Arnold Kling has an excellent article over on TCS today about his theory of government. He calls it "The Golden Scepter." If you care about government theory, do yourself a favor and read the whole thing.
Disputes happen all the time. If we did not have disputes, we would not need umpires in baseball -- players could just call the balls and strikes themselves. . . .
We do not give guns to baseball umpires, and still we accept their decisions as final. However, I would argue that baseball games are peaceful in the context of a society in which we expect government to enforce the peace. Thus, although umpires are not employed by the state, their authority to resolve baseball disputes is indirectly backed by the state, in the sense that if you engage in violence to try to overturn an umpire's call, you can be punished by the state.
In contrast, if you are a heroin dealer involved in a dispute with another heroin dealer, it is much harder to commit to peaceful resolution of a dispute. Because you are involved in a business that is not sanctioned by the government, you cannot submit your dispute to an Arbiter who has ultimate backing from the state. Thus, it becomes difficult to develop peaceful mechanisms for resolving disputes among heroin dealers.
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