Order Without the State: The Possibility of Market-Provided Law and Order
by Andrew Chamberlain
June 8, 2000
Much of the law and economics literature on legal systems and social order falls within a tradition best described as “legal centrism.” Ellickson (1991) describes this approach as, ”. . . the belief that governments are the chief sources of rules and enforcement efforts [in societies]” (Ellickson, 1991, p. 138). This view holds that “anarchy”—defined as the absence of formal government in society—is equivalent to chaos and social disorder. Thomas Hobbes pioneered this approach to law, believing that social order is impossible without a central coercive enforcer. This view of law as being a service necessarily provided by the state is supported by the fact that the provision of law and order has “public good” dimensions (Barzel, 2000, chapter 9) requiring state intervention to achieve an “efficient” level of protection and rights delineation.
However, recent empirical work has cast some doubt on the claim that the formal state is necessarily the exclusive source of law, and that the public good dimension of law and order cannot be solved in the absence of a formal state (Anderson & Hill, 1979; Benson, 1989; Benson, 1990; Benson, 1998; Ellickson, 1991; Hayek, 1973; Barnett & Hagel ed, 1977). There are a number of historical and contemporary examples of elaborate non-state legal systems that have developed and functioned remarkably well without any recourse to a state protector.
Many economists and legal scholars have ignored the role of these non-state legal systems in maintaining social order. Having theoretically identified law and order as a public good, they have delegated its provision to the state on a priori grounds, without having seriously examined how law and order has been provided for in varied institutional contexts. Just as Ronald H. Coase pointed out regarding economists’ mistaken use of lighthouses as an example of a public good requiring state provision (Coase, 1974), generalizations about the role of the state in providing law and order, “are not likely to be helpful unless they are derived from studies of how such activities are actually carried out within different institutional frameworks.” Similar to lighthouses, just because law and order has public good dimensions does not necessarily mean that markets will fail to supply it. The goal of this study is explore empirically how law and order has been provided by markets in varied institutional frameworks in the absence anything we would call “government.”
The remainder of the paper is divided into two parts. First, I will clarify the meaning of “law” and ” the legal system.” I then examine three separate examples of legal systems that developed and functioned in the absence of any state protector: Among the Yurok Indians of Northern California, on the nineteenth century Western American frontier, and in Anglo-Saxon England before the eleventh century. In these case studies, emphasis will be placed on the symmetries between these and other non-state legal systems.
In the second part of the paper, I give a qualified answer to the question, “How did law and order in American society come to be such a state-dominated enterprise?” I look at how the Anglo-Saxon English legal system transformed from a customary non-state system to a state-dominated one during the tenth, eleventh and twelfth centuries. The conclusion is that the massive expansion of the state’s role in the provision of law and order during this period had little to do with the public good aspects of protection or any “public interest” rationale. Instead, this expansion served primarily the financial interests of English kings and the powerful groups kings chose to favor.
PART I: EXAMPLES OF NON-STATE LEGAL SYSTEMS.
What is “the law?”
The dominant view of the law among economists and legal scholars is that “law simply means the ‘existence of public order.’ It means organized government, operating through the various instruments and channels of legal command.” (Friedman, W, p. 281). By this view, the state exogenously creates and enforces the “rules of the game” in society. This approach has been referred to as “legal positivism” (Benson, 1989), but is best described by Ellickson (1991) as “legal centrism” because of its view of the source of all law as a central state authority. By this view, “law without the state” is a contradiction in terms.
This approach to the law is unsatisfactory as it ignores important insights from the fields of anthropology and sociology and cannot account for the historical fact that law and order has often preceded the emergence of the state. As Hayek noted:
“Law in the sense of enforced rules of conduct is undoubtedly coeval with society; only the observance of common rules makes the peaceful existence of individuals in society possible. Long before man had developed language to the point where it enabled him to issue general commands, an individual would be accepted as a member of a group only so long as he conformed to its rules . . . [L]aw existed for ages before it occurred to man that he could make or alter it.” (Hayek, 1973, p. 72)
While Hayek defines law as “enforced rules of behavior,” this makes it difficult to distinguish morality and norms from law. Legal theorist Lon Fuller provides a useful definition that clarifies this distinction. To him, law is “the enterprise of subjecting human conduct to the governance of rules” (Fuller, 1964, p. 130). By this definition, the existence of social norms curbing certain behaviors is not enough.
