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March 26, 2007 | by  | in Opinion |
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Polycentric Law

In last week’s article we demonstrated that freedom and democracy are really antonyms, not synonyms. Democracy is the means by which politicians with special interests fool the people, who don’t know better because they’re rationally ignorant. This week we will demonstrate that ‘law and order’ are really two different things, and present our vision of a society based around radical capitalism.


Even free-market ideologues such as Milton Friedman believed that one of the justifiable roles of the government was the creation and enforcement of law (the other was providing for national defence). Milton Friedman was right that law is a necessity – but it took the next generation of Friedmans to realise that law can be and is created in a private market. David Friedman presented his ideas on how a truly free society would operate. The society he envisaged has been called many things: anarchism, anarcho-capitalism, radical capitalism, market anarchism, and polycentric law. We prefer calling it ‘totally awesome.’

Imagine that tomorrow we abolished the state. There were no police and no courts. The first response is that life would be chaos; that no one would know what they could and couldn’t do; that it would be a war with everyone fighting everyone else. The second response is that as individuals we have a need for standards and rules. We also have a need for the enforcement of these rules. In the absence of government provision, private institutions (private protection agencies and private arbitration agencies) would fill the role of the government in exchange for money. We will outline how this will work, then deal with some common concerns before discussing the benefits of such a system.

Roger, a member of the ‘Private Defense Forcez’ protection agency, steals Rangi’s wallet, a member of the ‘Protect R Us’ protection agency. ‘Protect R Us’ find Roger on the street with Rangi’s wallet and demand he return it. He says no and that if they forcibly take it then he will call ‘Private Defence Forcez.’ As Friedman notes, the “stage is set for a war.” But the costs of war are enormous. A war may result in many deaths on both sides. That’s wasted training, wasted men, wasted equipment – and will result in even higher wages to cover for the increased risk. Instead, it is extremely likely that ‘Protect R Us’ and ‘Private Defence Forcez’ will agree to settle the dispute in a private arbitration agency – ‘Da Cisions.’ In fact, given that many disputes will arise between clients of private protection agencies, they will most likely have contracts before disputes arise which determine which private arbitration agency to use.

There are common criticisms of this system, which we will turn to now.

The first is that “every one needs to live by the same set of rules.” This is not true. We live by a different set of rules than the Japanese, yet we don’t go to war with the Japanese every time we disagree with them. Consider what would happen if differences arose between certain laws and punishments.

Let’s say that I supported the death penalty as a punishment for murder, while you think the death penalty is wrong. If I value the death penalty at $500, and you value not having the death penalty at $800, then all you need to do is compensate me anywhere between $500 – $800 and we’re both better off (and nobody gets hurt). More generally, different legal systems can, and do coexist, with the ultimate law in individual circumstances being decided by the most valued rule.

The second is “that would never happen.” Wrong again. It already does. All over the world individuals are sitting in the rooms of private arbitration agencies settling disputes without governmental interference. There’s no backlog of cases as there are in public courts. There are also millions of private security agencies providing security guards to businesses, individuals, apartment blocks, and gated communities. In fact, England had no public police force until the 1870s.

So why do we want it all to be spent privately?

One major benefit is that arbitration services get paid to be fair. Any arbitration agency that continually gets it wrong, or accepts bribes, goes out of business. One party may want to take the dispute to a biased tribunal, but it seems unlikely that the other party would agree to that.

If you’re sitting there thinking that the High Court got the Rickards case wrong, would you choose to take your disputes to that court? No. When courts are private, there’s an incentive to get things right – because that increases your number of clients. Any court that fails the test of the market goes out of business. Public courts never go out of business – the Court of Appeal never gets liquidated for making mistakes.

Another advantage is that the person who values his set of rules and punishments the most gets the case tried the way he wants. The example of the death penalty above shows that the voluntary trade over crime and punishment result in both parties being happy. Where one system is designed to suit all, some legal systems lose out. If the Maori think it unfair that the current justice system is dominated by ideas of Pakeha justice, then the situation would only be reversed if the current system was changed to reflect Maori ideas. However, if the decision is made in the world of private law, the person who values their system the highest will be favoured in that circumstance. This analysis holds true for areas of law not applicable to all citizens – for example, marine law. Marine law is irrelevant to people living away from the sea so there is little reason for them to subsidise the costs of marine law.

More generally, the major benefit of private law is that a better law would defeat a bad law. Currently only a special interest in law will get legal favours at the expense of every one else. If we were all paying for our law, then this incentive would disappear. The intelligent observer may realise that there is nothing about this system which necessitates ‘freedom’; nothing which ensures that, for example, drugs would be legal. When they must meet all the costs, individuals value keeping their freedom more than others value taking it away.

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