Volume 7, Number 1 Winter 1991/92
by Tom W. Bell
Current Issues In Law
As any cynic will confirm, money and law have a lot in common. But their ties run even deeper than most suspect. Money and law had similar origins: both arose spontaneously out of the undirected actions of individuals seeking common standards for mutual coordination. Money and law developed in parallel fashion, too: medieval Europeans enjoyed competition in currencies and legal systems until monarchies took over both fields. And state monopolies in money and law now present common hazards: they are imposed by fiat, inefficiently operated, and (as the cynics point out) jointly corrupting. However, a new generation of scholars has come to question the need for state monopolies in money and law. In the place of central banks they advocate a free banking system. In the place of state legal systems they advocate overlapping private jurisdictions in free and open competition — a polycentric legal system.
This article offers an introduction to polycentric law. It begins by reviewing research on customary legal systems, using Anglo-Saxon law as an exemplar. Then the article traces how state law rose to domination in the competition among medieval European legal systems. This account reveals that privately produced law survived the state’s onslaught and has recently enjoyed a resurgence. After surveying current theories of polycentric legal systems, I will suggest another parallel between money and law: just as research in free banking has recently enjoyed a surge of interest, so too the study of polycentric law stands on the verge of new and rapid growth. (In this article I employ ” polycentric law,” ” privately produced law,” and ” purely private law” interchangeably. Others use ” non- monopolistic law.” See Randy Barnett, ” Four Senses of the Private-Public Law Distinction,” in Harvard Journal of Law and Public Policy 9 [Spring 1986, pp. 267-276].)
Law Prior to the State
Friedrich A. Hayek finds the origins of law in the process through which complex social orders naturally evolve by a manner akin to natural selection. Not all types of behavior support social life, he explains. Some — like violence, theft, and deceit — undercut it. ” Society can thus exist only if by a process of selection rules have evolved which lead individuals to behave in a manner which makes social life possible.” (F. A. Hayek, Law, Legislation, and Liberty, Vol. 1 [Chicago: University of Chicago Press, 1973], p. 44) The development of these rules predates courts, written law, and even the concept of law itself: ” At least in primitive human society, scarcely less than in animal societies, the structure of social life is determined by rules of conduct which manifest themselves only by being in fact observed.” (Hayek, 1973, p. 44) Because such customary laws exist prior to state laws, they have attracted the attention of those who research polycentric legal systems.
Bruce Benson examines the customary legal system of the Kapauku Papuans of West New Guinea in his recent book on purely private law. (Bruce L. Benson, The Enterprise of Law, [San Francisco: Pacific Research Institute, 1990], pp. 15-21) This ” primitive” legal system exhibited some remarkably sophisticated qualities. It emphasized individualism, physical freedom, and private property rights; sorted out fantastically complicated jurisdictional conflicts; and provided mechanisms for ” legislating” changes to customary law. (For detailed information about the Kapauku legal system turn to Benson’s main source: Leopold Popisil, Anthropology of Law: A Comparative Theory [New York: Harper and Row, 1971].) In a separate work, Benson points out similar features in the legal systems of the Yuroks of Northern California and the Ifuago of Northern Luzon. (Bruce L. Benson, ” Enforcement of Property Rights in Primitive Societies: Law Without Government,” in Journal Of Libertarian Studies, Vol. 9, Winter 1989, pp. 1-26. For more detailed accounts, see Benson’s main sources: Walter Goldschmidt, ” Ethics and The Structure of Society: An Ethnological Contribution to the Sociology of Knowledge,” in American Anthropologist, Vol. 53, October-December 1951, pp. 506-524; E. Adamson Hoebel, The Law of Primitive Man [Cambridge, MA: Harvard University Press, 1954]; R. F. Barton, ” Procedure Among the Ifugao,” in Paul Buchanan, ed., Law and Warfare [Garden City, NY: The National History Press, 1967]. See also Benson’s article, ” The Lost Victim and Other Failures of the Public Law Experiment,” in Harvard Journal of Law and Public Policy ,Vol. 9, Spring 1986, pp. 399-427.)
