WEBVTT NOTE The Production of Law and Order: Natural Order, Feudalism, and Federalism 1 00:00:00.000 --> 00:00:16.000 In my previous lecture, I had in the title announced some more than I did, at least part of the edition I want to briefly touch upon. 2 00:00:16.000 --> 00:00:32.000 And this is again a very politically sensitive, if not to say dangerous subject that I want to bring up. 3 00:00:32.000 --> 00:00:40.000 Again, I must say, I dare to bring that up in my classes at my university also. 4 00:00:40.000 --> 00:00:46.000 And about that stuff I have not yet received any complaints. 5 00:00:46.000 --> 00:01:00.000 This is a table that is culled from a recently published book by Richard Lin and Tartu Van Hanen, 6 00:01:00.000 --> 00:01:10.000 who did some very simple and elementary investigation. 7 00:01:10.000 --> 00:01:27.000 And what they did was try to show, does there or does there not exist some sort of correlation between IQ 8 00:01:27.000 --> 00:01:33.720 and some economic output measures such as G and P. 9 00:01:33.720 --> 00:01:45.480 I should say from the outset that they did not just use one IQ measure for countries. 10 00:01:45.480 --> 00:01:55.520 They typically had from most of the countries several types of IQ measures available and 11 00:01:55.520 --> 00:02:07.400 showed first that they are all highly inter-correlated, so to speak, convincing us that we can put 12 00:02:07.400 --> 00:02:12.880 a certain amount of trust into the numbers that they use. 13 00:02:12.880 --> 00:02:21.560 And they also did not just use one economic output measured just as G and P, but also 14 00:02:21.560 --> 00:02:38.560 if it was available two or three, and again inter-correlated them and tried to show that there was a high internal consistency among the numbers. 15 00:02:38.560 --> 00:02:59.560 Now, the correlation that they established, I'll say immediately something about the interpretation of this table, is extremely high for social sciences. 16 00:02:59.560 --> 00:03:09.760 is close to 0.7, which is, if you have ever done empirical research in sociology or psychology 17 00:03:09.760 --> 00:03:20.320 or so, those are numbers that are mind-bogglingly high. I mean, people are usually impressed 18 00:03:20.320 --> 00:03:26.800 already if you have correlations of 0.2 or 0.3 or something like that. That is already 19 00:03:26.800 --> 00:03:31.760 will consider to be worth showing. 20 00:03:31.760 --> 00:03:35.960 So here we get very high correlations. 21 00:03:35.960 --> 00:03:43.040 The interpretation of the table follows simply from the heading. 22 00:03:43.040 --> 00:03:48.840 The first number refers to the IQ. 23 00:03:48.840 --> 00:04:04.320 The second number is the actual GDP in I think in 2000 or something like that in these places. 24 00:04:04.320 --> 00:04:15.680 And the third number called fitted GDP would be the calculated GDP based on a regression 25 00:04:15.680 --> 00:04:16.820 analysis. 26 00:04:16.820 --> 00:04:26.860 That is what we should expect the GDP to be given the IQ in that country and taking the 27 00:04:26.860 --> 00:04:37.100 stable relationship between IQ and GDP into consideration. 28 00:04:37.100 --> 00:04:43.420 I do not want to spend much time on this. 29 00:04:43.420 --> 00:04:54.840 The countries are ordered here in descending order as far as IQ is concerned on the backside 30 00:04:54.840 --> 00:05:04.280 that continues all the way to Zimbabwe. 31 00:05:04.280 --> 00:05:12.120 I should make one remark about the more underdeveloped countries. 32 00:05:12.120 --> 00:05:23.640 In the more underdeveloped countries, the actual GDP tends to be underestimated because 33 00:05:23.640 --> 00:05:31.880 in very highly agricultural societies, where there is a relatively high degree of self-sufficiency, 34 00:05:31.880 --> 00:05:42.760 We see GDP numbers understate, so to speak, the productive output, because GDP measures 35 00:05:42.760 --> 00:05:48.440 only goods and services that were actually sold and bought in markets. 36 00:05:48.440 --> 00:05:56.640 So if you grow your own tomatoes and your own potatoes, that would not be counted, whereas 37 00:05:56.640 --> 00:06:03.640 Perhaps if you grow potatoes and tomatoes and then sell them on the market, then they would be counted. 38 00:06:03.640 --> 00:06:12.640 Obviously, in terms of standard of living, that would make no difference, but in terms of GDP or GNP numbers such as this, 39 00:06:12.640 --> 00:06:21.640 in one case it would be counted, in the other case it would not be counted. 40 00:06:21.640 --> 00:06:35.640 So the overall impression that you get from this list is, those countries that have high IQs also have high GDPs. 41 00:06:35.640 --> 00:06:46.640 And those countries that have very low IQs have, on the average, very low GDPs. 42 00:06:46.640 --> 00:06:57.640 There are, however, some clear-cut exceptions, obviously, which would have to be explained differently. 43 00:06:57.640 --> 00:07:25.140 takes the case of China, which is here listed with an IQ of 100 and has a GDP of $3,000 and a calculated GDP of 16,000. 44 00:07:25.140 --> 00:07:34.140 Now here, obviously, the explanation is that China was and still is to a certain extent a communist country, 45 00:07:34.140 --> 00:07:44.140 leading, of course, to an extremely low actual GDP and leading us, on the other hand, 46 00:07:44.140 --> 00:07:54.140 to the conclusion that if this type of system would be abolished, the potential of China is significant. 47 00:07:54.140 --> 00:08:04.140 That is, we can expect GDPs of 16,000 per person or something in the neighborhood of that. 48 00:08:04.140 --> 00:08:10.140 There are also some countries that seem to be overperforming. 49 00:08:10.140 --> 00:08:19.140 The Germans produce a higher GDP than their IQ would indicate, for instance. 50 00:08:19.140 --> 00:08:47.140 The same is true for the U.S. if I remember correctly. The U.S. has an IQ of 98. So this is significantly higher actual GDP than predicted GDP based on the intelligence of the population. 51 00:08:47.140 --> 00:08:56.380 Which again we would explain, so to speak, with having a relatively, comparatively speaking, 52 00:08:56.380 --> 00:09:02.300 freer market system than some other places have. 53 00:09:02.300 --> 00:09:09.300 One might object to a table such as this doesn't intelligence also have something to do with 54 00:09:09.300 --> 00:09:14.380 picking the right economic system. 55 00:09:14.380 --> 00:09:35.380 So maybe there is something wrong with the Chinese after all, despite having such a great potential, after all, for a considerable amount of time, they lag behind to such a great extent. 56 00:09:35.380 --> 00:09:48.380 We can also, again, I do not want to overinterpret this table, but you can also see, for instance, 57 00:09:48.380 --> 00:10:01.380 how relatively vain the attempt is, for instance, to expect economic miracles in Africa from taking place. 58 00:10:01.380 --> 00:10:10.740 If you look at African countries and look at the IQs there, you will have a rather dim 59 00:10:10.740 --> 00:10:23.260 impression as far as the growth potential of those countries are concerned. 