Before I begin, I should probably start off by noting that there isn't just one view of what anarchy is. Formally anarchy is:

Main Entry: an•ar•chy
Pronunciation: 'a-n&r-kE, -"när-
Function: noun
Etymology: Medieval Latin anarchia, from Greek, from anarchos having no ruler, from an- + archos ruler -- more at ARCH-
1 a : absence of government b : a state of lawlessness or political disorder due to the absence of governmental authority c : a utopian society of individuals who enjoy complete freedom without government
2 a : absence or denial of any authority or established order b : absence of order : DISORDER <not manicured plots but a wild anarchy of nature -- Israel Shenker>
3 : ANARCHISM
<http://www.m-w.com/> Merrim-Webster's Online Dictionary, Accessed 12/07/2004

However, there's a large number of interpretations of that definition. Most anarchists are working off of some variant of definition 1c, (though there is always the small segment of the population that seeks 2b) so I will focus on it, and address it as an effort to maximize liberty while keeping it reasonably balanced among all players. More likely than not, if you're an anarchist reading this, there will be at least one thing I say about anarchy (not the outcomes, which you inherently MUST disagree with,) that you'll disagree with. But without singling out a particular author of anarchist theory, I don't have a solid platform to debate against. So I’m just going to stick to the ideas that “Government limits liberty” and “Money limits equality” and go with it.

Anyway...

Anarchists dream of the ideal paradise, a world where man can operate free of legal oppression, where he can satisfy his needs without being bounded by systems of currency, where the community shares in the burden of production without any external stipulation, and where crime is self regulating. These are things that we would all favor seeing, but in practice there are a few critical flaws in the system.

The first of which is actually recognized by economists as the First Law of Economics: "Given no constraints, the demand for any given product approximates infinity." Notice the word "approximates". No, the demand isn't actually infinity, but when constraints ARE provided (whether this is limits coming from budgets or from supply limits) the demand usually will far exceed supply. I mean consider, You could probably find a use for 30 chairs if you could come across them. It's just that you usually can't just randomly come across 30 chairs available for the taking. This problem carries over into anarchy. Ideally, we would want an egalitarian distribution of the available resources across the board ("Everyone's fair share",) but instead there would be a conflict for rare resources, some of which aren't even bountiful enough for everyone to have one of. Consider the total availability of platinum. If everyone who depended on the supply was given an equal share, no one person would have enough to make one catalytic converter.

So now we come to the problem of non-value. Realistically speaking, it won't be that everyone will have an even share, instead, the people who produce something will have a large amount of it and will lack the things that they don't produce. To address this we introduce trade. Now, there are SEVERAL problems that arise from trade, the least of which is transportation (if molybdenum is only available in mines in what is now Colorado, how would it get to manufacturers in Europe?) But I'm going to focus on the effect of not having a currency. Ideally we want to make it possible for everyone to get what they need and deserve from those that produce it. The problem lies in the fact of how do we ensure that people only take what they need from the producers, rather than taking things they don't need, or that can be more efficiently used by someone else. Consider: in our system of laws (read: greater pressure than anarchy to not commit crimes since the cultural/social pressures exist in ADDITION to legal pressures) there is still crime. And we're going to stick to the economics of crime, not the problem of people who commit crimes, which will be addressed later. Anyway, if you consider the amount of goods that can be purchased with, say $300,000, when you account for a bank robber, even if he had come across the money by a legal means, it would still be an unfair amount of goods. This shows that in fact that human psychology is not always bound by only taking what they need. But the problem is deeper than that.

Considering that the per capita gross domestic product of the US was about $38,000 in 2003, then realistically speaking, if we eliminate currency systems, people reasonably should only get $38,000 in goods annually (and if you take the global GDP, adjusted to cost of living into account, every person deserves even less.) However, most anarchists are of the illusory view that it's possible to have more than that if they leveled the playing field. But what that number represents is how much stuff becomes available in the world per year. And worse yet, it contains all of the money made from artificial sources, such as interest and the sale of non-tangible goods such as music and consulting services (like engineers and interior decorators.) Because of this, what most people don't realize is that there just isn't enough stuff for everyone to live like a Gates or heck, even a reasonably paid software engineer. Now, don't get me wrong, there'd be many people whose station would be raised greatly by the introduction of egalitarian wealth distribution, most of the people who can afford to spend the time to consider the ramifications of anarchy are living a lifestyle that actually consumes more than the per capita GDP, and that's including the product from intangibles and non-rival resources (like music. My listening to a song does not diminish your enjoyment of it.) as well as excluding all gains from crime (such as music and software piracy.) This, however, leads us to the next point, motivation for production.

