The Evolution of Private Governance and the Fictions of Anarchism and Statism

As naturally social and political animals, human beings have evolved to live in social orders that arise as self-regulating spontaneous orders.  Every evolved human society has some form of governance.  In most of their evolutionary history, human beings have lived in foraging bands, in which governance has been through customary norms enforced by social punishment of wrongdoers and informal or episodic leadership.  Since the Neolithic Revolution, most human beings have settled into agrarian societies with more formal, bureaucratic, and centralized governments.  Since the end of the Middle Ages, many modern states have claimed a monopoly on the legitimate exercise of violence, which was Max Weber's definition of the state.

Foraging bands have often been identified as anarchistic societies, because as what anthropologists call "stateless societies," they seem to lack any governmental rule.  But if "anarchy" is taken in its literal sense of "no rule" or "no governance," then foraging societies are not anarchies, because they do have some form of governance, even if the governance is informal, fluctuating, and decentralized.  In fact, pure anarchy is a fiction, because no human society can endure for long without some governance.

Some anarchist theorists had implicitly conceded this point.  For example, the best history of anarchist thinkers and movements is Peter Marshall's Demanding the Impossible: A History of Anarchism (2010).  Anarchists begin by distinguishing between society and the state, he indicates, and then they argue that a society can be a self-regulating order of governance without a state.  He writes: "Pure anarchy in the sense of a society with no concentration of force and no social controls has probably never existed.  Stateless societies and peasant societies employ sanctions of approval and disapproval, the offer of reciprocity and the threat of its withdrawal, as instruments of social control.  But modern anthropology confirms that in organic or 'primitive' societies, there is a limited concentration of force.  If authority exists, it is delegated and rarely imposed, and in many societies no relation of command and obedience is in force" (12).

But if it is true that "pure anarchy . . . has probably never existed," and is therefore a fiction, it is also true that pure statism has never existed, and is therefore a fiction.  If we accept the Weberian definition of the state as an absolute monopoly on the legitimate exercise of force, then such a state has never existed, and can never exist, because human beings have evolved to form spontaneously ordered groups for their governance, and while  authoritarian states might vigorously try to suppress such private governance, liberal states will be more open to such private governance, and no state can ever succeed in successfully claiming an absolute monopoly on governance to the exclusion of private governance.

Authoritarian states will create maladaptive societies that promote violence and poverty, while liberal states will create adaptive societies that promote peace and prosperity, because liberal states provide more room for the private governance that arises from the naturally evolved nature of human beings.  Consequently, liberal states will tend to prevail in competition with authoritarian states through evolution by cultural group selection.

Although he does not present his argument against the background of human evolution, that's the picture of human social evolution and political theory that I draw out of Edward Peter Stringham's new book--Private Governance: Creating Order in Economic and Social Life (Oxford, 2015).  A good summary and discussion of Stringham's argument can be found at "Cato Unbound".

Stringham's argument is ambiguous.  On the one hand, he has argued for "Hayekian anarchism"--in an article coauthored with Todd Zywicki in the Journal of Economic Behavior & Organization, 78 (2011): 290-301, and in Chapter 13 of his book (206-225).  His argument is that given Hayek's reasoning about how spontaneous orders evolve without central planning or deliberate design, he should have seen that the logical conclusion from this is anarchism, but instead Hayek insisted that anarchism was impossible, and that the spontaneous order of markets depended upon laws coming from monopolistic government.  Hayek should have seen that his argument for market competition as superior to central planning supported a free market for governance without any need for a monopolistic government.

On the other hand, Stringham seems to pull back from explicitly arguing for pure anarchy, and he suggests that Hayek might have been right in his classical liberal endorsement of limited government that leaves "room for greater experimentation and competition among providers of governance," because "even where governments are pervasive, so too is private governance" (225-26).  Here he seems to agree with my conclusion that even if pure anarchy--the absence of any government--is impossible, every government must leave some room for a free market of private governance, and a liberal government will leave lots of room for this.

In developing my evolutionary interpretation of Stringham's account of private governance, I will read Stringham against the background of Morris Hoffman's The Punisher's Brain: The Evolution of Judge and Jury, which has been the subject of a previous post.