60 00:10:23.260 --> 00:10:35.080 Let me end this discussion, and I think the table itself is highly interesting to study. 61 00:10:35.080 --> 00:10:44.300 Let me end this by saying that of course IQs are also not what we might call invariable 62 00:10:44.300 --> 00:10:49.180 biological constants. 63 00:10:49.180 --> 00:10:59.180 They are subject to variation as well, even though it is not as easy to vary them as many other things. 64 00:10:59.180 --> 00:11:12.180 Obviously, we would expect that the old Babylonians and the old Egyptians must have done somewhat better 65 00:11:12.180 --> 00:11:32.180 are much better than the present Babylonians and the present Egyptians, given their relatively low performance nowadays and their glorious achievements in the past. 66 00:11:32.180 --> 00:11:59.180 The most straightforward way to imagine that these numbers are, of course, subject to influence is just to realize that populations can, of course, engage in eugenic breeding practices, so to speak. 67 00:11:59.180 --> 00:12:08.460 Societies, for instance, were the upper classes, the more intelligent people, have it as a 68 00:12:08.460 --> 00:12:19.180 habit to have larger numbers of children, and the lower classes with lower IQs have smaller 69 00:12:19.180 --> 00:12:27.660 number of children that would lead over a few generations, obviously, to an upward lifting 70 00:12:27.660 --> 00:12:41.080 of IQs. The same thing, of course, also applies in reverse. That is, if you would have the 71 00:12:41.080 --> 00:12:50.660 lower classes with low IQ levels, so to speak, producing the overwhelming bulk of children 72 00:12:50.660 --> 00:13:14.660 and the upper classes, so to speak, producing very few or none than one would expect that the average IQ over the time span of several generations would fall. 73 00:13:14.660 --> 00:13:36.660 Hypotheses have been advanced, for instance, for why is it that Jews tend to have a very high IQ, even though Israel here is not particularly outstanding with an IQ of 94. 74 00:13:36.660 --> 00:13:48.340 But the Jewish population in the United States has an IQ of well above 107 or something like this. 75 00:13:48.340 --> 00:13:55.660 Partially that can be explained simply by migration. 76 00:13:55.660 --> 00:14:05.700 That is, the more successful people are more mobile and go to places where there is more opportunity 77 00:14:05.700 --> 00:14:13.060 for them and there is a larger concentration of those. For instance, they have done studies 78 00:14:13.700 --> 00:14:22.340 where they compare the IQ of Scots who live in London as compared with Scots who remain in Scotland 79 00:14:22.980 --> 00:14:31.300 and found that the IQ of Scots in London was significantly higher than Scots who stayed behind 80 00:14:31.300 --> 00:14:39.100 in Scotland. Again, that has a rather obvious explanation that is just the smarter ones, 81 00:14:39.100 --> 00:14:46.420 so to speak, move to the place. The East German cases, East-West German case is also interesting. 82 00:14:46.420 --> 00:14:59.160 They do not break it up here. Germany is simply listed as IQ of 102. But I have seen comparisons 83 00:14:59.160 --> 00:15:08.160 There is a difference between East Germany and West Germany and the other difference was that West Germany had one of 104 and East Germany of 98. 84 00:15:08.160 --> 00:15:16.160 And again, there exists a very straightforward explanation for a phenomenon such as this. 85 00:15:16.160 --> 00:15:28.160 East Germany was under socialist rule and expropriated, of course, most of the successful individuals and the most successful individuals left the country. 86 00:15:28.160 --> 00:15:39.160 So of course that lifted the IQ in West Germany and lowered the IQ in East Germany. 87 00:15:39.160 --> 00:15:46.160 Another explanation that has been advanced, coming back to the case of the Jews for instance, 88 00:15:46.160 --> 00:15:55.160 I tend to be somewhat skeptical about that one, but just for illustrative purposes I might mention it, 89 00:15:55.160 --> 00:16:06.160 The largest numbers of children were in Orthodox Jewish families typically produced by rabbis. 90 00:16:06.160 --> 00:16:15.160 If one assumes that the rabbis, so to speak, were the smartest of the bunch, 91 00:16:15.160 --> 00:16:24.160 then you would expect an upward tendency in IQs simply by different types of breeding behaviors. 92 00:16:24.160 --> 00:16:32.160 Okay, so much about this subject. 93 00:16:32.160 --> 00:16:44.160 Clearly, explanations along this line are not sufficient when it comes to explaining the wealth of nations. 94 00:16:44.160 --> 00:16:59.160 But I think one would also be blind to the facts if one simply dismisses things like this easily. 95 00:16:59.160 --> 00:17:13.160 The evidence that these people Lin and Van Hanen present is dramatic, overwhelming. 96 00:17:13.160 --> 00:17:31.160 You will be shocked to see how easy sometimes the explanation for phenomena is that other people struggle around for decades to not explain. 97 00:17:31.160 --> 00:17:53.160 Okay, with this, let me return to the topic of this lecture, which is the production of law and order within a natural order, that is the production of law and order without a state. 98 00:17:53.160 --> 00:18:06.160 Tomorrow I will talk about the origin of the state, but so far we are still considering, so to speak, what would naturally evolve. 99 00:18:06.160 --> 00:18:17.160 Just as division of labor naturally evolves, money as a medium of exchange naturally evolves, 100 00:18:17.160 --> 00:18:30.280 Capital accumulation will take place under decently favorable circumstances and not so 101 00:18:30.280 --> 00:18:35.360 much under less favorable circumstances. 102 00:18:35.360 --> 00:18:45.700 So it can also be expected that every society will of course develop some mechanisms in order 103 00:18:45.700 --> 00:18:58.700 are to defend itself against asocial individuals. As long as mankind is what it is, we will 104 00:18:58.700 --> 00:19:05.920 have people who engage in productive activities and have never any other desire but to be 105 00:19:05.920 --> 00:19:14.320 productive individuals. So long as that is the case, we will also have people who try 106 00:19:14.320 --> 00:19:21.920 try to hit other people on the head and rob and rape them and so forth and every society 107 00:19:21.920 --> 00:19:31.840 that wants to survive will have to do something about it. 108 00:19:31.840 --> 00:19:42.640 Let me first return briefly to the subject of property and property rights because what 109 00:19:42.640 --> 00:19:49.780 What it is that we want to defend in a natural order is, of course, property and the rights 110 00:19:49.780 --> 00:19:53.380 of people to their property. 111 00:19:53.380 --> 00:20:05.920 We have seen that people take it even from the very most primitive situation on for granted 112 00:20:05.920 --> 00:20:13.920 that they own themselves due to the direct connection that we have with our physical body. 113 00:20:13.920 --> 00:20:27.920 People also never had any doubt that those instruments that they themselves produced were their instruments and nobody else's instruments. 