Funding Government while Avoiding Monopolies

Political Philosophy
1

I have often heard people suggest that, in order to fund a laissez-faire government, we should use some combined method of voluntary donations, lottery, and fees for services which can most easily be calculated (E.g., it is easy enough to calculate the use of a notary and set a fee for it. It’s more difficult to calculate the use of a police officer and set a fee for that.). I know that the general consensus here is that the issue of funding a laissez-faire government is exceedingly far-sighted, but I think it’s only fair to have a general plan when trying to explain how capitalism would be a workable system.

Now my question is, wouldn’t a lottery constitute a monopoly? Certainly, if the government were to hold a lottery, it would be using revenue from other sources–ostensibly collected in the name of protecting human rights–in order to fund the lottery and monopolize the lottery “industry”. Assuming that a government lottery does not constitute a monopoly in the lottery industry, would it then be fair for the government to organize horse races in order to make the betting process more exciting and shore up more funds? How about if it provides very comfortable seats and serves food? What if it locates this new, fun center of government funding next to a hotel, thus giving the hotel added revenue by a government favor? (For that matter, would the location of police departments constitute government interference in the economy and society?) At what point do you draw the line between how a laissez-faire government can collect money and how it cannot?

Also, couldn’t the same be said of charging for notarization? Certainly that is a function that private businesses could provide, with highly secure authentication procedures. And would it be just to charge for a court hearing? What if a person cannot afford it? Does one have to have money in order to afford justice?

I believe that a very strict, dedicated government could effectively operate on a shoe-string budget, and I believe that voluntary donations could certainly reach the required budget. And I would be very happy if there were another way to improve voluntary government financing, but I wonder if that’s possible while maintaining a laissez-faire government.

Suppose a business wants to start a nuclear power plant, but the government must hire a lot of personel and develop an infrastructure so that they can ensure that the power plant is operated safely. I wonder if, in this circumstance, it would be just for the government to charge the business a fee. I suspect it would be unjust. For suppose it were just. Then what would stop the government from charging citizens a fee who reside near a police station?

Any thoughts?

2

Now my question is, wouldn’t a lottery constitute a monopoly?

…

At what point do you draw the line between how a laissez-faire government can collect money and how it cannot?

If by monopoly you mean coercive monopoly, then a government lottery would not be, since the people who use it do so voluntarily. The line for collecting money is the same line for all government action: no initiation of force. If a government acts without initiating force, it is legitimate. The minute anything is made *involuntary* by government is the moment it crosses the line.

Does one have to have money in order to afford justice?

I’d say yes, in an important sense. Rights pertain to freedom of action, i.e. they are negative. While you have the right to be free of robbery, for example, you do not have a right to the time, energy, or resources of another man (police) to protect you from thieves. The government is the provider of a service, which is provided by men, which have a right to their life and must be paid for the voluntary work they do. This much is clear. How to deal with those rare instances in a laissez-faire capitalist society where the recipient cannot himself pay for the government services he receives is another question. I’d suggest it could be done in the same way people pay for non-government services they can’t now afford…loans, charity, etc.

Then what would stop the government from charging citizens a fee who reside near a police station?

Living near a police station, as such, constitutes no claim on anyone. On the other hand, when a police officer saves you from a mugger, I believe you owe him something.

3

If by monopoly you mean coercive monopoly, then a government lottery would not be, since the people who use it do so voluntarily. The line for collecting money is the same line for all government action: no initiation of force. If a government acts without initiating force, it is legitimate. The minute anything is made *involuntary* by government is the moment it crosses the line.

That’s a good point, and I have given it a little thought. At the same time, though, let us suppose that the government were to set up a restaurant. Or suppose that it set up a basic welfare program. It would be funded by people who were trying to pay for their own defense. Now it would not directly violate anybody’s rights by organizing these kinds of activities, but it would be artificially supporting a business and relieving it of some market pressures that a business would otherwise face. Isn’t this government manipulation of the economy? And isn’t it a misuse of money that is supposed to be aimed at protection?

In this kind of a situation, take the point of view of a lottery business owner. If he is rational, he will want to pay the government for his own defense, but in doing so he will also be helping to support a competing lottery business, and he hasn’t the option of devoting his money to one and not the other. It doesn’t seem just.

I’d say yes, in an important sense. Rights pertain to freedom of action, i.e. they are negative. While you have the right to be free of robbery, for example, you do not have a right to the time, energy, or resources of another man (police) to protect you from thieves.

That’s a good point. I’ll have to agree with you.

Living near a police station, as such, constitutes no claim on anyone. On the other hand, when a police officer saves you from a mugger, I believe you owe him something.