In a community where you can freely take what you need, why would you bother to produce? Consider, if you can take what you need, what leads you to believe that you personally are also responsible for the production of goods? Since with no effort you can yield what you need, you would be prone to not produce. Only when the supply is gone or notably scarce will you find people motivated to produce. But the people will only produce what they can and need. If you wanted, say, a steel spoon, you would have to ask a smith to make you one, but producing a spoon for you would require that he not produce a spoon for himself. So he would either have to deny you the spoon, or request that you give him something of equal value to him in exchange. But let's say you're not a miner or a farmer; let's say you produce microphones (we'll get to specialization in a moment.) A smith is not going to have a need for microphones. So he will deny you the spoon. Now, logically it would follow that you would trade the microphones to another person who has the ore that the smith needs. But the miner is also not going to have a need for a microphone. The only people who are going to need microphones are people who make records and radio shows. Both of which produce non-rival goods, and as such are not going to have any products that a miner or a smith could use.

This leads us to the possibility of communal property. Why not take the spoon? Here we come to a moral dilemma. No I'm not talking about the right to personal property; I'm talking about the right to satisfy needs. The smith may produce a spoon for himself, but he will not be motivated to produce any more (his need for spoons has been satisfied.) So now let's consider what happens when you take his spoon. He no longer has a spoon, and it may take him several DAYS to produce another, and then only if he has access to ore or steel ingots, which may be in short supply due to poor production from miners, or more mundane problems like bad weather or the local iron vein drying up. Now the smith must go without a spoon for a time. The question is, since you both have equal need of the spoon, what right do you have to deprive him of the spoon? If you're still a microphone producer, the smith may never benefit at all from any of the products you produce, both directly AND indirectly. If he prefers reading to listening to music, your production has no impact on his wellbeing at all, but your taking his spoon has deprived him of some he not only wants, but needs. But then we come to an important problem: why would you EVER produce microphones?

Microphones cannot be used by themselves. They are purely a factor in the production of other, more complex goods (music and such). You cannot eat the microphone, and unless you are also a recording musician, you'll never use them yourself. There is no motivation to produce them, especially if you could choose to produce something that everyone needs, like a crop, and completely bypass the problem above. This problem carries over to all luxury and factor-of-production specialties. If you could learn how to grow food, which either through trade, or through moralistic unsolicited appropriation of production, entitles you to things you may need (such as the spoon from above) what would ever motivate you to produce microphones? For the most part, nothing would. I say for the most part because there’s always the matter of personal hobby. Even in the current environment some people do specialize shearly because they find it interesting. However, the fact that most college freshmen know nothing about their field of study prior to entering shows that they did not have any interest in the topic prior to entering school. Since you could satisfy all of your needs (not wants) without them, there's very little motivation to produce them. Knowing this, why would you bother to even LEARN how to make them? And even then, what about those that cannot produce for themselves?

So far we’ve assumed that everyone is capable of producing at least something. However, this isn’t true. There’s children, those who’ve been injured, born with disabilities, or people who are currently in an environment that is poorly suited for what they can produce (such as a farmer trying to survive during a drought.) Unless there are people who are willing to aid these people, completely unprovoked, they must go without even their own production. They have no way of gaining any kind of “fame” or barter value, and may not even have the ability to take what they need from others, (in a society with perfect liberty you have an equally high liberty to defend the resources you’ve gathered by any means necessary if you so choose.) Although there will be some who feel the need to help them, the number of people who need help will far exceed the number of people who will help. Consider, in order to help those in need, you must sacrifice some of your liberty, (in the form of time which could have been spent doing other thing, resources you planned to use, etc.) in order to provide the aid these individuals need, which violates the premise of liberty maximizing anarchy. And those people, since they may lack the ability to defend themselves may become victims of the next problem: crime.

In reality, there are more than just crimes against the economy. There are things like abuse, rape, discrimination, and murder. Some of these crimes do occur as the result of the system we live in, but many of them are shearly random acts, or culturally stipulated acts. The theory of anarchy is to remove government. A police force of any kind would have to be an exception to the rule and would have to operate on a system of laws. As such, I'm going to assume that no such agency would exist (no police.) so as to maximize the liberty of the individual. But that's the whole problem. This would leave people at liberty to do anything they wish. For most people, this would be producing the very least they can get away with and taking what they need from those that produce it. But for some, the freedom would alleviate the few limitations that exist in their minds (the fact the non-larcenous crimes occur even with government shows that some people can override even the strongest of limitations) and permit them to act as they please. The lower end of these people would do things like randomly show "little Jimmy" to passerbys, and the top end of these people would commit murder. Obviously this would be SIGNIFICANTLY more pronounced during the first decade following the introduction of an anarchist system, but it would still occur to some degree even after that. Murder rates, realistically speaking could not get any better, but would have room to get worse; and there would be no system designed to control possible repeat offenders. Moralistically speaking, if you apply the anarchist theory to the possibility of revenge, (or people induced justice) you would be clearly in violation of the theory if you where to kill, beat, or even attempt to interfere with their murders, since you would be limiting their liberty. But what about indirect crimes against the community, like polluting and making lots of noise?