There must also be an “enterprise” that directs purposeful action to produce social order. This enterprise generates the mechanisms of enforcement, legal evolution, and dispute resolution that characterize the law, and is the source of the regularity we see across non-state legal systems. Fuller’s definition of “law” is used throughout the remainder of the paper.
As a note of motivation, the following study of primitive and non-state law is not merely of historical interest. Non-state legal systems shed light on many areas of contemporary law, and provide a useful comparison by which the effectiveness of state legal systems can be appraised. As Benson notes, “much of the law that guides today’s complex American society actually evolved from or is simply a reflection of precisely the same customary law sources as those underlying the legal systems [in primitive societies]” (Benson, 1989). Keeping in mind that much modern law in America has its origins in customary non-state systems of law, we now examine some examples of non-state legal systems, with emphasis placed on the symmetries between them.
A. THE YUROK INDIANS OF NORTHERN CALIFORNIA
Individuals in primitive, stateless societies have for the most part never known a Hobbsian existence that is “solitary, poor, nasty, brutish and short.” The case of the Yurok Indians illustrates why this is so. While Yurok society qualified as “anarchy” in the sense of having no governmental structure, many aspects of Yurok culture resemble “in surprising degree certain structural and ethical characteristics of emergent capitalistic Europe” (Goldsmidt, 1951). No central state enforcer subject to a collective action mechanism was ever erected (Barzel, 2000), yet a complex legal system emerged in Yurok society.
Property in Yurok society was held privately, and individuals were organized into households and villages with no overarching state-like entity (Benson, 1989). As discussed below, emphasis on private property is a common characteristic of primitive legal systems as property rights represent the most fundamental rules of conduct. After all, law enforcement among the Yurok arose through voluntary cooperative arrangements, and these arrangements are stable only to the extent that the benefits of law and order can be internalized (and the “public good” aspects of it can be overcome). Private property rights help achieve this.
There was a well-developed system of private judging among the Yurok (Goldsmidt, 1951). Both the individual pursuing a legal claim and the defendant would hire between two and four non-relatives from another community known as “crossers.” This hired group then functioned as an arbitrator, collecting evidence and evaluating claims, ultimately dismissing suits or rendering a judgment for damages. Yurok law clearly recognized crimes such as adultery, murder, theft, poaching and other offenses (Benson, 1989). In contrast to most modern state legal systems, all offenses in Yurok law were treated as torts. There was no overarching social unit in Yurok society and hence no “crimes against society.” All punishable offenses were a violation of some individual’s rights. This wronged individual was then required to actually pursue enforcement for any legal action to be taken.
Punishments were restitution-based in Yurok society, stipulating that guilty parties pay an indemnity or fine to the victim. All rights violations were valued in terms of property. Liability, intent, damages, and status of the offender were used in determining restitution.
Escaping the Legal Prisoners’ Dilemma
Since the Yurok legal system was a voluntary enterprise with no coercive enforcer, private judgments would seem to be unenforceable. This was not the case. As in nearly every primitive legal system, the credible threat of social ostracism provided negative incentives to observe judgments in Yurok law.
Repeated interaction between members allowed the Yurok to escape the Hobbsian prisoners’ dilemma. In the language of game theory, the Yurok were in a repeated game situation with a finite but uncertain horizon in which cooperation becomes possible (Gibbons, 1992, p. 88). Each individual assigns some positive probability to becoming a disputant at some future point, and therefore has incentives to exchange support in dispute resolution with others.
As with all cooperative arrangements, there are incentives to cheat once this arrangement for mutual protection is formed. To prevent cheating, there must be some credible threat of retaliation by other members if any cheating occurs. In primitive non-state legal systems, social ostracism serves this function. Individuals who are not in good standing and do not support others in dispute resolution can be excluded from all forms of social interaction (including religion, marriage, and trade), not merely legal protection (Benson, 1991). Complex interactions such as trade depend on all parties being in good legal standing, so punishing “outlaws” by ostracizing them from these channels of interaction does not require any coercive authority. Members will voluntary exclude outlaws because it is in their interest to do so, making ostracism a credible threat.
