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The Enterprise of Law. By Bruce L. Benson.
San Francisco: Pacific Research
Institute, 1990.

M any advocates of the free market hold an odd view of that
institution’s scope. Although economists such as F. A.
Hayek and James Buchanan laud the market to the skies
and never tire of describing the depredations and stupidities of the
state, they reverse themselves at a crucial junction.

They maintain that the market depends on the state for its
existence. Unless a government establishes and enforces law, they
claim, the market will soon sink from order to chaos. It is the
outstanding merit of Bruce Benson to subject this view to withering
scrutiny, both theoretical and historical. He argues that people can
secure justice through private arrangements and that they have often
done 80, both now and in the past. Far from being necessary to a just
social order, the state is a hindrance.

The book should not be taken as a defense of anarchism, since
Benson does not discuss functions other than justice such as national
defense usually assigned to the state. But in the contemporary cli-
mate of opinion, the work is startlingly radical.

If one characterizes law as a system of enforcible rules of conduct,
nothing in the nature of law requires its provision by a state. How
law has been provided is a question for historical investigation, not
one to be resolved by fiat.

Benson clearly gets off to a good beginning. One might add that
many eminent legal scholars, most notably John Austin and Hans
Kelsen, have defined law in a question-begging way: They require
that law be promulgated by a sovereign. Benson, who relies here
principally on Lon Fuller, avoids this pitfall.

On one minor point he seems to me incorrect. Why is it the case
that if “law is simply represented by any system of rules. . . then

The Review of Austrian Economics, Vol. 6, No. 1 (1992): 111-115
ISSN 0889-3047

111


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112 The Review of Austrian Economics, Vol. 6, No. 1

‘morality’ and ‘law’ would appear to be synonymous” (p. 11)? In this
definition, what is moral would be legal, but it is not necessary that
what is legal be moral.

Benson gives an excellent account of the development of law in
Anglo-Saxon England. Custom gave birth to the law and sustained
it. The state entered after the legal system was developed, seizing
control of it in order to gain power and money. His description of the
history of English law from Anglo-Saxon times through the nine-
teenth century shows mastery of a wide variety of sources; his
presentation is a veritable tour de force. I would suggest only two
additions. First, in the description of the Magna Carta, its annulment
by Pope Innocent III should have been mentioned. Also, in contrast
to the earlier situation described by Benson (p. 68), defendants during
much of the nineteenth century could not testify.

The author places great stress on the Law Merchant, which
during the period 1000-1200 “evolved into a universal legal system
through a process of natural selection” (p. 32). Trade among the
nations of Europe took place principally in fairs and markets, and
merchants traveled from one to another. They devised a system of
courts and regulations to handle business disputes; to rely on the
varying customs of each nation would have been grossly inconve-
nient. This system, formed independently of the various states, be-
came the basis of modern commercial law.

Benson, drawing upon a wide array of data, describes many cases
of law without the state, ranging from the Kapauku Papuans of
Western New Guinea to the American West in the nineteenth century.
Contrary to various Hollywood movies, the West was not a series of
never-ending gunfights in which outlaws terrorized a cowed popu-
lace. Quite the contrary, the West developed a considerable measure
of home-grown law and order (pp. 312-21).

Though these facts cannot be denied, some will be inclined to
interpose an objection. Before one can have private arrangements to
enforce a body of law, do we not require a structure of rights, in
particular an assignment of property titles? How can this structure
be created by the market, since for the market to operate rights must
first exist?

Benson’s reply is cogent. Rights are indeed necessary for a market
to function, but it by no means follows that they must be established
through collective action. By a mutual recognition of one another's
~ claims, people can gradually build up a system of rights. The market
does not delay its arrival until the full details of a law code are
hammered out; it comes into existence and develops along with the
clarification and extension of the system of rights.


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Book Reviews 113

However surprising one may find the historical facts, they are
exactly what one would expect given elementary principles of
economics. In a market system, producers have a strong incentive
to give customers what they want; if they do not, they will be
replaced by those better able to fulfill consumer demand. Those
who succeed in satisfying consumers will profit. This is the mech-
anism of natural selection mentioned above, and it exerts an inexo-
rable pressure.

The state operates through an utterly different principle. As
Benson accurately notes, the principal purpose of the state is the
transfer of wealth. Like Franz Oppenheimer and Albert Jay Nock
before him, Benson pictures the state as an instrument of coercive
interference with free activity. Struggles among the Anglo-Saxon
kingdoms, culminating in the Norman Conquest, dealt the non-stat-
ist Anglo-Saxon legal system crippling blows. The state took over the
Law Merchant and subjected it to rigid restrictions.

