital as it supports resources long-term.
Mafias come in all different kinds of forms over time, cumulating in their latest form as modern democratic nation-states.
The core mode of defense for individuals is to divest as many resources as possible away from the central coercion apparatus in favor of enterprises of free association on the free market.