On Libertarianism and Statecraft, Part IX: Trust
By Insula Qui
Author’s note: The main themes of this series are further expounded upon in my book Anarcho-Monarchism, which you can buy here.
Introduction
The first eight parts of this series demonstrated that libertarian governance is both necessary and desirable, explained how it ought to be structured, and showed that statism is inferior to libertarian statecraft. The next task, which will occupy the remainder of this series, is to explore the nature of wise statecraft. The principles laid out here will apply to all statecraft, whether done on an individual, collective, or even statist level. However, these principles of statecraft use libertarianism in a way that is not blindly dismissive of statecraft.
This can be thought of as the libertarian theory of efficient property management. Of course, if profit maximization would impose a cost on some person, that cost should eventually be internalized. If anyone else has to subsidize personal profit maximization, then social profit is not maximized. By applying libertarian theory, we have already eliminated the main concern that profit maximization will be anti-social. Imposing costs is contradictory to libertarianism, thus libertarianism can never consistently be anti-social.
The Good Effects
There are four major reasons why social trust is desirable. First, social trust strengthens property rights as property-oriented norms develop. Second, trust funds social activity and community spaces. The only way property can be managed in the social realm is if the managers have trust with the community. Without trust, any non-profit endeavor is made nearly impossible and the optimal size of all organization is greatly reduced. All social and community interaction is not quantifiable in material terms, as such it cannot simply use the logic of the marketplace for material goods. Third, trust lowers transaction costs, as transactions attain a less stringent necessity for verification while scams and fraudulence become less of a concern. Fourth, trust inherently creates opportunity as high-trust social networks lend themselves to an easier process of allocating resources. These features of trust are essential for creating and maintaining a society that can actually function and compete with other societies, but this warrants further explanation. It is imperative to establish how societies can create trust and then profit from it.
Property Rights
Within a society that has higher levels of trust, people also have a higher degree of social responsibility. Social trust means that each person can be relied on and all people are expected to function within society, with minimal exceptions. When people are expected to refrain from value-destructive behavior, they are expected to refrain from lessening the value of all property, regardless of who owns it.
The most egregious violation of the principle of social responsibility is the violation of property rights, especially the ultimate property right within one’s own body. When property rights are threatened, the necessary result is a general reduction in profits because theft is a complete social loss. There are two mechanisms by which social trust will necessarily reduce theft. First, when all people are expected to take care of themselves and social attitudes are conducive to this, there will be a significant reduction in people who are relegated to poverty and degenerate behavior. When people retain their cognitive abilities and have no need to steal, they rarely do so. Second, when people trust each other, they will reciprocate property rights. This is a main distinction between property rights in first-world versus third-world countries. In many third-world countries, property itself is met with envy. Low social trust leads people to believe that prosperity is built from poverty, that property is only held at the expense of everyone else. This lack of trust and reciprocity results in property being under constant attack. This reduces profits and creates general social stagnation.
Social Funding
A prominent criticism of libertarianism itself is that it cannot fund social activities, but this is only true as long as libertarianism is coupled with a low-trust society. In a high-trust libertarian social order, all people are invested in society. When people are invested in society through the mechanism of social responsibility, they will fund social activities. This creates a powerful drive to form commons in areas that are useful for many people and create norms and spaces in which communities can thrive. From subsidizing schools to establishing parks, high trust results in funding for community functions.
These libertarian commons would not be equivalent to state-established commons. This is because any libertarian form of common property would require general rules of organization to stay profitable for all people. The logic of spontaneous order applies even when property is not individually held and managed. These commons would effectively be market-based, as they are not owned by any state authority.
When all people are good caretakers of their property and the common property, all people can expect others to do the same. When it is expected that there is no abuse of common property, it leads to an establishment of common property and the defense thereof. Many libertarians may now try to argue against this by invoking the tragedy of the commons, but this is solved by a high-trust society through the mechanism described above. Note that if it is impossible to establish generalized rules in commons, then the entire theory of spontaneous order falls apart.
But why do these common spaces maximize profits more than spaces which are privately funded? Why is it not advantageous to leave schools to capitalists rather than subsidizing education for everyone? Why should parks not be privatized and function as places of advertising or require fees? The answers to both of these questions are fairly simple. First, social management of public areas greatly increases social capital, which is extremely valuable in itself. People can find shared interests and camaraderie by managing a public area. Having commons leads to a greater capacity of forming networks of trust and reciprocity.
