In Western countries, the rise of the “post-liberal right” has ushered in renewed popularity of German political theorist Carl Schmitt, especially among younger generations. At the heart of Schmitt’s philosophy is the friend/enemy distinction, which identifies the ever-present possibility that political communities may confront one another as public enemies in an existential struggle. While not embracing Schmitt himself, the American left embraces the idea of politics as an existential struggle against the right.
Many of Schmitt’s contemporary interpreters emphasize that the friend/enemy distinction is an empirical observation about how people actually behave. Some go further, arguing that liberalism is an illusion. All politics, they claim, is rooted in irreducible disagreements about our ultimate ends, moral truth, and the nature of justice. On this view, institutions and incentives are downstream of deeper commitments.
There is real force to these claims. Political actors are motivated by moral commitments and material interests, some of which are treated as non-negotiable. Yet they leave a crucial question: why do such disagreements sometimes produce peaceful coexistence and at other times generate existential enmity? If disagreement over “The Good” is constant, variation in outcomes requires explanation.
The answer lies in economics: the structure of transaction costs, or “human distance.” Human distance captures how difficult it is to understand, trust, and coordinate with others. When these costs are low, even deep disagreements can often be managed through cooperation, exchange, or institutional constraint. Not all disagreements, though, are equally tractable. Transaction costs determine whether we can solve disagreements through exchange, institutions, or existential conflict.
Even if we accept Schmitt’s tacit assumptions about politics, he at best describes a boundary case. Schmitt fails to account for the variation in intensity and duration of conflict when it does occur, as well as why conflict occurs in some situations but not in others. Economics provides the means of discovering these answers. Enmity is conditional on the costs of managing disagreement.
When Moral Disagreement is the Core of Politics
At the beginning of The Concept of the Political, Schmitt writes, “The concern here is neither with abstractions nor with normative ideals, but with inherent reality and the real possibility of such a distinction.” For him, that “inherent reality” (expressed in Concept and earlier works) is that man is irrevocably, naturally evil and dangerous. Drawing on Thomas Hobbes, Schmitt argues that man is kept in check by a sovereign political authority capable of deciding when normal conditions break down.
The relevant enemy is the hostis, the public enemy: someone one is willing to fight or kill as a member of a hostile group. A friend, by contrast, is one for whom the same is true in solidarity.
For Schmitt, personal convictions do not matter. One may trade with an enemy or begrudge a friend; what matters is collective identity. Even Matthew 5:44, “love your enemies,” does not escape the friend/enemy distinction for Schmitt because the “enemy” refers to a private enemy (inimicus) not the hostis.
Such decisions about conflict rest with a sovereign authority to declare the exception, yet that authority does not act in a vacuum. The sovereign must still be responsive to prevailing attitudes within the political community. Without that support, attempts to suspend the norm may fail, or the sovereign may himself be undermined by those who reject his account of the norm and the exception.
For Schmitt, liberal institutions are fragile because they depend on norms of discussion and openness that presuppose shared commitments about coexistence, competition, and conflict. Liberalism, in this view, seeks to neutralize conflict by recasting substantive disagreements into procedural, technical, or economic problems. As Leo Strauss observed, liberalism cannot eliminate disputes over “the good, the right, and the just;” it can only hide them under procedure. As commitments to procedure erode, however, politics can devolve from deliberation to antagonism.
Schmitt’s later work argues that political order depends on an a priori structuring of space and authority, a nomos, grounded in the division and allocation of land. Institutions presuppose a prior settlement of conflict, not an elimination of conflict. Moments of crisis may still require decisions that existing institutional arrangements cannot fully resolve.
Schmitt identifies the most extreme form of politics but mistakenly treats extremes as typical.
From Institutions to Human Distance
Whether disagreement escalates depends on both its content and the costs of managing it. In “The Problem of Social Cost,” Ronald Coase reframes conflict as reciprocal: disputes arise because individuals seek incompatible uses of scarce resources and institutional arrangements determine how costly it is to resolve those conflicts. In the UCLA price theory tradition, outcomes depend on rules and incentives. Rules shape behavior by determining the costs and benefits of cooperation and conflict, not by resolving moral disagreements.
This is the classical liberal insight: order requires institutions that make cooperation possible despite disagreement. Transaction costs capture the difficulty of coordinating and understanding others. Human distance reflects these frictions, including differences in norms, expectations, and moral frameworks.
This perspective has deep roots in Adam Smith’s moral philosophy. Smith’s The Theory of Moral Sentiments begins with moral psychology, specifically that humans possess a natural desire for “mutual sympathy of sentiments.” This desire encourages individuals to align their judgments with others, moderating behavior and reducing the frictions that would otherwise make cooperation prohibitively costly. These mechanisms work in part by allowing individuals to anticipate others’ responses, and they are generally stronger where relationships are closer. Individuals acting from sympathy, self-interest, and moral judgment generate patterns of cooperation they neither design nor fully understand. This helps overcome the challenge of coordinating dispersed knowledge without sharing identical beliefs or ends. The results of these spontaneous orders are institutions that are constantly evolving and changing to coordinate knowledge and reduce conflict whenever possible. These institutions, then, are responses to human distance that emerged over time to sustain cooperation despite persistent disagreement over ‘the good, the right, and the just.’
