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Why do we need a legal system can we imagine countries without them

Order Without the State: Part I is an attempt to define government. Part II is a brief sketch of the evidence on whether and under what circumstances an anarchy, a society without a government, is workable. Part III provides a theoretical discussion intended to help make sense of the evidence, including a discussion of possible reasons for the nonexistence of an anarchy.

Finally, part IV discusses under what circumstances and in what form stateless societies might come to exist over the next century or so. What is Government, What is Anarchy? An anarchy is a society without a government, so a discussion of anarchy requires a definition of government. Government cannot be defined by what it does, because all functions of government, including making and enforcing laws, have been, and most are, performed at some times and places by organizations that almost nobody would call governments.

So it makes sense to define government not by what functions it provides but by how it provides them. Further, there are societies in which law is not viewed as the creation of the state at all—including all traditional Islamic societies—hence where some use of physical force by the state is seen as illegal and some use by non-state actors as legal.

My preferred solution is to define rights in terms of the set of mutually recognized commitment strategies by which individuals constrain how other individuals act towards them, and to then define a government as an institution with regard to which those strategies do not apply, an institution which can violate what individuals view as their rights with regard to other individuals without setting off the responses by which such rights are normally defended.

An individual in some way claims and marks a territory. If another individual of the same species and gender trespasses on the territory he is attacked by the owner, who will fight more and more desperately the further into the territory the trespasser comes. A fight to the death is usually a loss for both winner and loser, which gives a potential trespasser a good reason to retreat.

Thus ownership is enforced by a mutually recognized commitment strategy. Corresponding behavior by humans, generalized to apply to much more than territory, is observed in many different contexts. A famous experiment in behavioral economics demonstrated that individuals value items they possess much more than items they do not possess, even when the initial allocation of items was random. In international relations, we routinely observe states willing to bear costs in defending their territory out of proportion to the value of the territory defended—the British war with Argentina over the Falklands being a striking modern example.

And both casual observation and introspection tell us that while individuals defending what they see as their rights against other individuals are not willing to bear unlimited costs—not many of us are willing to fight to the death against an armed mugger—they are willing to bear costs out of proportion to the value directly threatened.

Such behavior makes sense as a commitment strategy, since the knowledge that an individual will bear large costs in defending even small rights provides other individuals with a reason—often although not always an adequate reason—not to violate those rights, and as long as the right is not violated it is not necessary to bear large costs to defend it.

Starting with this definition of rights as based on mutually recognized commitment strategies, we may define a state or government—I will use the terms interchangeably—as an organization against which those commitment strategies do not hold. Most of us are willing to bear substantial costs defending ourselves from a private robber or an attempt by another individual to enslave us, even briefly.

Few of us are willing to bear similar costs to defend ourselves from a tax collector or mandatory jury service. Even those who consider taxation morally illegitimate and so have no reservations about concealing taxable income when they believe that doing so is in their interest feel no commitment to do so when it is not.

An anarchy, then, is a society in which there is no such organization, in which the commitment strategies by which we defend our rights, whatever we and other members of that society consider those rights to be, apply to all other individuals. The Evidence Anarchies, stateless societies, exist in the historical record in two forms. The best known are primitive societies, of which the Comanche indians provide a good example.

They functioned for well over a century, they succeeded surprisingly well in defending themselves and attacking others despite their eventual defeat by a vastly superior enemy, they had reasonably well defined rules of behavior enforced by private action, a system of private norms entirely substituting for a legal system. The other sort of stateless societies are embedded societies—subcultures that succeed in enforcing their own rules on their own members while to varying degrees obeying or evading the rules of the state within which they are located.

Modern examples include the Rominchal gypsies in England and the inhabitants of modern-day Shasta County California.

In these cases again, the equivalent of legal rules are enforced by decentralized private action, with no specially privileged enforcer. In addition to stateless societies, primitive or embedded, we also observe many examples, ancient and modern, of private arrangement substituting for what are usually viewed as core functions of the state. Both the making and the enforcement of law, for instance, exist in private as well as public forms.

Commercial arbitration has been and is used to resolve a considerable proportion of legal disputes, both in contexts where it does and in others where it does not depend on enforcement by the state.

Contracts create legal rules between the contracting parties. Protection against crime is provided legally by Brinks guards and the manufacturers of burglar alarms, illegally—but in a form much closer to the form provided by the state—by the Sicilian Mafia. As recently as the 19th century, much of the circulating money of both Scotland and the U.