114 00:20:27.920 --> 00:20:42.920 When it came to the development of settled agriculture, this idea was expanded to pieces of land. 115 00:20:42.920 --> 00:20:57.920 People then began to put up signs in order to claim certain land territories as theirs. 116 00:20:57.920 --> 00:21:07.920 And these signs consisted typically in doing something to the land visibly 117 00:21:07.920 --> 00:21:16.920 So that other people could see this is not a piece of uncultivated wilderness. 118 00:21:16.920 --> 00:21:19.920 This is a piece of land that has been worked on. 119 00:21:19.920 --> 00:21:25.920 Somebody has done something to it and I can see it. 120 00:21:25.920 --> 00:21:34.920 And as you will admit, of course, it is quite easy in almost all cases 121 00:21:34.920 --> 00:21:43.920 to distinguish between a piece of land that has been cultivated in any way by mankind and a piece of wilderness. 122 00:21:43.920 --> 00:21:51.920 Just drive through whatever the rocky mountains and you will see that most of the places are completely untouched. 123 00:21:51.920 --> 00:21:56.920 Nobody has done anything to these and you can see it that that is the case. 124 00:21:56.920 --> 00:22:18.920 On the other hand, drive through similar mountain ranges in Europe, let's say in Austria and Switzerland, you see that people have indeed cultivated the mountains all the way to the top of the mountain, that is visible for anyone who has eyes to see. 125 00:22:18.920 --> 00:22:42.920 And of course people will show willingness to defend themselves against invaders trying to take these cultivated pieces of land away from them. 126 00:22:42.920 --> 00:22:50.920 Let me emphasize again why it is that we need norms of property. 127 00:22:50.920 --> 00:22:57.920 If goods are scarce, then conflicts over these goods are possible. 128 00:22:57.920 --> 00:23:07.920 If we want to avoid conflicts over the use of scarce resources, there exists only one method to do it. 129 00:23:07.920 --> 00:23:17.920 And that is to formulate rules of exclusive use regarding scarce resources. 130 00:23:17.920 --> 00:23:27.920 That is, formulating rules that say you can do something with it, but you are excluded from it. 131 00:23:27.920 --> 00:23:35.920 As long as all of us have access to the scarce resources, conflicts are unavoidable. 132 00:23:35.920 --> 00:23:53.920 So we can say, property norms in this sense are natural and necessary institutions in order to avoid conflicts. 133 00:23:53.920 --> 00:24:01.920 And the rule of the first one to produce something, the first one to appropriate something, 134 00:24:01.920 --> 00:24:09.360 that he becomes the owner and not somebody else, the second one or the third one or the rest of the 135 00:24:09.360 --> 00:24:19.280 mankind sharing in what somebody else has originally appropriated. The naturalness of this rule you can 136 00:24:19.280 --> 00:24:29.440 recognize by recognizing that if mankind so to speak wants to act without conflicts from the 137 00:24:29.440 --> 00:24:42.440 From the beginning of mankind on, then the rule of the first one to use something becomes the owner of it, is the only rule that makes this possible. 138 00:24:42.440 --> 00:24:51.440 That is, that mankind can, from the beginning of mankind on, conceivably act without any conflicts. 139 00:24:51.440 --> 00:24:58.440 In this sense, these norms are natural norms or natural laws. 140 00:24:58.440 --> 00:25:13.440 No other laws have this advantage of making it possible to avoid conflicts between humans from the very beginning of mankind on. 141 00:25:13.440 --> 00:25:27.440 There's only one additional consideration that I want to present when it comes to conflicts over property rights. 142 00:25:27.440 --> 00:25:33.440 And that concerns the problem of easements. 143 00:25:33.440 --> 00:25:48.440 If I appropriate, oh no, this is the wrong thing here, right, but Lew is not here. 144 00:25:48.440 --> 00:26:13.440 This is high technology. Could not have happened with PowerPoint. So this is my piece of land, and I have no neighbors so far. 145 00:26:13.440 --> 00:26:34.440 And now I spew out smoke here and here and here and so forth, and after a while somebody settles next to me. 146 00:26:34.440 --> 00:26:54.440 Can this person B complain about person A that he causes physical damage to the property of B? 147 00:26:54.440 --> 00:27:06.440 And the answer is no, in this case he can't because person A has acquired what is called an easement. 148 00:27:06.440 --> 00:27:18.440 He was there first and nobody's property was damaged by his initial activities. 149 00:27:18.440 --> 00:27:31.440 If somebody else now comes along B, then what B has appropriated is from the outset soiled or dirty property. 150 00:27:31.440 --> 00:27:43.440 And if B wants to have unsoiled or clean property, then B must pay A to stop this. 151 00:27:43.440 --> 00:27:53.440 But A being there first has acquired an easement to continue with this activity if he so desires. 152 00:27:53.440 --> 00:27:58.440 B must pay A in order to stop it. 153 00:27:58.440 --> 00:28:12.440 If the situation is the other way around, that is, B is here first and then A settles next to B 154 00:28:12.440 --> 00:28:22.440 and then spooze out his smoke and whatever it is onto B's property, then the situation is different. 155 00:28:22.440 --> 00:28:38.440 B has acquired clean property and he has acquired an easement for his property to be left clean. 156 00:28:38.440 --> 00:28:58.440 In this case, he could take out an injunction against B and tell B, you must stop this, or you must pay me in order for me to let you continue with this activity. 157 00:28:58.440 --> 00:29:14.440 These are, so to speak, the elementary rules that have been accepted by mankind for thousands of years. 158 00:29:14.440 --> 00:29:21.440 Again, there exists, so to speak, disputes sometimes about who was their first and who was their second. 159 00:29:21.440 --> 00:29:42.440 But those rules were considered to be the basic fundamental rules of dealing with conflicts arising over who owns what and who is permitted to do what and who is not permitted to do what. 160 00:29:42.440 --> 00:29:56.440 So when we are talking about the production of security in a natural order, I have in mind the defense of these principles. 161 00:29:56.440 --> 00:30:09.440 Who has appropriated something first, has the right to defend it, who was there first without any neighbors acquires an easement, 162 00:30:09.440 --> 00:30:22.560 And if certain negative externalities result, or if negative externalities come later, then 163 00:30:22.560 --> 00:30:33.920 the initial owner has the right to stop these negative externalities. 164 00:30:33.920 --> 00:30:50.920 Now, in a natural order, first thing that I want to point out, that this does not only include, of course, self-defense. 165 00:30:50.920 --> 00:31:13.920 I've already mentioned the fact that insofar as we control something, we automatically would defend ourselves against people who try to take control away of things that we ourselves are in control of. 166 00:31:13.920 --> 00:31:38.920 We also, from the very beginning, select the places where we have our property, partly, partially, with consideration of how easy or difficult are these things to defend where they are. 167 00:31:38.920 --> 00:31:50.920 To just give you examples, for instance, the location of Venice is somehow in the marshes. 