First, I'll digress slightly to point out that libertarianism is by no means a single, undifferentiated political philosophy. Among people who refer to themselves as "libertarian," an entire spectrum exists. At one extreme are mainstream conservatives who merely want to reduce the size and power of government by a vague, but typically moderate, amount -- just reduce a tax here, reject a spending increase there. They still want a government, just one that does not interfere with the free market and our daily lives quite as much as the present one does. At the other extreme are radical conservatives who want to "minimize" government ("minarchy") or abolish it altogether to give way to the free market (anarcho-capitalism). Many minarchists say that the only legitimate functions of government are to provide national defense, police, and courts of law. (Ludwig von Mises, perhaps the most influential Austrian School economist, was a minarchist.) Anarcho-capitalism, on the other hand, holds that there are no legitimate functions of government since the very nature of government -- the initiation of coercive force or the threat thereof -- violates the Non-Aggression Axiom which is the foundation of libertarian political theory. (Murray Rothbard, another of the most influential Austrian School economists, was an anarcho-capitalist.)
Let me be clear that the idea of a private legal system falls at the radical end of the libertarian spectrum -- anarcho-capitalism -- since less radical libertarians think a government legal system is necessary. I cannot present all of the many arguments for and against a free-market legal system in one blog post, so I will attempt to summarize only a few of the major ones. Most of these ideas are taken from Murray Rothbard's libertarian manifesto, For a New Liberty.
Question #1: How can society avoid descending into conflict and chaos in the absence of standardized government courts?
This is typically the first question people ask, but it is far too general to be answered by a specific response. The various aspects of this general question will be addressed in the more specific questions that follow, but for now I'll just point out the contradiction inherent in the position that monopoly is undesirable in most, but not all, areas of life. Why is a monopoly in the farming sector, say, considered a bad thing, yet a monopoly in the legal system is considered a necessity? Is it because courts of law are so important to society? Well, what about farming -- isn't food somewhat important to society? How can we point to two different things that are both important to society, and say that one of them must not allow a monopoly but the other one must have a monopoly?
Question #2: Assuming a private legal system were to exist, how would it be financed?
One possible method of financing would be for people to subscribe voluntarily to a court service, paying a monthly premium and calling upon the court if needed. This would be similar to how insurance companies are financed. Another possible method would be for people simply to pay the private courts a fee whenever they choose to use them, and the convicted criminal or contract-breaker would eventually recompense the plaintiff for that fee. (So if the court finds the accused to be innocent, the plaintiff does not recover the fee. This provides a free-market check against the initiation of frivolous lawsuits, for people will know they are unlikely to recover the court fee unless they have a reasonable case.)
Question #3: Okay, so maybe financing for private courts wouldn't be a problem. But who in their right mind would choose a private court over the credibility and respectability of the public legal system?
Plenty of people already have. The use of private arbitration in lieu of public courts has grown for decades, especially in the insurance industry, a trend that is the exact opposite of what those who argue against private courts say should be happening. Evidently a growing number of people and organizations have found the public courts to be clogged, inefficient, and wasteful, so they are increasingly using the free-market alternative of private arbitration to settle their disputes. Private arbitration businesses have an economic incentive to be as fair and rational as possible. They seek to build a positive reputation for quality in their service just as any other business does.
I would add to Rothbard's explanation that almost every person -- especially every child -- has more than a passing familiarity with this basic libertarian concept of voluntary arbitration. Have two of your friends ever had a silly dispute about something (perhaps an arcane piece of trivia or who was "first") they cannot seem to resolve, and they recognized you as having reasonable knowledge of the topic, so they both agreed to let you arbitrate the dispute by declaring who was correct? One friend probably liked your decision more than the other one did, but if they both considered you knowledgeable on the topic, they most likely respected your decision as "final" in some sense. (One can learn a lot about basic truths of human nature just by watching how children spontaneously interact and organize in the absence of adult direction.)
Question #4: Ah, but who enforces the private arbitrators' decisions? Currently they are enforced by the public courts. Therefore, aren't public courts ultimately required after all?
No, they are not. Private arbitrators' decisions did not become legally binding until 1920, but prior to that year the use of private arbitration had grown rapidly. In fact, in medieval England, the structure of merchant law (which the government's courts handled clumsily and inefficiently) grew up completely in private merchants' courts. From the Middle Ages down to 1920, merchants enforced private arbitration decisions through ostracism and boycott. If a merchant refused to submit to arbitration or ignored a decision, the other merchants published this fact in the trade and refused to deal with the recalcitrant merchant. This typically brought him quickly to his senses. These days, with the Internet and credit ratings, ostracism and boycotting can be even more effective than they ever were in the past.
Question #5: Ostracism and boycott may work to enforce arbitrations in private disputes, but they wouldn't always be appropriate or effective in criminal cases. How would private courts enforce their decisions? Aren't libertarians opposed to the use of physical force?
