Classical Liberalism Solves the Hobbesian Problem

In debates, I’ve had colleagues on the left sneer at me: “You need to read Thomas Hobbes!”

That’s not wrong; we should all read Hobbes. He thought that human quarrels could not be solved by promises to cooperate. His 1651 summary was pithy: “Covenants, without the sword, are but words and of no strength to secure a man at all.”  Hobbes thought that the only way to assure cooperation was to constitute a sovereign, or “Leviathan.” Paradoxically, then, people who wanted to freely contract with each other for mutual benefit should favor a powerful, coercive state.

Hobbes has a point; the ability to make credible commitments is an indispensable component of a society if citizens are to be free and responsible. If two parties cannot agree on an enforceable arrangement for mutual benefit, they are harmed by their inability to arrange to be coerced.

But Hobbes was wrong to insist that only the sovereign monarch could be the source of the contingent coercion that secures covenants. One alternative might be the use of adversarial contests to determine which “team” of political actors will run the state monopoly. North, Wallis, and Weingast (2007) claimed that the abuse of coercive power can be constrained by an open access order, with free competition. The potential for incumbent state actors to do harm is limited by the threat of replacement, because the open access order is open to entry from alternative aspirants to adjudicate disputes and enforce agreements.

The question, then, is how to sustain an open access order where the institution of the state has a monopoly on the legitimate use of force.  To be fair to Hobbes, he had lived through a period that was catastrophically violent and chaotic; further, he had no examples of republican governance to reason from. Further, Hobbes had no examples of the kind of emergent institutions emphasized by classical liberals such as Friedrich Hayek and Elinor Ostrom. But in the 21^st century, it has become increasingly clear that concentrating all the coercive powers of contract enforcement in a monopoly state is not necessary for workable voluntary exchange and large-scale cooperation. What is required is that open access orders be maintained on many dimensions, using a particular set of institutions that allow innovation in forms of monitoring and enforcement.

The surprising conclusion of this argument is that the solution has been in our grasp for decades- in fact, for centuries. The solution is exactly the constitutional forms suggested by classical liberalism, enabled by new forms of technology such as smart contracts and block chain generation of consensus and dispute resolution.

The simplest way to think of it is that improved technology and decentralized mechanisms for organizing cooperation have for the first time made classical liberalism feasible on a broad scale. Government, as my dissertation adviser Douglass North often pointed out, was at best a way of reducing the transaction costs of achieving the gains of cooperation. But the innovations in managing transaction costs have made that old top-down form of governance obsolete.

The result is both innovation and disruption on a scale that has been seen only rarely in human history. The source of the innovation, and the disruption, is a set of rules that allow permissionless innovation.

But we no longer live in a Hobbesian world. We live in a world where the emergent institutions fostered by classical liberalism can solve the Hobbesian problem better than the state. We need to make that argument directly: the state is obsolete, because we can do better than an unaccountable Leviathan.

As Emily Chamlee-Wright has argued, “Liberalism is a set of institutions that embody a fiction: we are all each other’s dignified equals.”  Why a “fiction”?  As Hayek put it:

You may ask me, “What new forms will contracts and voluntary coercion take?” My answer is that I don’t know, and it’s very important that I don’t need to know. Long live classical liberalism, and the permissionless innovation in self-governance that it fosters.

Michael Munger teaches at Duke University and is Director of the interdisciplinary program in Philosophy, Politics, and Economics (PPE) at Duke University. He is a frequent guest on EconTalk.

Read more of Michael Munger’s writing at Archive.