How Human Distance Produces Political Enmity
When human distance is high, trust erodes, and communication becomes difficult. As transaction costs rise, cooperation becomes harder to sustain. When coordination fails, actors reframe disputes in moral terms. Claims become non-negotiable, tied to identity and justice. This strengthens internal cohesion but raises the cost of compromise.
At this point, Schmitt’s friend/enemy distinction emerges. Coordination problems become politically dangerous when they are reframed as an existential conflict with enemies instead of disputes among rivals, neighbors, or trading partners. Enemies are what remain when both the moral mechanisms of sympathy and the institutional mechanism of coordination fail to sustain cooperation.
Some conflicts may persist even when costs are low, but those lower costs will determine what such conflict looks like.
How Institutions Respond to Human Distance
Harold Demsetz explains how societies respond to conflict. Property rights, he argues, are an “instrument of society” that enables individuals to form stable expectations by specifying “how persons may be benefitted and harmed, and […] who must pay whom to modify the actions taken by persons.”
The central function of property rights, according to Demsetz, is a mechanism for dealing with externalities, which arise when “the cost of bringing the effect to bear on the decisions of one or more of the interacting persons is too high to make it worthwhile.” Property rights only emerge when “the gains of internalization become larger than the cost of internalization.” In another paper with Armen Alchian, he further explained that societies rely on multiple mechanisms (i.e., war, law, and exchange) to channel conflict into forms compatible with ongoing interaction. This bundle defines permissible actions and constraints regarding said resource, determining whether individuals bear the full consequences of their actions. Property rights do not eliminate disagreement; they make it tractable by lowering the cost of coordinating across it. Demsetz’s analysis of native tribes across North America illustrates this mechanism. In some cases (such as among tribes in modern-day Labrador), territorial rights over fur trapping were able to emerge because these rights reduced hunting costs by clarifying expectations. Additionally, Walter Williams showed that markets can mitigate even deeply rooted conflicts, including racial discrimination, by imposing costs on exclusion and rewarding mutually beneficial exchange, even when underlying beliefs remain unchanged.
Adam Smith’s moral theory complements this account. James Otteson clarifies Smith by showing that social order depends on both informal norms and formal rules. Through self-command, individuals internalize external judgment, reducing the need for costly enforcement.
Together, UCLA price theory and Smithian moral philosophy address the same underlying problem. Property rights align incentives; moral norms align expectations. Both function as distance-reducing mechanisms, enabling cooperation in the presence of moral disagreements.
Schmitt Vindicated? Not Quite
The objections listed above do not, however, completely put Schmitt to rest. Schmitt’s later works emphasize that order depends on spatial and institutional structure. The European state system limited conflict by “bracketing” war within recognized boundaries.
Where expectations are stable, conflict can be contained. Where order collapses, conflict becomes moralized and unbounded. For Schmitt and many contemporary supporters, liberalism can only obscure conflict and divisions, which inevitably reemerge in moments of crisis.
While disagreements over ‘the good, the true, and the just’ will never fully disappear, they need not culminate in domination or disorder. Richard Wagner and Alexander Salter argue that political order emerges from interaction within rule systems. These systems manage moral disagreements without eliminating them. Liberal orders succeed, when they do succeed, by lowering the costs of interacting across disagreement and by channeling conflict into exchange, bargaining, and rule-bound competition. Even in war, variation in duration and intensity reflects differences in coordination and institutional capacity.
These institutions, however, are not neutral. As Schmitt correctly notes, they reflect underlying moral and political judgments about how social order should be maintained. Smithian moral philosophy explains how moral judgments are formed and sustain cooperation; natural law traditions address how such judgments are to be evaluated. This distinction separates the formation of moral judgment from its evaluation, while leaving open the question of which judgments are ultimately correct.
As Samuel Gregg stresses, human action is ultimately grounded in reason: “the ultimate source of human actions—their motivation—are thus reasons; that is, something intelligible.” While such reasoning has informed the development of institutions such as property rights, contracts, and the rule of law, it does not uniquely determine their form. Instead, these institutions emerged as responses to the problem of sustaining cooperation among individuals who continue to disagree about justice.
Schmitt’s nomos can be reinterpreted as an institutional equilibrium. It persists, in part, because it reduces conflict and facilitates coordination. Boundaries and rules endure, in part, because they reduce human distance and stabilize expectations over time. Even Schmitt’s land-sea distinction can be reconsidered in these terms: commercial systems, though fluid, may reduce distance through repeated interaction and interdependence.
Whether those commitments are true or just remains a separate, though unavoidable, question. Schmitt is, therefore, partially vindicated by describing specific boundary cases. This account explains when such cases emerge so infrequently.
Conclusion
Schmitt and his supporters are correct that moral disagreements run deep. But those disagreements do not, by themselves, determine the form conflict takes. Disagreement is constant but enmity is conditional. When cooperation is relatively cheap, disagreement is manageable without full resolution. When it is costly, conflict hardens and escalates.
The friend/enemy distinction emerges when ordinary mechanisms of cooperation break down. The classical liberal perspective helps explain how moral sentiments, institutions, and decentralized order sustain cooperation among people who disagree about ultimate ends, and why that cooperation sometimes breaks down.
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