History is philosophy teaching by examples.
Many libertarians are familiar with the system of private law that prevailed in Iceland during the Free Commonwealth period (930-1262). Market mechanisms, rather than a governmental monopoly of power, provided the incentives to cooperate and maintain order.
In outline, the system's main features were these: Legislative power was vested in the General Assembly (althingi); the legislators were Chieftains (godhar; singular, godhi) representing their Assemblymen (thingmenn; singular, thingmadhr). Every Icelander was attached to a Chieftain, either directly, by being an Assemblyman, or indirectly, by belonging to a household headed by an Assemblyman. A Chieftaincy (godhordh) was private property, which could be bought and sold. Representation was determined by choice rather than by place of residence; an Assemblyman could transfer his allegiance (and attendant fees) at will from one Chieftain to another without moving to a new district. Hence competition among Chieftains served to keep them in line.
The General Assembly passed laws, but had no executive authority; law enforcement was up to the individual, with the help of his friends, family, and Chieftain. Disputes were resolved either through private arbitration or through the court system administered by the General Assembly. Wrongdoers were required to pay financial restitution to their victims; those who refused were denied all legal protection in the future (and thus, e.g., could be killed with impunity). The claim to such compensation was itself a marketable commodity; a person too weak to enforce his claim could sell it to someone more powerful. This served to prevent the powerful from preying on the weak. Foreigners were scandalised by this "land without a king"; but Iceland's system appears to have kept the peace at least as well as those of its monarchical neighbours.
The success of the Icelandic Free Commonwealth's quasi-anarchistic legal institutions has been used by David Friedman, Bruce Benson, and others as evidence against the Hobbesian argument that cooperation is impossible in the absence of central authority.
But during the Sturlung Period (1230-1262), the Icelandic Free Commonwealth did eventually collapse into violent conflict and social chaos, and the King of Norway had to be called in to restore order. Doesn't this show that Hobbes was right after all?
Not necessarily. There is another possible interpretation.
In the year 1000, seventy years after the founding of the Free Commonwealth, Iceland was officially converted to Christianity, thus putting an end to a tradition of relative religious freedom. Before that time, most Icelanders worshipped the pagan Norse gods, but there were a few Christians. If you were a Christian you were required, along with your pagan neighbours, to pay a temple fee to maintain the temple of your chosen Chieftain, but otherwise you could worship more or less as you pleased.
But in the 990's, King Olaf I of Norway sent groups of militant Christian missionaries to proselytise through harassment and intimidation techniques. Those who resisted the word of God were sometimes beaten or killed. Moreover, the King captured and held as hostages the relatives of prominent Icelanders visiting Norway; Olaf threatened to maim or kill these hostages unless Christianity was declared Iceland's official religion.
Iceland, a resource-poor country without an army, and for whom the powerful and wealthy Norway was an indispensable trading partner, had to take the King's threats seriously. Even so, many Icelanders resisted, refusing to abandon their pagan beliefs. The island swiftly became divided into hostile opposing factions of Christians and pagans. A bloody civil war seemed imminent.
But this catastrophe was averted in typical Icelandic fashion: the dispute was submitted to arbitration. Just as, to the composers of the Icelandic Sagas, it seemed natural, when telling of a haunted house, to depict the protagonists as holding a trial on the spot and trying the ghosts for trespassing, and likewise to portray the ghosts as accepting the verdict and peacefully departing, so it seemed equally natural to the religious disputants, whose entire social system was based on conflict avoidance through voluntary arbitration, to set the matter before a respected member of the community — someone acceptable to both sides — and agree to accept his decision as binding.
The choice fell on Throgeirr Thorkelsson, a prominent pagan Chieftain with strong ties to the Christian camp. Thorkelsson decided in favour of the Christians, and so Christianity became the compulsory religion for all Icelanders. (This is a striking example of the respect for arbitration that often characterises cultures with systems of private or polycentric law; it's difficult to imagine a similar settlement being as successful today in the case of Ireland, Bosnia, South Africa, or Palestine.)
The end of religious pluralism in Iceland in the year 1000 bore fruit nearly a century later in 1097, when the compulsory Christian tithe was instituted. This fee, which all householders were required to pay, was divided into four parts. The first was for your bishop. (Iceland had two, one for the Northern Quarter and one for the other three Quarters.) The second was for your local priest. The third part went for the purpose of welfare relief; this portion, at the demand of the farmers, was collected and administered by the Cooperatives (hreppar; singular, hreppr), i.e., self-governing mutual-aid associations of independent householders; so local control was preserved in this instance. But the fourth and most important portion — the Churchstead fee — went for the maintenance and upkeep of church buildings. It was this last, innocent-sounding portion of the tithe that did most to undermine the Icelandic legal system.