Consider, making metal takes a lot of water, and the quality definitely doesn’t have to be up to drinking water standards. However, the process also contaminates the water that they use and makes it well beyond the toxicity levels that fish can survive in.

But rather than saying, “See! See! That’s why anarchy sucks!” I think it will be better if we approach the issues as if they where already in place. So, from here on, we’ll pretend we live in an anarchist society and we’re a pair of people discussing how we can remedy the shortcomings of the current system.

First, let’s address the issue of crime. Let’s agree that the idea is to maximize the community’s liberty, a very noble goal. We realize that when you are injured, or otherwise abused that your personal liberty is decreased and the person who injured you does not gain any liberty, they only use the liberty that they have. As such, the community as a whole suffers a loss of liberty, and you notably so. Here we might have to debate as to whether or not the communal loss of the liberty to beat people is greater or smaller than the loss of liberty that the community is receiving from the total beatings that are occurring. I would suggest that in fact, the sum of the loss of liberty as a consequence of non-larcenous crimes (rape, murder, abuse, etc) is definitely more than the loss of liberty caused by being disallowed to engage in those acts. Logically it would then follow that communal liberty suffers more under the effect of unregulated crime than it would under regulated crime. This would lead us to the decision to regulate crime so as to maximize community liberty. Now, just saying that you cannot beat people is insufficient to cause it to stop happening. We need to be able to enforce it. Here, the people have the liberty to enforce it themselves, but they had the ability to do that before, and they did not have enough power to protect themselves. Thus, a group of people who sacrifice their ability to produce for the community and specialize in the protection of those too weak to protect themselves might be a good choice. Or we could choose to mandate that everyone MUST aid in the enforcement of the rules, but that takes away liberty from them since whenever they witness a crime, they must help, and can’t do what they want at that time. In the first case, we don’t have to force anyone to aid in protection, so only people who find themselves interested in it could opt in. So there is no liberty lost, whereas we still have a “who enforces the enforcers” with the “everyone MUST enforce the rules” rule. Using our goal of maximizing liberty, the dedicated enforcement group makes the most sense. But how will they get the specialized tools that are needed to do their job well?

To address this, we need to deal with two problems, the loss of specialization, and the need for indirectly related goods. First we need a way to encourage people to specialize. Realistically speaking this means we need a way for them to get the basic goods they need while still producing a product that is of no direct use to the suppliers of basic goods. If we just say that they should take the goods, we have a loss of liberty for the person who had the resources equal to the things that they planned to do with the good, plus the amount of things that they could be doing rather than having to go get yet another loaf of bread. The person who took the item gains liberty equal to the things they could do with the item, but they also loose the liberty for the time it took them to get the item. In this case the net liberty of the community is Uses of the item to the new holder – acquisition of the item by the new holder – Uses of the item to the original holder – acquisition of a new item by the original holder. This yields a net liberty (assuming that the uses of the item are equal, which isn’t always true, but usually is since the person wouldn’t have acquired it in the first place if it wasn’t useful.) of –(acquisition cost by new holder + acquisition cost of a new item by the original holder), and this may be an even more negative number if it was something important to what they where doing at the time, or it will be a long time until a replacement can be produced/acquired. This is reasonably poor, especially if you consider that the difficulty of producing, say, a metal spoon, is quite high. Also, you’ll notice that one of the people’s liberty is GREATLY reduced as compared to the other, so we clearly have a non-egalitarian system. How can we help compensate for this?

In the matter of accessibility, the possibility that the loss of liberty is quite strong, and the amount of liberty lost may be great. Let’s consider it using our microphone manufacturer. Pretend he FINALLY got his hands on the food he needed, and his next door neighbor takes it from him. He has now lost an immense amount of liberty overall, since he had to spend his time acquiring the food and not doing what he wanted to do, and now even the liberty gained from having the food has been lost since it was taken from him. The solution is to give the liberty to control what resources can be taken and what can’t. However, the people will only acquire the resources that they need, and not anything more. So we need a way to encourage people to gather more resources than they need, as well as encourage them to release these additional resources.

