Montreal, October 26, 2002  /  No 112
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Dr. Edward Younkins is a Professor of Accountancy and Business Administration at Wheeling Jesuit University in West Virginia. He is the author of Capitalism and Commerce
by Edward W.Younkins
          Historically, socially emergent ideas of legal principles, oftentimes in accord with the nature of reality, occurred prior to their adoption by political authorities. Voluntary forms of governance through customary private laws preexisted state law and effectively ordered human affairs. Law arose as a spontaneous order – something to be discovered rather than enacted. Law is an evolutionary systemic process involving the experiences of a vast number of people.
A natural outcome 
          The idea of law includes fundamental rules of behavior, as well as institutions and devices for changing, clarifying, refining, and applying the rules. Law is a natural outcome of people living and working together. If people are to live among others, there must be a way to resolve the inevitable disputes. Law can be seen as the activity of subjecting human conduct to the governance of rules. 
          The evolution of law began before history was recorded with laws built up one by one as disputes were settled. In fact, the development of rules in society predates both courts and the written law. For thousands of years, customary and private legal systems alone ordered human activities. The power of customary law is found in the fact that it is reflected in the conduct of people toward one another. The further a society moves away from customary and private law systems, the greater the need for laws coercively enforced by the state. 
          The law is essentially discovered, not made. Law is a systemic discovery process involving the historical experiences of successive generations. Law reflects and embodies the experiences of all men who have ever lived.   
          Rules, (i.e., customary laws) can evolve and emerge spontaneously as the unintended outcomes of individuals separately seeking their own goals. Such laws are less likely to be violated than enacted authoritarian laws because they require voluntary acceptance by individuals in recognition of reciprocal benefits received. As a result, customary law is less likely to require adjudication. Customary law, as a good shortcut, takes less time than authoritarian law to reach the same (or oftentimes preferred) end. 
          Customary law involves spontaneously evolved rules emerging through dispute adjudication. Customary law provides a rather reliable process for discovering the natural law, because a spontaneously evolved and voluntarily followed custom is more likely to result in mutual advantages to the involved parties than a rule imposed by a powerful group. Natural law is the immutable standard to which man-made laws must correspond in order to be legitimate. Natural law is the general body of rules of right conduct and justice common to all men. Analogously, a common law system in which law arises via judicial precedent is better than a system in which courts and judges merely apply positive laws enacted by a legislative body. 
          According to Bruce Benson: 
              When rules and governance evolve spontaneously through voluntary human interaction, both market and nonmarket institutions develop the way they do because individuals discover that the actions they are intended to coordinate are performed more effectively under one system or process than under another. They both facilitate wealth creation through voluntary interaction. Rules and institutions vary in quality, of course, so as individuals discover new rules or institutions and emulate them, or because they experiment and innovate), the new rules or institutions will be adopted unless the transactions costs of such an adoption are prohibitive. Thus, more effective rules and institutional arrangements tend to replace less effective ones as individuals observe, learn, imitate, and secede in order to migrate when superior competitive alternatives are available. Furthermore, existing rules and institutions influence the discovery process by motivating individuals to search in different directions for innovations – that is, there is a path dependency to the evolutionary process. (The Enterprise of Law: Justice Without the State, 1990)
          Anglo-Saxon customary law involved a group of individuals, often referred to as a bohr, pledging surety for each of its members. In such an arrangement, each person secured his property claims by freely accepting an obligation to respect the property rights of others, who were expected to reciprocate. The group would back up this pledge of surety by paying the fines of its members if they were found guilty of violating customary law. The surety group had financial incentives to police its members and exclude those who frequently and flagrantly engaged in undesirable behavior. Individuals would deal cooperatively with those known to be trustworthy while refusing to interact with those known to be untrustworthy. These solidarity rules evolved spontaneously as individuals utilized ostracism instead of violence. There is a certain timeless appeal to such reciprocal agreements. Modern parallels to these reciprocal voluntary agreements can be found in insurance agencies, credit card companies, and credit bureaus. Insurance agencies spread risks through the combining of assets. Credit card companies stand behind the actions and claims of their members. In addition, credit bureaus attest to the financial standing of their members. 
Nonviolent means emerging 
          Additional institutional arrangements easily evolve in such a cooperative social order. When a charge is disputed, nonviolent means of resolving conflicts and clarifying property rights emerge. For example, the dispute resolution process could be handled through the appointment of a mutually acceptable arbitrator or mediator. If the loser pays restitution, he may be permitted to rejoin the group. The coercive power of a central authority is not required in such a voluntary social arrangement. 
          Anglo-Saxon courts (moots) were assemblies of common men and neighbors. Operating similar to surety groups, their jurisdiction depended upon the consent of the parties. The moots passed judgment according to customary law. 