Stringham seems to agree with Hoffman's claim that human beings have three evolved instincts--to cooperate, to cheat, and to punish cheaters.  He also seems to agree with Hoffman that social order requires three rules that are driven by the common problems of property and promise.  The first rule is that transfers of property must be voluntary.  The second rule is that promises must be kept.  The third rule is that serious violations of the first two rules must be punished.

If "property" is understood broadly to include one's self-ownership, one's liberty, and one's possessions, then the rule protecting property encompasses both criminal law and the law of torts.

If "promises" are understood as legally enforceable agreements for exchange and cooperation, then the rule securing promises would encompass contract law.

The punishment required by the third rule is manifest at three levels.  Through first-party punishment, we punish ourselves with conscience and guilt.  Through second-party punishment, we punish our tormentors with retaliation and revenge.  Through third-party punishment, we act as a group in punishing wrongdoers with retribution.

Stringham agrees with Hoffman about all of this.  The disagreement, however, is that Stringham sees--correctly, I think--that third-party punishment does not have to be monopolized by the modern state, as Hoffman assumes, because third-party punishment can be enforced through private governance.

FIRST-PARTY PUNISHMENT: CONSCIENCE AND GUILT
Hoffman argues that as shaped by human evolution, most human beings instinctively punish themselves for cheating, or even thinking about cheating, through conscience and guilt.  Guilt is retroactive blame, feeling pained by the thought of our past misconduct.  Conscience is prospective blame, imagining the pain we would feel if we were to engage in some misconduct.  Such conscience and guilt requires empathy--being able to imaginatively put ourselves in the situation of others and feel the pain they might feel from our injuring them.

Hoffman points to the evidence for the neural correlates of conscience and guilt in particular parts of the brain, and for the diminished capacity for conscience and guilt when there is some innate or acquired abnormality in these parts of the brain.  So, for example, reduced connectivity in the ventromedial prefrontal cortex (vmPFC) of the brain seems to be associated with psychopathic psychology.  Psychopaths--those with little or no capacity for conscience and guilt--are the exception that proves the rule that most human beings have some instinctive propensity to punish themselves for violating moral rules against harming others.

Stringham agrees with this, in claiming that the most personal form of private governance is individual self-governance, which provides the internal moral constraints that support our human capacity for spontaneously forming voluntary associations.  Embracing the theory of human nature as Homo economicus, many economists ignore morality in assuming that cooperation requires external constraints on behavior.  But Stringham thinks Adam Smith did not make this mistake, because his Theory of Moral Sentiments shows how the moral sentiments arise spontaneously from human nature in society, which constitute the moral support for markets.  (Hoffman mistakenly attributes to Smith the Homo economicus model of human nature that sees "humans only as relentlessly selfish creatures" [18].)

Like Hoffman, Stringham sees the experimental work with behavioral economic games (such as the Ultimatum Game, the Trust Game, and the Public Goods game) as refuting Homo economicus and supporting Homo moralis.  Moreover, some of this research conducted cross-culturally around the world by anthropologists like Joseph Henrich confirms that markets and morals are mutually dependent.  The higher the degree of "market integration" in a society, the more likely are people in that society to express a sense of fairness in their playing of economic games.

The importance of internal character in sustaining good character is suggested, Stringham indicates, by the fact that the rate of crimes inside prisons is a hundred times higher than outside the prisons, although prisons are much more policed than life in the outside world.

Historically, bankers deciding on loans have judged the moral character of borrowers in considering whether they will feel a moral responsibility to pay back their loans.  Today, Stringham observes, lenders often can't have much personal knowledge of the character of borrowers.  But they can use credit scores as a proxy for character.  A credit score can be a sign of an individual's moral self-governance.

And notice that this self-governance through the punishment of conscience and guilt arises as a form of spontaneously ordered private governance that does not depend on legal coercion by a public government.

SECOND-PARTY PUNISHMENT:  RETALIATION AND REVENGE
If conscience and guilt fail to restrain us from cheating, Hoffman observes, we must then worry about the punishment coming from our victims or their family and friends.  For most of our evolutionary history, the primary punishment of wrongdoers was retaliation and revenge (delayed retaliation). 

