Sunday, May 13, 2007

Towards a digital and private common law

There is a problem in what name to give the topic of this post. Perhaps the best name is "digital private law," but this might invoke in the mind of the reader laws passed by politicians to regulate private computers, and that is practically the opposite of the meaning intended. Instead, our topic is digital code that augments or even replaces the functions of traditional private law: contracts, property, torts, etc. -- i.e. almost any law that is traditionally settled in a private lawsuit rather than by a criminal prosecution. Since most of the inspiration so far has come from the English legal tradition, it might also be called "digital common law." Or we might simply call it "smart law" in parallel with coinages like "smart weapons" and "smart contracts." Or "law in a box" or "law on your lap." Mark Miller has captured the spirit, with perhaps some utopian exaggeration, with his slogan, "computer security is the future of law." Lawrence Lessig has colorfully called such digital code "west coast code" (drafted by hackers in Silicon Valley and Seattle) in contrast to "east coast code" (drafted by lawyers in Washington, D.C.) This short-shrifts the many talented east coast computer programmers and west coast lawyers, not to mention all overseas lawyers and programmers. But it helps to clarify my topic by noting that it corresponds to Lessig's "west coast code."

Digital private law is also private law in the sense that contracts, property deeds, wills, and so on are private law. In contrast to statutes, regulations, and judicial precedents, they are drafted by private persons rather than politicians or government bureaucrats. Of course, governments could also draft digital code for private use (either voluntary or compulsory), but in the absence of a strong need for a trusted third party to enforce the rules -- which digital security codes can greatly reduce -- there will be much less need for this than there is for governments to operate courts, police forces, armed forces and the like to enforce traditional law and beat up on plenty of innocent people in the process. Digital private law replaces, where appropriate, the threat of violence, and both the flexibility and corruptibility of human judgment, with the utterly peaceful and predictable -- but at times naive, adhesive, strict, and harsh -- operation of digital code.

Digital private law, smart contracts, and the like are metaphors (using traditional legal code as a model for digital code), but they are also much more than metaphors -- such code can augment and increasingly, in some cases, will come to replace traditional legal code. They take the form of network protocols inspired by legal metaphors and implementing some of the functions that law has or could serve.

Smart contracts allow a new freedom of contract that is no longer possible, if it ever was, with traditional law. Secure property titles will allow more secure and more fine-grained recording and transfer of property rights, while RFIDs are enhancing and proplets will further enhance the protection of those rights. In general, digital security protocols, especially advanced cryptography, allow radically enhanced or utterly new kinds of security that were impossible and unthinkable, and indeed seem quite magical, from the perspective of traditional law and paper security. The raw power of computer to crunch numbers, combined with artful new ways to draw preferences from users and represent them digitally, may also overcome the mental transaction cost barrier to very complex terms and very fine-grained transactions, opening up a potentially large new economic space now crudely occupied by resource allocation algorithms.

Besides digital security and user interface design, the theory of digital private law involves much economics, not coincidentally of the law-and-economics kind -- ideas drawn from this area such as transaction costs, value measurement costs, the low-cost avoider, and so on loom large in thinking about these protocols.

I have thought of and sketched many digital protocols which demonstrate some of these new possibilities. Often I have taken protocols from advanced cryptography that were naively described in narrow terms (e.g. "digital cash") and described them in their full potential generality as substitutes for traditional commercial forms (e.g. "digital bearer instruments"). Sometimes I have described some utterly new possibilities (e.g. confidential auditing). Here are some of the highlights, roughly categorized by the area of law the protocols draw inspiration from -- which also contain the functions of law they intend to serve:

Property law
"Secure Property Titles with Owner Authority"

Contract Law
"The Idea of Smart Contracts"
"Smart Contracts Reduce Mental Transaction Costs"
"Smart Contracts Expand Credit Opportunities"
"From Vending Machines to Smart Contracts"
"Scarce Objects and Market Translators"

Banking and Payment Systems
"Contracts with Bearer"
"Bit Gold"
"Micropayments Redux"
"Combine Tipping with Aggregators"

Tort law
"Robot Law"

Corporate Law
"Confidential Auditing"
"Patterns of Integrity"

I've also written on some general theoretical considerations:
"Security and the Burden of Lawsuit" -- how computer security augments and interacts with traditional law
"Wet Code and Dry" -- On the strong distinctions, as well as similarities, between traditional legal code and digital code
"Things as Authorities" -- Digital private law will inherent the often authoritative nature of technology in human relationships
"Multiparty Secure Computation" -- a very powerful and general protocol that can provide radically new privacy functions enabling confidential bid auctions, confidential auditing, etc.

Even all this is just the tip of the iceberg.

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