Private defense agency
[citation needed] The concept later was advanced and expanded upon by anarcho-capitalists who consider the state to be illegitimate and therefore believe defense is something that should be provided or determined privately by individuals and firms competing in a free market.
Both hold that a PDA would be part of a privatized system of law, police, courts, insurance companies and arbitration agencies who are responsible for preventing and dealing with aggression.
Within economics, discussion of the concept largely has been confined to the Austrian School, as in Hans Hoppe's article "The Private Production of Defense" published by the Mises Institute.
[7] Accord to these authors, PDAs have different motives from existing statist defense agencies: they believe that their survival depends on quality of service leading to a wide customer base, rather than "the ability to extract funds via the force of law",[citation needed] and that customers and markets would thus dictate that PDAs minimize offensive tendencies and militarization in favor of a pure defense.
John Frederic Kosanke argues that the need for large-scale defense is minimized in direct inverse proportion to the extent of domestic control by the state.
Yet he says that they simultaneously hold that security must be undertaken by the government, which is a territorial monopoly of law and order (the ultimate decision maker and enforcer).
Now in pursuing these principles, one arrives at this rigorous conclusion: That the production of security should, in the interests of the consumers of this intangible commodity, remain subject to the law of free competition.
[12] Peter Leeson and Edward Stringham rebut this argument by claiming that unless the firm were overwhelmingly more powerful than its prey, it could incur substantial costs and risks in attempting to extract wealth by force.
[13] In The Market for Liberty, Linda and Morris Tannehill argue that a private defense agency would be unlikely to engage in aggression, as it would not only become a target of retaliatory force, but would become the subject of severe business ostracism.
"[17][full citation needed] Robert P. Murphy opines that given the privatization of other services in an anarcho-capitalist society, "We must consider that in such an environment, the law-abiding majority would have all sorts of mechanisms at their disposal, beyond physical confrontation.
In addition, the private utility companies could shut down electricity and water to the agency’s headquarters, in accordance with standard provisions in their contracts.
Bond also argues that some firms may not be concerned with the risk of alienating other clients, because their clientele may consist of a small number of, or even only one, enormous multinational corporations.
He points out that free riders are commonplace in other aspects of our economy, asking hypothetically, "Are we to be critical because more than one person benefits from someone's actions?...In short, am I to be taxed for enjoying the view of my neighbor's well-kept garden?"
[20] Joseph R. Stromberg notes that the American Revolution occurred despite the fact that some individuals might have been free riders who benefited from it without funding it; he opines that successful defense of freedom often relies not on precise allocations of cost, but on "nationalism, religion, the desire for freedom, hatred of the enemy, social pressure to do the right thing, and so on," some of which might represent "enlightened self interest.
[24] Prisoners of war also used to have shadow prices (ransoms) which were a source of income for victorious forces; this represents another potential alternative to taxation.
Another argument used by anarcho-capitalists states that, unlike voluntary transactions, no demonstrated preference has been made by the taxpayer; so they believe there is no objective way of showing that they are receiving a service they want and need, at a price that is fair.
According to David D. Friedman, "Medieval Icelandic institutions have several peculiar and interesting characteristics; they might almost have been invented by a mad economist to test the lengths to which market systems could supplant government in its most fundamental functions.
