Polycentric Law: Building legal systems for creativity, innovation, and happiness.

In brief:

Choice matters, perhaps nowhere more so than in the rules that govern our lives. A wider variety of law and legal systems can catalyze development, empower the world’s poor, and allow for greater innovation by radical social entrepreneurs. Legal systems are also the tools of community building. But new legal systems themselves need creative RSE’s behind them.

What is it?

Polycentric law is a structure of overlapping or competing legal systems. Instead of having a single, monopoly provider of law and legal services, different systems are used to resolve disputes alongside one another.

‘Polycentricity’ (a term first introduced by philosopher and scientist Michael Polanyi) is simpler than it may sound. It means simply ‘many’ (poly) ‘centers’, in this case, centers of law. There are many examples of the ‘polycentric’ principle throughout our daily lives.

For instance, standing in the grocery store you are presented with a wide array of different cereals. Many different cereals makers are competing to provide you with the best breakfast. The market for cereal is polycentric – Kelloggs and Quaker Oats are two different centers. The same holds for a car dealership: many different car manufacturers are all competing on the same lot to bring you a new car.

We typically consider the effects of polycentricity in these areas to be benefits: prices fall and quality increases over time. Providers of these products face a strong incentive to continue pursuing innovation and good customer service. Cars get faster, greener, sleeker, and more fun.

Legal systems set ‘the rules of the game.‘ In our complex and dynamic world, we want rules that enable us to innovate and grow.

One obvious objection to applying this principle to law is that a person’s home or business is only in one place at one time. How can a person use a different legal system from the same location, while their neighbors use something else? When do we stand in the ‘law’ aisle or on the ‘law dealership’ lot and choose the best law for our business or community?

First, many transactions we make need not be ‘tied’ to the location where we live. For example, businesses which trade overseas often will specify in their contracts which legal system they will use in the event of a disagreement. Both parties agree, for example, to have their disputes resolved in a US or British court, or even by a private arbitrator who they both respect and believe is fair.

This can occur even if neither party lives in the country or near the arbitrator that they’re using. International politics is ‘polycentric’ (though almost certainly still too monopolistic), and businesses are choosing legal systems from different national sets.

However, many laws are not just about trade and it is much more difficult to see how criminal or other laws can be ‘contracted’ like in our example.

This leads us to the importance of ‘switching costs’. Since we all live in some kind of community, with some kind of neighbors, somewhere, then a polycentric system is best achieved by allowing for a wide variety of different areas with different legal systems. The benefits of polycentricity require that we maintain a system of competition and choice – otherwise it begins to no longer resemble a system of ‘many centers’.

This means that we need to maintain ‘low switching costs’ for polycentric law to operate well. Walking from one car to another in the lot is a low cost way of finding good alternatives. We need to approximate this process as well as we can at the legal system level.

Consider a simple example. Cities like New York and Boston have different rules and compete with one another for residents. In the case of these cities, the rules are not especially distinct and U.S. federal law constrains the variety of laws and innovation between these two cities.

Since the difference between these legal systems is small, few people are willing to make the move from Boston to New York or vice-versa to find a better system. The costs of switching simply aren’t worth the little reward.

Better choice and more competition can be achieved two ways.

  1. We can raise the benefits of switching to a different legal system by allowing greater autonomy and pulling back on one-size-fits-all law imposed from the outside. More variety in legal systems means the benefits of system change more easily outweigh the costs of moving between jurisdictions.
  2. We can also lower switching costs by making jurisdictions smaller and easy to move between. People may be unwilling to move from New York to Boston, but many are willing to move across neighborhoods like from Manhattan to Brooklyn. People can still live near to their friends and community. They can still visit their favorite restaurant and commute to work. But they can also enjoy the benefits of polycentricity in law.

Societies throughout time and around the world have broadly agreed on basic laws against violence like murder or fraud. These baseline rules, agreed upon by almost everyone, are extremely unlikely to change. But legal systems also have massive quantities of rules managing nearly every aspect of human life – where there is far from consensus.

Consider a legal system near Yellowstone National Park that carefully governs the stewardship of our natural world. One-size-fits-all law administered from far away may not be sensitive to the ecology of Yellowstone, or may become politically ‘captured’ or excessively bureaucratic.

Or consider a Brooklyn neighborhood with a legal system that makes it easy for tech start-ups to incorporate, or for people to build artist spaces. One-size-fits-all building codes may prohibit the cutting-edge creative spaces that best stoke artists’ sensibilities. Innovation is an open-ended process, and excessive restrictions prevent social entrepreneurs from building our future.

Polycentricity means our rule systems can evolve alongside our economies, environment, social knowledge, and cultures.

What does Polycentric Law mean for radical social entrepreneurs?

Law is something active and evolving. Polycentric law is the system to catalyze that evolution.

Legal philosopher Lon Fuller defines law as “the enterprise of subjecting human conduct to the governance of rules.” While monopolistic law leaves little room for innovation or the entrepreneur, polycentric law is entrepreneurial law. New legal systems are created by governments but also can be created by radical social entrepreneurs with projects like Free Cities.

Think of it as entrepreneurship one level higher than usual projects. Creating legal systems is the building of frameworks to allow people (including other social entrepreneurs!) to find the best environments to live and work. Rules matter, and a good and healthy social and legal environment can be the key to human flourishing.

The world is desperately in need of legal innovation. Just as monopolies in other areas of our life are frowned upon as unresponsive, slow to change, and even exploitative, so too are monopolies in law.

It is a tragic reality that many legal systems which currently exist are enforced unfairly, or are used to benefit special-interests. Although people may be living beneath a legal system, in many nations, the legal system excludes the vast majority of the people. The law is monopolized.

Just as we would expect with a monopoly business, using the law in many nations can be extremely expensive and provide low-quality service. For the world’s poor, this means no recourse to peaceful arbitration in a fair court. Even when someone is able to afford the cost of going to court, many judiciaries are corrupt and rule in favor of the rich and powerful.

At the level of law-creation itself, many monopoly legal systems are structured to favor existing businesses and political elites. For instance, an established firm may lobby to have their particular mode of production written into law. This makes sure that upstarts – likely to innovate the process or pursue a rival model – are unable to get off the ground.

Monopoly law becomes a weapon for monopoly firms.

Stagnant, monopoly law has another serious effect: corruption. Corruption grows as the poor are unable to easily use the legal system, and as the rules become structured to benefit elites. People who cannot afford to go to court are more willing to pay bribes to avoid charges. The system rewards unscrupulous enforcers, who can take money to ‘look the other way.’

As legal rules grow more complicated and specific, people begin to accidentally break the law in their day-to-day lives. For instance, minute regulations for the display of trading licenses – that it must not be covered by a winter jacket, for example – lead to conflict between the world’s poor and law enforcement.

Fines for breaking these rules, which sometimes seem arbitrary and not protecting anyone, lead to resentment, violence, and extortion. Those targeted are often those who have the least ability to seek a redress of grievances in court.

Just as we want ‘many centers’ of social entrepreneurship, we need ‘many centers’ of legal activity. These centers won’t build themselves. To erode monopoly power with start-ups in business we need upstarts in law, channeling their ingenuity to building our polycentric system. In the process RSEs working for legal innovation can help fight corruption, empower the world’s poor, and spur economic progress.

Social entrepreneurs also make a polycentric system worthwhile. They provide the lively substance to the projects enabled by a polycentric legal structure. Consider the examples above. Why create a neighborhood legal system for start-ups, open-source cafes, or hack spaces if no one will build them?

A legal system is an empty husk without people creating within it.

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