168 00:31:50.920 --> 00:32:02.920 But it is difficult for invaders, especially at an age when you had very limited technological abilities, 169 00:32:02.920 --> 00:32:14.920 The idea is to invade a place like this because you have to go through the water and the water is flat and you don't know your way around it and so forth. 170 00:32:14.920 --> 00:32:18.920 It is easier to defend a place like this. 171 00:32:18.920 --> 00:32:25.920 So the location of many places was chosen precisely with this idea in mind. 172 00:32:25.920 --> 00:32:30.920 Is it a place that can be easily defended? 173 00:32:30.920 --> 00:32:41.920 Of course, if there's nobody around for ten thousands of miles, you are alone, then that might not be an important consideration for you to choose certain locations. 174 00:32:41.920 --> 00:32:48.920 But if you are surrounded by other people, then these sorts of considerations are of importance. 175 00:32:48.920 --> 00:32:56.920 The same thing is true for the low countries, the Netherlands. 176 00:32:56.920 --> 00:33:11.920 They also offer certain possibilities of defending yourself by flooding certain areas and making an invasion of other people very difficult. 177 00:33:11.920 --> 00:33:20.920 Another example would be the valleys in mountain regions. 178 00:33:20.920 --> 00:33:36.980 Some people settled in Swiss valleys, very remote valleys, in high elevations, precisely 179 00:33:36.980 --> 00:33:43.080 because they knew that those were places that were comparatively easy to defend and very 180 00:33:43.080 --> 00:33:48.480 difficult to occupy. 181 00:33:48.480 --> 00:33:54.880 And in modern times this has made a difference. 182 00:33:54.880 --> 00:34:04.600 The Germans could have probably because of their significantly larger size invaded a 183 00:34:04.600 --> 00:34:08.520 country such as Switzerland. 184 00:34:08.520 --> 00:34:21.400 What Switzerland had on the one hand a militia with every man being armed and having semi-machine 185 00:34:21.400 --> 00:34:29.920 guns at home with ammunition in the closet. 186 00:34:29.920 --> 00:34:36.360 Still remember how impressed my children were when I took them to some of my Swiss friends 187 00:34:36.360 --> 00:34:45.360 And then he opened the closet and there was a big gun and enough ammunition to kill half of the German population. 188 00:34:45.360 --> 00:34:57.360 And also, of course, because a country like Switzerland, because of its mountainous terrain, 189 00:34:57.360 --> 00:35:18.360 is very difficult to invade and occupy. You can see that again how our brave soldiers in Afghanistan struggle up and down the mountain to find the people that they are looking for. 190 00:35:18.360 --> 00:35:34.360 or take a place like San Marino, which sits on top of a thousand feet mountain with a big fortress around 191 00:35:34.360 --> 00:35:44.360 and a population of 8,000 people which made up San Marino 192 00:35:44.360 --> 00:35:52.360 were able to defend themselves for 1,500 years from any invasion. 193 00:35:52.360 --> 00:36:09.360 Now, the second thing I want to point out is how obvious it is 194 00:36:09.360 --> 00:36:20.360 is in which way in small societies justice will be done. 195 00:36:20.360 --> 00:36:27.360 We always hear about the necessity of a state in order to do justice. 196 00:36:27.360 --> 00:36:38.360 Again, the world provides us with hundreds of thousands of examples how absolutely ludicrous this idea is. 197 00:36:38.360 --> 00:36:52.360 In every little society encompassing a few people, there are very quickly a few people rising to the rank of some sort of authority. 198 00:36:52.360 --> 00:37:02.360 They are braver, smarter, more successful, more trusted than others. 199 00:37:02.360 --> 00:37:06.360 You can see that in every village. 200 00:37:06.360 --> 00:37:35.360 And whenever there is a conflict, that is, A steals something from B, or A knocks over B, and they fight over who did it and who didn't do it, while it was possible that they engaged, so to speak, in vigilante justice, that is, tried to beat the crap out of each other right on the spot. 201 00:37:35.360 --> 00:37:42.800 In most cases, and for good reasons, they don't do that because it is very difficult 202 00:37:42.800 --> 00:37:53.120 then afterwards to justify themselves before the other members in the village. 203 00:37:53.120 --> 00:38:02.680 So they turn to people who have more authority than others do and these people, let's call 204 00:38:02.680 --> 00:38:10.680 and call them nobles or whatever, or aristocrats or the elite, whatever the term is, it doesn't matter. 205 00:38:10.680 --> 00:38:19.680 These people will then act as judge, typically without charging any fee, 206 00:38:19.680 --> 00:38:26.680 just out of the responsibility of being a leader of a small community. 207 00:38:26.680 --> 00:38:39.680 And based on their judgment and on their authority that they have among their fellow men, this judgment then will be enforced automatically. 208 00:38:39.680 --> 00:38:48.680 In most cases, there is not even violence necessary in order to enforce it on the person who was found to be guilty. 209 00:38:48.680 --> 00:39:11.680 The person himself will accept it and will be willing to do restitution, because otherwise he will be expelled from the community, he will be an outcast, and nothing is in those societies worse than being an outcast. 210 00:39:11.680 --> 00:39:32.840 Again, even in modern times, this sort of ostracism works magnificently in many professions. 211 00:39:32.840 --> 00:39:40.120 I met a main, large grain dealer in Switzerland at some time. 212 00:39:40.120 --> 00:39:45.440 And they did dealings with grain dealers all over the world. 213 00:39:45.440 --> 00:39:55.720 And he reported that they had some quarrels with certain qualities of grains or delay 214 00:39:55.720 --> 00:40:01.480 of delivery from some grain dealer in the Soviet Union. 215 00:40:01.480 --> 00:40:13.280 Until at the time when the Soviet Union was intact, no regular court was involved, just 216 00:40:13.280 --> 00:40:21.120 the Association of Grain Dealers was involved in this. 217 00:40:21.120 --> 00:40:28.480 The proceedings took place in the Soviet Union. 218 00:40:28.480 --> 00:40:36.360 And the unanimous verdict was the guy in the Soviet Union had done wrong and the judgment 219 00:40:36.360 --> 00:40:44.160 was enforced and this person was thrown out of this association of merchant dealers, of 220 00:40:44.160 --> 00:40:45.800 grain dealers. 221 00:40:45.800 --> 00:40:54.680 Nobody ever dealing in grain would have had anything to do with this person again. 222 00:40:54.680 --> 00:41:01.080 Fear ostracism was entirely sufficient to do it. 223 00:41:01.080 --> 00:41:10.160 Now of course you also have sometimes recalcitant people and those people then get hit on the 224 00:41:10.160 --> 00:41:16.920 head, just like we do it nowadays, also with those people who are not willing to listen 225 00:41:16.920 --> 00:41:23.440 and they are, were by and large forced to do compensation to the victim. 