[L]aw and the State are both conceptually and historically separable, and law would develop in an anarchistic market society without any form of State. Specifically, the concrete form of anarchist legal institutions—judges, arbitrators, procedural methods for resolving disputes, etc.—would indeed grow by a market invisible-hand process, while the basic Law Code (requiring that no one invade any one else’s person and property) would have to be agreed upon by all the judicial agencies, just as all the competing judges once agreed to apply and extend the basic principles of the customary or common law. But the latter, again, would imply no unified legal system or dominant protective agency. Any agencies that transgressed the basic libertarian code would be open outlaws and aggressors, and Nozick himself concedes that, lacking legitimacy, such outlaw agencies would probably not do very well in an anarchist society.Here is the problem as I see it, with this idea of a "basic law code"...
Firstly: how detailed it this basic law code? Consider the two extremes:
- Broadly defined. "No one may invade anyone else's person and property". No more detail than that. ("Invade" and "property" are not given definitions... that is for the courts to interpret)
- Narrowly defined. The basic law code is identical to the libertarian law code, as developed by Rothbard, Kinsella, Block, etc... down to the details... like the basic law code is specific about IP, abortion, capital punishment, etc. (There is very little scope for interpretation of the basic legal code... the courts task is limited to applying the law code)
Rothbard says that the basic law code will be agreed upon by all reasonable courts. I take him to mean everybody except serial killers, rapists etc, i.e. 99% of the population. With such widespread agreement required, it seems hopelessly unrealistic to suppose that the basic law code is narrowly defined, down to the last detail. Even among libertarians, there is a disagreement over IP, abortion, punishments, etc. There is no way the entire population of reasonable people is going to agree on every little detail of libertarian theory. The entire field of economic analysis of law - how laws get produced and what kinds of laws get produced - is skipped over by making this supposition.
To Rothbard, there were two types of court: reasonable courts, which have signed up to the basic law code, and outlaw courts, which have not. Rothbard does not provide any analysis - any mechanism - of how reasonable courts and outlaw courts will resolve disputes between them. This may not be much of an issue if we assume 99% of courts are reasonable, but see above.
So maybe the basic law code is broadly defined, leaving a lot of scope for interpretation, so that widespread agreement is possible. But then how will disputes about things which might fall into the area of interpretation - say IP disputes - get resolved? There needs to be a mechanism to explain this... how disputes between courts which have both agreed to the basic (broadly defined) law code will be resolved, when their interpretation of that law code differs. Rothbard has not provided us with a mechanism for this.
David Friedman, in chapter 29 of The Machinery of Freedom, has described a mechanism for how courts which provide different laws (perhaps very different laws) will resolve their disputes: the bargaining process.
One can imagine an idealized bargaining process, for this or any other dispute, as follows: Two agencies are negotiating whether to recognize a pro- or anti-capital-punishment court. The pro agency calculates that getting a pro-capital-punishment court will be worth $20,000 a year to its customers; that is the additional amount it can get for its services if they include a guarantee of capital punishment in case of disputes with the other agency. The anti-capital-punishment agency calculates a corresponding figure of $40,000. It offers the pro agency $30,000 a year in exchange for accepting an anti-capital-punishment court. The pro agency accepts. Now the anti-capital-punishment agency can raise its rates enough to bring in an extra $35,000. Its customers are happy, since the guarantee of no capital punishment is worth more than that. The agency is happy; it is getting an extra $5,000 a year profit. The pro agency cuts its rates by an amount that costs it $25,000 a year. This lets it keep its customers and even get more, since the savings is more than enough to make up to them for not getting the court of their choice. It, too, is making a $5,000 a year profit on the transaction. As in any good trade, everyone gains.The same mechanism applies to all courts, so there is no need to call some courts "outlaw courts." Hence the idea of a basic law code dissolves. Each court is just producing laws, which may or may not be close to plumbline libertarian laws.