Second, whenever the children in a society are properly educated, those children become more productive adults. Whenever education is not subsidized, there will be less education and social profits will be greatly reduced. For highly intelligent children, this is not a problem in the age of technology. However, structural education is still useful for many people. Additionally, the subsidization of education makes the community socially responsible for education. This makes subversion much more difficult. (This is not to endorse over-education where children are bombarded for years with irrelevancies and propaganda, but a certain degree of knowledge is necessary to function within an industrial or service economy. And unlike higher forms of knowledge, it is much harder to learn the absolutely necessary forms of knowledge without guidance.)
Commons are beneficial because they are held and managed by the entire community at large. Since these commons produce profits for the entire community, they serve to increase the prosperity of an entire society. This creates a uniform increase in profits, which ensures that the general wealth of society is increased. When the quality of a community increases, so do the rents that can be charged for living in that community. This is a positive externality for everyone who can charge rents or owns property. That is not to say that this is fundamentally good, but most people prefer that the communities in which they live in are prosperous.
Transaction Costs
All markets in property titles include an inherent cost of verifying that transactions are legitimate alongside the cost of exchanging a title itself. When one buys a title for a good, one needs to make sure that the good itself is what one expects. If trust is low, all of these costs will be heightened. For example, when a society does not trust food to be of good quality, it needs to be regulated by a meta-structure that expands over the entire society. This imposes a tremendous cost on those who make food and those who consume food, but it is the only way to facilitate food production within a low-trust society. A high-trust society eliminates the need for compulsory audits in food production, as all food is expected to be of quality.
If blockchain technology is sufficiently advanced and universally adopted, this problem would be greatly alleviated. However, trustless systems can never be as efficient as high-trust systems. A trustless system can only function insofar as it prevents the imposition of costs, while a high-trust system can serve to be value-productive. For example, if one is sold rotten food, both systems will serve to solve that issue. But only a high-trust system will seek to ease the discomfort and re-establish good relations.
When all goods are expected to be of the promised quality, transaction costs are reduced. Conversely, in a low-trust society, there is no guarantee that promised goods would be delivered. This leads to the prevalence of scams and other forms of anti-social profit maximization. Even when this does not become outright fraudulence in selling goods, it still results in sub-par goods being passed off as better quality, and this relates to the final point.
When transactions are made, there needs to be a certainty that the ex-post value is the same as the ex-ante value. In essence, the potential for buyer’s remorse needs to be eliminated within reason. This is threatened by two things in a low-trust society: misrepresentation and false advertising. This is undesirable for the aforementioned reasons. When people do not have to pay any of these added costs, transactions will be done more rapidly and more efficiently. Societies with a high amount of trust will seek to transact in the optimal way, which will result in profits being maximized for all parties within that transaction. Thus, eliminating transaction costs is a vital part of what it means to increase profits within society. The lower transaction costs are, the less each person has to pay for trade and the more profits each person can internalize.
Efficiency Itself
When people can be trusted to keep their word and do what they promised to do, the social allocation of resources becomes more efficient. This is the basis for the brilliance of the contract; having tasks guaranteed to be done creates the potential for these tasks to be delegated to those who are the best suited for particular purposes. When there is little cost to delegating tasks, each person finds themselves with the opportunity to apply their own skills in such a way that is the most beneficial for the entirety of society, including themselves. The division of labor hinges on trust insofar as trust is required to guarantee the practical applicability of the contract.
Furthermore, the social networks inherent in a high-trust society create a higher degree of awareness for opportunities. All people are better able to find the tasks in which they are proficient and find people to whom they can delegate tasks that they are unable to do in an efficient manner. When there is social capital and high trust, there is a propensity for a better allocation of resources. This also applies to the allocation of property titles, but that mostly falls under the transaction costs that were described above.
Creating a High-Trust Society
The first and most relevant part of creating a high-trust society is to establish structures of authority to which all people can appeal whenever there is social irresponsibility. By establishing that the participants in society have an appeal for anti-social behavior, the society has established networks that incentivize trust. The trust level in society corresponds to the level of just authority.
An essential part of trust is to reduce out-group competition. Whenever a society has multiple competing factions, that society will lack trust. Trust, as a concept, is only ever truly applicable within the in-group, as all out-groups are in direct conflict with the in-group. Thus, the elimination of heterogeneity in society will result in the increased quality of trust. Beyond mechanical market operations, each in-group aims to subsidize itself at the expense of each out-group. For this reason, factionalism necessarily reduces profits.
Social responsibility at the institutional level is also integral to trust. This is represented in the Hoppean model of covenant communities, the Heathian model of central landlords, and any other form of libertarian statecraft. Making all people institutionally responsible for their own society will facilitate trust. Without any moral norms, people cannot be expected to be moral actors, and moral norms with no institutional backing cannot guarantee morality. In order to prevent low trust and its associated ills, libertarian forms of governance must enforce moral norms through non-aggressive means.
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