Here, some kind of “liberty exchange” makes sense. The idea would be that rather than taking what you need, you instead exchange some of the extra product you produce for the extra product of someone else. This works well for preserving the existing liberties of the individual that has the resources that you want, while requiring you to sacrifice only a small amount of your own liberties. Think about it, since you have more than you need, all of the extra does not provide any significant increase in choices by itself, but when used for exchange, actually causes an increase in available choices, and as such, liberties. But what about our microphones for spoons problem?

Some kind of universal exchange coupon would be a viable choice. If we assign the value of the possible liberties gained from a given exchange to a numeric value, we can then trade the microphones to a recording studio in exchange for some number of “liberties” that the recording studio is willing to surrender in exchange for the microphones. They then trade the records to a miner, who happens to enjoy the music for more liberty coupons, who then trades the ore he mines to the smith for some liberty coupons, who then, knowing that the liberty coupons can be used to acquire more ore, trades a spoon to the microphone producer in exchange for some liberty coupons. Although the smith did not receive any direct benefit from the trade that provided the microphone producer with the coupons, indirectly he has gained liberties from the exchange through this cycle of trade.

With this system of trading coupons of value we have solved our specialization problem, since even the miner, who has produced ore, which has no direct value at all to anyone but a smith, has been given the liberty (in the form of “liberty coupons” given to him by the smith for the ore) to acquire the goods he needs from other people who have no use for ore. Yet, we’ve introduced a new problem, those who can produce more can receive a disproportionate about of liberties, and, we still haven’t dealt with things like the disabled and the environment.

With these problems we have a similar dilemma as we did with the enforcement of the liberty stealing acts (murder, rape, etc) ban. The disabled cannot produce, and as such, cannot get any coupons with which to acquire the goods they need, and the environment, even though it affects everyone, it is difficult for any one person to see how they affect it. To address these issues, we need a benefactor, someone who will provide for those who cannot, and help the people to cooperate for the common good. Again, this would have to be people who just want to help, like in the enforcement group. However, it is unlikely that these people could, by themselves, help everyone who needs it. Some method would have to be introduced to help cause a reallocation of resources to those who need them. Since only people can produce there must be some way of encouraging them to provide for the needy. For this, we need everyone to sacrifice some of their liberties in exchange for community benefit, such as feeding the disabled, building community valued resources, like roads and dams. To do this we could set a rule that all people will produce a small amount extra and then give this to the benefactors for the purpose of redistribution for community benefit. As for those who produce well beyond their needs, to enforce egalitarian standings, we can require that they sacrifice a proportionately larger sum so as to encourage them to either reduce their production, or increase the production by others. If we apply the first law of economics here, we can see that they will want to have more stuff, and as a consequence, will want to cause the other people to produce more, so that the number of liberties that they must sacrifice to equalize the community can be reduced.

As for the protection of communal resources, such as the environment, rules could be established to limit any one person’s impact, and the enforcement group could then also extend their use. If we consider the effect of this on the personal and communal liberties, we see that we must sacrifice some liberties to protect the environment, but in exchange, we do not suffer the loss of liberties associated with the environment’s contamination. For example, if we promise not to spoil the water, then we can drink it. However, if the water is fouled, then we cannot drink it. If one person fouls the water so it cannot be consumed, then everyone who depended on that source has suffered. This loss of liberty significantly outweighs the liberties gained by the person who fouled it, as well as causing a disproportionate change in personal liberties, resulting in a non egalitarian society.

At this point I think we’ve addressed all of the concerns I had raised earlier. If you’re astute, you’ve already noticed by now that each of these solutions have names, specifically the police, private property, money, government, welfare, public works, and government protection of community resources. No, this is not an attempt to say that our government/economic system is the right choice. There are many other very effective systems to choose from, each bringing to the table a fresh new solution to the problems I’ve posed, and includes true socialism (where rather than using value to control who gets what, a central planner, such as the government, says who gets what) or true democracy (where everyone who gives a darn participates in the process of deciding who gets what and ultimately finds the Nash equilibrium.) The solutions I’ve proposed are something somewhere in the middle. And each of the systems I’ve listed as alternatives (as well as my primary solution suggestion) have problems of their own (such as tax loopholes and the problem of bribing the benefactors), but when the losses of communal liberty and equality are compared to anarchy, they typically show a general increase in the overall liberty and equity.

Additionally, there are more concerns than I have listed, such as the need for emergency services like fire protection, and the complexities introduced when our little ideal society runs into other societies (international trade, war, equity between nations, etc) but this was just intended to be brief overview of the reasons we exist under government and why anarchy, despite it’s simplicity, is not found in any place in the world for very long.