226 00:41:23.440 --> 00:41:28.960 That was the principle of punishment, to do compensation to the victim. 227 00:41:28.960 --> 00:41:37.440 You realize, of course, that criminals nowadays do not compensate their victims at all. 228 00:41:37.440 --> 00:41:45.320 As a matter of fact, victims typically have to shell out more money so that recalcitrant 229 00:41:45.320 --> 00:41:53.360 criminals can do table tennis, watch TV, engage in workouts, get the right muesli and 230 00:41:53.360 --> 00:42:04.800 whatever it is in present, very different situation than that that would exist in a natural order. 231 00:42:04.800 --> 00:42:20.440 But even on this relative primitive level, we would of course expect that there are certain 232 00:42:20.440 --> 00:42:34.440 There are some limitations to self-defense, that people would want to rely on specialized defense providers. 233 00:42:34.440 --> 00:42:39.440 They want to take advantage of division of labor also in this field. 234 00:42:39.440 --> 00:42:45.440 Not everybody is equally good at protecting somebody else. 235 00:42:45.440 --> 00:43:01.440 And ours usually have big time people standing in front of the door and making sure who goes in and doesn't go in and not teeny old ladies. 236 00:43:01.440 --> 00:43:11.440 So yes, division of labor is as important in that area as it is in others. 237 00:43:11.440 --> 00:43:31.440 And what I want to do now is to describe, so to speak, first how this system of defending oneself against aggressors worked during the feudal age, during the middle ages. 238 00:43:31.440 --> 00:43:51.440 A time when no state existed. Just a large number of highly decentralized lords and vassals and so forth. 239 00:43:51.440 --> 00:44:00.440 And then in the next step I will explain with some cues taking from the feudal order 240 00:44:00.440 --> 00:44:06.440 How such a system would work in modern times? 241 00:44:06.440 --> 00:44:16.440 I don't know how far I get, obviously a little bit behind in my plans here, so I might have to keep you on Saturday as well. 242 00:44:16.440 --> 00:44:27.440 So in these feudal times there existed, so to speak, landlords, owners of pieces of land, 243 00:44:27.440 --> 00:44:40.440 and they had tenants, tenant farmers, both were contractually connected. 244 00:44:40.440 --> 00:44:47.440 Most of the stuff that we learn about feudalism tends to be half-truth at the best. 245 00:44:47.440 --> 00:44:54.440 Feudalism has a very bad name, undeservedly bad name. 246 00:44:54.440 --> 00:45:23.440 And the contract between the landlords and the tenants typically provided for, the landlord provides protection and the tenant works for a certain period of time for the landlord and is in cases of conflict also willing and prepared to fight on the land. 247 00:45:24.440 --> 00:45:40.480 Law, as Joe Stromberg mentioned in his lecture, law at that time was considered something 248 00:45:40.480 --> 00:45:44.120 that was given. 249 00:45:44.120 --> 00:45:49.800 Law was not considered to be something that was made by people, but something that existed 250 00:45:49.800 --> 00:46:09.800 People learned what it was. New law was from the very outset considered to be suspicious, because law had to be old. It had to be something that had always existed. 251 00:46:09.800 --> 00:46:25.800 Anybody who came up with some sort of new thing was automatically dismissed as probably a fraud. 252 00:46:25.800 --> 00:46:34.800 The subjects, the tenants, had a right to resist. 253 00:46:34.800 --> 00:46:50.800 They were not subject to their lords no matter what because, as I said, there existed an eternally valid law which protected the tenant as much as the landlords. 254 00:46:50.800 --> 00:47:02.800 And if the landlord did break this law, then the tenants had the right to resist, up to the point of killing the landlord. 255 00:47:02.800 --> 00:47:13.800 These landlords in turn had been contractually tied to other landlords. 256 00:47:13.800 --> 00:47:19.800 The lords had, so to speak, other overlords. 257 00:47:19.800 --> 00:47:30.800 And again, these contracts provided by and large for mutual assistance agreements. 258 00:47:30.800 --> 00:47:44.800 If such and such happens, you will provide so and so many soldiers or peasants to do this, and you do such and such, and so forth. 259 00:47:44.800 --> 00:47:52.800 And what came about was called a feudal pyramid. 260 00:47:52.800 --> 00:48:11.800 That is, again, another contract with somebody who might be even more powerful, meaning in this case who had even larger land holdings and larger number of tenants and so forth, all the way up to the king. 261 00:48:11.800 --> 00:48:28.800 Not only that, people frequently had contracts with various lords, with competing lords, so to speak, as some sort of insurance policy. 262 00:48:28.800 --> 00:48:34.800 That is, if this guy does something to me, I also have another protector. 263 00:48:34.800 --> 00:48:46.720 And in combination with these sorts of multiple alliances that existed, they typically agreed 264 00:48:46.720 --> 00:48:52.320 that if it would come to a conflict between their two lords to which they had pledged 265 00:48:52.320 --> 00:49:22.320 Peasants who were not associated directly with any particular Lord in some sort of protection agreement, who were, so to speak, either the Lord or the Lord, 266 00:49:22.320 --> 00:49:32.320 isolated peasants usually chose the king as their protector. 267 00:49:32.320 --> 00:49:36.240 There is someone slightly more removed, 268 00:49:36.240 --> 00:49:42.120 but they also received some sort of legal protection 269 00:49:42.120 --> 00:49:47.800 by associating them with the king directly. 270 00:49:47.800 --> 00:50:16.800 There existed also so-called allodial owners, that is people who were big land owners on their own and had no allegiances to anyone and would meet the king, so to speak, on an even level. 271 00:50:16.800 --> 00:50:27.800 They had less land than the king might have had and so forth, and less tenants and less soldiers working for them. 272 00:50:27.800 --> 00:50:38.800 But they were in dealings with the king, his equals. 273 00:50:38.800 --> 00:50:57.800 The lords on their territory had complete jurisdiction over their territory, including over all those people who lived on that territory. 274 00:50:57.800 --> 00:51:10.800 That is, they were the judge over their peasants, their warriors, their house personnel, and so forth. 275 00:51:10.800 --> 00:51:20.800 Intervening into the internal affairs of the Lord was not permitted. 276 00:51:20.800 --> 00:51:28.800 In this sense, they had a similar status that, let's say, embassies have nowadays. 277 00:51:28.800 --> 00:51:36.800 Whereas the United States cannot simply go into the embassy of China and then do whatever they want. 278 00:51:36.800 --> 00:51:42.800 In the Chinese embassy, the Chinese rule themselves. 279 00:51:42.800 --> 00:52:01.800 So the lords were in charge of their dominion and they represented their tenants or vassals in external affairs. 