ECO 481:Public Choice Theory

Week 14 – Pt. IWeek 14 – Pt. I

Chaos Theory:Chaos Theory:

Private Legal Private Legal

SystemSystemDr. Dennis Foster

Legal System - Basic IssuesLegal System - Basic Issues

• Government-provided is a monopoly

• Isn’t efficient nor equitable.

• Relies on threat of the use of force.

• RPM: Mechanics of “market anarchy.”

• Libertarian premise:– The Non-Aggression Principle

No one has the right, under any circumstances, to initiate force against another human being, nor to delegate

its initiation.

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, or science, and it takes no government to

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

interactions of freely acting individuals…Murder isn’t wrong because it fails the market test…its intrinsic immorality will

find expression through market forces.

Some ApplicationsSome Applications

• Product safety.

•Professional licensing.

• Gun control & Dangerous criminals

ECO 481:Public Choice Theory

Week 14 – Pt. IWeek 14 – Pt. I

Chaos Theory:Chaos Theory:

Private Legal Private Legal

SystemSystemDr. Dennis Foster