Home | Business News | Browse by Publication | J | Journal of Private Enterprise

On the monopoly of rule enforcement.

Article Excerpt
I. Episodes

A man travelling at night in the New York subway is menacingly surrounded by five young men brandishing long screwdrivers. He shoots and wounds all five, one grievously. His plea of self-defense is vitiated by his disproportionate use of force. Convicted and sentenced to a long prison term, he fights a protracted legal battle financed by donations, and is finally acquitted on appeal.

In a French school, a teenage boy misbehaves, disrupts the class, and ends up kicking everyone in sight, including the teacher. The assistant head takes him to his office and spanks him. The head of the school suspends the assistant head on the spot, and he is prosecuted under the act forbidding corporal punishment. He is acquitted because he did not humiliate the boy (as he would have done if he had spanked his bottom in front of the class).

After the July 2005 terrorist attacks on London Transport, police shoot dead an innocent foreigner, mistaking him for a terrorist. In the ensuing storm of indignation, the police are severely blamed for not ascertaining the intentions of their victim. The article in The Economist discussing the matter is entitled 'Excuse Me, But Are You A Suicide Bomber?'

II. The Monopoly of Enforcement

1. Rule Enforcement as a Public Good

It is a well-understood problem of public goods that because it is very difficult or morally repugnant to exclude any member of the public from enjoying such goods if they are provided at all, each individual member will choose to enjoy them without contributing to their cost. In other words, he will choose to be a free rider. Obviously, if everyone tries to be a free rider, no contribution is made to the cost, and the public good cannot be provided at all. Logically, therefore, everybody cannot be a free rider. Some--at least a critical minimum number--must contribute for the public good to be produced so that all, contributors and free riders alike, can enjoy it.

In a world where each person is motivated by the good of all, presumably all would contribute. The public goods problem would not arise. In a world where each person pursued mostly his own interest, two solutions would be open.

One is for an authority with sufficient backup force--the state--to compel some or all individuals to contribute by taxing them on some basis. The angelic version of democratic theory supposes that all individuals positively wish to be so compelled, because compulsion ensures that all will contribute equitably. Adult versions of democratic theory tell us that a majority of people will accept compulsion provided the major part of taxation falls on the minority, so that the majority gets at least a little bit of a free ride.

The other solution is the state-of-nature one in which the state does not intervene (or there is no state), and any contribution to producing a public good is voluntary. Received wisdom from mainstream economics holds that voluntary contributions would be irrational; hence the public good either could not be produced at all, or only to a suboptimal extent. Optimality criteria are contestable, but this is not the place to explore that particular controversy. For the present purpose, what we need is to relax the received wisdom about voluntary contribution being necessarily inadequate or nil. It is the wrong kind of a priori reasoning to deny the possibility that some individuals attach a high enough 'utility' to a public good to contribute to its cost rather than allow it to fail altogether, given the requisite probability that enough other individuals will also contribute for the same reason. The secret of this voluntary solution is the reliance of each contributor on a reciprocal probability (1) that each accords to others behaving the right way,--a probability that serves as the foundation of a coordination equilibrium or convention.

Instead of any public good in general, consider next the particular public good of the enforcement of beneficial rules, notably rules against torts and rules of civility. It is true of many such rules that if they are upheld, a temptation is provided to breach them or at least not to contribute to their enforcement, but to free-ride instead. Hence enforcement is necessary by punishment of some kind or the credible threat thereof. We can consider that the rule is self-enforcing, i.e., an equilibrium, if the conditions for generating voluntary contributions to the cost and effort of enforcement are fulfilled.

One such condition is that the contributor should derive a greater benefit from punishing and deterring the breach of a particular rule than his cost of punishing the rule-breaker. Two kinds of benefit may play a role here. One is the defense of his own life, limb and property by shooting the intruder who threatens to stab him with a long screwdriver, running after...