Brian L. FrankBefore the gold rush began, San Francisco was a sleepy settlement with only about a dozen homes. By 1849, the town’s population had expanded to 5,000; by 1850, it was 20,000. Tens of thousands more passed through. The little village had become a bustling city, with hundreds of ships in the harbor bringing people looking to get rich. They came from all over America, and then from Australia, Chile, China, England, Germany, Mexico, Peru, and the islands now known as Hawaii. Eighty percent were single males.

Yet in its early days San Francisco had no police department. As one visitor from Scotland, James Hogg, wrote in 1850, there were “no police or soldiers to watch specially over the interests of the public. Such a state of things will give rise at the first moment to a sentiment of surprise, almost indignation; nobody could imagine that a government could be so wanting in its essential duties as to not accord direct and official protection to a country ranged under its banner, but many things which the European can scarcely conceive appear natural and simple to the Americans.”

Crime started escalating. Criminal groups with names like the Hounds, the Regulators, and the Sydney Ducks (“composed chiefly of Sydney convicts,” the 19th century historian Hubert Bancroft explained) terrorized the city. The 1854 Annals of San Francisco, written by Frank Soulé, John Gihon, and James Nisbet, describes the gangs throughout San Francisco in 1849: “They invaded the stores, taverns, and houses of Americans themselves, and rudely demanded whatever they desired. They could not be refused, for their numbers were so great, while they were well armed, that nobody durst resist them.” The city incorporated in 1850, and a police department was created in August. But the force was small, and it was generally considered corrupt and ill-equipped to deal with the crime.

So San Franciscans created a private security system instead. These private police protected individual establishments, and sometimes entire neighborhoods, without taxation or official sanction. By 1851, Soulé, Gihon, and Nisbet wrote, people “could now lie down to rest at nights without feeling the old constant dread of having their houses robbed or burned before morning.” In 1853, the German traveler Friedrich Gerstecker wrote that “perfect peace and security exist now in San Francisco.”

As the city government grew, the private alternative stuck around. By 1916, San Francisco had 985 government cops—and 1,199 private police, by then referred to as Special Police Officers. Today the network of independent firms, now known as the San Francisco Patrol Special Police, still provides such services as helping merchants escort unruly patrons or vagrants off their property. Unlike security guards, the Patrol Special Police wear badges, are armed, and can protect multiple properties.

Mainstream economists argue that policing is a public good where charging people is impossible. They claim the peaceful law and order that policing provides is non-excludable, that people who do not pay still get to use the product. But in practice, police services are often bundled with real estate, where access is excludable and the bundle has a single price. Whether the “public” good is unarmed security or full-fledged private police, the principles are the same. A shopping center does not charge separately for its security guards—or fountains, sidewalks, and streetlights—and instead prices these collective goods into merchant rents, which are ultimately priced into consumer products. A shopping center does not need to negotiate with each customer for each of these separate amenities, and it eliminates free riding by indirectly charging all customers for these collective goods. Similarly, in 1850s San Francisco, private police did not need to go into the bar and negotiate with individual patrons for protection against criminals. The free-riding problem was overcome by bar owners pricing private policing into the cost of drinks.

Good security is an important aspect of property management, and that can come from everything from white-gloved doormen to fully deputized private police. Customers of retail stores, office parks, hotels, casinos, colleges, and housing complexes all demand a good experience, and if proprietors want shoppers, tenants, guests, gamblers, students, or residents, they must provide the bundle of private and “public” goods that their particular customers want. That includes policing.

Anarchy by the Bay?

San Francisco was in a state of de facto anarchy—in the sense of an absence of government, not an absence of order—before the city incorporated. In many ways, it remained in such a state afterward. Describing 1850 San Francisco, the 19th century historian Theodore Hittell writes, “There was no place of office for the first magistrate, or any edifice or building for municipal purposes. There was not a single police officer or watchman; nor a prison for confining a prisoner.”

When the government started hiring police, the new force was—in the words of Josiah Royce, a 19th century American philosopher who also wrote on the history of the American West—”small, poorly trained, generally neglected, and ill-paid, getting its wages in depreciated city scrip.” To Soulé, Gihon, and Nisbet, the law was “a matter for ridicule. The police were few in number, and poorly as well as irregularly paid. Some of them were in league with the criminals themselves, and assisted these at all times to elude justice.” Even after a government was created, its police were not there to serve and protect.

Scholars such as the Columbia political scientist Timothy Frye have argued that social cooperation without government breaks down when a population is heterogeneous or has high discount rates, meaning people care much more about today than about the future. Both of those conditions were met in San Francisco. Residents came from all over. One author who visited San Francisco during the gold rush, Hinton Rowan Helper, wrote in 1855 that “villains from all parts of the world swarmed upon the new soil” and that “words fail us to express the shameful depravity and unexampled turpitude of California society.” The 19th-century San Francisco historian Hubert Bancroft describes gangs “entering various saloons and demanding drink and cigars; if not instantly and cheerfully produced, the rioters would go behind the bar, help themselves and their associates, then smash a few decanters and mirrors.”