The law of self-defense--that everyone has the right to retaliate against attacks on their lives, their health, or their property--is universal, and it is supported by neural circuitry in the amygdala, the insula, the vmPFC, the cingulate, and the dorsolateral prefrontal cortex (dlPFC).  If people play the Ultimatum Game while they're in a brain-scanning machine, we can see the enhanced activity of this neural circuitry when they refuse unfair offers, and thus inflict a costly punishment on the other player.

As Stringham points out, the simplest way to punish cheating and promote cooperation is to act according to the principle of reciprocity--treat others as they treat you.  Boycott those who have cheated you.  Cooperate with those who have been cooperative with you.  As a result, those with the reputation for being cheaters will be punished, because no one will cooperate with them; and those with the reputation for being cooperative will be rewarded, because they will enjoy the benefits of cooperation with others. 

This is the lesson of Robert Axelrod's famous experiments with the iterated prisoner's dilemma in The Evolution of Cooperation (1984), in which the most successful strategy was the simple strategy of tit-for-tat: cooperate on the first play of the game, and then on all subsequent plays, reciprocate whatever the other player has done on the previous play--cooperating when he has cooperated, defecting when he has defected.  This was a system of private governance, because it showed how cooperation could evolve in a world without the coercive law enforcement of a monopoly government.

As Chris Boehm has shown in his Moral Origins, the evolution of cooperation and morality in foraging bands has depended largely on the reciprocal altruism of reputation, so that people with a good reputation for obeying social norms are rewarded, and those with a bad reputation for violating those norms are punished.  Stringham shows how this evolved reputation mechanism continues to support social order in modern commercial societies.


THIRD-PARTY PUNISHMENT: RETRIBUTION
The emotions that we feel when we punish wrongdoers for harming others can be very strong, but usually they are not as strong as they are when we are punishing those who have harmed us directly.  For that reason, third-party punishers can move towards a more impartial judgment, Hoffman argues, which is what we look for in the rule of law.

Treating our families as extensions of ourselves turns second-party punishment into third-party punishment.  But this familial third-party punishment is not likely to be as impartial as punishment coming from someone who is unrelated to the victim or the wrongdoer.  Originally, those dominant individuals who acted as mediators or judges of disputes in the band or tribe exercised third-party punishment on their own.  But in some special cases, they might have delegated this to select groups of people, which would have acted as the first juries.

From brain-scanning, there is some evidence for the neural correlates of third-party punishment.  The right dorsolateral prefrontal cortex seems to be active both when people are engaged in third-party punishment (in weighing punishment for hypothetical criminal behavior) and when they are engaged in second-party punishment (in retaliating against unfair players in economic games).  This suggests that the modern legal system--with a centralized government enforcing punishment--could have been built on the cognitive mechanisms that evolved for retaliation and revenge.

The detailed rules and procedures for third-party punishment in modern legal systems show the vagaries of historical contingency in the cultural evolution of law that is highly variable across legal systems.  But still these modern rules and procedures can manifest general patterns rooted in ancient human instincts for punishing. 

For example, one ancient form of punishment for the most severe crimes was ostracism or banishment from the community.  Although prisons are a relatively new invention in legal history, Hoffman observes, imprisonment can be seen as a new way to punish people by ostracizing or banishing them from the community, either temporarily or permanently.

Throughout most of human history, Hoffman observes, the rules protecting property and promises were enforced through private punishment, because wrongdoers were punished by individuals, families, and social groups.  But as the state grew in size and complexity, the state began to punish private wrongs as public wrongs.  Hoffman explains:

". . . Eventually, the state in its modern form has occupied the field of punishment to the exclusion of private enforcement, and in the course of that occupation ostracism has reemerged in the form of prison.

"As the size and complexity of our social organizations grew, traditional social ostracism became impossible.  A drunk might be shunned in his hometown, but not in towns miles away.  Complex trading and distribution networks could not risk having key components fail simply because one of their members was being ostracized.  So today we ostracize criminals physically, by forcing them to live in their own separate prison societies, rather than shunning them socially while permitting them to remain in our physical midst." (166)

Is this really true?  Does legal punishment by the modern state exist "to the exclusion of private enforcement"?  Did the turn to imprisonment by the state mean that "traditional social ostracism became impossible"?

