ECO 481: Public Choice Theory Chaos Theory I – A Private Legal System II - Private Defense Dr. Dennis Foster

Government based Legal System It is a monopoly It isn’t efficient It isn’t equitable It relies on the use/threat of force.

A Private/Free Legal System? The basis for voluntary associations. Libertarian premise: – The Non-Aggression Principle No one has the right, under any circumstances, to initiate force against another human being, nor to delegate its initiation. Links: +/- NAP RPM: Mechanics of “market anarchy.”

What does the legal system do? Define & protect property rights. Do we need a state to do this? No! Key mechanisms – contracts & insurance. Contracts spell out the nature of our interactions. Insurance provides the validation of the contract. It took no king to produce language, money, or science, and it takes no government to produce a just legal system.

How do you enforce contracts? Professional arbiters (judges) will rule. Parties must agree. Judges have incentive to be fair & impartial. Insurance company pays off on the judgment. Judges will likely follow precedent. Contracts will evolve into standard formats. What if . . . . Parties can’t agree to a judge? Loser won’t pay? Loser has no insurance?

Advantages of a private system Based on restitution, not on punishment. Peer pressure is an important element. Even jails will be private, competitive & voluntary. We eliminate the litigation abuses we now have. Disadvantages??? It is a totally free society, but . . .

Critiques of a private system “Warring” insurance agencies. Will criminals take over? Will insurance companies become the state? What about the children? How do you get original title? How can the market really make these decisions? But “the market” is just shorthand for the totality of economic interactions of freely acting individuals…Murder isn’t wrong because it fails the market test…its intrinsic immorality will find expression through market forces.

Some Applications Product safety. Professional licensing. Gun control & Dangerous criminals

Private Defense - Basic Issues Government-provided monopoly is . . . Inefficient Ineffective Costly Problem of Economic Calculation Military as “island of Socialism.”

It is a market for . . . Military Liability An insurance problem Analogy – earthquake insurance. Collect premiums to cover losses. Tradeoff defense services for  premiums! Free riders? No coverage! Threat to others? Costly! Pure defense. Who buys? Biggest risks. Defense services may be outsourced!

Private Defense - Characteristics Better than state agency. More responsive. Multi-national. Best and brightest. Sharing equipment/resources/intelligence. Defensive advantages.

ECO 481: Public Choice Theory Chaos Theory I – A Private Legal System II - Private Defense Dr. Dennis Foster