This fear of ostracism (and the potential for being a victim of violence once ostracized) provided incentives for the Yurok to voluntarily accept private judgments. In this way, the credible threat of violence was the primary means of avoiding violence in Yurok society. This is another common feature of non-state legal systems: Since violence is costly to all parties involved, the credible threat of it provides strong incentives to seek peaceful dispute resolution.
The final relevant feature of Yurok law is its mechanism of change and adaptation. While actual changes in Yurok law are not documented (Benson, 1989), there are good reasons to think that the system was dynamic. Non-state legal systems like the one in Yurok society are “spontaneous orders” that develop in a decentralized way similar to exchange markets, language and modern science (Polanyi, 1951). Yurok law developed and evolved internally through the process of actual conflicts being resolved by crossers and rules being developed and altered to facilitate interaction between members. In contrast to state-made law, customary restitution-based legal systems (by definition) enforce only those attributes of relationships that transactors actually value. This is one of their most attractive features, and is not necessarily one found in law created by state enforcers who face very different sets of incentives and constraints from interacting individuals.
Common Characteristics of Non-State Legal Systems
The overview of the Yurok legal system illustrates what Benson (1989) has identified as general characteristics of non-state legal systems: (1) Enforced rules of behavior characterized by respect for private property and individual rights; (2) victims are held responsible for pursuing claims, and law enforcement is conducted through reciprocal protection arrangements with others; (3) standard dispute resolution procedures exist to help avoid any resort to violence; (4) offenses are treated as torts and punishments are restitution-based (there are no “crimes against society”); (5) the credible threat of social ostracism induces observance of the legal system in the absence of a coercive enforcer; and (6) legal change occurs spontaneously due to developing norms and customs. These characteristics of non-state law will be emphasized repeatedly in the two remaining case studies.
B. THE AMERICAN WESTERN FRONTIER
Despite the popular characterization of the western American frontier as “the wild, wild West,” substantial evidence suggests that law and order—rather than violence and chaos—was the norm (Hollon, 1974, p. x; Dykstra, 1968, p. 144; Prassel, 1937, pp. 16-17). The surprising feature of the legal apparatus in the American West is that it was produced privately, as the undeveloped frontier was beyond the reach of state authorities in the Eastern cities. Economists Terry L. Anderson and P.J. Hill (1979) examine four privately produced Western legal institutions: Land clubs, cattlemens’ associations, mining camps, and wagon trains. Each of these illustrates how a legal apparatus can emerge spontaneously to facilitate dispute resolution and protect private property in the absence of any state enforcer.
The unifying theme beneath the legal institutions of the West was a deep respect for private property and individual rights. This is not surprising, given that nearly all of the settlers were originally from the developed East where these legal rights were already well defined and enforced. This point of commonality existing in the minds of participants in social situations is referred to as a “Schelling point” (Anderson & Hill, 1979, p. 12), and represents the initial bargaining position from which settlers constructed a private legal apparatus.
In the absence of any state protector, settling groups often drafted the rules of operation in wagon trains and mining camps before leaving their homes (ibid, p. 18). Typical mining camp contracts made provisions for the financing of operations, rules governing relations between members, methods of resolving property and other disputes, fines and punishment for misconduct (including misuse of alcohol and violation of the Sabbath), and even payments to the sick and unfortunate (ibid, p. 19). Wagon train constitutions often included rules regulating gambling and intoxication, penalties for dereliction of guard duties, and provision of jury trials. As Anderson and Hill (1979, p. 22) note, “In certain cases there were even provisions for the repair of roads, building bridges, and provision of other ‘public goods’.” All of these provisions emerged in the absence of any coercive enforcer. Also, rules varied considerably across groups, satisfying settlers’ diverse tastes for the good “law and order” in a way that is impossible under uniform state enforcement (ibid, p. 21).
Enforcement and adjudication regarding these rules was privately provided. Land clubs – voluntary extra-legal organizations formed by frontier squatters to provide protection and justice – were common across the Middle West. Each club featured its own constitution and by-laws, elected officers, and rules of adjudication, with user fees utilized to defray arbitration costs (ibid, p. 15). Recognizing that violence is a costly method of settling claims to all parties, private arbitration became the preferred method of resolving disputes. These judgments were backed primarily by the threat of social ostracism – which, on the isolated American frontier, meant extreme hardship to offenders.
