[This article is excerpted from the first two chapters of The Enterprise of Law by Bruce Benson.]

Anyone who would even question the "fact" that law and order are necessary functions of government is likely to be considered a ridiculous, uninformed radical by most observers.

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"No one would voluntarily recognize a legal system that was not expected to treat him fairly."

This study will use economic theory to compare institutions and incentives that influence public and private performance in the provision of law and its enforcement. Some critics may contend that law is not an appropriate subject for "economic analysis," because it is not produced and allocated in exchange markets. To be certain, economics has a great deal to say about market institutions, but its relevance and scope are not so narrowly limited. Economic theory requires only that scarce resources be allocated among competing uses. Clearly, the enterprise of law — the use of police services, court time, and all other inputs in the process of making law and establishing order — requires scarce resources that must be allocated. Beyond that, economic theory explains human behavior by considering how individuals react to incentives and constraints.

Using economic theory, then, it can be convincingly demonstrated that private-sector (i.e., market or voluntary) institutions are capable of establishing strong incentives that lead to effective law making and law enforcement. The resulting legal constraints facilitate interaction and support social order by inducing cooperation and reducing violent confrontation. It can also be shown that public-sector institutions create incentives that can lead to substantial inefficiencies in the provision of these same functions. In fact, our modern reliance on government to make law and establish order is not the historical norm.

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