David Friedman adopts medieval Iceland as his favorite example of a polycentric legal system. He writes that it ” . . . might almost have been invented by a mad economist to test the lengths to which market systems could supplant government in its most fundamental functions.” Friedman summarizes and interprets research on Icelandic law in the piece quoted above and, more briefly, in a later, larger work. (David D. Friedman, ” Private Creation and Enforcement of Law: A Historical Case,” in Journal of Legal Studies, Vol. 8, March 1979, p. 400; The Machinery Of Freedom, 2nd ed. [La Salle, IL: Open Court, 1989]) Several recent or forthcoming works give outstanding introductions to the legal system that flourished in Iceland during the ” free state period,” all highlighting the system’s effectiveness and flexibility. These sources also describe the relations between Iceland’s legal system and the other institutions of this essentially voluntaristic, stateless society. Note that, contrary to popular assumptions, the system did not depend upon a kinship or territorial/tribal social structure. (William I. Miller, Bloodtaking and Peacemaking [Chicago: University of Chicago Press, 1990]; Birgir T. Solvason, Ordered Anarchy and Rent-Seeking: The Old Icelandic Commonwealth, 930-1262 [Fairfax, VA: George Mason University Department of Economics Doctoral Dissertation, forthcoming]; Jesse L. Byock, Medieval Iceland [Berkeley, CA: University of California Press, 1988])
Celtic Ireland’s polycentric legal system has also attracted a great deal of attention. This system flourished for a longer time than any other of which we have detailed knowledge, and has left a truly massive amount of records. (For an introduction to this see Joseph R. Peden ” Property Rights in Celtic Irish Law,” in Journal Of Libertarian Studies, Vol. 1, 1977, pp. 81-95. A more detailed source is the work of D. A. Binchy, ed., Studies in Early Irish Law [Dublin: Irish University Press, 1936] . See also his ” Ancient Irish Law,” in The Irish Jurist, Vol. 1, 1966, pp. 84-92.)
Diligent researchers will find still other historical examples demonstrating the viability of privately produced law. See for instance Harold Berman’s discussion of the European folk law and mercantile law, or E. Adamson Hoebel’s description of Comanche law. (Harold J. Berman, Law and Revolution: The Formation of the Western Legal Tradition [Cambridge, MA: Harvard University Press, 1983]; E. Adamson Hoebel, ” Law Ways of the Comanche Indians,” in P. Buchanan ) Berman points out that in Western legal history, pluralism is the rule and monopoly the exception. See also the accounts of the development of a customary legal system in the mining camps of the old West in Terry L. Anderson and P. J. Hill, ” An American Experiment in Anarcho-Capitalism: The Not So Wild, Wild West,” in Journal of Libertarian Studies (Vol. 3, 1979, pp. 9-29). Still more customary legal systems wait to be researched. (For an anthropological study of systems of mutual responsibility, see Sally Fox Moore, Law as Process: An Anthropological Approach [London: Routledge & Kegan Paul, 1978].) What do these many historical examples of polycentric law tell us? After a wide review of the field, Benson concludes that each customary legal system has six basic features:
1) a predominant concern for individual rights and private property;
2) laws enforced by victims backed by reciprocal agreements;
3) standard adjudicative procedures established to avoid violence;
4) offenses treated as torts punishable by economic restitution;
5) strong incentives for the guilty to yield to prescribed punishment due to the threat of social ostracism; and
6) legal change via an evolutionary process of developing customs and norms. (Benson, 1990, p. 21)
Anglo-Saxon Customary Law
The Anglo-Saxon legal system gives us a particularly good example of a legal system embodying the six features Benson finds throughout customary law. A system of surety, known as borh, provided the foundation of Anglo-Saxon law. Under the borh system a set of ten to twelve individuals, defined at first by kinship but later by contractual agreement, would form a group to pledge surety for the good behavior of its members. The group would back up this pledge by paying the fines of its members if they were found guilty of violating customary law. A surety group thus had strong financial incentives to police its members and exclude those who persistently engaged in criminal behavior. Exclusion served as a powerful sanction: ” Every person either had sureties and pledge associates or one would not be able to function beyond one’s own land, as no one would deal with one who had no bond or who could not get anyone to pledge their surety to them.” (Leonard P. Liggio, ” The Transportation of Criminals: A Brief Political-Economic History,” in Randy E. Barnett and John Hagel III, eds., Assessing The Criminal: Restitution, Retribution and the Legal Process [Cambridge, MA: Ballinger Publishing Co., 1977])
Such reciprocal voluntary agreements have a certain timeless appeal. Consider the modern parallels: like insurance agencies, the surety groups helped members to spread risks by pooling assets; like credit bureaus, they vouched for the good standing of their own members and denied access to outsiders who had demonstrated their untrustworthiness; like credit card companies, they stood behind the claims and acts of their members. Whether ancient or modern, these common solutions to common problems all arose out of the free and spontaneous cooperation of self-interested agents. (For in depth treatment of the borh system and its replacement after 1066 by the related but distinct and non-voluntary system called frankpledge, see William A. Morris, The Frankpledge System [New York: Longmans, Green & Co, 1910], and J. E. A. Jolliffe, The Constitutional History of Medieval England [New York: W.W. Norton & Co, 1961].)
