The problem of lawlessness can be solved by the rule of law. Now, “rule of law” seems redundant, since laws are a kind of rule. But the point is that the “rule of law” is juxtaposed against “rule of men,” in which the judgements of the judge, and the privileges of the disputants, determine the outcome. Sir Edward Coke famously said, “Magna Charta is such a fellow, that he will have no “Sovereign” in debate in the House of Commons in 1628. The point being that even the king is bound by the law, rather than the king having sole discretion to decide what the law says.

Edward Coke and Magna Carta
I know that prerogative is part of the law, but “Sovereign Power” is no parliamentary word. In my opinion it weakens Magna Charta, and all the statutes; for they are absolute, without any saving of “Sovereign Power”; and should we now add it, we shall weaken the foundation of law, and then the building must needs fall. Take we heed what we yield unto: Magna Charta is such a fellow, that he will have no “Sovereign.” I wonder this “Sovereign” was not in Magna Charta, or in the confirmations of it. If we grant this, by implication we give a “Sovereign Power” above all laws. (Debate in the House of Commons, May 17, 1628)

The advantages of “rule of law” are obvious: the rules are consistently applied and enforced, without privilege or exemption. As F.A. Hayek put it, the purpose of the rule of law,

is to limit coercion by the power of the state to instances where it is explicitly required by general abstract rules which have been announced beforehand and which applied equally to all people, and refer to circumstances known to them (F.  A.  Hayek,  The  Political Ideal of the  Rule  of Law. Cairo: National  Bank  of  Egypt Printing  Press,  1955; p. 34).

But note that there is an implicit assumption (even Hayek does it, in the quote above) that the rule of law involves a monopoly, single body of law, provided by a monopoly, single entity, the state. The rationale is the Hobbesian-Weberian story that the state is violence, and violence is required to enforce contracts. As Hobbes put it, in Book II of Leviathan:

For the laws of nature, as justice, equity, modesty, mercy, and, in sum, going to others as we would be done to, of themselves, without the terror of some power to cause them to be observed, are contrary to our natural passions, that carry us to partiality, pride, revenge, and the like. And covenants, without the sword, are but words and of no strength to secure a man at all.

Defenders of liberty often want to define anything private as “voluntary” and anything done by the state as “coercive.” But that’s not right; violence or coercion in support of promises (“covenants”) we want to agree to is not only useful, but actually essential to being able to make enforceable agreements. Market entities and other private associations require recourse to coercion, so long as the terms under which coercion is employed are voluntarily agreed upon in advance. The problem is not violence; the problem is monopoly!

The key distinction, and the necessary condition for liberalism to work, then, should be made between artificial monopoly and negotiated, free-entry competition for controlling coercion. Allowing people to cooperate in many different ways, and encouraging the creation of alternative forms of adjudication of disputes over breach of agreements, and imposition of damages for failure to keep promises solves the Hobbesian problem, and treats all of us as equals before the law. The Hobbesian solution was more plausible in a world where there were prohibitive costs of keeping track of identity and reputation, and the ex ante contracting costs of anticipating ways of resolving disputes.

It is no longer necessary to create a vast monopoly entity capable of unanswerable violence; all that is necessary is that citizens adopt a set of institutions that instantiate a presumption that we are all equal before the law. Some libertarians (including John Hasnas) have claimed that the “rule of law,” at least in terms of a coherent, stable political law, is nonsense. What Hasnas wants people to recognize is that for liberalism to be an actual alternative to the Hobbesian model that concludes state monopoly contract enforcement, liberalism has to accept the logic of its own position: people must be able to negotiate rules of laws, for their own agreements. The relevant equality is not that we all are the same before “The Law” (singlular, one size fits all, spoken of with reverence), but that we all have an equal opportunity to negotiate the laws.

The alternative solution to the problem of Hobbesian “war of all against all,” then, is “common law liberalism.” As John Hasnas has pointed out, in an argument many people might find shocking, the key distinction is not “markets=liberty” and “state=coercion.” In fact, there is (and should be!) coercion in all systems. The ability to coerce a contract partner to carry out their promises is a key aspect of liberty, without which contracts would be unenforceable. As Hasnas puts it:

The position that I now hold, which I perhaps inaccurately refer to as common law libertarianism or common law liberalism, is consistent with the arguments against the monopolistic state provision of services without implying an absence of all morally legitimate coercive regulation of human activity.

The state suffers from not only incentive problems but also a knowledge problem. One system of law cannot possibly answer the needs of all persons, in all settings. Nevertheless, it is at least possible to begin to address this problem by having multiple competing systems of “law,” or traditions of dispute resolution and contract enforcement, and to allow the selection of adjudication and enforcement regimes to be negotiated along with the other terms of contracts. Price, delivery date, and the flavor of enforcement protocol we agree on are all parts of our voluntarily negotiated deal, and all are enforceable for that reason. The “rules of laws” requires that individuals be able to act on their perceptions that different systems of law and different arrangements of adjudication of disputes can be desirable.


Michael Munger teaches at Duke University and is Director of the interdisciplinary program in Philosophy, Politics, and Economics (PPE) at Duke University. He is a frequent guest on EconTalk.

Read more of Michael Munger’s writing at Archive.