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A Convincing Schematic for Market Anarchy

The market can handle law too. Here’s how.

Over at C4SS’ Stateless U in ATP 102, I read and critiqued Chapter 1 (“Private Law”) of Robert Murphy’s “Chaos Theory. [PDF]”

In “Private Law,” Murphy takes aim at the mistaken belief that without government there is no law. The web of voluntary arrangements we call “the market” can handle law, just as it can handle even more urgent needs like food, clothing and shelter. Even under government now there are many different lawmaking authorities and sets of law, Murphy points out. So this is not an especially strange or exotic idea. In fact, the market can do it more efficiently and produce better justice, he claims. Murphy’s argument is succinct and convincing. His plan for voluntary law is straightforward but capable of scaling to enormous complexity.

Under Murphy’s proposed system of private law, there would be no laws promulgated by legislatures, judged by state courts or enforced by state police. Instead, all law would arise from voluntary contracts and apply only to those individuals in those contexts where voluntary agreement has been secured. For example, in order to “outlaw” theft in the workplace, employees would sign contracts with their employers agreeing not to steal. It’s as simple as that.

All of what we now refer to as laws would be made effective in the same way. In order to buy something, there would be a contract. Murphy argues that these contracts would be standardized and simplified. Legal experts would compete to write the best ones, he says. In order to rent an apartment, there would be a contract. In order even to enter a friend’s house or travel down the road, one would have to first sign a contract covering all the eventualities of that situation.

Should a claim of theft arise, the case would be heard by the private arbitration agency named for that purpose in the appropriate contract. But what if the agency abuses its authority or decides a case incorrectly? Without a state to cartelize the media, word would get out. Without a state to bail out the arbitration agency, it would lose business. In other words, market action would keep bad actors in check.

Murphy posits that individuals would engage insurance companies as co-signers for their contracts. In this way, any restitution would be paid immediately to victims, just as life or car insurance payments happen today. This would help make victims whole, unlike the state justice system where damages payments are not guaranteed. It would also provide a strong web of incentives against criminal activity. Violate a voluntary contract and your insurance rates will go up. Similar to the credit card system now, Murphy argues, the very existence of this surety system is so useful that people would keep paying in order to not lose access to it.

Violent criminals, instead of going to state prison on the public dime, could be granted continued insurance coverage on the provision that they reside in a high security facility. There the insurance company would have a strong incentive to ensure they harm no one, since they would be liable for any crimes. Since the prisoners are paying customers, there could be competition among prisons, providing an incentive for more humane prison conditions. What’s more, even those accused of violent crimes who escape formal condemnation on a legal technicality could still be the subject of corrective measures by their insurance company.

To those who worry about individuals possessing bazookas, nuclear weapons or weapons of mass destruction, Murphy proposes a clever solution. The insurance companies, taking into account the risks posed by simple possession of these arms, could make ownership cost prohibitive. This is an entirely voluntary and effective solution. Those with the financial capability to actually keep these weapons would have the most to lose should they be abused.

While Murphy’s argument is very persuasive, even elegant, there is something very dark about finding oneself at the mercy of an insurance company. Insurance companies have a reputation for bureaucracy, one of the most hated aspects of government. Admittedly, without government, insurance companies would likely have less need for bureaucracy and would experience inexorable incentives to simplify their operations. Murphy convincingly argues that insurance companies could not morph into a new state again because there would be no tax collection mechanism or central authority to occupy. Also customers, through market action, could bankrupt a misbehaving firm.

Submitting oneself to a certain, single arbitration firm also sounds dangerous. If a misdeed occurs, it could take some time before it is corrected. Meanwhile, one might be wasting away in a secure facility, in financial ruin, unable to afford the access to the outside world needed to correct the injustice. Nightmare scenarios, of course, are possible in any society, with any political arrangements.

Murphy’s system of private law is unquestionably better than what we have now. The incentives are right. The means are voluntary. No system will be perfect but this one is simple, elegant and promises to be effective.