The Anglo-Saxon courts, called moots, were public assemblies of common men and neighbors. The moots did not expend their efforts on creating or codifying the law; they left that to custom and to the essentially declaratory law codes of kings. The outcome of a dispute turned entirely on the facts of the case, which were usually established through ritual oath-giving. The disputants first swore to their accusations and denials. Each party then called on oath helpers (including members of their surety groups) to back up these claims with oaths of their own. For the court to accept any one of these oaths, it would have to be given flawlessly — though the poetic form of the oaths made it easier to meet this requirement. Deadlocks were often settled by ordeals of fire or water. Berman points out that the ambiguity of oath taking and ordeals left room for flexible judgements, while the fear of supernatural retribution and the vital importance of a good reputation made perjury a matter that no one would take lightly. Consequently, these procedures were not simply mystical or ” crazy.” Similar points apply to most studies of customary law.
Anglo-Saxon law had no category for crimes against the state or against society — it recognized only crimes against individuals. As in other customary legal systems, the moots typically demanded that criminals pay restitution or composition to their victims — or else face the hazards of outlawry and blood-feud. Murderers owed wergeld (literally, ” man-money” ) to their victims’ kin. Lesser criminals owed their victims lesser fines, elaborately graded according to the victim’s status and the importance of the limb, hand, digit, fingertip, etc., that had been lost. In recognition of the importance of private property, heavier penalties were also imposed for crimes occurring in or about the home, the most serious being hamesucken, i.e. smashing up someone’s house. This emphasis on the home reflected Anglo-Saxon law’s concern with protecting property rights, including the notion of a protected private space. The law codes of early medieval Europe consisted largely of lists of offenses and the corresponding schedules of payments. In issuing these, Kings were not legislating in the modern sense: they were rather codifying and declaring already existing custom and practice. Like the surety groups, the moot courts depended on voluntary cooperation. Berman writes that
Jurisdiction in most types of cases depended on the consent of the parties. Even if they consented to appear, they might not remain throughout, and even if they remained, the moot generally could not compel them to submit to its decision. Thus the procedure of the moot had to assume, and to help create, a sufficient degree of trust between the parties to permit the system to operate…(Berman, 1983, p. 56)
This Anglo-Saxon customary legal system protected the liberties of the English long and well. Royal law rose to domination only after a bitter struggle, and even then the lasting imprint of customary law helped England to remain a relatively free society.
The Rise of Royal Law
In many societies, state law has advanced rapidly on the heels of military conquest. It entered England, however, with almost imperceptible subtlety. Two factors prepared the stage. First, the constant threat of foreign invaders, particularly the Danes, had concentrated power in the hands of England’s defenders. Second, the influence of Christianity imbued the throne with a godly quality, allowing kings to claim a divine mandate. Onto this stage strode Alfred, king of Wessex, during the last quarter of the ninth century.
Prior to Alfred, men served their kings voluntarily. A king had to offer battle gear, food, and plunder to get others to follow him into battle. Under Alfred and his successors this developed into the fyrd, a levy of men drawn from a locality to form a war host. More importantly, he volunteered to champion the cause of the weak — for a fee. Weak victims sometimes found it difficult to convince their much stronger offenders to appear before the court. Kings balanced the scales by backing the claims of such plaintiffs. This forced brazen defendants to face the court, where they faced the usual fines plus a surcharge that went to the king as payment for his services.
This surcharge, called wite, made enforcing the law a profitable business. King Alfred, strengthened by threat of invasion and emboldened by his holy title, assumed the duty of preventing all fighting within his kingdom. He did this by extending the special jurisdiction which the king had always exercised over his own household to cover the old Roman highways and eventually the entire kingdom. In effect, the boundaries of the royal household expanded to encompass the entire realm, and the protection of the peace and safety of private households was subsumed into that of the king. Alfred declared that anyone found guilty of assault owed him wite for violating the king’s peace. He lacked the ability to back up this claim, however, and it went largely ignored. But he had set a trend in motion. Over the next few centuries royal law would grow stronger, with later monarchs such as Athelstan and Knut creating the skeleton of a royal legal system. This reflected the reality that almost half of England under the later Saxon kings was conquered territory (the Danelaw, the Five Boroughs, and York) which had been overrun by the Vikings after the great invasion of 853 and then regained by Alfred’s successors as kings of Wessex. Faced with the problem of governing territory where the old Saxon institutions had disappeared, they were driven to create a governmental and legal system which was, for the time, unusually uniform and centralized (e.g. in its use of a standardized unit of law and administration, the hundred ). This centralization received a major boost with the Norman conquest of 1066, when an alien minority of rulers found the system they inherited highly congenial. Eventually royal law consumed virtually all of England’s legal order, as it did in countries throughout Europe. But first royal law would have to contend with some stiff competition.
