Texas A&M University School of Law Texas A&M Law Scholarship Faculty Scholarship 1-1998 Miners, Vigilantes & Cattlemen: Overcoming Free Rider Problems in the Private Provision of Law Andrew P. Morriss Texas A&M University School of Law, [email protected] Follow this and additional works at: https://scholarship.law.tamu.edu/facscholar Part of the Law Commons Recommended Citation Andrew P. Morriss, Miners, Vigilantes & Cattlemen: Overcoming Free Rider Problems in the Private Provision of Law, 33 Land & Water L. Rev. 581 (1998). Available at: https://scholarship.law.tamu.edu/facscholar/142 This Article is brought to you for free and open access by Texas A&M Law Scholarship. It has been accepted for inclusion in Faculty Scholarship by an authorized administrator of Texas A&M Law Scholarship. For more information, please contact [email protected]. MINERS, VIGILANTES & CATTLEMEN: OVERCOMING FREE RIDER PROBLEMS IN THE PRIVATE PROVISION OF LAW Andrew P.Morriss* Law is a good like food, insurance, or housing. Like other goods, it can and often should be provided by private entities. Yet law is usually regarded as the quintessential public good, so obviously public in nature that we need not even discuss its provision by anyone but the State. As Bruce Benson observed "[a]nyone who would even question the 'fact' that law and order are necessary functions of government is likely to be considered a ridicu- lous, uninformed radical by most observers.", Even William Landes and Richard Posner, hardly apologists for the State, have concluded that law often must be publicly provided., Ultimately, the arguments for public provision of law turn on one as- pect or another of the free rider problem. In essence this problem arises be- cause it is difficult to exclude those who refuse to pay from the consumption of law. Thus, if you and I agreed to purchase "rule of law services" from a private firm, even those of our neighbors who refused to contribute a dime would reap some of the benefits of our services if only because they would * Associate Professor of Law and Associate Professor of Economics, Case Western Reserve Uni- versity; A.B., 1981 Princeton; J.D. and M. Pub. Aff., 1984, The University of Texas at Austin; Ph.D. (Economics), 1994, Massachusetts Institute of Technology. This paper began while I was visiting the Political Economy Research Center, Bozeman, Montana, and I gratefully acknowledge not only the financial assistance but the stimulating intellectual atmosphere which enabled me to complete a first draft. More than the usual intellectual debts also need acknowledgment. I owe Walter Grinder and Leonard Liggio for the suggestion that I think about this area and encouragement in doing so. Randy Barnett's lectures and writings on Justice in a Free Society first sparked my interest in these topics. Don Boudreaux, with whom I have discussed this topic for years and with whom I am co-writing a "theoreti- cal" companion piece to this article (see infranote 7), has heavily influenced my views on this subject. Co-teaching a seminar on cooperation with Sue Helper over the past three years influenced this paper in many respects. I presented portions of this material at several years of Liberty and Society seminars sponsored by the Institute forHumane Studies, my fellow lecturers and the seminar participants have significantly influenced on my thinking, often pointing out gaps in logic which I otherwise never might have found. Particularly helpful comments at Liberty & Society seminars came from David Beito, Christine Blundell, Mark Brady, George Selgin, Loren Lomasky, Tom Palmer, Ralph Raico, Mario Rizzo, Jeremy Shearmur, and David Schmidtz. I also thank the following who suffered through various drafts and offered helpful comments: Terry L. Anderson, Bruce Benson, Don Boudreaux, Richard Ep- stein, Sue Helper, P.J. Hill, Jason Korosec, Robert Strassfield, Richard Stroup, Wendy Wagner, Steven Ware, Jonathan Entin, students in the CWRU Executive Doctorate in Management program, participants at the Akron/CSU/CWRU Legal Theory Workshop, and the 1997 Southern Economic Association session on private legal systems. Kathleen Mesel provided much needed research assistance. No one suffered more than Alice Hunt, who repeatedly transformed my scratchings into text. 1. BRUCE BENSON, THE ENTERPRISE OF LAw 1 (1990). 