5/01/2011

Chaos Theory!

The new issue of Bloomberg Businessweek is out with an article titled, "The Arms Race Against the Pirates." This article reads like a real world example of how the free market would deal with the problems of police and security in a world absent of any government whatsoever, as outlined in the short book, Chaos Theory, by Robert Murphy.

The article is really a very interesting read and highlights how in the absence of any government provided protection in 2.8 million square miles of ocean, insurance companies provided the impetus for innovation in the market for security and protection. A quote from the article:

To deal with this 21st century version of an ancient threat, ship owners, often at the behest of their insurers, have resorted to tactics old and new-from razor wire, fie hoses, and safe rooms to long range acoustic devices, laser dazzlers, and, most recently, armed guards.

I mean I thought the idea of a sonic gun that propels sound waves that can incapacitate your enemy was only something that exists in Spiderman comics!

The statist might now remark on how the burden for providing for this protection is unfairly placed onto the innocent ship owners. Let's continue reading:

In the eyes of insurers, however, there is no equal to the threat of lethal force. Says Clive Stoddart, global head for kidnap and ransom for Aon Risk Solutions insurance brokerage: "There really is no substitute for having a weapon: live ammunition carried by people who have the right training." Marsh's Gustafson states the case simply: "Not one ship has been taken that has an armed security team on board." For a tanker transiting high-risk waters, an armed, four-person security detail costs about $30,000. That's expensive, but insurers are willing to discount premiums by as much as $20,000 for ships that use them, says Catlin underwriter Stuart Allen. Catlin's Dobbs relays the report of one security firm: In 1,000 transits through treacherous waters there were 90 encounters with pirates. Seventy-two were resolved simply by showing arms. Of the remaining 18, three were deterred by warning shots fired into the air, and 15 by single shots fired near the pirate vessel.

So again we see Dr. Murphy's hypothesis that it would be insurance companies that would bear most of the cost and provide the most effective forms of policing and security. Their reasons for doing so are simple and based on the one certainty we know of human action, self-interest. That is to say, simply due to their own self interest to not have to pay out massive insurance claims, it is in the insurance companies best interest to provide discounts and incentives for ships that are more secure and thus less likely to be robbed, than their counterparts. Unfortunately the article ends by bringing us back to reality and reminding us the brilliance of the free market is still not appreciated even when it rises up and slaps you in the face with a giant sonic cannon. Referring to the ultra effective armed security detail that had emerged spontaneously with no central planning required, the article closes out with the following quote:

"There aren't enough of these guys to protect the ships," says Frodl. "And by the time you start hiring guys to fill in the void, you're going to get guys who really aren't qualified for the job."

Well, that's one possibility. Or, and bear with me here, quite possibly the increased demand for high level security personnel could result in greater pay for said security personnel. Which then leads to more people becoming interested in this profession to fill this alleged void that those whom have not fully grasped the workings of the market appear to be concerned with.

Damn, it's good to be an anarchist!


1 comment:

  1. I'll drink to your last statement! Great read. Thanks!

    ReplyDelete