As I said in yesterday’s introduction, this series is going to be a bit random and haphazard at first. There will not be a particular order, either of topics or of the challenges addressed within each topic. Once I have covered everything, I will recast it all into a more organized resource. (All of this will take many months, so I ask for your patience.)
In the meantime, I will just fly by the seat of my pants. I am going to go through some of the major works on the subject of voluntary order, glean all the wisdom I can, and add thoughts of my own. These will be interwoven together, though obviously I will note when I directly quote someone. I will begin with the book I happen to be reading now: The Market for Liberty, by Linda and Morris Tannehill.
Please ask questions and present your challenges. Even if these represent issues I will tackle down the road, I want to hear them whenever you have them.
Private Arbitration
Many of the books in this field begin by laying out a case for how disputes can be adjudicated through purely private arbitration, without the use (or threat) of government courts.
Two important preliminaries:
Private arbitration is used successfully by businesses and disputants across the globe now. The concept and systems thereof are already in place and functioning—so we know it works. Many businesses prefer private arbitration to slow, inefficient government courts. Really, then, we only need to demonstrate two things:
that private arbitration (without any government) is better and more desirable, and
that private arbitration can still work even if there is no threat of government enforcement of decisions in a last-resort case where a disputant refuses to abide by the decision of a private arbiter.
Both cases will be made only incompletely here, but it will be a start. We will be returning and adding to this topic in future installments.Remember also the admonition in the introduction: Do not compare these possibilities to the sanitized, brochure version of what we imagine government to be, but rather to the way things actually are. Disputes are not perfectly arbitrated under, or by, government. There are plenty of failures of the system: unjust and unfair rulings, unresolved cases, and crippling delays and inefficiency.
In both cases, then, we are considering what actually exists, not the stylized ideal that proponents of statism want us to pretend exists.
Q: Government judges are impartial. How can we trust private arbiters to be impartial, given that they are subject to market forces?
This very common objection is wrong on multiple levels:
Government judges are not impartial
and
Market forces make private arbiters better.
First of all, no one is purely impartial. All people are biased in one way or another. Personal, political, philosophical, and other biases will exist in each individual person, whether they are working for government or a private agency. So what we really want to know is if there are differences in how each might behave, based on the incentives associated with their positions:
A government judge is paid by tax dollars. Those paying him rarely know anything about how is is performing in his job, and he is going to get paid either way.
A private judge is paid by customers. If he has a reputation for just, wise, and efficient adjudication of matters of dispute, he will attract more customers who want to use his services.
A government judge is either elected or appointed.
The idea that elected judges are beholden to the voters sounds good in theory, but is rarely and barely true in practice. Voters know little of judges’ day-to-day activities, and incumbency re-elect rates are high either way. A cause célèbre is generally required to produce sufficient voter wrath to overcome ignorance and inertia.
Appointed judges are beholden to those who appoint them. This does not make them impartial—quite the contrary.
All government judges are ultimately government employees, and are thus partial towards government. When a government judge hears a case in which government is one of the parties to the dispute, it is a situation of government policing itself. It is naive to believe that this does not, in the aggregate, produce partiality towards government and more rulings in its favor. (You are wronged by government and you must go to government to ask it to punish government. What is wrong with this picture?)
A private judge is hired—by an arbitration firm, private clients, or both. The incentives to do a good job are far greater. His reputation, pay level, and continued employment all depend on being the best arbiter he can be. With government judges, we roll the dice and hope we get one with skill and personal integrity. With private judges, we hire ones whom we know have these characteristics.
Private arbiters must attract customers. Operating in a market does not make private arbiters worse; it forces them to be better. In the case of government judges, operating as part of a government monopoly, few of these incentives exist.
Q: Without a single court of final appeal, rules that force people to use that court, and the ability to force people to abide by its decisions, how can disputes be solved?
This argument rests on at least two assumptions:
Assumption 1
That disputants cannot choose the courts they want to use in the event of a contract dispute, including any court of final appeal—that they must be forced to use particular courts.
Why assume this? Disputants choose their own private arbitration courts all the time (among other reasons, to avoid the hell of trying to get disputes through the slow, inefficient slog of government court system). Which private courts they will use is generally stipulated in contracts before any dispute arises.
Imagine that Widgets, Inc. and Acme, Ltd. want to do business. In their contract(s), they agree ahead of time to use a particular arbitration agency in the event of a dispute. They agree to some number of agencies of appeal, including a court of final appeal. They agree to abide by any decisions made.
This is done now, and there is no reason to believe it would not be done—and done even more scrupulously—in the absence of government courts. The idea that these courts must be forced upon them (and that they must be subjected to the randomness of which judges they get) is simply not a realistic objection.
Assumption 2
That there must be an entity with the power to compel disputants to submit to arbitration and abide by decisions made by the arbiter—that no incentives to do so exist other than forcible compulsion.
Since many entities can and do use private arbitration and abide by its decisions now, the statist argument must be that the only reason they do so is because the existence of a government court of final appeal and enforcement forces disputants to abide by the decision.
