 Law without government. How could that work? To explain it, I'll start with definitions and principles. Then look at a practical example of how a crime is dealt with in a society with law but without government. Then end by talking about how laws emerge through a market process in the absence of government and what kind of laws we could expect from a society with law but without government. Let's start by defining law. Laws are property rules that emerge from the resolution of conflicts. Two facts about the world explain why laws exist. Scarcity of resources and diversity of interests between individuals. These two facts mean there is always a potential for interpersonal conflicts about resource usage. Take an apple. If two people both want to eat it and not share it, they cannot both be satisfied. For conflict avoidance, we need property rules to establish who has the ownership right over the apple. That is, who has the right to decide how the apple is used. The production of these property rules or laws is the law industry. Laws emerge from the services provided by arbitrators asked for their opinion to help resolve a conflict. Now let's define government, which I'm using here interchangeably with the word state. Government is a territorial monopolist over law. It is the sole provider of law, the ultimate decision maker and arbitrator within a territory. Monopolies can only be maintained using force and this is how a government operates. It uses its monopoly of law to exempt itself from rules about the use of force. For example, they declare that stealing is legal when they do it and they call it taxation. So in the field of law, just like every other industry, you can have competition or you can have monopoly. When you have a monopoly, that's government. When you have competition, that's anarchy. Now let's see this in action starting with the simplest possible society. Two people on a desert island, Adam and Ben. They could either live in isolation from each other or they could interact. The interaction could be violent, such as one man killing or enslaving the other, but is more likely to be peaceful as both men will see the benefit in peaceful interactions such as friendship, joint projects or trade. Let's suppose they live peacefully but now they have a conflict. Adam picks some apples from a tree that Ben considers his own. Ben tells Adam to go and find his own apple tree or offers to trade him some apples. Adam replies that Ben has no legitimate claim to own the tree, so he did nothing wrong by picking some apples off it. They have a falling out. With no one else on the island, Adam and Ben have no one they can turn to for help resolving this conflict. Maybe they will have a physical fight about it or maybe they will just leave each other alone going forward. But now suppose a third individual is on the island, Charlie. Now there is a new possibility. Ask Charlie for his opinion and agree to whatever resolution he suggests. This is third party dispute resolution. Adam and Ben both make their cases to Charlie. Charlie must decide who he believes has the stronger claim to the apple tree and then suggest a resolution that he feels will serve justice and maintain peaceful relations on the island. Charlie might decide Ben rightfully owns the tree so Adam should give back the apples and apologise and maybe make amends for his theft by giving Ben some compensation. Or Charlie might decide no one owns the tree so apples can be freely picked from it so Adam gets to keep his apples and Ben is in the wrong for preventing Adam from picking the apples. Or maybe Charlie will find a compromise between the two positions so Adam gets to keep the apples that he already picked but is not allowed to pick anymore. Whatever Charlie decides one party is going to be disappointed but still has the strong incentive to accept the decision for the sake of continued peaceful interactions. In rendering his opinion about ownership of a disputed property Charlie has produced a law. The island now has its first law, that tree is Ben's or that tree is freely available for anyone to pick apples from, whatever Charlie decided. Now suppose later Adam has a dispute with Charlie about some fish. If they cannot resolve it themselves they may ask Ben for his opinion. The same process happens so now Ben has produced a law about fish and then when Ben and Charlie have a dispute they may ask Adam to produce a law for them. Here we have a society with law but without government. There are laws but there is no monopolist producing them. Everyone is of equal status with respect to the laws. What would a monopoly of the production of law be like on our island? Let's suppose that after producing a law for Adam and Ben Charlie decided he wants to be the monopolist of law so when he gets into a dispute with Adam over some fish he refuses to take it to Ben. Charlie says that he is the only person who produces laws on this island so he is going to arbitrate on his own case. Unsurprisingly Charlie makes a law that says he gets to keep the fish. If Adam and Ben accept this situation then Charlie is now a government. He is the final decision maker in all disputes even the ones he is involved in. Now we no longer have a society where