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Private Law

In a recent article Alex Velazquez treated us to his kindler, gentler side.  He used his (largely wasted) talents to describe his vision of a stateless society.  Although I agree that his suggestion is better than the State’s compulsory alternative, I think there are problems with Velazquez’s system.  However, I'll hold off on my critiques until Alex elaborates upon his proposal in subsequent articles (coming soon--yippee!).  Until then, I'll offer up my own ideas for public consumption. 

*  *  * 

First, I think everyone needs to scrap the idea of the mythical “law of the land.”  There doesn’t need to be a single set of laws binding everyone.  In any event, we don’t have it now, anyway.  The laws in each of the fifty states are different, and if you go to another country, forget about it.  Yet we go about our daily lives, and even visit and do business with foreign countries, without too much trouble. 

I believe that all actions in a purely free society would be subject to contract.  For example, right now it’s a crime to steal; the legislature says so.  So someone who hires me knows that if I steal from his firm, he can tattle on me to the government and they’ll beat my ass. 

But in a stateless society there wouldn’t be a legislated body of laws, nor would there be government courts or police.  Nonetheless, employers would still like some protection from theft by their employees.  So before hiring you, the employer would make you sign a document that said something to the effect of, “I promise not to steal from the Acme Firm.  If I get caught stealing, as established by Arbitration Agency X, then I agree to pay whatever restitution that Agency X deems appropriate.” 

We immediately see two things in this contract.  First, it is completely voluntary; any “laws” binding the employee have been acknowledged by him, beforehand.  Second, the existence of Arbitration Agency X ensures fairness and objectivity in any disputes. 

To see this, let’s suppose it didn’t.  Suppose that a big firm bribed the arbitrators at Agency X, so that lazy workers (who were going to be fired anyway) were (falsely) charged by the employers with embezzlement, and Agency X always ruled “guilty.”  Thus, the big firm could skim thousands of dollars off of its bad employees before terminating them.  And since the hapless employees had agreed beforehand to abide by the arbitration outcome, they couldn’t do much about it.  (An appeals process might be included in the arbitration procedure, but then the big firm could just bribe those judges, too.) 

But if you think about it, it’s easy to see that such behavior would be foolish.  Just because an arbitration agency ruled a certain way, wouldn’t make everyone agree with it, just like people complain about B.S. court rulings by government judges.  The press would pick up on the outrageous rulings, and people would lose faith in the objectivity of Agency X’s rulings.  Potential employees would think twice before working for the big firm, as long as it required (in its work contracts) that people submitted to the suspect Agency X. 

Other firms would patronize different, more reputable arbitration agencies, and workers would flock to them.  Soon enough, the corrupt big firm and Arbitration Agency X would suffer huge financial penalties for their behavior. 

In the same way, all aspects of social intercourse would be “regulated” by voluntary contracts.  Specialized firms would probably provide standardized forms so that new contracts wouldn’t have to be drawn up every time you did business with someone.  For example, if you bought something on installment, the store would probably have you sign a form that said something like, “I agree to the provisions of the 2001 edition Standard Deferred Payment Procedures as published by the Ace Legal Firm.” 

Under this system, legal experts would draft the “laws of the land,” not corrupt and inept politicians.  And these experts would be chosen in open competition with all rivals.  Right now you can go buy “definitive” style manuals for writing term papers, or dictionaries of the English language.  The government doesn’t need to establish the “experts” in these fields.  It would be the same way with private legal contracts.  Everybody knows the “rules” of grammar just like everyone would know what’s “legal” and what isn’t. 

Of course, one of the most basic stipulations in any contract -- whether entering a mall or living in a neighborhood co-op -- would be strong prohibitions on murder.  In other words all contracts of this type would have a clause saying, “If I am found guilty of murder I agree to pay $y million to the estate of the deceased.”  Naturally, no one would sign such a contract unless he were sure that the trial procedures used to determine his guilt or innocence had a strong presumption of innocence; nobody would want to be found guilty of a murder he didn’t commit.  But on the other hand, the procedures would have to be designed so that there was still a good chance that guilty people would actually be convicted, since e.g. people don’t want to shop in malls where murder goes unpunished. 

And, since all contracts (except possibly in very eccentric areas frequented by people who liked to live dangerously) would contain such clauses, one could say that “murder is illegal” in the whole anarchist society, even though the evidentiary rules and penalties might differ from area to area.  But again, this is no different from our current system (only some states have the death penalty, e.g.), yet no one doubts that “murder is illegal” in the current United States. 

*  *  * 

The beauty of this system is that the competing desires of everyone are taken into account.  The market solves this problem everyday, in reference to all other goods and services.  For example, it would be very convenient for customers if your local deli were open 24-7.  But on the other hand, it’s very tedious for its workers to be there such long hours.  So the market system of profit and loss determines the “correct” hours of operation. 

In the same way, we saw above how evidentiary rules would be determined under a system of private law as I’ve described.  Because people would be submitting themselves contractually to the rulings of a certain arbitration agency, the agency would need a reputation for objectivity and fairness to defendants.  But on the other hand, the owners of stores, firms, rental cars, etc. would want some means of restitution in the event of theft, and so the arbitration agencies couldn’t be too lenient.  As with the hours of a store’s operation, so too would the legal procedures be decided by the profit and loss test.  Maybe there would be juries, maybe there wouldn’t.  We can’t predict this beforehand, just as we can’t say a priori how many tricycles “should” be made this year; we let the market take care of it, automatically. 

