How Much Law Does a Free Society Need?

Let’s consider two forms of agreements—marriage, and corporations—as they could be constructed in Rand’s projected society.

An intriguing aspect of the nature of a government based on Ayn Rand’s philosophy of Objectivism is that there’d be little or no law.

Not a lawless society, but a society without much law—as we know it today.

To appreciate this distinction, let’s consider two forms of agreements—marriage, and corporations—as they could be constructed in Rand’s projected society.

Just What Is “Marriage”?

The word “marriage” can have many meanings: a relationship, an institution, the lynchpin of the family, a commitment, a sacrament—to name just a few.

Legally, however, marriage is an agreement. A contract. Today, regardless of where you are in the world, the marriage contract is defined by the State.

Legally, however, marriage is an agreement. A contract.

Today, regardless of where you are in the world, the marriage contract is defined by the State. As such it varies from one State to another.

In most countries, marriage is a contract limited to two people of opposite sex. In some countries, that definition has been expanded to include two people of the same sex.

In Muslim countries, marriage can be a contract of up to five people: one male, and one to four females. A practice followed by the Mormons in the USA—until outlawed.

Marriage can also be a de facto relationship. A formal or informal agreement between two (or more) people which in most countries will not be legally recognized.

Australia is one exception. There, if a couple (either opposite or same sex) have lived together for two or more years, or have a child together, their relationship will be subject to the State’s marriage dissolution laws in the case of separation. Similar provisions apply, fully or partially, in Canada, Israel, the Netherlands, and several states of the United States.

Intriguingly, one unintended side-effect of the Australian law is that bigamy is inadvertently lawful: a person who is married (but presumably separated) can also be in a legally-recognized de facto relationship at the same time!

Polyandry—the union of several husbands with one wife—has been practised at various times by the ancient Britons, the inhabitants of the Canary Islands, American Indians, the Hottentots, the inhabitants of India, Ceylon, Tibet, and New Zealand.

Historically, almost every form of relationship has been considered a marriage at one or another place or time. Polyandry—the union of several husbands with one wife—has been practised at various times by the ancient Britons, the inhabitants of the Canary Islands, American Indians, the Hottentots, the inhabitants of India, Ceylon, Tibet, and New Zealand. Polygamy (multiple partners) or, more correctly, polygyny (many wives) has been practiced far more widely than polyandry—and of course, still is. Concubinage, effectively a variation on polygyny, was also widely practiced. And still is in the sense that a man having a mistress is a similar relationship, except that the “other woman” has no formal or legal rights.

Even the Catholic Church initially treated two people who were living together as married—and if they separated, as no longer married. Only in the 12th century did Catholic theologians begin referring to marriage as a sacrament. Four centuries passed before this became official Catholic doctrine, in 1563, when the Council of Trent deemed that marriage was one of the seven sacraments.

And in the United States, public cohabitation was sufficient evidence of a valid marriage until the second half of the 19th century.

Today’s Marriages: a 3- or 4-Way Contract

Today, in all cases the terms of the marriage contract are defined by the State. Including the terms for dissolution of the contract—divorce. Terms that can be modified or overridden by a prenuptial agreement—with no guarantee that such an agreement will be upheld in full or in part by a divorce court.

Thus, marriage today is an agreement between three parties: the two spouses plus the state. Or four when a church, mosque, synagogue or temple is also involved.

Would the legal definition of marriage be any different in a society governed according to Objectivist principles?

In one sense, the answer is no. A marriage is a contract. That would not change.

Rand makes it clear that an Objectivist government cannot dictate the content of a private contract. She proposes “an ironclad constitutional provision to prevent the government from dictating the content of private contracts.”

But Rand makes it clear that an Objectivist government cannot dictate the content of a private contract. She proposes “an ironclad constitutional provision to prevent the government from dictating the content of private contracts.”^[1]

The role of Rand’s concept of government in relation to private contracts is purely one of adjudication. That is: the provision of courts to settle differences between contracting parties.

Contracts are thus agreements arrived at by two or more consenting adults. The Randian state has nothing to say about either the content of such agreements or what the parties choose to call them.

So marriage in such a society is whatever two or more people decide it to be. They would have the option of devising their own agreement, or selecting one “off the shelf” from a religious or other organization.

Furthermore, they could agree to modify that agreement at any time.

We’re all accustomed to the content of most agreements being dictated or regulated by the State. But historically, much of a State’s law has been adopted from processes which evolved in an open market.

As an example, consider the California gold rush.

For the eighteen years from 1848 to 1866, gold production in California boomed without a governmental framework to recognize mining claims, register titles, and regulate disputes.

How could that be?

The miners created their own.

They established districts, registries, procedures for establishing and registering a claim and buying and selling claim titles, and a system for resolving disputes. Officers were usually elected, including the recorder of claims. Their private arrangements were recognized in California state courts. Congress’s 1866 statute “explicitly noted that all explorations for minerals would be subject to those ‘local customs or rules of miners in the several mining districts’ that were not in conflict with the laws of the United States.”^[2]

The structure of the corporation as we know it today evolved in a similar manner.

Companies, Partnerships, and Other Associations

A company, partnership, trust, club, charity, or other organization is also an association of individuals bound together by contractual relationships. Albeit usually more complex than a marriage.

