Dispute Resolution System in a Libertarian Society

Economics Political Theory
1

I am interested in finding books and papers that discuss how a legal system, in general, and a dispute resolution system, in particular, would work in a libertarian society.

I think of the following scenarios and wonder how it would be resolved in a libertarian society: A and B enter a contract. A agrees to sell 100 widgets to B for 10 pounds of gold. A delivers the widgets as promised, but B refuses to pay. B claims the widgets were of inferior quality. Similarly, B injures A. A claims he is entitled to 10 pounds of gold as compensation.

How does A get paid his 10 pounds of gold in either case? I understand that the general idea is that A and B would mutually agree on a private court, judge, arbitrator, or mediator of some sort to resolve their dispute. I also understand that B may be ostracized from society if B refuses to submit to a dispute resolution process or to follow the decision made by a court or judge. But, what if B does not fear ostracism and refuses to submit to a dispute resolution process? What if A and B do submit their dispute, A prevails, but B still refuses to pay?

Answers to these questions in this forum would be appreciated, but what I am really looking for is books and papers on the subject. I guess my general question is what force or compulsion, if any, would be used to enforce the law in a libertarian society? Or maybe better said, how would the law be enforced in a libertarian society? Thanks.

Gathering the good forum posts
Rule of law
What Would Happen to Quality of Car Insurance Without Goverment Mandates?
2

A collects stamps. B collects advanced weaponry. B wins.

This is why even with all it’s faults we still need minimal government. You can have all the private security firms you want but that doesn’t resolve the dispute. The loser of a serious dispute is never going to submit to punishment if he has superior firepower. You think a powerful gang leader is going to voluntarily go to jail if he is found guilty by some private court? And how does the average person on the street even know the facts of the case? Maybe the gang leader was innocent?

Also the whole notion of being ostracized is silly. Next time you shop at Walmart see if you can tell who should be “ostracized”.

3

Lyle: I am not aware of anyone who has written at any length on this subject. However, I have been working on an article for sometime on the subject of law under ‘anarchy’ and I think this is one of the easier issues to dispose of. Here’s what I have written on it:

Disputes are costly and risky, privatizing these costs rationalizes disputes. Human rights then begin to become exactly property rights. Rational property law, then, can only exist in the absence of socialization of the costs of disputes. The more that the costs of disputes are deflected from being borne by the decision-makers in the disputes, the less constrained by real scarcity the decision-makers are and the less concerned with the costs of the dispute they will be.

If someone commits a tort (“crime”) against someone else, in a natural order society, a dispute may arise. It is a human right for individuals to settle their disputes in any which way they both find mutually agreeable. Hence, if you both want to “take it outside” and duke it out, that’s your business. So long as both parties agree to this method of dispute resolution, there are no further legal consequences. This is the basis of the idea of the duel. I term this martial contest.

If one party is disproportionately stronger than the other, the outcome of a martial contest is readily deduced by both parties. This “strongarm effect” creates a default outcome to the dispute… whatever the stronger party dictates. That is, might makes right. In modern law, a crime is not an offense against the victim, it is an offense against the State. By converting the dispute from a dispute between people who are nearly peers into a dispute between the State and an individual, a criminal dispute is transformed into the might-makes-right model - the dispute will be resolved in the manner the State says it will be resolved because the outcome of a martial contest between the accused and the State is certain (the accused will be vanquished). This is the basis of modern State courts or Hobbesian law*.

If, on the other hand, one party is not overwhelmingly more powerful than the other, then the outcome of a martial contest is - from the point of view of both parties - somewhat uncertain. Martial contests are an incredibly costly and unfair way to settle disputes and reasonable people will want to avoid these costs and risks. Arbitrated dispute resolution is far more cost effective, even though it involves negotiation, that is, relinquishing some of your interests in order to avoid a martial contest.

Arbitration is just a means to an end: settlement of a dispute without resort to martial contest. Customary law - or simply, law - emerges from a multitude of successfully arbitrated decisions. Experienced and in-demand arbitrators will utilize the “case record” to help parties see what sorts of settlements are realistically possible and which are not. The problem of incalcitrant parties to an arbitrated disputes is exaggerated… why else would the parties be paying an arbitrator except that they are seriously seeking to avoid martial contest?