*  *  * 

Of course, the real kicker with a contractual system is this:  How can people afford to pay these outrageous fines?  Granted, a guy might sign a piece of paper, pledging restitution to his employer if he’s caught stealing from him.  But suppose he steals anyway, and is found guilty by the arbitration agency, but he has no money.  Then what? 

Well, how does our present system of auto damages work?  Right now, if you sideswipe some lady, you have to pay her tons of money.  Or rather, your insurance company does.  (Light bulbs should be going off in your head by now.) 

It would be the same way with all torts and crimes under the system I’ve described.  An insurance company would act as a guarantor (or co-signer) of all of your contracts with various firms.  Just as a bank uses experts to take depositors’ money and efficiently allocate it to borrowers, so too would the experts at the insurance company determine the risk of a certain client (i.e. the likelihood he or she would violate contracts by stealing or killing) and charge an appropriate premium.  Thus, other firms wouldn’t have to keep tabs on all of their customers and employees; the firms’ only responsibility would be to make sure everyone they dealt with carried a policy with a reputable insurance agency. 

Under this system, the victims of a crime are always paid, immediately.  (Contrast this to the government system, where victims usually get nothing except the satisfaction of seeing the criminal placed behind bars.)  There would also be incentives for people to behave responsibly.  Just as reckless drivers pay higher premiums for car insurance, so too would repeat offenders be charged higher premiums for their contract insurance. 

And why would the person with criminal proclivities care about his insurance company?  Well, if he stopped paying his premiums, his coverage would be dropped.  With no one to underwrite his contractual obligations, such a person would make a very poor customer or employee.  People wouldn’t hire him or trust him to browse through a china shop, since there would be no “legal” recourse if he did anything naughty.  So in order to get by in society, it would be extremely useful to keep your insurance coverage by always paying your premiums.  And that means it would be in your great interest to refrain from criminal activity, since that’s the way to keep your premiums down. 

Admittedly, such arguments seem fanciful.  But they are no more farfetched than the modern credit card system.  People have huge lines of credit advanced to them, sometimes only by filling out a form, and it is extremely easy to engage in credit card fraud.  If you run up a huge bill, you can simply refuse to pay it, and in most cases nothing physical will happen to you.  But most people don’t behave in such an irresponsible manner, because they don’t want to ruin their credit history.  If they do, they know they’ll forever more be cut off from this wonderful tool of the capitalist society.  

*  *  * 

But what about the really tough cases?  What about the incorrigible bank robber, or the crazed ax murderer?  First, keep in mind that wherever someone is standing in a libertarian society, he would be on somebody’s property.  This is the way in which force could be brought to bear on criminals without violating their natural rights. 

For example, the contract (and even if it weren’t literally signed every time you visited, it would be understood implicitly) of a movie theater would have a clause saying something like, “If I am judged guilty of a crime by a reputable arbitration agency [perhaps listed in an Appendix], I release the theater owner from any liability should armed men come to remove me from his property.” 

So we see that it is not a contradiction to use force to capture fugitives in a completely voluntary society.  All such uses would have been authorized by the recipients themselves beforehand.  (And of course, if someone tried to simply barge onto another’s property, without agreeing to any contractual obligations, then the owner would be perfectly justified in using force to repel him.) 

But where would these ne’er-do-wells be taken, once they were brought into “custody”?  Specialized firms would develop, offering high security analogs to the current jailhouse.  The difference is, the “jails” in my system would compete with each other to attract criminals.  In other words, no insurance company would vouch for a serial killer if he applied for a job at the local library, but they would deal with him if he agreed to live in a secure building under close scrutiny.  The insurance company would make sure that the “jail” that held him was well-run; if the person escaped and killed again, the insurance company would be held liable, since it pledges to make good on any damages its clients commit. 

On the other hand, there would be no undue cruelty for the prisoners in such a system.  Although they would have no chance of escape (unlike government prisons), they wouldn’t be beaten by sadistic guards.  If they were, they’d simply switch to a different jail, just as travelers can switch hotels if they view the staff as discourteous.  Again, the insurance company (which vouches for a violent person) doesn’t care which jail its client chooses, so long as its inspectors have determined that the jail will not let its client escape into the general population. 

*  *  * 

There are plenty more issues that need to be resolved, but I’ll leave those to future essays.  Let me add that the ideas above are certainly not original with me, although most other anarcho-capitalist authors suggest that the insurance company would protect its clients’ rights.  In contrast, under my system an insurance company pledges to compensate anyone who is harmed by its clients.  Both approaches might be used in a real anarchist society, depending on the specifics. 

Of course, feel free to email me with any problems or questions you have with my suggestions.  Or, better yet, write up your thoughts a bit more systematically and submit them to Velazquez for publication.  That’s the purpose of anti-state.com, folks. 

Oh, one last thing:  Please don’t email me and say, “Your system wouldn’t work,” unless you can tell me in what sense our current government legal system “works.” 

August 18, 2001


Bob Murphy is an oppressively cocky graduate student in New York City. He is a columnist for LewRockwell.com and The Mises Institute, and has a personal website at bobmurphy.net. He is also Senior Editor for anti-state.com

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