Tom is beginning his talk on the orgins and nature of the law by reminding us that the "law" is not encompassed by the actions taken by the state. Rather the law includes all the sorts of contractual agreements and rules that govern our lives. He just used the word "enterprise" to describe the process of generating these rules. The law is "not a set of commands given by a supreme ruler," rather it's a service industry. Not surprisingly, he's now using Lon Fuller's wonderful definition of law: the enterprise of subjecting human conduct to the governance of rules.
Much like the way public choice gives students a framework for systematically understanding political activity, so does the Fuller insight give students a framework for thinking about the way in which rules, not just state-made law, serve to coordinate human choices. Tom is starting to use this insight to talk about "polycentric" law, or the idea that multiple forms of law can overlap within the same geographic area. Law need not be, and in fact is not, a monopoly within a specific geographic region.