All the good land in Iceland had more or less been claimed and occupied in the first century of settlement, and the Church as yet lacked the power to wrest any land away from its individual owners. Thus in Iceland, Christian churches were built not on church property but on private land; such tracts of land were called Churchsteads (stadhir; singular, stadhr). The money raised by the tithe to maintain property located on a Churchstead went to the private owner of that Churchstead. Thus, owning a Churchstead was a source of guaranteed income.
Fees to support Chieftains were compulsory too, of course; but the person paying the fee was free to determine its recipient. The following of a particular Chieftain was after all determined not by territorial sovereignty but by mutual consent; if your Chieftain were inclined to abuse his power or to neglect his obligations toward you, you could transfer your allegiance to a rival Chieftain without having to move from the district. This element of competition, remember, was what served to keep the ambition of the Chieftains in check.
Those paying the tithe, however, had no choice about which Churchsteads their money would go to; that was decided by the bishops. In other words, those who owned Churchsteads — generally Chieftains who had become Christian priests — got the money no matter what they did, and thus did not have to depend for their income on the good will of their clients. Hence the Churchstead fee, unlike the regular Chieftain fee, lacked the crucial element of accountability.
Moreover, the Churchstead fee, again unlike the Chieftain fee, was based on an assessment of the payer's property; this allowed for graduated taxation and the possibility of soaking the rich. Well, some of the rich. For of course those among the rich who were also Chieftains were exempted from having the value of their Chieftaincy taxed. Since a Chieftaincy was, directly and indirectly, the chief source of income for a Chieftain, this was very convenient for the Chieftains, who pushed the tithe law through the General Assembly (which by some strange coincidence consisted entirely of Chieftains!) under the pretext of public support for Christianity, a religion that Icelanders unsurprisingly revered after ninety-seven years of compulsory Christian indoctrination.
The original Chieftains were pagan priests; becoming Christian priests did not involve a major change in lifestyle for them. Under Icelandic law, despite the futile protests of their nominal superior the Norwegian archbishop, priests could take part in lawsuits and bloodfeuds. More importantly for present purposes, they could marry and have children. Hence, when a Chieftain-Priest who owned a Churchstead died, the right to receive the Churchstead fee would pass to his children rather than reverting to the Church. Since recipients of Churchstead fees did not have to compete for the good will of their clients, those families that owned Churchsteads were able to accumulate wealth and power without the traditional restraint of the market.
Over time, wealth and power began accordingly to be concentrated in the hands of a few families, as those who owned Churchsteads used their new income to buy up, or enable relatives to buy up, Chieftaincies belonging to other Chieftains. By the time of the Sturlung Period, this had led to the emergence of a privileged elite called storgodhar ("Big" Chieftains). Since the total number of Chieftaincies was fixed by law, competition among Chieftains became less effective as more and more Chieftaincies passed into the hands of storgodhar families. Less competition meant that Chieftains could charge arbitrarily high prices for their services, often forcing their Assemblymen into the role of propertyless dependents. The seeds of territorial sovereignty were sown as many Chieftains began to acquire exclusive monopoly control over their districts. The Free Commonwealth was beginning to succumb to an alien disease common throughout Europe but hitherto unknown in Iceland — feudalism.
In the absence of the earlier competitive check on abuse of power, the storgodhar grew so powerful during the Sturlung Period that they became able, for the first time in Iceland's history, to impose general taxation whose revenues went directly to support the governing elite, without the disguise of supporting Christianity. Moreover, now that ownership of Churchsteads had become the road to political power, contests over Churchsteads were more important than traditional contests over ordinary sorts of property; more people's interests were involved, conflict was more likely, and disputes once settled through arbitration were now settled on the battlefield.
In 1000, Iceland's unique institutions of voluntary coordination had averted civil war. But those institutions, and the market incentives that had served to maintain them, had now been undermined. Iceland saw its first full-scale battles as power struggles among the elite families and their respective supporters erupted across the land. This was the Sturlung Period (1230-1262), named after one of the most important storgodhar families.
