Mises Daily

The Possibility of Private Law

In a recent article, I discussed the possibility of private, competing security agencies.  I took for granted the background rule of law (or lack thereof), and merely made the relative argument that a monopoly institution of violence (i.e. the State) would not aid the achievement of a working consensus on legal norms, and that in fact (as history shows) government-controlled societies are certainly susceptible to civil war.  In the present piece, I will elaborate on how law itself could be efficiently and equitably produced in a private setting.


Whether society is in anarchy or under the domination of a State apparatus, individuals will always have disputes. Although most arguments are settled between the parties themselves, some disagreements are too serious for such resolution. In such cases, the disputants (in anarchy) can turn to a judge, who is simply a person who agrees to render an opinion on their dispute.  Although many anarchist theorists link private judges with enforcement agencies in their expositions, we should keep in mind that the two are conceptually distinct.  In its essence, a private judicial ruling is just that—one person’s opinion as to who is right, and what he or she is owed, in a given dispute.

One major difference between private and State judges is that the former only entertain cases when both parties submit to the “jurisdiction” of the judge.  (In contrast, one or both parties in a State court case may strongly object to the judge and/or jury who will decide the issue.)  Cynics of private law may consider this proposal as ridiculous—the very idea that a rapist or bank robber would agree to plead his case before a third party, ha!

However, this glib dismissal overlooks the fact that most disputes in modern commercial society are not between an “obvious” innocent and an “obvious” malefactor.  Rather, it is often the case that both parties to a dispute genuinely believe themselves to be in the right, and would be happy to make their cases in front of a disinterested third party.

Another consideration is that, without the government monopoly and selection of judges based on political pull and demagogic appeal, a crop of professional judges would arise who were, well, quite judicious.  (Any unmarried female judges would quite truly be the fairest maidens in the land.)  When reading their previous opinions on cases in which they had expertise, people would recognize their excellence, and say, “Wow, that was a great ruling!  When I first heard the evidence, I thought the plaintiff was right, but after Judge Barnett explained it with his analogies, the defendant is obviously not guilty.”

In anarchy, people would demand judicial services for all the reasons that people desire law itself:  They would want to satisfy their desire for abstract justice, but they would also want to foster predictable business relationships, as well as enjoy a good reputation among their neighbors.

Let’s consider a concrete example.  Suppose Mark Johnson owns a store and he breaks the arm of Gary Owens, a customer.  Owens proceeds to tell all his friends (and anyone else who will listen) that he was minding his own business when Johnson attacked him.  Now in the standard view (and even to some extent that promoted by anarcho-capitalist writers), unless Owens belongs to a protection agency himself, he has no recourse.

But this is simply not true.  It is bad for business if Owens runs around telling people he was brutally attacked, and if Johnson does nothing to rebut these charges.  If people give any validity to Owens’ story, they will shop elsewhere.  Even beyond the pecuniary aspects, if Johnson is at all a normal human being, he will feel uncomfortable at social events if people are whispering about the tale behind his back.

Consequently, Johnson will publicly invite Owens to bring his charges to any reputable judge who specializes in such cases.  Now if Owens comes back and recommends that they take the case to his brother, Johnson will object that such a trial would be biased.  But if Owens suggests several possible judges, all of whom are unrelated to the disputants and specialize in commercial theft and excessive force, and still Johnson refuses, then the community will give more credence to Owens’ claims of brutality.  The point is that within a private legal system, there would be dozens of fair judges from which to choose; there would be no question on two honest disputants settling on one of them, and hence failure to do so would be interpreted as a sign of dishonesty.


Now once two parties (Johnson and Owens, in our example) agreed on a judge, he or she would presumably hear testimony, admit physical evidence, etc. according to rules and procedures that were designed to best promote the appearance of fairness and objectivity.  After all, the one crucial asset a private judge would have is his or her reputation for unbiased rulings.  In our fictitious case, Owens would probably be allowed to present medical records from the date of the alleged attack, while Johnson would submit the surveillance tapes if he had footage of Owens pocketing merchandise and then resisting when confronted.

When making his final decision, the judge would probably rely on precedent.  He would probably say, “In other cases like this one, judges have found the store owner culpable of excessive force whenever…” and so on.  We should realize that this reliance on precedent is not necessarily due to an abstract conception of ideal law, but also the result of the incentives faced by the judge.  He wants future customers to bring cases before him, and they will be more likely to do so if his prior rulings are based on some type of judicial principles and are consistent with “reasonable” rulings made by other judges.

To see this point, imagine a ridiculous scenario.  Suppose after hearing the evidence from both sides, the judge ponders for a moment and then announces, “I find in favor of the plaintiff, Mr. Gary Owens.  Because of the unwarranted force used by the owner, I hereby declare that justice will be served only when Mr. Mark Johnson gives three hickeys to the plaintiff.”  After such a ruling, this judge would likely go out of business.


Instead of the above ruling that would benefit neither party, suppose instead that the judge had ruled that Johnson owed Owens 50,000 ounces of gold.  Johnson would surely object that this was ridiculous, and would refuse to comply.  He would then appeal the ruling and demand that he and Owens bring the case before a different judge, who would “overturn” the prior ruling.

