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Monopoly Courts and Police

Richard Posner, the author of The Economic Analysis Of Law

The structure of a libertarian society which is likely to evolve out of the voluntary interactions of private individuals would be extremely complex and no one can predict it accurately. In the words of John Hasnas: “So, what would a free market in legal services be like? I am always tempted to give the honest and accurate response to this challenge, which is that to ask the question is to miss the point. If human beings had the wisdom and knowledge-generating capacity to be able to describe how a free market would work, that would be the strongest argument for central planning.” Yet, it is possible to draw a rough outline through logical reasoning and our knowledge of similar systems in the past and present. It should be noted that this is just a possibility and the exact structure of a future libertarian society might be different and much more complex. Insurance companies would either sell defense or maintain proximity with Private Defense Agencies (PDAs). If we both are customers of Reliance Defense Company, and a dispute between us occurs, the dispute would be submitted to the court of Reliance Defense company, or a court patronized by Reliance Defense Company. The decision of the court would be respected. If you are found guilty, the Reliance Defense Company, or its Insurance Company would compensate me for the damages done by you. It will be then the task of Reliance Defense Company to get back their money by putting you in a debtor workhouse (prison) or by garnishing your wages. I, the Defense Company, and the Insurance Company would be in a position of inconvenience due to the damages caused by you. So, it would be in the rational self interest of Defense and Insurance companies to not deal with (Insurance companies might rate their insurance premiums up in some cases) you, or other people with criminal tendencies. If a person doesn’t have insurance, no sane person would deal with him in any manner, as they won’t be able to claim compensation in case a dispute occurs. Almost everyone would have Insurance under anarchy, as without Insurance, one can’t get a job, rent a house, buy a car, travel through a private road or get into any other contractual situation.

In the case mentioned above, If I am a customer of Reliance Defense Company, and you are a customer of Tata Defense company, our dispute would first be set for arbitration in the court of the plaintiff (I)-which means: a court of, or patronized by Reliance Defense company. If the defendant (You) is found innocent, the matter has come to an end. If you are found guilty, then the arbitration would run in the Court of Tata Defense Company. If that court too finds you guilty, you will be punished. If it finds you innocent, the arbitration would move to an appeals court. The decision of the appeals court would be respected. If a person (defendant) refuses arbitration, the arbitration would be held in the court of the plaintiff, and the decision would be binding. So, a person who didn’t commit a crime will not refuse arbitration in normal cases. If he disagrees with the decision, he can take the case to his court, or a mutually consented appeals court. It is rational to assume that if the defendant and the plaintiff are customers of different Defense Companies, these Companies together might decide the court in which the arbitration would run. The courts would try to be as honest and objective as possible, as their profits depend on the number of cases they receive for arbitration. People won’t deal with dishonest Insurance companies, or their customers, as no sane person would want to be taken advantage of. So, a dishonest Insurance company would soon find it deserted by almost all its customers. An Insurance company which patronizes poor courts too would be soon deserted by its customers.

Wouldn’t Defense Companies battle?

Battles could be ruled out for two reasons. 1) Wars are costly and would result in high Insurance premiums. Most customers would desert Insurance Companies with high premiums. 2) People won’t deal with the customers of warring defense agencies as they would lose in any case. As of it, the customers of the warring agency would be forced to patronize another Insurance company, if they want to get into contracts with other people. A court too should be honest if they want more cases handed over to them. What if a rich person bribes the court of Insurance company? If that is the case, most people won’t use those courts and Insurance companies. Nothing like that happens in the case of Government courts. People are forced to use them, even if they don’t trust them.

Do Anarchists assume a change in human nature?

No change in human nature is assumed here. We, libertarians don’t take a rosy view of human nature. We see human nature rightly, and admit all its flaws. Three things have to be pointed out-1) If you believe human nature is flawed, you have to admit that the politicians and bureaucrats chosen by these flawed creatures too would be of that sort, and there would be no excuse for state action. 2) A change in human nature is not necessary for libertarian anarchy to work. 3) People with power lust are more likely to rise to the top under statism. The state attracts all kinds of rascals. What libertarian anarchy does is that it leads to a system in which criminal acts are hard to perform. It also punishes those who resort to such acts in a just manner. Under the present system, a judge has no financial incentive to be honest and objective. He has only a moral incentive. Under anarchy, he would have both financial and moral incentive. Ask yourself which system will deal with criminals better.

