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I think the libertarian position is:

1. in a free market,

2. with seller reputation,

3. where the seller is the direct producer/grower/manufacturer, rather than the producer retailing through many false, reputationless identities,

4. "fair-trade" and "conflict-free" drugs will simply outcompete the other kinds.

Which is to say, if the consumer is willing to pay $X, then any money $N used to pay for guards and guns and drug mules (the "conflict" part) is $N less available for actual chemists and equipment and materials.

The guards and guns and drug mules are a sound investment for A. putting down rival operations to ensure a monopoly, or B. avoiding state action at scale, but if A is made impossible (by Tor) and B avoided by technological advances (running headless drug-manufacturing cells rather than a centralized organization), they cease to be rational investments.

Without these considerations, "conflict" drugs would have either a higher markup (decreasing marketshare), or a higher ratio of fake/cut product--a lower quality--meaning a worse reputation for the seller (decreasing marketshare). The conflict-free drugs would naturally rise to the top of an efficient marketplace.

The simplest comparison is another marketplace commodity which could, for all you know, be cut and low-quality all the time, but which very likely isn't: gasoline. Gas stations which sell at a higher markup go out of business. Gas stations which sell inferior product get a bad reputation, and go out of business. The market takes care of itself, without a regulator having to intercede at any point. (Commodities markets like this are in fact the shining example of where free markets are optimal for consumers, because they get very close to having the "complete information and distributed intelligence" that the Efficient Market Hypothesis assumes. The less commoditized the goods in a market are, the further from efficient it will be.)

But (3) is not the case here, presumably - I'd wager that most of the people selling, e.g., cocaine on Silk Road 2.X aren't harvesting the coca leaves themselves.

I'm also not sure that (4) will out-compete the other kinds. That's assuming that consumers place a higher value on fair-trade and conflict-free than they do on getting a cheaper product. What if fair-trade-conflict-free costs 5x what the unverified stuff does?

> That's assuming that consumers place a higher value on fair-trade and conflict-free than they do on getting a cheaper product. What if fair-trade-conflict-free costs 5x what the unverified stuff does?

Obviously any social system needs to deal with the realities of externalities. Simply invoking the concept of externalities is insufficient to dismiss anti-regulation, libertarian, or anarchic positions, because the literature of those positions nearly universally [0] recognizes externalities and constructs arguments under the acceptance that externalities exist.

The first thing to recognize is that government regulatory agency is not a simple cure for externalities. There is no obvious inherent reason why a government would even be able to estimate externalities better than a market, much less enforce the internalization of those externalities.

[0] My claim of "nearly universally" is mostly anecdotal, based on my own reading of prominent literature from laissez-faire and anarcho-capitalism. I am sure there are some people who use those labels yet deny the existence of externalities, but I think in principle one should argue against the strongest version of your opponent's position.

> There is no obvious inherent reason why a government would even be able to estimate externalities better than a market

Well, assuming effective equal democracy [1] there is, given also the assumptions on which market efficiency in transactions without externalities is based [2], since presumably interest in promoting or preventing a transaction one is not engaged in directly engaged maps to the expected utility or disutility experienced as a result of the transaction (i.e., its positive or negative externality.)

[1] which is a big assumption, to be sure.

[2] which are also big assumptions, but they are also the entire underpinning for the idea that libertarian, market-based economies are efficient for any kind of transaction, so in considering regulated vs. libertarian markets, its pretty fair to assume them in consideration on the regulated side.

Indeed, all the economic models I'm aware of are explicitly theoretical, including ones that cover how governments and markets work. They often contain assumptions that are obviously not present in the real world: like perfect information or zero transaction costs. Of course, that doesn't mean they're not occasionally testable to some extent, but I'm strongly skeptical of anyone claiming to have a "proof" of any nontrivial claim regarding these ideas. That said, I do personally find the arguments that markets will outperform governments more convincing than the inverse.

On the topic of market transactions with externalities, you might find the Coase theorem interesting, and the related folk theorems in game theory. I see it as a compelling rebuttal to the Pigovian model of using a centralized organization (generally government) to internalize social costs.

http://en.wikipedia.org/wiki/Coase_theorem

http://en.wikipedia.org/wiki/Folk_theorem_(game_theory)

http://en.wikipedia.org/wiki/Pigovian_tax

> On the topic of market transactions with externalities, you might find the Coase theorem interesting, and the related folk theorems in game theory. I see it as a compelling rebuttal to the Pigovian model of using a centralized organization (generally government) to internalize social costs.

One can envision idealized democratic government as a mechanism for realizing the required precondition for the Coase theorem, to wit, the democratic process of policy making in such a system is the venue in which externalities are traded. (That such exchanges occur in the policy making process in any government of human beings is widely observed, the "ideal democratic" part is that that all citizens have equal power in the policy making process, such that the trade is generalized.)

This, of course, unifies the Coase theorem with the Pigovian model (the separation between the two comes from treating "government" as something distinct from the participants in the economy, rather than a venue in which those participants interact.)

It was not my intent to dismiss anything, but derefr didn't address these issues. I'm glad that someone has spent time thinking about this stuff, but no possible solutions were mentioned.