What we do not observe are modern anarchies in the sense of modern, developed, fully independent stateless societies. That fact is, in my view, the strongest argument against the practicality of a stateless society replacing a modern state. To see why the argument, while strong, does not entirely rule out the possibility of future non-primitive anarchies, it is worth considering a somewhat different set of hypothetical institutions from a perspective two centuries in our past Suppose that in 1800 some political theorist, inspired perhaps by the French and American revolutions, proposes a new and different form of political and social organization.

Its features include not merely a democratic government with all adult male citizens having the right to vote, already an unusual arrangement, but voting rights for women as well, along with complete legal equality between men and women. Its government taxes why do we need a legal system can we imagine countries without them spends between a third and a half of all income. The polity has no state supported religion, considerable diversity of religious beliefs, and a sizable part of the population believing in no religion at all.

To add additional, if implausible, interest to this imaginary creation, it has no serious restrictions on the sexual behavior of adult citizens, no legal and few social penalties for bastardy, and little more than token enforcement of either the stability or fidelity of marriage.

A well informed 18th century scholar might be able to find precedents for one or another of the features of this bizarre hypothetical—whether utopia or distopia could be a matter of dispute. He would, I think, have difficulty citing any past society that combined very many of them.

He would thus have about as good reason to reject as impossible what is now the dominant social and political system of the developed world as a modern scholar would have to reject the possibility of a future stateless society.

Theory In constructing a theoretical picture of a modern stateless society and using that theory to explore the possibility of future stateless societies, one faces two sets of problems that such a society must deal with. The first is how a legal framework for trade, contracts, human interaction could exist without a state to maintain it, and the associated stability problem—how such a framework could be prevented from collapsing into either chaos in one direction or a state in the other.

The second is how, without a state, various useful functions of current states could be provided—a monetary system, protection of rights, the production of public goods, including defense against foreign states.

Framework and Stability A legal framework has to solve the problem of creating and enforcing legal rules that will bind both parties to a dispute.

  • Charity is a way of providing aid that reinforces the hierarchical relationship between groups;
  • Similarly a private agency can, and private agencies do, protect those who pay them and not those who do not;
  • My preferred solution is to define rights in terms of the set of mutually recognized commitment strategies by which individuals constrain how other individuals act towards them, and to then define a government as an institution with regard to which those strategies do not apply, an institution which can violate what individuals view as their rights with regard to other individuals without setting off the responses by which such rights are normally defended;
  • While largely popular and indeed, often successful, in the past, the nature of modern labor and the shift in developed countries away from manufacturing makes syndicalism less popular than it has historically been;
  • Poor people, however, organizing to share resources as equals, are acting out of solidarity.

I sketched one possible solution over thirty years ago. In the system I then described, each individual is the customer of a private rights enforcement agency which, in exchange for an annual fee, agrees to arrange for his disputes with other individuals to be settled and the verdicts enforced.

It does so by contracting with every other such agency whose customers have any significant chance of interacting with its customers to specify, for each pair of agencies, a private court whose verdicts both agencies agree to accept and enforce. In the absence of a sovereign, what enforces the contracts between the agencies?

The answer is that they are enforced by reputation and the discipline of repeat dealings. An agency that adopts a policy of only abiding by court verdicts when they favor its customers will soon find no other agency willing to go to court with it.

Since violence is both more expensive and less predictable in its outcome than litigation, such an agency finds itself at a serious competitive disadvantage.

Life Without Law

In such a system, law is produced on the market by private courts, each of which seeks to create legal rules that the customers of the enforcement agencies will wish to live under. I have argued elsewhere that the incentives created by that system would lead to a more attractive legal system than what is or can be expected to be created by the incentives of those—judges and legislators—who create current law. My purpose here is more modest—merely to establish the possibility of an enforced legal framework without a state.

Would such a framework be stable? That depends in large part on whether the equilibrium of the market I have described contains few or many agencies. That, in turn, depends on the size of the market and the extent of economies of scale in the business of settling disputes and enforcing rights. If, in equilibrium, there are only two or three rights enforcement agencies, there is an obvious temptation either for them to merge into a government in order to improve their ability to exploit their customers or for the situation to devolve into civil war as one or more concludes that it can establish a monopoly by force.

