Polycentric Law

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"Polycentric law is a structure of overlapping or competing legal systems. Instead of having a single, monopoly provider of law and legal services, different systems are used to resolve disputes alongside one another.

‘Polycentricity’ (a term first introduced by philosopher and scientist Michael Polanyi) is simpler than it may sound. It means simply ‘many’ (poly) ‘centers’, in this case, centers of law."

2. From the Wikipedia [1]:

"Polycentric law is a legal structure in which providers of legal systems compete or overlap in a given jurisdiction, as opposed to monopolistic statutory law according to which there is a sole provider of law for each jurisdiction. Devolution of this monopoly occurs by the principle of jurisprudence in which they rule according to higher law.

Tom W. Bell, former director of telecommunications and technology studies at Cato Institute, now a professor of law at Chapman University School of Law in California[2] wrote "Polycentric Law," published by the Institute for Humane Studies, when he was a law student at the University of Chicago. In it he notes that others use phrases such as "privately produced law," "purely private law," and "non-monopolistic law" to describe these polycentric alternatives. He outlines traditional customary law (also known as consuetudinary law) before the creation of states, including as described by Friedrich A. Hayek, Bruce L. Benson, and David D. Friedman. He mentions Anglo-Saxon customary law, church law, guild law, and merchant law as examples of polycentric law. He notes that customary and statutory law have co-existed through history, as when Roman law applied to Romans throughout the Roman Empire, but indigenous legal systems were permitted for non-Romans. In "Polycentric Law in the New Millennium," which won first place in the Mont Pelerin Society's 1998 Friedrich A. Hayek Fellowship competition, Bell predicts three areas where polycentric law might develop: alternative dispute resolution, private communities, and the Internet.

The University of Helsinki (Finland) funded a "Polycentric Law" research project from 1992 to 1995, led by professor Lars D. Eriksson. Its goal was to demonstrate "the inadequacy of current legal paradigms by mapping the indeterminacies of both the modern law and the modern legal theory. It also addressed the possibility of legal and ethical alternativies to the modern legal theories" and "provided openings to polycentric legal theories both by deconstructing the idea of unity in law and re-constructing legal and ethical differences." The project hosted two international conferences. In 1998 the book Polycentricity: The Multiple Scenes of Law, edited by Ari Hirvonen, collected essays written by scholars involved with the project.

Professor Randy Barnett, who originally wrote about "non-monopolistic" law, later used the phrase "polycentric legal order." He explains the advantages of such a system in his book The Structure of Liberty: Justice and the Rule of Law.

Bruce L. Benson also uses the phrase, writing in a Cato Institute publication in 2007: "A customary system of polycentric law would appear to be much more likely to generate efficient sized jurisdictions for the various communities involved — perhaps many smaller than most nations, with others encompassing many of today’s political jurisdictions (e.g., as international commercial law does today)."

John K. Palchak and Stanley T. Leung in "No State Required? A Critical Review of the Polycentric Legal Order," criticize the concept of polycentric law.

Legal scholar Gary Chartier in "Anarchy and Legal Order" elaborates and defends the idea of law without the state. [8] Animated by a vision of peaceful, voluntary cooperation as a social ideal and building on a careful account of non-aggression, the book seeks to explain why the state is illegitimate, dangerous, and unnecessary. It proposes an understanding of how law enforcement in a stateless society could be legitimate and what the optimal substance of law without the state might be, suggests ways in which a stateless legal order could foster the growth of a culture of freedom, and situates the project it elaborates in relation to leftist, anti-capitalist, and socialist traditions." (http://en.wikipedia.org/wiki/Polycentric_law)

Theories of Polycentric Law

Tom Bell:

"Economists since Adam Smith have argued that competition in production serves consumers' interests, while monopolies tend toward sloth and waste. Gustave de Molinari, editor of the Journal des economistes, was probably the first legal theorist who dared to ask why this should not be as true of the law as it is of apples, cotton, and iron. He argued that under the state's monopoly of law " Justice becomes slow and costly, the police vexatious, individual liberty is no longer respected, [and] the price of security is abusively inflated and inequitably apportioned. . . ." He therefore advocated a non- monopolistic legal system and projected that once " all artificial obstacles to the free action of the natural laws that govern the economic world have disappeared, the situation of the various members of society will become the best possible." (Gustave de Molinari, The Production of Security, translated by J. H. McCulloch [New York: Center For Libertarian Studies, 1977], pp. 14-15. For a more detailed exposition, see Molinari's Society of Tomorrow [New York: G. P. Putnam's Sons, 1904].)

