Enforcing
Rules
"A social norm is legal if its neglect or infraction is
regularly met, in threat or in fact, by the application of
physical force by an individual or group possessing the socially
recognized privilege of so acting." E.A. Hoebel, The Law of
Primitive Man (Cambridge, Mass., 1954) p. 28.
To the modern ear, “law enforcement” implies police, but police
are only one of several mechanisms for enforcing legal rules. If
someone breaks your arm you call a cop; if he breaks your window
you are more likely to call a lawyer. Criminal law and tort law
are mildly different mechanisms for doing the same work. Someone
does something bad to someone, the legal system is called in,
something bad happens to him, and that is a reason not to do bad
things to people. In one case the offender is found and
prosecuted by government employees, police and public
prosecutors, in the other by private actors, the victim and his
agents, but the basic logic is in both cases the same. Sometimes
either or both approaches can be used; O.J. Simpson was first
acquitted of the crime of killing his wife and then convicted of
the tort of killing his wife.
Lots and Lots of Ways of Doing it
Since we are looking at the legal systems of a wide
variety of societies, I will spend this chapter listing all the
enforcement mechanisms I know of and considering the problems
with each. As you will see, it is sometimes hard to draw sharp
lines between them. As a first cut at classification it is
useful to think of the task to be done as having three parts,
corresponding, in the criminal case, to the jobs done by:
- police and public prosecutors—finding the offender
and proving his guilt
- judge and jury—deciding guilt
- police, prisons, etc.—enforcing the punishment.
Under criminal law, all three jobs are done by
professionals employed by a government to do them. Tort law is
criminal law with one change—the police and public prosecutors
are replaced by the victim and his agents. It is their job to
figure out who committed the tort, gather evidence, and convince
the court. The police and public prosecutors are professionals
who do it because that is the job they are hired to do. The tort
victim does it in order to collect damages; what the tortfeasor
pays as penalty the successful victim receives as a reward. The
victim may also have the additional incentive of private
deterrence, establishing a reputation as a bad person to commit
torts against, as discussed in Chapter IX.
Privately prosecuted criminal law is intermediate between
the first two. Prosecution is by a private party who need not be
the victim; in both the English and Athenian cases, any adult
male citizen could prosecute any crime. In Athens the immediate
incentive was a reward, a share of the fine that the criminal
defendant paid if convicted. Prosecution could also be motivated
by personal hostility or political rivalry. In England, during
most of the 18th century, there was no reward for a successful
prosecution. The incentives were private deterrence and the
possibility of extorting an out of court settlement from a
defendant who, if convicted, was at risk of being hanged or
transported.
All three of these approaches to enforcement—criminal,
tort, and privately prosecuted criminal—are broadly similar in
their approach. Someone violates a rule, someone—police officer,
tort victim, or private prosecutor—convinces a court that a rule
has been violated and shows by whom, the court delivers a
verdict and the state enforces it.
For a very different approach to achieving the same
objective consider a private system such as that of the
Rominchal. Jerry violates a rule, harming Larry. Larry threatens
Jerry with violence if he does not compensate Larry for the
harm. The three jobs of criminal law are all done by the victim.
He is, simultaneously, policeman, prosecutor, judge, jury, and
executioner.
At first glance, such a feud system sounds more likely to
produce bloodshed than law enforcement, but in practice that
need not be the case. Jerry's ability to use force against Larry
is limited by the existence of Cary, Gary, Harry, … potential
allies of both parties. If they believe that Larry''s demand is
unreasonable and Jerry justified in refusing it, they will be
unwilling to support Larry and likely to support Jerry, making
the attempt by Larry to carry out his threat hazardous in the
extreme. Thus a feud system can successfully enforce a set of
rules understood and accepted by the participants. Enforcement
depends on the threat of violence, but that is true of other
mechanisms for enforcing law as well. The difference is that
violence by one private party against another is constrained by
the symmetry of the situation; unlike the state, the initiator
of a feud does not have access to enormously greater resources
than the defendant.
Saga period Iceland had a legal system intermediate
between tort and feud. As in our first three cases, there was an
explicit body of law and a system of courts to judge whether it
had been violated and, if so, with what legal consequences. But
the final step of enforcing the verdict was done privately by
the tort victim and his allies. If the defendant lost his case
and refused to pay the resulting fine, the plaintiff could have
him outlawed and, if he failed to leave Iceland in the next two
weeks, be free to hunt him down and kill him. And a victim who
chose not to go to court had the option of demanding
compensation from the offender as in a feud system and, if it
was not forthcoming, using violence against him—at the risk of
provoking retaliation in the form of either return violence or a
law suit.
Traditional Somali law shows a pattern intermediate between
Iceland and the Rominchal. There is no legislature, but there
are mechanisms for creating a court and trial to determine
whether or not a party has violated
traditional law. And there is an existing group of people, the
diya-paying group, precommitted by contract to support their
members in both collecting and paying compensation.