everyone is of equal status with respect to the laws. We have a ruler who is above the law because he makes all the laws and everyone else is ruled. It is a master-slave relationship between the ruler and the ruled. Adam and Ben are no longer free. Why would Adam and Ben accept this situation? Isn't it obvious Charlie is just a tyrant, a scoundrel, a bully? They may begrudgingly accept the situation because they fear the use of force from Charlie. But even better from Charlie's perspective would be if he can convince them that a ruler is necessary for social order and that he is their rightful ruler. Because he is outnumbered this kind of propaganda is necessary for Charlie to maintain his position as a monopolist of law. So any society which has three or more people can have laws. Those laws can be produced freely by anyone, we call that a stateless or free society. Or those laws can be produced by a monopolist, a government, a bully that has taken over society. Let us do one more thought experiment on our desert island. But this time there are eleven people in the society. Each of them have a dispute about some coconuts. They need a third party to help them. Now there are nine people they can choose from. They could take their dispute to any of them. On what basis will they choose somebody? The most important requirement is that it must be someone impartial. There is no point taking a dispute to someone who is obviously going to favour one party over the other, like a family member. Other qualities would be that they have a reputation for being fair, honest and wise. The disputants want a serious opinion that they can respect. As the population grows and the division of labour intensifies, some individuals who possess these qualities may find that they can make a living purely by providing third party dispute resolution services. They will be professional arbitrators. They may create firms selling these services. Their customers will be disputants who need help resolving a conflict. Their income will depend on their reputation for making wise and fair decisions. These arbitrators and law providers are not rulers. None of them is in a privileged position. If someone has a dispute with an arbitrator, that dispute is taken to a different arbitrator. If one of the arbitrators started to abuse his position, by ruling on a case involving himself or taking a bribe, his power is quickly checked by his competitors, the other arbitrators. Any of them would happily re-hear the case and make an unbiased ruling on it. Once the wannabe tyrant arbitrator has been exposed, he loses his reputation and his livelihood. It is the best imaginable system of checks and balances on power. Now we move into part two of the video. We've discussed definitions and principles. Now we're going to leave the desert island and consider the real modern complex world. Whenever an industry has been under the control of a monopoly for a long time, it becomes hard to imagine how it could be done differently by freely competing firms. We currently live in a world of governments, monopolists of law, out of control arbitrators making laws in conflicts involving themselves. The principles we discussed of equality under the law and competition between providers may all sound good and it may work on a small scale, but what would that be like in practice in the real world? To explain it, I'm going to take the perspective of an ordinary person living in a hypothetical world with laws but without government. Meet Alice. Alice pays a monthly subscription to a company called Dawn Defense, a protection agency. In return, if Alice ever becomes a victim of a crime, all she needs to do is contact Dawn Defense for assistance. Let's say that Alice becomes a victim of a crime. Some money is stolen from her. At the earliest opportunity, she calls the emergency number supplied by Dawn Defense. If she is in danger, security agents will be sent to her immediately. Alice describes the events, the attacker and her losses to Dawn Defense investigators. Dawn Defense quickly pays out suitable compensation to Alice. Alice has chosen Dawn Defense because they are a reputable provider of these services. They're known to respond very quickly in emergencies to take care of their customers in difficult circumstances, to pay out quickly and generously when one of their customers becomes a victim of a crime and to effectively pursue justice on behalf of their customers. Alice cares about all these things. Companies like Dawn Defense exist to serve the demands we all have for security, law and justice. These companies suffer financially when one of their customers is a victim of a crime. They have a strong incentive to identify and catch the criminal, to satisfy demands for justice, and to recover their cost of having to pay compensation to Alice. Dawn Defense employs skilled detectives to identify criminals. They conclude that Bill was the thief. They issue him a fine. Pay up or force will be used to make you pay up. Bill could admit his guilt and accept his punishment, or he could protest his innocence. Dawn Defense takes great care to not use force against innocent people, so it will take Bill's claims of innocence seriously. They need to be sure they