An essential aspect of economic life is the ability to enforce contracts and resolve intractable disputes. How can a stateless society provide these functions in the absence of a government?
The first thing to understand about contracts is that they are a form of insurance, insofar as they attempt to minimize the risks of noncompliance. If I enter into a five-year mortgage agreement with a bank, I will attempt to minimize my risks by requiring that the bank give me a fixed interest rate for the time period of the contract. My bank, on the other hand, will minimize its risk by retaining ownership of my house as collateral, in case I do not pay the mortgage. In a world without risk, contracts would be unnecessary, and everyone would do business on a handshake. However, there are people who are dishonest, scatterbrained, manipulative and false, and so we need contracts which basically spell out the penalties for noncompliance to particular requirements. In modern statist societies, contracts are generally enforced not through the court system, but rather through the threat of the court system. I was in business for many years, at an executive level, and I never once heard of