All of the ways of enforcing law that I have so far described
depend on force or the threat of force. For a very different
mechanism, imagine that you have bought a jacket from a
department store that guarantees to refund your money if you are
not satisfied with what you bought. If, when you discover that
the jacket you bought is the wrong size and your wife points out
that purple is not really your color, the store refuses to give
you a refund, you are unlikely to sue them—the amount at stake
is not enough to make it worth the time and trouble.
Nonetheless, almost all stores in that situation will, at least
in my experience, take the product back—because they want the
reputation, with you and with others, of living up to their
promises.
A more elaborate example of the same approach is provided
by the New York diamond industry as described in a classic
article by Lisa Bernstein.
At one point, somewhat before the time she studied it, the
industry had been mostly in the hands of orthodox Jews,
forbidden by their religious beliefs from suing each other. They
settled disputes instead by a system of trusted arbitrators and
reputational sanctions. If one party to a dispute refused to
accept the arbitrator’s verdict the information would be rapidly
spread through the community, with the result that he would no
longer be able to function in that industry. The system of
reputational enforcement survived after membership in the
industry became more diverse, with organizations such as the New
York Diamond Dealer’s Club providing both trusted arbitration
and information spreading.
The reason the department store or diamond merchant is
concerned about his reputation is not fear of being disliked but
of losing business. The reason your friend will shop at another
store if you tell him that this one refused to take your jacket
back is not that he wishes to punish the store for cheating you
but that he does not himself want to be cheated. Reputational
enforcement works by spreading true information about bad
behavior, information that makes it in the interest of some who
receive it to modify their actions in a way which imposes costs
on the person who has behaved badly. Deterrence is not anyone’s
objective, merely a side effect of interested third parties
acting in their own interest.
Next consider the same sort of enforcement, this time used
as a deliberate punishment.
A community finds one of its members guilty of violating its
rules and pronounces a sentence of ostracism—in the context of
the Vlach Rom described in Chapter I, a sentence of marimé imposed by a kris romani. Other members
of the community refuse to associate with the convicted
defendant. If, as in the case of a gypsy community, ostracism
imposes very large costs on its target the threat provides a
reason not to violate the rules of the community.
There is, however, a problem with this enforcement
mechanism. The reason not to associate with the convicted
defendant is in order to enforce the rules of the community.
That is what economists call a public good; an individual who goes
along with it bears all of the cost of giving up any mutually
profitable dealing he might otherwise have with the defendant,
while the benefit is shared with all members of the community.
That makes it unlikely that an individual's share of the benefit
will be larger than his cost.
One solution is the following rule:
You shall not associate with anyone who has violated a
communal rule—including this one.
To see how this works, start at a time when everyone
accepts and follows all of the communal rules. Jerry violates
one of them and is sentenced to ostracism. A second member of
the community, Larry, has to decide whether to help enforce the
sentence by refusing to deal with him. The cost/benefit
calculation described above suggests that doing so is probably
not in Larry's interest, but there is now an additional cost to
be considered—continuing to associate with Jerry will itself be
a rules violation and will subject Larry in turn to ostracism.
That cost makes in in Larry's interest to refuse to deal with
Jerry. The members of the community (no longer including Jerry)
are in what is described in game theory as a Nash equilibrium;
each of them is following the best strategy for himself
(refusing to associate with rules violators), given how the
others are acting. Rewind our film a little to before Larry
violated our rule and the whole community, Larry now included,
is in a Nash equilibrium; given how everyone else is acting, it
is in Larry's interest not to violate communal rules, and the
same is true for all the others.
So far I have assumed a setting with a formal mechanism
for imposing ostracism. Informal norm enforcement is a more
familiar version of the same logic. There is no legal rule that
forbids me from teaching classes stripped to the waist, but
doing so would be imprudent. Many of my colleagues would
conclude that I was not the sort of person they wished to
associate with—in part because if they continued associating
with me, their colleagues might reach a similar conclusion about
them.
The Nash equilibrium provides one way in which ostracism
can be a workable mechanism for enforcing rules. Before offering
a second solution to the public good problem, I need to
introduce one other approach to rules enforcement: Divine.
Consider an orthodox Jew who keeps kosher even when he is
sure nobody is watching, or a Muslim convert who suppresses his
remembered taste for pork. Either can be seen as an example of
rule enforcement by the threat of divine sanctions, whether a
stroke of lightning or refusal of entry to heaven.
Alternatively, either can be seen as obedience to a command not
from fear of punishment but because obedience is seen as right,
what one ought to do. There is a whole continuum of variants,
with the believer in fear of divine punishment at one end,
Mencken's atheist brought up to believe that gentlemen do not
cheat at cards at the other; for
simplicity I lump all of it into the category of divine
enforcement, even though some examples depend on neither the
existence of a divinity nor the threat of punishment. What they
have in common is that they depend on either immaterial costs,
such as guilt from behaving as you believe you ought not to, or
the belief in material costs, such as being struck by
lightening, due to supernatural causes.