Norwegian influence served to exacerbate the conflict. The King of Norway had always been lurking in the background, and now it was understandably tempting to each of the various competing parties to attempt to enlist him on their side. These shifting alliances and power plays further destabilised the Icelandic situation, as King Haakon of Norway eagerly encouraged conflict, dissension, mistrust, and confusion.
Finally, in 1262, King Haakon graciously offered to come in and quell the conflict he had helped to create. A desperate Iceland, ravaged by civil war, accepted his offer, and submitted to Norwegian rule. The Icelandic Free Commonwealth, founded 332 years earlier by refugees from the tyranny of Norway's first monarch, Harald Fairhair, fell at last under the yoke of a Norwegian King.
The Icelandic Free Commonwealth's downfall was not that it was too anarchistic, but rather that it was not anarchistic enough!
Suppose Iceland had maintained competition in religion the way it had competition in law. Or again, suppose Iceland had continued to rely solely on voluntary support for religion rather than making the tithe mandatory. In either case, the owners of Churchsteads would not have had an automatic guarantee of income, and so could not have accumulated wealth and power without being subject to competition and accountable to their clients.
Moreover, if the upper limit on the total number of Chieftaincies had not been fixed by law, new Chieftains would have been able to arise and challenge the emerging ruling class. The ruling families' strategy of buying up all the Chieftaincies would have failed, because it would not have decreased the potential number of independent Chieftains; hence competition would not have been undermined. If, for example, a Cooperative had been able to start up its own Chieftaincy, its members banding together for mutual aid and acting jointly as a kind of corporate Chieftain, the power of the storgodhar would have been severely undercut. Local control and accountability would have been strengthened, and the centralising of power reversed. For that matter, if the supply of Chieftaincies had not been regulated by the legislature — or if there had been competing legislatures — it would have been much harder to institute the tithe law in the first place. Instead, the legal cap on Chieftaincies artificially restricted the supply of political power, while the tithe law artificially subsidised the demand for such power; a centralisation of power in a few hands was the inevitable result. The instability of the Icelandic Free Commonwealth lay not in its anarchistic, polycentric features but in its governmental, monocentric features.
Foreign monocentrism also contributed to the Free Commonwealth's demise. If Norway had had a private or polycentric legal system, there would have been no King Olaf in 1000 to intimidate Iceland out of religious freedom, and no King Haakon in 1262 to encourage conflict and exploit its consequences. The problem of foreign states and the threat they pose is one of the most important ones for theorists of private law to discuss and resolve.
Yet despite the incipient monocentrism at home and the monocentric Norwegian threat next door, Iceland's polycentric legal system was so stable that the seeds of corruption took a remarkably long time to bloom: from the forcible conversion at the end of the tenth century, to the compulsory tithe at the end of the eleventh century, to the final collapse in the mid-thirteenth century. Is this the instability of anarchy portrayed by Hobbesians?
Moreover, as David Friedman has pointed out, examination of the historical evidence indicates that the murder rate in Iceland during the Sturlung Period — the era that Icelanders regarded as so intolerably violent as to justify abandoning their political system — was about the same as the murder rate in the United States today! Pre-Sturlung Iceland must thus have been even less violent than our own society.
Iceland's quasi-anarchistic system broke down only in the last thirty years of its existence, having worked successfully for three hundred years before that. We should be cautious in labelling as a failure a political experiment that flourished longer than the United States has even existed.
Bruce Benson. The Enterprise of Law: Justice Without the State. Pacific Research Institute, San Francisco, 1990.
Jesse L. Byock. Feud in the Icelandic Saga. University of California Press, Berkeley, 1982.
Jesse L. Byock. Medieval Iceland. University of California Press, Berkeley, 1988.
Tom W. Bell. "Polycentric Law." Humane Studies Review, Vol. 7, No. 1, 1991/92.
David Friedman. The Machinery of Freedom: Guide to a Radical Capitalism. Second Edition. Open Court, La Salle, 1989. Chapter 44.
David Friedman. "Private Creation and Enforcement of Law: A Historical Case." Journal of Legal Studies 8, 1979.
Albert Loan. "Institutional Bases of the Spontaneous Order: Surety and Assurance." Humane Studies Review, Vol. 7, No. 2, 1992.
William I. Miller. Bloodtaking and Peacemaking. University of Chicago Press, Chicago, 1990.
Birgir T. Solvason. Ordered Anarchy, the State, and Rent-Seeking: The Icelandic Commonwealth, 930-1264. Ph.D. Dissertation in Economics, George Mason University, 1991.