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Is Life without the State Always Chaos?

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Tags Free MarketsEntrepreneurship

02/08/2011David S. D'Amato

Egypt's dictator, Hosni Mubarak, objected to the demand that he step down, on the grounds that this would lead to utter chaos in Egypt. Many commentators implicitly agreed with him, warning that anarchy could result unless there were some organized transition to a new government, a new source of law.

The assumption that the state is the only source of law is wrong. Removing the ability of a lone societal institution — namely, the state — to arrogate to itself the right to pronounce law and to decide cases would result, not in disorder, but in a legal framework that more perfectly reflects the norms of society.

If by "anarchy" we mean simply consensual agreements designed to benefit those they bind, then uncontrolled social upheaval is no anarchy at all, merely replacing the state's coercion with more of the same. Subjecting the law itself to the forces of voluntary exchange is the height of order and civilization, detaching the law from the shortcomings of statist control.

In his magnum opus, Man, Economy, and State, Murray Rothbard pointed to the law merchant and admiralty law as areas of jurisprudence that were "developed by privately competitive judges, who were sought out by litigants for their expertise in understanding the legal areas involved." Rothbard's example was intended to illustrate the viability of a model of law without a centralized, hierarchical design, and the myriad benefits that could derive from such a network.

By analogy, today's Internet, with its open-source streams of information and its participatory approach, constantly demonstrates the advantages that Rothbard saw in diffusely located law. As Bruce Benson similarly noted, "law can develop 'from the ground,'" taking shape by reference to the expectations of participants and adapting "as customs and practice evolve." For all of the same reasons that top-down arrangement of the economy at large ought to be avoided, a legal framework superimposed on activities within society — insulated from the influences of competition and foisted upon society by fiat — is profoundly undesirable.

Instead of such an arbitrarily decreed paradigm for legal services, society should adopt a voluntary, free-market approach, whereby what Avery Wiener Katz described as legal professionals' "skill at detecting the underlying social customs and conventions" would be fostered rather than impaired. Indeed, this focus on "detecting," on the discovery rather than pronouncement of the law, is and has been the central advantage of the Anglo-American common law, a tradition that gives substance to the claim that law is best when it reflects the presupposed calculations of actors.

As against a code-based system that allows a legislative body to thrust their insular formulations of the law onto free people acting within society, the common law — at its best — is an apparatus for unearthing the customary law that exists beforehand, that is, independent of a particular judge's perception of it. As articulated by the eminent British jurist William Blackstone, "Such of [the laws] as are valid derive all their force, and all their authority, mediately or immediately, from this original [law of nature]."

Any lawyer will tell you that there are few things that vex a trial-court judge more acutely than to be overturned by a court of appeals, to be effectively upbraided for "getting the law wrong." Thus, the appeals process gives judges an incentive toward having the most sound and prevailing understanding of the law and away from issuing opinions that flout the parties' assumptions about the process. They must follow these incentives or lose their legitimacy in the public view.

As it happens, the American legal system and federalism itself are built upon the notion that in fact it is process, rather than the "parchment guarantees" of static, black-letter law, that furnishes the kinds of results we find worthwhile. The division of powers immanent in the tripartite federal government, and that between the federal and state governments, are instances of competition deliberately initiated in order to prevent the kind of unitary finality that underlies government dominion over the law.

While all statists make positive gestures to their odd idea that the "buck" has to stop somewhere (i.e., that legal disputes need some terminal point or ultimate referee), even they implicitly acknowledge that the best results grow out of just the opposite compositional structure. When, for instance, Congress passes a law, we never achieve complete certainty as to its definitive constitutional posture until that time when the Supreme Court might review the statute (if indeed it does at all), and even then nothing is to say that a law deemed constitutional might not later be struck down.

Further, "concurrent jurisdiction" creates overlaps in the authority of courts to hear disputes and "circuit splits" between the federal courts of appeals pit tribunals and opinions against one another, all undermining the idea so beloved by statists that we need someone with "the final say."

Litigants do not recognize and submit to the judgments of the courts because they are final in some fantastic sense completely detached from anything actually occurring in our current legal system. Rather, individuals defer to judgments of courts to the degree that those decisions are thought to be appropriately undergirded by cogent reasoning and by referral to respected and controlling legal authority. It is society's trust in the institutions that occasions acquiescence to the law.

But how does society achieve that trust? How do we cultivate courts that themselves submit not to their own capricious impulses about a case but to the proper touchstones of fairness and justice? It is clear enough — born out daily in, for example, international commercial relationships — that some courts are fairer than others, and they are sought after by disputants for their objectivity and lack of receptiveness to bribes. Business actors in some areas of the world will routinely steer clear of their countries' own venal and unreliable courts in favor of those of nations, such as the United Kingdom, with reputations for impartiality and evenhandedness in adjudicating business litigation.

Such businesspeople include in their agreements "forum-selection" clauses, in effect choosing between service providers the world over, and these clauses are commonly enforced to allow the parties their choice. Even in the lack of a Supreme Court–like tribunal charged with acting as the terminal depository for intercourt dissimilarities or disputes, business is conducted across international boundaries and courts accede to jurisdiction not by their sheer, coercive proclamation, but out of the range of options of the parties.

As Alfred Cuzán, Rothbard, and others have noted, even though states relate to one another, in practice, within a framework of anarchy, this has not rendered impossible peaceful, workable trade across national boundaries; and "there is no more need," taught Rothbard, "for a monopoly government over the citizens of one country than there is for one between the citizens of two different nations."

