polis, the Aegean city-state which introduced the clear division of human affairs into a private and a public sphere. It comes to us directly from Roman law, under which there is a manifest frontier, contract belonging to civil, and command to public life and public law. However, to escape the evident danger of circularity, such an answer needs definitions of private and public life which are themselves independent of the manner, contractual or coercive, in which social co-operation is cemented. Otherwise we would be asserting that the proper place of command is in public affairs, and public affairs are those ruled by command.
Whatever else it may be, it is at least not circular to say that the place of contract is in those situations of co-operation which do not require anything stronger for commitment to a common endeavor than the attraction of the surplus expected to be produced and divided. Command comes into its own when this expectation alone is insufficient to call forth the required conduct; when the way the surplus would naturally fall ("the incentive structure” or “payoff structure") or the bargaining problem involved in dividing it differently is such that the threat of coercion is needed. Though these definitions are far from watertight, they are at least independent and do not coincide with the conventional private-public division. There is non-coerced, voluntary co-operation now and then in certain affairs that are indisputably public, and uncontracted-for subordination to command is not altogether unknown in private ones. None the less, the imputation of “private” to “contract,” “public” to “command” has the ring of “simple truths” and is worth pursuing.
Some important types of contracts, as we have seen, are by their structure not self-enforcing. Enforcement in turn is not sui generis public or sui generis private. It can be one or the other and sometimes one may supplement the other. The reasons why one or the other predominates are difficult to state concisely at the best of times, and especially so without a prior base of public goods theory. Some work in that direction will be presented in Part Two of this book. Meanwhile, we may at least note the following. There are two influences arising from the practice of contracting (one primary, the other secondary), tending to make the relative sphere of command grow.
1. The primary influence is the competitive advantage of contract-enforcement by the sovereign political authority over self-help, bought help, or the agency of other non-sovereign institutions.
(a) Appeal. Once a state exists, there are cost-benefit type incentives for the losing party in any action in private non-sovereign enforcement not to submit to his loss. He may have much to gain if he takes his case in appeal to the state, which may choose to assume jurisdiction and, if it does, can override non-sovereign instances. There are incentives for the state to assume jurisdiction. A given non-zero probability that the sovereign will on appeal override the non-sovereign in a random case would engender a given volume of appeals; the greater the probability, the better it pays to appeal. The process can feed on itself and have a debilitating effect on the lower instances. The decline of self-help, communal, ecclesiastical, and professional (peer) jurisdiction and enforcement is not altogether unrelated to this sort of process.
(b) Cost allocation. The civil adjudicating and contract-enforcing functions of the state may obtain a free ride on its functions in defense and public order. If the king has dragoons and gendarmes, the relative authority of royal justice gains from the existence of this back-up force, whose cost is borne by general revenue and need not be borne by individual litigants. Moreover, the cost of enforcing a judgment against a very powerful litigant is the more easily financed the more “averaging” is taking place among cases, which gives an advantage to the large centralized enforcing authority, i.e., in practice the all-inclusive state.
2. The secondary or induced influence erodes the quality and acceptability of non-sovereign enforcement.
(a) From common law to equity. One may assume for simplicity that the authority of non-sovereign, decentralized enforcement, by which I mean the extent to which it can enforce its judgments over and above what could be explained solely by the force at its disposal, is rooted in the regard for the customary law it applies. Customary law offers little scope for discretion. The state acting as sovereign contract-enforcer has important interests flowing from its vastly more substantial role as the tenant of political power, charged with maximizing some definition of the public good. Applying common law is mostly neutral, Equity often useful in furthering these interests. Both by overt legislation and by more surreptitious judicial law-making, the state has “natural” tendencies, explicable in terms of rational choice, to introduce considerations of public policy and social justice into contract law. Rival jurisdictions cannot remain entirely indifferent to these developments; yet as they move away from (or adjust) common law, they lose, and the state gains, relative authority.
(b) Judge in own cause. Suppose, once more for simplicity, that with all other things equal judgments are the easier to enforce the more impartial the judge seemed in the eyes of the parties; his impartiality as presumed by them would increase with his distance from the case. Self-help, bought help, and mutual aid by coalition members would then be regarded as the least impartial, and the agents of the state as the most impartial, of possible judges. The importance of impartiality is obviously the greater the stronger is the element of discretion, or the less automatic is the “formalistic” rule-application associated with customary law. Hence, by causing, in one way and another, Equity to prevail over the common law and discretion over rule-application, the state enhances the weight of its own comparative advantage in impartiality and the disadvantage of those who, in their smaller jurisdictions, are in the nature of things both judge and party.
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