From Polycentric Law to State Law
A legal revolution swept through Europe in the years between 1050 and 1200. While the power of the Church rose to rival that of kings, the law of the church — inspired by the newly rediscovered Justinian codification of Roman law — rose to new levels of sophistication. The key events in this process were the Gregorian reforms and the Investiture Crisis of the twelfth century. The actual issue, whether kings could invest bishops with the symbols of their office and so ” make bishops,” may seem obscure to us, but it had profound effects. These events transformed the church into an independent institution, distinct from monarchies and staffed by a clergy who formed an independent order in society, marked off by their vow of celibacy. (In marked contrast, the church in Byzantium remained the creature of the emperor and never gained independence.) Following its achievement of independence, the church created the great system of canon law, with commentators from Gratian onwards turning a haphazard collection of edicts into a massive, sophisticated intellectual system. A major impetus to this process was provided by the previously mentioned rediscovery of Roman law in the form of Justinian codes, which were a compilation of the decisions of Roman jurists. The Church’s new-found independence in turn helped to develop the state, as kings reformed royal law to give it the order and strength of ecclesiastical law.
Other legal systems entered the fray. Thousands of cities and towns sprang up, leading to new centers of power and the development of urban law. The support of the church and a labor shortage brought an element of reciprocity to the relations between peasants and lords, triggering the emergence of manorial law. Vassals likewise won standing in the separate jurisdiction of feudal law. And the rise of a populous, mobile merchant class promoted the evolution of another form of privately produced law, the law merchant. (See Leon E. Trakman, The Law Merchant: The Evolution of Commercial Law [Littleton, CO: Fred B. Rothman & Co., 1983]. For studies of the way this pluralistic system worked see these excellent collections: John Bossy, ed., Disputes and Settlements: Law and Human Relations in the West [Cambridge: Cambridge University Press, 1983]; Wendy Davies and Paul Touraine, eds., The Settlement of Disputes in Early Medieval Europe [Cambridge: Cambridge University Press, 1986].)
Berman provides the single best source for sorting out this legal tangle in his magisterial Law and Revolution. He there explains how competition between jurisdictions helped to protect individual liberty: ” A serf might run to the town court for protection against his master. A vassal might run to the king’s court for protection against his lord. A cleric might run to the ecclesiastical court for protection against the king.” (Berman, 1983, p.10) The same person, in different capacities (merchant, cleric, vassal, townsman, etc.), enjoyed a significant degree of choice among legal systems, forcing them to compete. This competition for ” customers” and the interaction among rivalrous legal systems resulted in many of the legal innovations that we take for granted today.
For the most part, royal law won this competition among jurisdictions. It had two important advantages over its rivals. The power to tax allowed it to subsidize its legal services. Royal courts absorbed the local functions of the law merchant, for instance, by adopting its precedents and offering to enforce them at bargain rates. Royal law also wielded far greater coercive power than competing legal systems, which depended on reciprocity and trust for their operation. The overarching or paramount power of monarchs enabled them to restrict competition to their jurisdiction, with force the ultimate support for royal action. Thus in England Edward I was able to restrict the growth of private jurisdictions through the Quo Warranto procedure created by the Statute of Gloucester in 1278. (This growth, however, was not restricted entirely: see Robert C. Palmer, The County Courts of Medieval England [Princeton, NJ: Princeton University Press, 1982].) So-called ” weak” monarchs, i.e. those who lacked the physical force to be able to aggrandize their power in this way, were often those whose reigns saw greater prosperity and, not coincidentally, growth of private legal systems. (For an example of this see the account of late medieval Scotland, supposedly plagued by ” weak kings,” given by Jenny Wormald in ” Bloodfeud, Kindred and Government in Early Modern Scotland,” in Past and Present, No. 87, 1980, pp. 54-97, and in Lords and Men in Scotland: Bonds of Manrent 1442-1603 [Edinburgh: John Donald, 1985].)
Henry II stands out as the central figure in the history of English royal law. Through measures such as the Assize of Clarendon he established a permanent court of professional judges, the use of inquisitional juries, regular circuits for itinerant judges, and a system of standardized forms of action via writs. The system of itinerant justices, in particular, reveals Henry’s motivations; these justices also served as tax collectors.
The legal conquests of King Henry II and kings throughout high-medieval Europe established a reign of state law that has lasted to this day. Although grafted to the good stock of customary law, state law grew in strange, twisted ways. This transformation reflected the royalists’ original motives for establishing a monopoly in law and the secret key to their success: restructuring property rights. Customary legal systems viewed crimes as violations of individuals’ property rights, including rights to ” personal peace” ; hence the emphasis on restitution for victims, with the accompanying incentive for individuals to enforce the law. The new royal law classified murder, rape, theft, and so on as crimes against the state, rather than as crimes against individuals. Fines went to the king. Victims got only the satisfaction of seeing criminals suffer corporal punishment. Dissatisfied individuals continued to seek restitution out of court, so state officials forbade them to take justice into their own hands. This sharply reduced victims’ incentives to pursue criminals, and statutes demanding the victims’ cooperation had little effect. The state therefore developed the police powers necessary to enforce its laws on criminals and victims alike. (For an overview of this transformation see Geoffrey Parker and Bruce Lenman, ” The Judicial Revolution,” in N. G. Parker, B. P. Lenman and Victor A. C. Gatrell, eds., Crime and the Law: The Social History of Crime In Europe Since 1500 [London: Europa Press, 1980]. For an account of the U.S. legal system’s poor treatment of victims see William F. McDonald, ” The Role of the Victim in America,” in Barnett and Hagel 1977, pp. 295-307.)
