[hmkpoker]

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To look at it from a game theory POV, if everyone is willing to spend a very high amount of $ on security, then no thiefs will exist. But then, there's no reason to spend such a high amount on security in the first place. There will always be an equilibrium... some theft will always exist.

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Bingo; the theft that exists in such circumstances where time preferences are usually low enough to disincentivize them is just the inevitable variance at the end of the curve that should be expected to result from a large population. Car accidents are quite similar. There are HUGE disincentives not to drive drunk, carelessly, or tiredly, but nevertheless they DO happen from time to time. And when they do happen, they cause a lot of damage. That's why the insurance premiums are significant. It seems to me like a private security service would be similar.

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There are several things to look at then. Some people simply won't have enough $ to be able to adequetly defend themselves. I've heard the counter argument that someone too poor to afford security would be too poor to steal from, but that's patently absurd to me.

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Absurd to me too, since the poor get robbed much more frequently than the rich.

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If someone had money and I could continuously and easily take it from them, you'd better believe I would.

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But there is more to it than that. Just because a free market big security insurance service doesn't exist doesn't mean that the poor aren't actively seeking (and using) security. Try thinking about what will happen if you pick a poor person and just keep stealing from him over and over again. It's not going to take long before that person realizes that he HAS to put priority on security, and he will do what he can to defend his property. It could involve calling a favor from a friend to watch the property, it could involve getting a gun, it could involve double-padlocking the door. Whatever it is, this person is going to seek to reduce your chances of repeating the crime, increase the chances of your detection, and increase the chances of you being punished for it. Bottom line: you're better off just buying your cheap crap off of craigslist.

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What's more bothersome to me is something you've hidden away by framing this the way you have. The problem lies precisely in "defense". If there's one company in the area that provides the best defense, the obvious implication is that they are quite powerful, because they must be able to monitor the region and have enough armed forces to dissuade criminals.

What does this mean then? It means that they have, if not a monopoly on force, something quite near it. Near enough to constitute precisely the coercion that we attribute to the state. Certainly people in the region could stop funding this group, but if it had made enough profit and accrued enough guns/troops in the meantime, they would have the power to start charging "taxes".

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I see what you are saying, but I don't see why they would do such a thing. If the people are liberty-conscious (the major prerequisite for market anarchy in the first place), they are going to demand a service that does not tax, and there will be a demand for a competitor. Why would an admittedly successful security provider, that was generating huge profits and satisfying customers, suddenly decide to employ a policy that is very costly (armies ain't cheap), unsatisfactory, and poses them as a threat to the civilized world? It's like claiming that Wal-Mart will someday devour all of the competition and suddenly price-gouge everyone to hell. It's simply not going to happen, because there is no reason for it to happen.

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You can counter that the people would now start paying some neighboring defense company, but it would be quite easy for such companies to form cartels, or for it to be not worth their time to enter into a state of violent warfare with one another (or really any sort of battle).

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Well, it is very hard to say since this is such an alien kind of business. However, we have seen in the past that free market cartels are difficult and very unstable.