Divine enforcement provides not only an independent
mechanism for rules enforcement but also a way of facilitating
other mechanisms. The point of swearing to tell the truth, the
whole truth, and nothing but the truth, so help me God, is that
the oath makes it more likely that you will actually do it, for
fear of divine punishment or out of belief in your obligation to
act as God wishes. The reason to allow the defendant in a suit
under Jewish law to “swear and be quit,” defeating the suit
(Chapter III), or the plaintiff, in a case where the evidence is
stronger, to “swear and take,” is that plaintiff and defendant,
as believing Jews, will be very reluctant to swear
falsely—similarly for plaintiff and defendant in a case decided
by a qadi under Shari'a, where the putative
winner must swear to the truth of his position and refusal to do
so reverses the judgement. Both the criminal and civil
mechanisms for rules enforcement depend on a court being able to
judge guilt or innocence. Doing that is easier if the court is
provided with a lie detector, and the practice of swearing oaths
by believers reluctant to swear falsely for fear of divine
punishment provides one.
Divine intervention can also substitute completely for a
court trial. If God supports the right, trial by combat or
ordeal vindicates the innocent and convicts the guilty. Even if
divine intervention is only mythical, the belief in it gives an
advantage to the party who knows he is innocent over the party
who knows he is guilty.
Divine enforcement could also provide another solution to the
public good problem faced by enforcement via the threat of
ostracism. One feature of marimé,
from the point of view of a traditional gypsy, is that it is
contagious. Another is that being polluted is not merely a
violation of communal norms, it also has serious real world
effects, bad luck and related risks. That provides members of
the community a reason not to associate with a fellow gypsy
under sentence of marimé
for failing to conform to the verdict of a kris Romane.
For another example of the same pattern, consider the
mechanism by which the Cheyenne indians capped the level of
physical violence by one Cheyenne to another. Fighting, even quite
violent fighting, was allowable. But a Cheyenne who killed
another member of the tribe, for whatever reason, was banished
from the tribe—not because he had been wicked but because he now
smelled of death, and the smell, and its consequences in ill
fortune, were contagious. After a period of years he could
petition for readmission and the petition might be granted,
especially if the circumstances of the killing made it appear
excusable. But for the rest of
his life, nobody else would drink from his bowl or share his
pipe, because they, and he, still smelled of death, even if time
had diluted the effect enough to make his presence in the tribe
again tolerable.
And What is Wrong With Each of Them
All of these methods for enforcing rules have been used by
real world societies; they all work. Sometimes. All have also,
at various times and places, failed to work or worked very
imperfectly. Why? What are the problems with each of the
alternative approaches? I start with criminal law.
Crime
In an ideal system of criminal law enforcement, everyone
involved in the project, from prison guards and police officers
up to the politicians ultimately responsible for selecting and
controlling everyone else, will act in the general interest of
the population they serve, doing their best to convict the
guilty and acquit the innocent while minimizing unnecessary
costs of the legal process.
That is a desirable outcome, but a hard one to achieve.
Politicians, like the rest of us, are more interested in serving
their own objectives than those of other people. If, in a high
profile case, the real criminal can not be found, there may be
much to be said for finding someone else who can be convicted;
what the voters don't know won't hurt them. If campaign
contributions are needed, organized groups of government
employees, such as cops and prison guards, are one place to get
them, which gives the politician an incentive to follow the
policies those those interest groups support. In California, the
prison guard union routinely, and often successfully, lobbies
against policies that would reduce the number of prisoners and
thus the demand for their services.
Some costs of enforcing criminal law are paid by the law
enforcement agency that incurs them, giving it an incentive to
hold them down. Other costs are imposed on other people without
compensation and so may, whenever those people have insufficient
political influence to make their complaints matter, safely be
ignored. Criminal law in imperial China provides multiple
examples. Torturing a witness or an innocent defendant imposes a
cost on him but not on those who impose the torture, so there is
little reason for them to take account of that cost in deciding
when to employ torture and when to refrain from doing so.
The same logic applies in modern systems. Holding a
suspect in jail imposes a cost on him. Shutting up a restaurant
where a crime has occurred until all relevant evidence has been
collected imposes a cost on the restaurant owner and his
customers and employees. Seizing computers containing all the
copies of important information—the only draft of a book or a
doctoral thesis, say (real cases)—and
holding them until the police are certain that they no longer
contains evidence of interest to them, imposes costs, possibly
very large costs, on the computers' owner, but costs nothing to
the police. Not only do they have the option of ignoring costs
they impose on others, they have the option of deliberately
imposing such costs as a way of punishing people whose legal
behavior they disapprove of. If the police smash down my door,
shoot my dog, scare my children half to death, and only them
discover that they have come to the wrong address, they have no
obligation to compensate me for the damage they have done, hence
little reason to take extra care to avoid such costly (to me,
not them) errors.
Focusing less on police and more on the whole system, it
is far from clear how to make it take account of one of the most
serious costs it imposes on other people, the cost to defendants
who end up convicted of and punished for crimes they did not
commit. For a discussion of that problem, in the context of
criminal law and alternative enforcement systems, see the next
chapter.