No, libertarians are not opposed to the use of physical force per se. What they are opposed to is the initiation of physical force. In a criminal case, some sort of physical force has allegedly been initiated by the accused. If the accused is convicted, then enforcing his sentence is not the initiation of force but rather the serving of justice. However, justice can only be served after the accused is convicted. Prior to conviction, any physical force used by private police, judges, or marshals against an accused criminal could later be prosecuted as a crime if the accused is found innocent. In particular, no coercive "subpoena power" would exist. Accused criminals would be notified of their upcoming trial, but they would not be forced to attend (however, showing up would definitely help their case!). In contrast to statist systems, no police and judges in a libertarian society could be granted special immunity to use coercion beyond what other people in the society can use.
Question #6: Given your description of how a private court would enforce its own decisions, wouldn't private courts always tend to convict accused criminals in order to justify any use of physical force by its own marshals and judges -- regardless of whether the accused in fact committed the alleged crime?
No, because just as there is an appeals process in the public court system, a private court system would have one as well. In order to gain credibility with consumers and build a reputation for fairness, private courts would have every incentive to enter agreements with other private courts on a reasonable and fair appeals procedure. The simplest procedure would be to allow the defendant, if convicted in the plaintiff's court, to appeal his case at a court of his own choosing. If that second court also finds him guilty, no more appeals can be made -- the criminal has been convicted. However, if the second court finds him innocent, a third court (agreed upon by both courts beforehand) would act as arbitrator to reach the final decision. Effectively, this would mean that if any two private courts reach the same decision, that decision becomes binding on the guilty. With such an appeals procedure in place, any given court would have even more incentive to render fair and accurate verdicts as consistently as possible. For if the consumers started to notice that a particular private court's decisions were contradicted by arbitrating courts in an unusually large percentage of cases, they would tend to avoid using that court.
Question #7: It sounds like the courts' decisions would all be based largely on custom. But customs can differ by location. How could there be a standard, uniform legal code in a private legal system?
The entire law merchant was developed, not by the State or in State courts, but by private merchant courts. It was only much later that government took over mercantile law from its development in merchants' courts. The same occurred with admiralty law, the entire structure of the law of the sea, shipping, salvages, etc. Here again, the State was not interested, and its jurisdiction did not apply to the high seas; so the shippers themselves took on the task of not only applying, but working out the whole structure of admiralty law in their own private courts. Again, it was only later that the government appropriated admiralty law into its own courts.
The major body of Anglo-Saxon law, the justly celebrated common law, was developed over the centuries by competing judges applying time-honored principles rather than the shifting decrees of the State. These principles were not decided upon arbitrarily by any king or legislature; they grew up over the centuries by applying rational -- and very often libertarian -- principles to the cases before them. The idea of following precedent was developed, not as a blind service to the past, but because all the judges of the past had made their decisions in applying the generally accepted common law principles to specific cases and problems. For it was universally held that the judge did not make law (as he often does today); the judge's task, his expertise, was in finding the law in accepted common law principles, and then applying that law to specific cases or to new technological or institutional conditions. The glory of the centuries-long development of the common law is testimony to their success.
In those times, there was no arbitrarily imposed "supreme court" whose decision was binding, nor was precedent (albeit honored) considered automatically binding.
Question #8: But who will appoint the judges to let them perform the task of defining the law?
As the libertarian Italian jurist Bruno Leoni wrote: the people themselves, people who choose the judges with the best reputations and greatest expertise and wisdom:
The appointment of judges is not such a special problem as would be, for example, that of "appointing" physicists or doctors or other kinds of learned and experienced people. The emergence of good professional people in any society is only apparently due to official appointments, if any. It is, in fact, based on a widespread consent on the part of clients, colleagues, and the public at large -- a consent without which no appointment is really effective. Of course, people can be wrong about the true value chosen as being worthy, but these difficulties in their choice are inescapable in any kind of choice.
Question #9: This is all fine and good in theory, but there's no way a private, libertarian legal system would work in the real world. Is there any evidence that this theoretical libertarian nonsense actually works?
Absolutely. I already mentioned the libertarian historical development of merchant law, admiralty law, and Anglo-Saxon common law. But perhaps the most impressive historical example of a society of libertarian law and courts was neglected by historians until relatively recently. And we're not just talking about a society where only the courts and law were libertarian -- we're talking about a society that was completely without a State. It was ancient Celtic Ireland.
Ancient Ireland was libertarian for about a thousand years before it was conquered by England in the seventeenth century. It was by no means a "primitive" society; it was the most advanced, most scholarly, and most civilized society in all of Western Europe for centuries. As Joseph R. Peden, an authority on ancient Irish law, wrote in the Journal of Libertarian Studies in 1977, "There was no legislature, no bailiffs, no police, no public enforcement of justice... There was no trace of State-administered justice."
How's that for evidence that libertarianism can actually work in the real world?
Question #10: Okay, in this single blog post you've won me over to the idea that a private legal system in a libertarian society works in theory and can also work (because it has worked!) in the real world. Where can I learn more about this absolutely fascinating topic?
Outstanding! Start by reading pp. 275-290 from Murray Rothbard's For a New Liberty. It's a free download from the Mises Institute web site. He gives some references and footnotes in that section if you're hungry for further reading. While you're at it, read the whole book. It'll open your mind to a whole new universe of possibilities in political philosophy and economics. Also, I've read one other book titled Complete Liberty by a guy named Wes Bertrand that has sections discussing certain aspects of law in the absence of a State.