There is a fear that the revolution of information techonology leads to an Orwellian police state. Here we present an alternative scenario – that it makes the state unnecessary. And we argue that there are good chances that this scenario will happen.
Traditinal reputational systems have a problem: They are restricted to sufficiently small groups of people. They have to be small enough so that all people can know each other, and therefore can know the reputation of each other, or at least know somebody who knows the other guy's reputation, so that one can ask him.
Once the number of people becomes greater, reputational systems no longer work, and have to be replaced by others - in particular by contract enforcement using police and state courts.
With this restriction of applicability, reputational systems are, whenever available, in a quite obvious way also preferable to other systems. In particular, even in societies too big for a global reputational system to work, various subgroups have created their own, restricted reputational systems: peasants living in the same village, people with the same profession, feudal elites, mafia gangs are well-known examples, and the role of reputation in their communities is well-known. Jews are also known to avoid the legal system of the states where they live, and prefer to solve conflicts with other jews by the rabbi, and similar developments can be found today in moslem immigrant communities where local Sharia courts start to decide conflicts between moslems.
We conclude that once a global reputational system becomes possible with modern information technology, this possibility will be used, and in a few years such a system will be created - if we like this or not.
And, once it is created, it will be used. Obvious reasons in favor of using such a system will be:
So, there are enough reasons to participate in this system. Given that one of them is sufficient for each person, one can be quite sure that the system will be used, after some time, by a large enough majority.
This follows from the fact that there may be, at least potentially, several competing reputational systems. To participate in many of them is not problematic. What makes a difference is if one wants to make some contract, with some specific properties, and this is impossible in one system but possible in another. Then one will prefer the system where it is possible. So, it would be deadly for a global reputational system to exclude certain types of contracts.
A particular contract, which seems of special importance for a reputational system, is a warranty. I can give X a warranty, which claims that if X has to pay some penalty and cannot do this himself, I have to pay up to some specified amount for him. Collecting such warranties gives positive reputation. To obtain them there is a reasonable and natural way: If we have successfully realized a contract, we exchange warranties, with a small amount, below the profit we have made, so that if we have to pay, this is not a big loss.
A reputational system, which would give such warranties a special status, so that the software allows to compute automatically the amounts of warranties given to somebody, would have an advantage. So, one can expect that such warranties will be supported.
For contracts which are somehow illegal, one would prefer a system which protects the privacy as good as possible. Of course, the black list should contain the full information about a person, including its real name. But this is not necessary not for the contract itself, not even for the arbiter to decide it. All one needs is a way to get the information about the real name once there is a record for the black list.
Similarly, there should be also a way to identify all other pseudonyms of that person. Moreover, it should be impossible to create new pseudonyms if one has already a black list entry. If these properties would be guaranteed, one could (at least usually) trust pseudonyms in the same way as any other persons.
Given that the number of people who, in one way or another, sometimes make illegal contracts, the possibility of pseudonymous use will be important for a lot of people. Therefore it will be provided by the reputational system.
Organizations and firms, which do not have a single owner to be put on the black list for contract breaking, as well as persons who do not want to risk a black list entry for their real name, could be nonetheless allowed too participate. Of course, it should be visible that these participants are different, do not risk a black list entry at all. Nonetheless, their reputation could be initially supported with warranties, and, if they act honestly, they can increase in this way their warranties and become trustworthy in this way.
Note that nonetheless in case of a contract violation a black list entry will appear. So, you will have the information that the particular organization has cheated, and the reputation, which this organization may have obtained in years of honest behavior, will be gone. The only difference is that in this black list record there will be no natural person.
Organizations and firms play a far too big role in our life to exclude them completely. Solutions where at least one person has to be blacklisted for the failure of the whole organization seem too restrictive in general. So, one can expect that organizations will be allowed to participate.
It should also be noted that even in the case of a black list record the information provided may be restricted to the necessary minimum. What is necessary is: The acceptance of the particular arbiter, the maximal penalties allowed by the contract, the actual penalty imposed by the arbiter, and the amount of the penalty which has not been paid. It makes sense for the contract breaker to include some additional information, like the date of the penalty, the birthday, the begin of participation, which would allow people to forgive newbies, youngsters, and what happened long ago.
But there is no need to give information nor about the other side, nor about the content of the contract, not of what has been done by the contract breaker. If the parties agree about publishing this information, fine, if not, not.
Privacy of the contracts, together with the freedom of choice of the arbiter, means complete freedom of contract.
Once a reputational system is created and accepted by a large part of the population, this has important consequences for the state. First of all, the civil courts of the state become empty, because the people use, instead, the private arbitrage supported by the reputational system.