A different sort of incentive problem was pointed out in
an old article by George Stigler and Gary Becker. Imagine that I am a
cop, you are a criminal, and I have the goods on you, the
evidence that will get you convicted. The punishment that will
result is, from your standpoint, equivalent to a hundred
thousand dollar fine. If I bring in you and the evidence, I will
be rewarded with a gold star on my report card, an improvement
in my reputation with my employer that will result in a twenty
thousand dollar increase in my lifetime income.
From the standpoint of Dragnet, the rest of the story is
obvious: I turn the evidence over to the D.A., you are arrested,
tried and convicted. From the standpoint of economics, the rest
of the story is also obvious. I have something that is worth
twenty thousand dollars to me and a hundred thousand dollars to
you. Resources move to their highest valued use; you pay me
fifty thousand dollars, I give you the evidence, you burn it. In
order for the criminal model of law enforcement to work,
something has to prevent this obvious and mutually profitable
transaction. We need a second cop watching the first cop, which
may substantially raise the cost of law enforcement and may or
may not entirely eliminate the problem.
Becker and Stigler proposed a solution the problem they
described: stop paying salaries to police officers and instead
compensate them with a reward equal to the penalty paid by those
they convict. Now the only bribe I will accept is one of at
least a hundred thousand dollars, in which case you have paid
your fine and I have received my pay. We have simply cut out the
middleman.
Richard Posner and William Landes responded to Becker and
Stigler with an article of their own,
pointing out a number of problems with the proposal, among them
the problem of allocating the right to catch a criminal; I would
not want to spend lots of time and effort collecting the
evidence only to have a competitor arrest the criminal first and
collect the fine. One simple solution is to give the right to
the victim and let him sell it to whomever offers him the
highest price. Work through a few organizational details and we
have privatized law enforcement, replacing police departments
with firms that buy offenses from the victims, catch and convict
offenders, and support themselves on the resulting fines.
Becker and Stigler had, without realizing it, reinvented
tort law, although not in precisely the current form. The victim
of a tort owns the right to collect the fine—called a damage
payment—paid by the convicted tortfeasor. He can transfer part
of that right to a private enforcement agency—we call it a law
firm—that is willing to take the case on a contingency basis. If
the law firm convicts the defendant some of what he pays goes to
the firm to pay for its efforts, some to the victim as the price
at which he has sold his claim. Which brings us to our next
topic.
Tort
Tort law, as the arguments of Becker and Stigler suggest,
in part privatizes the job of enforcing legal rules; by doing so
it solves some, but not all, of the problems raised by criminal
law. A tort plaintiff can impose some costs on the defendant
without compensation, such as the cost of paying for a lawyer to
defend against the suit or of responding to a discovery demand,
but, not being protected by the principle of sovereign immunity,
he is less able to do so than a police department. The lawyer
representing the plaintiff might, like the corrupt policeman,
sell out to the other side, but there is already someone in
whose interest it is to prevent that from happening—the
plaintiff. Many of the arguments that suggest that a competitive
private market usually does a better job of producing goods and
services than a government monopoly apply here, where the
service being produced is that of detecting and proving
violations of legal rules. We do not usually think of government
enforcement of criminal law as a form of socialism but,
economically speaking, that is what it is—government ownership
and control of the means of production—and the usual arguments
for the inefficiency of socialism apply.
Tort law brings with it, however, a new set of problems.
Consider first tort law as it now exists, in which the damage
payment owed by the convicted tortfeasor is “enough to make his
victim whole,” to compensate him for the damage that the tort
did to him. The damage payment is both the penalty to the
convicted tortfeasor and the reward to the plaintiff and his
lawyer for convicting him, and there is no good reason to expect
it to be the proper sum for either purpose.
Consider, for instance, a tort which is difficult to
detect and prove, with the result that half the tortfeasors
escape unpunished. The damage done is (say) ten thousand
dollars, so that is what convicted tortfeasors pay, making the
average penalty five thousand. If deliberately committing the
tort benefits me (or if precautions to prevent accidentally
commiting it cost me) six thousand dollars, I am better off
committing the tort and (sometimes) paying for it, even though
what saves me six thousand is costing you ten, and so on
net makes us worse off. So some torts that should be deterred
will not be.
The problem is worse than that, because we must consider
the incentives of the victim as well as those of the potential
tortfeasor. If spending six thousand dollars on a law suit buys
me only a fifty percent chance of collecting a ten thousand
dollar damage payment, suing you makes me poorer, not richer, so
I don't. And if I am not going to sue you, the penalty you pay
for committing a tort is not five thousand dollars but zero.
One solution to this problem might be a probability
multiplier for damage awards. If damage done is ten thousand but
the probability of successful suit is only fifty percent, set
the award at twenty thousand. Now the average punishment is
equal to the damage done, giving potential tortfeasors an
incentive to prevent any tort whose prevention costs less than
the damage done by not preventing it. Some scholars, including
Landes and Posner, have suggested that punitive damages, damage
awards greater than damage done, serve just that purpose.
While this might be an attractive solution in some cases,
it too has problems. For one thing, the damage award is limited
to what the tortfeasor can pay; in the case of a serious offense
with only a low probability of successful prosecution, that may
be less, perhaps much less, than the damage done scaled up to
allow for the low probability of conviction.