The change from customary to state law did not happen suddenly and finally, nor did it flow in a smooth, one-way process. The change took a very long time, its two main active periods coming during the eleventh and sixteenth to seventeenth centuries. The latter period saw the appearance of centralizing, absolutist monarchies and the so-called ” reception” of Roman law, with customary systems replaced by uniform ones derived from Roman principles. The most notable example of this was the Carolina, a system of romanized criminal law imposed in Germany by Charles V. By contrast, the later Middle Ages had seen a recession of royal power, and the revival of customary law systems in many places.
The Persistence of Polycentric Law
Although state legal systems have amassed immense monopolistic powers, they have never entirely quashed competition among legal systems. States themselves compete to attract human and financial capital. And the law merchant has continued to survive in a realm safely beyond the reach of any one state’s laws: international trade. But even within state boundaries polycentricity has survived into modern times. For example, recent work shows the persistence and even revival of polycentric law in England in the eighteenth and nineteenth centuries. H. W. Arthur’s Without the Law: Administrative Justice and Legal Pluralism in Nineteenth-Century England (Toronto: University of Toronto Press, 1985) looks at the growth of private arbitration services in Victorian England and the revival of old jurisdictions as ways of circumventing the state system. Parliament later terminated this process through the Judicature Acts. Douglas Hay and Francis Snyder have edited a collection containing several papers that look at the way private action supplied services such as law enforcement. (Hay and Snyder, eds., Policing and Prosecution in Britain, 1750-1850 [Oxford: Oxford University Press, 1989])
The United States in particular has enjoyed a rich variety of competing jurisdictions. Each federal, state, county, municipal, and military court system has its own substantive and procedural rules — rules that often come into conflict. But these ” official” jurisdictions barely scratch the surface. In Justice Without Law?, Jerold S. Auerbach records several groups that produced systems of private law: the early Puritan, Quaker, and Dutch settlers; the many various nineteenth century utopian communes; the newly-freed slaves; the Mormons; the Chinese, the Jewish, and other immigrant communities; merchants; and labor/management councils. (Jerold S. Auerbach, Justice Without Law? [New York: Oxford University Press, 1983])
Pioneers, moving beyond the reach of state law, also created their own private legal systems. Terry L. Anderson and P. J.. Hill provide an excellent summary of the laws of the land clubs, cattlemans’ associations, mining camps, and wagon trains. See Benson as well for a fascinating account of private justice on the western frontier. (Anderson & Hill, 1979, pp. 9-29; Benson, 1990, pp. 312-321)
Privately produced law continues to thrive in the U.S. and gives every indication of growing stronger. Americans have a special knack for forming private organizations, each of which produces a set of rules we can justifiably call ” law.” Lon Fuller explains:
If the law is considered as ” the enterprise of subjecting human conduct to the governance of rules,” [Fuller’s own definition] then this enterprise is being conducted, not on two or three fronts, but on thousands. Engaged in this enterprise are those who draft and administer rules governing the internal affairs of clubs, churches, schools, labor unions, trade associations, agricultural fairs, and a hundred and one other forms of human association . . . there are in this country alone ” systems of law” numbering in the hundreds of thousands. (Lon L. Fuller, The Morality of Law [New Haven, CT: Yale University Press, 1969], pp. 124-125)
Many of the organizations that Fuller lists provide law in areas that the state has overlooked or willfully ignored. In recent years, however, privately produced law has grown most rapidly in an area where it competes directly with state law: commercial arbitration.
By the seventeenth century royal courts had absorbed or abolished the local functions of the law merchant. But disruptions in trade caused by the American Civil War triggered a resurgence in commercial arbitration. The war had clogged English courts with cases relating to the uncertain U.S- British cotton trade. Members of the Liverpool Cotton Association tried inserting arbitration clauses into their contracts. Their experiment succeeded, and soon arbitration spread to other trade associations, professions, and countries. (See William C. Woolridge, Uncle Sam, The Monopoly Man [New Rochelle, NY: Arlington House, 1970], pp. 94-110.)
