What's So Private about Private Ordering?

Private ordering—i.e., development of extralegal forums and forms of dispute processing by nonhierarchical groups—has preoccupied legal economists for nearly three decades. According to the prevailing analysis, private orders grow in socially‐flat market communities without any intervention by the state. This article challenges the received view on two fronts: First, it establishes a causal connection between the development of private orders and a social hierarchy. Second, the article demonstrates that the state often intentionally assumes a proactive role in the creation of these orders. To illustrate this two‐pronged theory of private ordering, this article offers a detailed analysis of three well‐known cases that have been considered prototypes of private ordering by market communities: the Diamond Dealers Club of N ew Y ork, the kibbutz in I srael, and ranch owners in S hasta County, C alifornia. Finally, the article argues for a need to re‐evaluate the feasibility and desirability of private ordering and privatization of law.