In my article “National defense: the hard problem and its true free-market solution” I describe a basic problem of the anarcho-capitalist national defense/insurance companies. The idea that I advance there is however not limited to protection from foreign invasion only, but applies directly to the anarcho-capitalist style crime prevention companies.

In short what I claim (similarly to many other authors) is that they find themselves in a classical conflict of interests situation. This conflict stems from the fact that in order to exist such protection agencies need clients, i.e. private property owners who would like to pay for police protection. The private property owners however will pay only if crime is a credible threat to them. So, if the private protection agencies get somehow extremely efficient in preventing/countering crime they will ruin their own business. The simple reason is that people will pay only if they are afraid for their security, which will never happen if crime does not exist. However every company on the free market is motivated by the profit motive and the private protection companies will be no exception. Since they have control over the crime situation they will use this control in their best interests, which however may not be the one of their clients. They will allow crime to happen to a certain extent, so that their clients are afraid and consequently motivated to pay high prices for private property protection. Basically, they have two self-opposing motives: on one hand to stop crime because only then will they be employed and paid by their clients; on the other hand they will be motivated not to prevent the crime, because only then are their clients afraid and therefore willing to pay for their services. The above is a classical situation of a conflict of interests.

In contrast, in the system I suggest such a conflict does not exist. Since the police will get its money from the crime itself its motivation will be a one way street: to catch as many criminals as possible. What this means is that the police may even kill its own business by being efficient, i.e. if it is so good that criminals dare not commit crimes. Their motivation is a one-sided one and a conflict of interests does not exist.

It is of course possible that the police under the suggested system tries to fake/create crimes, so that it can profit. However, since there will be competing police companies, such an act would attract the attention of the competition because it would be a potentially profitable opportunity. This would present itself as an absolutely legal opportunity to kill the competition. Basically, the system will police itself, i.e. self-regulate. Such an option is not available in anarcho-capitalism.