The private military firm Blackwater has been getting a lot of media attention lately, some good and some bad. In libertarian terms the case is not cut and dry. One part of my libertarian inner economist wants to say that private firms are better than the state at providing international defense services. David Friedman once similarly wrote that the incentives produced from a volunteer or paid army yield preferable quality outcomes compared to forced conscription and a military draft. On the other side of the debate there are some human rights issues to be concerned about. As Hart, Shleifer and Vishny (1997) have noted concerning the contracting out of prison services, private managers are often promoted to degrade quality by cutting costs to maximize profits. Benson (1994 and 2003) has similar concerns.
On net I think the market wins out on this debate but not necessarily the current so-called private firms we see today. Private companies should be more responsive to quality standards that take note of the excessive use of force compared to governments. The fact that current private firms appear to be liberal with their applications of violence is not necessarily due to their private-ness.
When governments use excessive force in international conflict they are only held in check by additional levels of international bureaucracies and governments, private firms on the other hand should be directly liable under their domestic tort systems. Unfortunately firms like Blackwater are receiving degrees of immunity specified in their contracts from American governments.
What seems obvious and affirming to my market-preference for international involvement is the fact that if the federal government were to revoke these immunities then Blackwater would conduct itself more prudently. Raise the cost to frivolous violence and it will be committed less frequently.