Since Molinari, other scholars have developed sophisticated theories of polycentric law. In addition to the work drawing on customary law referred to above, the work of Randy E. Barnett and Morris and Linda Tannehill merits special attention. Barnett criticizes the state's monopoly in law from first- hand experience as a former prosecuting attorney, and promotes a forward-looking polycentric alternative. (Randy E. Barnett, " Pursuing Justice in a Free Society, Part One: Power versus Liberty," in Criminal Justice Ethics, Summer/Fall 1985, pp. 50-72; " Pursuing Justice in a Free Society, Part Two: Crime Prevention and the Legal Order," in Criminal Justice Ethics, Winter/Spring 1986, pp. 30-53) The Tannehills employ Ayn Rand's objectivist ethics to derive the moral superiority and basic features of a system of privately produced law. (Morris and Linda Tannehill, The Market For Liberty [New York : Libertarian Review Foundation, 1984 repr. of 1970 ed.]) The polycentric legal systems advocated by these theorists share several features: the protection of individual rights and private property; voluntary agreements for the provision of security; non-violent dispute resolution; restitution (backed up by insurance against crime losses); compliance enforced primarily through the threat of ostracism; and the evolution of legal norms through entrepreneurial activity. Note that these are essentially modernized versions of the six features that Benson discovered common to all customary legal systems (above).

Advocates of polycentric legal systems disagree about how to justify these common features, however. Murray Rothbard, for instance, argues that private courts would have to obey a legal code " established on the basis of the acknowledged libertarian principle, of nonaggression against the person or property of others; in short, on the basis of reason rather than on mere tradition..." (Murray N. Rothbard, For A New Liberty [New York: Collier Books, 1978], p. 230) David Friedman, on the other hand, argues that the market in law will tend to protect individual rights because people " are willing to pay a much higher price to be left alone than anyone is willing to pay to push them around." (Friedman, 1989, pp. 127-128)

These two forms of justification represent extreme versions of two approaches to the study of polycentric law: the philosophical/normative approach and the economic/descriptive approach. Although many legal theorists mix these two methods, they provide useful means of classifying research in polycentric law.

In Anarchy, State, and Utopia, Robert Nozick employs the philosophical/normative approach to argue against the desirability of a polycentric legal system. (Robert Nozick, Anarchy, State and Utopia [New York: Basic Books, 1974]) His work has triggered a number of defenses of privately produced law couched in terms of moral rights. (Several of these are gathered in the special issue of Journal of Libertarian Studies, Vol. 1, Winter 1977. This contains articles by Barnett, Roy A. Childs, John T. Sanders, and Rothbard. See also George H. Smith, " Justice Entrepreneurship In A Free Market," in Journal of Libertarian Studies, Vol. 3, Winter 1979, pp. 405-426.) Outside of this debate, few philosophers have yet to employ philosophical/normative arguments with the sole intent of justifying or refuting polycentric law. The vast literature concerning attempts to justify the state contains arguments that touch on the subject, however -- particularly those that address rights to personal autonomy.

Fuller's Morality and the Law introduced polycentric law to mainstream legal philosophy. Fuller defines " law" in terms broad enough to encompass privately produced law (as we saw in the quote above), and criticizes legal positivism's authoritarian tendencies. In " Toward a Theory of Legal Naturalism," Barnett argues that Fuller's reasoning should lead him to repudiate monopolistic legal systems altogether. Barnett then sketches a plan for developing an organic legal philosophy capable of unifying the two contrasting approaches to polycentric law described here. (Randy E. Barnett, " Toward a Theory of Legal Naturalism," in Journal Of Libertarian Studies, Vol. 2, Summer 1978, pp. 97- 107)

In the long run, polycentric law poses an interesting problem for philosophers. A great deal of political and legal philosophy aims at justifying the imposition of state law. (Quite a bit less tries to show that no such justification is possible.) But a purely private legal system threatens to render these efforts meaningless. Need one justify that which is freely chosen? Addressing such questions promises to cast light on the means and ends of justification, and on the nature of political and legal philosophy in general.

