Is Rule of Law an Equilibrium Without Private Ordering? By Emily Skarbek

In a new paper, Gillian Hadfield and Barry Weingast argue that regimes characterized by the rule of law are only stable equilibria because of a substantial amount of decentralizing private enforcement. Without mutual expectations and the coordinating properties of self-enforcement, a government cannot sustain law.

This argument challenges the standard view that law begins with government. Instead they argue, private enforcement is the central mechanism to a theory of law. Hadfield and Weingast think that what distinguishes legal from social order is not public enforcement but rather common knowledge, a stewarded normative classification institution that designates what is and what is not acceptable conduct in a community. Law emerges then “to better coordinate and incentivize decentralized collective punishment (that is, private ordering: sanctions imposed by individuals not in an official capacity.”

Our work to date shows that the social order produced by a centralized classification institution supported exclusively by decentralized enforcement is characterized by several normatively attractive features. We call these features legal attributes. They include features routinely understood in the legal philosophical literature as characteristic of the rule of law: generality, published, clear, prospective, and stable. Importantly, the legal attributes we identify do not arise from normative claims about law. Rather, they arise from our positive analysis sustaining an equilibrium based on centralized classification when enforcement requires the voluntary participation of ordinary citizens. These legal attributes are necessary to secure coordination and incentive compatibility in a regime of fully decentralized enforcement. Without them, the effort to sustain an equilibrium based on centralized classification fails. A regime characterized by rule of law is only an equilibrium, we argue, when enforcement of public classifications includes an important component of private enforcement. Without the discipline imposed by the need to incentivize and coordinate private enforcers, a government cannot succeed in sustaining law.

The argument for me is compelling in numerous dimensions. First, I read it as consistent with the history of how the rule of law actually emerged in England out of a long process of establishing mutual expectations with regard to laws of property. The prevalence of these mutual expectations of enforcing law on the ground helped to lay the groundwork for Magna Carta in 1215. As Robert Tombes writes in his excellent book The English and Their History, Magna Carta appeals to “the community of the realm” and not only establishes that the king is subject to the law, but also codifies that consent is required for taxation, grants to ‘all free men’ the right to procedural justice practices already prevalent with the Common Law. Thus according to Tombes, “the Common Law and Magna Carta were not seen as revolutionary innovations, but as restatements of ancient principles” (pg 81).

Second, it brings Hayek’s arguments about the nature of evolved rules and the dangers of constructionist rationality back into discussion of law and economics. Here the authors err in citing Hayek in the Road to Serfdom as conceptualizing law as coming from government, when in fact he pioneered the idea of rule of law as emerging from private enforcement and evolved codes of conduct. Hayek (1973, pg 28) writes:

Only when it wrongly assumed that all rules of just conduct have deliberately been made by somebody do such sophisms become plausible that all power of making laws must be arbitrary, or that their must exist an ultimate ‘sovereign’ source of power which all law derives. Many of the age-old puzzles of political theory and many of the conceptions which have profoundly affected the evolution of political institutions are the product of this confusion.

Finally, I like this paper because it pushes arguments such as those by Edward Stringham in Private Governance further by suggesting not only that these mechanisms of private enforcement work, but that they may actually be foundational for the types of laws to emerge that support the extended order of exchange.