If, in equilibrium, there are hundred such agencies in a territory similar to that of a modern state, with several sufficiently local to be available to the typical customer, then neither approach is likely to be workable. What determines economies of scale in rights enforcement?

Casual observation suggests that large police forces have no obvious advantage in cost of operation or quality of service than small ones. Perhaps more relevantly, the Sicilian Mafia, whose chief line of business is private rights enforcement, is made up of many small firms, not a few large ones.

There is one special factor in the rights enforcement industry, however. Firm A prefers one legal system, say one that permits capital punishment for murder.

  • Rich people donating money to charity makes poor people even more dependent upon the rich;
  • Further, there are societies in which law is not viewed as the creation of the state at all—including all traditional Islamic societies—hence where some use of physical force by the state is seen as illegal and some use by non-state actors as legal;
  • As a word of warning, there are predators in the anarchist movement.

Firm B prefers a different system, one that does not permit it. Each firm estimates the value to its customers, and from that the increase it can expect in its revenues, if it can provide them with its preferred legal system. We expect, along conventional Coaseian lines, that they will agree on the system that maximizes their combined benefit.

But while this provides a solution to the allocational problem—what legal rule will exist—it leaves open the distributional problem. Put differently, what is the starting point from which the two firms bargain?

The need for laws

The theoretical answer, I think, is that while allocation comes out of a bargaining game leading to an efficient legal system, distribution comes out of a prior mutual threat game among the rights enforcement agencies. Under many, although not all, military technologies, there are considerable economies of scale in warfare—large armies can not only defeat small armies, they can do so while inflicting larger costs than they receive.

Hence if the ability to bully other agencies, or resist bullying by other agencies, is a major part of what determines how well a rights enforcement agency functions, that might lead to substantial economies of scale which might make the system unstable. My guess is that the ability to use force against other agencies will not be an important element of what rights enforcement agencies produce in a funcitoning society of this sort, mostly because observation suggests a great deal of inertia in such mutual threat games.

Consider the obvious example of international relations, which one could argue have very much the structure I have described. We do not observe that national boundaries shift a mile or two in one direction or the other every time one country launches a new battleship or raises or lowers its military budget.

Nor do we observe that smaller nations routinely pay tribute to larger nations. If I am correct then, once the sort of system I have described is well established, the distributional outcome will be determined not by a current mutual threat game based on current abilities to employ force but by the result of such a game played out in the distant past. Given a starting point, the obvious equilibrium is one in which any bargaining among agencies takes the continuance of the existing terms as the default.

An agency that tries to use the threat of military force to unilaterally modify the rules in its favor is then seen as a threat to the other agencies which, in total, greatly outnumber it. The system should be stable, provided that the economies of scale in the business of rights enforcement itself do not go far enough to produce a market equilibrium with only a few firms.

Even if economies of scale in the application of force are not an important issue in an existing anarchy, however, they may provide a barrier preventing such an anarchy from coming into existence, since at that point threats of force are likely to play a much larger role. Why do we need a legal system can we imagine countries without them Substitutes for Public Production At a theoretical level, the problem of replacing useful government services with privately produced services comes down to the problem of market failure—of situations where individual rationality fails to lead to group rationality.

Familiar examples are the problem of producing a public good, such as national defense, basic scientific research or a radio broadcast, and the problem of dealing with externalities. It is often argued that since market failure means that some desirable goods and services will not be produced on the private market, they must be produced instead by the state.

This argument purports to both explain the existence of the state and justify it. There are two responses. The first is that, in many cases, an ingenious entrepreneur can find a profitable partial solution to the problem of market failure.

A radio or television broadcast, for example, is a pure public good in the conventional sense—the producer cannot control who gets it and consumption by one individual does not interfere with consumption by another. Nonetheless such broadcasts are routinely produced privately, paid for by the ingenious trick of combining a public good with positive cost of production and positive value to the consumer with a public good with negative cost of production and negative value and giving away the package: Basic research may be produced either as a source of valuable reputation for scientists, universities and firms or because those producing it will be able to appropriate some of the benefits through first mover advantages—the scientists who develop a new idea will understand it better and be better able to exploit it than others.

This is a point that has been explored at greater lengthy by Terence Kealey. It follows that while market failure on private markets will lead to suboptimal production, it may not, and frequently does not, lead to the complete failure to produce.