What Is Polycentric Law? by Tom W. Bell

Do you like having options when you look for a new bank, dry cleaner, or veterinarian? Of course you do. You want to find the service that will best satisfy your particular demands, after all, and you know that when banks, cleaners, and vets have to compete they have a powerful incentive to make you happy. A monopoly, in contrast, can take its customers for granted.

Polycentric law simply extends that observation from commercial services to government ones. Just as competition makes life better for those who seek banking, cleaning, and pet care, it can benefit those seeking fair and efficient legal systems. Competition helps consumers and citizens alike.

Polycentric law regards the sorts of legal services that governments provide—defining rules, policing their application, and settling disputes—as a ripe field for competition. When a government claims a monopoly in the law, it tends to neglect the needs of its subjects. In a polycentric system, however, providers of legal services care more about what consumers want. They have to, if they don’t want to go out of business.

Our Polycentric World

But won’t competition between legal services lead to chaos? Evidently not. We already live in a world that offers us a fair degree of choice between the sorts of rules we live under. Polycentric law simply takes note of that fact, sees the good in it, and argues for more of the same.

It may not always seem as if you can choose the legal system you will live under. If you like the culture and climate of United States, for instance, but not the commands that issue from the federal government, you indeed face a hard choice: Suck it up or hit the road.

And even if you do decide to leave in search of a better legal system, you have no guarantee of finding one. Because they typically impose uniform rules across large geographic areas, governments tend more toward monopolistic law than polycentric law.

Even so, excepting totalitarian regimes such as the former Soviet Union and present-day North Korea, most governments allow disgruntled residents the freedom to escape to better legal systems. Most also allow movement within their borders, from one state, county, or town to another, affording the freedom to choose between local legal systems. To some degree, therefore, governments already compete against each other. But the influence of polycentric law goes deeper than that.

From Plain Old Law to Polycentric Law

To fully understand the extent of polycentric law, you have to understand the nature of law itself. Legal philosopher Lon Fuller aptly described it as “the enterprise of subjecting human conduct to the governance of rules.” So described, the law is not just a service provided by public organizations. It also issues from private sources such as homeowners’ associations, businesses, religions, clubs, and myriad other organizations that subject their members’ conduct to the governance of rules.

Consider a residential cooperative corporation, for instance. Such a co-op’s members both possess shares of it and lease their homes from it; in effect, they own their landlord. And like other landlords, a residential cooperative corporation subjects its tenants to the governance of rules. A residential co-op might specify quiet hours, for instance, and establish a committee to resolve complaints between member tenants.

That may not sound much like the sort of legal system offered by a conventional government—until you reflect that many residential co-ops rival cities in terms of their size and range of operations. The largest of them, Co-Op City in New York’s Bronx borough, houses over 50,000 members. In addition to shelter, Co-Op City provides an elected government, parks, streets, security, and just about every other service you might expect from a conventional city.

Homeowners’ associations (HOAs) likewise often grow as large and capable as cities. The largest HOA in the United States, Highlands Ranch, Colorado, includes over 30,000 homes and 90,000 residents. In all respects but its origins and legal status, it resembles a conventional municipality.

Other private organizations also effectively duplicate cities on a small scale. Malls and hotels, for instance, provide their users with transportation networks, shelter from the elements, utilities, fire protection, security, and (most pertinently for present purposes) rules of conduct.

The scale and scope of residential co-ops, HOAs, malls, and hotels make it easy to see how the private sector can rival the public one in providing governing services. Polycentric law is not solely the province of huge, private quasi-cities, however. Under Fuller’s definition, even a small organization that regulates only a narrow range of behavior—a church that imposes strict dietary rules on its members, for instance—also qualifies as a source of law. Size and breadth matter less than whether an organization subjects human conduct to the governance of rules.

For More Polycentricity

We thus already live in a somewhat polycentric legal order. Except when they completely imprison their subjects, governments have to compete against each other for financial and human capital. This means that, in the long run, governments that fail to supply adequate legal services tend to end up poor and unpopulated. Alas for consumers of governing services, though, that “long run” can last for generations. To make governments better sooner, we need to make them face more competition.

Except when a totalitarian government completely eradicates them, intermediary institutions also compete in the market for law. Towns compete with residential co-ops and HOAs to provide housing arrangements; main streets compete with malls to provide shopping environments; religious institutions compete with each other to provide moral instruction, and so forth. Because each subjects human conduct to the governance of rules, each of these institutions competes in providing the law. Here, too, though, we might benefit from more competition.

How can we make the law more polycentric? We can start by recognizing that legal systems do not differ in principle from banks, vets, cleaners, or other services. All face some competition and, insofar as they do, consumers benefit. Legal systems differ from other services not because they escape the effect of market forces, but because they have for too long pretended to do so.

Once we recognize that competitive forces already shape legal services, we can turn to increasing their influence. We should seek ways to make it easier for disgruntled subjects to flee, either physically or virtually, from bad governments to better ones. Bitcoin, for instance, seems likely to help on that front. And we should encourage the rise of special jurisdictions, such as the ZEDE/LEAP zones recently introduced in Honduras, where locals can opt into legal rules imported from abroad.

From a Good World to a Better One

Far from a mere theoretical ideal, polycentric law already shapes our world. We need only appreciate its latent power and invite more of the same. Once more fully realized, polycentric law can give to the consumers of legal services the same benefits that free and open competition already gives to the consumers of banking, cleaning, and veterinary services.

ABOUT TOM W. BELL

Tom W. Bell is a professor at Chapman University School of Law.