Comment by snitko | Hacker News Reader

Comment by snitko | Hacker News Reader

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> As to what it's called; the extortion would be called a compulsory service fee, war would be called large scale protective operations.

You're missing the point. Paying service fees is never taxation because the result of not paying for a service is denying that service, while the result of not paying taxes is forceful alienation of property and possibly imprisonment. I am yet to hear of a private company who threatened its customers with all that if they cancel their subscription. If this happens in the free market with the said protection agency, my point is that it will be called extortion and recognized for what it is. That's important because the threshold of compliance in people lowers when they recognize they are being robbed.

> Prices are set to what the market will pay, in this case it's as close to revolt as the business can get away with.

I don't understand this point. What prevents a competitor (say, a big investor) from entering the market and establishing another big protection firm with lower prices and better service? If you say "they all will form a cartel" then I will point out that cartels are always very unstable and someone deserts or another outsider disrupts the market, historically this has been true.

> I would also like to point out that I don't disagree with your assertion that their are negatives with a government controlled monopoly on law enforcement, I disagree with the idea that a free market system for it would not be subject to worse corruption/abuse.

What could be worse than conducting a theft from people calling it taxation, then be bribed by corporations and using those tax money to serve corporate interests? Simple math: a company bribes an official with $1, the official spends $10 of somebody else's stolen money (so it doesn't cost him anything) for that company interests and that makes the company $100. In the free market, companies at least deal with the money they actually made, so there's no "free" money for them and no one to bribe.

I didn't miss the point, I was being flippant in that they can call it what they like and there is little you can do about it, you can call it extortion among your friends but that doesn't change the outcome. I also think you're forgetting what service they're providing. If you aren't paying anyone for protection then anyone can rob you and no one will be enforcing consequences on them for you as you have no protection, anyone can break contract with you as you have no option to enforce the contract. Maybe you're rich enough to hire a personal bodyguard but the majority of people can not. The majority of people effectively have to pay this “service” fee or move or be insecure in their possessions.

Why doesn't another competitor enter the market? Well considering the market the competitor needs to be big enough to stand up to a literal attack by the incumbent. In the best case the incumbent and the newcomer both end up being about the same size and they compete. Alternatively as this hypothetical investor who has the capital to get about half of this large market I would do better spending the same investment on a smaller market were I can capture the whole market and force a higher percentage return on the investment. You can look at comcast/time warner to get an idea why these two big encumbents might not compete even without forming a cartel. If someone was to point me at google fiber as an example of how the market will be disrupted I'd point out the fact that the local companies are trying to use the legal system to thwart google fibers growth even within the city and if these companies were the enforcement of the legal system I don't particularly believe google would get a fair shake of the stick.

What could be worse? What could be worse than conducting a theft from people calling it a service fee, then be bribed by corporations and not delivering the service to serve a corporate interests? Simple math: a company pays (it's not a bribe it's legal) the protection company with $1, the protection company allows $10 of somebody's stolen property to be used (so it doesn't cost them anything) for that company and that makes the company $100. In a system with a democratic government, the official has to at least pay lip service to working for the public good and it's illegal to accept that payment.

I think all your assumptions come from the fact that you don't believe competition, specifically on the protection market, can work. If I could convince you that in fact it would, then it appears all other questions can be resolved. For example your hypothetical scenario in the last paragraph is absolutely impossible if people have a choice of whom to pay for what services. In fact, it is possible even if this firm is monopolistic: stolen property? how was it stolen? why did nobody care? why did customers thought it's okay to keep paying to that firm knowing that their property can be alienated at any point in the same way?

But anyhow, back to competition. First of all, for a competition to exist, it doesn't have to take 50% of the market. It only has to be sure that it is cheaper for the monopolist to compete with it fairly than to go to war using tactics such as predatory pricing or actual violence. In almost all cases fair competition is more profitable in the long term. It is established by many industry experts and economists that predatory pricing doesn't actually work. Only legislators seem to not grasp it and there's a good reason why: because their pay depends on the fact that they are supposedly protecting the public. I've read an awesome book about Airlines once (http://www.amazon.com/gp/product/B000W6871G/) and at the time it was a big surprise for me to find that governments very often launched predatory pricing and anti-competitive cases against discounters, who tried to disrupt the market of big established carriers.

> In a system with a democratic government, the official has to at least pay lip service to working for the public good and it's illegal to accept that payment.

The difference is, in a democratic government official when elected knows almost definitely he's not going to lose his job for the next n years. He knows people will keep paying taxes. How does that create any incentive for him to work in the interests of the public? This kind of situation only creates incentives to accept bribes and use the position of power. If this official does this carefully, he will never face allegations, let alone jail time, because, of course, the judges and the police work in the same system with him and it is HIM who pays them, although not from his own money. The only people who go to jail are in the lower echelons of power and those are the ones who weren't careful enough to not piss off their masters. The Democratic system the west adores so much is just civilized and institutionalized corruption. It's a theatre pulled over the eyes of the people and it's so sad many people have this blind faith or at best acceptance of it.

Yes my main problem is I don't see how a free market system on protection would not devolve into a mafia-esque extortion scheme. I cover a bit more what powers I'd assume they effectively have in the other thread. Please correct me if I'm wrong on those assumptions (but please point out how they've been stopped from acquiring those powers).

So to sum up why you'd keep paying a protection monopoly even if it was abusive to you is because unless you have an effective alternative protection arrangement they have the power to do what they like to you and if you rock the boat you give them a reason to.

I'll have a look at that book and the premise that in free market competition these monopolies wouldn't form or would behave fairly to competitors if they did (Though normally I'd argue that you wouldn't have seen AT&T and Standard Oil stopping their practices without the oncoming threat of government intervention.) I will instead point out the question of “A rich merchant with a bag of gold, the king, the pope, and a man with a gun are alone in a room. Who is the most powerful?”. The answer is it depends on the man with the gun. The point being that while there are several different forms of power the ability to inflict violence is one of them and it's master is not necessarily market forces especially since it can shape the market. So how do you ensure a free market system?

There are several countries where you could visit and pay the local warlord money to ensure you're not harassed inside their territory. Whether they stick to the deal is somewhat questionable but several do, this does not mean I'd feel secure in their justice if one of their men decided to beat me, and I would be more than a fool to expect a refund if they did. Why would I pay the warlord instead of putting all my money toward bodyguards? Because the cost for the warlord if everyone does this is higher for him than losing men the first few times and then having a steady income. Why haven't all those who believe they will visit these countries to hire a large mercenary force to stabilize the region? Is it just more efficient to keep the local warlord? Similar abuses occurred with the mafia before an outside supplier of greater protection stepped in, unfortunately in the free market that outside supplier could just as easily be the more efficient yakuza.

I'd also like to point out that the demand to not be shot in the head is inelastic and a local provider of the service can manipulate the supply of not being shot in the head to reach a price to his liking.

Now if I grant you democracy is a more corrupt system would you still suggest to me that it is worse than what I conclude a system with a free market on protection would devolve into?

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