The growth of private arbitration has since removed entire classes of disputes from state courts. The insurance, construction, stock exchange, and textile industries (among others) all make heavy use of arbitration. There are currently about 600 arbitration associations in the U.S. The largest of them, the American Arbitration Association, reported 52,520 case filings in 1989 — up more than 36% from 1980’s figures. Overall, some 90,000 cases were filed with arbitrators in 1989. (See Andrew Patner, ” Arbitration Settles A Lot, Unsettles A Few,” in the Wall Street Journal, April 13, 1990, p. B1.) Why are state courts losing so much business? Because private courts offer greater speed and efficiency.
Theories of Polycentric Law
Economists since Adam Smith have argued that competition in production serves consumers’ interests, while monopolies tend toward sloth and waste. Gustave de Molinari, editor of the Journal des economistes, was probably the first legal theorist who dared to ask why this should not be as true of the law as it is of apples, cotton, and iron. He argued that under the state’s monopoly of law ” Justice becomes slow and costly, the police vexatious, individual liberty is no longer respected, [and] the price of security is abusively inflated and inequitably apportioned. . . .” He therefore advocated a non- monopolistic legal system and projected that once ” all artificial obstacles to the free action of the natural laws that govern the economic world have disappeared, the situation of the various members of society will become the best possible.” (Gustave de Molinari, The Production of Security, translated by J. H. McCulloch [New York: Center For Libertarian Studies, 1977], pp. 14-15. For a more detailed exposition, see Molinari’s Society of Tomorrow [New York: G. P. Putnam’s Sons, 1904].)
Since Molinari, other scholars have developed sophisticated theories of polycentric law. In addition to the work drawing on customary law referred to above, the work of Randy E. Barnett and Morris and Linda Tannehill merits special attention. Barnett criticizes the state’s monopoly in law from first- hand experience as a former prosecuting attorney, and promotes a forward-looking polycentric alternative. (Randy E. Barnett, ” Pursuing Justice in a Free Society, Part One: Power versus Liberty,” in Criminal Justice Ethics, Summer/Fall 1985, pp. 50-72; ” Pursuing Justice in a Free Society, Part Two: Crime Prevention and the Legal Order,” in Criminal Justice Ethics, Winter/Spring 1986, pp. 30-53) The Tannehills employ Ayn Rand’s objectivist ethics to derive the moral superiority and basic features of a system of privately produced law. (Morris and Linda Tannehill, The Market For Liberty [New York : Libertarian Review Foundation, 1984 repr. of 1970 ed.]) The polycentric legal systems advocated by these theorists share several features: the protection of individual rights and private property; voluntary agreements for the provision of security; non-violent dispute resolution; restitution (backed up by insurance against crime losses); compliance enforced primarily through the threat of ostracism; and the evolution of legal norms through entrepreneurial activity. Note that these are essentially modernized versions of the six features that Benson discovered common to all customary legal systems (above).
Advocates of polycentric legal systems disagree about how to justify these common features, however. Murray Rothbard, for instance, argues that private courts would have to obey a legal code ” established on the basis of the acknowledged libertarian principle, of nonaggression against the person or property of others; in short, on the basis of reason rather than on mere tradition…” (Murray N. Rothbard, For A New Liberty [New York: Collier Books, 1978], p. 230) David Friedman, on the other hand, argues that the market in law will tend to protect individual rights because people ” are willing to pay a much higher price to be left alone than anyone is willing to pay to push them around.” (Friedman, 1989, pp. 127-128)
These two forms of justification represent extreme versions of two approaches to the study of polycentric law: the philosophical/normative approach and the economic/descriptive approach. Although many legal theorists mix these two methods, they provide useful means of classifying research in polycentric law.
In Anarchy, State, and Utopia, Robert Nozick employs the philosophical/normative approach to argue against the desirability of a polycentric legal system. (Robert Nozick, Anarchy, State and Utopia [New York: Basic Books, 1974]) His work has triggered a number of defenses of privately produced law couched in terms of moral rights. (Several of these are gathered in the special issue of Journal of Libertarian Studies, Vol. 1, Winter 1977. This contains articles by Barnett, Roy A. Childs, John T. Sanders, and Rothbard. See also George H. Smith, ” Justice Entrepreneurship In A Free Market,” in Journal of Libertarian Studies, Vol. 3, Winter 1979, pp. 405-426.) Outside of this debate, few philosophers have yet to employ philosophical/normative arguments with the sole intent of justifying or refuting polycentric law. The vast literature concerning attempts to justify the state contains arguments that touch on the subject, however — particularly those that address rights to personal autonomy.