But how do you quantify that? It seems very difficult and one should be wary of slippery slopes. For instance, let’s say that you are being mugged, and the police stop the mugger. Then you say, “Look, I was going to take care of it myself, then you stepped in without my request or permission. I don’t owe you squat!” Should the person be forced to pay? What if he calls for help, but then denies that he ever called for help? Or suppose there are three people involved: A man snatches a woman’s purse, and a third person calls for help. Should somebody be charged for that? Who?

I can see how it would be justified to set a fee to have a court hearing–that makes good sense. And I can see how it makes good sense to charge a fee for petitioning the government to enact a law. But something this nebulous seems to invite trouble.

4

Isn’t this government manipulation of the economy?

If the government in no way uses government power to run these enterprises, then no. They are no different from other private competitors. And there lies the rub: if they are no different from their competitors, how can they compete with them - the others don’t have a government to fund out of their revenue!

The problem with lottery or any other sort of business as a source of funding for a government is that they cant hope to compete with free enterprise. For them to “compete”, government force would have to be used - establishing a monopoly for instance - and that is unacceptable.

That’s a good point. I’ll have to agree with you.

Its not so simple. The citizen has delegated his right to self defense to the government. The government would not tolerate this man if he decided to go vigilante and hunt down anyone who he thinks is a criminal himself, right? A government that forbids a man from defending himself and then refuses to defend him except for an arbitrary fee is on extremely dubious moral ground.

Should the person be forced to pay? (…) Should somebody be charged for that? Who?

And how much? And if you are forbiding the citizen from using retaliatory force himself (remeber, this is an individual right that is delegated to the government) how do you justify charging him anything at all?

Two essentials pertain to this issue:

  1. If government service (i.e. the protection of your individual rights) is conditional to payment and securing them yourself is forbidden by force, the price charged for “justice” can be whatever the government chooses it to be and you have no alternative. It is de facto taxation.

This means that in a free society either everyone is free to choose between “doing justice with their own hands” or paying the “government”'s price OR the government maintains its monopoly on retaliatory force but provides the protection of rights freely. The first case is anarchy, and the “government” is no true government at all. The second case requires a source of funding not on a usage basis.

  1. When justice is done (a mugger impeded in his action, a defrauder discovered and made to pay restitution - anything) everyone in the society benefits - not only the victim. A society where justice is known to function always, is the strongest deterrent against crime. A society where you can get away with crime if the victim is poor enough is the opposite.

This means that in using the money good citizens have provided to the government in order to protect the rights of some free loader, the government is serving the best interests of those good citizens.

This is why outright donations are the only way a proper government can be funded : any “business” source of income cannot compete with the free market without the initiation of government force, charging fees for securing individual rights while denying the individual the right to protect himself is de facto taxation.

5

You’re assuming that criminal justice is the only kind of court service the government provides. A lot of what the government does is settle disputes and guarantee contracts, and these are services it’s perfectly rational to pay for.

Private companies can’t guarantee contracts because they don’t have the ability to insure, by force, that your property is protected. Likewise if you’re suing someone the government is perfectly rational to charge you a fee; this has the side-effect of cutting down on nonsense-suits because you have to spend money to start the suit.

6

You’re assuming that criminal justice is the only kind of court service the government provides.

No, I’m not assuming that. I am not even assuming that protecting individual rights is the only kind of service the government provides - and I have shown why providing other services than that protection cannot be a source of government funding.

A lot of what the government does is settle disputes and guarantee contracts, and these are services it’s perfectly rational to pay for.

As it is rational to pay for police protection and criminal justice. That is not the point. The point is valid for all types of right protection: If you are too poor to pay for a government suit when I sign a contract with you, what is the contract worth to you? Absolutely nothing. Do your property rights cease to exist because you are poor? No. Are you expecting to mooch of others when you sign this contract? No, you dont expect to be cheated in the first place.

Private companies can’t guarantee contracts because they don’t have the ability to insure, by force, that your property is protected. Likewise if you’re suing someone the government is perfectly rational to charge you a fee

Exactly. The government forbids you to enforce your own contract (i.e. you are assumed to have delegated the right to use retaliatory force) and then refuses to enforce it - unless you pay an arbitrary amount. This is as bad as extortion, almost as bad as taxation.

7

The government forbids you to enforce your own contract (i.e. you are assumed to have delegated the right to use retaliatory force) and then refuses to enforce it - unless you pay an arbitrary amount. This is as bad as extortion, almost as bad as taxation.