Thus, the role of a government based on Objectivist principles in relation to the formation of such associations would, as in the case of marriage, be purely limited to the adjudication of disputes between contracting persons.

Today, the State offers a variety of business and association structures, including sole proprietorships, trusts, partnerships, and limited liability companies.

Plus, there are structures created purely for tax reasons: in the US an LLC, which is a limited liability entity treated as a partnership for tax purposes; nonprofits (which must usually meet certain requirements to maintain that nonprofit status), and religious organizations (which are normally exempt from taxation).

The joint stock company as we know it today was adopted by the State from a structure which evolved without the State’s blessing.

These latter structures would all disappear in an Objectivist society as there will be no taxation. To quote Rand:

“The government of a free society may not initiate the use of physical force [and as] the imposition of taxes does represent an initiation of force [so] in a fully free society taxation—or, to be exact, payment for government services—would be voluntary.”^[3]

To appreciate what kind of entities might evolve in such a “free for all” environment, it is instructive to realize that the joint stock company as we know it today was adopted by the State from a structure which evolved without the State’s blessing.

The Evolution of the Joint Stock Company

The origin of the joint stock company can be traced back to other forms of association, including medieval guilds, partnerships, and various informal arrangements where individuals joined together to pool capital to finance a project beyond the means of any one of them individually. Such pools of capital were usually limited to a single project such as the financing or insuring of the voyage of a trading ship.

This changed in England after the “Glorious Revolution” of 1688 which resulted in the overthrow of King James II, who was replaced with the Dutch stadtholder William III, Prince of Orange (who was James’s nephew and son-in-law!).

One result was the supremacy of parliament over the monarchy as the King’s powers were restricted. This change in the balance of power was one factor that led to . . .

“ . . . a boom in joint stock company formations, both incorporated and unincorporated, in a wide range of industries including treasure salvaging, mining, fire insurance, water suppliers, banks and manufacturers of arms, textiles, soap, sugar, paper and glass. This boom was closely interrelated to the development of stock markets and the growth of trading in the shares of both incorporated and unincorporated joint stock companies.”^[4]

At that time, there were three forms of associations similar to the corporate structures we are familiar with today.

1. The chartered company, like the Muscovy Company (chartered in 1555 with a monopoly on trade between London and Moscow), the East India Company (1600, with a monopoly on trade with the East Indies), and its Dutch equivalent, the United East India Company (1602, better known in English as the Dutch East India Company), were created by acts of parliament granting a territorial monopoly on a certain trade.
2. “Private” companies, essentially similar to a chartered company, created by an act of parliament for a specific purpose like a turnpike, a canal, or similar projects which, today, are usually the province of governments. These were usually formed upon the initiative of a local association.
3. Unincorporated companies: associations formed without the state’s blessing, based on partnership law.

All told, the number of securities traded in England increased from 14 before 1688 to over a hundred in the 1690s. And more than a thousand by the time of the South Sea Bubble in 1720. Most of them being unincorporated entities.

The structure of these unincorporated companies was in essence a partnership, sometimes combined with a trust, with the difference that the units of ownership could be bought and sold without the approval of the other partners.

As in a partnership, the “partners” were not protected by limited liability. But in practice, the large number of such partners made it impractical for anyone to sue them. Unlike today, there was no central registration office where a complete list of such owners could be accessed.

Even though they existed in a legal grey area, such unincorporated joint-stock companies continued to flourish until 1844 when the British Parliament recognized such entities by passing the Joint Stock Companies Act.

Given that a government based on Objectivist principles cannot dictate the content of private contracts, there would be no “Joint Stock Companies Act” or its equivalent. And none of the regulatory apparatus that governs corporations today.

As with marriage, when a group of people wish to create a partnership, corporation, or other association, they could devise their own agreement or select one “off the shelf.”

The possible structures of such agreements would be limited only by human ingenuity.

In sum, most if not all of the civil law as we know it today would no longer be the province of the government in a society based on Objectivist principles. All such a government would be left with is criminal law. And once the penalties have been set for different crimes, there’d be very little for the parliament or congress to legislate.

 
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^[1] Ayn Rand, “Government Financing in a Free Society,” in The Virtue of Selfishness, page 137.

^[2] Hernando de Soto, The Mystery of Capital (Basic Books: New York, 2000), pp. 146–147.

^[3] Rand, op. cit., page 135.

^[4] Philip Lipton, The Evolution of the Joint Stock Company to 1800: A Study of Institutional Change, http://www.clta.edu.au/professional/papers/conference2009/LiptonCLTA09.pdf

Related Posts:

1. Ayn Rand, Aristotle, and the Ethics of Flourishing
2. Rasmussen and Den Uyl’s Trilogy of Freedom and Flourishing
3. What Did Capitalism Require to Emerge?

   

About the Author: Mark Tier

Mark Tier is an Australian writer and businessman based in Hong Kong “partly because paying taxes is against my religion.” Founder of the investment newsletter World Money Analyst, he is the author of Understanding Inflation, The Nature of Market Cycles, How To Get A Second Passport, The Winning Investment Habits of Warren Buffett & George Soros, and Trust Your Enemies, a political thriller which is “up there with The Girl With the Dragon Tattoo,” and “Worthy of Ayn Rand” according to Amazon reviewers. He also coedited two Prometheus Award-winning collections of science fiction stories: Give Me Liberty and Visions of Liberty.