I also agree that a government isn't a simple cure, but a government can definitely enforce things better than a free market. As a hyperbolic example, if I use slave labor to cook meth to sell on Ideal Silk Road 2.0, my worst case scenario is losing my business - with a government, my worst case scenario is fines and decades in prison.

> a government can definitely enforce things better than a free market.

It might be true that government can more effectively enforce the rules which is chooses to enforce, although I might even argue that. It is not definitely true that government will more effectively enforce the rules which you (or society) believes should be enforced.

I'm assuming this is your interpretation of their position, and not a statement of belief. Because as always, the libertarian position is wildly at odds with reality and history, and grossly over-estimates the impacts of the factors it can control, while grossly underestimating the impact of the problematic ones (to take an example from the above: it presumes that the cost of murder-for-hire is high in the places drugs are made. It has no answer beyond falling back of ideologically not caring if it turns out to be a sound business strategy).

gas stations are actually

* subject to several different types of fraud against which consumers have little way of protecting themselves. Can you tell if the pump is dispensing the octane rating you actually selected or a slightly lesser-quality fuel? Or if the meter on the pump is tampered by just a small percent?

* have relatively little reputation to worry about if you're near any road with any kind out-of-town traffic, such as a highway.

* very regulated for both fraud and environmental reasons

> Can you tell if the pump is dispensing the octane rating you actually selected or a slightly lesser-quality fuel?

Isn't that true for any conceivable gas station, from the most laissez-faire to the most centrally regulated? Unless you can physically perform the experiments required to test the octane rating yourself, the only thing you can do is trust. You either trust the reputation of a gas station or gas station chain which you frequently purchase from (and have had no previous issues with their gas), or the reputation of some third-party consumer review organization in a laissez-faire economy, or the reputation of the government regulatory agency in charge of gas stations.

In all three cases, the organization you are trusting has some incentives to lie/cheat, and some incentives to be honest. Deciding which system has the best incentives on net, and thus is the most trustworthy, depends on the details of how each system works, and is a nontrivial economics problem.

> The simplest comparison is another marketplace commodity which could, for all you know, be cut and low-quality all the time, but which very likely isn't: gasoline. Gas stations which sell at a higher markup go out of business. Gas stations which sell inferior product get a bad reputation, and go out of business. The market takes care of itself, without a regulator having to intercede at any point.

In most places I've been inthe US , every individual gas pump has a seal from a local government inspector certifying -- with a date -- the inspection of the individual pump. That's just one of the most visible signs of the rather extensive regulation of gasoline sellers.

To say that that market "takes care of itself, without a regulator having to intercede at any point" is simply not a factual description of the market that actually exists.

In most places I've been inthe US , every individual gas pump has a seal from a local government inspector certifying -- with a date -- the inspection of the individual pump

What I don't understand is why anybody believes that that seal actually means anything, just because it's "government". I mean, I wouldn't (and don't) trust the State of North Carolina any further than I can throw it. The State government is still just a system, made up of fallible, corruptible people, with all the same quirks and foibles of people who make up private enterprise. In the end, there's no real reason to trust State regulators.

Uh, the issues with marketing terms being inaccurate has hardly been solved by regulatory agencies either in mainstream business. Especially retail. I'm not even talking about dangerously mis-labeling products such as in the pharmaceutical industry which continues to happen every year [1] resulting in billion dollar law-suits, I mean terms like 'fair-trade' and 'organic' are mostly bullshit in every industry.

I guess that aspect of these markets is more symbolic than a sign of concrete progressiveness.

[1] https://en.wikipedia.org/wiki/List_of_largest_pharmaceutical...

By and large, "organic" in the US is regulated and has a specific meaning. It's probably the only term that actually is, though. How heavily enforced this is, I don't know.

http://en.wikipedia.org/wiki/Organic_certification#United_St...

Amusingly, that only applies to food afaik, meaning you are free to sell your "organic" sea salt without certification.

> This is where a purely libertarian position tends to run into trouble

You're right that outlawing free markets -- such as banning Politically Unpopular Drugs -- can cause problems for free markets. :)

Similarly, if selling books becomes a crime, and you buy books on the black market, it may become more difficult to verify claims about the paper used in the printing process coming from renewable resources. The problem lies not in the claim about renewability, but in the underlying book ban.

Perhaps we can conclude from this that processes relying on free markets may not work as well if markets aren't free? Remember that libertarians != anarchists; I've never seen a libertarian marching in the streets against laws in their state or province designed to prevent fraudulent claims about fair trade coffee or renewable forests.

It always comes down to trust though, right? Well, unless you can physically travel and do an audit of the production chain in person, which the average customer cannot. So then your claim becomes that the "purely libertarian position" is less trustworthy than whatever alternative you are considering, which I presume is a government regulatory agency. That's certainly a plausible claim, but I think you would need to go into more detail about why you think the one is less trustworthy than the other.

It seems pretty implausible honestly. Most people order their stuff from people in the same country as them as otherwise it risks being caught at the boarder. This means the product is probably still crossing boarders in the same way it always has. And that generally means cartel /organized crime played a role.

It seems far harder to believe that both fair trade sources and conflict free delivery systems sprung up than the idea that anonymous dealer is telling fibs.