Chaos Theory: Two Essays on Market Anarchy

Robert P. Murphy's Chaos Theory pairs two short essays, "Private Law" and "Private Defense," on how a stateless society could settle disputes and repel invasion. Murphy's answer to both runs through one device: a private party contracts in advance to pay for other people's wrongs, and so has reasons to price them and prevent them. In the preface to this second edition, dated December 2009, he says he kept the case practical and left competing moral foundations aside (p. 8). The first edition, available by May 2002 with Robert Vroman's illustrations, combined Murphy's web articles on private law from late 2001 into one essay alongside the private defense essay (p. 7), and the Mises Institute edition appends a bibliography on anarcho-capitalism compiled by Hans-Hermann Hoppe (p. 65).

The law essay begins before any dispute. An employer and a worker name an arbitration agency in their contract, and the worker promises in advance to pay whatever restitution it awards for theft (p. 14). Murphy relies on reputation to check a corrupt arbitrator. If bad rulings became public, job seekers would move to rival employers using more credible agencies, and the firm and the agency would both lose business (p. 15). That check reaches only as far as misconduct is observable and workers have alternatives. The preface adds a step the essay skipped: a private judge gives a third party's opinion on what custom or contract requires (pp. 8-9).

An award is worth little against an offender with no money, so Murphy has an insurer cosign each client's contracts and pay victims immediately, charging repeat offenders higher premiums the way auto insurers charge reckless drivers (p. 18). Losing coverage makes a person a poor employee or customer, a pressure Murphy compares to a credit history (pp. 18-19). He concedes that the uninsured would struggle to find work or credit and could be refused entry to many neighborhoods (p. 21). His claim that basic policies would be cheap rests on break-even arithmetic in footnote 13 (p. 22). It multiplies an assumed homicide risk by assumed damages, so the illustrated premium of roughly $10 a year is a conditional figure that moves with those two inputs and draws on no observed premium or real quotation.

The defense essay carries the same liability over to foreign aggression. Insurers owing compensation for invasion losses would pay for protection whenever the expected fall in claims exceeded its cost (pp. 45-47). A rival insurer could undercut one that funds defense. Murphy answers this free-rider problem by projecting that large firms would supply most premiums, which would let an insurer sell long-term packages whose low rates apply when enough major clients sign (p. 48). He calls the remedy "rather vague" and leaves open how those firms would bargain over their shares, so total defense spending stays undetermined until that bargain closes (p. 48). He fills the gap by asserting that shareholders of rich companies are "anything but reckless" with money (p. 49).

War insurance also carries a solvency condition. An invasion can trigger many correlated claims across a region, and the coverage is worth what insurers can pay when those claims come due together. Murphy concedes a further weakness: military defense gives little feedback before a sudden attack, which blunts the trial-and-error correction that disciplines other firms. His proposed fix is multinational agencies that lose one regional franchise and learn from the failure (pp. 57-58), and he admits that lesson could come at catastrophic cost.

His confidence runs ahead of these concessions. He predicts that private forces would beat government armies in all but lopsided contests (p. 43), and his closing pages offer polemical historical comparisons that document government failure without establishing that his agencies would do better (pp. 60-63). He calls the law essay "admittedly incomplete" (p. 39).

Source: Robert P. Murphy, Chaos Theory: Two Essays on Market Anarchy, second edition (Ludwig von Mises Institute, 2010), ISBN 978-1-933550-65-7, with illustrations by Robert Vroman and an appended bibliography compiled by Hans-Hermann Hoppe. Page numbers are the printed page numbers. The book is published under the Creative Commons Attribution 3.0 license, and readers can consult the Mises Institute book page and the publisher's original PDF. Unaltered copies of that PDF, with all credits and notices intact, can also be downloaded from the Towards Liberty file server and from nostr.download.