In the "anarchy" of the law of nations, courts regularly appeal to customary-law standards that have (and require) no codification. Legal scholars' traditional worries about "forum shopping" (roughly, the practice of seeking a court more favorable to a particular theory of a case), therefore, do not at all tend to justify arguments against a free market for legal services. As a practical matter, it is just this kind of direct competition between courts, without monopoly privileges or unnaturally added costs, that yields an orderly and cost-effective administration of justice.

Contrary to the assumptions underlying the state's coercive monopolization of the law, no common-law lawyer would consider arguments for engrossing the authority of law within one body or institution as anything but the most abortive endeavor toward the goal of justice. Through, as described by Rothbard, "confer[ring] a monopolistic privilege, and therefore a restrictionist price," the state's enclosure of legal services produces the worst kinds of results, subjecting society to all of the inefficiencies inherent in planning.

And the lessons of Mises and Hayek regarding coercively steered economies, and all of their insights regarding the disjunctions of information and the resulting misallocations of resources, are readily applicable to the market for access to adjudication. Besides strangling the supply of legal resources through professional licensure and restrictions on alternatives to its formal courts, the state's "monocentric" institutions are, observed Randy Barnett, "hopelessly unresponsive to consumer needs and desires."

As a feature of a social system, responsiveness is not something that can be instituted by high-handed mandate. It must originate in the relationships between entities. Gregory Scott Crespi examined these "attempt[s] to prescribe substantive results rather than merely define decision maker boundaries" where they relate to free-speech jurisprudence. Explicating an Austrian approach to law and economics, he discussed the idea that decision-making authority ought to be located

in those social processes best designed to allow individuals to obtain and utilize the necessary and dispersed information, and to provide feedback — and incentives for its effective utilization — concerning the consequences of decisions. (emphasis added)

Crespi's goals — aims that law-and-economics scholars have grappled with in attempting to model legal decisions and organization in ways that internalize the costs of behaviors in those who carry them out — are best attained through what Rothbard called "freely competitive judiciaries." These bodies, more than just the theoretical postulations of economists, have existed within the intervening spaces of the state's preeminence, and function on a rationale that, if carried to its logical end, would result in a more "accurate and efficient" justice system.

Where law-and-economics literature has traditionally focused on "substantive results," perhaps at the expense of attention to what we might think of as constitutional or structural concerns, praxeology shifts the analysis. In criticizing the idea of the liberal state as a "neutral" instrument capable of disinterested, objective application to society, Luigi Marco Bassani and Carlo Lottieri argued that such a "neutralization of politics … is simply impossible." The state does not operate on society within a vacuum, distinct from the people who carry out its activities, so the idea that it would be unprejudiced by the interests of the ruling class ignores important issues.

The law-and-economics emphasis on the effects of legal decisions and outcomes similarly disembodies the law from people and institutions, mistakenly setting it up as a detached utensil. Building from Mises's understanding that "the state is a human institution, not a superhuman being," any evaluation of its component parts and its laws requires attention to a theory of human action, that is, to praxeology.

Data, like words, can be made to serve fallacious claims, and proper praxeological scrutiny allows us to avoid the problems that Mises and Rothbard found in any overly empirical approach. Rothbard noted that although mathematics is "seemingly more precise and basking in the reflected glory of the physical sciences," it is inadequate to fully illuminate economics. This task needs the logical "edifice" of human action. Likewise, a law-and-economics method that makes the mistake of looking for utility-maximizing mathematic formulas in the law overlooks the most important area of inquiry.

Crespi observed a similar problem in the tendency of the neoclassicists to "[copy] their models mostly term for term" from those of Newtonian physics. By blindly appealing to "hard science," they ignored other, less conspicuous areas of scientific investigation. Unlike other scholarly persuasions, the Austrian School understands that economics, law, and societal institutions more generally are not so easily severable from the idiosyncrasies of actual human beings; accordingly, praxeology escapes what Hayek characterized as the "illusion that we can deliberately create 'the future of mankind,'" that we can draw up the law in such a way as to bring about certain desired outcomes through a plan.

Instead, the free market's ability — specifically, through its price mechanism — to act as a ranking or grading mechanism is suitable to the business of law in the same way as it is other commodities or services. Unfettered competition between courts is capable of providing the results that the discarnate formulae of traditional law-and-economics analysis grasp at but, due to their misapprehension of the underlying problem, cannot generate.

Attempts to shape the law according to decrees from the outside are doomed to all of the deficiencies we would expect from central planning. Cost-benefit coherence and the avoidance of the externality problems of flawed judicial decision making ought to be organized according to the "spontaneous order" of voluntary agreement and cooperation.

Notwithstanding their insistence to the contrary, governments, through their monopoly on law, stand in the way of order and promote lawlessness. If we allow the market to do its job, returning law to the sphere of what Albert Jay Nock called "social power," injustices we have come to identify with our legal system will wither and fall away.

Genuine revolution does not spring forth from wanton violence or even widespread protests; it instead grows, like the common law itself, organically and nonviolently from the practices of individuals in society. Rather than unbridled mayhem, law without the state would mean law without the stranglehold of groundless declarations or of special interests. Accountability is a byproduct of the diffusion of power within society, and law is too important to be concentrated in and left to the state. The revolutionary legal change that society needs will never come from guns or a coup; it will be the culmination of free people wresting the rule of law from the dominance of the state.

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