Yet bar owners and others did not want to be subject to bands of marauding gangs. Having your customers beaten up or your property smashed is not exactly a good business model. A column in the January 24, 1850, Daily Alta California declared: “Our merchants must organize some system of private watchmen.” Because the private sector had needs that government clearly did not meet, it decided to create a system of private police.

In 1849, private groups rounded up many of the Hounds and temporarily held them in a boat in the harbor. Arrestees were given trials that followed common-law procedure, including giving the accused counsel and letting the lawyers call witnesses; some prisoners succeeded in earning an acquittal and release. The leader of the Hounds, Sam Roberts, was found guilty of robbery, assault, and intent to kill. The informal jurists pondered sending him to prison, but they decided against it. Instead, he was banished from the city. Most of the people found guilty were fined, required to give bonds to keep the peace for one year, or simply asked to leave the city. Even without incarceration, this brought much of the chaos to an end. These groups may not have been paragons of liberal respect for individual rights, but the punishments they doled out were in many ways superior to those served up by the modern legal system, which has put more than a million nonviolent offenders behind bars.

They were also much more liberal than San Francisco’s government cops. In 1851, a visitor to the city wrote: “As for the police, I have only one thing to say. The police force is largely made up of ex-bandits, and naturally the members are interested above all in saving their old friends from punishment. Policemen here are quite as much to be feared as the robbers; if they know you have money, they will be the first to knock you on the head. You pay them well to watch over your house, and they set it on fire. In short, I think that all the people concerned with justice or the police are in league with the criminals.” That same year, the Daily Alta California complained that the “police established under our charter, and costing the city an immense sum, has been found entirely inadequate. Here as elsewhere, a large portion of their body offer a protection to, rather than a check upon, the disorderly and vicious. Men get appointed sometimes as policemen, who are no better than the unhung villains who prowl about our streets at night for theft and robbery.”

The politicians were no better. Describing the 1850s, Hittell wrote that “some of the boldest and most dangerous criminals in California were themselves officials.” Hittell writes about “the crimes upon the ballot-box, the corruptions of the public service, the prominence of notorious ruffians and their patrons in city offices.” In one prominent case, the politician James P. Casey murdered a businessman for printing negative things about him in the press. The government courts found Casey innocent. In response to that and other problems, residents formed vigilance committees and rounded up some of the worst criminals in the government. They held a trial of Casey and ended up hanging him. They also banished many others from the city. One result: an 85 percent reduction in government spending.

In 1965, the economist Mancur Olson wrote that police improvements “cannot be financed without in some sense reducing the economic freedoms of the citizenry, without increasing taxes and thereby reducing the individual’s freedom to spend.” But the San Franciscans were acting well over a century earlier, so they did not realize what they did was allegedly impossible. On May 19, 1851, the Daily Alta California described “two methods by which a police additional to that maintained by the corporation can be supplied.” The first was “to hire persons to watch and guard certain blocks or buildings, the funds necessary being furnished by individuals occupying or owning the particular property to be guarded.” (A real estate ad in a later edition of the paper would offer an example: It said the lease would “provide for a day and night watchmen and a fire department attached to the block.”) The second method was a volunteer police force, which the paper praised, saying that they “cost the city nothing—a very important consideration at this time.”

From day one, private police protected groups that government police were either incapable of or uninterested in protecting. For example, the government had little concern for the residents of Chinatown. Yet an 1854 Daily Alta California article reported that the Chinese neighborhood near Sacramento Street was “kept scrupulously clean by the special policeman on that beat, and no portion of the city is more quiet and orderly at night. This, however, has been the work of the Chinese themselves, in putting themselves voluntarily under the supervision of a special policeman, and no praise is due to the city.” At one point the city proposed outlawing the private patrols: The authorities were worried that there was too much gambling in Chinatown, but the private police did not seem concerned about prohibiting consensual acts.

The government, by contrast, kept passing laws targeting the Chinese, including the state’s 1862 “Act to protect free white labor against competition with Chinese coolie labor, and to discourage the immigration of Chinese into the State of California.” Some modern critics of private policing, such as Rich Benjamin of Demos, assume that private cops persecute minorities while government police do the opposite. In fact, the private sector came to the minority community’s rescue. In her 1909 report, Chinese Immigration, Mary Roberts Coolidge wrote, “In 1869 the abuse had become so flagrant and the police so indifferent that a Chinese Protective Society was organized among merchants and humanitarians in San Francisco, which employed a staff of special police to patrol the city day and night and to arrest those molesting the Chinese.”