As part of the settlement of disputes, the party who has wronged another will likely have to submit to the payment of damages - whether these damages constitute restitution only or retribution, as well, would emerge through precedent in the case record. That is, precedents would emerge over time… if you burn my house down, then you have to pay me the value of the house times two. Or, if you run over my dog, you have to either pay some fine or submit to some sort of public humiliation. And so on.

To add to this, let’s look at the case where we have a party who is clearly in the wrong and another who is clearly in the right, both parties fairly well matched in terms of their ability to fight. The party in the right will always choose to argue instead of fight, since he stands to gain much more from arguing at much lower risk, than he can hope to gain by fighting (with much greater risk). The choice facing the party in the wrong is simple: fight or argue?

There are three possible outcomes facing the party in the wrong:

  1. Fight and win everything
  2. Fight and lose everything
  3. Argue and lose something

But the party in the wrong cannot control the outcome of fighting, so he can only choose 1 or 2 together, or 3. If he’s fairly well matched to the party in the right, he stands a fairly good chance of getting outcome 2, which could even include his death. Since he’s clearly in the wrong, choosing 3 necessarily entails losing something but given that he’s submitting to arbitration, he only stands to lose what is customarily judged to be fair, given his actions.

We should expect that, in a natural order society, security services would emerge that would put most people most of the time on a fairly equal footing, in terms of their ability to fight (my PDA vs. your PDA … they’re much more likely to be well-matched than you vs. me). In addition, we should expect that part of what forms the precedents on what are fair judgment awards is informed by how appealing the alternative of fighting looks, by comparison. In other words, the severity of customary awards for this or that tort will be informed by how willing a person is to fight rather than accept such judgments. I believe, for example, that this makes it impossible that arbitrators could “impose” the death penalty, since no one would ever accept certain death versus any other alternative. Hence, the most severe punishment an arbitrator could suggest is outlawing/ostracism (which I would expect would result in the wronged party - and his family - visiting vigilante justice on the party in the wrong).

Clayton -

4

I can’t provide any books or papers right this moment, so I hope you don’t mind if I answer your questions directly.

There’s never any certainty that A will get the compensation that he claims he’s entitled to. He always has the possibility (however small) of taking a loss from the situation. Presumably, this would motivate him to either purchase an insurance policy or self-insure.

In the case of A having an insurance policy, he can file a claim with his insurance company. The insurance company would first see whether A’s claim seems valid (i.e. withstands scrutiny). It would do this because there’s always a risk that A could be trying to defraud it. If the case holds up, it would then contact B and/or his insurance company (if he has one and it’s different from A’s). Note that it may have already made contact as part of its own investigation.

At this point, A’s insurance company would probably first try to negotiate with B and/or his insurance company directly. If that fails, both sides would be motivated to find an impartial arbitrator to judge the dispute. The reasons are:

  1. Neither insurance company would choose an arbitrator that’s biased towards the other side, for obvious reasons.
  2. Neither insurance company would choose an arbitrator that’s biased towards its own side, as the other side would then claim bias and refuse judgement from that arbitrator.
  3. Hence, each would consider its best bet of winning the case to be through an unbiased third party.

If B has a corresponding insurance policy with the same or another insurance company, and B refuses to abide by arbitration, then B would likely be summarily dropped from insurance coverage. This may well have negative consequences for B in the future. However, that doesn’t mean B would be off the hook for the liability. The arbitration could proceed with B placed in absentia. Indeed, it could happen the other way around, with B’s insurance being suspended during the arbitration process and only being reinstated if judgement is not found against him.

Now if A does not have an insurance policy with any insurance company, and B does, then the onus is on him to collect from B’s insurance company. This puts more work on A directly, but otherwise doesn’t change much.

What’s more interesting is the case where B is self-insured and refuses arbitration. As before the judgement could proceed in absentia if the case is deemed to withstand (initial) scrutiny. Presuming that judgement is found against B and he refuses to submit, what could be done? Some form of record would be made stating the facts and outcome of the case. This would be sent to any and all organizations which track creditworthiness. B’s credit rating (such as it may already be) would decline. A or his insurance company could also hire one or more collection agencies to harrass B into paying.

In the specific case of B refusing to pay A for 100 widgets because B found them defective, why wouldn’t B file a claim against A or simply return the widgets to A? By not doing so, B is strengthening A’s case against him.