The situation remains the same today. The abundant efforts of
people to escape from the official legal system, e.g., through arbitra-
tion and private police, have been continually shackled by the state,
a “jealous God” indeed, fearful and intolerant of all rivals.

Supporters of state provision of justice frequently rely on one
weapon to defeat opponents, the famous public-goods problem. Law
and its enforcement, it is alleged, generate several public goods. If,
for example, police patrol a neighborhood, the benefit of deterrence
of crime extends not just to those who pay for the services but to all
local residents. Most of these public goods are familiar but some are
rather recondite. David Landes and Richard Posner, for expample,
maintain that written opinions by judges produce positive externali-
ties, since people other than the parties to the case can use written
decisions as guides (p. 279).

Benson has a double line of defense to these criticisms of private
law. First, he endeavors to show that the market can internalize the
externalities in question. Neighborhood associations, e.g., can re-
quire everyone who purchases property in an area to contribute to
police protection. (Of course, this must be done not through compul-
sion but contractually.)

So far as the problem of precedent is concerned, judges do have an
incentive to issue written opinions. In a competitive situation, judges
need to acquire a good reputation in order to attract customers; no one
can compel disputants to use them. To issue opinions that attain wide-

spread respect is obviously one means of doing so. One might add to
Benson's discussion that in the Roman Empire many legal scholars or
Jurisconsults gained recognition through their writing.


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114 The Review of Austrian Economics, Vol. 6, No. 1

The second string in Benson's bow is as much an attack as a
defense. To think that government has any realistic chance of improv-
ing the provision of public goods by the market is fatuous. Govern-
ment is dominated by bureaucrats, intent on gaining power for
themselves. Special interest groups can through concentration of
resources gain privileges that worsen the position of others. Benson
develops his bleak picture principally through application of public
choice economics. He defends it by massive citation of historical and
contemporary evidence.

Furthermore, state activities tend to create their own public
goods problems. Access to the courts is available to all; people do not
have to pay a market price to use the state’s legal services. Of course,
expenses such as filing fees and attorneys’ costs do limit entry, but
there is no charge just for access. Overcrowding results; and the
governmentally supplied resource is used inefficiently. If the market
sometimes underproduces public goods, the state more frequently
overproduces them.

Benson concludes that the public goods problem does not strike a
fatal blow at a free market legal system. Given the manifest advan-
tages of this system, he accordingly recommends it.

The book’s outstanding argument can I think be strengthened at
two points. First, the underlying assumptions of Benson’s model of
public goods are not entirely clear. On one model, “a public good is
one that enters two or more persons’ utility” (p. 273, quoting Paul
Samuelson). Efficiency aims at matching utilities and costs as closely
as possible.

I am far from certain, but I think this is the conception of
efficiency Benson uses. Although in his hands it leads to results
favorable to the free market, it is intrinsically objectionable. If taken
as a welfare ideal, a glance will show that this view of efficiency is a
variant of utilitarianism, subject to most of the problems of that
position. This is not the place to debate ethical theory, but it is
uncontroversial that utilitarianism is controversial. It cannot simply
be assumed without defense.

Another way of looking at public goods has quite different impli-
cations. Here one begins with having people and property rights not
subject to coercion. People may find themselves in situations where
individual and collective rationality conflict, but the question facing
the analyst is entirely different from that of the first model. All
solutions must strictly respect property rights.

If one goes one step farther and adds the Austrian demonstrated
preference principle, the problem of public goods dissolves. The prin-
ciple is of course much disputed; but it seems to me that even those


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Book Reviews 116

inclined against it ought to adopt a strict view of rights. Had Benson
done s0, he could not so easily have said: “An ideal and permanently
limited government might be an improvement” over a complete free
market (p. 373).

The second point at which the book’s argument might benefit from
expansion resembles the first. If efficiency is understood in loose
terms as increasing wealth then it seems evident that it is an impor-
tant value. But it is not the sum and substance of political philosophy,
and its relation to other values needs to be examined. How would
Benson reply to a defender of government who accepted his argument
but claimed that other ethical principles still required a statist legal
order?

I cannot guess Benson's response to this question, but of one thing
I am sure. It would be a carefully considered answer, based on
exhaustive research. The Enterprise of Law is a magnificent achieve-
ment and I enthusiastically recommend it.

David Gordon
The Ludwig von Mises Institute