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January 14, 2013

The Private Market for Law: Anarchist David Friedman Visits Booth

By Aaron Toomey '14  |  january, 2013, Issue 1

Economist, legal scholar and self-proclaimed anarcho-capitalist Dr. David D. Friedman visited campus Jan. 7 to discuss a controversial topic: the market for law in an anarchist society. Dr. Friedman, who is the son of Chicago's own Nobel laureate economist Milton Friedman, drew a crowd of nearly 50 Booth students to listen to the Santa Clara University professor extoll the virtues of a society rid of government. He argued that freedom, civility and order would still prevail, and in fact thrive, under such a system.

Dr. Friedman, whose works include The Machinery of Freedom: Guide to a Radical Capitalism and Future Imperfect, spoke for about an hour in a talk entitled "The Market for Law." He argued that in anarchy, citizens would have no need for government courts, police or legislative bodies. Rather, individuals would contract with private Rights Enforcement Agencies which would guarantee the protection of their customers from infringement of rights specified in their contracts. Such agencies would settle disputes between customers of competing agencies through private arbitrations. Dr. Friedman dismisses the prospect that these firms would wage war with each other because war is expensive, not to mention bad for business.

Such a world, Dr. Friedman argued in his talk, would actually lead to more efficient legal outcomes and better protected rights than the current system of government, which he calls "legitimized coercion." As an example, he hypothesizes two groups of citizens represented by two different agencies. One group abhors the death penalty, and wishes it to never be enforced for any crime. The other group is in favor of capital punishment and wants their agency to enforce the death penalty for any murder committed against its customers.

Suppose, Dr. Friedman continues, that the first group values the lack of a death penalty at $2 million, while the second group values having the death penalty at $1 million. In an anarcho-capitalist society, the agency representing the anti-death penalty customers would simply pay the pro-death penalty agency some price between $1 million and $2 million. Theoretically, everyone is happy with the outcome unlike today's government-imposed legal system where one group is perennially unhappy because such trades are not possible.

When asked whether such a system would result in the rich having far more rights than the poor, Dr. Friedman admitted the possibility, saying, "It could. But (the rich) have that now. Also, you don't see GM devoting resources to making gold-plated Cadillacs just because some rich people could buy them," implying that firms would not necessarily create vastly unequal "rights bundles" because they would be focused on maximizing their market shares and appealing to a broad consumer base.

One student questioned how a transition to such a society would happen in practicality.

"I'm not a revolutionary," Dr. Friedman noted. "I believe violent revolutions tend to strengthen governments rather than weaken them." He went on to note privatization of traditionally government sponsored functions has been gradually happening for some time, citing package delivery and home schooling, among others.

Technology, in fact, might make such a transition even easier. As more economic and social activity moves to cyberspace, government control and enforcement of real space is becoming less and less relevant. One might imagine a world where all activity could be conducted on-line through virtual reality, rendering the terrestrial jurisdiction of national governments meaningless and leaving private citizens to contract with each other or firms on the design and enforcement of the law.

Even if governments are not eliminated entirely, Dr. Friedman noted that technology and remote productivity will eventually make them more competitive on liberty. Technology makes moving to more libertarian regimes less costly. After all, if a rich woman can be equally productive from anywhere in the world, would she not move to the lowest tax, freest government she can? Dr. Friedman argues we may just find out.

Last Updated 1/20/13
Last Updated 1/20/13