Fuller’s Morality and the Law introduced polycentric law to mainstream legal philosophy. Fuller defines ” law” in terms broad enough to encompass privately produced law (as we saw in the quote above), and criticizes legal positivism’s authoritarian tendencies. In ” Toward a Theory of Legal Naturalism,” Barnett argues that Fuller’s reasoning should lead him to repudiate monopolistic legal systems altogether. Barnett then sketches a plan for developing an organic legal philosophy capable of unifying the two contrasting approaches to polycentric law described here. (Randy E. Barnett, ” Toward a Theory of Legal Naturalism,” in Journal Of Libertarian Studies, Vol. 2, Summer 1978, pp. 97- 107)
In the long run, polycentric law poses an interesting problem for philosophers. A great deal of political and legal philosophy aims at justifying the imposition of state law. (Quite a bit less tries to show that no such justification is possible.) But a purely private legal system threatens to render these efforts meaningless. Need one justify that which is freely chosen? Addressing such questions promises to cast light on the means and ends of justification, and on the nature of political and legal philosophy in general.
Researchers of polycentric law employ the economic/descriptive approach more often than the philosophical/normative one. Barnett and Benson apply public choice arguments to analyze the actions of state agents and criticize the perverse incentives created by state legal institutions. Research by Gerald J. Postema and Robert Sugden supports Hayek’s views on the spontaneous development of customary law with game theoretic proofs of the important role that social conventions play in coordinating behavior. (Gerald J. Postema, ” Coordination and Convention at the Foundations of Law,” in Journal of Legal Studies, Vol. 11, January 1982, pp. 165-203; Robert Sugden, The Economics of Rights, Cooperation and Welfare [Oxford: Basil Blackwell, 1986]. See also Robert Axelrod, The Evolution of Cooperation [New York: Basic Books, 1984]; Lawrence Becker, Reciprocity [Chicago: University of Chicago Press, 1986]; and Michael Taylor, The Possibility of Cooperation [New York: Cambridge University Press, 1987])
Economic analysis cuts both ways, however. The most sophisticated critique of polycentric law comes from William M. Landes and Richard A. Posner, who argue on economic grounds that private adjudication depends on state courts to back up its decisions; that it under-produces precedents; and that it creates a confusing hodgepodge of conflicting jurisdictions. This last objection, in particular, raises a crucial issue for any advocate of polycentric law: the question of common standards. Put simply, will a polycentric legal system tend to agree on a common body of law that all of the various jurisdictions recognize? If not, then there will be serious problems, e.g. one jurisdiction regarding adultery as an offense while others do not. In that instance the case for a single definitive source of law, regardless of how many enforcement agencies there may be, becomes very persuasive. (William L. Landes and Richard A. Posner, ” Adjudication as a Public Good,” in Journal of Legal Studies, Vol. 8, March 1979, pp. 235-284) Benson offers convincing counter-arguments to these claims, calling in part on examples of successful private legal systems like the law merchant mentioned above. (Benson, 1990, pp. 221, 228, 277-281, 299-300) Nonetheless, Landes and Posner set a standard of research that those who champion polycentric legal systems would do well to emulate.
However, advocates of polycentric legal systems have yet to employ the economic/descriptive approach to their fullest advantage. The analogy between the private production of law and the private production of money deserves further attention. Note, for example, that courts in a polycentric system do not simply sell judgements. Anyone can name one party of a dispute ” the winner.” By demonstrating wisdom and impartiality, private courts can offer for sale judgements that people will respect. Consider the parallel with free banking: anyone can call a piece of paper ” money,” but people will respect only the currency of banks that demonstrate adequate reserves and good management.
The analogy goes still deeper. Banknotes represent claims to commodities. In a free banking system, only those banks that successfully back up their claims will be able to keep currency in circulation. Bruno Leoni explains the law in similar terms: ” Individuals make the law insofar as they make successful claims.” By this, he means that legal norms arise out of the sorts of claims that have a good probability of being satisfied in a given society. Leoni thus takes polycentricity to its logical extreme: there are as many potential sources of law as there are individually successful claims, each of which might serve as a precedent for later cases. Building on this, Leoni distinguishes between law, which arises out of individual claims, and legislation, which is consciously designed to serve the wishes of those in power. In Leoni’s view law emerges spontaneously and adapts to change, while legislation is engineered to constrain behavior within rigid, unchanging limits. (See Bruno Leoni, Freedom and the Law [Indianapolis: LibertyPress/LibertyClassics, 1991].)
As we have seen, polycentric legal systems tend to generate successful claims to restitution. Just as the claim to a commodity can be transferred from one party to another (via the exchange of banknotes), so too the right to restitution could be transferred from one party to another (via the exchange of ” courtnotes,” we might say). For example, individuals in a polycentric legal system would probably buy insurance to protect themselves against losses due to others’ illegal activity. When insurance companies had to cover their clients’ losses they would assume the right to demand restitution from the responsible parties. The claim to restitution would thus transfer from the original victim to the insurance company. Insurance companies would probably transfer claims to restitution among themselves to settle their accounts, giving rise to features analogous to those that arose among private banks: transferable courtnotes, clearinghouses, and client information bureaus. This transfer of claims to restitution was an important feature of the stateless legal system of Medieval Iceland, allowing relatively weaker victims to gain the support of stronger champions in exchange for a share of the restitution. Even today, law firms often undertake cases in exchange for a portion of the court’s award.
