A Free Market in Law Benefits The 99%

I hear an awful lot of socially conscious liberals bemoan the wealth/income disparity. They rightly point out the social injustice present in this disparity. The ultra-wealthy retain for themselves special benefits that the rest of us cannot afford. They "suffer" from affluenza, and live by a different set of rules.

How does the wealth disparity arise?

First, let's acknowledge that while we each may want more wealth, we do not have a guaranteed right of possession. For example, if everyone on Earth were given the same amount of wealth, knowledge, and opportunity at the beginning of a day, they would each have different levels of that wealth at the end of the day. This results in accordance with each individual's different values on how to best spend that wealth. So a disparity in wealth arises as a natural consequence of differences between individuals.

But that same disparity can grow, quite unnaturally, through political means. When society organizes itself to permit a special class of people that follow different rules of conduct, the wealthy grow to inhabit that position. They purchase favor from lawmakers and enforcers, pricing such intervention out of the reach of the masses. What starts off as unequal treatment in the eyes of the Law, results in lawmakers that twist it to enforce the inequality of means and restrict the opportunities available to the masses.

Once the rich have spent some wealth on maintaining their high standard of living, they spend their remaining funds on political manipulation, which can take the form of donations to specific charities or media produced by agenda-pushing think tanks. I don't begrudge the rich this opportunity to try and change the social fabric, as long as they pay the costs of that activity.

Why do we tolerate the disparity?

I do take issue when the rich partner with the political class and push for social change through government intervention. Using the mechanism of campaign contributions, the rich effectively steal my money. They divert my taxes into their pockets, via subsidies for protected industries, special exemption in the eyes of law, and production of propaganda that promotes their social agenda.

For example, under the politically popular support for green and sustainable energy technology, the politically connected corporation Solyndra received and scuttled the wealth of taxpayers, giving them nothing but scandal in return.

Solyndra received a $535 million U.S. Energy Department loan guarantee before going bankrupt. Under the Solyndra restructuring plan, the government is projected to recoup 19 percent on $142.8 million of the loan and nothing on the remaining $385 million.[19] Additionally, Solyndra received a $25.1 million tax break from California's Alternative Energy and Advanced Transportation Financing Authority.[20]

The majority of Solyndra funding was provided by the American Recovery and Reinvestment Act. 

Wikipedia

Though examples of political graft take place in all governments at all levels from local to national, no individual case has yet provoked the ire of the masses to abandon hope of reform and change. The public still clings to the idea that lawmakers can respond to their desires. We find ourselves distracted with promises of bread and circuses, of transparent bureaucracy, of politician accountability. On these empty promises we still hope for change.

What should we do to rectify the disparity?

Recall, that I started this article about wealth, showing how it leads to social manipulation that protects the wealthy class. We do not solve this problem by forming an organized Robin Hood force that robs the wealthy and redistributes to the poor. An agency capable of that feat already exists, and it remains under the control of the very wealthy being targeted.

Government cannot be the answer, because government exacerbates the problem. It enables the politically favored to become wealthy. It enables the wealthy to practice political protectionism. No! We must take away that tool that the wealthy have used to obtain their special status! We must dismantle the iron fist that protects them.

We can lessen the wealth disparity by privatizing law. By wresting law from the manipulation of government and putting in into the hands of individuals who need its services. We need for the law to treat everyone equally.

A Private Market of Law

The production of law requires fewer initial capital expenditures than machinery and electronics. It involves less complexity than computer operating systems and applications. It retains a similarly high cost in education and training compared to technological services. If people produce computers, cars, and most everything else using a system of private investment, why not also law?

Should we convert to a system of private arbitration, I would expect that dispute rulings become more fair in the eyes of the masses, and more accessible.

Consider that arbitrators will persist in competition with each other. We cannot expect that an arbitrator who begins systematically favoring the rich clients at the expense of the poor ones to remain in business. I conceded that the rich clients might use that arbitrator's services with each other, but they would be unable to find willing business partners among the lower economic rungs. By insisting on the use of such an arbitrator, they lose out on valuable business with the masses.

We can also expect that the vast majority of cases arbitrated will occur between people of lower economic status, simply because more of them exist, and they have more interaction with each other. Consequently, for most arbitrators, their majority of clients will be from the lower economic strata, whether directly or through legal insurance agencies, so they will have to take care to make rulings fair to these clients.