There is overwhelming evidence of complex and well-functioning legal institutions in the American West, suggesting that a well-functioning “market” for law and order emerged despite its public good dimensions. Next, we look at the ancestry of modern American law and its Germanic roots in the non-state legal system of Anglo-Saxon England.
C. CUSTOMARY LAW IN ANGLO-SAXON ENGLAND
By Fuller’s definition of law as “the enterprise of subjecting human conduct to the governance of rules,” every society in the West was governed by a legal order prior to the eleventh century. In Anglo-Saxon England, there were clearly legally constituted authorities that systematically applied law – in the absence of any government intervention. Benson (1983, p. 50) notes:
”[Law] prior to the late eleventh and early twelfth centuries was largely undifferentiated from social custom and from political and religious institutions. . . Very little law was in writing. There was no professional judiciary, no professional class of lawyers, no professional legal literature. . . [Law] had not yet been ‘disembedded’ from the whole social matrix of which it was a part.”
Law in Anglo-Saxon England was customary and decentralized in nature, and displays all of the six common characteristics of non-state legal systems discussed above. Evidence of early English law comes mainly from king’s attempts to codify previously existing customary law in written form as “king’s codes.” These codes illustrate a strong respect for private property and individual rights (Benson, 1990, p. 21). Large portions of offenses in modern criminal code were deemed illegal in Anglo-Saxon law, including various wounds, rape, murder, and assault. Theft of private property was extensively treated as well.
Punishment for harms in Anglo-Saxon law was restitution-based, as economic payment was substituted for violence as a means of resolving disputes. Detailed schedules of compensation to be paid to victims were common; offenders who committed crimes ranging from cattle theft to murder atoned their crimes through monetary restitution to harmed parties (Pollack & Maitland, 1898, p. 48). This system of restitution was the driving force that led to voluntary reciprocal protection agreements in Anglo-Saxon England. Potential victims recognized that they would require community support to recover their own losses, and were therefore motivated to back others’ claims as well.
The basic Anglo-Saxon legal unit was the household, and communities were bonded by kinship and by oaths of mutual protection and service (Benson, 1983, p. 52). By the tenth century there was a widely recognized legal institution called the “hundred,” which was mainly responsible for rounding up stray cattle and dispensing justice. Hundreds were a voluntary association of geographical neighbors formed for mutual protection, and provided restitution “insurance” to members. Individuals not belonging to one of the hundreds were essentially self-sufficient outcasts without legal protection, so there were strong incentives to join (Benson, 1983, p. 23).
Hundred courts provided judicial services to members through a twelve-man committee of members (ibid, p. 24). Disputes between individuals belonging to different hundreds were handled in a shire court. All judicial rulings were backed by the threat of social ostracism from the most powerful members of Anglo-Saxon society (Pollack & Maitland, 1898, p. 48). Aside from the threat of ostracism, individuals also had incentives to submit to this arbitration process because refusal to do so legally entitled victims to take the life of offenders, and could potentially lead to a “blood-feud” (a costly private war between victim and offender). As in other non-state legal systems, the credible threat of costly violence led to peaceful dispute resolution.
Having replaced Hobbsian violence with monetary restitution and private arbitration backed by the threat of ostracism, the customary Anglo-Saxon legal system survived for more 600 years. Legal scholar Harold Berman (1983, p. 55) notes:
“It is, in many respects, a very sensible system. The treat of heavy financial burdens upon the wrongdoer and his kin is probably a more effective deterrent of crime than the threat of capital punishment . . . and at least equally effective as the modern sanction of imprisonment; and it is surely less expensive for society. Moreover, in terns of retributive justice, not only is the wrongdoer made to suffer, but in addition – in contrast to today’s more ‘civilized’ penology – the victim is thereby made whole.”
The relevant point is that this complex and well-functioning legal system developed and operated independently from the state in Anglo-Saxon England.
PART II. THE TRANSFORMATION OF ENGLISH LAW: PUBLIC INTEREST OR PUBLIC CHOICE?
