4 ms·

You're right in general, but if two groups use a common software platform and write the rules of the contract into it, there's less need to build up an enforcem

by ewzimm 11y ago

You're right in general, but if two groups use a common software platform and write the rules of the contract into it, there's less need to build up an enforcement regime. I'm not sure exactly how you're interpreting contract enforcement leading to violence, so I'll try to explain a little more. Two people make a financial agreement, hire lawyers, and depend on a powerful police force and and penal system to enforce the terms of their contract. This increases the need for armed police, prisons, etc. As more people and institutions are given the right to enact violence to enforce these contracts, people become more desensitized to violence and arrest and more opportunities for abuse present themselves. Abstracting this enforcement into software also distances the enforcement from the culture and removes some of the negative psychological effects on people of carrying out that enforcement. That's on the smaller scale. On the larger scale, nations feel pressure into increasingly more arms races to keep themselves on an even level. Abstracting enforcement of agreements into software can have the same effect as the introduction of diplomacy into international trade. While it didn't eliminate war, it offered an alternative to straight-out aggression between tribes. Groups that used to stay to themselves and interact with each other only on disputed borders were able to cooperate on a much higher level by establishing representatives inside each others borders. A smart contract system is a neutral, diplomatic ground for the Internet. Today, the Internet resembles in many ways the world before diplomacy. There is a persistent, escalating cyber-war between nations. People can move in between nations, but there's no real neutral territory that every nation would consider fair. By having a mutually-agreed and verifiably trustworthy software platform to enact contracts, there can be opportunities for new types of deals that are more mutually beneficial. Will this suddenly eliminate war and hostility? Of course not. Neither did diplomacy. But almost nobody thinks we should go back to a world without any diplomacy, and once we have neutral and fair systems to conduct electronic business, few will want to give it up.

mempko 11y ago
Contracts that are mutually beneficial typically don't need to be enforced because they are not often broken. People who consider themselves equals give each other slack in contracts. The only use case this software fits with is is handling contracts where one party does not trust the other. Typically the more powerful party is at an advantage. There are two scenarios I see. This software is useful to powerful groups to make contract enforcement cheaper in which case they will essentially force the weaker party into compliance. Or this gives the weaker party an advantage, in which case this software never takes off. Because let's face it, I would never use this with people I like.
- sirclueless 11y ago
  Contracts that are mutually beneficial typically don't need to be enforced because they are not often broken. This is a fundamental misunderstanding the purpose of contracts. Contracts are almost by definition mutually beneficial, at least nominally. Otherwise the only reason parties would enter into them is under duress or out of ignorance. And in fact, contracts backed by a legal system are routinely struck down if either of those cases occur. What you are describing is a situation where neither party has an incentive to defect or default on the contract. And if that is the case then there was no need for a contract in the first place. For example, you and I agree to meet Friday night for dinner. This is a beneficial arrangement for both of us, neither of us need sign anything. The purpose of contracts is to solve a game-theoretic problem: it is to our mutual benefit to cooperate in some way. But if we cooperate, then one of us can do even better by defecting. For example, it might be mutually beneficial for me to give you $1,000 today, and for you to give me 100 widgets on Thursday. But if I give you $1,000 today, you can do better than the original agreement by keeping the money and the widgets. So the only reason I would ever give you $1,000 is if there was some way to enforce that you give me 100 widgets. That can be by legal means, or technological means. The threat of punishment under a legal system is one traditionally effective way to incentivize you to hold your end of the bargain, and in many ways is at the very heart of what makes modern society work. A technological solution, that avoided law enforcement and judiciary systems, has the potential to be even better because there are obvious negative effects to having a large and over-reaching police force, for example. TL;DR The enforceability of the contract is the whole point. The only reason you need a contract in the first place is because someone has an incentive to defect.
  - ewzimm 11y ago
    Thanks. That's exactly it. People might try to counter by saying that specific cases don't work that way, but that's not what game theory predicts. It won't tell you the outcome of a specific instance of a conflict, but it will predict the overall trend when a winning strategy exists. Traditionally, the counter to exploitable strategies was the honor system. You trusted the people you interacted with not to take advantage of you because you believed in their character. While that can work in specific cases, it's not an overall good system for running a large-scale system of social interactions because it invites exploitation. We tend to think of corruption as inevitable, but the degree of corruption in a system is actually somewhat predictable by the incentives for it built into the rules of the system when that system runs at a large scale.

by ewzimm 11y ago

mempko 11y ago

Contracts that are mutually beneficial typically don't need to be enforced because they are not often broken. People who consider themselves equals give each other slack in contracts. The only use case this software fits with is is handling contracts where one party does not trust the other. Typically the more powerful party is at an advantage. There are two scenarios I see. This software is useful to powerful groups to make contract enforcement cheaper in which case they will essentially force the weaker party into compliance. Or this gives the weaker party an advantage, in which case this software never takes off. Because let's face it, I would never use this with people I like.

sirclueless 11y ago
Contracts that are mutually beneficial typically don't need to be enforced because they are not often broken. This is a fundamental misunderstanding the purpose of contracts. Contracts are almost by definition mutually beneficial, at least nominally. Otherwise the only reason parties would enter into them is under duress or out of ignorance. And in fact, contracts backed by a legal system are routinely struck down if either of those cases occur. What you are describing is a situation where neither party has an incentive to defect or default on the contract. And if that is the case then there was no need for a contract in the first place. For example, you and I agree to meet Friday night for dinner. This is a beneficial arrangement for both of us, neither of us need sign anything. The purpose of contracts is to solve a game-theoretic problem: it is to our mutual benefit to cooperate in some way. But if we cooperate, then one of us can do even better by defecting. For example, it might be mutually beneficial for me to give you $1,000 today, and for you to give me 100 widgets on Thursday. But if I give you $1,000 today, you can do better than the original agreement by keeping the money and the widgets. So the only reason I would ever give you $1,000 is if there was some way to enforce that you give me 100 widgets. That can be by legal means, or technological means. The threat of punishment under a legal system is one traditionally effective way to incentivize you to hold your end of the bargain, and in many ways is at the very heart of what makes modern society work. A technological solution, that avoided law enforcement and judiciary systems, has the potential to be even better because there are obvious negative effects to having a large and over-reaching police force, for example. TL;DR The enforceability of the contract is the whole point. The only reason you need a contract in the first place is because someone has an incentive to defect.
- ewzimm 11y ago
  Thanks. That's exactly it. People might try to counter by saying that specific cases don't work that way, but that's not what game theory predicts. It won't tell you the outcome of a specific instance of a conflict, but it will predict the overall trend when a winning strategy exists. Traditionally, the counter to exploitable strategies was the honor system. You trusted the people you interacted with not to take advantage of you because you believed in their character. While that can work in specific cases, it's not an overall good system for running a large-scale system of social interactions because it invites exploitation. We tend to think of corruption as inevitable, but the degree of corruption in a system is actually somewhat predictable by the incentives for it built into the rules of the system when that system runs at a large scale.