In The Papers: Hayekian Anarchism

Ed Stringham and Todd Zywicki argue, in their paper entitled Hayekian Anarchism, that a Hayekian should be in favor of anarchy.

Abstract:

Should law be provided centrally by the state or by some other means? Even relatively staunch advocates of competition such as Friedrich Hayek believe that the state must provide law centrally. This article asks whether Hayek’s theories about competition and the use of knowledge in society should lead one to support centrally provided law enforcement or competition in law. In writing about economics, Hayek famously described the competitive process of the market as a “discovery process.” In writing about law, Hayek coincidentally referred to the role of the judge under the common law as “discovering” the law in the expectations and conventions of people in a given society. We argue that this consistent usage was more than a mere semantic coincidence — that the two concepts of discovery are remarkably similar in Hayek’s thought and that his idea of economic discovery influenced his later ideas about legal discovery. Moreover, once this conceptual similarity is recognized, certain conclusions logically follow: namely, that just as economic discovery requires the competitive process of the market to provide information and feedback to correct errors, competition in the provision of legal services is essential to the judicial discovery in law. In fact, the English common law, from which Hayek drew his model of legal discovery, was itself a model of polycentric and competing sources of law throughout much of its history. We conclude that for the same reasons that made Hayek a champion of market competition over central planning of the economy, he should have also supported competition in legal services over monopolistic provision by the state — in short, Hayek should have been an anarchist.

The authors point out that Hayek’s idea of spontaneous order comes from his experience in noting that institutions such as money can emerge endogeneously (3).  When it comes to serving consumers, “we often don’t know what should be produced until a market test occurs” (6), meaning that not only would a central planner have trouble determining the best way to produce things, a central planner would be lost as to where even to begin the process.

Stringham and Zywicki then point out that there were two Hayeks when it comes to the notion of law:  the first Hayek was in favor of the Rechtsstaat (civil law), whereas the second Hayek was decidedly in favor of common law (8).  This accounts for the difference you can see in reading Hayek’s Constitution of Liberty versus his later Law, Legislation, and Liberty series.  In the former, he dedicates much more discussion to legislative processes, and in the latter, more to judicial processes for evolving a common law.  This bottom-up common law approach is “more conducive to liberty, coordination of individual expectations, and efficient use of disbursed knowledge” (8).  Also, the authors point out that the common law approach is based on the notion that there are pre-societal rules, and the object of judges is to apply the law based on these rules, “discovering” how past precedent and notions of order would lead to judgment in wholly new cases  (9).  The thing is that a verbal articulation of understood rules is not “the law”; rather, the rules, principles, and expectations themselves make up the law (13).

So why was Hayek not an anarchist?  Because, as the authors note, he argued that we need to expect that others will follow the same law as us, and so there needs to be a single legal authority with jurisdiction, able to forge common expectations of behavior (13).  The authors posit a rejoinder, noting that we don’t expect the same thing with currencies:  we don’t need common currencies in order to make an exchange.  I am not totally satisfied with this argument, however, as there is a mechanism for harmonizing different currencies:  exchange rates.  I don’t see a similar legal mechanism in the event that “you have your law and I have mine.”

At any rate, the authors go on to note that there are institutional problems in limiting judges simply to following and applying precedent (17), which is a strong criticism and justly applied.  A weaker criticism is their note that “a view of law wedded to precedent must start with the assumption that all previous precedents are correct” (19).  I don’t buy this, as any follower of common law would tend to believe in the notion of the “crooked timber of humanity.”  Humans make mistakes, are imperfect, and have flaws; this applies to jurists as well.  As a result, the common law system has a number of checks:  appeals courts, en banc hearings (which can act as an appeal within a court), and even going against one precedent when there exists a stronger argument for a better one.  This last point does raise some level of uncertainty in the common law system, but I think it is more flexible than the authors allow.

Finally, the authors point out that international and interstate laws differ, meaning that interpersonal laws may differ without negative consequence (23).  As an Ohioan, I make dealings with Indianians without a great level of difficulty, even though Ohio law differs in some respects from Indiana law.  Thus, it would be entirely possible to see individuals adhere to different, privately provided, legal codes in harmony.

I see two problems with this.  The first one is, to whom do these organizations turn when there is a problem?  In our current world, if Alice hires Legal Firm A and Bob hires Legal Firm B, these two legal firms may sometimes argue over jurisdiction, but generally that is clear-cut, and there is always an arbiter to whom they may turn.  However, suppose that in the world of private provision of law, Alice joins the Court Association A and Bob joins Court Association B.  If Alice and Bob have a legal scuffle, and if the rules of A and B do not jibe, where does it go?  To some higher-up arbiter?  A random choice between A and B?  Whichever court association has the more guns?

The second problem is that we have a system of law denoted by territory.  Going back to the above example, if I make a deal with a resident of Indiana (or India, for that matter) in the state of Ohio, Ohio laws will apply.  With the private provision of law, there is more uncertainty as to which law will apply.  Some of this could be mitigated by defining this before-hand, but that raises the cost of compliance.

All in all, I’m not ready to buy the idea of becoming an anarchist; I think there are still too many unanswered questions for my taste.

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