280 00:52:01.800 --> 00:52:25.800 The king was typically a person who came from a particularly noble family, a family that was recognized as a family of great achievement, 281 00:52:25.800 --> 00:52:41.800 and was always chosen from this family but was not hereditary in the sense that it was perfectly clear who would become the next king. 282 00:52:41.800 --> 00:52:50.800 It was all the other nobles who were contractually all connected with each other 283 00:52:50.800 --> 00:53:01.800 who determined unanimously who of the members of this king family should become the king. 284 00:53:01.800 --> 00:53:12.200 Eventually, this type of principle that combines, so to speak, hereditary elements with elective 285 00:53:42.200 --> 00:54:05.200 These assemblies of lords that selected the king became in a way the precursors of what we consider to be parliaments. 286 00:54:05.200 --> 00:54:24.200 But of course, only nobles, that is, landlords themselves, not tenants, were in charge of electing the king. 287 00:54:24.200 --> 00:54:50.200 The King's main task consisted with the agreement of his assembled nobles to declare cases of emergency, war or something like this. 288 00:54:50.200 --> 00:55:01.200 But only with the consent, with the unanimous consent of the nobles assembled in this parliament. 289 00:55:01.200 --> 00:55:12.200 And in addition, the king had, so to speak, the function of some sort of appeals court. 290 00:55:12.200 --> 00:55:30.200 That people who thought that an injustice had been committed against them, including an injustice by their own lord, could appeal to the king for final justice. 291 00:55:30.200 --> 00:55:39.200 The early feudal kings traveled around frequently from town to town. 292 00:55:39.200 --> 00:55:42.200 They were, so to speak, wandering judges. 293 00:55:42.200 --> 00:55:47.200 There existed no such thing as capitals. 294 00:55:47.200 --> 00:55:52.200 In the German case, for instance, 295 00:55:52.200 --> 00:56:14.200 There were places where regular court sessions were held in Nuremberg, in Augsburg, in Regensburg, in Frankfurt, in Prague, in Vienna and several other places. 296 00:56:14.200 --> 00:56:25.200 All of these places had, so to speak, an elevated status as places where one could seek justice, but no capital existed. 297 00:56:25.200 --> 00:56:33.200 The king could also not tax. Taxes in the modern sense did not exist. 298 00:56:33.200 --> 00:56:44.200 The king lived of his own estate, just as all lords lived of their own estate. 299 00:56:44.200 --> 00:56:55.200 All that he could do is, in cases of war, go to his various nobles there and beg them, 300 00:56:55.200 --> 00:57:13.200 Give me a little bit, give me a little bit, or something like this, whereby every noble was perfectly entitled to say no, and nothing would happen to him. 301 00:57:13.200 --> 00:57:40.200 The task of the king was also, besides with the agreement of the nobles to decide about cases of war, to establish on the outskirts of these loose associations of lords and nobles and so forth, 302 00:57:40.200 --> 00:58:08.200 There were those so-called protection villages where people were settled, selected due to their particular abilities as fighters in order to protect, let's say, Christendom from the Turks or something like this. 303 00:58:08.200 --> 00:58:36.200 They were called Wehrdörfer, who were fortified, especially because their task consisted in the defense against societies that were considered to be other than the society that was combined or integrated through this intricate system 304 00:58:36.200 --> 00:58:41.200 of feudal contract relationships. 305 00:58:48.200 --> 00:58:57.200 Not only did the right to resistance exist among the tenants against their landlords. 306 00:58:57.200 --> 00:59:19.200 Very importantly, it was also possible that these tenants, if they felt oppressed by their landlord, could run away and simply associate and get protection from a neighboring lord. 307 00:59:19.200 --> 00:59:40.200 Which was, of course, the best protection that you can have, so to speak, from being oppressed in the first place, knowing that all you have to do is run away and attach yourself to some other protector and thereby you get rid of your previous lord. 308 00:59:40.200 --> 00:59:57.200 On this point in particular, that is the ability of people to run away and attaching themselves to a different protector, 309 00:59:57.200 --> 01:00:19.200 I want to quote Herbert Spencer, who describes the situation in ancient Rome, which was very similar in its feudal structure as Europe during the Middle Ages. 310 01:00:19.200 --> 01:00:48.320 Herbert Spencer there says about early Rome, in early Rome, Rome is also famous place for 311 01:00:48.320 --> 01:01:06.320 complete domination of the master of the household over his tenants and servants, including his children and wife and so forth. 312 01:01:06.320 --> 01:01:17.320 He writes there, in early Rome, while coercive rule within the family and the group of related families was easy, 313 01:01:17.320 --> 01:01:38.320 There was difficulty in extending coercion over many such groups, fortified as they were against one another. 314 01:01:38.320 --> 01:01:59.320 Moreover, the stringency of government within each of the communities, that is each of the clans, constituting the primitive city, was diminished by the facility of escape from one and admission into another. 315 01:01:59.320 --> 01:02:22.320 As we have seen among simple tribes, desertions take place when the rule is harsh, and we may infer that, in primitive Rome, there was a check on exercise of force by the more powerful families in each settlement over the less powerful, 316 01:02:22.320 --> 01:02:27.400 caused by the fear that migration might weaken the settlement 317 01:02:27.400 --> 01:02:30.620 and strengthen an adjacent one. 318 01:02:30.620 --> 01:02:33.840 Thus, the circumstance were such that when, 319 01:02:33.840 --> 01:02:39.080 for defense of the city, cooperation became needful, 320 01:02:39.080 --> 01:02:44.360 the heads of the clans, included in its several divisions, 321 01:02:44.360 --> 01:02:48.080 came to have substantially equal powers. 322 01:02:48.080 --> 01:02:55.880 The original Roman Senate was the collective body of clan elders, and this assembly of 323 01:02:55.880 --> 01:03:00.680 elders was the ultimate holder of the ruling power. 324 01:03:00.680 --> 01:03:06.840 It was an assembly of kings. 325 01:03:06.840 --> 01:03:14.400 Now let me emphasize at this point again. 326 01:03:14.400 --> 01:03:21.600 Just as important for the successful development of Western Europe, it was that there was a 327 01:03:21.600 --> 01:03:32.680 separation between church and state, different from all other regions on the globe. 328 01:03:32.680 --> 01:03:41.040 So it was of utmost importance for the dynamic development of Western Europe, that Western 329 01:03:41.040 --> 01:03:50.520 European Europe was, so to speak, a political anarchy. That is to say, thousands of independent 330 01:03:50.520 --> 01:03:59.360 landlord nobles somehow connected together through contracts and so forth, but each being 331 01:03:59.360 --> 01:04:09.720 his own man, and the ease with which people could move from one jurisdiction, so to speak, 332 01:04:09.720 --> 01:04:19.720 and another which tends to contribute of course to moderation on the part of each one of these rulers. 