But this is the system which enforces a lot of government regulations. As a consequence, all these regulations may be avoided if they seem not in the interest of the contracting people.
Given the complete freedom of contract, combined with the strong enforcement of hidden contracts by the reputational system, also allows for more than avoiding unnecessary regulations. In particular, they allow to hide almost all the information which is relevant for taxation, especially the income. Given that the regulations of the banking sector may be ignored, there will appear a hidden banking system out of control of the government. Transfers made in this hidden banking system cannot be taxed or forbidden, the accounts cannot be confiscated.
Moreover, the hidden banking system destroys the government monopoly of money. In the hidden banking system, everybody can use every currency as well as precious metals or other things to store his wealth. As a consequence, the ability of the government to print money looses much of its power.
We conclude that the appearence of a reputational system leads to essential losses, as in its ability to enforce his laws and regulations, as in the taxation base.
Given that the state looses, in this way, a lot of standard ways to fight organized crime, one may be afraid of negative consequences. But in evaluating these consequences, one should not forget that what makes organized crime dangerous is the large amount of violence related with contract enforcement. With organized crime starting to use the reputational system, the level of non-violent obedience of illegal contracts will increase. So, even if organized crime as a whole may increase, the related violence may even decrease essentially, down to the level of industries which can use peaceful methods of contract enforcement.
Once the reputational system has been established, one can expect slow but certain modifications in the morals. This becomes clear if one considers the choice, in case of a conflict, between breaking an own contract and breaking some law of the state. Contract breaking leads to a heavy, lifelong penalty, an entry in the black list. Breaking the law of the state can, of course, also lead to harsh penalties. But, once you have finished your prison sentence, you can start a new life. So, it may be more reasonable to break a law, if this is necessary to avoid breaking a contract.
A similar consideration will be made on the other side too. If one learns from the black list that this guy has broken his contract, you will think twice about signing a contract with him, whatever the content of it. There is no general reason for this if all you know about him is that, say, he has used some illegal drugs or so. Of course, there may be special circumstances where this could be important, but not in general. Instead, a broken contract is problematic in general - if what you have to decide is if you want to sign a contract.
Once holding contracts becomes much more important than following laws, for everybody, for purely egoistic reasons on all sides, this will influence morals. Of course, this can be shown only if one assumes a pragmatic base for moral decisions - that moral behavior is rational behavior, which takes into account all long term consequences, side effects, and risks of the decisions. This is far from being the most popular ethical theory. But those who follow these pragmatic moral will be more successful, and will teach their own rules of behavior to others. So, this pragmatic moral is what works in reality.
So, we can expect that it becomes much more amoral to break the own word, than to violate some law of the state. The difference will be quite large, like that between a criminal and a political prisoner today. And this analogy will be quite accurate: The criminal violates laws which all reasonable people support, like, in particular, breaking contracts, while the political prisoner is simply the loser in a political fight, who would be an admired politician if he would have been the winner, because in this case the law he does not accept as just would have been rejected.
But what about the basic rules of behavior, which are necessary for a peaceful life? That one should not murder and so on? How will such basic rules enforced, as they obviously have to be?
First of all, let's not forget that the state, even if less powerful, yet exists. Some elements of the state which are really important will remain, and abandoned only if there is no longer a necessity for them. So, the murderer goes to prison, even if he, as a terrorist, has never made the promise not to kill. That he will be considered as a political prisoner will not free him earlier than now.
Then, there is another, new method, which is available given the reputational system: Namely, to use general conventions. A convention contains a lot of different rules, and penalties for violating them. The obligations one accepts by signing the convention may be directed only toward those who have signed this convention too - which gives also, in exchange, huge advantages to those who sign the convention, advantages which will be, for usual people, much greater than the obligations to behave in a civilized way which they have to accept. Some of them - general rules - may be directed toward everybody, may be even animals (say, animal protection conventions). Here, the advantage of signing is indirect, one obtains a higher status as a person which follows moral rules independent of reaching in this way own advantages.
The signature of such conventions is public. It has to be - else, nobody would be able to find out if he is obliged to follow a rule which is obligatory only toward those who have signed it. Moreover, the whole world is essentially the other side of this special form of a contract, and the other side has to know the contract to detect violations. Once it is public, those who have signed the convention can use moral pressure against those who, for whatever reasons, refuse to sign.
The moral pressure can be, in particular, a boycott - the refusal to sign any contracts with those who do not sign. This may be the typical case once to sign it is really necessary for a peaceful life together. In this case, those who refuse to sign will become a negligible minority, which has to live in quite hard circumstances even without violating the law in question.
