It might have taken me more than two weeks and a half, but I'm finally back at this discussion. Sorry for the huge delay!
I've heard the idea of mediation services being put in place of the court system, but I have not yet been convinced that it would be something that could work even for something as simple as selling a plot of land.
To demonstrate that the idea works, you shouldn't look at the base case scenarios, but at the worst case scenarios where different participants in the process have their own selfish interests and are looking for ways to exploit other. If your proposed system is better, it should handle those cases better than the current one even when we assume the worst. (We should assume the worst while examining both).
In the cases where the parties involved are cooperative and are willing to pay the mediation company to handle the deal and so on, things are easy. Things are always easy when everybody involves is assumed to agree. If everybody is assumed to agree, even things like communism could viewed as something that could work and not as an utopia.
What happens if there are two cousins with a claim to the same plot of land. One cousin goes to one mediation company and sells it and the other cousin goes to another midiation company and sells it to another buyer. Now we have to buyers with equally legitimate claims to the plot and both mediation companies claim their ruling is the correct one. How do they solve it if they are unwilling to cooperate as they are market rivals? Have their hired security outfits battle it out and whoever wins the war gets the plot?
Additionally, if you can have a security outfit that is basically a private police force with the power to evict people, jail people and punish people, why not collude with a dishonest mediation company and start taking people's lands on whatever pretexts. You just have to build up the strongest security outfit and you can start ruling everything. I think that would be a much more unpleasant racketeering than the racketeering you get from the state to get your taxes paid. And since this would be a very profitable activity to be involved in, sooner or later a company would be expected to start doing it. Look at cable and mobile operators. They abuse their customers as soon as they can and what stops things from being worse is regulation. Now imagine Comcast with a security outfit by its side to make sure you never opt out of your super expensive contract for super slow internet access that is filtered so you can only use services owned by them with no access to any competitors or decentralized networks.
How does having one court system solve that? Well, you have one court, it looks at the evidence, it tires to apply to law and you get a resolution. Regardless of the outcome, you do get an outcome, the plot has a clear owner and you move on. And having clear legal outcomes is something the market needs to thrive. Even an unfair but still reliable and final court is better than no court at all as it provides more stability and businesses know what to expect. If there are all kinds of courts, there is no real court system and no reliability, so businesses have to constantly hedge on investment because of the risk some mediation company might rule against it for some reason and take it away form them somehow.
And how about crimes like murder? If the victim's family can't afford a mediation company and a security outfit, how would prosecute the murderer? There is no market incentive to do that if there is nobody to pay for it. So you get justice only if you can afford it?
Same goes in the real world, being a dick and an asshole doesn't get you very far...
Even in this world with all the regulations out there, there are a ton of companies with bad reputations who keep being dicks and making money like the example above. If you make sure you have the strongest security outfit out there by far, you stop caring about reputation because consumers simply don't have another option to select. Worst of all, a market with 10 security outfits that are equally strong and with equal levels of integrity is imaginable, but it is not a stable state of things. Not all businesses can be exact equals and when they aren't, they start buying up each other until you are left with very few. And you only need them to merge once to be left with an unchecked monopoly. One super strong and dishonest business is just a more stable arrangement. A balanced system is like a pencil balanced on its tip while the other is like the pencil falling down. Even if you manage to balance it on its tip, it's going to fall down eventually. And once it has fallen down, it's impossible for it to go back up by itself.
Now, as far as reputation goes, it's also important to say that it's something that is quite mailable and prone to abuse. Pyramid schemes invest in building up a good reputation for a while before they cash in on it. Buying votes from bots on our blockchain can give anybody a reputation boost. And if you dig deep enough into reputations of businesses online, you'll see a booming market for fake reviews. In other words, there are tons you can do for PR if you have the resources and PR efforts do work on us which makes reputation something you can't fully rely on.
#2 If I am going to give any credit to the "founding fathers", it's that they knew the people should be armed. With our current govt, or absent one, you must have some big cajones to assume that when you come onto MY property intending to kill me, that I won't pump your ass full of lead. Merry Christmas ya filthy animal.
Every single time I read the final phrase of this paragraph, I imagine Macaulay Culkin mouthing it and burst into laughter. And I've read your comment multiple times!
Now to the point. I by no means view the US "founding fathers" as infallible and I do think they did get some things wrong. I'm actually pro gun control and I don't see it as a good way to regulate society. I don't need big cajones to come to your home to kill you, I just need bigger, better and more plentiful guns. If you let guns rule social interactions, I think you're very likely to end up with gun-toting rulers with no scruples. All you need is a group of dicks to manage to amass more guns than the cooperative population in an area, for them to start controlling that area.