A second problem is that a probability multiplier may make
it profitable to create fictitious torts. Late at night, as your
car comes around the bend, I shove mine into the road and
hastily stand back. When the dust has cleared and you have
gotten free of the wreckage—I considerately staged my fake
accident on a slow road, so that you would survive to be sued—I
commence a legal action, claiming five times the value of my car
on the grounds that it was only by great good luck that you did
not succeed in escaping after smashing my car and that four
friends of mine just happened to be lurking in the underbrush to
witness the accident and testify against you. In order to frame
you I had to create a real accident, so it was made profitable
only by the existence of a probability multiplier.
So far, I have assumed that the tort victim only sues in
order to collect damages, hence will not sue if damages come to
less than the cost of suit. If that were always the case, then
privately prosecuted criminal law without rewards, the criminal
law of England through most of the 18th century, could not have
worked, since there was no damage payment to compensate for even
modest costs of prosecution. Yet that system, described in
Chapter IX, existed and functioned.
Part of the explanation was that plaintiff and defendant
together could convert a criminal punishment, such as hanging,
into a tort punishment by a covert out of court settlement.
Another part is that potential victims could precommit to
prosecute and inform potential felons of that commitment, making
deterrence a private good, hence one the potential victims were
willing to pay for.
Another assumption I have been making is that the tort
victim has sufficient resources to prosecute if he chooses to.
That may not always be the case. If we shift the story from 21st
century American to tenth century Iceland, the man whose brother
has been killed be old, weak, and with no remaining relatives
willing to help him press his suit against offenders perfectly
willing, if they can get away with it, to beat him up when he
tries to go through the legal procedures required for a law
suit.
The Icelanders had a simple solution to that problem; tort
claims were transferable. I may not have the resources to press
my claim, but one of my neighbors, a wealthy farmer with four
strong sons who went a-viking in their youth and lots of
relatives and allies, does. Successfully pressing the claim
results in collecting several hundred ounces of silver as
wergeld, tort damages for the killing. I transfer my claim to my
neighbor, he prosecutes it successfully, keeps whatever share of
the profits we have agreed to and gives me the rest.
The same solution could be applied in a modern context. A
tort victim in our legal system has the option of finding a
lawyer willing to take the case on a contingency basis, but he
has no way of knowing which lawyer will do a good job of winning
a hefty award and which will sell him out for a concealed side
payment from the other side. If tort claims were transferable,
he could sell his to the highest bidder, at which point he no
longer cares greatly how well it is prosecuted.
Transferable tort claims could solve another problem in
our system as well. Consider a tort that does a small amount of
damage to each of a large number of victims, small enough so
that no individual victim or small group will find it worth the
trouble of suing. The current solution is a class action; an
enterprising lawyer gets himself named as attorney for the class
of all victims, sues on their behalf, and collects damages or
accepts an out of court settlement. One problem with that
solution is that there is little to keep the attorney from
acting in his own interest instead of that of his imaginary
clients by settling on terms that give him a substantial sum in
real cash and them compensation in the form of discounts on
their hypothetical future dealings with the defendant.
Transferable claims make possible a better solution. The
lawyer purchases a large number of small claims, perhaps with
the assistance of middlemen, then sues on his own behalf as
their owner. In this respect, at
least, our legal system is a mere eleven hundred years behind
the cutting edge of legal technology.
Feud
So far I have explored problems with the two legal
mechanisms central to modern legal systems, hence the two most
familiar to my readers, especially any of them who happen to be
lawyers. The third distinct system, feud, is less familiar;
inasmuch as moderns have opinions on it they are highly colored
and almost entirely negative. Yet it too is a system that can
function and has functioned for enforcing legal rules. What
problems limit its ability to do so?
One is that it depends, to a considerable extent, on the
availability of commitment mechanisms. The benefit of it being
known that if I am injured I will revenge myself, whatever the
cost, may be very great, since it sharply reduces the risk both
of being injured and of having to bear the costs of revenge. But
after I have suffered a serious injury from a formidable
opponent, the cost of revenging myself, assuming he refuses to
offer adequate compensation, may be more than the benefit is
worth—better to be a live wimp than a dead hero. The solution,
as in the parallel case with private prosecution of criminal
law, is to find some way of committing myself in advance. In
18th century England it was done by prepayment to a prosecution
association. In a less developed society, it depends more on
some combination of social norms and internal incentives.
Seen from this standpoint, the human trait of vengefulness
is not an irrational passion but a hardwired commitment
strategy, a psychological
pattern whose result appears irrational after the fact, when I
have to do my best to hunt down the killer of my kinsman at
considerable risk to myself, but rational ex ante, when
the knowledge that I will hunt down anyone who kills my kin is
one reason my kin do not get killed, and the knowledge that they
will hunt down anyone who kills me one reason I don't.
Part of the modern hostility to feud is the belief that
its violence is unbounded in both time and magnitude, with a
minor conflict generating seas of blood for a century or more.
