ECO 481:Public Choice Theory

Week 14Week 14

Chaos TheoryChaos Theory

Part I – A Private Legal Part I – A Private Legal

SystemSystemDr. Dennis Foster

Government based Legal Government based Legal SystemSystem

• 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?A Private/Free Legal System?

• The basis for voluntary associations.

• Libertarian premise:– The Non-Aggression Principle

No one has the right, under any No one has the right, under any circumstances, to initiate force circumstances, to initiate force

against another human being, nor to against another human being, nor to delegate its initiation.delegate its initiation.

• RPM: Mechanics of “market anarchy.”

Links:+/- NAP

What does the legal system What does the legal system do?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, It took no king to produce language, money, or science, and it takes no government to or science, and it takes no government to

produce a just legal system.produce a just legal system.

How do you enforce How do you enforce contracts?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 Advantages of a private systemsystem

• 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???Disadvantages???

•It is a totally free society, but . . .

Critiques of a private systemCritiques 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 But “the market” is just shorthand for the totality of economic interactions of freely acting individuals…Murder isn’t wrong interactions of freely acting individuals…Murder isn’t wrong because it fails the market test…its intrinsic immorality will because it fails the market test…its intrinsic immorality will

find expression through market forces.find expression through market forces.

Some ApplicationsSome Applications

• Product safety.

• Professional licensing.

• Gun control & Dangerous criminals

ECO 481:Public Choice Theory

Week 14Week 14

Chaos TheoryChaos Theory

Part I – A Private Legal Part I – A Private Legal

SystemSystemDr. Dennis Foster