I don’t understand your argument. Is it based on the supposedly arbitrary amount of the fee? There are two non-punitive proposals for contracts out there, either the up-front fee approach or the actual cost approach (and the punitive “loser pays” option) – in any approach, the cost is entirely non-arbitrary. It is based on the actual cost of adjudicating contract disputes, just as insurance premiums aren’t “arbitrary” fees. How is this extortion, or in any way comparable to extortion? You have not given an argument against requiring an enforcement fee of some kind, no evidence that it is in any way bad to require the payment of an enforcement fee. Personally, I propose that the government should collect the cost of enforcement from the rights-violator [FN below], but I don’t think the insurance approach is entirely without merit. Tell me why the government should not recover the cost of contract enforcement from the rights-violator, leaving the payment of contract enforcement outside of the realm of things that voluntary contributions go towards. Contract enforcement payments cannot be a source of general government revenue, but it can and should be a source of revenue that sustains the system of contract enforcement.

[FN: The rights violator would either be the respondent found in breach, or the appellant in case the respondent was not found in breach. In the latter case, the appellant has initiated force under color of law by falsely alleging violation of his rights]

8

If you are too poor to pay for a government suit when I sign a contract with you, what is the contract worth to you?

If you are unable to pay to have your contract guaranteed, then what the heck value are you trading with this contract? People enter contracts as part of an exchange of values, meaning that both parties have to have some kind of value to exchange. You can’t be defrauded if you don’t have anything.

9

If the government in no way uses government power to run these enterprises, then no. They are no different from other private competitors. And there lies the rub: if they are no different from their competitors, how can they compete with them - the others don’t have a government to fund out of their revenue!

The problem with lottery or any other sort of business as a source of funding for a government is that they cant hope to compete with free enterprise. For them to “compete”, government force would have to be used - establishing a monopoly for instance - and that is unacceptable.

I’m not sure I understand what you’re saying. If a laissez-faire government took a portion of its money and bought real-estate, hired a contractor, and built a restaurant, it would be in competition with other restaurants and yet not using direct physical force. It would only be a kind of indirect use of force, where a competing restaurant would want to provide money for his own protection but would not want to contribute to his competition. It is a kind of “or else” use of force. Support your competition–or else.

Its not so simple. The citizen has delegated his right to self defense to the government.

Necessarily? Are you assuming some kind of social contract philosophy? If so, it would be poignant to note that Objectivism rejects any notion of a social contract.

In any case, even if the person did at one time delegate his right to self defense to the government in some fashion (for we need not accept that this delegation would be unconditional and complete), why would he not have the right ot take it back?

The government would not tolerate this man if he decided to go vigilante and hunt down anyone who he thinks is a criminal himself, right? A government that forbids a man from defending himself and then refuses to defend him except for an arbitrary fee is on extremely dubious moral ground.

Good point. I’ll have to think about that some more.

And how much?

As much as the government judges it can get–just as a business would weigh supply, demand, costs, etc. to find what it thinks is the ideal price.

  1. When justice is done (a mugger impeded in his action, a defrauder discovered and made to pay restitution - anything) everyone in the society benefits - not only the victim. A society where justice is known to function always, is the strongest deterrent against crime. A society where you can get away with crime if the victim is poor enough is the opposite.

Another good point.

Private companies can’t guarantee contracts because they don’t have the ability to insure, by force, that your property is protected. Likewise if you’re suing someone the government is perfectly rational to charge you a fee; this has the side-effect of cutting down on nonsense-suits because you have to spend money to start the suit.

I haven’t made up my mind about this, but it’s worth considering that the government should try lawsuits without requiring a fee in order to ensure that no crime goes unpunished.

10

I don’t understand your argument. Is it based on the supposedly arbitrary amount of the fee? There are two non-punitive proposals for contracts out there, either the up-front fee approach or the actual cost approach (and the punitive “loser pays” option) – in any approach, the cost is entirely non-arbitrary. It is based on the actual cost of adjudicating contract disputes, just as insurance premiums aren’t “arbitrary” fees.

A good point I expected to be made. How much is the “actual cost” though? Are we counting on the government not to aggrandize itself given the power to charge as much as it likes for the essential services it renders? Are we counting on the government to police itself and continuously seek out the lowest cost workforce to perform its functions, when there is no economic incentive for those in the government to do so? I would not consider such a system sustainable, though you are right that it is not a moral issue - within those bounds.

Those bounds leave the issue of how to fund the police, criminal justice and military open, however. Yes an “actual cost” fee for civil justice - but if you make that your source of revenue for the whole government you are tacking on an arbitrary amount to the fair value of the service. How big the military is, how big the police force is - given an unrestrained source of funding such as tacking on their cost to essential services they would grow with no practical long term control possible.

