Pirates, Anarchy, and the Monetization of Social Media

(Editor’s note: some ideas adapted from writings of Peter T. Leeson and introduces the idea of IOUs trading as a proxy for production.  The monetization of social media will likely evolve from such an idea)

No sane blogger would post an article suggesting that anarchy is superior to government as a means of producing widespread cooperation…or would they?

As Milton Friedman put it, “government is essential both as a forum for determining the ‘rules of the game’ and as an umpire to interpret and enforce the rules decided upon.” Most great anarchist theories are duly faulted for significant problems coping with cheating and violence.

Nonetheless, large swaths or anarchy exist today.  For example, there is no World Court to enforce World Law, if such laws existed.  Nor is there a Global commercial law to enforce contracts between Global traders. Even at a local level there is no guarantee that the government will protect your property or enforce your contracts.

A common objection to anarchy is that without government the strong will plunder the weak because the weak have an inherent inability to protect themselves. How can self-governance alone protect the weak?

Social Piracy?

Pirates, for example, tended to be substantially stronger than producers and could steal from them by force. So the producers devised an institutional solution to the problem that allowed them to trade with bandits – they devised a system of credits (IOUs). In essence, one cannot steal goods that aren’t yet produced, but one can trade a representation of such productivity.

After getting plundered a few times, producers would not produce anything but would instead wait for pirates to arrive looking for goods to plunder. With nothing available to steal, the pirates had two options: return to the coast empty-handed after having made a long and expensive trip, or make an agreement with producers to supply the goods they required on the basis of an IOU.  Given the cost of the trip, pirates often negotiated for IOUs.  They could then trade the IOUs as money backed by future productivity.

First, this enabled the weak to avoid being plundered, (which would have been the same as not producing anything at all). Second, it transformed producers in the eyes of pirates from targets into valuable assets they had an interest in protecting. If pirates wanted to be repaid, they needed to ensure that their debtors remained alive and well enough to produce. This meant abstaining from violence against producers and protecting producers against the predation of others.

Anarchy, like all political-economic organizations, is riddled with problems. The question is whether these problems are more severe than those that plague governments.  Where the government cannot provide law, order, or the institutions required to produce goods and services, private institutions emerge to perform these roles instead.

Today, social media is lawless.  There is no ’social media government’. As with the example of the pillaging pirates, it is in everyone’s best interest to help others in the hope that they will be successful in the future and pay back an IOU.  It is in the best interest of others to accept an IOU because the alternative is to be plundered and lose any incentive to produce anything in a fundamentally anarchistic environment.  Since social media is a closed loop, it is in everyone’s best interest to protect each other against the predation of others.  Suppose now that people were to “trade” IOUs as money in social media?

It’s not difficult to see how trade can in many cases prevent cheating even where government enforcement is not an option. So far, the result has been phenomenally successful in social media and therefore demonstrates that anarchy may in fact work better than government.

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