Blind signatures

The following, from a larger article of mine, serves as an introduction to the idea of blind signatures and their use in digital cash and other digital bearer certificates:

Introduction

Meet the greatest simple equation since e=mc²:

gSf(m) = S(m)

S is a digital signature, f is the blinding function, and g an unblinding function. The blinding functions are usually based on a secret random number called the "blinding factor". m is another random number, a unique identifier which can, for example, refer to an instance of some object.

The idea is very clever but very simple. It may be counterintuitive because the simplest physical world metaphor of this highly useful e-commerce primitive sounds worse than useless: Alice can get Carol to sign a blank check! Here's how:

(1) Alice generates m and blinds it. "Blinding" is just a one-time-pad encryption to oneself, f(m). She sends this to Carol. This is like taking a piece of paper and sealing it inside an envelope which Carol can't open or see through.

(2) Carol signs it: Sf(m), and sends this back to Alice. This is like Carol signing the outside of the envelope.

(3) Alice unblinds it: gSf(m) = S(m). Carol has also signed the paper Alice put inside the envelope!

The genius behind this discovery: cryptography guru David
Chaum. The brilliance lies in step 3: Chaum discovered that
some signatures have the property of being "commutative"
with the blinding functions: Alice can strip off the blinding
in the reverse order which the blinding and signature
were applied, leaving just Alice's signature of n. It is as if
Alice put a piece of carbon paper inside the envelope.

In particular for RSA signatures, with public key (pq, e)
and private key d, the blind signature functions are the following
modulo pq:

S(x) = xd
g(x) = xk-1
f(x)= xke

We can check that the blind signature property holds:

gSf(m) = (m(ke))d * k-1
       = md * k * k-1
= md

which is the valid RSA signature of private key d on m.

Unlinkable Transfers

Distinguish between either a counter or third party tracing one person's true name, via lack of or weak communications mix, and a third party linking two entities (whether nyms, use-more-than-once-addresses, account numbers, or true names) as being involved in the same transaction. By unlinkability herein we mean the latter. The goal where true names are used (this occurs, for example, when using true name accounts or not using good communications mixes), is to prevent third party linking of two people doing business with each other. Where nyms are used the goal is to minimize the release of traffic information, to prevent the unwanted accumulation of unique behavior patterns, which could be used to link nyms (including to their true names), or could augment other means of breaching privacy. Blinding especially helps where rights holders want to keep third party or public accounts denominated in generic rights. In that case a communications mix doesn't even in principle give us what blinding does.

Besides protecting against the transfer agent, Chaum's transferor-, transferee-, and double-blinding protocols protect against collusion of a party with a transfer agent to identify the countparty account or nym.

Unlinkability can be provided by combining a list of cleared certificates with blind signatures and a delay-mixing effect. Enough instances of a standardized contract [or specifically with digital cash, standard denominations of money] are issued over a period of time to create a mix. Between the issuing and clearing of a certificate, many other certificates with the same signature will be cleared, making it highly improbable that a particular clearing can be linked to a particular issue via the signature. There is a tradeoff between the mixing effect and the exposure to the theft of a "plate" for a particular issue: the smaller the issue, the smaller the exposure but the greater the linkability; a larger issue has both greater exposure and greater confidentiality.

Blind signatures can be used to make certificate transfers unlinkable via serial number. Privacy from the transfer agent can take the form of transferee- unlinkability, transferor-unlinkability, or "double blinded" where both transferor and transferee are unlinkable by the transfer agent or a collusion of a transfer agent and counterparty.

A use-once-address communications mix plus foreswearing any reputation gain from keeping accounts, in theory also buys us unlinkability, but a communications mix is weak and very expensive.

Bearer certificates come in an "online" variety, cleared during every transfer, and thus both verifiable and observable, and an "offline" variety, which can be transferred without being cleared, but is only verifiable when finally cleared, by revealing any the clearing name of any intermediate holder who transferred the object multiple times (a breach of contract).

This unlinkability is often called "anonymity", but the issue of whether accounts are issued to real names or pseudonyms, and whether transferor and transferee identify themselves to each other, is orthogonal to unlinkability by the transfer agent in the online model. In the off-line model, account identification (or at least a highly reputable and/or secured pseudonym) is required: passing an offline certificate a second time reveals this identity. Furthermore, communications channels can allow Eve to link transferor and transferee, unless they take the precaution of using an anonymous remailer. Online clearing does make lack of identification a reasonable option for many kinds of transactions, although common credit and warrantee situations often benefit from or even require identification.

When confronting an attempted clearing of a cleared serial number, we face an error-or-fraud dilemma similar to the one we encountered above in double entry bookkeeping. The ecash(tm) protocol from DigiCash actually takes advantage of on purpose to recover from a network failure. When certificates are lost over the net it is not clear to the transferor whether they have been received and cleared by the transferee or not. Second-transferring directly with the transfer agent resolves the ambiguity. This only works with the online protocol. The issue of distinguishing error from fraud is urgent in the offline protocol, but there is as yet no highly satisfactory solution. This problem is often intractable due to the subjectivity of intent.