Part of the basis for this view, at least among Americans, is
the legendary Hatfield/McCoy feud—legendary not only because it
is famous but also because it is mostly fictional. In the
appendix to this chapter, I sketch the real history. The parts
that fit the feud stereotype of revenge killing total one
exchange in which three members of one family killed one member
of the other and were themselves killed in revenge, and a
second, five years later, in which a renewal of the conflict set
off by the intervention of the governor of Kentucky resulted in
one death on one side, revenged by two on the other. The rest of
the famous feud exists in movies and newspaper stories but not
in the work of careful historians, illustrating my rule of thumb
for evaluating historical accounts: View with suspicion any
anecdote that makes a good enough story to have survived on its
literary merits.
Moderns are less familiar with the much more extensive
record from societies such as saga period Iceland. A careless
reading of the sagas makes it sound like a violent society,
until you notice that two successive chapters, recounting two
violent clashes, are separated by enough time for a character
not yet born at the time of the first to participate in the
second as an adult. A more careful examination suggests that
most feuds terminated either at the first round, when the
offender agreed to pay the penalty set by court or arbitrator,
or at the second, after the victim of the first clash had
reversed roles for the second. Only a few continued beyond that
for multiple exchanges—and so, with the boring sections removed,
provided the material for sagas.
If I honestly believe that the compensation you are
offering me for the damage you and your allies did to me is
absurdly low while you regard it as generous, we may have a hard
time finding any settlement that does not make at least one of
us feel as though he has abandoned his own commitment strategy,
making him fair game for any future aggressor. So a well
functioning feud system may require, in addition to mechanisms
for commitment, enough commonality among the participants to
make it possible for the two sides to agree on settlements,
whether negotiated between them or arranged by a third party
arbitrator. An alternative may be a mechanism whose authority is
commonly recognized, such as the Icelandic court system or the
Somali institutions for choosing judges. Even if I believe that
what the court awarded me was unreasonably little I can still
accept it without signaling my unwillingness to defend my rights
against future aggressors, since they will have no reason to
expect the court in the cases spawned by future clashes to err
in their favor.
Reputation
Reputational enforcement works well for parties engaged in
repeat voluntary transactions; once you have obtained a
reputation for failing to fulfill your contractual obligations,
other people become unwilling to deal with you. Anticipating
that, you fulfill your obligations. It does not work for a one
time transaction, a con-man who intends to cheat his victim out
of a fortune and then retire. Nor does it work for involuntary
transactions; a mugger does not require the consent of his
victims. And even in the case of repeat voluntary transactions,
there is a risk of end-game betrayal, the trader who, having
built up a reputation for trustworthyness by twenty years of
honest dealing, spends the final year before his planned but
unannounced retirement borrowing money he has no intention of
paying back and taking payment for orders he does not plan to
fill.
These problems may be ameliorated in several ways. Even if
I am only an occasional participant in any particular market, I
routinely engage in other transactions, social, economic,
political. If I sell you a car which I know, and you do not
know, is about to fall apart, I suffer a reputational penalty
even if I never plan to sell another car. The fact that I
cheated you over a car will be seen as evidence of bad
character, implying that I am likely to mistreat other people in
other ways. One way of making sense of our moral judgements is
that we put two different acts into the same moral category
precisely because we believe that the willingness to do one
correlates positively with the willingness to do the other. Once enough people
have heard your story and inspected your car, I will find
landlords unwilling to rent me a room, employers reluctant to
hire me, fathers refusing to allow me to date their daughters.
Mugging is an involuntary transactions, but even muggers
depend on voluntary transactions for much that they value. In a
society where people know each other well enough for
reputational enforcement to work well, the mugger, even if he
has never been convicted, even if his society has no courts to
convict him in, may find that his reputation costs him in that
part of his life that does not consist of mugging people.
The argument can be expanded beyond the loss of trading
opportunities. Humans are social animals; most of us want to be
liked, want to be admired, want to be seen as high status. Being
viewed as someone who cannot be trusted costs in all those
dimensions, which may be a reason, even for someone planning no
repeat transactions that depend on trust, to choose to be
trustworthy. Human beings reveal their feelings, values,
thoughts in facial expressions, voice tones, gestures. That
makes it difficult, although not necessarily impossible, to
maintain the reputation of being an honest, trustworthy,
generous person while awaiting a good opportunity to swindle all
and sundry. Good con men exist, but they are rare. Reputational
enforcement becomes a little harder in the case of firms, which
have no faces to show expressions and which can discard a bad
reputation by filing a new set of incorporation papers under a
new name.
There is a further problem with reputational enforcement,
one which becomes more serious the larger the society. When you
cheat me by failing to fulfill your side of a contract and I
complain, you respond by explaining to any who ask that you only
pulled out of the contract because I had failed to fulfill my
side of the bargain. An interested third party with no easy way
to tell which of us is lying may conclude that it would be
prudent not to trust either of us. Anticipating that response I
conclude that public complaint about your default will only make
a bad situation worse—better to take my losses and keep my mouth
shut. This raises a serious problem of incentive compatibility
for a system which depends on action taken, not by government
employees hired to enforce the law, but by private individuals
acting in their own self interest.