have the right person. Let's take the simplest case first. Bill's arguments are unconvincing. He is obviously guilty and no one is willing to defend him. If he still refuses to pay, Dawn Defense will go ahead and use minimal force against Bill. Acting as agents of Alice the victim, this use of force is retaliatory, not aggressive. But let's suppose it's not so clear cut. Bill subscribes to his own protection agency called Tanna Justice, a competitor of Dawn Defense. As soon as Bill gets accused of a crime, he's on the phone to Tanna Justice, telling them that he is innocent and being unjustly accused and threatened with force by Dawn Defense. Tanna Justice calls Dawn Defense to see what evidence they have. They conduct their own investigation to see whether their customer is truly being unjustly threatened with force here because he is innocent or is being justly threatened with force because he is guilty. If Tanna Justice conclude Bill is guilty as well, they will back down and advise him to pay up. Then we're back to the previous situation with no one to defend Bill. If Tanna Justice conclude Bill is innocent, they will defend him. They will consider the threats made by Dawn Defense to be aggression against their customer, rather than retaliation on behalf of Alice. In this situation, the two protection agencies need to find some peaceful resolution to this conflict, so they will ask the opinion of a third party. Naturally, there are firms in the market that provide this service of helping to resolve conflicts between the protection agencies. These are the court agencies. Dawn Defense and Tanna Justice will have a prior agreement about which court to use. Let's say they agree to go to a court agency called Benson Enterprises. The firm will examine the evidence and arguments expertly presented by the two sides. They will offer their opinion. If the court opines that Bill is guilty, Tanna Justice will back down. If the court opines that Bill is innocent, then Dawn Defense will be made to apologize to Bill, cancel the fine and pay him compensation for the false accusation and threat. And that is how crime is dealt with in a society with law but without government. The difference between this and government is competition versus monopoly. Here there is competition at all levels, impelling excellence, delivering value for customers. The court agencies compete over how well they resolve disputes between protection agencies. Above all, they must maintain their reputation for being impartial, honest, fair and wise. They are being paid to offer a just opinion. Any court can retry a case, and if an injustice is revealed, the responsible court will be shunned by the protection agencies, whether it is due to incompetence or corruption. Each court serves as a check and balance on the power of all the competing courts. The protection agencies compete to provide for their customers the best all-round protection service. It will be insurance based, and the protection agencies will compete on all aspects of the package deal they provide, including home security, self-defence, guards, emergency services, investigators, internal courts, lawyers, debt collectors and law enforcers. In this story, the two protection agencies perform several distinct functions in-house, but these functions may well be outsourced to specialized firms. The market will find the optimal way of structuring the industry. Then there are the watchdogs providing consumer advice, auditors checking due processes followed and the media, all competing for a hint of corruption or incompetence by the protection agencies or courts, forcing them to be consistent and transparent. It is all oriented to satisfying the consumer demand for security, law and justice. Just like every industry, where there is free market competition, what gets demanded is what gets produced. Through competition between court agencies in a stateless society, laws emerge. Now we're going to part three of this video where I'll go more in-depth on the market process of how laws emerge in a stateless society, the economics of the law industry, the mechanism by which consumer demands for laws will be translated into the laws that are provided by the protection agencies. The conflict we looked at between Alice and Bill and their respective protection agencies was a disagreement about circumstances, the identity of the thief, what events really took place. They disagreed on whether Bill was the guilty person, as they used a third party to help them resolve it. What they both agreed upon was that theft is a crime, that whoever committed theft against Alice should be brought to justice, and that the amount of the fine was a just punishment. They agreed on all the principles involved. They only disagreed about the circumstances. So now let's take the opposite example where both sides fully agree on the circumstances, but the disagreement is about a principle. To make the example as extreme as possible, let's say the disagreement is about whether capital punishment is suitable for murderers. Bill murdered Alice. Neither protection agency disputes this fact. This dispute is not about what is true, but what is just. The disagreement is that dawn defence is in favour of the