Several systems have been postulated and/or implemented, historically, for the private provision of legal services and the enforcement of legal decisions. I’m going to describe my favorite theoretical system (which resembles Xeer law). In a following article I will be addressing some concerns that are raised with this type of system, yet for now I will give a basic layout. The central service in the system is indemnification against crime — harm to the customer or his property. Typically, they’re called “dispute resolution organizations,” or DROs, as that describes their main purpose, but they work very much like insurance companies, even more so in this situation, so we can just call them that.

The primary function in the system is compensation against crime from harm to the customer or their property. This is provided by associations, which as I mentioned, with DRO’s, resemble insurance companies. The details of the service are contractual, voluntary, with exact services differing for each organization and individual contract — similar to what is done in more familiar actuarial settings. This would result in organizations competing with each other on terms and prices. Sound familiar? To clarify some, there would be (one assumes) many competing insurers, who all know well in advance that conflicts will arise among them and that they need efficient arbitration, so what’s needed is an interlocking series of contracts every which way regarding what arbitrator(s) will be used in disputes, which they must both agree on in advance. Which means your insurer has the same incentive as you — find the other guy, if anyone, at fault — and the opposing party has the opposite incentive. If there’s any dispute, arbitration settles the matter.

The best way to elaborate on a system such as this would probably be to describe a potential scenario from beginning to end. To simplify things just a bit for the sake of discussion let’s say Jones is a thief and has broken into Smith’s home and stolen his television. Later Smith comes home, or wakes up in the morning, and finds it missing. First thing Smith would do is call up his insurance organization (A). At this point, his biggest concern is that some hooligan was in his house and his contractual arrangement with A requires that they either recover his television intact or give him a sum of money to help cover the loss and replace it. Per the terms of the contract, his insurance organization might owe him the cost of replacing the door, the television, whatever else is damaged/stolen and preferably they would want to be reimbursed by the apparent thief, rather than take a financial loss — it’s much cheaper for them if they can simply find it, and to minimize costs, they’ll first attempt to recover the actual TV.

Only they didn’t simply try, but arranged for systems that would increase their chances of catching Jones. The insurance organization A and Smith found it mutually beneficial to install a security camera system in the house for just this kind of situation. Due to an interlocking series of contracts existing among competing associations, things can come off complicated, as the course of events could involve arbitration from a 3rd party, and problems potentially arising that are legitimate concerns. Right now, for the sake of discussion, let us assume it is discovered that Jones is the culprit, Smith has Jones on camera, and Jones is found in short order.

To pause for a moment, at this point, you may be visualizing costumed goons with badges bursting into Jones’ house with guns and tasers as this is what people usually visualize since that’s the way things currently are, but this won’t be necessary and will likely be too costly up front in most cases without a tax base or a printing press. Instead, Jones receives a phone call from A, explaining that he was caught on camera, he’ll lose any attempt at arbitration because of that, and it is in his own best interest to return the television. Another possible route is that A could call Jones directly explaining all of this can go away for X$ amount, which is enough to replace Smiths missing/damaged property, and to reimburse him for his trouble and for A’s trouble – otherwise B (Jones’ insurance organization) would be contacted for reimbursement, in which case his premiums and settlement amount will likely increase. The story concludes here and is rather boring, so let’s mix things up a little and assume Jones refuses. Because we don’t have “cops” and have no way to “force” Jones to return it, Jones could say, “Yeah right, bitches, you don’t even have an enforcement arm, and I don’t wanna.” In response A says, “Very well sir, have a nice day.”

At this point A will contact B to inform them of Jones, their client’s (and thus, contractually with Jones, their own) liability. Now the judgement against Jones, according to our assumption, is an undisputed conclusion, and B is now on the hook for an amount calculated either contractually or by a third party arbitration firm, and so it pays A accordingly, Smith is made whole, and A earns a small profit.

Later, Jones receives a call from his insurance organization. How do we know Jones has an insurance organization? That’s the crux of the enforcement question, yes? Keep reading.