2. William M. Landes and Richard A. Posner, Adjudication as a PrivateGood, 8 1. LEGAL STUD. 235,237,239, 241-42 (1979). LAND AND WATER LAW REVIEW Vol. XXLXIII no longer need to worry about spillover violence from our less peaceful, nonlegal methods of settling disputes. Similarly, rules produced by our liti- gation could be used by others without payment. The net result could be too little law since many would opt to ride for free on the efforts of others. Despite this seeming consensus on law's public nature, Americans frequently turn to private sources for law. During the development of the American West, private citizens often undertook to privately provide both rules and enforcement mechanisms where governmental systems were ab- sent or ineffective. Some of these examples, like the placer mining districts, Montana cattlemen, and Montana vigilantes, provide positive lessons. Oth- ers, like the 1856 San Francisco vigilance committee and Wyoming cattle- men's "invasion" of Johnson County, provide negative lessons. These expe- riences with privately produced law answer questions about how some peo- ple overcame free rider problems in privately providing law and illustrate how to avoid substituting private for public monopolies. These lessons pro- vide us with guidelines for shifting provision of at least some law provision functions of government to private entities. Briefly, the Western experiences with privately produced, customary law suggest the following are important to successfully overcoming the free rider problems in private provision of law: First, customary legal systems work best when they enforce reasonably well defined rights generally rec- ognized in the community as just. Second, private legal systems flourish spontaneously when they are given space to grow, making the ability to opt out of any State system crucial to their development. Third, removing dis- tortions blocking private law, including pricing State legal institutions at their true costs, can significantly assist the growth of customary legal insti- tutions. Fourth, customary law requires a set of skills and knowledge to succeed. Fostering these skills and disseminating this knowledge can en- hance these skills. Finally, customary systems that reward treating others with respect are more likely to succeed. I examine several case studies of non-state legal systems: Miners' law in California, Montana, and the Dakota Black Hills; two prominent vigilante movements in San Francisco in 1856 and Montana in 1863-64; and conflicts between cattlemen and settlers in the 1880s-1890s in Wyoming and Mon- tana? I examine the lessons from Part II on how private law production can be enhanced in Part III and suggest how those principles can be applied 3. A note on sources: I have relied on a combination ofsecondary sources and participants and their contemporaries' accounts. This Article is not intended to be an exhaustive, definitive account of the events described. Rather I have set out to describe the events with sufficient detail to inform the theoreti- cal analysis. Where there are disagreements among historians, I have noted those in the footnotes. More detailed source notes appear at the start of each section. 1998 PRIVATE PROVISION OF LAW today to enable privately produced law to develop regarding the Internet, in Part IV. I also briefly examine the recent phenomenon of "common law courts" and conclude they do not meet the requirements for successful de- velopment of private law. I. PRIVATE PRODUCTION OF LAW Goods may be produced in many ways: Privately through market mechanisms, privately through non-market mechanisms, publicly through non-market mechanisms, or through some combination of these mecha- nisms. Law in the United States, and elsewhere, is produced through a similar range of methods.' Public courts and legislatures operate side by side with private tribunals and trade associations. Both public courts and private tribunals decide cases and create "common law" rules. Both public legisla- tures and private associations create "statutory" rules. Some activities of private providers of law are highly regulated, some depend on the State le- gal system for enforcement, and others are entirely independent of the State. Bruce Benson classifies law into two broad categories according to its source: Authoritarian law and customary law. Authoritarian law is produced from the top down, does not require consent, and is characterized by a reli- ance on the threat of official force for its enforcement. Customary law, on 4. Lon Fuller argued that law should be "viewed as a direction of purposive human effort." Under Fuller's definition, law "consists in the enterprise of subjecting human conduct to the governance of rules." LON L. FULLER, THE MORALrrY OF LAW 30 (1964). (The primary alternative definition is John Austin's: law as the command of the sovereign. JOHN AUSTIN, THE PROVINCE OF JURISPRUDENCE DETERMINED (Wilfred E. Rumble, ed. 1995). While such a definition has the virtue of simplicity, it is inadequate to describe the richness of the law.) Law thus has two primary elements: Rules of conduct and a mechanism for applying those rules. BENSON, supra note 1, at 11. "Law" is made up of many services: Rule production, dispute resolution, deterrence, investigation, enforcement, and punishment. Simply because these services are currently combined in a single package does not mean that they must be. Just as telephone service has been unbundled, so too could law be broken into discrete services. Individual service providers could provide some or all services or combine provision of particular serv- ices with other goods or services. For example, an auto insurance company could provide insurance, adjudication, and liability rules for its policyholders.