Saturday, October 10, 2015

Volkswagen, the NAP, and Contract

The story is well known: Volkswagen introduced some trickery in their software that controls certain diesel engines, software designed to fool the emissions regulators.  While being tested, the engine would run cleaner (and presumably with less power and fuel efficiency); under normal operation, the engine would run more efficiently but while producing pollutants in excess of legal limits.

I could keep this short: the government has no business in the regulation of automobile production and performance; the government is interfering in the free market between consumers and producers of automobiles.

This much is true, and would be true (more or less) in a libertarian world.  But my “more or less” gives me pause; further, there are other considerations that might be relevant in a world populated by libertarian adherents.


This is the overt “more or less” part, and the only NAP violation (strictly defined) that I can find.  I believe it is reasonably well-settled in libertarian circles that pollution is a violation of the NAP.  Of course, how such pollution standards will be set, regulated, and monitored make the discussion a bit complex (although I suspect better thinkers than I am have tackled these issues).  In any case, in theory pollution is a violation, and as a society flourishes it is reasonable to assume that practice will be developed consistent with the theory.

Volkswagen’s trickeration violated the NAP for this reason.  Setting aside that the government set the standard (as it is reasonable to assume that a libertarian world could support a standard in a manner developed consistent with the theory, I can set this aside), VW emitted more pollutants than allowed. 

VW trespassed.  This is an NAP violation.  Technically, I suppose that the owner of the vehicle is the trespasser; of course, this would open a claim against VW by the owner of the vehicle – although this might be more a contractual question than a strictly NAP question.

Which brings me to…


Is violation of a contract also an NAP violation?  The answer to this question is somewhat unimportant to me.  I have written before, and offer here: for areas that do not fall within the bounds of the NAP, contract (in various forms) will be the perhaps the most important “regulator” in a libertarian world.

In other words, I think it doesn’t matter what libertarian theory offers: in a libertarian world, something will govern relationships.  This “something” is contracts.

The most obvious contract violation is regarding the contract that VW has with its customers.  The customers each expected some level of performance from the vehicles they purchased.  Presumably, each customer valued one or all of the relatively clean level of emissions, a level of fuel economy, or a level of performance in terms of engine responsiveness. It seems clear that VW’s actions and / or the potential solutions will result in something less than the advertised level of performance.

A second violation – and I admit that I am not as clear in my mind on this one – is possibly in the relationship between the management and the owners of the company.  The easiest connection would be found in the employment contract and / or company policies.  I suspect (but do not know) that there is something in one or the other of these documents that speaks against falsifying data, using deception to trick regulators (the free market will also have regulators), purposely taking actions that put the company assets at risk, etc.  Something.

Clearly, management put the company’s assets at risk – maybe even grave risk.

But what if no such agreement exists?  It would seem a dereliction of duty in executive management that this would be the case, but is it a contractual violation?  Perhaps not – just poor management practice.


One could easily (at least on the surface) make a claim of fraud against VW for their actions.  I know there is some debate within libertarian circles – is “fraud” a violation of the NAP?  For those who believe fraud is a violation of the NAP, certainly a case could be made.

I have never tackled this question of fraud and the NAP, nor do I have any interest in doing so.  Why?  First, define the term “fraud.”  I find no meaningful definition beyond violation of contract: although not every violation of contract can be deemed “fraud,” every fraud must be a violation of contract (explicit, implicit, whatever).

So, I come back to contract.  Without a meaningful definition of the term fraud, I go no further.  And with contracts (on questions outside of the NAP) governing relationships, I need not.


While it is easy to find fault in everything associated with the government’s involvement in the automobile market, I think the question in a libertarian world is not answered so simply.  Certainly there is an NAP trespass in the pollution, and the violation of contract between the company and its customers is equally a violation in an NAP world.  I believe this also applies to the failings of management to the shareholders.


  1. Thank you for the thought-provoking essay about fraud, contracts and the NAP.
    What do you think of Eric Peters’ argument that the “cheating” Volkswagen vehicles emit fewer pollutants than the ones that pass the EPA test? According to Peters,, those vehicles emit 1.2% more pollutants per gallon while consuming at least 4% less fuel per mile.
    So, perhaps VW did not violate the NAP with extra pollution.
    Did VW have a moral contract with the EPA? No. But, they did have moral contracts with their customers to provide legally drivable and resalable cars.

    1. My point re the a private governance society, it is reasonable to assume that some agency will set limits for pollution - however they do this and monitor it is secondary for my purpose.

      And therefore, if one wants to sell a vehicle in that jurisdiction, these must comply with the limits.

      I cannot comment re Peters' thoughts - he might be right. Yet if all this is so, VW could have found another way to pass the test. In any case, it points to a fallacy of current test methods - and one more fault in one-size-fits-all government standards.