5

Check out Schaeffer Cox, the Fairbanks Militia and their common law court system run on silver and juries.

They have a simple legal system they have been testing out, and it seems to have promise. There is only so much one can learn from reading intellectuals, academics and ideologues. A working court, solving real issues and confronting real challenges is going to be much more robust than pen to paper theorizing.

6

With all due respect, I think this is a blatant case of both strawmanning and context-dropping.

The strawmanning occurs from assuming that B would necessarily “win” if he collects “advanced weaponry” and that “the loser of a serious dispute is never going to submit to punishment if he has superior firepower”. However, there is no certainty here or with anything else in the future.

The context-dropping occurs from implicitly assuming that the way things would be in a free-market society must be the same as the way things are today. That’s a simple non sequitur. If you’re making that a premise, I simply don’t buy it. Otherwise, if it depends on other premises, what are they?

Keep in mind that only the most naive libertarians believe that a free-market society must have no coercion whatsoever.

7

Not if B wants to send a letter.

Ostracism as understood on these forums and ancaps is different from what ostracism in a free market will likely be. In a free market for law, there will be those who are protected by law, and those who are not (out law). Those who are outside the law, cannot expect equitable treatment by those participating within a lawful order.

Lawful and legal are not the same thing, and until people understand that, it is pointless to try to debate how a free market in defense will work. The entire focus on PDAs as a business model, instead of a lawful order is a critical error.

8

Autolykos: “The strawmanning occurs from assuming that B would necessarily “win” if he collects “advanced weaponry” and that “the loser of a serious dispute is never going to submit to punishment if he has superior firepower”. However, there is no certainty here or with anything else in the future.”

Notice that I wrote, “serious dispute”. Of course if you get ripped off on ebay for a few hundred bucks you’re not going to go to war. I’m talking serious disputes. The most obvious being murder. Someone accused of murder and sentenced to death or life in prison is not going to comply if they have superior firepower. It’s not about economics. It’s self preservation.

Dispute resolution is fundamentally differerent from trade. Trade is a win-win situation that does not involve the use of force. Dispute resolution requires the use of force (or the threat of it). That’s why you can’t leave dispute resolution to the free market. The free market can’t force the resolution on a powerful party.

9

If they do not comply, they will be outlaw. They will need to have superior firepower not just to the claimant, but to everyone within that lawful order. Not only will people not trade with them, they won’t be able to claim the same rights as those people who act within the lawful order. They will be no different than a stray dog. A stray dog with fangs and rabies, but still just a mongrel to be put down.

Failing to abide by a court that seeks to restore both the victim and the aggressor, restoring the latter’s standing in the community by making good on a bad act, means that individual has no interest in participating in good faith in a community. They are persona non grata. They, and their property become a target (opportunity) for everyone.

10

liberty student: “If they do not comply, they will be outlaw. They will need to have superior firepower not just to the claimant, but to everyone within that lawful order. Not only will people not trade with them, they won’t be able to claim the same rights as those people who act within the lawful order. They will be no different than a stray dog. A stray dog with fangs and rabies, but still just a mongrel to be put down.”

First off how would you know they were guilty? Maybe the murder charge was frivolous. Second, how would you recognize these supposed “outlaws”? You think the cashier at Walmart is going to say “Hey, I can’t sell you anything, you’re an outlaw.” This idea that people will be outcast is silly. The only prayer that has of working is in a small village of a few hundred people.

11

Maybe it was frivolous. That is why we go to court. To resolve claims.

They might not get into the store in the first place. Someone might capture them on the road outside. They might not be able to leave their house. But yes, it is very possible that the cashier could check that someone was on the do not serve list. They do exist you know. People do get banned from stores.

It’s actually not silly, and with digital databases and internet communication, it is very easy to create social, political, financial and legal outcasts. Look at Julian Assange. He’s not an outcast by a lawful order, but he has been rendered an outcast by authoritative bodies.

So much so, that he has delivered himself to one of these bodies to face what are clearly frivolous claims.

12

I want to add, that without some knowledge of jurisprudence, it is very hard to debate whether a minimal state or panarchistic system (polycentric legal order) is more or less feasible.