B: “I’ve seen it myself, Jones, you were caught on camera. I promise the easiest and cheapest way out of this is to just return the television. By the way, I’m afraid your rates are going up.”

Jones: “Dude whatever, it’s mine now, you don’t even have cops. Can’t make me.”

B: “That’s not really going to work. We can only profitably indemnify you against harm if you’re not out there asking for harm by harming others and incurring expenses for us.”

Jones: “What do you mean ‘expenses for you’?”

B: “It isn’t obvious? It wouldn’t work very well if not for a series of contracts among us and our competitors. Since you, our customer, stole property from this individual, if you don’t pay, we owe his insurance provider in your stead the money to reimburse their client for the loss you caused him. It’s like if you’d hit him with your car, except in this case you can fix it by returning the TV, you don’t even have to come up with a sum of money, apart from your increased rates.”

Jones: “Whatever, sorry I asked, not my problem.”

B: “You should realize by refusing we’d have little choice but to terminate our relationship. And those contracts we mentioned — we’ll be obliged to publish your name as a thief and a deadbeat. If you’re able to get an insurance policy at all after that, it’ll be quite expensive; that is if anyone wants to take on business with someone who engages in known risky and expensive activity.”

Jones: “As in if I don’t return the television I’ll be without recourse to the law? Plus their client could come in here himself and take his television back, and my jewelry while he’s at it, and club me upside the head for good measure, and there’s nothing I can do about it?”

B: “Is it starting to sink in?”

Jones: “Can’t talk, loading a TV into the truck…”

In the instance of non-compliance, the decision against Jones, according to the assumptions given, can not be disputed, and B is now going to be required to pay an amount calculated by either a 3rd party arbitration association or contractually, and so it pays A accordingly, Smith is made whole, and a small profit is earned by A. If it had been an accident, maybe your rates go up, but now they know Jones is a happy criminal who doesn’t make good on his debts, and that makes Jones a prohibitively expensive customer to insure, at almost any rate.

So to clarify, how would compliance be required? Alternatively, how is the law enforced? Will agents in arms be sent to Jones’ house to arrest him or force restitution? Possibly, since certain clients want competition, that is a potential outcome, yet compulsion and/or violence may not be necessary and can be removed as a possibility. One option for B is to cancel its contract with Jones, eject him from its roles, and publish that he is a criminal and a risk to business. Will that serve justice? This was Jones’ access to the legal system, he no longer has it — he effectively forfeited it. The thought of being without access to the legal system, where anyone can do as they please to you with impunity, is incomprehensible, to be avoided at literally any cost.

Despite the justified harm to his reputation, it could be possible Jones (or any individual in these circumstances) will be able to hire a new DRO, albeit along with higher premiums that reflect their relatively potential high financial risk. But barring this, if I steal your property, there’s nobody for you to complain to. You are an outlaw, in the ancient sense of the word, and I can damage you or your property with impunity if I want to. Historically these “outlaws” would flee to the wilderness, most likely to their deaths, but never to be seen again in any case. The threat of this outcome, of basically crowdsourced enforcement, is why crime is mostly avoided and why debts incurred when it’s not, are paid. You can now be victimized and it this can be exempted from punishment. Having violated the property of another individual and refusing to abide or reimburse, your rights have now been forfeited, or at least institutionalized protection, and the victim has still been compensated. Your previous protector has suffered a loss, and mine has earned a profit.

When it comes to libertarianism, law is one of the things that many libertarians consider the state must be in charge of. Law could be considered on a long list of services which the state has provided, and in most cases monopolized, for as long as anyone can remember. This is further complicated by a complete lack of even an attempt to investigate whether these things have ever been provided by private for-profit enterprises, let alone whether the state actually outperforms them in terms of cost, quality, and so on. Polycentric law has often worked with a state. Most of the history of western legal systems has been characterized by a polycentric court system, and much of existing legislation was basically “ported over” from common law that emerged from these systems. There is no reason to assume the state must be in control of it.

