Handbook on Contemporary Austrian Economics

How much order can spontaneous order create
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Stringham, 2006). A common objection to this suggestion is that spontaneous
orders, such as reputation and bonding, emerge and work precisely
because the specter of the state lurks in the background ready to enforce
contractual agreements if for some reason private arrangements break
down. If, for instance, Jimmy B. is very impatient and so doesn't care if
he loses some future customers if he defrauds you or, say, the value of a
producer's firm-specific investments for some reason plunge below what
he can earn by defaulting on his contracts, the threat of state enforcement
can facilitate contractual compliance nonetheless. 2 According to this reasoning,
ultimately, it is government-created order that makes spontaneous
order work.
Those who hold this popular position point out that the state supports
spontaneous orders in another important way as well: it provides the
physical security that individuals need to feel confident interacting. If,
for instance, government didn't ensure that you wouldn't be stabbed or
mugged when you left your home in the morning, you wouldn't be able
to realize the benefits of cooperation whether spontaneously ordered contract
enforcement prevented post-contractual opportunism or not. This
criticism of the magnitude of the order that spontaneous order can create
is closely related to another, which argues that spontaneous orders only
work under certain, rather limited conditions, such as in small populations
(although eBay seems to belie this) and where individuals are socially close
(although international trade, discussed below, belies this).
None of this means what those who most frequently make these criticisms
think it means, which is that spontaneous order can therefore create
very little order. Rather, what it means is that spontaneous order must
move beyond simple reputation mechanisms to secure more widespread
social order. And this is precisely what we observe.
10.3 The harder case: spontaneous order without government
The "shadow of the state" limitation on spontaneous order is not a limitation
if in fact individuals' private actions are capable of generating spontaneously
ordered "meta-rules" - that is, if they are capable of going beyond
facilitating contractual enforcement where commercial law already exists
and can produce such law itself, as well as produce and enforce laws
regulating violence, theft, and other kinds of socially destructive behavior.
For meta-rule-creating spontaneous order to emerge, there must be either
"pockets of anarchy" or "utter anarchy," which create a need for private
meta-rules in the first place. For both types of anarchy, spontaneous metarules
emerge not because government institutions exist but are impractical
or costly to use. They emerge because for some or all kinds of interaction,
government institutions do not exist.