10 Non-Coercive Methods of Funding a National Defense

Tall ship Niagara passes the Lorain lighthouse

Probably the most common objection to a stateless society is that invading armies will occupy the country and establish a new state. The idea is that a minimal state could ward off that threat in the same way that a flu shot, which contains a vastly weakened form of the flu virus, theoretically prevents an occurrence of the actual virus.

I think there are reasons to believe it is very unlikely that an army would attempt to invade a stateless society. For this discussion, I will assume that people think it is a big enough concern that people think some type of national defense in needed. National defense is what is commonly called a public good, a product or service in which it is difficult if not impossible to exclude people who have not paid for it from enjoying its benefits. A classic example of a public good is a lighthouse since any passing ship can use it to aid navigation. Similarly, if I hope to repel an invasion or discourage the threat of an invasion from a large-scale force, as a consequence then I will likely need to defend my neighbor’s property too. (Incidentally, I show how lighthouse operators overcame the problem.) The theory is that public goods become underproduced relative to their demand as everyone is waiting for someone else to pay for them. In essence, everyone sits on the sidelines hoping others will pay for it.

It is worth pointing out that the existence of a state does not address this problem of public goods, but only creates more public goods, namely the creation of just laws and an informed electorate. Meanwhile, laws that favor special interests are private goods under statism, and so they are produced in great supply, while laws to insure equal justice are underproduced.

Also, it is conceivable that the possibilities I point to below could exist within a taxless minimal state, however unlikely that would be to exist. I do think that if national defense could be shown to work without the state’s aid, then government officials would just exist as some nominal figure heads without much authority.

The free rider problem could also be minimized if defense expenses were reduced by not threatening other countries. Relatively cheap defensive weapons like shoulder-fired anti-aircraft missiles along with snipers would cripple any occupation before it even started. Such a free society could drastically reduce its defense budget, vastly decreasing the free rider problem off the bat. This would be something that people valued, not the paranoid national security state that now exists. The only solution that the state offers for public goods is to forbid competition and create more free riders in the beaucracy. Yet entrepreneurs have a financial stake to figure out how to exclude free riders, so listed below are just a few possible solutions that occur to me for privately funding a national defense. I cannot explain exactly which solutions people will eventually adopt, for if anyone could, that would be a good case of installing a dictator (which would sort of defeat the point).

  1. Ostracism — The more anonymous a free rider can become, the greater the number of free riders. People who contributed to some national defense might proudly display a sign on their mailbox or on their car. Entire neighborhoods might brag that 100 percent of the households have contributed to national defense. A low contribution rate within a neighborhood would probably be seen as indicative of other social ills, and their property values would likely suffer.
  2. Make it easier to pay — Businesses might raise funds by asking customers for voluntary contributions, as with tipping. At a restaurant, people know that their meals are discounted to some degree because their hosts are paid very little per hour. If people understood that their meals were discounted by the lack of any national defense overhead, it would seem fair to most people if they tacked on ten cents or something like that to a good cause that benefited them.
  3. Ask for charity — Fundraisers could always be held to ask for donations from people in other countries. Citizens of neighboring countries who did not wish to see the invasion of an adjacent nation might find it helpful to contribute. They might be worried about an interruption of trade. We could also ask residents of foreign countries who value liberty to help.
  4. Disperse the collection process — People could be asked to collect funds just from others around their neighborhood. This way the money was being given to others whom they know. In a free society, I think people might then become more engrossed in their communities, and have more invested in the caretaking of others through institutions like mutual aid societies.
  5. Guarantee funds — There might be some guarantee to refund a contribution if a sufficient amount of money were not raised. An aspect of a free rider problem is the worry that not enough money will be contributed and the money will just idly go to waste.
  6. Partially exclude free riders — There are ways of making the free rider problem more manageable by de-emphasizing services for geographic regions of the nation that failed to pay their share. You might also offer premium services to those who do contribute. Maybe people who contribute could be invited to special safety classes to learn to defend themselves and their homes, which might help to reduce their home insurance rates.
  7. Bundle services — The private supply of firearms guarantees a private good, namely protection of an individual’s property. But the vast distribution of firearms also provides some measure of public good like national defense. Dispute resolution organizations (DROs) might very well require the purchase of a bundled national defense service in order to receive their full protection. Some DROs might try undercutting the cost of bundled services; however, they would likely have a fairly diminished reputation as a result, causing more trusted DROs to be less willing to have reciprocal agreements with them. The cheapskate DROs would find their dispute costs increasing as a result, and would have to raise its rates near those of the more reputable DROs anyway. I mentioned lighthouses as a classic case of a public good. Well, this was a way lighthouses owners overcame the problem of free riders by also operating the docks near their lighthouses. Navigation to their docks became safer In turn, their docks got more business. So it can be more profitable to bundle a public good with a private good.
  8. Advertising — Sponsorships are also a popular way of funding public goods. The broadcast television signal is interrupted by commercials, for example. Organizations could even broadcast that they financially support defense services. At sporting events, prize promotions are often funded privately so that a sponsor receive some public goodwill. This would likely also be the case for a widely desired good like national defense.
  9. Donut model — Before fully transforming into a stateless society, a nation could gradually free itself in a pattern of increasing concentric circles until the point of reaching its border. This way, a stateless society could more gradually transition away from statism. In the meantime, the stateless inner ring could begin experimenting with other funding models to see which work best.
  10. Lottery — Lotteries have been used by governments to fund education budgets and all sort of other spending. I am sure there would exist other lotteries for people to gamble their money, but one that’s profits were invested in a public good might garner more appeal. A lottery could be used in conjunction with another funding methods to get even wider appeal.

I am sure there are lots of different approaches to public goods. The reason more solutions have not been developed is because the states historically have always monopolized the service. Imagine if the government began regulating beauty as a public good, which it conceivably is, and taxed people who did not meet some quantitative standard. You might see some initial improvement in the attractiveness of a population, but those government standards would begin to erode to meet the majority’s demands. After a few generations, people would be asking themselves how they could ever find a partner without government-run matchmaking.

Further Resources
Image credit: ronnie44052, with a Creative Commons license
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