On David Friedman's 3rd AMA

David Friedman recently conducted his 3rd AMA, <a href="http://www.reddit.com/r/IAmA/comments/2xyb7y/iama_economist_legal_theorist_and_novelist_david/">found here. This article collects selected highlights from the AMA and my notes. There are 6 highlighted questions in total.

1. Q: \"...what mechanism of a free market would keep a corporation from expanding into so many ventures and growing so large that it becomes essentially a government?\"
   1. A: \"In most industries, there are economies of scale up to some size, diseconomies above that, with the result that natural monopolies are rare except in very small markets...\"
   2. Notes: Friedman takes the pragmatic response that A-C enforcement firms could turn into governments, but they probably won't. He identifies two related supply-side mechanisms including economies of scale and potential cartelization. There are many other possible mechanisms including-demand side mechanisms. Two notables are technology and ideological social preference. Interestingly, market economics can describe the way governments previously formed.
2. Q: \"What do you think of Nozick's argument that anarchy itself is unstable which will cause the rights enforcement agencies to become psuedo state then essentially states?\"
   1. A: Friedman said that he finds the argument weak and that a stronger argument is that A-C societies are not found in the modern world which demonstrates infeasibility. Another user noted that the fact that A-C societies are not found today or in the past is particularly weak evidence that such a society could not thrive in the future.
   2. Notes: I agree that A-C society becomes more plausible as time goes on, in part due to the effect of technology on the structure of society. Absence of A-C society does not demonstrate infeasibility, but it does demonstrate relative efficiency of traditional states in contexts thus far, which could change in the blink of an eye. Most importantly, the facts are wrong here. Anarchic society has existed and still exists today, despite the allegation that anarchies are not observed. Anarchy just hasn't looked quite like Friedmanian Anarcho-Capitalism thus far. For reference, see Can an Anarchic Nation Exist? and Another Historical Objection to Anarcho-Capitalism.
3. Q: \"Would the concentration of power through economic inequality be a serious problem to the stability of a anarchocapitalistic society?\"
   1. A: \"In a modern society, I don't think concentration through economic inequality would be a serious problem, since even a very rich individual has a very small fraction of the total wealth of everyone.\"
   2. Notes: I would also point out that open source and similar shared resources are on the rise. These resources have larger spillover benefits than primary consumption benefits. In other words, the general welfare increases more than the welfare of the primary consumer when such goods are produced and consumed. If technological progress continues this trend of positive external dominance, then real wealth per person will be increasingly equal even if nominal income becomes infinitely unequal.
4. Q: \"Obviously you have different views on law than Rothbard, but I was wondering what your opinion on his concept of law in an ancap society is?\"
   1. A: \"As best I understand it, his view was that legal philosophers would figure out what the law should be and all courts would follow it. In the system I describe, law is produced on a competitive market by arbitration agencies, each pair of private rights enforcement agencies agrees on an arbitration agency to settle disputes between their customers, so the arbitration agencies are trying to create the law that customers want to be under.\"
   2. Notes: I think the Friedmanian system is much more plausible in the real world.
5. Q: \"Why couldn't individual people to craft private law themselves or via their explicit agents via contract --why rely on orgs to make law that people then adopt?\"
   1. A: \"Because there are economies of scale in both crafting legal systems and negotiating agreement. \"
   2. Notes: Friedman's answer is good for the current historical climate, but technology can deleverage economies of scale. This is related to the notion that A-C is more plausible in the future. The idea is that States have economies of scale which is comparatively better than small firms, but this competitive advantage will vanish and then even reverse due to technological empowerment of the masses. For the same reason small firm enforcement agencies may only be a transitory phase on the way to individual governance. Now, if economies of scale are somehow permanent in the very long run then they would not be a mere phase. Perhaps Friedman believe the economies of scale are permanent, but I don't.
6. Q: \"I'm curious what your rebuttal is to the possibility of an ancap future full of private military corporations formed over ethnic, geographic, religious, and cultural ties, as opposed to merely a profit incentive, which may or may not reap grand financial returns. Do you consider something like this likely, or possible even?\"
   1. A: \"People are sometimes willing to bear large costs for ideological motives that don't easily fit a model of rational self interest, but I don't think it's so common that such behavior is likely to dominate the structure of the society.\"
   2. Notes: Social values are priced in to the market. If you buy some good for religious, cultural, ethnic, or other reasons the market will still regulate good price, quantity produced, and so on in the same way as any other good. Next, in the long run the profit motive is the dominant factor. This is not because of an intent to form profit, but because of economic law. A business with an ethnic discount, for example, would be out-competed in the long run, ceteris paribus.