Understandably the above scenario will lead to some “what if” questions which will be followed up with soon but in the mean time I would challenge those who are skeptical of it to consider a few thingswhen it comes to decentralizing law ethically and economically. Ethically, polycentric law is a lot better at not producing unethical results, because there’s nobody just making stuff up on a whim. In polycentric legal systems, interaction with the legal system begins with a dispute — there’s no other way for it to be. Assault, for example, is handled as a tort rather than a crime (in the modern legal sense), as everything under the purview of the polycentric system is. If there’s still a state, it can and will prosecute you for anything it considers a crime, such as treason, but literally every other interaction with the legal system is a tort. There is no case without a tort, no tort without a dispute, no dispute without an actual offense against an actual person. The state is now necessarily in charge of deciding what constitutes defensive versus aggressive force, and will of course consider all of its own violence to be defensive in nature, and that deployed by any would-be competitors (“vigilantes”) as aggressive and intolerable — a justification for “defensive” force to be used against them. Also, the State will put itself in charge of resolving all disputes, including disputes arising between itself and its subjects. It will of course resolve those disputes in favor of itself, and it will find that it has incentives to provoke conflicts in order to resolve them in its own favor, as it does with the creation, through legislation, of new “crimes.” The state is the final authority in conflict resolution (and all other decision making). Everyone has a built-in incentive to consistently resolve disputes in his own favor, but only an entity like the state has the means to do so. It also thereby has the incentive to create such conflicts.

Economically, it’s basically the same as in any other pursuit. Monopolies are prone to abuse, and to rising prices and diminishing quality over time, while competitive enterprises have the opposite tendencies. Also, there is mobility. If I am unsatisfied with the current provider (the State), I can’t take my business elsewhere which would not be the case in a number of places, and without great cost to myself, even in the freest.

Some other reasons is that due to the state’s monopoly on law is that there is no way to prevent the state from growing and it is one of the areas that is abused by the state. Once you put people in charge, you have very close to zero control over what they do, how much additional/unauthorized power they will seize, and so they will always take “more,” the results of their previous handiwork not being very good. Some of the same libertarians who do believe the state must have a monopoly, or must be in charge of it, may hold the position that in their ideal system it would be funded voluntarily in which case I would ask: Assuming it can and should be funded voluntarily, how and why would it have a monopoly? How would it protect that monopoly and how would that protection be justified? How do you propose to restrain the monopolist once it has this power, and what justification can there be for the belief that it can be restrained? Are people free to leave or unsubscribe and go to another “state” without incurring any costs they didn’t agree to? You cannot have a monopoly on law without forcing competitors to stop competing. Thus, you must at a minimum coerce people to use you as the monopoly provider. And a state monopoly is always the banning of competition.

What I have described may be dismissed for being hypothetical or too idealistic but I would argue that it isn’t. Systems such as what I am proposing have existed. Even so, this is exactly like any other objection you could think of, anything that worries you about how a free market might operate, in that your anxiety constitutes a consumer demand for which we can expect a supply to emerge. Furthermore, if you want to advocate change, then you most certainly must argue hypotheticals. If one change is better than another, which market based ones are, it is utterly insensible to dismiss it as “hypothetical.” One comes off simply contradictory when they talk about limiting government, but then when someone proposes an actual limitation they prefer to “solve” the issue by “tweaking” existing government power over a nominal system of private property. Undoubtedly there will be some concerns, but hopefully the correlation is seen. Property rights and owners’ incentives to preserve them, the market demand this represents, the supply available through DROs or insurance solutions, how this addresses externalities and is enforced without the possibility of arbitrary and unilaterally stipulated rules or threats of violence from the states monopoly on law and violence.

 

 

Further reading:

http://daviddfriedman.com/Academic/Anarchy_and_Eff_Law/Anarchy_and_Eff_Law.html

http://mises.org/library/chaos-theory

http://daviddfriedman.com/The_Machinery_of_Freedom_.pdf

http://mises.org/sites/default/files/14_1_3_0.pdf

http://www.tomwbell.com/writings/JurisPoly.html

http://www.tomwbell.com/writings/FAH.html

http://mises.org/library/possibility-private-law