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Mar 8, 2016

The Limits of Private Governance

In many contexts, private governance can be highly effective—but not in all circumstances.

 

In my last post, I argued that it is reasonable to restrict free exchange when it causes non-contingent harms to third parties. I concluded by leaving open the question of who has the authority to restrict free exchange when it causes harm to third parties in this way, suggesting both that private governance could play a role but also that there were likely limits to its effectiveness.

There are more than enough posts on this website about the effectiveness of private governance and why it is a better alternative than the vast majority of the public, governmental structures that we see around us. I don’t wish to add anything more to this pro-private governance discussion, but if you’re looking for material beyond what is here already, you can read anything by Walter Block or Edward Stringham’s recent book on the subject.

What I will address here are the practical limits of private governance.

I am a member of a private golf club. As a member of that club, I have access to resources that people who are not members do not have access to—a golf course, swimming pool, tennis courts, and so forth. There is a long list of rules governing the use of these facilities. Some of these rules are reasonable (e.g., no one use the course on Mondays because that is the course maintenance day), others strike me as unreasonable (e.g., to be a voting member, you must be a male and over 35 years old), and others seem antiquated or silly (e.g., no shorts with “expanding pockets” can be worn on the course).

As a non-voting club member, I balance my desire to access club resources with my aversion to some of the club policies. If at any point my aversion to some of these policies outweighs my desire to access the club’s resources, I can resign from the club and continue with my life relatively unaffected. It also seems unreasonable to seek a remedy outside of the club structure for anything related to club policies or procedures. Private governance seems to function perfectly well when addressing internal matters related to the club and the conduct of its members.

So, for example, if I object to a new club policy requiring that members only wear clothing purchased from the club while at the club, it would be unreasonable for me to seek a resolution by taking the club to court or otherwise appealing to an entity outside of the club. I was not forced to join the club, am not being forced to remain a member, and if I cannot change the policies that I find objection then I can resign as a member at any point when I believe the costs of membership outweigh the benefits.

This point about resignation is important in determining the practical limits of private governance. In this example, the only individuals who are affected by the implementation of this new policy are members who can resign from the club. In no way do these changes to club policy affect the lives or wellbeing of anyone beyond the members of the club. No third parties have experienced direct, non-contingent harms as the result of this policy.

But we can imagine situations where changes to club policies cause direct, non-contingent harms to third parties, people who cannot simply resign from the club and have these policies no longer affect them. Suppose the club has a problem with geese on the golf course. As a way of deterring geese from coming to the course at night, the club purchases a large number of strobe lights and loudspeakers, running the lights and playing loud music from sunset to sunrise. Although the members are happy with this new policy because it keeps the course goose-free, people who live in geographical proximity to the club experience the non-contingent harm of being unable to sleep peacefully due to the lights and noise.

What is their remedy?

Some advocates of private governance will say, “Well, they’ll be able to come to some agreement.” But how people operate in reality suggests other remedies. In a situation of pure private governance, if the neighbors do not wish to, or otherwise cannot, abandon their property, and cannot otherwise come to some peaceful resolution with the club (and it does not require a great imagination to envision circumstances where one sees no need to compromise), the only remedy they have is violence (sabotaging the speakers and lights, threatening bodily harm to club members, etc.). What is lacking in most accounts of private governance is a practical and reasonable explanation for how to address non-contingent harm externalities.

Private governance is effective and appropriate when looking to police the activities of a group of people who have freely associated with one another and who can freely resign from that association whenever they see fit. Where private governance fails, or at least where we can start to see the limits of private governance, is examples like the one mentioned above where individuals outside of the club are directly and negatively affected by the club’s policies and have no way to mitigate these harms.

If private governance comes up short in these cases, then what would effective non-private governance look like? While the common response to this question is to reference the state and its power to compel individuals within its jurisdiction to behave in a certain way, determining why the state or any other third party possesses the authority to intervene is a significant problem in political philosophy. I cannot even begin to address this problem here. But if you are interested in this problem of political authority, you should read Michael Huemer’s 2012 book on this topic. It is by far the best and most comprehensive treatment of this issue.

Even if we set aside the problem of political authority and assume that the state as we understand it currently is the appropriate entity through which we can realize a system of non-private governance to address non-contingent harms to third, we are left with the question of how the state should address these harms. In other words, since the state is being asked to intervene in the actions of, or free exchange between, private persons, what would this intervention look like if the ultimate aim of state involvement is to respect, promote, and maximize individual freedom, since, as I have shown previously, free exchange is necessary to promote individual wellbeing?

My next post will address this topic. I will argue that the role of the state is to be involved as minimally as possible, operating in a similar manner as referees in a game. 

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