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Summer 2017

ISSN 0890-913X

Volume 32, Number 2

Do Economies of Scale Exist in Private Protection? Evaluating Nozick's "Invisible Hand"

Brian Meehan , Berry College

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TheJournalofPrivateEnterprise32(2),2017,83–91DoEconomiesofScaleExistinPrivateProtection?EvaluatingNozick’s“InvisibleHand”BrianMeehan*BerryCollege______________________________________________________AbstractRobertNozickarguedthatprivateprotectionservicesproducedinanenvironmentwithoutregulatoryoversightwouldleadtoanaturalmonopoly.Thisargumentsuggeststhatadvantagesineconomiesofscaleincentivizeprotectionfirmstoconcentratewherenoregulatoryauthorityexists.Ifmodernprivatesecurityfirmsaresomewhatanalogoustoprotectionagencies,weshouldobservemoreconcentrated,largerfirmswhentheindustryisleftwithoutregulatoryoversightandmorenumerous,smallerfirmswhenthisindustryisheavilyregulated.Onthecontrary,recentevidencesuggeststhatprivatesecurityfirmsbecomelargerandthenumberoffirmsdeclinesasregulationbecomesmorestringent.______________________________________________________JELCodes:L120,L510Keywords:privatesecurity,regulation,RobertNozick,economiesofscale,naturalmonopolyI.IntroductionThepossibilitythatcompetingprivateprotectionagenciescouldoperateseparatelyinalong-runequilibriumwithinastatelesssocietyhasbeendisputedbysomelibertarianscholars.RobertNozick(1974)wasamongtheleadingproponentsofthisview,arguingthatprivateprotectionagencieswouldconvergeintoanaturalmonopolythroughan“invisiblehand”process.Theseconvergingfirmswouldeventuallyresembleagovernment.Otherscholars(Friedman1979;Benson1990,1998;Rothbard1973)havearguedthatnumerousprivateprotectionagenciescouldexistwithinastableequilibriuminastatelesssociety.Modernempiricalevidenceonprotectionagenciesoperatingwithoutgovernmentislimited.Somaliaoperatedwithoutacentralizedgovernmentfrom1991through2006andhadclanmilitiasthatofferedprivateprotectionservicesforhire(Leeson*IthankBruceL.BensonandPeterLeesonforhelpingmeformulatetheideaforthispaper.

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Title	Do Economies of Scale Exist in Private Protection? Evaluating Nozick's "Invisible Hand"
Authors/Creators:	Brian Meehan , Berry College
Year:	2017
Volume:	32
Number:	2
Pages:	83 - 91
Publisher:	The Association of Private Enterprise Education
ISSN:	0890-913X
Document Type:	Articles
Keywords:	private security, regulation Robert Nozick, economies of scale, natural monopoly

Citation:
Meehan, Brian / 2017. "Do Economies of Scale Exist in Private Protection? Evaluating Nozick's "Invisible Hand"." The Journal of Private Enterprise, 32(2): 83-91.