Self-Governance in San Pedro Prison

History provides many examples of self-governing communities that maintained extensive economic exchange and order despite the absence of a government that enforced the law or protected property rights. In such cases, individuals engaging in economic activity with different groups or with others in a single group must develop self-enforcing mechanisms that will induce cooperation, such as abiding by contracts. Individuals facilitate cooperation by various means, including reputation, signaling, and commitment mechanisms, which allow self-enforcing exchange in a diversity of situations. For example, Edward Stringham (2003) identifies the self-enforcing mechanisms that facilitated the rise of seventeenth-century stock exchanges in Amsterdam. Exchange occurred among medieval traders with the assistance of institutions such as the law merchant (Greif 1989; Milgrom, North, and Weingast 1990). Peter Leeson (2007b, 2008) identifies the signaling and commitment mechanisms that facilitated exchange in precolonial African trade. Emily Schaeffer (2008) examines a modern-day manifestation of these types of self-enforcing reputation mechanisms in the case of Hawala traders, who act as intermediaries in international financial transactions. For a contemporary stateless society, Benjamin Powell, Ryan Ford, and Alex Nowrasteh (2008) find that Somalia’s relative economic performance has improved during its period of statelessness. (See Stringham 2007 for an excellent collection of related essays on anarchy and the law.) These studies demonstrate the remarkable variety of situations in which people benefit from mutually beneficial exchange and establish order without the assistance of the state. 

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