So one requirement for reputational enforcement to work is that
the information cost to interested third parties of figuring out
who was at fault be low enough to make it worth their while to
do so. One way of fulfilling this condition has already been
mentioned—employ reputational enforcement in a small society
where everyone knows everyone else and has a pretty good idea
whose account can or cannot be trusted. Another way is the use
of arbitration, ideally prearranged. If you and I have publicly
agreed in advance that any dispute in our gemstone dealings will
be settled by the New York Diamond Dealers' Association, or by
the local rabbi, all a third party has to know is the
arbitrator's verdict, which takes a lot less effort than
investigating the details of the controversy himself.
A third way is demonstrated by the dealings of Chinese
merchants on Taiwan, in an environment almost entirely without
contract law hence largely dependent on reputational
enforcement, as described in Chapter XIV. Structure your
contracts in ways that make it as easy as possible, when there
is a disagreement, for third parties to tell who was at fault.
If my goods are being stored in your warehouse and I complain
that you have let them be damaged, or that some of them are
missing, it will be hard for a third party to judge the dispute,
so follow the simple rule that ownership goes with physical
possession. Make a buyer responsible for inspecting goods before
he accepts them and forbidding him, save in the most extreme
cases, from demanding compensation if he later discovers that
their quality is less than he was led to expect—the rule of caveat
emptor. It is easier to demonstrate whether or not I
delivered the goods than what happened to them afterwards, or
what condition they were delivered in.
The effectiveness of reputational enforcement is different
for different people, strong for repeat players, weaker for
someone who only expects to participate in such transactions
rarely. So design contracts to put the temptation to default on
those who can be trusted not to yield to it. If you can be
trusted and I cannot, then I pay in advance; you could take my
money and fail to deliver what it bought, but you won't.
Ostracism
There are two major problems with ostracism as a way of
enforcing rules. The first is that someone has to decide who to
ostracize, which requires some decision making procedure whose
results practically everyone accepts. Absent that, an attempt at
ostracism may divide the community between those who accept the
verdict and go along and those who do neither. The second
problem is that the collection of people participating in the
ostracism has to include a large enough proportion of those the
target would like to interact with so that their refusal to
interact imposes a serious cost on him.
In a large society this is hard to arrange, since only a
small proportion of its members need defect to provide the
target with an adequate number of trading partners. In a small
community embedded in a larger society, the gypsy (and Amish and
Mormon and …) case, it works only if the barriers to a member of
the community interacting outside it are high. That condition
can be met, as in the case of the Vlach Rom, but at a
considerable cost, and it may cease to be met due to changes
that make either the community or the society less intolerant of
the other. If the barriers are not high, then the threat of
ostracism is only a mild deterrent, giving the community only a
very limited ability to enforce its rules on its members—which
may be why the Vlach Rom in America found it necessary to modify
their divorce rules to make them more favorable to wives than
before, to avoid the risk that unhappy wives would look for a
divorce from American courts rather than the gypsy Kris.
That suggests that ostracism will be most effective for a
small community either entirely isolated or set in a very
unfriendly larger society. Outside of one of those situations it
can still be used to enforce rules, but only rules that nobody
has strong reasons to want to violate.
Divine Enforcement: In Foro Interno
The pure form of divine enforcement depends on everyone
believing in the divinity and his willingness to enforce or
their obligation to obey. That belief may be shaken if violators
of the rules are seen to escape unpunished. One way to avoid
that is to start with beliefs sufficiently strong to make
violations, or at least detected violations, rare. Another is to
incorporate in the belief system forms of divine punishment that
are unobservable from the outside, such as punishment
post-mortem, or at least difficult to observe, such as bad luck.
Even if belief is not sufficiently strong and uniform to
make divine enforcement a substitute for more mundane
alternatives, it may still make those alternatives more
workable. To use oaths as a lie detector it is not necessary
that everyone be a believer, only that there is some reasonably
reliable way of knowing who is not and refusing to accept their
oaths. One way is for there to be religious practices which are
costly and not enforced, hence engaged in only by the believers;
as I suggested in Chapter III, one way of interpreting kosher
rules and similar restrictions is that they provide a way of
recognizing who believes, hence whose oaths are to be trusted.
An extreme version of this is a situation where being a member
of the group is itself costly, so costly that nobody would
choose to join unless he really believed in the religion.
Arguably that describes those who participated in the early
years of the Mormon church, when the faithful were fleeing most
of the rest of mankind to set up their own refuge in what would
become Utah, and equally describes the core of believers who
accepted expulsion from Mecca in order to join Mohammed in
Medina.
Which suggests that religions such as the LDS or Islam, at
least in their early stages, have a significant advantage over
more conventional and less controversial rivals; they know who
can be trusted, because nobody who can't will join. Arguably an
analogous situation exists for political movements. There are
undoubtedly advantages to being in power, but also a significant
disadvantage—since identifying with the party in power pays,
there is no easy way of distinguishing dedicated believers who
can be trusted from rice Christians who cannot.