     « Systems of private and customary law rely on individual motivation and market mechanisms, rather than the state’s monopoly of power, to provide the incentives to cooperate and maintain order. »
          In the late Middle Ages, the Law Merchant, a far-reaching system of private mercantile law that operated through reputation, credit, and economic embargo, regulated commercial transactions throughout Europe. This system of voluntary law emerged in response to the need for common standards to govern international trade. Members formed their own Europe-wide court system and legal order. They relied on credit reports for enforcement and the fact that those declining to submit to the system’s rules and decisions would have great difficulty finding other merchants to do business with. Merchants who did not adhere to the Law Merchant standards found themselves ostracized from the community of reciprocal commercial relationships. 
          Bruce Benson has concluded that customary legal systems tend to share the following basic characteristics: 1) a strong concern for individual rights; 2) laws enforced by victims backed by reciprocal agreements; 3) standard adjudication procedures established to avoid violence; 4) offenses treated as torts punishable through economic restitution; 5) strong incentives for the guilty to submit to the prescribed punishments due to the threat of social ostracism; and 6) legal change by means of an evolutionary process of developing customs and norms. 
          States amassed enough power to claim monopoly in law relatively recently and only after a long battle with competing legal systems. State law gained dominance in the competition among medieval European legal systems such as Canon law, the Law Merchant, feudal (manorial) law, etc. State law forged ahead in part to the state’s success in military conquests. In addition, the state’s power to tax allowed it to subsidize its legal services. Royal law absorbed the functions of the Law Merchant by adopting its precedents and enforcing them at lower prices. Royal law, and eventually state law, wielded greater coercive power than competing legal systems which depended on reciprocity and trust. The state was able to lower its costs and legitimize its claims as the monopoly source of law by establishing courts backed by the threat of violence. 
          Citizens in a given geographical area began to view the sovereign as the sole legitimate source of law. Eventually, the state formulated and imposed its own laws in addition to claiming to be the source of existing customary laws. Early codes of kings were mainly codifications of customary law. 
          The influence of Christianity provided the throne with a godly character thus enabling kings to assert a divine mandate. When kings reformed royal law to absorb portions of the Church’s Canon law, the state’s legal system gained the strength and aura of ecclesiastical law. 
          Before the Norman Conquest in 1066, governance and law in England were extremely decentralized. William the Conqueror greatly contributed to the destruction of competing legal systems by completing the centralization of royal power that had been begun by Alfred the Great in the ninth century. William and his successors worked to bring competing legal systems under royal control in order to levy fines and surcharges that would accrue to the king. By 1200, royal law dominated the legal order of England and other countries in Europe. 
The source of all law 
          In retrospect, most modern nation-states evolved from nonstatist extortionist institutions. There was a natural progression as tribal war chiefs became kings and kingdoms developed into nations. The coercive state is thus seen as the source of all law. The existence of coercive institutions and rules stifles the growth of voluntary trust relationships. In addition, the motivation for honoring commitments shifts to the avoidance of punishment from the sovereign state. 
          Still, competing legal and governance systems have continued to exist. In fact, multiple systems have been more common than unitary systems. For example, in the American West, before federal power had reached the territories, disputes were resolved by private courts. Throughout its history, America has been the home of wagon trains, cattlemen’s associations, mining camps, clubs, churches, unions, trade associations, private communities, alternative dispute resolution arrangements (i.e., arbitration and mediation), etc. Polycentric law naturally fills the voids that appear when state laws are found to be lacking. For example, informal customary norms are currently effectively regulating the Internet. Systems of private and customary law rely on individual motivation and market mechanisms, rather than the state’s monopoly of power, to provide the incentives to cooperate and maintain order. 
          Lon Fuller has contended that modern customary law should be seen as: 
              a branch of constitutional law, largely and properly developed outside the framework of our written constitutions. It is constitutional law in that it involves the allocation among various institutions of our society (e.g., churches, social clubs, labor unions, trade associations, etc.) of legal power, that is, the authority to enact rules and to reach decisions that will be regarded as properly binding on those affected by them. That this body of constitutional law should have grown outside our written constitution should not be a source of concern. It would have been impossible to have anticipated the rich institutional growth that has occurred since their time. Furthermore, the intellectual climate of the late eighteenth century was such as to obscure a recognition of the centers of authority created when men form voluntary associations. (The Morality of Law, 1964)
          Rules and laws need not be created or enforced by a central authority. Customary law has many advantages and continues to govern a wide range of social interactions and to promote order in many areas of modern society. Unfortunately, today’s intellectual climate largely fails to recognize the existence and potential for customary law creation. 
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