The alternative to the state, part 4: polycentric law
Wouldn’t it be great if we did not have to follow every law the state passes over us? But then, how would we enforce contracts? How would we enforce property rights? What if someone attacked us? If these concerns could be answered, if we could still have contracts and property and security without following the laws of the state, would you be interested?
Advocates of a minimal state (minarchists) spend considerable time debating which government functions can or should be handed over to the private sector. They may say the state should contract out utilities, social security or the military. However, under such an arrangement, the state would retain ultimate control of all those things, because it would have the prerogative of the law. The law is, in fact, the source of the state’s power.
But as I keep asking, why would we want to give the power to make and enforce laws to a small group of people? Is it that we can trust these people because “we” “elected” them, or threaten not to do so? Or that we do not trust others? Anarchists are not against all rules, contrary to the straw man thrust upon them, just against state laws. My post on state law can be found here; it is the why not of state law. Law that is determined not by one institution but by many is called polycentric, customary or privately-produced law. This post is about the why and how of polycentric law.
In The Market for Liberty, Morris and Linda Tannehill dismiss the idea that we need monopolistic law and force to solve disputes.
It is interesting to note that the advocates of government see initiated force ( the legal force of government ) as the only solution to social disputes. According to them, if everyone in society were not forced to use the same court system, and particularly the same final court of appeal, disputes would be insoluble. Apparently it doesn’t occur to them that disputing parties are capable of freely choosing their own arbiters, including the final arbiter, and that this final arbiter wouldn’t need to be the same agency for all disputes which occur in the society. They have not realized that disputants would, in fact, be far better off if they could choose among competing arbitration agencies so that they could reap the benefits of competition and specialization.
It should be obvious that a court system which has a monopoly guaranteed by the force of statutory law will not give as good quality service as will free-market arbitration agencies which must compete for their customers. Also, a multiplicity of agencies facilitates specialization, so that people with a dispute in some specialized field can hire arbitration by experts in that field . . . instead of being compelled to submit to the judgment of men who have little or no background in the matter.
As we will see, a better system is preferable and possible.
A simple rule is, the easier it is for normal people to do what they want without harming others, to do business and trade, to create and innovate, the better off the people around them. There are, in fact, things a government can do to aid an economy. One of the most important, as seen from the studies in The Mystery of Capital by Hernando de Soto, is upholding contracts and property rights. If there are ways to do these things in a free market, while lowering or eliminating the risks of abuse associated with state intervention, they are worth considering.
Law around the world
In his paper Privately-Produced Law, Tom W. Bell explains that people around the world and throughout history have used more equitable legal systems than the centralised model. Some legal systems that many would write off as “primitive” are in fact very effective at protecting individual freedom and property, resolving complex conflicts, avoiding violence and can legislate changes in the law. They do all these things without the inefficient, unsatisfying elite control of the system most civilised people are used to.
In such systems, people make reciprocal agreements and victims enforce them. Such agreements are necessary to belong to the community in the first place; and since they are mutually beneficial (unless one knows he or she is going to break the law), people believe in them. Economic restitution, proportionate to the severity of the crime, is the main form of punishment for torts. The guilty yield to the punishment largely due to the threat of ostracism.
Old Anglo-Saxon law made courts out of public assemblies. Interpreting the law was not a problem, as custom took care of it. The outcome of the dispute was about the facts of the case. There were no crimes against the state, or against society. There were only crimes against individuals.
Various other groups have come up with laws regarding the conduct of their members, including immigrant communities, merchants and guilds and communes. It is related to arbitration. Commercial arbitration has become a popular, fast and efficient form of resolving disputes for the insurance, construction and textile industries. (Find more on arbitration below.)
Contracts and reputation
In advanced capitalist countries, where legal contracts have a long history and a solid place in the culture, enforcing contracts is one the state does reasonably well. How could contracts work in a stateless society? Well, how did they work before the state began enforcing them? How do they work where there is no state? Generally, the answer is the same: reputation. If you are known for enforcing your contracts, you win new ones, and you make money. If you break a contract, you lose big time. You lose future contracts but you also lose face from all your peers. Nowadays, that could mean being smeared on the internet as well. Shame, and in more extreme cases, ostracism, is a common punishment throughout the world for anyone who breaks with his or her expected obligations.
Reputation is very important. In a small enough community, we would probably not need any kind of court system because if Johnny cheats Holly, everyone will find out, and will shame, attempt to rehabilitate or, at the extreme, ostracise Johnny. We could formalise this process for a larger society with some kind of reputation database, possibly along the lines of what eBay and Amazon use, or possibly more sophisticated, using arbitrators. Arbitrators would be judged on their reputation. They would likely specialise in a field. They could create permissions to add entries and create permissions to read the database, but cannot alter or remove entries.
When Johnny and Holly agree to enter into a contract, they take it to an arbitrator, Justine, who gets a fee. Justine makes an entry in the database. If Justine makes a ruling against Johnny the cheat, and Johnny does not comply with it, the arbitrator puts all of it in the database, showing that Johnny is not someone you would want to do business with. There could be a number of online and offline backup databases to ensure no one tampers with them.
A credit rating is a kind of reputation. Debts that are so small they are not worth taking to court or even arbitrators are still regularly paid off because of one’s credit rating. Stefan Molyneux explains (here and here) that we already operate under such a system, and that expanding it with dispute-resolution organisations, or DROs, could be advantageous to all.
Picture for a moment the infinite complexity of modern economic life. Most individuals bind themselves to dozens of contracts, from car loans and mortgages to cell phone contracts, gym membership, condo agreements and so on. To flourish in a free market, a man must honour his contracts. A reputation for honest dealing is the foundation of a successful economic life. Now, few DROs will want to represent a man who regularly breaks contracts, or associates with difficult and litigious people. (For instance, this writer once refrained from entering into a business partnership because the potential partner revealed that he had sued two previous partners.)