Stringham answers no.  To see why he disagrees with Hoffman, consider the common characteristics of the following: gated communities, apartment complexes, shopping malls, office complexes, amusement parks (like Disney World), corporations, shopper's clubs, country clubs, churches, hotels, Amish communities, fraternal organizations, schools, stock exchanges, credit card networks, cell phone carriers, and Internet shopping (like eBay).  These are all voluntary clubs that engage in private governance that protects property, enforces contracts, and punishes cheaters through social ostracism.

When sellers and buyers meet on eBay, they are strangers who need to trust one another, so that they can engage in a contractual exchange without being cheated.  Hoffman would seem to say that they must depend upon governmental agents--regulators, police, and courts--to enforce their contracts and punish those who cheat.  But how likely is it that a buyer on eBay who is cheated by a seller will file a lawsuit in a government court?  He is more likely to report the cheating to eBay, and someone at eBay will arbitrate the dispute.  Sellers with a history of cheating will be ostracized from the eBay club, because the profitability of eBay depends on the private enforcement of rules of fair trading by excluding those who violate the rules.  Like all the other voluntary clubs listed above, eBay relies on private governance to enforce its rules, because the courts of the public government are too expensive and too inefficient.

Similarly, when one joins a credit card network, one signs an agreement that probably includes a clause stating that any disputes will be settled by a private profit-making arbitration agency (such as the American Arbitration Association).  Once again, government courts are simply too expensive and too inefficient to be reliable for settling disputes for credit card companies.  When borrowers refuse to pay their credit card bills, the ultimate punishment is exclusion from the credit card club and a poor credit rating, which is an example of a multilateral reputation mechanism, in which those with a reputation for cheating are ostracized from the club.

People who move into a gated community might join a homeowner's association that governs their community.  The sidewalks, the streets, the street lights, the landscaping, and the security guards who patrol the community are all privately managed.  The residents pay for all of this through their dues.  Some gated communities are as large as small cities.  Celebration, Florida, which was built by the Walt Disney Company, now has 10,000 residents.  Today, over 60 million Americans live in private communities with private governance.

We often assume that enforcing the rules of property and contracts must depend ultimately on the monopoly government of the state.  As Stringham points out, even most of the leading proponents of free markets--including Ludwig von Mises, Friedrich Hayek, Milton Friedman, Ayn Rand, and James Buchanan--have all argued that markets cannot work at all if there is no central government to define and enforce property rights and contracts.  But this ignores the many cases of private governance presented by Stringham.

The question we need to ask, Stringham suggests, is whether governmental agents--politicians, bureaucrats, judges, and police officers--have the knowledge, incentives, and ability to solve social problems in a cost-effective way.  When the answer is no, it is possible that the entrepreneurial providers of private governance might have the knowledge, the incentives, and the ability to solve social problems in a cost-effective way.

We must wonder, however, whether even when private governance does work, it does so under the shadow of public government.  For example, Stringham tells the history of private police forces in San Francisco from the 1840s to the present.  In the early history, the private police even had the power of arresting people and conducting trials.  He also tells the story of private policing in North Carolina.  But in all such cases, the powers of private policing seem to depend upon governmental legislation, so that private governance is regulated by public government.  Similarly, when Stringham speaks about private arbitration in the United States, he is silent about the importance of the Federal Arbitration Act of 1925 in authorizing and regulating private arbitration, although he does note that "statutes that legalize binding arbitration have the downside of requiring arbitrators to follow many of the bureaucratic procedures of government courts" (201).

Moreover, Stringham is almost completely silent about the need for military defense.  He mentions this in only one footnote (164, n. 15).  He doesn't explain how military defense could be privatized.  And when he describes the legal system in Ango-Saxon England as "decentralized and largely private" (200), he is silent about the importance of Anglo-Saxon kings as war leaders, and how the need for military leadership led to a more centralized monarchic government.  The Norman conquest of England in 1066 shows the crucial importance of military defense.

All of this leads me to the conclusion that both pure anarchism and pure statism are impossible, because even stateless societies have some governance, even the most authoritarian states allow some private governance, and liberal states leave lots of room for private governance.  The greater freedom for private governance provided by liberal states allows for adaptive flexibility in solving public problems in ways that promote peace and prosperity, and consequently liberal states will outcompete illiberal states through cultural group selection, which includes competition in war.

Some of my previous posts on anarchism can be found here, here, here, here, here., here, here, and here.