This ignores the power of market and social forces: stigma, reputation, ostracism, etc. In the absence of involuntary governance, these would play a significant role in convincing parties to participate in and abide by the decisions of arbitration. People who do not will immediately develop a reputation for being shady and unreliable, and no one will want to do business with them. (Arbitration, insurance, and other agencies would no doubt keep and share records on unreliable players, the way collection and credit agencies do today.)
This is not just some hypothetical assumption; this is how social and market relations function today. We also have examples in history where these mechanisms allowed a private law system to function for hundreds of years:
It may be objected that arbitration only works successfully because the courts enforce the award of the arbitrator. Wooldridge points out, however, that arbitration was unenforceable in the American courts before 1920, but that this did not prevent voluntary arbitration from being successful and expanding in the United States and in England. He points, furthermore, to the successful operations of merchant courts since the Middle Ages, those courts which successfully developed the entire body of the law merchant. None of those courts possessed the power of enforcement. He might have added the private courts of shippers which developed the body of admiralty law in a similar way.
How then did these private, "anarchistic," and voluntary courts ensure the acceptance of their decisions? By the method of social ostracism, and by the refusal to deal any further with the offending merchant. This method of voluntary "enforcement," indeed proved highly successful. Wooldridge writes that "the merchants' courts were voluntary, and if a man ignored their judgment, he could not be sent to jail…. Nevertheless, it is apparent that … [their] decisions were generally respected even by the losers; otherwise people would never have used them in the first place…. Merchants made their courts work simply by agreeing to abide by the results. The merchant who broke the understanding would not be sent to jail, to be sure, but neither would he long continue to be a merchant, for the compliance exacted by his fellows … proved if anything more effective than physical coercion."3 Nor did this voluntary method fail to work in modern times. Wooldridge writes that it was precisely in the years before 1920, when arbitration awards could not be enforced in the courts
We see similar examples in maritime history. We know that social forces can regulate voluntary human interactions, because they did exactly that for centuries without any oversight or initiation of force by any government.
Is it possible that some people might still be scofflaws? Sure. There are also plenty of scofflaws now.
Might some private enforcement mechanisms also be necessary? Yes, and such mechanisms are absolutely possible, but this piece is getting long, so we will have to focus on those in another installment. In the meantime, though, as the Tannehills trenchantly note: “It’s hardly necessary to institutionalize aggressive violence in order to deal with aggressive violence.” There are other means.
Indeed, one should ask oneself some deep questions on this subject:
Why do we assume that initiated force (the legal force of government) is the only way to make people behave themselves? If we’re that rotten, wouldn’t the institution of government reflect that rottenness? And conversely, if we are good enough to create good governments, why would we not be good enough to create systems that create a good voluntary order? We’re either rotten or we’re not.
Why assume that people cannot choose their own courts of arbitration, including a court of final appeal? Why assume that all courts must be the same for all people? Why can’t different people make different choices? Why is it better to have one court forced upon everyone—a court that has no market incentives to deliver good justice—rather than giving people a choice of arbitration services that are competing to offer them the best service at the best price?
A scattering of random notes:
Market forces also allow for specialization: arbitration agencies would arise that specialize in resolving particular kinds of disputes or work in particular fields. This allows for far greater service than the one-size-fits-all government system provides, or can provide.
Citizen juries arose, and are desirable, as checks against government overreach (though sadly, jury nullification has ben largely crushed by government judges today). In the absence of government, though, having arbiters be trained professionals becomes more desirable.
Could private arbiters be bought off? Sure. But juries are also bought off now, and it would be easier for trained professionals to spot shenanigans in their fellows than for amateur jurors to do so.
Contract insurance creates another layer of protection (and another market opportunity). Insurance agencies might cover contract defaults and then subrogate from the liable party. They might work through the liable party’s bank or employer to garnish money or wages. These entities might have clauses in their banking or employment contracts that allow for this, on the grounds that doing so attracts a more replicable type of client or employee, thus lowering their costs and increasing their productivity.
Arbiters would have an interest in really trying to settle cases and keeping both parties happy, as opposed to handing down rulings from on high. The whole ethos is different!
(Again, I apologize for the somewhat scattershot approach here. This is an organic process, and will have to be for a while yet.)
There is a lot more to discuss, but in the meantime, can you feel it? Just those first little glimmers of awakening to the fact that we do not need to be ruled?
If not, give it time. Evolution is coming.
Years ago, we were putting a sizable addition on our house. I was telling a friend, with some chagrin, that I didn’t appreciate the inspections. He pointed out that all the requirements were very sensible. I said, Yes, but do the inspectors themselves have any vested interest in making sure my house is safely and properly built? The obvious answer is No. They are paid a salary that they may or may not consider adequate. They could easily be bribed by unscrupulous builders; in fact I had heard of inspectors who would sign off on construction if they simply drove by and saw that a house was standing. --My lefty friend didn’t get it.