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By George Donnelly

I'm building a tribe of radical libertarians to voluntarize the world by 2064. Join me.

9 replies on “A Convincing Schematic for Market Anarchy”

The question becomes: are there any currently operating, active PDAs/RDOs in the geographical area claimed as a possession by the UNITED STATES OF AMERICA, Inc.?

No, really, I’m asking. I’m in the market since anyone who isn’t currently insured by such a free-market, private organization is officially an Outlaw. They’re “outside the law” and therefore not protected by the only valid law ever known. This is nothing new; these used to exist extensively. They’ve been pushed out by the corporate “governments”. We will only get them back when a market has made it worthwhile for them to form and fight. I’m a customer waiting for a vendor. If you know of any vendors, I’d love to hear about it!

There are many arbitration providers. They have an association. I’ll name one private defense agency: the University of Chicago police. Most major universities have them.

But, no, sorry I don’t know of any vendors for you. Thanks for commenting. :)

so my understanding=no laws, crimes simply written in contracts
e.g
–workplace contract — no stealing
–trailer park community — no drug dealing, no vandalizing…etc, all part of rental contract.

Problem: violent crimes involving two towns or groups, and mob violence. Say, girl from Town A is raped in Town B. Town B doesn’t punish rape very harshly, and the girl’s attacker is given a light sentence. Town A serves death penalty for rape (or maybe, they simply find this one deserving of death). They want to charge in, kidnap attacker, and kill him. How do you account for this in your contract system?

1. Say maybe, Town A is responsible for knowing the laws of other towns and not let girls stray into the rape-easy Town B.
–rebuttal: but, say the girl and other women have to cross into Town B daily for food shopping or for work. In this case they couldn’t afford to stay away from Town B, which causes conflicts. And this kind of situation, where property/political borders do not match human traffic, is 100% likely.

2. You address the dispute by going to a higher court.
–rebuttal: What if Town A or Town B do not belong to a higher judicial system, due to disagreement on principles? they will refuse to go to a higher court. What if a higher court is unable to be assembled in time to placate the mob? Any number of reasons could make a region/nation (I hesitate to use the word since nation’s should exist in this scenarion, but ‘continent’ seemed too big) judicial entity inneffective.

If higher court is unavailable do you simply expect pepole to accept the decision of the local judge? Say, the crime has to be judged based on where it occurred, and that is that? The only way one group will accept the judgement of another group it disagrees with, in cases of life or death involving members of both groups, is by threat of force.

This is the basic problem of tribalism.

In what ways do you see a volunteer-syndicate world resolve violence and power issues like this?

Say, girl from Town A is raped in Town B. Town B doesn’t punish rape very harshly, and the girl’s attacker is given a light sentence. Town A serves death penalty for rape (or maybe, they simply find this one deserving of death). They want to charge in, kidnap attacker, and kill him. How do you account for this in your contract system?

First off, in a stateless society, it would be very rare for a town (government) to make laws. After all, if there was a government it wouldn’t be a stateless society!

Second, before a person transited into another person’s property they would have to agree to be bound by that property owner’s rules. A contract of sorts would be signed. It wouldn’t be as clumsy as a long legal document and a formal signing. It would probably be as simple as the contract on the back of parking lot receipts.

Thus the rapist would have already agreed to be bound by this other area’s rules. If the girl’s friends want to bust in and execute some mob justice, they have to risk their lives, reputations and fortunes to get past all the security measures on all the properties they have to transit to get to this rapist.

If the violate the contracts they signed to do this, they will owe restitution to all the property owners. The cost would be staggering.

Not to mention that in a stateless society, restitution would be more likely to prevail over the punishment model. And legal uniformity is more likely since dramatic differences in rules among property owners can raise the costs of doing business. It introduces uncertainty and risk which has to be accounted for in insurance agreements.

That’s probably a briefer answer than you wanted but your question is huge and I don’t have unlimited time. I’ve also addressed some of these issues in other posts or you can find answers via google search. Feel free to followup with more questions.

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