Those who advocate free banking can justify it on the grounds that it brings the economy nearer to a perfect market at general equilibrium. No such ideal yet exists in the law. There are important differences between banknotes and judgements or courtnotes, but combining Leoni’s theory of successful claims with the concept of transferable rights to restitution suggests the possibility of a model for the legal market. The existence of such a model would allow those who advocate a polycentric legal system to justify it on the grounds that it brings the law nearer to its ideal.
Consider, for instance, how we might use this approach to counter the claim that a polycentric legal system would generate conflicting legal standards. In the case of free banking, economic forces lead to a convergence of the various issuing banks on a common standard unit of account and circulation. We should expect a similar process to apply in the case of polycentric law, such that overlapping jurisdictions would converge on a shared set of legal standards. History supports this view, providing several examples of legal systems that coexisted in spite of having quite different contents in certain areas. Consider Gaul and Italy during the early Middle Ages, when Roman and Germanic laws existed side by side with people opting to define themselves as either Romans or Franks/Burgundians/Lombards — something that became increasingly a matter of choice as time passed. In practice, there is a strong tendency for overlapping legal systems to agree in most areas of civil and criminal law. A problem may sometimes arise with regard to ” moral offenses” however, due for the most part to the existence of an actual monopoly resulting from attempts by activist coalitions to seize control of the system.
Future Growth in the Study of Polycentric Law
The powerful parallels between free banking and polycentric law suggest a further parallel: the two fields may come to share a similar intellectual history. Although it followed important works by Vera C. Smith, Friedrich A. Hayek, and others, Lawrence H. White’s Free Banking in Britain: Theory, Experience, and Debate, 1800-1845 (Cambridge: Cambridge University Press, 1984) triggered a surge of interest in free banking. Within a few years of the publication of White’s book, free banking had earned the endorsements of two Nobel Prize-winning economists, coverage by the business press, and even the attention of the World Bank. (See also White’s Competition and Currency [New York: New York University Press, 1989].) New scholarship has blossomed, and scholars like George A. Selgin (The Theory of Free Banking: Money Supply Under Competitive Note Issue [Totowa, NJ: Rowman and Littlefield, 1988]) have developed solid theoretical foundations for free banking. Kurt Schuler reviews these trends in ” Free Banking,” a summary of theory and practice in that field, and predicts that ” As the idea of free banking continues to gather momentum, it will become one of the three or four most widely debated topics in economics.” (Kurt Schuler, ” Free Banking,” in Humane Studies Review, Vol. 6, Fall 1988, p. 11)
The study of polycentric legal systems stands ready to experience a similar surge in interest. Benson’s new book, The Enterprise of Law, promises to do for privately produced law what White’s work did for free banking. As the many references above to The Enterprise of Law attest, Benson has produced a carefully researched and comprehensive introduction to polycentric law. It is sure to stimulate further work in the field.
Interested in studying polycentric law? Don’t be put off by the number of works listed here. A few ” must-reads,” can provide you with a good introduction. I suggest Benson’s The Enterprise of Law as the best general overview of the field; Berman’s Law and Revolution as the most complete historical study of a polycentric legal system; Fuller’s The Morality of Law and Barnett’s ” Toward a Theory of Legal Naturalism” as preliminaries to further legal philosophy on the subject; and Landes and Posner’s ” Adjudication as a Public Good” as the most sophisticated critique of privately produced law.
The study of polycentric law offers many rich opportunities for academic entrepreneurs. For all of the systems of customary law that have been the subject of research, many more wait to be discovered. Interesting historical puzzles remain unanswered: Why did eighteenth century rulers give up the revenue acquired by fining criminals in exchange for corporal punishment? What factors mark the transition from customary to state law? Why has state law won its competition with privately produced law in some areas (as in criminal law) and lost in others (as in certain trades)? And as I’ve already indicated, the theory of polycentric law opens fresh vistas to scholars ready to carry out Barnett’s program for developing a new school of jurisprudence or to those intrigued by the prospect of modeling a market in law.
In conclusion, the study of polycentric law offers the opportunity to research fascinating questions from a fresh point of view. More importantly, however, it offers the opportunity to help discover and develop the legal foundations of a free society based on consent, reciprocity, and justice.
Tom W. Bell is a second-year law student at the University of Chicago. He would like to thank Stephen Davies for substantial contributions to this article.
Copyright 1992 by the Institute for Humane Studies.