Carl
Menger was the father of the Austrian School of Economics. Today, we
know better the contributions of those who followed on his path, like
Hayek and Mises, than those of the initiator. Neverthless, I think
that there are still in Menger's works gems of thought that deserve greater
consideration.
I
plan to write three posts about one of those neglected gems,
Menger's thoughts about the orgins of law. His article has been included as appendix VIII of his book "Investigations into the Method of the Social Sciences" (link to the book at Mises.org).
This first post will
tell briefly how he came to the notion of spontaneous order, and how
he applied it to the origins of law. In the second post I will try
to show how Menger provided a better understanding of law than today's
dominant theories. In the last post I will trace a parallel
between Menger's descriptions of the orgins of money and of law and
will suggest that they are relevant not only concerning the origins
of both in the distant past but to understand how money and
law work today. So Menger's little article on the origins of
law sheds light not only on history, but on legal and economic
theory.
How did Menger come to the idea of spontaneous order? A few years after writing his book Principles of Economics (1871), he engaged in a famous debate with German economists who denied the
very possibility of an economic theory. They claimed that economics
had to be dissolved into national history as economic life was merely
another manifestation of an undefined national "spirit". As
part of his reply, Menger wrote about the real origins of economic
institutions, showing that it wasn't a mistical collective spirit
peculiar to every nation that shaped them, but the action of people
who everywhere on earth tried to improve their situation. In his
study, Menger came to the notion of spontaneous order, an order that
results from individual efforts of people who pursue individual goals
by adapting to each other's action. That is how markets work, without
the need of a common national goal, State plan, or Weltanshauung.
The notion of spontaneous order became one of the key ideas of the
Austrian School of Economics. It was later developed by Friedrich
Hayek and many others who followed Menger's insight.
It is well known that Menger
wrote an essay in which he explained that it was spontaneous
order that created money. It is less often mentioned that he applied
the same idea to the origins of cities and of law.
Menger
said that the use of money came as the result of spontanous human
actions that weren't commanded by any king or parliament but evolved
from the mutual adaptation of people who pursued their own goals.
Certainly, that is how barter must have started, as it is difficult
to assume that some tribal leader gathered his people some day and
told them: from now on you will have to exchange things. No, barter
must have started by people who shought to improve their situation by
offering things they had in excess -say animal skins- in exchange for
things they lacked -say arrows. By the same spontaneous process -not
following orders-, some individuals came to the idea of using
intermediate objects that were easier to carry and were readily
accepted everywhere. So they would exchange their excess goods for
things they didn't really need, but which they could easly exchange
for those they did need. Skins, salt, pieces of iron, silver, gold
and many other things started to be used as intermediate goods that
facilitated exchange well before any king decided to put his seal on
a coin.
I
won't try to repeat Menger's magnificent article about the origins of
money and must simply recommend the lecture of the original (link). But, as
said, I would point out that it is often forgotten that Menger used
the same method he applied to the origins of money, to the more general issue of the origins of
law.
Today
we tend to see law as something made by legislators, perhaps also by
judges, maybe even by regulatory agencies. But we seldom stop to
think that law must have started the same way money started, by the
efforts of individuals who had in mind their own improvement and that
of their families. If it is unrealistic to assume that kings ordered
their people to engage in barter and then to use intermediate goods,
it is even more so to assume that some day a king gathered his
subjects and told them about a bright idea he had that he decided to
call "inheritance", commanding his people to leave their
huts and kattle to their children.
No,
some people must have started to do these things spontaneously, and
many of them must have observed that those who respected their
neighbours' children inheritance had a better chance of having their
own children's inheritance respected. Of course, as with barter and
money, there must have been variations and even exceptions -tribes
that never came to these practices. But on the whole people tended to
imitate the most sucessful ways of action.
In
commerce, clever individuals in many places around the world must
have observed that it is better to honor your word than to cheat.
That if you manage to trick your neighbour and sell him a sick animal
you won't be able to sell him another one, and probably won't sell
kattle again in the whole village. Others would imitate that
practice. Some must have observed that it is a good thing to isolate
those who broke their promises and refrain to deal with them, which
must have been an informal but effective punishment -as it is still
today.
Some
villagers must have started to use some formal words to stricke their
agreements as a way to be certain about the meaning of what is
promised. That was advantageous as a way to prevent disputes. Doing
it in public must have worked in the same way. Helping others in the
persecution and punishment of robbers and other criminals was bound
to be seen as a way to protect yourself, your family, and the whole
area from suffering future outrages.
None
of this implies that this evolution was perfect and without setbacks.
Nor does it mean that legal practices were uniform (as there was wide
diversity in the objects used to facilitate exchange). Nevertheless,
discovery through experience, insight, and imitation of succesful
practices worked in law as worked in building, cultivation, sailing,
and many other human activities.
We
must understand that "spontaneous" does not mean
"thoughtless". On the contrary: there are the thoughts of
millions of people doing things that benefit each other. It means:
practices and order that arise without anyone commanding people what
to do, and without the need of an agreement on common goals.
Menger
says that sooner or later, chieftains must have started to put their
seal on these practices, as they did with money. They must have
organized the persecution of criminals, given protection to
commercial fairs...and too often abused their power.
When
kings issued orders, they called them "law" too. More often
than not, it was simply an official seal given to ancient practices
that had emerged spontaneously. Sometimes though, these laws were
truly just the will of the rulers. Nevertheless, kings and governing
bodies must have soon realized that issuing their commands under the
name of "law" gave them an aura of respect that ancestral
customs and rights possessed, and mere personal whim could not
provide. Still, it seems that in some places people refused to use
the same name for law that resulted from their own action and the
edicts of some authority. In Roman law, the word "delicto"
was reserved for those punished by the old rules of the city from time
immemorial. Those other ones created by authorities received the name
of "cuasidelicto", that is, "like delicto", but
different in origin and therefore not to be confused.
In
modern times, we tend to think that law is simply the expression of
the will of some authority, usually an assembly of legislators. That
is because we see only the end result of a long historical evolution
and, as with money, we tend to assume that everything must have
started as it is today, with some authority putting its seal on
something.