In part one we looked at three examples of how law and order has been provided for in the absence of government, despite its public good dimensions. Are these historical cases relevant to modern law in America? At first glance it would seem not, given that “the law” and “the state” have become practically synonymous today. It may be argued that these non-state legal systems were possible only because they were nested in comparatively uncomplicated societies, and that as the complexity of interactions increased a state protector eventually had to be erected to maintain social order. This is the “public interest” justification of state law. Next I will show that it is false in at least one case: The transformation of the Anglo-Saxon English legal system between the tenth and thirteenth centuries. This is historically a very significant case given that much of early American law was simply transplanted from England unchanged.
The Institution of Kingship
The institution of kingship has Germanic roots, and began with war chieftains who led early raiding parties into Britain. These early “kings” were voluntarily followed by freemen: Even the term “king” derives from the Old English word cyning, and the earliest records use the phrase ceosan to cyninge, which translates as “choose a king” (Blair, 1956, p. 198). Between 450 and 600AD, brisk competition for kingship reduced the number of kingdoms in Britain to seven (Benson, 1998). The primary function of kings at this point was warfare, as it had always been – they were not at all involved in the legal system.
By 850, three kingdoms moved into dominant positions: Wessex, Mercia and Northumbria. Until this point, warfare engaged in by Anglo-Saxon kings had been with other Anglo kingdoms. But in the late eighth century Viking raids on the English coast eventually led to a consolidation of Britain into a single kingdom for purposes of defense (Blair, 1956). Thus, the institution of kingship and the formation of the English kingdom had nothing to do with maintenance of internal law and order; they existed to provide external protection.
By the early eleventh century, members of the aristocracy that survived this lengthy period of warfare were strong and relatively concentrated (Benson, 1998). The king’s widely dispersed land holdings were maintained by sheriffs and earls, who collected tolls and other revenues for him. In return, they were rewarded with a portion of the revenues and produce. This incentive structure set the stage for the expansion of the state’s role in law, which Anglo-Saxon kings began to see as way to generate revenue and grant favors to powerful followers for support.
Development of Criminal Law
As discussed above, early Anglo-Saxon law was based on reciprocity, and restitution for rights violations was paid only to victims. This began to gradually change to include forfeiture of goods to kings for offenses as well. According to Berman (1983, p. 107), “two closely interconnected factors . . . made for conscious overt change: one was the influence of Christianity on legal concepts; the other was the development of the kingship as a trans-local and trans-tribal institution.” The combination of a consolidated English kingdom discussed above with emerging concepts from ecclesiastical canon law led to the rise of the idea of a king’s “divine authority.” Prior to this time the state was concerned only with its own affairs and disputes, not with conflicts between subjects. But as powerful Norman kings came to be seen as rulers with divine authority, this policy of non-interference changed rapidly.
Every freeman’s house in Anglo-Saxon law had a “peace,” and violators were required to pay restitution if it was broken. Gradually the notion of the “king’s peace” was expanded beyond his own house to the roads on which he traveled. Eventually every violation in the kingdom was declared a breach of king’s peace regardless of whether the king was actually involved, and this required payment to the king.
This presented an opportunity to increase royal revenues through the legal system, as kings began to filter off the restitution that once was paid to actual victims (Lyon, 1980, p. 42). Needless to say, peasant freemen resisted these changes. Pollock and Maitland note that extension of king’s peace led to “a constant tendency to conflict between the old customs of the family and the newer laws of the State” (Pollock & Maitland, 1959, p. 31).
Following their invasion of England in 1066, the Normans even further strengthened the institution of kingship, and effectively ended the old restitution-based system and began to build what we now know as criminal law on top of it (Pollock & Maitland, 1959, p. 53). The end of restitution reduced individual’s incentives to maintain their earlier reciprocal protection agreements and participate in the hundred courts, as the external benefits of law and order could no longer be internalized. This set the stage for a massive expansion of state law.
Criminal Law as a Revenue-Enhancing Device
Sheriffs were the most important local officials in the Norman system, with numerous legal functions. In exchange for these services, kings gave them control over tracts of land, and the majority of their income was extorted from the people living on them (Lyons, 1980, p. 170). This was a well known perquisite, and it helped fuel the state’s expanding role in the law by generating further revenues as a reward for this expansion.