People will need to be represented by DROs because their being accepted into mainstream society will demand it. Without a contract with a DRO, one would have no credibility as an honest broker and thus no chance of entering into contracts—at least, contracts without very high fees and penalties for breaking them.
A DRO would be liable for crimes their clients commit. If a man murdered his wife, he would lose his contract (which would prohibit murder) and have to pay some penalty to the next of kin. That might mean forced labour under some kind of imprisonment. DROs “are as ancient as civilization itself, but have been shouldered aside by the constant escalation of State power over the last century or so…. [They make] all the information formerly known by the local community available to the world as whole, just as credit reports do.” And insurance can be created for just about anything.
Arbitration has made courts superfluous in many areas, with tens of thousands of arbitrations conducted every year. Arbitration is a kind of privately-produced law, as it involves two people voluntarily coming together, choosing their own terms and accepting someone else’s ruling. Arbitrators have been around since the Middle Ages, and developed the whole body of merchant law. None of them could violently enforce their rulings.
In a society of polycentric law, arbitrators would be chosen for their expertise, efficiency and integrity as impartial judges, as they are now. Arbitration has even gone online. Judge.me is a company that resolves international disputes in a matter of days based on common principles of justice. It is an efficient and very promising service.
Choosing the law
Private law means we can choose which laws to abide by, instead of hoping to impose them on others. Sure, people in polycentric legal societies will get things wrong; but they will get them less wrong, with less drastic, society-wide consequences, than state law. David Friedman’s argument is that, since the government does not do anything efficiently or better than the free market, why would we expect it to make laws right? A monopoly is rarely necessarily or preferable; why would a monopoly on the production of law be different?
In a free market for law, a large number of security firms would exist that, for a fee, would enforce the basic rights, including contracts, of their customers. Imagine my television goes missing. The camera my security agency has installed in my home saw the person who did it. The thief the agency identified denies the crime. I have a rights-enforcement agency, but so do you. The two agencies might go to war over my claim to get my TV back, right?
But wars are very expensive and private firms want to minimise costs. War only profits those who wage it when they steal the money used to pay for it from someone else through taxation. Instead, the agencies could decide on a netural arbitrator who will decide to whom the TV belongs. Since such disputes are likely to recur, policies will stipulate when the firms will approach an arbitrator.
Since such firms will deal with each other for a long time, they will be able to agree on rules and industry standards. Instead of fighting, they will have rules and mechanisms in place to enforce rulings of the arbitrators. If firms attempt to collude, it is likely that customers will desert them, as existing and potential customers find that legitimate claims are not redressed.
In order for a rights-enforcement agency, an arbitration agency or a private court to make money, people need to choose to use it. So who would their customers be? A polycentric legal order would resolve the debates over, say, the implementation of Islamic sharia, because Muslims who want sharia (which is not all Muslims, just so you know) can abide by it, and would not force others to follow it. Strict, Orthodox Jews would shop at a different agency. Libertarians who do not want too many rules would have their own. Pacifists might choose arbitration without enforcement.
Dealing with aggression
Contracts are a very useful way to solve disputes. Perhaps I sign a contract when I move somewhere that I am not going to let my grass grow too high or scatter car parts on the lawn, and if I break it, there is recourse to kick me out. But what about torts or crimes of aggression where there has been no contract? Murray Rothbard has some ideas. The free market offers endless possibilities—whatever people can offer that customers want. Insurance companies would pay the victims of crime, the breaking of contracts, the winners of arbitration, then pursue the aggressors in court to recoup their losses. Competing defense agencies would exist to protect people, and they would likely work closely with the insurance companies: the less crime there is, the less the insurance companies need to pay out. Insurance companies would probably lower the cost of burglary insurance to those with alarm systems, or trained gun owners. Thus, the incentives for swift, efficient restitution with a minimum of violence are built in to the system.
Holly accuses Johnny of a crime. Johnny gives her the finger and does not show up in court or send a representative. As a result, his side of the case is not heard. If he is found guilty, he might nonetheless accept the verdict. If not, he could go to another court, he could appeal, and so on. If courts and appeals continue to find Johnny guilty, they will have found him guilty of aggression. In a society based on the non-aggression principle, this is, in effect, a crime. Private defense agencies thus have the moral authority to demand restitution and employ violence if it is not forthcoming.
In a free society, people would be free not to press charges, or not to employ violence if other parties did not accept rulings against them. Nonetheless, in the eyes of anyone with access to a reputation or contract-rating database (which would be everyone), those who violate the NAP would have all manner of sanction against them. They would find it difficult to buy a car, for instance, because they would not be trusted to pay for it. Finally, crimes against “society” would not exist (and arguably do not exist at the moment).
I am sure that, like with everything an anarchist proposes, statists will be able to find holes in the theory and “what if” their ideas to death. A few holes in the presentation of a theory does not invalidate it, especially when it is something everyone will have the chance to influence, unlike the current way of dispensing law. They are free to continue to believe they are best represented by the “justice” system as it is now. All we ask is that they respect others’ opinions enough to let them try their own way of doing things. They could be attempted on a micro level, with a few hundred or a few thousand people.
A system of polycentric law would eliminate victimless crimes, because people could choose their own laws. It would be fairer, instead of today’s system of treating rich people’s crimes as misdemeanors and minorities or the poor’s crimes as murder. It would simplify laws, meaning far less need for expensive lawyers. It would lower costs, meaning everyone could afford it; or at least, it would be easy to raise money for those who could not. And we would not have every law and verdict handed down by a self-interested elite.