The market price of a good is a choice of buyers and sellers, but what is a good? What are the limits of this choice?

The subjective theory of value commonly refers to economic value or market price. Market price is a function of scarcity, and scarcity involves the demand for a good relative to its supply. Demand is the preference of consumers, and an economist knows this preference only by observing consumers choosing goods in a market. The value of a good is not a property of the good itself. It is a property of the good within this market context.

But what about values more generally? Suppose you like the look of my fanny. May you communicate your approval by giving it a pat? Must you ask my consent first? May you express the sentiment otherwise, simply saying, “I like the look of your fanny.” Must you ask my consent to say such a thing? If you must ask and if you say, “May I say that I like the look of your fanny?”, have you already committed the offence?

If you commit such an offence, what is an appropriate penalty? May I slap your face, or must I press charges through a law enforcement agency presuming you innocent until I prove you guilty? If I slap your face without this legal process, have I committed an unlawful act myself?

Do these questions have universal answers, across time and space, or do the answers depend upon a context like the market in which the price of a good emerges?

My thesis in this forum is radically subjectivist. Answers to these questions are context dependent. You pay a price for slapping my fanny, even if the price is only the cost of first obtaining my consent, but the price in a free society is or should be a market price. Even the penalty for an extremely serious crime, like brutal assault or rape, much less vandalism or theft, is a market price in a free society, because “free society” rules out a central authority answering these questions for everyone everywhere.

Ideally, the law itself is a good with a value subject to market forces, and law enforcement is similarly a service subject to the willingness of producers and consumers. The producers in this market are legislators offering laws and policemen offering law enforcement services. Who are the consumers?

Libertarian answers to this question vary, and I again distinguish two categories of answer, the left and the right, with the usual proviso. “Left” and “right” are loaded terms, and my usage here is hardly universal or even common.

For the right libertarian, the consumer is the victim of crime exclusively. Because only victims of crime exercise this choice, the right libertarian constrains the market for legislation far more. A right libertarian must tell us the law that law enforcement services compete to enforce. A criminal has no voice in the matter, and a victim has a voice only insofar as he may press a criminal charge or not. Victims of crime do not decide what constitutes a “crime” or the standards of guilt or the extent of punishment.

For the left libertarian, victims are consumers, but so are criminals. Both law enforcement and law itself emerges from their interaction.

In the liberal archipelago, communities are islands distinguished by the rules governing them, but an inalienable right of self-ownership constrains the rules. An individual may exit any community at will. If an individual violates a community’s standards, the community may impose a penalty on the individual only with the individual’s consent. If the community forbids you to slap my fanny without my consent, and if you slap it regardless, the community’s standards may require you to pay a fine or to spend time in a cage or both, but you may escape the fine, to some extent, and the cage by leaving the community. By exiting, you become dead to the community with neither an obligation to respect its standards nor any rights within it.

You may escape a fine only to an extent, because you have exclusive rights to resources within the community only subject to the community’s standards. You own a house within the community only because other members of the community consent to your exclusive use of the house. Exiting the community surrenders all rights within the community including a right to expect other members to respect your ownership of the house.1 If you own nothing, other than yourself, within a community, you are in a sense freer of it, because you have less to lose by exiting.2

Privatizing prisons

“Privatizing prisons” typically suggests little more than entitling a prison’s administrators, who practically remain state employees enacting a state’s decrees, and possibly shareholders to receive monopoly rents. A state assigns prisoners to a prison and governs the treatment of the prisoners but pays nominally “private” owners of the prison for the use of their resources.

A liberal archipelago privatizes prisons, but no central authority assigns prisoners to a prison or governs the treatment of prisoners. Instead, convicts choose their prisons and the terms of their treatment. If you violate the standards of a community by slapping my fanny, the community may assign you to a prison within the community, but you need not accept this assignment. You may instead resign from the community and join a second community.

This right to exit a community does not imply impunity for slapping my fanny. Nothing compels a second community to accept as a member a person convicted in the first community of non-consensual fanny slapping, much less a more serious crime; however, if accepting this convict on its terms benefits the second community, and if the same terms satisfy the convict, the move occurs. The second community may permit the convict to labor profitably while paying a small fine, while the first community requires him to remain in a cage for a time without laboring profitably.

The system of law and law enforcement emerging on the archipelago satisfies every subject, as much as everyone can be satisfied, in the same sense that the market price of a good satisfies all producers and consumers in a market. The price of membership in a community is adherence to the community’s standards, and individuals pay the price of their choice for the standards of their choice. Insofar as people value freedom and productivity, the right to exit ensures that emerging law does not impede these values unnecessarily.

Outlaws participate in this market as much as inlaws, and criminal penalties are voluntary in the same sense that market prices are voluntary. In a sense, every member of a community is a voluntary prisoner. Every member accepts constraints on his behavior in exchange for benefits of living peacefully among the community’s other members.


1If you also own a house in a second community permitting dual membership, you may escape a penalty in the first community without jeopardizing the second house if the second community does not penalize your offence in the first community.

2In a paternalistic context, Locke describes this inducement to respect a community’s standards as follows.

“By this power indeed fathers oblige their children to obedience to themselves, even when they are past minority, and most commonly too subject them to this or that political power: but neither of these by any peculiar right of fatherhood, but by the reward they have in their hands to inforce and recompence such a compliance; and is no more power than what a French man has over an English man, who by the hopes of an estate he will leave him, will certainly have a strong tie on his obedience: and if, when it is left him, he will enjoy it, he must certainly take it upon the conditions annexed to the possession of land in that country where it lies, whether it be France or England.”

An English father has power over his children in this context not so much because he is their father as because the political power in England entitles a father both to enforce exclusive rights to resources and to choose an heir to these rights.