A mixed system with donations for police, criminal justice, military and a fee based civil justice could work, I suppose. I see no advantage when compared to a full donation system though.

If you are unable to pay to have your contract guaranteed, then what the heck value are you trading with this contract?

That assumes that the cost of justice is proportional to the value of the contract. A poor recent-imigrant who can only afford his food and housing and can’t pay for 5 minutes of a judge’s time would be rightless, in practice.

11

Just a quick thought, but suppose you had the government charge a fee for enforcing a contract whose value was above some threshold. Contracts where the value being exchanged was below the threshold would be enforced at no charge. Since the contracts entered into by people with little money would typically also be of low value, they would get their rights protected at no direct cost to themselves. (In effect, they would be free riders on the justice system.) But large businesses and financial institutions would definitely want to pay the government for contract enforcement, and the magnitude of the values they exchange would easily support the funding of a minimal state. The costs they pay for contract enforcement would be passed down to consumers in the form of slightly higher prices. And such a system would be voluntary, because businesses could always choose not to pay for government contract enforcement. I just expect they would not, because it would be more than worth it to them.

12

Are we counting on the government not to aggrandize itself given the power to charge as much as it likes for the essential services it renders? Are we counting on the government to police itself and continuously seek out the lowest cost workforce to perform its functions, when there is no economic incentive for those in the government to do so?

Even with voluntary contributions we are counting on the government to not aggrandize itself by misrepresenting the amount of money needed to perform its proper function, and to continuously seek the most cost-efective way of performing its functions. If you deny these premises, you’re on the slippery slope to arguing for anarchy. These discussions always have to be founded on the assumption of a rational, rights-respecting government (though it doesn’t require that every agent in the government be perfect).

A mixed system with donations for police, criminal justice, military and a fee based civil justice could work, I suppose. I see no advantage when compared to a full donation system though.

A fundamental difference between enforcement of the terms of a contract and protection against aggression is that you can anticipate the former – you know exactly who the bad guy might be when you enter into a contract, and you chose to enter into an agreement with the person, thus knowingly taking a certain risk. Some of that risk can be insured against. When the government says “We will not enforce any contract which has not had the enforcement fee paid”, that is a recognition of the fact that contract enforcement is expensive, and that just as having house insurance is the only rational course for a person who doesn’t want to lose it all in a fire, paying a premium in insurance-fashion against the possibility of the various errors that can arise with contracts.

The advantage to the user fee system is that it places the economic burden on those who willingly incur the potential costs, which is justice. Police protection and national defense are causes that all citizens should contribute to because it is impossible to guarantee that you will never be a victim (“They’ll never send foreign troops to my town”; “I’ll never the the victim of a mugging”). There is a simple way to never be on the short end of a contract dispute – enter into no contracts. Never enter into an contract which is unenforceable. You should not do it because you don’t feel it’s worth the $25, and you should never get into a business arrangement with a person who won’t put up the $25 for enforcement. Paying the contract enforcement fee is roughly like buying a lock for your house. Sure it costs money and you shouldn’t need it because it’s only for protection against bad people, but there are bad people, so recognize that fact.

BTW, the “cost” should be the cost of evaluating the facts and terms of the contract, i.e the cost of the decision. At that point, the person who is ruled against must do as he is told, or he is a criminal, and the discussion shifts to paying for police to nab criminals.

13

If a lottery donated a portion of its profits to the government, it might attract sales. Lotteries could then compete over returns and government donation levels while escaping the problem of a monopoly.

14

Even with voluntary contributions we are counting on the government to not aggrandize itself by misrepresenting the amount of money needed to perform its proper function, and to continuously seek the most cost-efective way of performing its functions.

Do you not agree that there is a qualitative difference between a government that is a “price setter” and one that is a “price taker” so to speak? Yes, the government can engage in fraud but in a system where the government sets its own prices and you have to pay to have your rights protected no fraud is even necessary - and the aggrandizement receives a facade of legitimacy.

I’m not arguing that all government officials must be perfect nor that the system must make it impossible for the government to do any wrong - only that the government’s ability to choose who has their rights protected and who does not (by setting prices) should not be a club wielded against the individual.

The advantage to the user fee system is that it places the economic burden on those who willingly incur the potential costs, which is justice. Police protection and national defense are causes that all citizens should contribute to because it is impossible to guarantee that you will never be a victim

This makes sense. To use fees where it is possible is justice.

If a lottery donated a portion of its profits to the government, it might attract sales. Lotteries could then compete over returns and government donation levels while escaping the problem of a monopoly.

