Some electronic commerce projects promise dramatically lower transaction costs, so that we can achieve "micropayments", "microintermediation", and so forth. Is this achievable? Consider a feature fairly independent of the particular payment system: the statement of charges. Here lies a tradeoff here between completeness and complexity. On the one hand, merely summarizing charges creates the opportunity for salami frauds, allowing widely distributed false or exaggerated microcharges to go undetected. Furthermore, parties reading only the summaries get no feedback by which they can adjust their behavior to minimize costs. On the other hand, a statement too complex to be easily read also allows fraud, error, and inefficient usage to go unrecognized, because one or both parties cannot understand the rationale for the charges in relation to the presumed agreement on terms of service and payment. There seems to lie here a fundamental cognitive bottleneck, creating a limit to the granularity of billable transaction size whether electronic or physical. One proposed solution to this has been "intelligent agents". But since these agents are programmed remotely, not by the consumer, it is difficult for the consumer to determine whether the agent is acting the consumers' best interests, or in the best interests of the counterparty -- perhaps, necessarily, at least as difficult as reading the corresponding full statement of charges. By sleight of hand we may have merely transformed the language of the transaction as it needs to be understood by the party, without reducing the complexity to be understood. Furthermore, the user interface to enable consumers to simply express their sophisticated preferences to an agent is lacking, and may represent another fundamental cognitive bottleneck. Telephone companies have found billing to be a major bottleneck. By some estimates, up to 50% of the costs of a long distance call are for billing, and this is on the order of a $100 billion per year market worldwide. Internet providers have been moving to a flat fee in order to minimize these costs, even though this creates the incentive for network resource overusage. A micropayments system assumes a solution to the billing problem. If somebody could actually solve the this problem, rather than merely claiming to have solved it via some mysterious means ("intelligent agents", et. al.), the savings would be enormous even in existing businesses such as long distance and Internet service -- never mind all the new opportunities made possible by micropayments. Nick Szabo szabo@netcom.com http://www.best.com/~szabo/