Researchers of polycentric law employ the economic/descriptive approach more often than the philosophical/normative one. Barnett and Benson apply public choice arguments to analyze the actions of state agents and criticize the perverse incentives created by state legal institutions. Research by Gerald J. Postema and Robert Sugden supports Hayek's views on the spontaneous development of customary law with game theoretic proofs of the important role that social conventions play in coordinating behavior. (Gerald J. Postema, " Coordination and Convention at the Foundations of Law," in Journal of Legal Studies, Vol. 11, January 1982, pp. 165-203; Robert Sugden, The Economics of Rights, Cooperation and Welfare [Oxford: Basil Blackwell, 1986]. See also Robert Axelrod, The Evolution of Cooperation [New York: Basic Books, 1984]; Lawrence Becker, Reciprocity [Chicago: University of Chicago Press, 1986]; and Michael Taylor, The Possibility of Cooperation [New York: Cambridge University Press, 1987])

Economic analysis cuts both ways, however. The most sophisticated critique of polycentric law comes from William M. Landes and Richard A. Posner, who argue on economic grounds that private adjudication depends on state courts to back up its decisions; that it under-produces precedents; and that it creates a confusing hodgepodge of conflicting jurisdictions. This last objection, in particular, raises a crucial issue for any advocate of polycentric law: the question of common standards. Put simply, will a polycentric legal system tend to agree on a common body of law that all of the various jurisdictions recognize? If not, then there will be serious problems, e.g. one jurisdiction regarding adultery as an offense while others do not. In that instance the case for a single definitive source of law, regardless of how many enforcement agencies there may be, becomes very persuasive. (William L. Landes and Richard A. Posner, " Adjudication as a Public Good," in Journal of Legal Studies, Vol. 8, March 1979, pp. 235-284) Benson offers convincing counter-arguments to these claims, calling in part on examples of successful private legal systems like the law merchant mentioned above. (Benson, 1990, pp. 221, 228, 277-281, 299-300) Nonetheless, Landes and Posner set a standard of research that those who champion polycentric legal systems would do well to emulate.

However, advocates of polycentric legal systems have yet to employ the economic/descriptive approach to their fullest advantage. The analogy between the private production of law and the private production of money deserves further attention. Note, for example, that courts in a polycentric system do not simply sell judgements. Anyone can name one party of a dispute " the winner." By demonstrating wisdom and impartiality, private courts can offer for sale judgements that people will respect. Consider the parallel with free banking: anyone can call a piece of paper " money," but people will respect only the currency of banks that demonstrate adequate reserves and good management.

The analogy goes still deeper. Banknotes represent claims to commodities. In a free banking system, only those banks that successfully back up their claims will be able to keep currency in circulation. Bruno Leoni explains the law in similar terms: " Individuals make the law insofar as they make successful claims." By this, he means that legal norms arise out of the sorts of claims that have a good probability of being satisfied in a given society. Leoni thus takes polycentricity to its logical extreme: there are as many potential sources of law as there are individually successful claims, each of which might serve as a precedent for later cases. Building on this, Leoni distinguishes between law, which arises out of individual claims, and legislation, which is consciously designed to serve the wishes of those in power. In Leoni's view law emerges spontaneously and adapts to change, while legislation is engineered to constrain behavior within rigid, unchanging limits. (See Bruno Leoni, Freedom and the Law [Indianapolis: LibertyPress/LibertyClassics, 1991].)

As we have seen, polycentric legal systems tend to generate successful claims to restitution. Just as the claim to a commodity can be transferred from one party to another (via the exchange of banknotes), so too the right to restitution could be transferred from one party to another (via the exchange of " courtnotes," we might say). For example, individuals in a polycentric legal system would probably buy insurance to protect themselves against losses due to others' illegal activity. When insurance companies had to cover their clients' losses they would assume the right to demand restitution from the responsible parties. The claim to restitution would thus transfer from the original victim to the insurance company. Insurance companies would probably transfer claims to restitution among themselves to settle their accounts, giving rise to features analogous to those that arose among private banks: transferable courtnotes, clearinghouses, and client information bureaus. This transfer of claims to restitution was an important feature of the stateless legal system of Medieval Iceland, allowing relatively weaker victims to gain the support of stronger champions in exchange for a share of the restitution. Even today, law firms often undertake cases in exchange for a portion of the court's award.

Those who advocate free banking can justify it on the grounds that it brings the economy nearer to a perfect market at general equilibrium. No such ideal yet exists in the law. There are important differences between banknotes and judgements or courtnotes, but combining Leoni's theory of successful claims with the concept of transferable rights to restitution suggests the possibility of a model for the legal market. The existence of such a model would allow those who advocate a polycentric legal system to justify it on the grounds that it brings the law nearer to its ideal.