    2. But don’t we have a right to noncompliance if the regulation palpable cause more harm than benefit. The prime benefit of Diesel power is greater efficiency, i.e. lower CO2 emissions. However, this efficiency comes at the cost of operating conditions that prompts air to react with itself producing NOx emissions that are essentially of concern in certain urban areas, i.e. the L.A. basin. If, as you note, there are faults in the regulation, is noncompliance a reasonable NAP response?
      In a society that affords essentially overlord if not fascist authority to the EPA it would seem reasonable to allow the public to protest. My NAP answer would be a switch that allowed for low nitrogen oxide as needed and low carbon oxide emissions otherwise.

      For the record, there is a complicated exhaust injection system that produces both when the system works.

    3. I invite you on to my property, I tell you that you cannot throw trash on the floor. You don't like that idea - you decide not to comply.

      Sound OK? I suggest, if you don't like my rules, don't come to my house.

      "But this is the government forcing a rule" you say. Now go back and read my post - in a libertarian world, it is perfectly to be expected that rights and limits regarding air pollution would be defined and established..

      There are many things the government does that violate the NAP - everything, given the method of funding. This does not mean that some things currently done by the government would not also materialize in an NAP-respecting world.

      Second, even if one concludes that VW has a right to not comply, what position does this put the owner of the vehicle in - a person who had no knowledge of or choice in the matter?

    4. But which property, the road or the car? And we’re discussing an administrative agency rule not a law passed by representatives of the people. Assuming arguendo that the rule in fact does more harm than good by its narrow focus, at what point is protest proper? Not that I think that VW was taking a principled position.

      Government is in some quarters thought to be valid only to protect life, liberty and property. The subject law ostensibly protects life at the expense of property. If property fails as a protected class, i.e. the government takes control of property while leaving a bare title with the “owner”, we have the makings of fascism.


    5. Protest is proper as long as it doesn't violate someone else's property rights. The pollution is a property rights violation.

      And, as you point out, VW was not protesting in any case. Just violating.

  2. No NAP committed by VW in this instance. As you correctly identified, the government made the arbitrary regulation. That's the end of the argument right there.

    Further, if a violation of the NAP has occurred there must be a victim. Does any victim exist in this instance? The answer is no. No one is hurt even.

    Finally, in referring to a fraud, it would pay to recall that the very institution that is claiming VW committed fraud against it is very same one which has committed fraud after fraud resulting in suffering, impoverishment, injury and even the deaths of an untold host of individuals.


    1. As you do not address the points I made, I have no idea where to start.

    2. That's because beyond your first point you don't have any further idea at all.

      Your first point, "I could keep this short: the government has no business in the regulation of automobile production and performance; the government is interfering in the free market between consumers and producers of automobiles."

      Indeed you ought to have taken your own advice and kept it short. There was no more to say. That first point was true. My response was that point represents the end of the whole matter right there. There was no NAP by the employees of VW. There was no trespass. There was no victim.

      Given your usually sharp analysis and erudite explanations of various matters (for example, your work on certain historical matters) you post was beneath you (as was your response to my comment).


    3. Government bad, Volkswagen good.

      I got it.

  3. Thanks for the post. I have struggled with the idea of pollution in a libertarian world myself. I have come to realize that there are a lot of ways this could be addressed, but some solutions may include what the government is currently doing. You often remind me that, just because the government does it, that doesn't mean the same thing wouldn't manifest itself in a free society as well. But, as you point out, minus the coercive taxation.

    1. Thank you, matman. Rothbard, Hoppe and Block all taught / teach at state-funded universities. What are we to make of this? This is my point, and Rothbard has already answered the question with a principled response (in my view).

      It is reasonable to expect that an advanced "libertarian" society would develop standards for pollution, and penalties for violations.

      The issue (from an NAP viewpoint) is more complex than "government bad, Volkswagen good."

    2. Why is the NAP perspective more complex than "government bad, Volkswagen good?"

      Too often, too many people, assume that too many propositions are more complicated than a simple, binary reality. That is not life and it certainly is not reality when it comes to the state.

      One is not more nuanced or intelligent or wise because one erroneously thinks that a given situation is not a black and white proposition.

    3. Explain why Volkswagen is good.

      Explain how this world around you is a simple, binary reality.

      Explain how you survive without using a government-enforced medium of exchange.

    4. VW is good because it makes a product, desired by millions of consumers, who buy the product because of its overall sustained high level of performance and utility.

      The United States government is not only bad, it is evil. Naturally, this applies to all of the administrative agencies, boards, commissions, and tentacles of the United States government, including the EPA.

      Thus, vis-à-vis each other, VW is good, the government is bad. The former, by peaceful and voluntary means, makes a product, offers it for sale, and, by and large, satisfies its customers. The latter, uses violence in order to get its way. It cages people who employ peaceful means to interact and trade.

      The world around you, me, and Dupree consists of simple, binary realities AS WELL AS complex, nuanced realities. I do not think that you would, after careful consideration, contend that I asseverated that the world consists ONLY of simple, binary realities. Its just that too often people, in a knee-jerk, pavlovian fashion, aver that most things, or worse, everything, is complex.