333 01:04:19.720 --> 01:04:26.720 Each one must be afraid if I am too draconic in my punishment of my own men, 334 01:04:26.720 --> 01:04:38.720 then they will attach themselves to somebody else and strengthen people who in some situations might become my enemy. 335 01:04:38.720 --> 01:04:58.720 In addition, one more element should be mentioned in order to characterize, so to speak, the feudal world, and that is the existence of cities. 336 01:04:58.720 --> 01:05:25.720 These cities were typically founded either by bishops or by nobles, by lords, or by associations of merchants. 337 01:05:25.720 --> 01:05:40.720 And in some cases, of course, also by, as in the case of Switzerland, for instance, by Eidgenossenschaften, what would be the appropriate term for that, Joe? 338 01:05:40.720 --> 01:06:09.720 Sworn communities, which is, so to speak, the structure that the initial founding cantons in Switzerland had, where all three men swore in oath that they would come to mutually assist each other in case of an attack. 339 01:06:09.720 --> 01:06:17.680 attack against them. 340 01:06:17.680 --> 01:06:32.520 And these cities had frequently written law codes, that is, Magdeburg law or Hamburg law 341 01:06:32.520 --> 01:06:41.480 Law, or Hanover Law, or Lübeck Law and so forth, so that people who moved to these cities 342 01:06:41.480 --> 01:06:54.600 knew what law code would apply to them, and when new cities were founded, the normal thing 343 01:06:54.600 --> 01:07:05.600 The first thing to do was to adopt one of the already existing law codes and maybe make a few amendments to it. 344 01:07:05.600 --> 01:07:16.600 That is, some law codes became the law codes not just of one city but of many, many cities 345 01:07:16.600 --> 01:07:33.600 who adopted the initial example of some place that first took the initiative to write these laws down. 346 01:07:33.600 --> 01:07:41.600 In this connection, a little side remark. 347 01:07:41.600 --> 01:07:50.960 In English-speaking countries, America and England, there is a certain amount of pride 348 01:07:50.960 --> 01:08:08.320 in having the so-called common law, which is in a way non-codified law, case law. 349 01:08:08.320 --> 01:08:16.220 The Continental tradition, as you know, has been for a long time different. 350 01:08:16.220 --> 01:08:31.080 That is, there we have had codified law taken from the Romans, especially from the East 351 01:08:31.080 --> 01:08:41.360 Romance, who had codified this law for the first time in an extensive manner. 352 01:08:41.360 --> 01:08:50.520 And then of course, in modern times, the Code Napoleon, which has been taken over by most 353 01:08:50.520 --> 01:08:59.760 continental European states in one form or another with some modification or another. 354 01:08:59.760 --> 01:09:11.920 And as I said, Anglo-Saxons look down on codified law and hail their non-codified common law. 355 01:09:11.920 --> 01:09:18.920 I want to just remark that, for instance, Max Weber has a very interesting observation 356 01:09:18.920 --> 01:09:30.960 Regarding this, he sees the reason for the non-codification of the common law in the 357 01:09:30.960 --> 01:09:41.040 self-interest of the lawyers to make the law difficult to understand for the layman and 358 01:09:41.040 --> 01:09:49.200 thus make a lot of money and emphasizes that codified law, of course, makes it possible 359 01:09:49.200 --> 01:09:57.680 for the layman on the street who can read to study the law book himself and go to court 360 01:09:57.680 --> 01:10:04.880 himself and point out here, this is written down and so forth. 361 01:10:04.880 --> 01:10:16.840 So maybe this excessive pride that the Anglo-Saxons have in their common law might be a little 362 01:10:16.840 --> 01:10:22.260 bit overdrawn. 363 01:10:22.260 --> 01:10:36.940 In terms of punishment, as I said, compensation to the victim was the main principle and there 364 01:10:36.940 --> 01:10:48.260 was worked out relatively quickly some system of paying fines for various types of offenses. 365 01:10:48.260 --> 01:10:54.700 And by and large, they've accepted the principle of proportionality. 366 01:10:54.700 --> 01:11:02.680 If you killed somebody, then you had to pay more than if you cut off somebody's arm. 367 01:11:02.680 --> 01:11:10.320 If you cut off somebody's arm, the fine that was imposed on you was higher than if you 368 01:11:10.320 --> 01:11:13.900 cut off somebody's toe and so forth. 369 01:11:13.900 --> 01:11:28.900 But most of the punishments were indeed in the form of fines, either monetary fines or fines in the form of natural goods. 370 01:11:28.900 --> 01:11:42.900 So now I should come to the modern world. I'm realizing that I'm running somewhat out of time. 371 01:11:42.900 --> 01:11:47.900 But let me, yeah, let me just begin at least. 372 01:11:49.900 --> 01:11:54.900 Now obviously we cannot go back to this feudal system. 373 01:11:56.900 --> 01:12:03.900 My purpose was only to show that we do have historical examples 374 01:12:03.900 --> 01:12:16.900 where societies have developed relatively effective means of protecting themselves through systems of alliances. 375 01:12:16.900 --> 01:12:26.900 In the modern world, we would expect, of course, a slightly different setup. 376 01:12:26.900 --> 01:12:41.900 and this setup would be composed mostly of three institutional devices. 377 01:12:41.900 --> 01:12:55.900 On the one hand commercial insurance companies, on the other hand freely financed police forces, 378 01:12:55.900 --> 01:13:07.900 and freely financed arbitration and judging agencies. 379 01:13:07.900 --> 01:13:15.900 We can imagine that these three institutions would operate separately from each other 380 01:13:15.900 --> 01:13:20.900 but be contractually aligned with the others 381 01:13:20.900 --> 01:13:37.900 or we can imagine that these three institutions would be vertically integrated, that is to say an insurance company would also have a police division and a judge division attached to it. 382 01:13:37.900 --> 01:13:48.900 It doesn't really matter whether it is vertically integrated or we have independent institutions. 383 01:13:48.900 --> 01:14:11.900 The decisive element here would be again that the relationships between all of these institutions would be again contractual, voluntary, similar to the situation that existed during the feudal era. 384 01:14:11.900 --> 01:14:31.900 And I want to explain in particular that through such a set up, we would gradually create also something like the unification of law. 385 01:14:31.900 --> 01:14:44.900 Just as we have the world becomes unified through one money, the world becomes unified through worldwide division of labor, 386 01:14:44.900 --> 01:15:02.900 So the world would also become integrated through a set of universal standards of law. 387 01:15:02.900 --> 01:15:09.900 Now how would this happen? 388 01:15:09.900 --> 01:15:23.380 I think the main impulse in that direction would come from insurance companies. 