Anarcho-Capitalism: The Kindergarden Version

Explanations of economics sometimes start with Robinson Crusoe on his island, go on to add Friday, and from there expand to a more complicated and realistic economy. The equivalent for physics is to analyze the trajectory of a point mass moving in a vacuum or a hockey puck on a frictionless table.

I am going to apply the same approach to the explanation, and defense, of a stateless legal order. My objective is not to produce a realistic description of what such an order might look like in a modern society—that was the project of Part III of this book. It is rather to answer, in the simplest possible way, the arguments of those who claim not only that such an order would not work but that it is obvious that it cannot work. A proof is destroyed by a single counter-example. If I can describe a working stateless order, even in a much simpler society than ours, then a proof that such an order cannot work must be wrong.

Imagine a society where population densities are low enough so that everyone knows most of his neighbors, as would have been the case, outside a few cities, in the thirteen colonies in the 18^th century. It is a society sufficiently homogeneous so that most people agree, most of the time, on fundamental moral issues—that theft and murder are wrong, that people are obliged to fulfill their contracts, and the like. That does not mean that nobody will choose to rob or kill; people are good at finding exceptions in their own favor to the moral rules they otherwise agree with. But it does mean that, faced with an accurate account of such an action by someone else, most people will reach the same conclusion as to whether it was right or wrong.

Finally, make it a society without a government.

I believe that you have done something that violates my rights, stolen my cow perhaps. I publicly complain and ask you to return the animal or compensate me. You deny that you are guilty.

I could proceed to threaten you with the use of force, threaten to shoot your cow, or even you, if you refuse my demand, but that would be imprudent. Our neighbors would have no way of knowing whether I was punishing a guilty offender, punishing someone I mistakenly believed to be guilty, or engaged in extortion under pretence of defending my rights. Some of them might help you in the resulting conflict, many would be cautious in the future about dealing with me, someone might even decide that I was a public nuisance—especially if I went ahead and killed you—and remove me.

Instead, I demand that you submit our dispute to a neutral arbitrator, someone who has the reputation in our community of being honest and competent. I offer, if the arbitrator rules against me, to compensate you for your time, trouble, and general unpleasantness. In return, I ask you to agree that if he rules that you did steal my cow, you will return the cow or its equivalent and compensate me for the trouble you have put me to. To make the offer more attractive, I add that I am willing to consider an alternative arbitrator if you want to suggest one, provided he has the same reputation as the one I propose. The reason I do all of these things is not that I want to act justly; as it happens, I am quite sure you stole my cow, having seen you go off with it. The reason is that I want to make the offer attractive enough so that if you were innocent you would accept it.

If you refuse, our neighbors will conclude that you are guilty. Not only will they not object to my threatening force against you, they may offer to help, since you might steal one of their cows next. If you accept, the arbitrator rules against you, and you then refuse to pay me the damages he adjudges, they again conclude that you are the guilty party, again accept, perhaps assist, my use of force against you. If you are guilty, I can prove it to an arbitrator, and you do not want to be subject to the socially sanctioned use of force, your only practical option is to pay up,.

This is a very simple society but it contains most of the essential features of a more realistic one. Criminals exist and are restrained not by moral pressure but by the threat of force. There are good faith disagreements about who owes whom what, but they can be resolved by arbitration. Once you have agreed to an arbitrator, lost, and refused to pay up, the disagreement will no longer be viewed by others as in good faith.

What important features have I left out? One is the problem of information—how do third parties, or for that matter defendants, know which arbitrators are to be trusted? How much do my neighbors know about how I have conducted myself in the past, hence how they should regard me in the future?

These are the same problems that separate a toy model from a more realistic one in the context of ordinary markets. In the world as it is, still more in the world as most libertarians, including those who are not anarchists, want it to be, I still face the problem of deciding which doctors, which teachers, which car repairmen, which computer manufacturers, to trust. We solve that problem in part by word of mouth reputation, in part by professional intermediaries—a university that hires the teacher and is a big enough player to have a reputation it wants to maintain, Consumer Reports, rating agencies of various sorts. Part III of this book described what the intermediary institutions in the market for rights enforcement and dispute resolution might look like.

A second problem I have assumed away is serious disagreement over what rights people have and who has them. Do women have the same rights as men? At what age do children get to be treated as adults? Are there slaves with greatly reduced rights, defined either by race or by their history—perhaps, as in classical antiquity, captured in war or sold for debt. Given enough disagreement over such issues, it might be impossible to find an arbitrator who was acceptable to both disputants and most of their neighbors. But it is worth remembering that, given enough disagreement over such issues, any society, any legal system, is likely to have problem. Disagreement over the last, in the U.S., resulted in four years of warfare with enormous loss of life and destruction of property.

In Chapter 44, I described a society, saga period Iceland, intermediate between the toy society I have just been describing and the modern stateless order I sketched in Chapter 29. It had a legislature and a court system, so did not depend on the sort of informal and decentralized legislation/adjudication I have been describing. But enforcement was entirely private; it was a feud system (not to be confused with a feudal system—the two terms sound similar but are unrelated both in meaning and origin), where the ultimate sanction was private force.

Iceland twice faced a large scale conflict over religion. The first, in the year 1000, was between Christians and pagans. It was settled by arbitration after violence in which perhaps half a dozen people were killed. Compared to similar conflicts elsewhere in Scandinavia, under something closer to central royal authority, it was an extraordinarily peaceful outcome.

The second was the conversion from Catholicism to Lutheranism, forced by the king of Denmark nearly three hundred years after the end of the Icelandic Commonwealth. That time about ten times as many people were killed, out of a smaller population.

Proofs about how alternative legal or social or economic systems will work are hard to come by. But that evidence at least suggests that a decentralized legal system may be able to settle fundamental conflicts somewhat more easily than a centralized system. One possible reason is that it has less need of uniformity—for many, although not all, issues, it can let different people function under different rules. One of the terms of the settlement of the original Christian/Pagan conflict was that, while Christianity became the official religion, private pagan worship was still permitted.