Why do I want to impose anarchy on people against it?

Some argue if people don’t want liberty, imposing it over them would be violating their freedom. If you tell a thief to not rob from your house, will you be imposing your views on him? If someone takes your money by force, gives you stale food, forbidding you from buying food from anyone else, is that right or wrong? If you prevent him from doing so, will you be imposing your views on him and hence violating his freedom? That precisely is what the Government does. It forcefully takes money, gives poor quality defense, and forbid us from buying the service from private organizations.

Was anarchy put into practice anywhere?

It is true that pure Anarcho-Free market was never put into practice anywhere. However, that can’t be an argument against anarchy. A person who invents an electric generator doesn’t have to prove that there were electric generators in the past. A new invention, innovation or theory is something which crushes all existing conceptions. It is unprecedented. I think this should be obvious and it makes no sense to argue against it.

Isn’t the Government a neutral body and is more likely to be objective?

The Government is not a neutral body. Everyone has biases and prejudices, and Government judges are not exceptions. As the Tannehill’s point out, they are likely to be biased in favor of the Government. It is easier to bribe a Government judge, politician or bureaucrat and get ones things done. They have nothing to lose. They don’t have incentives. There is no strong reward and punishment mechanism in the system. There are no profit-loss calculations. But, a private judge loses his reputation, profits and eventually his job if he is not honest or Objective.

Won’t Anarchy lead to gang warfare?

A classic case of such anarchy (and gang warfare) cited was Iraq, but such arguments do not hold much water. Don’t forget the US presence in the case of Iraq. The same was said of Sicily. But Italian Government has an influence there. Such arguments are as valid as saying that violence will happen in drug and liquor industries –which obviously are a result of Government coercion and interference. Gang warfare and takeover of mafia (Ayn Rand raised such an argument) can happen only if there is a coercive atmosphere. A more cooperative system is in Somalia, which is stateless. There is much order there after the collapse of state, and it showed great improvement in almost all development indicators. It is not an utopia, but people are better off without a state.

Is there any empirical evidence to support the viability of Anarcho Free market?

Anarcho free market was not practiced in most parts of the world for most of the human history. However, there were societies which were really close to Anarcho-Free market.. Such a system has worked in Iceland, Celtic Ireland, American old west, British colonies in North America, Rhode Island, Albemarle, and Pennsylvania.

If you want to reject anarchy as it was never practice everywhere, you will have to reject minarchy too. Absolute minarchy was never practiced anywhere. Minarchists believe in a free banking system and gold standard. They will have to reject both as there was never a fully consistent gold standard or absolutely free banking in the past. I have asked this question to several minarchists. They were not willing to be consistent in their positions. What matters is logic, not empirical evidence. In Economics, facts don’t prove or disprove a theory.

PDA’s will become a state.

If you fear the possibility that a PDA will become a state, what reason there is for you to support the state? You are in the position of someone who supports a Government monopoly in the fear that a private firm is likely to become a monopoly. This again, is something which was refuted many times. You always have the option of stop patronizing such a PDA.

PDA’s have an option of initiating force which they might use against its customers. Why do I think that PDAs will not resort to force? Firstly, I don’t think they will never resort to force. That’s a remote possibility. But, there is too much evidence, that if left to themselves, people will find ways to resolve their disputes peacefully, as they tried to do in many historical cases in the past. There is even a book “Order without Law’, which explains how people settle their disputes peacefully without resorting to law. What anarchy does is to make co-operation and respect of law profitable. There are of course, irrational people who don’t care for long term profits. But, such people will exist even in a Government run society. The difference is that under Government, they profit financially from their irrationality and corruption. Under anarchy, they lose. There are several reasons why under anarchy, PDA’s are not likely to resort to force 1) Force is non-productive and costly. 2) It will alienate customers, who find that no one wants to enter into a contract with them. 3) Using force will result in high insurance premiums for customers, which will further alienate them. 4) One can always look at the present world. Legal conflicts between ordinary individual citizens usually don’t result in wars between nations even though Governments can externalize their cost of aggression. So, how likely is it that PDA’s will do it when they have no way of externalizing their costs?

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