In the case where the necessity of the law is less clear, one can expect a larger community of refusers. They may organize their life cooperating with each other in separate communities. The connection between this community and the outside world will be done by those who have signed the convention, but do not support a rigorous boycott.
This natural process leads to the following consequences:
All these points lead, in the consequence, to less conflicts above the communities.
These general, vague rules of behavior may become formalized too if one considers gated communities. To live in a gated community, one is obliged to accept rules of behavior inside the community. Some part of these rules have to be accepted even by visitors of the gated community. So, those who live in a community of supporters have to accept the law, those who live in a community of refusers have to accept not to call the police if the see violations of the law.
This natural behavior is completely different from what one expects today. Namely, loud claims of support of some law mean nothing, and may be useful as a cover especially for those who plan to violate it. In the reputational society, signing the convention changes a lot - if one violates it, one becomes a contract breaker, and is marked forever. This makes it much more likely that those who sign the convention do not plan to violate it.
Given that the changed moral makes a big difference between the guilt of a contract breaker and a political prisoner who has never accepted the law he has broken, and the refusal of local communities of those who do not accept the law as just against attempts of law enforcement, there will be a quite natural consequence: With time, the penalties for political prisoners will decrease relative to contract breakers. The natural end of such an evolution would be the complete rejection of law enforcement against those who reject the law. But even if some penalties remain, they will be less than for those who also break the convention they have signed.
It is worth to note that the possibilities given by the reputational system to hide relevant information about himself from the state leads to modifications of what can be taxed, and how.
So, the main tax income will shift toward communities, as taxes for land and extraction of ressources. Other taxes will become much more moderate than today. In particular, income taxes will essentially disappear.
This leads to the prediction of a general weakening of the tax base for large states, in favor of communes, and a corresponding power shift toward decentralization.
If the reputational system will be ignored by the state, this will lead to increasing losses related with corruption. Indeed, the workers of the state will not ignore the system, but participate, and can not sell, in a much more secure way, information and other services to the public in exchange for bribes, which can be safely paid using the hidden banking system.
Fortunately, the state has a possibility to solve this problem, namely, to force those who work for the state, as part of their volitional working contract, to sign obligations to follow the laws of the state against corruption. So, those who get bribed, and will be catched, will end on the black list too, which will be, again, a much better protection against corruption as what is available now.
While this solves the problem of corruption, it means also a de-facto acceptance of the reputational system by the state itself, which may prevent any measures like forbidding the use of this system.
It is not clear if the final result is a complete disappearance of the state or if something remains. But, nonetheless, the resulting society will be much closer to the libertarian ideal.
In fact, one should not forget, that a tendency toward separation, if it ends up in ministates of a size of a gated community, will be indistinguishable from a anarcho-capitalistic society, where the community owns the land of the ministates and can, similarly, to obtain acceptance of the local laws of the ministate simply as part of the rent contract. So, there is no rigorous hard difference between a society of many ministates and an anarcho-capitalistic society with land ownership. In fact, these are simply two different descriptions of the same type of libertarian society.
One should also remember that a set of general laws which one does not even want to violate is not a burden. What is missed today is the possibility to choose between many different ministates, with very different laws, and without a necessity to learn a different language and to accept a different culture if one does not like the laws in big nation states.
It is worth to note that there is no part of the whole transformation which does not have an evolutionary character.
The creation of the reputational system is nothing but some guys writing some user platform, some sort of a social medium. This user platform peacefully competes with others. Given that it has some attractive features, many people will start to use it. Everything is volitional, non-violent, unproblematic.
The people use this platform to enforce contracts. In general, this is useful for society if this becomes easier, and if contracts are broken less often. One may be afraid that this also includes criminal, illegal contracts. But the effect will be, probably, life saving, because the organized crime no longer has to use brute force to enforce contracts, but can also use the reputational system. Anyway, even this use of the platform by criminal structures will be an evolutional process.
The modifications of tax income of the state, and the resulting changes in the taxation methods itself, will be a slow evolutionary process too. The modifications of moral values, toward honor of holding promises, will be even more slow. The process of adding volitionally signed conventions not to violate some laws is clearly evolutional too. The moral pressure needs time to reach general acceptance of all really necessary laws, and the separation of those who consider some laws as important from those who want to get rid of them. The next process - the formalization of this separation in gated communities with different laws - is also evolutionary.
All these evolutionary steps happen because of the private interests of those who act - because changing their behavior is in their own interest. And in every step, one can also argue that the society in general will be improved.