389 01:15:23.380 --> 01:15:35.420 All institutions in the modern world, all firms, all companies, everybody having an enterprise 390 01:15:35.420 --> 01:15:39.300 requires insurance. 391 01:15:39.300 --> 01:15:42.540 To operate, so to speak, without insurance 392 01:15:42.540 --> 01:15:45.800 is almost impossible in the modern world. 393 01:15:45.800 --> 01:15:49.620 You can only be a very small scale entrepreneur 394 01:15:49.620 --> 01:15:53.580 and do entirely on your own without having 395 01:15:53.580 --> 01:15:55.340 some sort of insurance protection. 396 01:15:58.860 --> 01:16:03.820 Because of this, it would not be possible, 397 01:16:03.820 --> 01:16:19.520 As some people have argued, that there would be, so to speak, that all institutions, all places would lay down their own peculiar rules and laws. 398 01:16:19.520 --> 01:16:32.720 That is, the mall has the mall laws, the school has the school laws, the steel factory has the steel factory laws. 399 01:16:32.720 --> 01:16:41.360 At Stringham's house, the laws would be if somebody comes in there, that he has not invited, 400 01:16:41.360 --> 01:16:46.440 there might be automatic shooting devices that kill the person who comes in and things 401 01:16:46.440 --> 01:16:50.160 like this. 402 01:16:50.160 --> 01:16:53.320 Why would that not be the case? 403 01:16:53.320 --> 01:16:59.280 Because insurance companies would of course insist that many of these practices are simply 404 01:16:59.280 --> 01:17:02.400 not insurable. 405 01:17:02.400 --> 01:17:13.240 They would insist on a certain amount of uniformity of standards that all of these insured companies 406 01:17:13.240 --> 01:17:17.580 would have to adopt. 407 01:17:17.580 --> 01:17:25.840 They would eliminate, so to speak, arbitrary rules applying at this place or at that place 408 01:17:25.840 --> 01:17:34.480 and insist on rather general and generally known rules. 409 01:17:34.480 --> 01:17:40.340 On the one hand in order to reduce, so to speak, general uncertainty and on the other 410 01:17:40.340 --> 01:17:47.440 hand because only if they lay down rather general rules will they be able to attract 411 01:17:47.440 --> 01:17:53.640 a large clientele, which is of course their desire. 412 01:17:53.640 --> 01:18:14.240 Secondly, insurance companies will have an inherent interest, a financial interest in imposing on everyone who is insured by them a defensive behavioral code. 413 01:18:14.240 --> 01:18:28.080 The reason for this is you can insure yourself only against risks over whose outcome you have no personal control. 414 01:18:28.080 --> 01:18:39.280 You cannot insure yourself, for instance, against the risk that I provoke him and he then smashes me in the face 415 01:18:39.280 --> 01:18:46.920 Then I go to my insurance company and say, he smashed me in the face and now defend me against him. 416 01:18:46.920 --> 01:18:54.240 The insurance company would say, look, you have to behave in an entirely defensive way. 417 01:18:54.240 --> 01:18:57.680 The attack must have been entirely unprovoked. 418 01:18:57.680 --> 01:19:06.200 Only then will we defend yourself, but not if you have anything to do with the attack yourself. 419 01:19:06.200 --> 01:19:12.320 I cannot insure myself against the risk of burning down my own house. 420 01:19:12.320 --> 01:19:19.080 I can insure myself against the risk that my house burns down, but no insurance company 421 01:19:19.080 --> 01:19:27.680 would insure me and allow me to burn down my own house and then make payment for it. 422 01:19:27.680 --> 01:19:36.440 So insurance companies will insist, in order to cover you for any type of contingency, 423 01:19:36.440 --> 01:19:50.480 that you have to commit yourself to a fundamentally defensive form of behavior and conduct. 424 01:19:50.480 --> 01:20:03.480 Why? They are very nature. They want to minimize damage. Minimizing damage is, so to speak, the business in which they are in. 425 01:20:03.480 --> 01:20:10.480 Otherwise, they would have to pay up. 426 01:20:10.480 --> 01:20:25.480 What we would get is insurance companies might offer a certain variety in the types of contracts that they offer. 427 01:20:25.480 --> 01:20:49.480 Let's say an insurance company might specialize in Catholic clients and impose certain types of punishment for whatever, committing adultery that other companies would not have in their repertoire. 428 01:20:49.480 --> 01:21:00.360 are, but they cannot be fundamentally different in the type of codes that they would offer. 429 01:21:00.360 --> 01:21:08.960 And moreover, because it is now possible that conflicts arise between members of different 430 01:21:08.960 --> 01:21:17.160 insurance agencies as slightly different as the contracts of these different insurance 431 01:21:17.160 --> 01:21:35.160 When there are conflicts between people being insured by different insurance agencies, the only peaceful resolution that is possible is to go to an independent third arbitrator. 432 01:21:35.160 --> 01:22:02.160 And this independent third arbitrator, again that might be agencies that offer, so to speak, they would be independent of both companies, these independent arbitration agencies of which they exist again competing once, and no arbitration agency can be sure that it will be chosen again in such cases. 433 01:22:02.160 --> 01:22:12.160 These independent arbitration agencies have now obviously an interest in order not to lose their clients, 434 01:22:12.160 --> 01:22:28.160 that is the two conflicting insurance companies, to develop a set of law that can be regarded as acceptable to everyone 435 01:22:28.160 --> 01:22:38.960 regardless of what his particular or specific insurance company is, with which he deals in most cases. 436 01:22:38.960 --> 01:22:46.460 That is to say, these independent arbitration agencies would create, in a process of competition, 437 01:22:46.460 --> 01:22:54.360 something like a universally valid international law. 438 01:22:54.360 --> 01:23:09.360 And thereby, through a process of competition, lead to a situation where we have a unified law structure that is valid, so to speak, throughout the entire world, more or less. 439 01:23:11.360 --> 01:23:22.360 And this completes, so to speak, the process of economic and social integration. 440 01:23:24.360 --> 01:23:34.600 integration through division of labor, integration through money, and integration through some 441 01:23:34.600 --> 01:23:42.600 international law that binds all societies together, however different their internal 442 01:23:42.600 --> 01:23:46.260 law structure might be. 443 01:23:46.260 --> 01:23:56.860 This is how I think a natural order would look like roughly in the modern world and 444 01:23:56.860 --> 01:24:03.980 effectively defend the property rights of individuals. 445 01:24:03.980 --> 01:24:16.580 And with this I have again overdrawn my time and beg for your forgiveness. 446 01:24:16.580 --> 01:24:24.300 There will be more time in the lectures to come, especially in the last one when I talk 447 01:24:24.300 --> 01:24:41.300 I'm going to talk about strategic ideas, so I would ask you, since I'm dried out in the meantime, to hold back with any questions and delay them until the next time. Thank you again.