The incentives here would be similar to the situation that led to the first trial.  Depending on how absurd the first ruling, the community would be more or less understanding of Johnson’s refusal to submit to the decision (even though he had agreed to do so beforehand).  But once a judge had rendered a quite “reasonable” ruling, even if it had gone against Johnson, the store owner would eventually submit in order to put the issue behind him and get back to his business.  As with someone who refused to go to trial at all, someone who continually appealed, especially after multiple rulings that were totally consistent with the prevailing legal norms, would be viewed with suspicion.


The above examples serve to illustrate the fundamental basis of private law: individuals have disputes and want an expert, third party to render an opinion.  Over time, of course, the free market would develop institutional refinements of this basic service.

Most obvious, people could arrange beforehand on the judge (or arbitrator) to be used in the event of a dispute.  (For example, this could be specified in every contract, whether hiring an employee or renting an apartment.)  The legal codes to be applied, the number of permissible appeals, etc. could all be specified beforehand, making it all the more suspicious if one of the parties violated these provisions after hearing the decision of the judge.

The other likely refinement would be the involvement of guarantors, or agencies that would vouch for individuals in the event that they were assessed large fines.  Just as insurance companies presently pay catastrophic damages committed by their clients, so too would such agencies pay the fines if one of their clients were convicted, say, of bank robbery.  In modern societies banks, large employers, real estate agents, etc. would all probably insist on dealing only with individuals who were represented by reputable agencies vouching for them.


One major objection to such a system is that there wouldn’t be one uniform set of laws applicable to everyone.  So what?  If orthodox Jews want to have a rabbi apply the Mosaic Law to their disputes, while atheist libertarians want Stephan Kinsella to apply The Ethics of Liberty to their disputes, why shouldn’t they be allowed to do this?  Yes, “bad laws” might be produced under anarchy, but people would not be subjected to them, or at least not nearly to the extent that they are forced to submit to bad government legislation.  (In the same way, bad books will be produced under anarchy, but no one would be forced to read them.)  In any event, under the government right now, there isn’t a uniform set of laws applied to everyone, so this objection is silly on its face.

Another common objection is that the rich could purchase rulings in a private court system.  Again, this overlooks the rampant corruption in government courts.  At least on the open market, future disputants could avoid judges accused of accepting bribes in the past.  In contrast, under the State the only recourse against a corrupt judge is to hope that the voters remember (and care) and vote him or her out, or that the politicians appoint someone else.

Another typical concern is that my proposed system would work for “rational” people, but not for violent criminals.  In an article such as this, I can only say that every action in a free society would be subject to the judicial process as I’ve described.  I specifically constructed the example to include the use of force (rather than reneging on a debt contract, say) to illustrate the principles involved.  Had Johnson hired a private security firm whose employees broke Owens’ arm, the situation would not be essentially altered.  (Of course, Johnson would do well to patronize only reputable security firms that had a reputation for restraint when dealing with shoplifters.)  This concern is related to the role (if any) of prisons in a free society, and here I do not have the space to deal with this fascinating subject (though I do so in my book ).

Finally, there is the allegation that I am somehow advocating legal positivism, i.e. that I am claiming any “law” that passes the profit-and-loss test is a good one.  Nothing could be further from the truth; my ethical beliefs are informed by my Christian faith, and I am a firm believer in natural law.  But in this article, I am describing not the content of the legal code(s) that would arise in a free market society, but rather the forces influencing their evolution.1   For those Randians who are tempted to email me and claim that there is one objective set of laws that any intelligent thinker can discover through ratiocination, I merely respond:  Even if this were true, no government in history has yet achieved what you desire.2   Perhaps it is time to consider a different approach?


In closing, let me point out two real world examples of “private law” in action.  First, there is the burgeoning arbitration industry.  Just as millions of people opt for market-produced bottled water, despite the “free” government alternative, so too do millions of people resolve their disputes through private arbitration.

For another obvious example, consider the umpires and referees in professional sports.  Despite the clichés, these “judges” have to be generally unbiased, because the owners of teams know that customers would stop watching games if they were rigged.  Although die hard sports fans may still bitterly lament the horrible call back in 1978 (say) that cost their team victory, that’s just the point—you have to go back decades for most teams to remember such a travesty!  And if anyone claimed that his football team had a losing record last season because of bad refs, everyone would know the guy was being absurd.  Especially when it’s not their own team at stake, sports fans know and trust the integrity of their “judicial system.”

To argue for a private legal system is really just to argue against a government-imposed monopoly.  In every other sector, the coercive approach fails, and there is nothing unique about law to change that conclusion.


  • 1For an analogy, imagine that I proposed abolishing the State’s involvement in education. Imagine my critic then saying, “Mathematics is an objective body of truth. Under your proposed system, if it were more profitable to teach the wrong times tables, that’s what would happen. Therefore we need a limited government to ensure proper curricula.”
  • 2After all, Rand’s book is Capitalism: The Unknown Ideal.
All Rights Reserved ©
Support Liberty

The Mises Institute exists solely on voluntary contributions from readers like you. Support our students and faculty in their work for Austrian economics, freedom, and peace.

Donate today
Group photo of Mises staff and fellows