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Contracting-out Contract Law

This exploration, led by Mark S. Miller, delves into the dynamics of low-trust societies and the potential for electronic contracts to innovate trust-building mechanisms. Examining historical transitions post-communism and the need for reliable intermediaries, the piece discusses how smart contracts could facilitate complex cooperation independent of physical interactions. It highlights the challenges faced by emerging markets in establishing trust and the viability of electronic systems in cultivating a trustworthy business landscape. The analysis aims to inspire new strategies for enhancing transactional trust.

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Contracting-out Contract Law

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Presentation Transcript

  1. Contracting-out Contract Law Importing Trust into Low-Trust Societies Electronically Mark S. Miller CTO, Combex Inc. Open Source Coordinator, ERights.org Director, Extropy Institute

  2. What Went Wrong? • End of communism • Great liberation from oppression • New leaders include many free market folk • Vaclav Klaus, Miseans in the Baltics, Poland, etc. • Soros, others, eager to help • “It is easy to turn an aquarium into fish soup, but not • so easy to turn fish soup back into an aquarium.” • –Lech Walesa

  3. Low-Trust Societies • From “Trust”, “The Other Path”, E. Dyson • Absence of oppression isn’t enough • Complex extended cooperation requires trust • Besides culture, what? • Accumulated “capital” of widely trusted intermediary institutions • Secures relationships & contracts among others

  4. Hubs of High Trust Actual Virtual

  5. Low-Trust TragedyNot no trust. No trust hubs. Actual Virtual

  6. Hubs: Trusted Intermediaries • Arbitrators, Banks, Notaries, Visa, • Underwriters, Lloyd’s, Sotheby’s, • Exchanges, Brokers, Funds, Escrow, • Consumer Reports, Roger Ebert, …, • Courts, Law, Enforcement, Money • yeah, but still better than their absence

  7. Bits Without Borders • Can now purchase e-goods & e-services from across the world as easily as next door. • Escape old limits of geography & jurisdiction. • Can trust-hubs escape too? • Can they be made purely electronic? • Mostly independent of physical interaction • Many 1st world hubs are trusted worldwide

  8. Remote Trust Bootstrapping 1st World 3rd World

  9. Smart Contracts • Contract as Program Code • Terms enforced by program’s execution • Inescapable arrangement vs. punishment. • Contract host == trusted escrow & enforcer • Private law provided per-contract • Nick Szabo’s www.best.com/~szabo • Our “Capability-based Financial Instruments” at FC00

  10. Contracts as Games • Players make moves, but only “legal” ones • Move changes state of board • Board-state determines move “legality” • ERights are “pieces” placed on board • Game escrows pieces, • Pieces/ERights released only by play

  11. A Simple Exchange Game

  12. A Covered Call Option

  13. The Game Design Game • Contract Negotiation as Game Design • Framework as the Game of Game Design • Design rules for game all are willing to play • Write “board manager” for that game • Agree on a mutually trusted host • Pay host to run the board manager • Host verifies everyone agreed on same game

  14. World Isn’t Purely Electronic

  15. Why the 3rd World First? • Less burden of installed base • Like cell-phones in Eastern Europe. • Where legal system isn’t thought legitimate,legitimate businesses need not be legal. • Especially given alternate source of legitimacy.

  16. “Rule of Law & Not of Men” • The Classical Liberal ideal • A neutral simple framework of rules • enforced impartially & justly • enabling cooperation without vulnerability • The old “right of contract” • Any mutually acceptable arrangement • Law secures it, as a trusted intermediary

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