Law and Order without Coercion
Cole, G. Marcus, Journal of Private Enterprise
Much of the contemporary discussion regarding law and public policy focuses on how government ought to address important issues. From global warming to technological innovation to corporate finance, voters and policy-makers alike share the belief that the tools of government ought to be brought to bear on all of the important matters of our times.
Virtually no attention is given public policy debates, however, to the question of whether government ought to address these important issues. In fact, the larger and more complex the issue, the more policy-makers and opinion leaders assume that government provides the only mechanism for addressing such concerns. Two types of "market failure," in particular, commonly serve as justifications for governmental intervention into and regulation of otherwise private markets and matters. Private market mechanisms are said to fail where society seeks the provision of what are commonly called "public goods," and also where the cooperation of large groups of individuals are necessary in order to accomplish some task. These latter problems, frequently termed "collective action" problems, can coincide with the problem of public goods provision, but can also arise independently of them.
These two typical justifications for imposition of regulation, the "Public Goods" justification and the "Collective Action" justification, have largely been embraced by neoclassical economists, and have been completely unchallenged by legal academics. Nevertheless, the question as to whether and to what extent private actors can regulate their own behavior without government coercion is an increasingly important one.
This Article attempts to answer this question by surveying the literature on private ordering and self-regulating human systems. As such, it demonstrates the many circumstances under which human beings have provided kw and order to govern their affairs without the monopolized use of coercive physical force or violence characteristic of, and indeed defining, governmental regulation.
This Article proceeds in three parts. Part I outlines the commonly relied-upon justifications for the use of coercive governmental force to regulate human affairs. These include the "public goods" justification, as well as the "common pool" justification. The conditions surrounding public goods and common pools are assumed to require governmental intervention and regulation, and typical examples of these are explored here. Part I concludes with an explication of the responses to the public goods and common pool justifications offered by Austrian school and classical economists, which provide logical albeit theoretical market alternatives to regulatory solutions.
Part II bridges theory with reality, by exploring the many and varied historical examples of private order solutions to what neoclassical economists refer to as public goods or common pool problems. In this part, the literature expositing these examples is surveyed, detailing the rise, operation, and decline of sophisticated and complex private legal orders of the past. These orders are significant examples, in part because their functioning was often only interrupted by state action and resort to the government's monopolistic use of legitimized physical force.
Part III brings theory and practice into the present, with an examination of just a few of the many private legal orders that make modern life possible or prosperous. Unlike many of the historical .examples, these modern private legal orders frequently operate "in the shadow of the law" provided by governmental entities. Nevertheless, this survey of contemporary private legal orders illustrates the ways in which many institutions and industries regulate their own members' behavior and affairs, without resort to the coercive use of physical force entailed by governmental regulation.
Part IV explores the future of private ordering, by surveying the literature proposing innovative market-based solutions to problems commonly thought to be the province of governmental regulators. …