Catching a blip of the news today I overheard a conversation about a Texas governor passing legislation to prevent frivolous lawsuits by making anyone who loses a lawsuit responsible for the legal costs of those he filed suit against. Would you assume that this type of legislation would be the norm in a free market for law? I would assume that companies and individuals would pay monthly prices to have access to the court systems and their premium would be based on how many times they sue or are sued, but this is just a guess. Thoughts?
Maybe ‘loser pays’ is more rational, because there’s the choice to settle the dispute out of court when one’s position is indefensible.
Kinsella discussed that in this blog:
http://blog.mises.org/8815/is-loser-pays-libertarian/
He concludes by saying:
In a state-run system, neither loser-pays, nor winner-pays, nor each-side-pays-his-own-fees, is just. The only just system is a voluntary, private justice system where customers of competing justice agencies agree voluntarily ahead of time to some rule–in this case, any of the fee-payment schemes is libertarian since it is agreed to by all sides.