The economics of law on a free market on a free market, strongly encourages paying attention to the 99%. because they form the majority customer base. The arbitrator gets squeezed in the provision of law, for they must pronounce rulings fair in the eyes of a majority of clients. While clients get squeezed in their selection of law, for they must choose arbitrators that all parties can agree upon.

The process of the free market produces a law that represents the interests of those who elect to use it. In contrast, our current system produces law via a corrupt political process. The competition driving a free market of law treats the rich person as equally as it treats the poor. Neither one can use the difference in social status as leverage against the other.

Article about the book in The Freeman

Review at Center for a Stateless Society

Society can prosper by producing law outside of government. Within a free market of law, the rich no longer have the ability to practice regulatory capture, drafting laws that favor themselves at the expense of the masses. They no longer have the means to delegate special privileges to themselves. They no longer retain special social status and the resulting benefits. The market will make them pay for their injustices as it does all criminals.

If you don't yet believe in the practicality of a Free Market in Law, please consider the cases that David D. Friedman discusses in Ch 29. Police, Courts, and Laws -- on the Market, of his book Machinery of Freedom, or the chapter about Anarchy and Efficient Law from John Sanders and Jan Narveson's book For and Against the State.

Finally, it doesn't matter that you may not believe my argument. Private arbitrators currently hear more than 80% of disputes within the United States, and their rulings did not admit government guns for enforcement until recently. The Admiral himself benefits from the international market for law, which already covers 20% of WORLD GDP, resulting from international commerce. What government could make a rightful claim to use only its legal monopoly in such disputes?

Update [140105]. The 20% figure comes from the end of Peter Leeson's talk on Anarcho-Capitalism. I think that the 80% figure comes from David D. Friedman's Machinery of Freedom, but in any case it's dated, but I don't expect that it has changed significantly. Check the American Arbitration Association for more recent stats. Also read those wordy papers you signed at the dentist, doctor office, bank checking account, etc. Many of them contain an arbitration clause.

Arguing Against Inflationary Currency by Famous Example

During the last Liberty on The Rocks meeting about Bitcoin, I found myself in an argument with a fellow that claimed that a deflationary currency would harm the economy, because it discourages spending. I quickly countered this opinion by stating that I believed the opposite: that without an encouragement of savings, the economy would collapse.

Alas, he could not say why we would want to privilege spending over saving, other than to state that without spending we wouldn't have exchange. So I pointed out that spending occurs regardless: I need food, water, housing, fuel for my car, clothing, etc. No matter how the underlying currency fluctuates relative to these goods and services, I and everyone else will continue spending. The only effect that promoting discretionary spending over savings has is to promote some industries (such as entertainment) over others. Why does the economy need artificial, and preferential encouragement of these more consumerist industries?

Still, in the face of these questions, my partner in argument had not yet changed his opinion, so I tried a different approach, arguing by analogy.

Suppose that there existed an industry where consumers expected a substantially better product each year, and at a lower price! Would you, as a producer, ever choose to enter this industry, or would you instead decide on something more mundane and stable? A different industry, where you wouldn't have to work as hard at improving product and where sales kept a high price. If customers can expect to purchase a better product at a cheaper price every 6 months or so, then why would they buy today? Surely even sales in this industry would experience low volume. From looking at both sides, and in keeping with your argument about a deflationary currency, would you then predict that this industry remains quite small compared to others, because of the continuously devaluing wares?

Well, devious debater that I am, I just described the electronics/computer industry which has experienced explosive growth unlike any other, in every year since 1960! One of my favorite examples, specifically for knocking down the "we won't have spending without inflation" argument. As if the compulsive, grasshopper consumers need an additional, abstract reason not to save for the future.

Far from discouraging spending, the continuously increased quality has instead generated recurring sales. Rather than saving their ever more valuable dollar, the consumers in this market exhibit strong time preference: they don't want to wait a newer, better, fancier product 6 months hence. They want the latest and greatest RIGHT NOW! Every year a saved dollar can buy more processing power, more memory, lower power consumption, smaller device size, etc. But that incentive for saving hasn't halted the spending. Instead, the rapid pace of change drives sales: once their existing wares become obsolete (which happens quickly) consumers go out and purchase anew.



Unfortunately, I was unable to penetrate the Keynesian mythology that fogged his mind, and my colleague remained unconvinced by what I consider a remarkably compelling example.