agreed with the liberal use of the phrase "perceived value" when referring to transaction motivations...this is exactly the basis for equities markets. A company is not "worth $8.1Bn"...the "perceived value" of a company may be $8.1Bn. A company is technically worth two things: a) the physical assets at current fair market price (assuming liquidation of assets) and b) projected value of intellectual property, market momentum, customer lists, marketing program efficacy, team competency, projected sales, and other intangible items. The latter of the two is what defines the market cap of companies. Tim, you recommended we search out for your prior articles...I've done that and found a couple of things (the '97 conference paper on this topic was most relevant) but I couldn't find a whole lot...please provide an url if you have one... after reading what I did find, I've come to the conclusion that "reputation" is not necessarily an issue for certain kinds of transactions...I believe it's useful to define when/where reputation means a lot: - If i'm hiring a painter or plumber, referrals mean a lot. anyone can push a pain roller. few of us know how to do it well. - If i'm hiring a contract programmer...past work and working relationships matter. Where reputation of a transactive party doesn't realy mean a lot (or means little): - napster. I don't care who has the song I'm looking for...i'd download from anyone (given the right bit rate, ping distance, connection type, etc.) The product quality is judged by itself and my only potential 'downside' is having spent a little time downloading a poorly encoded file...in which case i delete the bad file and find someone else who has what i'm looking for. - real life humint. in this case, knowing the person is helpful, but not important. the key important factors are: a) is the intelligence valuable? b) can it be verified via other sources? c) can i act on the intelligence when i'm ready to act? d) can i control the information source? in this case you're necessarily dealing with people who you wouldn't trust by definition. the value of the relationship is maintained by how quickly the contact is paid (unless ideologically motivated) and how consistently that contact delivers. but rating this information source is only useful to me and my organization...i wouldn't share this information with a third party 'reputation credit system'. I'm not a spy or a counter-spy so I'm only guessing at these statements...but i think logically the above is true. - when using an intermediary party to ensure the transaction terms were met. in this case, the reputation of the transaction party is not important, it's the reputation of the 3rd party intermediary. and i don't believe this means an "escrow" agent...it could be the financial institution guaranteeing the funds (sort of like a letter of credit, but with verification of the transaction details done by the bank.) perhaps this means we would need to have a new kind of 'bank' (or many banks) whose digital currency incorporates triggers to ensure a transaction is completely smoothly and to the favor of both parties (not sure how to deal with disputes though.) - when the perceived value of the item is less than my level of acceptable risk tolerance. If i'm buying gum, I really don't care if i buy it from one store or another. i see the gum packaging looks right, the price is in the right ballpark, then i buy it. one other point: the issues with "reputation credit reporting", etc. are being experienced in some degree by ebay: - ebay allows one to rate buyers/sellers. if you receive negative feedback for unfair reasons, you're stuck with that negative feedback...you can't force ebay to change the feedback. - ebay sellers will sometimes not sell to someone who is new or has no feedback. this encourages people to give each other positive feedback to falsify their 'good reputation'. finally, i think Tim's logic is right: don't try to come up with a complete overhaul to the existing monetary system, just focus on the incremental pieces. in my opinion, infomarkets are the first best step...they're digital, portable, somewhat protectable, and have value. phillip -----Original Message----- From: owner-cypherpunks@Algebra.COM [mailto:owner-cypherpunks@Algebra.COM]On Behalf Of Tim May Sent: Monday, April 16, 2001 12:33 PM To: cypherpunks@lne.com Subject: Re: Message from a Parallel Universe At 7:26 PM -0400 4/15/01, Declan McCullagh wrote:
On Sun, Apr 15, 2001 at 07:26:24PM -0700, Tim May wrote:
And my point is a very serious one: saying that "anarchy" cannot work in markets is not much different from saying anarchy (uncoerced transactions) cannot work in areas where in fact uncoerced transactions are the _norm_.
Right. It's like telling a statist that certain government programs and regulatory systems aren't absolutely necessary. Their initial reaction is to disbelieve this notion: "But how would it work?"
To phrase Tim's point another way, taking some liberties: If there is sufficient market demand for a product or service, it will become available, whether or not the government regulates it, encourages it, or prohibits it. If we knew tomorrow that copyright law would disappear in 10 years, the market would move to continue a system where new content would be available -- the incentives are too strong to ignore.
Obviously ease of avoiding regulation and technological advances aiding reputational systems are big variables too.
Like I've said recently (and years ago, too), the "economics of black markets" is an interesting topic. One could even take out the "black" loaded term and just refer to economics of markets, except that then sounds like ordinary Econ 101. An agent typically undertakes/completes a transaction when: Benefits > Costs or, elaborating, when: [Perceived benefits] > [Perceived costs] plus some epsilon for hassle/effort (This can be puffed out, or term re-written, with various subterms reflecting actual prices, risks, costs of money, criminal penalties, chance of detection, etc. I did this some years back, but don't have the time right now to track down my article or to rewrite it. I hope most readers get the picture and can fill in the blanks themselves. Probably more useful to do that.) "Perceived benefits" has the usual meaning. The agent may be wrong in his calculation or estimate, but it is for him to make the best overall estimate of what he can get out of the transaction. Perhaps by using the thing he buys, perhaps by selling it to another, whatever. "Perceived costs" are likewise his estimates of actual monetary cost, risks to him (imprisonment, defection, bad deals) in the transaction, etc. Into this side of the equation will go the possible law enforcement issues. And maybe even "psychic costs" for buying something illegal or unethical. This is the sense in which black markets are simply markets. The "costs" of being in the black market are simply more terms on the cost side. Nothing new here, as black markets have been the norm in most societies at most times, with the local thugs collecting some percentage, etc. For example, in the Napster case the actual monetary costs of downloaded songs were zero (lacking MojoNation kinds of mechanisms). The cost was partly bandwidth and sitting around waiting for Metallica songs to download. There was also some slight cost to some students at universities who were sanctioned for their Napster habits. There was no "criminal cost," at least for the downloaders. As another example, illegal drug users may put much heavier emphasis on the criminal costs, i.e., the risk that they will be caught and prosecuted, blah blah. There are also the reputational issues such as we've been discussing. These show up in the cost side as risks, actual costs to check credit ratings, etc. But still the Basic Equation stands: Benefits > Costs What Napster did was to alter several terms in the equation. What cypherspace offers for, say, porn trading rings is the same thing. Claims that transactions will simply "not happen" if some parts of the equation get murkier than they might otherwise be are not convincing. Markets clear, and cypherspace will change the terms in the equation but not the equation itself. --Tim May -- Timothy C. May tcmay@got.net Corralitos, California Political: Co-founder Cypherpunks/crypto anarchy/Cyphernomicon Technical: physics/soft errors/Smalltalk/Squeak/agents/games/Go Personal: b.1951/UCSB/Intel '74-'86/retired/investor/motorcycles/guns