Segundo Parcial - Law and Economics

I. Conceptos Fundamentales de la Ley Sin Estado

El derecho como institución: Norms, like money, are institutions that can arise spontaneously.
Puntos focales Definition: A form of action that generates a convergence of mutual expectations.
When actors must coordinate without communication, they look for a unique or obvious solution (the Schelling point).
Propiedad privada como punto focal: Respect for private property is an accepted distribution of rights that functions as a Schelling point.
The convergence of respect is based on the expectation that individuals will protect their claims.
The derecho sobre tu cuerpo (right over your body) is the underlying natural property because the individual has the lowest transaction costs for controlling their own body, making self-ownership efficient (Coasian argument).
Efecto dotación (Endowment Effect): People value goods they already possess more highly than those they do not. This cognitive bias leads owners to be willing to pay more to protect their property than others would pay to acquire it, reinforcing protection expectations.

Coste de la violencia (Cost of violence): Violence and warfare are economically costly ways of resolving disputes.
Violence is also highly scalable and involves great uncertainty about the outcome.
Private enforcement agencies prefer lower-cost alternatives, such as arbitraje.

Arbitration is the preferred method for resolving conflicts peacefully using neutral third parties.
Arbitrators decide cases based on private norms or precedents.
Reputación (Reputation): An arbitrator’s reputation for honesty, impartiality, and wisdom is their most critical asset.
If an arbitrator gains a reputation for corruption or inefficiency, their business will quickly disintegrate.
Eficiencia (Efficiency): Competition among adjudication bodies acts as a healthy check on undesirable behavior, providing better results than government monopolies.

Parties seek an impartial judge because the primary goal is a peaceful resolution to the original dispute.
Incentives to Obey: If a client rejects arbitration or violates the ruling, their security agency will likely refuse to defend them.
The refusal results in a bad Reputación (Reputation), making the individual appear guilty to society.
A negative reputation makes it difficult to engage in future transactions, find jobs, or obtain credit.
Disciplina de los acuerdos frecuentes (Discipline of constant dealings): Continuous interaction reinforces the incentive for parties to keep their agreements.

Arbitration firms have an incentive to guard their reputation for fairness and would be unlikely to explicitly embrace injustice by offering grossly excessive awards.
Most ordinary victims seek justice rather than using criminal victimization as an opportunity to get rich.
Excessive awards are difficult or expensive to collect, as the criminal would be less likely to pay.
Most people oppose excessive penalties because they worry they or an innocent person might be wrongly convicted and face severe repercussions.

These are voluntary organizations or firms providing law enforcement and order, without a legal monopoly on coercion.
They provide the necessary functions for the preservation of an orderly society.
They are driven by the profit motive to provide the optimal size and type of protective services.
Policentrismo (Polycentrism): The presence of multiple competing agencies prevents a single entity from dominating the market for protection services.
There is no expectation of economies of scale significant enough for major mafia organizations to evolve and dominate society.

The period was not characterized by chaos; property rights were protected, and order prevailed, supported by market peacekeeping agencies.
Agencias de seguridad (Security Agencies): Voluntary organizations like Land Clubs, Cattlemen’s Associations, Mining Camps, and Wagon Trains provided order and enforcement.
Land Clubs adopted constitutions and rules to protect property rights in the absence of official state protection. They used boycotts and non-association as sanctions.
Cattlemen's Associations arose to protect livestock due to the lack of state police power.
Policentrismo (Polycentrism): In mining camps, multiple jurisdictions coexisted and respected each other’s rulings.
Competition among courts served as a check, as people favored the most just options.
Wagon Trains negotiated formal constitutions ("plains law") as a voluntary contract for order during their journey, relying heavily on existing property rights (Schelling points).

The legal system closely resembles an anarcho-capitalist system applied to a smaller society.
Sistema de derecho plenamente privado (Fully Private Law System): All law was tort law; the victim was responsible for prosecution and enforcement.
The central figure was the chieftain (Goði), whose authority (goðorð) was private property that could be bought, sold, or inherited.
Compraventa del derecho a ver un daño resarcido (Transferability of Claims): A claim for damages could be sold by a weak victim to a stronger individual (often a chieftain) who would enforce it, thereby preventing powerful individuals from defying the law.
The payment for homicide was wergeld (man gold), paid to the victim’s heirs.
Leyes ocaso (Sunset Laws): The Lawspeaker had to publicly recite the entire law code over three years; any omitted part that went unchallenged was removed from the law.

Pirates created their own internal law ("articles") to enable cooperation and resolve conflicts among large groups of violent Gorrones (free-riders/criminals).
They offered employment insurance (workers' compensation) paid from the "publick stock" to injured crew members, reducing the incentive for free-riding in battle.
División de poderes (Division of Powers): Authority was split between the Captain (military command in battle) and the Quartermaster (civil authority/magistrate).
This division constrained authority, preventing the abuse of power experienced under merchant captains.
The Captain and Quartermaster were democratically elected and could be popularly deposed.
Castigos (Punishments): Punishments were severe, including lashing, mutilation, marooning, and death for serious offenses like desertion or theft.
A jury ad hoc or a vote by the majority decided punishments for cases not specified in the articles.

They maintain a separate system of rules (Ordnung), selectively rejecting modern technologies that might disrupt their social structure.
Mecanismo para entrar en la comunidad (Mechanism for joining): Young adults go through Rumspringa (age 16 to 20), a period where they can experience the non-Amish world before deciding to be baptized and commit to the Ordnung.
Castigos (Punishments): Violations are addressed first by a visit from the clergy.
If offenses persist, the congregation proposes and votes unanimously on a punishment.
The ultimate punishment is Meidung/excomunión (shunning), which severely restricts social and business interaction with the individual.
The Amish system functions as a competitive dictatorship; members unhappy with the rules can switch to less strict affiliations or communities.