Appendix: Hatfields and McCoys, The Feud that Mostly
Wasn't
According to a popular tale, the Hatfields and McCoys, two
families of Appalachian hillbillies living on opposite sides of
the Tug Fork, the border between Kentucky and West Virginia,
started killing each other before the end of the Civil War and
continued to do so through a long series of revenge killings,
each inspiring the next, for some decades thereafter.
The real history is shorter and less dramatic. Asa McCoy
volunteered for the Union Army, was invalided out, returned to
the Tug valley, and was killed, a murder often claimed to have
been the first in the feud. There is, however, no evidence that
his death had anything to do with a family feud, and who killed
him was never discovered. Practically everyone in the Tug Valley
other than Asa, both Hatfields and McCoys, was pro-Confederate,
providing an obvious motive for his killing.
The first definite conflict between Hatfield and McCoy
occurred 13 years later, when Old Ranel, the patriarch of the
McCoy clan, suspected that Floyd Hatfield had stolen one of his
hogs. Instead of getting down his rifle and telling his boys to
fetch theirs, however, Ranel took his suspicions to the nearest
Justice of the Peace. Floyd Hatfield was tried and acquitted. A
year and a half later, two of Ranel's nephews got in a fight
with Bill Staton, a relative of both families who had been a
witness for Floyd Hatfield's side in the trial, and killed him.
They were arrested, tried, and acquitted on grounds of
self-defense—on the Hatfield side of the river by a Hatfield
judge. No revenge killings followed.
The first exchange of violence fitting the pattern of a
proper family feud occurred in 1882. In the course of an
election day fight, Ellison Hatfield was badly wounded by three
of the McCoys. The three were arrested and on their way to the
Pikeville, Kentucky, jail when their party was intercepted by a
larger group led by Anse Hatfield and the prisoners seized. The
captors, uncertain whether Ellison's wounds were mortal, waited
until he died and then killed the three McCoys.
That should, of course, have brought forth return violence
from the McCoys. What actually happened was that they took the
matter to a Kentucky court, which issued warrants for twenty-one
of those involved in the killing but did nothing else. Five
years passed with no further violence.
At which point a new governor of Kentucky was elected who
happened to be a friend of Perry Cline, a lawyer, friend and
distant relative of Ranel McCoy. Cline persuaded the governor to
announce rewards for Anse Hatfield and his fellow killers and
begin extradition proceedings. Kentucky posses crossed the state
border into West Virginia with no authorization from its
authorities, killed Anse's uncle, captured nine of those charged
with the earlier killing and brought them back to Kentucky,
where they were eventually tried and convicted; one was hanged,
the other eight given life sentences.
That set off the second and final instance of retaliatory
killing; a group of Hatfield supporters attacked Ranel's home,
burned it, and in the process killed two of his children. That
was the point at which the conflict began to draw national
attention, with newspapers describing it in dramatic, and wildly
exaggerated, terms. Also the point at which the whole conflict
was over, at least for the two families.
Not, however, for the lawyers. The governor of West
Virginia demanded the return of the nine citizens of his state
who had been kidnapped at the bidding of the governor of
Kentucky, carried off, and tried in a Kentucky court. The case
eventually reached the Supreme Court which held that although
the kidnapping was illegal, there was no recourse; once the nine
were in Kentucky, the Kentucky court could try them.
Two things are worth noting about the story. The first is
that at most seven killings are clearly due to conflict between
the families, of which five were revenge killings, two the
killings that inspired the revenge. The other is that, so far as
we can tell, the “feud” would have ended with a total of only
four killings—for five years had ended—had not the state
government of Kentucky chosen to revive it.
References
Becker, Gary S. & Stigler,
George J. , "Law Enforcement, Malfeasance, and Compensation of
Enforcers," 3 J. Legal Stud. 1 (1974).
Friedman David, "Private Creation
and Enforcement of Law -- A Historical Case." Journal of Legal
Studies, (March 1979), pp. 399-415.
"Efficient Institutions for the
Private Enforcement of Law." Journal of Legal Studies, June
(1984).
Hidden Order: The Economics of
Everyday Life:
HarperBusiness 1996.
Law's Order: What Economics has
to do with Law and Why It Matters, Princeton University Press, 2000.
"Contracts in Cyberspace," 6 Journal of Internet Law 12 (Dec. 2002).
"From Imperial China to Cyberspace: Contracting Without
the State." Journal of Law, Economics and Policy, July 2005.
Landes, William M. & Posner,
Richard A., "The Private Enforcement of Law," 4 J. Legal Stud.
1 (1975)
Llewellyn, Karl N. and Hoebel, E.
Adamson, The Cheyenne Way, U. of Oklahoma Press (1983).
MacDowell, Douglas M., The Law in Classical Athens,
Cornell University Press 1978.
Sterling, Bruce, The Hacker Crackdown. Law and Disorder on
the Electronic Frontier. Bantam
(1993). Available online at:
http://www.mit.edu/hacker/hacker.html
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