The lottery that pays zero to the government will always have the highest payout/ticket price. And if the consumer buys the government lottery knowing it is a worse deal - he might as well donate.

15

The lottery that pays zero to the government will always have the highest payout/ticket price. And if the consumer buys the government lottery knowing it is a worse deal - he might as well donate.

Sure, but this is the type of situation where personal preferences might lead to different courses of action. Some people might simply choose to frequent businesses that donate instead of donating themselves as a matter of convenience with consolidated donations. Could this be more efficient than everyone sending individual checks or wiring the donation separately? It would certainly be easier for the average tax donator.

16

Do you not agree that there is a qualitative difference between a government that is a “price setter” and one that is a “price taker” so to speak? Yes, the government can engage in fraud but in a system where the government sets its own prices and you have to pay to have your rights protected no fraud is even necessary - and the aggrandizement receives a facade of legitimacy.

If we set aside that theoretical possibility of government fraud, then I don’t see the objection. The principle is that the government should charge what is necessary, and that can be computed objectively. (Pick a specific scheme, i.e. the punitive system vs. the insurance-premium system, and I’ll say how you compute the cost). This is public information; if the government is charging too much, the price must be reduced. You seem to be thinking that the government can just get away with whatever it wants (speaking very metaphorically – the government cannot “want”, as the government is not a volitional, conscious being). In a society governed by law, rather than the whims of men, the price of justice, by law, is the cost of justice.

17

[FN: The rights violator would either be the respondent found in breach, or the appellant in case the respondent was not found in breach. In the latter case, the appellant has initiated force under color of law by falsely alleging violation of his rights]

Is it possible to have a breach of contract without the initiation of force?

Dan

18

Is it possible to have a breach of contract without the initiation of force?

Typically. For instance, if the contract specifies using material X and the contractor uses material Y, that is a breach of contract but not the initiation of force. If the substitution is not material, the customer is intitled to nothing. When it is impossible to perform, there is a breach but no initiation of force (e.g. if the house burns hown, the painter can’t perform but there has been no initiation of force). Very often, the issue of what the terms of the contract actually require is in dispute, which is not an initiation of force (e.g. Andersen v. State Farm). Failure to make a car payment is not the initiation of force, but it is a breach of contract. You could turn it into force, to be sure. The damaged party sues you for the payment, the court finds in his favor, you refuse to pay, the court sends the sheriff, you shoot the sheriff (or his deputy).

A contract is “acting with permission, as stated in the agreement”, and initiation of force is “acting without permission”. A breach is when the act and the agreement don’t match.

19

If a lottery donated a portion of its profits to the government, it might attract sales. Lotteries could then compete over returns and government donation levels while escaping the problem of a monopoly.

That’s a good point and, moreover, could apply to all businesses–not just lotteries. The catch, though, is that it side-steps the issue of whether it would be legitimate for the government itself to operate businesses in an attempt to make money.

This makes sense. To use fees where it is possible is justice.

Huh? I thought you were arguing against fees. In fact, I think I have come around to agreeing that, so long as the government forbids extra-legal action to pursue a criminal, it should not charge fees for people who use the service.

My only hesitation is the idea that, even if the government forbids extra-legal means of pursuing a criminal, it should never forbid extra-legal self-defense. Hence, you can own a gun and protect your property with it. In the rule of law, though, you have no right to venture out into the rest of society in order to apprehend, try, or punish a person who no longer poses an immediate threat. Given this, it may still be just to charge a fee for various governmental functions. Still, I don’t like the idea of the government allowing crime to take place in this country, so I lean toward the idea that the government should not require a fee.

The lottery that pays zero to the government will always have the highest payout/ticket price. And if the consumer buys the government lottery knowing it is a worse deal - he might as well donate.

Yet businesses do this all the time. Look at all the publicity and marketing that Whole Foods and Starbucks get for their charity operations, and they make a killing with absurdly high prices. It seems to me that the companies are in a better position to give donations in mass, and so it is more efficient for people to shop at places that donate rather than for them to donate directly. So I wouldn’t rule this idea out so quickly.

20

That’s a good point and, moreover, could apply to all businesses–not just lotteries. The catch, though, is that it side-steps the issue of whether it would be legitimate for the government itself to operate businesses in an attempt to make money.

The catch is the point I’m driving at. I am all for businesses donating and agree that public perception is a powerful driver for uncoerced government revenue.

Huh? I thought you were arguing against fees.

I am, I just recognized that David has a valid argument that it is possible that for some government services fees may be appropriate.