When anarcho-capitalists argue that protection should be provided in a private manner by companies instead of coercively by governments, opponents maintain that neighboring police agencies will start fighting amongst each other. The argument goes that one company will decide that it will make more money if it physically forces another company out of business, and this sets the stage for endless fighting. Structures that have many police forces in the same general area are thus bound to fail. Robert Murphy has an excellent refutation of this line of argumentation in his article “But Wouldn’t the Warlords Take Over?”  Here, I will turn the opponents on themselves and challenge them to explain what makes government work.
Let’s begin by asking what government is. Government is not the buildings, the equipment, and the people who make up the government. Such a thought is ridiculous, because these factors can be engaged in market processes of production (in the construction of an apartment complex, for example) and would hardly be called governments. Not only that, but the same exact buildings, equipment, and people can engage in some of the same activities in which governments engage and still not be governments. Take, for example, the United States Postal Office.
Government, then, is an institution – a set of interpersonal relationships between the people in a society. But what are “relationships”? If we imagine a picture of a group of people and use a pen to draw lines between those who are friends, we are demonstrating of one type of relationship. Yet thinking of relationships like this can be a little bit misleading when it comes to understanding their fundamental nature. The lines we draw between the people appear to be external to the people themselves. That is, they appear to be aspects of the system that are separate from the people they link. For example, we could take our picture of the people and the friendships and use scissors to cut out all the people and put them in a pile and cut out all the “friendship lines” and put them in another pile, and we’d have a pile of people and a pile of relationships. Yet this is a mistake – relationships do not have any sort of physical existence in the real world outside of the minds of the people who are in the relationships. A relationship “between” two people actually exists within person 1 (in the form of a feeling of friendship toward person 2) and within person 2 (in the form of a feeling of friendship toward person 1), but has no existence of its own. That is, relationships exist within the minds they link.
Why is this important? This understanding of relationships is vital to an analysis of the existence of governments and stateless societies. The reason why is that there is no “law of physics” that dictates that government must work and a stateless society must not. People often think of a society with a government in the same way they imagine the diagram of the friends with the friendships – with the laws of the government existing by themselves, external to the people that they control. Even if subconsciously, they think of these laws as “self-enforcing” laws of nature. Just as there is no worker in charge of making sure the laws of physics are obeyed (and instead they “just work”), so most people think of the institution of government – as a rigid structure between the people in a society that has an external existence of its own that can regulate the affairs between individuals. For example, it is easy enough to see that the police keep the public in check with the threat of force in case things get rowdy, yet few people stop to think about what keeps order among the police forces themselves. Why, it’s government! It just works! It’s as if the public is a collection of free particles that bounce around and do as they please, while the police forces are contained within a rigid external structure that keeps them in check. This structure is disconnected from all of its components, and acts externally to maintain order. This structure is government. Yet this is not so.
For example, under, say, a republican system of government, when a court gives its verdict, why does the losing party have to abide by the verdict? The courts certainly can’t force anyone to do anything – they consist of a bunch of unarmed men and women in loose-fitting gowns that are inadequate for combat and law enforcement. One might say “because the police will make sure that the order is enforced.” But wait a second – why does the police have to do anything at all? In fact, since the police is the group of people with guns, why doesn’t the police just take any amount of money it likes from the public and then auction out neighborhoods to different crime lords for a fee and allow them to run crime syndicates? There is certainly nothing stopping the police! So why doesn’t this happen?
The dilemma doesn’t end there! In fact, not only do we have a police force which could take over a neighborhood or city, but we have the police forces of different cities right next to each other. That is, we have around us a real-world example of a polycentric power structure – a fancy term for a system where there are many centers of power. If private defense agencies which work right next to each other are bound to fight each other off for power, why don’t neighboring government police forces do the same? Simply because they are called “government?”
The reason for asking all of these questions ties back to the question of relationships in an institution. There is no physical thing or barrier or law of physics which prevents police forces from getting at each other. There is no “governmental relationship” between people in the police that physically prevents chaos from breaking out. Everything is in the minds of the police and the public.
Allow me, then, this mental experiment. Take a society with a government. Take all the police forces and take the public, and take all of their incentives, desire for peace, stability, and order, and their ability to reason. Now take all of the police forces and stop calling them “government.” What you are left with is a bunch of neighboring armed defense agencies in a “stateless” society. Now you’re telling me that if this is called a “stateless society” there would be endless infighting and warlordism between them, but if we were to just label these same groups of people “government,” then they would come in peaceful equilibrium with each other and achieve peace, order, and law?
If this argument is unconvincing, work the opposite way. Imagine that the United States does indeed become an anarchic society, and that there is a variety of warring police forces that try to take over different territories. Opponents of anarchy suggest that the way to solve this situation is to simply take these warring factions and call them “governments” (or, rather “states”), and that the issue is then resolved. However, it should be obvious that nothing has changed besides the label we place on the groups. The nation still contains the same people, the same weapons, the same land. Yet we’re supposed to believe that once we call these factions government, the fighting will stop.
Of course, opponents might throw in additional language to legitimize the concept – “No, we will establish a constitutional framework separating the powers of government and limiting the possibility of aggression.” However, as I explained in “Social Stability, Rule of Law, and the Free Society” , this is all smokes and mirrors – it once again assumes that this constitution will be some external framework that forces all the groups to play nice, completely ignoring the fact that someone must actually enforce this constitution – namely, all the groups that were fighting in the first place.