death penalty for murderers, while tanner justice is opposed. There can be no compromise here. A third party opinion is of no use. The protection agencies are not going to be able to agree on a court to approach. Dawn defence has advertised itself as pro-capital punishment. It has promised its customers that it will seek the death penalty against anyone guilty of murder. They could potentially lose lots of customers if Bill, the murderer of Alice their customer, is not executed. Tanner justice is anti-capital punishment. It has promised its customers it will seek to protect them even when they are guilty of murder against anyone who threatens them with the death penalty. They could potentially lose lots of customers if they cannot prevent Bill from being executed. This kind of dispute gets resolved by a stand-down payment being made from one firm to the other. The direction and size of the stand-down payment depends on the bargaining power of the two firms. Here's a numeric example of how these stand-down payments work. Suppose Dawn defence estimates that if it backs down in this case, it will lose $1 million worth of revenue from customers who abandon them because they cannot deliver on their pro-death penalty position. This means they will be willing to pay up to $1 million to ensure that Bill gets the death penalty so that they would hold on to those customers. Tanner justice similarly estimates how many customers they would lose by backing down. They estimate it will lose them $500,000 in revenue, so they would be willing to pay up to $500,000 to stop the execution. So the two sides come to an agreement. Dawn defence offers to pay $800,000 to Tanner justice if they will stand down in this case and allow them to execute Bill. Tanner justice accepts the offer because if their estimates are correct, they gain $300,000 from the deal. Dawn defence is better off by $200,000 on retaining those customers. As with any voluntary trade, both parties benefit from this agreement. Consumers as a group benefit too because they were willing to pay $1 million for Bill to be executed but only willing to pay half a million for him to avoid execution. The reason Dawn pays Tanner and not the other way round is that Dawn had more to lose by not getting their way. In this hypothetical, capital punishment for murderers is the more popular viewpoint. Since Dawn and Tanner are both reputable firms in a mature market, they do not negotiate these stand-down agreements case by case. They have standing agreements about how to handle each situation and regular stand-down payments. This way, everyone knows what will happen in advance and consumers can make an informed choice. Tanner openly declares that while it will not enforce the death penalty itself, they will also not be able to defend their customers from the death penalty if they murder a customer of Dawn defence. For another type of crime, Dawn and Tanner may have a different stand-down agreement. Perhaps Dawn defence is in favour of corporal punishment against violent offenders while Tanner thinks imprisonment is a more suitable punishment. Maybe the majority in this case agree with Tanner so Tanner makes a regular payment to Dawn so that the Tanner way is upheld. Dawn defence customers who support corporal punishment will have to settle for knowing that it will not be used if the violent offender is protected by Tanner. The pattern of payments between these two firms could be complex if they have many disagreements with each other about crime and punishment principles. And there will not just be two protection agencies in society but many. Each pair of agencies will have a set of stand-down agreements with each other for any principled disagreements. Agencies that have the same policy as each other can pool their resources to secure beneficial agreements with the protection agencies they have a mutual disagreement with. For example, all the anti-capital punishment agencies could bid as a group against all the pro-capital punishment agencies for an agreement that capital punishment will not be used against their customers. So this is how consumer demand for laws ultimately determines the laws enforced in a stateless society. It is a market process the products of which are superior to products of the political process. So we can expect laws that emerge from this market process to be superior to laws produced by governments. We can make predictions about what would be illegal in a stateless society by asking are people going to be willing to pay for that law to be enforced? A drug or gun prohibition law may sound appealing when the costs are spread across all taxpayers but will be less so when the costs are borne only by the individuals who choose to pay for it. A protection agency trying to enforce a prohibition law would have to charge customers significantly more to cover the cost of enforcing the law. Principally the cost of attaining stand-down agreements with the competing protection agencies that promise to protect gun owners and drug owners from violations. My prediction is that most people will consider only libertarian laws to be good value for money in the marketplace for laws. This is how law without government will tend towards libertarianism.