Consider, for instance, how we might use this approach to counter the claim that a polycentric legal system would generate conflicting legal standards. In the case of free banking, economic forces lead to a convergence of the various issuing banks on a common standard unit of account and circulation. We should expect a similar process to apply in the case of polycentric law, such that overlapping jurisdictions would converge on a shared set of legal standards. History supports this view, providing several examples of legal systems that coexisted in spite of having quite different contents in certain areas. Consider Gaul and Italy during the early Middle Ages, when Roman and Germanic laws existed side by side with people opting to define themselves as either Romans or Franks/Burgundians/Lombards -- something that became increasingly a matter of choice as time passed. In practice, there is a strong tendency for overlapping legal systems to agree in most areas of civil and criminal law. A problem may sometimes arise with regard to " moral offenses" however, due for the most part to the existence of an actual monopoly resulting from attempts by activist coalitions to seize control of the system." (http://osf1.gmu.edu/~ihs/w91issues.html)


"How can a person use a different legal system from the same location, while their neighbors use something else? When do we stand in the ‘law’ aisle or on the ‘law dealership’ lot and choose the best law for our business or community?

First, many transactions we make need not be ‘tied’ to the location where we live. For example, businesses which trade overseas often will specify in their contracts which legal system they will use in the event of a disagreement. Both parties agree, for example, to have their disputes resolved in a US or British court, or even by a private arbitrator who they both respect and believe is fair.

This can occur even if neither party lives in the country or near the arbitrator that they’re using. International politics is ‘polycentric’ (though almost certainly still too monopolistic), and businesses are choosing legal systems from different national sets.

However, many laws are not just about trade and it is much more difficult to see how criminal or other laws can be ‘contracted’ like in our example.

This leads us to the importance of ‘switching costs’. Since we all live in some kind of community, with some kind of neighbors, somewhere, then a polycentric system is best achieved by allowing for a wide variety of different areas with different legal systems. The benefits of polycentricity require that we maintain a system of competition and choice – otherwise it begins to no longer resemble a system of ‘many centers’.

This means that we need to maintain ‘low switching costs’ for polycentric law to operate well. Walking from one car to another in the lot is a low cost way of finding good alternatives. We need to approximate this process as well as we can at the legal system level.

Consider a simple example. Cities like New York and Boston have different rules and compete with one another for residents. In the case of these cities, the rules are not especially distinct and U.S. federal law constrains the variety of laws and innovation between these two cities.

Since the difference between these legal systems is small, few people are willing to make the move from Boston to New York or vice-versa to find a better system. The costs of switching simply aren’t worth the little reward." (http://www.radicalsocialentreps.org/theory/polycentric-law/)

Radical Enterpreneurs against monopoly law?

"At the level of law-creation itself, many monopoly legal systems are structured to favor existing businesses and political elites. For instance, an established firm may lobby to have their particular mode of production written into law. This makes sure that upstarts – likely to innovate the process or pursue a rival model – are unable to get off the ground.

Monopoly law becomes a weapon for monopoly firms.

Stagnant, monopoly law has another serious effect: corruption. Corruption grows as the poor are unable to easily use the legal system, and as the rules become structured to benefit elites. People who cannot afford to go to court are more willing to pay bribes to avoid charges. The system rewards unscrupulous enforcers, who can take money to ‘look the other way.’

As legal rules grow more complicated and specific, people begin to accidentally break the law in their day-to-day lives. For instance, minute regulations for the display of trading licenses – that it must not be covered by a winter jacket, for example – lead to conflict between the world’s poor and law enforcement.

Fines for breaking these rules, which sometimes seem arbitrary and not protecting anyone, lead to resentment, violence, and extortion. Those targeted are often those who have the least ability to seek a redress of grievances in court.