With ideal two-way anonymous communications between use-once keys, and completely accountless clearing, unlinkability via blind signatures becomes redundant. This ideal case has yet to be even closely approached with implemented technology, and necessarily involves long communications delays which are often intolerable. Real imperfect communications mixes and less expensive blinded tokens complement each other.

Personal jurisdiction before sovereignty

Today the concept of personal jurisdiction -- the freedom of a government to take action against a particular person for the purposes of enforcing a law -- is largely based around the idea that a "sovereign state" has personal jurisdiction over the persons and activities within its territory. But in many times and places this has not been so. Under the system of political property rights in most of medieval Western Europe, for example, the kings had their political property rights, and the lords had theirs. Both were governed by the same basic laws of property, including laws of right (title), trespass, and inheritance. The result was a sophisticated system of jurisdiction based on property rights rather than sovereign rule.

Both kings and lords had an incentive to respect each other's political and economic property. This is illustrated by a speech that Shakespeare puts into the mouth of Duke of York in Richard II, when King Richard is threatening to (under somewhat dubious legal arguments) confiscate the exiled Duke of Hereford's estates and franchises (i.e. both his economic and political property rights). Indeed, a major theme of the tragedy is that since the king failed to respect political property rights, his own end up being overturned. Note that "royalties" and "franchises" are synonyms used for political property rights -- they are the same kinds of property rights as the king himself holds, and alliterative redundant pairs like (e.g. "royalties and rights") were common in legal language as well as in Shakespeare:

O my liege,
Pardon me, if you please; if not, I, pleased
Not to be pardon'd, am content withal.
Seek you to seize and gripe into your hands
The royalties and rights of banish'd Hereford?
....
Take Hereford's rights away, and take from Time
His charters and his customary rights;
Let not to-morrow then ensue to-day;
Be not thyself; for how art thou a king
But by fair sequence and succession?

The king's own rights to his realm are, in other words, based on the same property law as the jurisdictions of the dukes, burghers, and other franchise owners. Abrogate the law for others and it could easily be abrogated for the king. But the long era of political property rights would end with the coming of republicansim and democracy because Parliament and other legislatures do not share this coincidence of interests. Only the dawn of an independent court saved economic property rights in England and America -- but it was insufficient to save political property rights, especially those of jurisdiction which the "sovereign" courts seized for themselves.

The late medieval English case of Upton v. Le Mazerer provides a great illustration of personal jurisdiction based on political property rights rather than sovereignty. To get the most out of the following you should have a basic idea what a life estate and reversion are. The basic issue of the case is whether the the tenant holds property of the lord as a "sokeman" tenant (in which case the lord has jurisdiction) or whether the lord had granted the tenant a release from jurisdiction, making the tenant a "frank" tenant which meant the king had jurisdiction. The meanings of all these will become clearer as you read through the following description of the case, taken from my paper "Jurisdiction as Property."

Our cast has several players:

(1) Lord Hugh, ancestor of the current lord.

(2) Hugh, a tenant of the Lord Hugh. As the curtain opens on the facts of the case, Hugh is a sokeman tenant of Hugh the lord, and thus Hugh the lord starts with personal jurisdiction over Hugh the tenant.

(3) The current lord, heir of Lord Hugh.

(4) The current tenant, heir of Hugh the tenant.

In Upton v. Le Mazerer a “writ of right according to the custom of the manor,” a dispute over lands of the manor, was removed...from the manorial court because the tenant party claimed to hold in frank-fee rather than as a sokeman of the lord of the manor. If this was the case the king, not the lord of the manor had personal jurisdiction over the tenant.

The agreed facts were that Hugh, ancestor of the current lord, had granted to Hugh, a sokeman tenant (i.e. a tenant then under the jurisdiction of Hugh the lord), the same lands that Hugh already held of his lord, but in “frank,” thus releasing Hugh the tenant from the lord’s to the king’s jurisdiction. The current tenant, a successor to the tenant Hugh, claimed the grant was frank-fee, i.e. [in the king's jurisdiction] “for all time”, while the current lord, an heir to Hugh the lord, agreed that it was a grant of freedom from the lord’s jurisdiction but argued that the grant was only for “a term of life.” The current lord, heir of Hugh the lord, argued that “we are claiming these tenements as ancient demesne from the seisin of [our] ancestor, which is higher in time than this deed” In modern terms, the lord of the manor was claiming that the tenant now held only the reversion of the life estate, which was just the original sokeman fee held of the lord of the manor, and thus that the lord of the manor had regained jurisdiction over the tenant. The outcome of the case thus hinged on whether the grant adding to the tenancy freedom from the lord’s jurisdiction was for a term of life or a perpetual fee. The outcome of this factual issue was not reported, but the reporter observed that “if it be found that Hugh [the tenant] had fee, the original writ, which remained in the lord’s court, would abate...[a]nd if it be found that he only had for a term of life, then the parties shall go back to the lord’s court, and plead with regard to the original etc.” The personal jurisdiction of each court was entirely contingent on the outcome of the property issue: as one Scrope (either a justice favorable to the lord, or one of the lord’s barristers) observed, “[t]he scope of the averment is only to determine whether the tenements ought to be tried here or sent back to the lord’s court.” The reporter also noted main property law issue on which jurisdiction hinged: “[w]hen a man recovers tenements from his ancestor’s seisin, he shall recover the tenements in the state wherein his ancestors held them, and all deeds made in the meantime between the ancestor’s recovery and the seisin will be defeated by this recovery.”

