Most days I'm an anarchocapitalist. On my off days I'm an extreme minarchist. I've been thinking about what the proper role of a legislature is in society, including whether there is a place for such a thing in a world of zero or near-zero government. There probably is, but the role is a much smaller and more circumscribed role than the one played by the legislature in most modern democracies.
"But in anarchocapitalism," the naive response might begin, "don't you simply contract for everything? Isn't the argument that you don't need government because everything is spelled out in contractual agreements between individuals?" This is wrong, because there are bound to be disputes in any society under any conceivable system of government. Contractual language is bound to be ambiguous, leading to disputes between contracting parties. In a nation state, there are also disputes about what "the law" actually means, and citizens must occasionally sue their governments to assert (or at least clarify) their rights. So that's the first point: under any system of government, you need lawyers, arbitration, litigation, courts and judges to resolve disputes. You need someone who can bang a gavel and say, "Pay him back his $200, or you'll be marked a scoundrel." Anarchocapitalist writers, like David Friedman, Bruce Benson, and Peter Leeson, have quite a lot to say about dispute resolution in the absence of government. You might even say it's the focus of anarchocapitalist literature. Any boob can say, "This all works out fine, because there are prior agreements and the rules are spelled out plainly." But disputes are inevitable. The interesting stuff happens when there are disagreements about the rules and contracts that have been written.
Suppose you have commonly-occurring disputes that are resolved in different ways in different regions. But some firms operate across these different regions, so they need to be compliant with various inconsistent judicial rulings. This could end up being incredibly stifling, because the rule of law is not clear. It differs from one city to the next, because one judge zigs while the other zags. It might be desirable to impose some consistency such that people know the rules ahead of time and can plan accordingly. This is the proper role for a legislature. It should be to clarify the law and resolve opposing judicial decisions regarding similar cases, not to invent new law out of whole cloth. Some amount of pure policy-making might be unavoidable. Maybe your minarchy needs to go to war with a neighboring state, or maybe you face some internal crisis of the kind that was constantly plaguing the United States early in its history. Perhaps there are a few coordination problems too large to be solved privately. We need a canal dug or highway built, so we need an elegant way to secure easements across many thousands of properties. Or we need a unified system of intellectual property rights so that innovators with very high research costs can recoup their investments. I'm sympathetic to the idea that some projects are rendered incredibly difficult, even unfeasible, without a central government overseeing it. Mostly, the legislature should see its role as clarifying existing law, not changing the law to something that some central planner deems desirable. Inventing penalties for the use and sale of drugs, limiting immigration into the country, constraining the allowable range of labor contract provisions, and redistributing wealth are not the proper purview of the legislature. We need to be a lot more humble about our ability to reshape society to make the unpleasant things go away. Legislatures should get out of the business of banning things. But it's probably useful to have groups of representatives assemble and review the existing law to see if it makes sense.
(Great podcast on law versus legislation on Econtalk here, with Don Boudreaux as the guest. "The law" is the set of rules we all implicitly follow. "Legislation" is the set of dictated rules made by fiat. "The law" says you may speed up to about 5 over the speed limit, while "legislation" restricts you to the number posted on the sign. At least in Boudreaux' usage. At any rate this is a very useful concept.)
I'll take an example I've used before: a careless employee who can easily lose his employer a lot of money. The employee takes a call, mishears an order, and upon delivery the customer says, "That's not what I ordered." The employer, who can't tolerate money-losing misplaced orders, fills the correct order and makes the employee pay for the cost of the misplaced one. The employee says, "No fair! Occasional wrong orders are a cost of doing business. It doesn't say anything in my contract about having to pay for a misplaced order. This eats up an hour's worth of my five-hour shift!" The employer says, "This is your fourth misplaced order this week. You are costing me money, so you're going to have to pay for your mistakes." Here there is a legitimate dispute over who should pay. If the employer is wrong and withholds a misplaced-order's worth of wages, he is stealing from his employee. If the employee is wrong, he is insisting on the right to injure his employer with impunity. Someone will have to step in and resolve the conflict. You want to make sure similar cases are resolved in similar ways such that everybody knows the rules ahead of time.
The anarchocapitalist has an answer to this. Judicial decisions can set the default rules, but parties can contract around these rules by explicitly specifying the details. But even here, maybe a judge rules that some obscure provision was buried in the fine print of a simple low-skilled labor contract, and such a person can't be expected to read and understand such provisions. Maybe these kinds of contract provisions get thrown out, and to my point get thrown out inconsistently across regions. Such a society might want something that functions like a legislature, clarifying the law by fiat. Another anarchocapitalist answer is that the contracting parties can specify ahead of time which judge (or which dispute resolution firm) will solve any disputes. (David Friedman describes this kind of arrangement frequently in his talks and (I think) in his excellent book The Machinery of Freedom.) But then I can imagine a class-action suit in which a large number of employees cry foul. "No fair. You stacked the deck against us, so we're suing you in another court." Dispute resolution is hard. It's a little bit question-begging to say, "All potential disputes will be specified ahead of time in the contract," and it's just further question-begging to say, "Methods for resolving disputes will be determined ahead of time in the contract." There can be legitimate disputes over any of the details in a contract, including details about how disputes will be resolved. Once again, this kind of society might want a legislature that clarifies the rules.
Of course, legislation can also be confusing. An attempt to clarify can confuse. "Hmm...the law says: If X, then Y. It also says: If A, then B. Wait, does the condition X apply here? Or condition A? Judges?" So this needs to be done carefully. The inefficiencies of inconsistent judicial rulings might be too small to justify the drawbacks of having a legislature that rules by fiat. Don't mistake me as arguing that an initially anarchocapitalist society will inevitably institute some form of central government. I just want to modestly suggest that dispute resolution is really hard. It's going to suck. Even if anarchocapitalism is better than having a central government, these painful disputes over the rules of the game will arise now and then.
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