      As for surviving without using a government-enforced medium of exchange, I cannot tell you that I do, because I do not. To be sure, I do barter, from time to time, but that is it.

    5. Thank you for the thoughtful reply.

      I make no statement comparing VW to the US government – I do not compare one against the other.

      First, VW sold its customers a defective product – it is defective because VW promised one level of performance and delivered another; VW promised that the vehicles were compliant with jurisdictional requirements – SETTING ASIDE HOW THE STANDARDS WERE DERIVED.

      Second, for those customers who value a less polluting vehicle, VW did not deliver what was promised; it is at minimum a violation of contract between company and customer. My point is nothing more than the issue regarding VW is not black and white. Just because the government is bad does not make VW good.

      If my homebuilder promised that my new home is compliant with all building codes, and three years later the local building department presents me with a $200,000 bill for retrofit because of clear violations of the code – would you suggest that my homebuilder was good?

      As to the government – my only point is that in a libertarian world it is not a violation of the NAP for there to be standards regarding the release of pollutants. Who sets the standards and how these are enforced are secondary issues to the theory.

      Further, if I expect a certain level of pollutants and you promise to deliver this, then purposely do not and instead hide your failure to deliver via deceptive methods, what do you suggest as proper application of the NAP? Or contract?

      I am glad to read that you see some things in the world to be nuanced – I suggest that this issue of VW is nuanced: just because the government is bad does not make VW good, yet this is the extent of the analysis that I have read in many libertarian-world columns.

      There are many things that the government does that would also be done in a libertarian world. It is this nuance that I intend to bring out – a nuance missed when “government bad” is not thought through in a thorough manner.

      Government = bad. Full stop; I agree. But does this mean that the violation of pollution standards is NOT a violation of the NAP? In theory, no – the only question is who derives the standards, how these are derived, and how these are enforced.

      As to your use of government issued currency – well, the world is nuanced.

    6. Thank you for your thoughtful response.

      I suspect that you might appreciate some give and take with an incorrigible anarcho-free enterprise freak like me who just happens to admire your work. In fact, I have favorably cited you at Reason's H&R blog (too thick, I know), Bleeding Heart Libertarians (too thick to the third power), NRO, Eric Peters' blog (I really enjoy his writing and perspective), and Taki's (I love provoking the race realists).

      Of course, it does not follow that VW is good just because the government is bad. As for VW selling a defective product, I would agree if it can be shown that the company expressly warranted that it was selling a car that conformed to EPA standards.

      If the contention is predicated upon an implied warranty, I would not agree that VW sold a defective product to its customers. Do you think car buyers typically insist upon EPA compliance when negotiating their purchase?

      I readily admit that I do not know whether VW actually promised its customers that its cars complied with EPA standards. Again, if it is to be implied that they make such promises, that will not carry the day for me. Put another way, the position that because VW is selling cars to the American market, it necessarily should be implied that it promises that its cars shall be EPA compliant is insufficient. To be sure, in many legal situations, it is sufficient to plead that a particular seller is held to certain implied warranties and it matters not that the seller did not make any express promises.

      However, you should, as Bodhi suggested above, read Eric Peters' piece concerning VW's actions. He does not think VW did anything wrong. Of course, he knows far more than me about the emissions issues and quite frankly, I just skimmed that article.

      Your homebuilder hypothetical is incontestable. Yet, again, I am not prepared to conclude that your homebuilder's reneging on a direct promise is analogous to VW unless it can be shown that VW failed to adhere to a direct, unqualified promise that its cars would be compliant with EPA regulations.

      In responding to your question about the level of pollutants, I would defer to Eric Peters' explanation that what VW actually delivered was superior to what the EPA ordained and therefore better for its customers notwithstanding the chicanery.

      That Rothbard was employed by a public university demonstrates that the world is nuanced!

    7. I think we will not reach agreement, as I believe rather strongly that an implied contract is a valid contract (setting aside that it is likely that the actual contract is explicit on this point). To determine if an implied contract is enforceable is subject to determination based on many factors. I will contend that sufficient factors are present in this transaction.

      I have no reason to doubt Peters' contention - the cars are cleaner than the standard. This opens many possibilities ranging from: VW can prove this scientifically, to the government can conclude it doesn't matter - as the cars didn't legitimately pass the designed test. This certainly is evidence that a monopoly standard provider is a bad idea: government bad! I get it. This doesn't make VW good.

      But I don't want to go too far down the rabbit hole. VW is not "good" in this situation; VW did not circumvent the testing due to some principled stand against government in the market; VW did not tell its shareholders that they were invested in an entity that would take such principled anti-government stands no matter the risks; VW did not go to the government and say "our cars are cleaner than your standard, change the test.

    8. Implied, you say? But imaginary be it!

      By such sophistry is life breathed into the unreal to make it become as though real.