New Paper on Anarchy, etc.

I have a new paper forthcoming in the Journal of Institutional and Theoretical Economics on anarchy entitled, "Anarchy, Monopoly, and Predation." To read it, click here. My paper builds on Ed Stringham's excellent piece on vertically-integrated proprietary communities published in JITE earlier this year. Here's my paper's abstract:

The ‘folk theorem’ suggests that the shadow of the future coupled with the threat of lost business can create cooperation without government. Although institutions rooted in this theorem can support self-enforcing exchange in a wide variety of contexts, their potential to create cooperation is not limitless. In particular, the folk theorem may break down when some agents are physically stronger than others. Stringham’s [2006] system of vertically integrated proprietary communities relies on the folk theorem to prevent proprietors from preying on their customers. I show that while innovative, this system does not work. A monopoly proprietor maximizes profits by optimally extorting his tenants in violation of voluntary contracts.

As a side note, Pete B.'s recent post that mentions Ed Stringham and Ben Powell made me think for a moment about Salerno's comments on the research program that Boettke and I have proposed young Austrians pursue. Stringham and Powell are both excellent examples of precisely the kind of research we are advocating and both do a superb job of avoiding the Austrian vices (certainly a better job than I do). Both Stringham and Powell also agree wholeheartedly with my list of Austrian vices.

I mention all of this for two reasons. First, along with Pete B. I wonder, would Salerno also refuse to consider Stringham and Powell Austrians? Second, either way, things aren't looking so good for his very narrow conception of Austrian economics, or what could more accurately be called "history of Austrian thought."

It seems that the majority of the young professors (30 or under) who are actively publishing, influencing students, and consider themselves Austrian are advocates of what Boettke's last post describes in terms of research, or what Salerno called "Post-Modernist Austrian" economics. So, to paraphrase Joe's comment, perhaps water has already run its course. The New Austrian economics is already here.

Comments

[Joe Salerno]

Pete:

1. Why drag Ed Stringham and Ben Powell into this? I haven't seen any posts by either of them sermonizing on how the diverse research programs of other Austrian are ridden with "vices" and are merely "history of Austrian thought," while holding up their own research programs as the model for all other Austrians to follow. As far as I know, Ed and Ben are strategic pluralists who do not have a monolithic conception of what all other Austrians should be doing.

2. I, along with you, hail the arrival of the "New Austrian economics" devised by Pete Boettke and yourself. I believe the new name will stick and prevent future misunderstandings. Had you employed this label in the title of your original blog post, I wouldn't have batted an eye and would have continued with my mundane research as a plain old Austrian economist.

[Misesian]

Hey, Leeson is full of crap. And I ought to know. I got full honors on my oral exam at the Mises University, have not published anything (not even in QJAE or JLS [and I don't mean Journal of Legal Studies - I'm not Leeson after all!]), teach a 10-10 load, & regularly quote Hulsmann to friends and family.

[chucknorris and Christie Brinkley]

A vert serious query. Why are so many austrian kids so grossly overweight? Do they have no self-respect. Get to the Mercatus gym immediately and turn theyself into a lean mean austrian machine like mises or hayek.

[Devin Finbarr]

a) The monopolist (over a given territory) still has an incentive to obey contracts because it wants to attract high value immigrants from other territories. In the U.S. something like 50% of new businesses are started by immigrants. The owner of the territory needs to maintain its promises in order to attract continuous inflows of profitable residents. You seem to assume that the state only attracts residents once, but a profit maximizing state would be attracting residents continuously. A territory that reneges on promises and traps immigrants and prevents them from leaving will end up like East Germany or North Korea. Prison states are not profitable.

In order for any state to be profitable, it needs exports and foreign exchange. How is the proprietor going to grown an export economy when no citizens are allowed to leave, and no foreign citizen wants to enter the country, lest they get trapped?

Yes, Feudal lords often restricted exit. But you will notice that these feudal lords were left in the dust by the free cities. This would be even more so now, when agriculture is such a tiny part of the economy, and tech and manufacturing are so much greater.

b) Even if you have a total monopolist (no competing territories) the proprietor still has an incentive to maintain a great deal of liberty and rule of law. In order to extract goods and services from the economy, the proprietor must allow workers to reap the benefits of their work. It must have proper incentive structures to encourage people to take risks developing new products, and to allocate people into tasks at which they are most productivity, and to allocate people and resources to where they are more demanded. In other words, the proprietor would have to set up a market economy. The proprietor would tax this market at the maximizing point, but overall, it might end up being freer then most current governments (since the profit maximizing monopolist has no reason to interfere in areas like freedom of medicine, freedom to make marriage contracts, etc )

[Nike Vandal]

Our destiny offers not the cup of despair , but the chalice of opportunity .