13

Ask him if he knows why the’re meeting in the dessert?

http://www.youtube.com/user/MrLondon#p/u/3/JD44ouab5pc

14

liberty student: “They might not get into the store in the first place. Someone might capture them on the road outside. They might not be able to leave their house. But yes, it is very possible that the cashier could check that someone was on the do not serve list. They do exist you know. People do get banned from stores.”

We’ll have to agree to disagree on this one. I’m not buying it. Peace!

15

I appreciate the time you have taken to respond to my post. It is helpful.

When I ruminate about libertarian/Austrian theory, the logic leads me, quite compellingly, to accept the idea of a state-less society. I have, however, studied law/jurisprudence for more than twenty years and practiced law for more than fifteen years. (Liberty Student, I am not sure if this meets your definition as having “some knowledge of jurisprudence.” I am not sure myself. The longer I have studied law, the more I realize how little I actually know.) My experiences in practicing law and being involved in dispute resolutions are what prompts my questions. I take the theories and try to understand how it would actually work. When I do this, I am less sure that a state-less society is possible and lean towards the idea of a minimal state. Here is why:

What makes the law different from other things that we use to guide our lives is the ability to compel obedience or impose punishments for disobedience by force. Without this force, law is is no different than a set of ethics or moral code. So, the question that follows for me is, in a state-less society who will exercise this power to enforce the law? Because it is the nature and disposition of nearly all people who have power to seek more power and exercise that power improperly, then in a state-less society how will that power be limited and controlled in enforcing the law? These issues come to a head in dispute resolution proceedings. I understand these are broad questions. This is why I am looking for books and papers on these issues. While the discussions in these forums are helpful, I am looking for a more in depth analysis than I think we can achieve here.

Here are three general scenarios involving dispute resolution issues.

First scenario, there is a genuine dispute. All parties agree that a wrong has occurred and that someone is entitled to compensation. The disputes center on who was wronged, who committed the wrong, the extent of the compensation, or some combination of these. Most of these types of disputes are settled through negotiations because of litigation costs and risks. Most parties in this scenario willing submit to the dispute resolution process because they want the matter resolved. Because most settlements are negotiated, which almost always includes assurances that compensation will be paid, compelling payment is not an issue. In a state-less society, I think this will continue to occur. I think in a state-less society even more cases will be settled by negotiation because the non-prevailing party would bear all of the litigation costs. So, the need to compel someone to participate in a dispute resolution process and to honor the decision resulting from the process is not really an issue in this scenario.

Second scenario, the person asserting the claim is not really injured and is advancing, what we call today, a nuisance lawsuit, or the person is actually injured, but is mistaken as to who is liable for those injuries. In a state-less society, these types of claims would be even less frequent. A nuisance lawsuit today usually involves a tort (personal injury) claim. Most US courts in these lawsuits do not impose all of the litigation costs on the non-prevailing party. When they do, it is usually just court costs, but almost never attorney’s fees. So, the uninjured party asserts the claim knowing its risks of having to pay for asserting this false claim is minimal. The other party settles the case to avoid litigation costs. Because in a state-less society the non-prevailing party would bear all of the costs of litigation, nuisance lawsuits would be even more discouraged. For this same reason, a claimant with a valid injury will make a greater effort to make sure she is suing the right person. So, the need to compel someone to participate in a dispute resolution process and to honor the decision resulting from the process is not a significant issue here.

Third scenario, a person has a valid claim and is entitled to compensation. The liable party is known, but refuses to accept liability or to pay compensation. I do not think this would be a widespread problem in a state-less society. I understand what has been discussed by others in this thread. Most people will, as they do now, compensate those they have injured whether though insurance or otherwise because of their ethics, moral codes, desire to maintain their standing in society, etc. For this group of people, the law is basically irrelevant. It is their ethics or sense of moral obligation, not the law, that compels them to compensate those they have injured. But, there are those who will not compensate those they have injured, submit to a dispute resolution process, or honor the results. Society must be able to address this scenario if the law is to have any validity at all. If an injured party does not have a process to compel the liable party to make restitution, then lawlessness is encouraged. Contracts can be beached without consequence. People will be less careful in their interactions with others since they will not be held liable for even their negligent acts, let alone intentional acts. This is the issue I am trying to get at.