See? There is no physical thing that makes government work. These interpersonal relationships have no external physical being. There is literally no law of physics that is currently preventing all of society from relapsing into chaos and lawlessness. The reason why there is peace and order is that this is what the public demands. Allow me to reiterate that – as long as the public desires social stability through the rule of law and the respect of rights, private defense agencies would not devolve into infighting, since they would not be providing a product the public desires. Whenever you are tempted to think that private police agencies might fall prey to a specific type of problem, ask yourself why the government doesn’t fall prey to it as well.
Let’s address some possible attempts of opponents to wiggle out of the conclusion that there is nothing that makes government work that doesn’t also exist in a stateless society.
When I asked why the police doesn’t enslave all the citizenry, one might have answered “because neighboring police forces would come in to stop them.” But then this leads to the question “well, why wouldn’t the same happen in a stateless society – other defense agencies coming in to stop the bad one?”
Furthermore, that argument of the opponents is circular in reasoning – why expect all other enforcement agencies to be good and come to the defense of the citizens living under the evil police force? Why don’t all the police forces try to take over each other?
An opponent might then persist, saying “well, the national army would step in.” But this just shifts the burden of proof one level up – to the army. That is, why doesn’t the national army enslave us all? 
Seeing that the essence of government superiority eludes their grasp, opponents might then try to take aim at private defense agencies, arguing that a rich guy could pay off a private police agency and get them to do a lot of killing for him. But couldn’t this exact same scenario happen under the existence of government? Once again, the opponent commits the fallacy of thinking that the relationships that exist under government are rigid and external to the individual actors – and hence objective, impartial, and absolute – while thinking that in a stateless society everything is up to the whim of each person. Therefore, following this logic, a government couldn’t become corrupted by the money of a rich person, but a private defense agency could. This, of course, disregards the fact that if a private company is caught cheating, this would ruin its reputation and it would go out of business. Government, when caught in a scandal, keeps on churning after the creation of enough committees to appease the public’s desire for justice.
A weak-hearted attempt might be made to argue that the government police forces are kept honest by the system of voting, but all of this falls apart once one realizes that voting is the process of writing down names on a piece of paper, which is of no use in a combat situation. Why would a corrupt police care that a bunch of people wrote down names on pieces of paper? Since the police enforces the results of the voting, voting is useless in controlling them. One might again argue that external (neighboring) police forces would then step in to enforce the vote, but this once again begs the question of why they are not themselves busy enslaving their own constituents. Even if we attempt some game-theoretic explanation of why the governments don’t fight each other, the same reasoning could be applied to private police agencies. There might very well also be some sort of tacit understanding between police forces that if they attack one another they would likely get destroyed, but this understanding, as mentioned above, would also exist in a stateless society .
We see, then, that all of this is a vain attempt to escape the conclusion that there is nothing specific to government that makes it work. Instead, the reason why we have peace, law, and order is that they are demanded by the public.
We have in the present day an empirical example of a polycentric power structure which is stable – the 48 contiguous states and the hundreds of cities within them. Furthermore, the reason why this structure is stable is not related to the nature of government (since no reason can be found why a government cannot fall into chaos), but is instead related to the public desire for peace. We see, then, that since government is not essential to the stability of polycentric power structures, a stateless society with private defense agencies can also provide stability and rule of law. Chances are that it could do so much better than government, in fact, since free market competition tends to drive prices down and tends to push firms to innovate.
 Consult the LibertyHQ listing on the issue: Courts, Police, and National Defense
 One might try to argue that there would be sectional loyalties within the army, but then that once again begs the question of why all the sections in the nation are not constantly at war with each other. Others might argue that the US army isn’t large enough to conquer the US, but this vastly understates the power of the army, which is enormous:
 An astute and stubborn reader might say “fine, it appears that a country may exist at peace internally without a government, since government has no inherent thing that keeps it from providing protection better than a stateless society. As you explain, just as neighboring states and cities don’t fight, so neighboring private police forces will not fight. As such, your theory of anarchy has empirical backing. However, your empirical backing ends at the international level. That is, while a country might be internally at peace under anarchy, this does not mean that countries will be at peace with each other. To make the case for anarchy you are relying on empirical observations of police forces within states or within a country. Fine. That works. Since, however, there exist wars between countries, your theory doesn’t guarantee international peace. Hence, the theory of anarchic capitalism cannot guarantee peace on the world scale.”
This is not a bad observation. Indeed, insofar as we take only the argument presented thus far, it is true – the argument I have presented cannot by itself guarantee world peace. However, there are other arguments to be made that make a good case for why free market anarchy can move in the direction of world peace. Furthermore, the question is whether the existence of a government can guarantee peace better than a stateless society. The answer is no. So how does the market make a more realistic promise of peace? Wars will exist as long as there is a lack of respect for property rights. When property rights are respected, war cannot break out (by definition). Free markets tend to create interdependencies between countries which leave them as partners who respect each other’s’ rights. Governments, on the other hand, are fundamentally predicated on the violation of property rights through taxation and coercive monopolies on the provision of protection. As such, the existence of the government is a de-facto decrease in the respect for property rights.
On top of this, the existence of a government makes war more likely to occur, since the burden of paying for the war is spread across the entire public through taxation – whether everyone likes it or not – and hence each individual feels it less heavily. Under anarchy, on the other hand, if an agency wants to go to war, it must draw on its own funds, which makes war much more expensive to conduct for that agency, since it must fund its own war, it must raise its customers’ rates, and it can’t get the entire public to pay for it (or else it will devolve into a rogue organization). Remember, too, that trade leads to cultures crossing borders and seeping into each other. If two neighboring countries never trade, they have a much lower tolerance and understanding of each other’s culture. The law of comparative advantage informs us that countries with market economies will tend to trade with each other even when one country is much more advanced than the other, creating bonds that prevent wars.