When most people think about a justice system they envision police, courts, and jails. Everyone wants justice and we are told over and over again that justice is what police, courts, and jails produce. But is this really the case?

When you are harmed you want justice. To be more specific you want a fair outcome and that usually means receiving restitution (compensation) from the party that harmed you. Fairness is something that cannot be defined in absolute terms because everyone has a different opinion about what is fair. In general there is only one means to establish what is fair, voluntary trade. Absent voluntary trade you always have one person who feels they have been harmed and therefore treated unfairly.

This is where our modern justice system ends up producing more injustice than justice. Lets imagine that Alice, some one you don’t know, has her house robbed while she is on vacation. Alice wants justice. She wants her stuff back and the person who stole it to compensate her for the time and distress they caused. At this point we have one injustice caused by the robber.

Alice, in pursuit of justice, comes to you and asks that you pay to hire a detective to track down the thief. She argues that you could be robbed next and that she cannot afford to do it herself. You get to thinking about it and then decide that it would be cheaper for you to lock your doors and adopt a crypto currency than hire that detective for her. Alice goes door to door and is unable to find anyone willing to help her. Frustrated, Alice goes home, finds a gun, and goes door to door demanding everyone contribute a small amount to her cause.

At this point we now have many injustices. Alice has become guilty of the same crime for which she demands justice. In some ways she is guilty of a far worse crime because she is threatening to kill anyone who doesn’t help her. Most people cave to Alice, but one guy resists paying and is killed while resisting. Alice feels this is necessary because otherwise crime would get out of control and they guy who resisted paying is guilty of helping the robber.

The challenge is that just because Alice has experienced an injustice at the hands of another does not mean that she is granted a right to harm others. Instead she must find a way to get justice without causing injustice to innocent parties.

Insuring against Injustice

In attempt to resolve her internal contradiction by finding an alternative to violence, Alice decides that she will buy insurance so that if she happens to be robbed in the future she will have the ability to hire a detective to track down the criminal, a court to try the criminal, and a prison to detain the criminal. So Alice starts shopping around and finds out insurance is extremely expensive.

Obviously I haven’t done exact probabilistic number crunching that an actuary would do, but I presume that the cost of police patrols is similar to routine medical checkups, the cost of a trial is similar to an emergency room visit followed by multiple days of hospitalization, and the cost of imprisoning someone is similar to the cost of long-term care in the event of cancer and the cost of malpractice insurance is similar to cost of insuring against wrongful imprisonment. I then presume that the risk of being victim of a crime is similar to the risk of a major medical expense. If you were to attempt to purchase medical insurance with 0% co-pay and no limit then you would quickly discover the cost is very high. Higher than most people would be able to pay.

The problem with our justice system is that expenses are socialized and no one really knows the cost of the system. If people had their insurance rates go up every time they called the cops and started an investigation, then people would call the cops less often. If people had a co-pay on prosecuting a criminal, then many wouldn’t bother to press charges for petty offenses. Everything changes as soon as someone else is paying the bill.

One study found that people would be willing to pay up to $12 million dollars to stop a murder. I am going to assume the study used flawed economic reasoning when they attempted to estimate the individual demand, but I do believe that people are willing to spend $12 million of other peoples money to stop a single murder. And this is the heart of socialism.

Imagine if those who chose to use our criminal justice system were responsible for 100% of the bill? I think you would find that no one would be in prison unless they were mentally ill and posed a very high probability of a future threat. Theft, fraud, drugs, and even murder would not result in prison. With the rare exception of serial killers who murder for the joy of it, there is little reform or deterrence actually occurring by throwing people in prison.

So far my arguments have been almost purely utilitarian. People would not voluntarily pay for the system we have today. If you keep the entire premise and structure of our justice system and simply remove the tax subsidy, then few would choose to pay to use it. They would find an alternative that was more effective and cheaper.

Retribution vs Restitution

The problem we have in our society is that people have adopted a punishment mentality when it comes to crime. When someone is robbed the state might catch the robber, but will rarely make the victim whole. The robber is rarely even held liable for the cost of his own incarceration. It is easy to promote punishment when you are not the one who has to pay for that punishment. Do we really want a policy of socialized revenge? Does revenge even stop crime? It is like punching yourself in the face to spite your nose. You end up harming yourself more in the pursuit of revenge. When you allow society to socialize the cost of revenge you don’t even feel the pain. Everyone else does.

Socialist Justice can not Work

Ludwig von Mises in his paper “Economic Calculation in the Socialist Commonwealth” outlined the primary reason socialist institutions cannot function: they lack the ability to economically allocate resources. Without price feedback the bureaucrats who set the prison sentences and the politicians who make the laws have no measure of profit and loss to society. For them longer sentences and more laws almost always help them get elected and gain more wealth and power individually. Those that press charges have no problem calling the police over the loss of $1000 despite the cost of the police investigation, trial, and punishment being over $100,000.

When someone has been harmed it is normal for people to lose all rational thinking. In their anger they are willing to go on a rampage and exact a punishment greatly disproportional to the crime because it will make them feel better. Give someone a gun after they have been harmed, robbed, or violated and an opportunity to shoot the other person without consequence and many will use it. Oftentimes people take out their anger on innocent bystanders. This is just the nature of many people.

When you have a socialist justice system all of the emotions and irrational behavior gets expressed by excessive spending on bureaucratic trials and punishment that ultimately do little to reduce crime.

Justice in a Free Society

This blog post would get entirely too long if I attempted to propose solutions to the current system here. I just wanted to point out that we need to find a free market approach to justice so we can all start saving hundreds of billions of dollars per year wasted to socialist inefficiency. A solution exists and BitShares is laying the foundation. Stay tuned for more details on how it all might work.