A private defense agency (PDA) is a theoretical enterprise which would provide personal protection and military defense services to individuals who would pay for its services. PDAs are advocated in anarcho-capitalism as a way of enforcing the system of private property. A PDA is distinguished from a private contractor employed by a state which is usually subsidized. Instead, such agencies would in theory be financed primarily by competing insurance and security companies.
Theory Benjamin Tucker and Gustave de Molinari first explicitly proposed private defense agencies. The concept later was advanced and expanded upon by anarcho-capitalists who consider the state to be illegitimate and therefore believe defense is something that should be provided or determined privately by individuals and firms competing in a free market. The Mises Institute published a book of essays entitled The Myth of National Defense: Essays on the Theory and History of Security Production. Murray Rothbard in For a New Liberty: The Libertarian Manifesto and David D. Friedman in The Machinery of Freedom expand substantially on the idea. Both hold that a PDA would be part of a privatized system of law, police, courts, insurance companies and arbitration agencies who are responsible for preventing and dealing with aggression. In this environment, victimless crimes and "crimes against the state" would be rendered moot, and the legal realm would be limited to contractual disputes and tort damages, as from assault, burglary, pollution, and all other forms of aggression. This concept is similar to polycentric law. Within economics, discussion of the concept largely has been confined to the Austrian School, as in Hans Hoppe's article "The Private Production of Defense" published by the Mises Institute. Accord to these authors, PDAs have different motives from existing statist defense agencies: they believe that their survival depends on quality of service leading to a wide customer base, rather than "the ability to extract funds via the force of law", and that customers and markets would thus dictate that PDAs minimize offensive tendencies and militarization in favor of a pure defense. Anarcho-capitalists believe such privatization and decentralization of defense would eliminate the credibility of, and popular support for, the state. As a private firm offering individually determined defense, the PDA provides a model for how an entirely private defense would work in a free market. John Frederic Kosanke argues that the need for large-scale defense is minimized in direct inverse proportion to the extent of domestic control by the state. He believes that since the greater number of proprietors makes surrender more costly to an aggressor than a relatively authoritarian region, vulnerability to attack is less likely. Furthermore, he believes that since individuals minding their own business pose little threat to neighboring regions, official or ideological justification by those neighbors for attacking them is also proportionately diminished.
Lack of monopoly power Hans Hoppe believes that there is a contradiction in the beliefs of most philosophers and economists in reference to national defense. According to his argument, they generally hold that any monopoly is "bad" for consumers because, shielded from potential new entrants into his area of production, the price of his product X will be higher and its quality lower than otherwise. Yet he says that they simultaneously hold that security must be undertaken by the government, which is a territorial monopoly of law and order (the ultimate decision maker and enforcer). Hoppe holds that the two propositions are clearly incompatible. In his essay The Production of Security, Molinari concluded:
If there is one well-established truth in political economy, it is this: That in all cases, for all commodities that serve to provide for the tangible or intangible needs of the consumer, it is in the consumer's best interest that labor and trade remain free, because the freedom of labor and of trade have as their necessary and permanent result the maximum reduction of price. And this: That the interests of the consumer of any commodity whatsoever should always prevail over the interests of the producer. Now in pursuing these principles, one arrives at this rigorous conclusion: That the production of security should, in the interests of the consumers of this intangible commodity, remain subject to the law of free competition. Whence it follows: That no government should have the right to prevent another government from going into competition with it, or to require consumers of security to come exclusively to it for this commodity. Tyler Cowen argues that allowing private defense agencies would not necessarily prevent a monopoly on defense services, by positing that a cooperating network of such firms could use aggressive force to enforce the cartel's market domination. Noting that advocates of PDAs typically argue that abuses would be prevented by the presence of rival agencies acting under the authority of rulings made by arbitrators empowered by inter-agency arbitration agreements, Cowen opines, "The adjudication network is stable only if it can use force to put down outlaw agencies that do not accept its higher-order arbitration decisions. Such a network could also use force to put down firms that do not adhere to the collusive agreement." Anarcho-capitalists argue that competing defense providers would concentrate on comparatively lower-cost defense and security technology rather than relatively costly offensive weaponry, in order to maintain lower premiums and service charges. A company's offensive capabilities would also be readily exposed by such an aggressor's competitors. State-subsidized militaries, in contrast, are granted a distinct offensive advantage, resulting in a proportionately greater tendency toward monopolization.
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