The Market for Law

Consider a society in which the production and enforcement of law is entirely private. Individuals contract with rights enforcement firms to protect their rights and arrange for the settlement of legal disputes to which they are a party. Each pair of enforcement firms contracts with an arbitration agency, a private court, to settle disputes between their customers, agreeing to accept and enforce the verdicts. That agreement is enforced by the discipline of constant dealings; an enforcement firm that refuses to accept a court decision against its customers will find few other firms willing to play a game of “heads I win, tails we roll again.”