What is the practical difference between those two things?
Basically, motivation versus brute force.
I suppose it only works well in cohesive societies, which tends to keep the scope smaller (which in itself is a good thing). Centralized societies with "one size fits all" rules are going to need to use more force to maintain order in all districts.
Some previous societies (and still our own to some degree) used social standards developed over a long time to maintain order. Violate, and you might be subject to shunning, banning (exile), or maybe corporal punsishment or execution in severe instances. Banning was pretty much a death sentence anyway unless you could find another society to take you in. Prisons were largely unknown, and pretty much impractical anyway, without a "state" (or king) to run them.
As much as I hate to admit it, I suppose religion plays a large role in developing a cohesive society. But behavioral standards and customs are probably more important to many individuals than a specific faith. Those customs would include things like how land ownership is determined, how transactions are accomplished, etc. Even today,
most human interaction consists of voluntary exchanges that do not require state management. There are exceptions of course, and that is where you get into "dispute resolution."
Under a "state", dispute resolution is monopolized by government, which then backs up its verdict with monopolized force. But who is to say that a society is not only capable of but would be better off with competive systems of dispute resolution? You might argue that we already do that now with private arbitration, but that only serves to support and not negate the proposition.
Violent crimes against persons and property would tend to be met with reciprocal violence in defense, unfettered by state rules of monopolized force. There are examples of this in our own society: for instance when there was a police strike in a city and crime went
down instead of up, because the criminals were more afraid of citizens than the police.
No society is going to be "utopia" but that shouldn't prevent discussion and striving for something maybe better than what we live in now. A few hundred years ago in most of Europe, a monarchy was the only conceivable option. But then those unruly children in the British Colonies in North America got this wild idea about a "democratic republic." Why should we assume that we have reached a pinnacle of perfection, especially when we seem to be slipping into democratized tryanny?
