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Privatize…Everything?

January 15, 2010 Leave a comment Go to comments

The last post elicited discussion about the difference between public and private institutions and whether there is a basis for individuals to distinguish between the two when considering abuses of power and authority. In terms of the provision of goods and services in society, some commenters and many other people continue to argue for privatization. Simply stated, the notion behind calls for privatization is that private entities can better provide goods and services– perhaps medical treatment, education, roads, or security– than the government.

Should there be limits to privatization? Most Americans, either through an express push for privatization or through actions designed to avoid a variety of costs, have argued for the privatization of the administration of justice under the law for decades. A vast majority of Americans avoid some or all of the process the public judicial system (i.e., courts of law) offers, preferring party-driven contractual resolutions to the unpredictability and transactional costs of courts.

David Souter was known as a private justice, but it is likely that he sees justice as a public good.

By some estimates, as few as one percent of lawsuits filed actually go to trial. Most resolve their disputes through what might broadly be understood as contractual means. These forms of alternative dispute resolution include settlement, mediation, and arbitration, as well as ex ante agreements requiring dispute resolution by means other than traditional lawsuits in court.

Private initiative has not been the sole driver of competition with the judiciary. The first version of the Federal Rules of Civil Procedure, issued in 1938, did not mention settlement, although many cases were settling even then. Today, by contrast, the Rules direct judges to encourage out-of-court resolution of suits. In certain situations, judges may be required or requested to evaluate and approve proposed settlements and enforce settlements against post-settlement breaches of the agreement. A relevant, common feature of these contractual agreements is privacy. In contrast to a trial, rarely are the terms of settlement available to the public. This can include the amount of money for which the parties settled, the facts of the dispute, or even the fact that there was a dispute at all.

If courts are nothing more than venues for dispute resolution, a public service the government offers to its citizens (and non-citizens), then competition from private substitutes probably is not of much concern. Not everyone agrees with this vision of the judiciary, however. Judith Resnik and David Luban both argue that trials are public goods. According to them, we have reason to worry about the rise of contractual, private dispute resolution. Resnik sees value in trials because they produce precedent. The judge’s ruling in a particular case applies to everyone, not just the parties to the case. Private, contractual dispute resolution deprives the public of precedent, which clarifies the law and its applicability to different factual circumstances, and which serves to develop the common law. Luban’s vision is broader, couched in civic republican terminology. He argues that trials are an opportunity for expression and development of societal values. Private dispute resolution deprives the public of both of these public goods.

Product liability class actions provide another, more practical concern. If the defendant-product manufacturer resolves the dispute with a group of injured plaintiffs privately, the allegedly dangerous product likely will continue to be available on the market, and potential customers likely will not be aware of the possibility of injury associated with that product.

Should Americans be concerned with their overwhelming preference for privatized justice? Are courts something more than dispute resolution service centers? Is contractual dispute resolution worth the cost of less judicial precedent? Are courts valid and valuable enunciators and developers of social and political values?

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Categories: Legal, Privatize
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  1. January 15, 2010 at 12:49 pm

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