Fascinating article on private law in Iceland: Private Creation and Enforcement of Law: A Historical Case.
Legal conflicts were of great interest to the medieval Icelanders: Njal, the eponymous hero of the most famous of the sagas, is not a warrior but a lawyer: "so skilled in law that no one was considered his equal." In the action of the sagas, law cases play as central a role as battles.
Second, medieval Icelandic institutions have several peculiar and interesting characteristics; they might almost have been invented by a mad economist to test the lengths to which market systems could supplant government in its most fundamental functions. Killing was a civil offense resulting in a fine paid to the survivors of the victim. Laws were made by a "parliament," seats in which were a marketable commodity. Enforcement of law was entirely a private affair.
And yet these extraordinary institutions survived for over three hundred years, and the society in which they survived appears to have been in many ways an attractive one. Its citizens were, by medieval standards, free; differences in status based on rank or sex were relatively small; and its literary, output in relation to its size has been compared, with some justice, to that of Athens.
While the characteristics of the Icelandic legal system may seem peculiar, they are not unique to medieval Iceland. The wergeld -- the fine for killing a man -- was an essential part of the legal system of Anglo-Saxon England, and still exists in New Guinea. The sale of legislative seats has been alleged in many societies and existed openly in some. Private enforcement existed both in the American West and in pre-nineteenth-century Britain: a famous character of eighteenth-century fiction, Mr. Peachum in Gay's "Beggar's Opera," was based on Jonathan Wild, self-titled 'Thief-Taker General," who profitably combined the professions of thief-taker, recoverer of stolen property, and large-scale employer of thieves for eleven years, until he was finally hanged in l725. The idea that law is primarily private, that most offenses are offenses against specific individuals or families, and that punishment of the crime is primarily the business of the injured party seems to be common to many early systems of law and has been discussed at some length by Maine with special reference to the early history of Roman law.
Medieval Iceland, however, presents institutions of private enforcement of law in a purer form than any other well-recorded society of which I am aware. Even early Roman law recognized the existence of crimes, offenses against society rather than against any individual, and dealt with them, in effect, by using the legislature as a special court. Under Anglo-Saxon law killing was an offense against the victim's family, his lord, and the lord of the place whose peace had been broken; wergeld was paid to the family, manbote to the crown, and fightwite to the respective lords. British thief-takers in the eighteenth century were motivated by a public reward of 40 [pounds sterling] per thief.
All of these systems involved some combination of private and public enforcement. The Icelandic system developed without any central authority comparable to the Anglo-Saxon king; as a result, even where the Icelandic legal system recognized an essentially "public" offense, it dealt with it by giving some individual (in some cases chosen by lot from those affected) the right to pursue the case and collect the resulting fine, thus fitting it into an essentially private system.Read on in the article.
Next time somebody asks you for a success story of anarchy, point him to this article. Iceland successfully existed in this state for 300 years and fared better (in societal sense) than many other countries. Life in Iceland may have been harder than in France, but let's not forget that it was basically a settlement on top of an icy rock.
(Yes, it's true that eventually the state of anarchy ended, and Iceland became subjugated to another king. But please point me to its statist contemporary that did not suffer the same fate.)
By the way, another example is medieval Ireland.
The point is not that Icelandic or Irish societies were Heaven on Earth. The point is that private law creation and enforcement are clearly feasible within the framework of human society. Ancient wheels were also not as good as modern wheels. And anyone who has read Shulchan Aruch HaRav knows what use Russian peasants had for rocks as late as the 18th century.
So, with modern technology, modern development of natural and social sciences, with modern levels of population, capital accumulation, experience, and private initiative, surely we can much better than the medieval Irish and Icelanders. There is no reason to believe that if they were able to accomplish something in the "simpler times" we can't do the same in the modern times.
Just like there was a short period of considerable cooling down of climate in the last few centuries, known as the Little Ice Age, I think that the 20th century will be known in the future as "The Little Dark Age". All the crying out for liberty that we hear nowadays is by no means a new phenomenon. If you read the writings of the Founding Fathers (and philosophers such as Thomas Paine, John Locke or Adam Smith), you will see a very clear and sharp understanding of the evils of the government and the necessity for private initiative in all areas.