I have not found a historical example of a state-less society with a well-developed dispute resolution system. The closest examples I have found are intermittent periods during the common law era of England when the monarch and aristocracy was not so meddlesome. Even during those periods, there was still a minimal state. If a person refused to submit to dispute resolution process, then the injured party would have the state-sponsored court issue an order to compel the liable party to participate. The local sheriff or constable would deliver the order. If the liable party lived outside the court’s or sheriff’s jurisdiction, then the court or sheriff would involve the local court or sheriff who did have jurisdiction. One way or another, the injured party could compel the liable party to submit to the process. If the liable party refused to honor the judgment of the court to pay compensation, then a sheriff could execute the judgment and take property from the liable party and give it to the injured party or sell it and given the proceeds to the injured party. This procedure was of course subject to abuse. The common law (state) courts developed over time safeguards to minimize that abuse.

I am sorry for this long version of my questions. I do not expect libertarian theory to be able to address every conceivable hypothetical. I am just trying to get a better understanding of current libertarian thought on how law might be enforced in a state-less society as opposed to a minimal state society. Most of what I have read and studied about law in a libertarian society address the issues of what the law should be. There is plenty to read and study on this subject. Now, I am looking for how the law will be enforced and disputes resolved in a libertarian society. I have found some writings. These have been summarized, in part, by what has already be posted in this thread. I am just looking for systematic approaches or analysis in books or papers that answer my questions and perhaps the broader question of how laws would be enforced in a state-less society? Who will exercise the power to enforce those laws in a state-less society? How will that power be controlled in a state-less society?

If such books or papers are lacking, then maybe there is room for contribution to the subject by a novice like me. Thanks again for those who have addressed my questions. I really appreciate it.

16

“What makes the law different from other things that we use to guide our lives is the ability to compel obedience or impose punishments for disobedience by force.”

That’s basically the same conclusion I came up with. In the scenarios you gave I think you left out the most obvious one. Criminal disputes. I think criminal disputes really highlight the differences between anarchism and minarchism.

The only book I know of that mentions this is Ayn Rand’s Capitalism the Unknown Ideal. But she only mentions anarchism in a few paragraphs. It’s a great book though.

17

I seriously doubt that death or life imprisonment per se would be punishments for murder in a free-market society. First off, killing the murderer removes any possibility for him to provide restitution. Second, while indentured servitude may occur in order to pay off restitution, there would be no particular length of time required.

How are you defining “the free market”? It’s de facto inaccurate to state or claim that a government has a monopoly over violence or the use of force within its territorial boundaries. Obviously people can and do wield violence or use force without government approval or permission.

If you want to consider coercion to be outside of “the free market”, that’s fine. In that case, any time someone defends his property against an aggressor, he is not engaging in a free-market activity. But that in no way means that there must be one and only one “ultimate authority” which judges all of his disputes. (Strictly speaking, that doesn’t exist even today. The world is divided among various governments.)

Finally, let me ask you this: does the loser of a serious dispute really have superior firepower if the multitude of people around him are all against him? Presume that all of those people are themselves armed.

18

It seems that you’re defining “criminal disputes” as “disputes in which the losing party is punished by violence, imprisonment, or both”. If so, then I’d say that, in all likelihood, there would be no criminal disputes in a free-market society. The “punishments” for all disputes would be restitution payments. In other words, there would be no crimes, only torts. Does this make sense?

19

Autolykos “It seems that you’re defining “criminal disputes” as “disputes in which the losing party is punished by violence, imprisonment, or both”. If so, then I’d say that, in all likelihood, there would be no criminal disputes in a free-market society. The “punishments” for all disputes would be restitution payments. In other words, there would be no crimes, only torts. Does this make sense?”

I guess my definition is a little fuzzy. When I said criminal disputes I had in mind things like murder, rape and armed robbery vs contractual type disputes where there is no violence. So maybe “disputes involving violence” is a better way to say it?

20

That’s fine with me.

Let’s say we both live in a free-market society. I’m a shiftless bum living on the streets, while you live in a comfortable house. One day I decide to break into your house to steal your stuff or maybe even hold you hostage. You find me, put a gun in my face, and order me in no uncertain terms to leave. I do so.

Have you coerced me in that situation? Absolutely. The question is whether I deserved it. It’s not that all coercion is bad or wrong, but that some coercion is. Whether a case of coercion is or not is a matter of morality and law. Note, however, that this means coercion can occur in a free market.

Make sense?