Royal legislation, a relatively new concept, expanded under Norman rule. Three new law books were added to a translation of the earlier codes of the Saxon king Edward (Benson, 1998). According to Pollock and Maitland (1959, p. 105), “these new law books have one main theme . . . some violent offense has been committed. Who then is to get money, and how much money, out of the offender? ” State revenues from law enforcement were clearly the most important consideration in the expansion of royal law. The list of violations of king’s peace was dramatically expanded due to the king’s, “need of money; to increase his income the king only needed to use his prerogative and throw his jurisdiction over another offense” (Lyon, 1980, p. 189).
Soon, Norman kings had introduced the concept of felony, and it quickly became another source of royal revenue:
“Again, royal greed seems to be the best explanation for the expansion of the concept of felony. Any crime called a felony meant that if the appellee was found guilty his possessions escheated to the king. The more crimes called felonies, the greater the income, and so the list of felonies continued to grow throughout the twelfth century.” (Lyon, 1980, p. 190)
The king’s treasurer even sat on the first permanent court of law – the ten to twelve man curia regis – indicating the vital role of revenue collection from justice. Eventually, the distinction between criminal and civil law became clear: Criminal law referred to offenses that generated revenue for the king, while civil offenses required payment to victims (Benson, 1998). Predictably, there was a massive expansion of criminal law in Norman England because of the kings’ interest in generating revenues for himself and his powerful supporting groups (such as sheriffs and earls). Kings received judicial revenues regardless of whether the accused were found guilty or innocent – even an innocent verdict led to fines imposed for false accusation (Lyon, 1980, p. 295).
By the end of the reign of Edward I, state-mandated criminal law had largely replaced the earlier Anglo-Saxon legal system based on reciprocity and restitution with king-made rules that facilitated wealth-transfers to the king and other powerful groups. Because of considerable resistance to this shift, English citizens had to be carroted and sticked into acceptance of criminal law. Royal law declared it a criminal violation to seek restitution without first coming before the king’s court where he could collect his royal fees. The crime of “theftbote” was later created, making it a crime to accept the return of stolen goods in exchange for an agreement not to prosecute. Civil remedies for criminal offenses could not be pursued until after criminal proceedings had taken place. Fines were also imposed on those who advertised for a return of stolen goods with “no questions asked.” All of these actions were clearly attempts by the state to force unwilling individuals into the developing state legal system, the unifying theme of which was generation of royal revenues.
Summary of Part II
The theory of public choice has been referred to as “politics without romance,” and the development of the state-dominated legal system in England is a clear application of this idea. The development of state law in England was not aimed at promoting the “public interest” or overcoming the public good “problem” of providing law and order in any way. In many ways it promoted social disorder due to citizens unorganized resistance to state confiscation (Benson, 1990). The state did not assume control over criminal punishment to allow an escape from some mythical Hobbsian jungle – the earlier Anglo-Saxon system has long replaced Hobbsian violence with monetary payments as a method of dispute resolution, and functioned well for 600 years based on voluntary cooperation. State law was only reluctantly accepted through substantial coercion and the violent conquest of England, Ireland and other European regions (Barnett, 1977).
The development of English criminal law was driven by the self-interested goals of kings, their employees, and other politically powerful groups in society. As Benson (1990) notes, ”’Public interest’ justifications for a government-dominated legal system and institutions must be viewed as ex post rationalization rather than as ex ante explanations of their development” (p. 59). At least in the specific case of the rapid expansion of the state’s role in English criminal law from the tenth century on, the state legal system is not a reflection of the superior efficiency of a state protector but rather is a result of king’s attempts to generate revenues and reward powerful supporters through the use of criminal law.
Conclusion
The previous case studies show that despite the public good dimensions of law and order, complex legal systems have often emerged in the absence of state intervention. This should not be a surprising result, as it is perfectly consistent with the postulate of rational utility maximization. Whenever activities generate large positive externalities there are strong incentives to internalize them in actual markets. This is exactly how lighthouses were privately provided in Britain during the nineteenth century, and is how law and order is often achieved in the absence of the state. Contemporary examples of this phenomenon include alternative (private) dispute resolution between firms, law in gated communities, and the emerging legal norms of the Internet (Bell, 1999). This paper does not attempt to resolve the question of whether the state or the market is the better provider of law and order. Rather, it is an attempt to persuade economists that the question cannot be resolved on theoretical grounds alone, without any recourse to the actual institutional frameworks within which we can choose alternative forms of law.
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