Just as we want ‘many centers’ of social entrepreneurship, we need ‘many centers’ of legal activity. These centers won’t build themselves. To erode monopoly power with start-ups in business we need upstarts in law, channeling their ingenuity to building our polycentric system. In the process RSEs working for legal innovation can help fight corruption, empower the world’s poor, and spur economic progress." ((http://www.radicalsocialentreps.org/theory/polycentric-law/))


see also: Law Prior to the State


Tom Bell:

"The Persistence of Polycentric Law Although state legal systems have amassed immense monopolistic powers, they have never entirely quashed competition among legal systems. States themselves compete to attract human and financial capital. And the law merchant has continued to survive in a realm safely beyond the reach of any one state's laws: international trade. But even within state boundaries polycentricity has survived into modern times. For example, recent work shows the persistence and even revival of polycentric law in England in the eighteenth and nineteenth centuries. H. W. Arthur's Without the Law: Administrative Justice and Legal Pluralism in Nineteenth-Century England (Toronto: University of Toronto Press, 1985) looks at the growth of private arbitration services in Victorian England and the revival of old jurisdictions as ways of circumventing the state system. Parliament later terminated this process through the Judicature Acts. Douglas Hay and Francis Snyder have edited a collection containing several papers that look at the way private action supplied services such as law enforcement. (Hay and Snyder, eds., Policing and Prosecution in Britain, 1750-1850 [Oxford: Oxford University Press, 1989])

The United States in particular has enjoyed a rich variety of competing jurisdictions. Each federal, state, county, municipal, and military court system has its own substantive and procedural rules -- rules that often come into conflict. But these " official" jurisdictions barely scratch the surface. In Justice Without Law?, Jerold S. Auerbach records several groups that produced systems of private law: the early Puritan, Quaker, and Dutch settlers; the many various nineteenth century utopian communes; the newly-freed slaves; the Mormons; the Chinese, the Jewish, and other immigrant communities; merchants; and labor/management councils. (Jerold S. Auerbach, Justice Without Law? [New York: Oxford University Press, 1983])

Pioneers, moving beyond the reach of state law, also created their own private legal systems. Terry L. Anderson and P. J.. Hill provide an excellent summary of the laws of the land clubs, cattlemans' associations, mining camps, and wagon trains. See Benson as well for a fascinating account of private justice on the western frontier. (Anderson & Hill, 1979, pp. 9-29; Benson, 1990, pp. 312-321)

Privately produced law continues to thrive in the U.S. and gives every indication of growing stronger. Americans have a special knack for forming private organizations, each of which produces a set of rules we can justifiably call " law." Lon Fuller explains:

If the law is considered as " the enterprise of subjecting human conduct to the governance of rules," [Fuller's own definition] then this enterprise is being conducted, not on two or three fronts, but on thousands. Engaged in this enterprise are those who draft and administer rules governing the internal affairs of clubs, churches, schools, labor unions, trade associations, agricultural fairs, and a hundred and one other forms of human association . . . there are in this country alone " systems of law" numbering in the hundreds of thousands. (Lon L. Fuller, The Morality of Law [New Haven, CT: Yale University Press, 1969], pp. 124-125) Many of the organizations that Fuller lists provide law in areas that the state has overlooked or willfully ignored. In recent years, however, privately produced law has grown most rapidly in an area where it competes directly with state law: commercial arbitration. By the seventeenth century royal courts had absorbed or abolished the local functions of the law merchant. But disruptions in trade caused by the American Civil War triggered a resurgence in commercial arbitration. The war had clogged English courts with cases relating to the uncertain U.S- British cotton trade. Members of the Liverpool Cotton Association tried inserting arbitration clauses into their contracts. Their experiment succeeded, and soon arbitration spread to other trade associations, professions, and countries. (See William C. Woolridge, Uncle Sam, The Monopoly Man [New Rochelle, NY: Arlington House, 1970], pp. 94-110.)

The growth of private arbitration has since removed entire classes of disputes from state courts. The insurance, construction, stock exchange, and textile industries (among others) all make heavy use of arbitration. There are currently about 600 arbitration associations in the U.S. The largest of them, the American Arbitration Association, reported 52,520 case filings in 1989 -- up more than 36% from 1980's figures. Overall, some 90,000 cases were filed with arbitrators in 1989. (See Andrew Patner, " Arbitration Settles A Lot, Unsettles A Few," in the Wall Street Journal, April 13, 1990, p. B1.) Why are state courts losing so much business? Because private courts offer greater speed and efficiency." (http://osf1.gmu.edu/~ihs/w91issues.html)


  • Article: Polycentric Law. by Tom W. Bell. Humane Studies Review, Volume 7, Number 1 Winter 1991/92

URL = http://osf1.gmu.edu/~ihs/w91issues.html

More Information

  • No State Required? A Critical Review of the Polycentric Legal Order. John K. Palchak & Stanley T. Leung. [2]