Smart contracts watch

Cell phones can be used to monitor and pay for parking. This system and this one are pretty clumsy in terms of all the gratuitous user input required, but as has occurred with prepaid cell phones I expect this to become quite a bit more user-friendly in the future. It will be very nice to be able to top up the parking meter without having to return to the car.

As usual remember that any information recorded (here, where and when you park) "can and will be used against you." For example it can generally be subpoenad for use in court, as also occurs with credit card records, phone records, and automated toll systems. My old boss David Chaum, his student Stefan Brands, and others in the advanced cryptography community have designed many protocols that would preserve privacy in these scenarios, but the deployers of these technologies are usually not terribly interested in your privacy. Your recourse -- keep using physical cash, and take the trouble to go back to your car to check and stuff your parking meter.

In my original writing on smart contracts I talked about trading derivatives and constructing synthetic assets with low transaction costs:

Very complex term structures for payments (ie, what payments get made when, the rate of interest, etc.) can now be built into standardized contracts and traded with low transaction costs, due to computerized analysis of these complex term structures. Synthetic assets allow us to arbitrage the different term structures desired by different customers, and they allow us to construct contracts that mimic other contracts, minus certain liabilities. As an example of the latter, synthetic assets have been constructed that mimic the returns of stocks in German companies, without requiring payment of the tax foreigners must pay to the German government for capital gains in German stocks.

A bit later I figured out that the primary barrier to such activity is mental transaction costs. These costs throw a monkey wrench into what is otherwise the very good idea of consumer derivatives. One can imagine a wide variety of consumer derivatives, such as buying insurance against air fare changes and the growing business of selling sports tickets based on personal seat licenses (PSLs). I have sketched some possible solutions to the mental transaction problem, such as the market translator. The main problem is designing an automated agent that can figure out user preferences without bothering the user -- usually by recording and analyzing the user's normal behavior. If this can be fully automated the bottom drops out, so to speak, and even nanobarter becomes possible.

Smart contracts, based on digital property, open up a vast new space of possibilities. Many of the digital machines you own can obtain good information about your usage and their own status, from which they could at least crudely estimate what you want to buy. Take parking, for example. A suitably smart car and parking meter system should be able to figure out where you want to park and how much you want to pay for it, with minimal user intervention. I'm not talking anything like "AI" here, just computerized cars and parking meters that have sufficient sensors, can communicate with each other, and use known algorithms. As you are driving down the street, you tell your car that you want to find a parking place. The price of open parking spots ahead starts popping up on your dashboard. You choose and agree to pay the fee by simply parking in the spot.

Along with this future urban lifesaver, parking spot derivatives would be very useful. For the same reasons as stadium owners sell PSLs -- to receive revenue up-front to help pay the cost of building the infrastructure -- owners of parking spaces could sell parking space licenses (PSL again, oops :-). The owner of the PSL, in turn -- or said owner's car acting as his agent -- could sell the hours or minutes that the car is not using. You could buy a PSL and thereby reserve that sweet spot right next to your downtown office for the year. Then sell off the parking rights for the weekends. You could reserve a spot next the your favorite club and sell off all the times except Thursday through Saturday night. And if you are away from the office or staying in for the evening, your car's market translator can price and offer the space and it will become open and start popping up on driver's dashboards.

This kind of thing is just the tip of the iceberg as far as the potential of smart contracts is concerned.

Finally I will report on a digital cash system from no less than our frequent commentor Daniel Nagy. Nagy makes the following observation:

While everyone with a cellular or a touch-tone telephone, a web-browser or email client in its readily available, out-of-box configuration is able to transmit short messages (up to a few hundred bits), performing complex calculations involving strong asymmetric cryptography requires additional tools which not everyone possesses or can afford to run. The fact that it is impossible to transact without performing complex calculations in real time is a far more serious obstacle than the need to contact the issuer for each transaction.

This is an interesting approach, but I suspect may be correct only in the limited sense that these devices and software don't come built-in with the particular cryptographic protocols needed for strongly private cash (e.g. Chaumian blinding). But they don't come built-in with digital cash software either. Thus, the main advantage of Nagy's scheme, which may or may not make up for its reduced privacy features, comes from the ability to use it without having to install any extra software at all -- to just, for example, cut and paste the cash from an e-mail where you received it from one person to an e-mail where you pay it to another. Your word processor can be your wallet. If this is an important use-case, then Nagian cash may succeed where Chaumian cash failed.

Another payment system of note is WebMoney, which recently started up a gold-backed currency, a competitor to the troubled e-gold. (HT: Financial Cryptography)

Exit and freedom

Why did the early United States have much stronger property rights and far lower taxes than today, even though it is nominally governed by the same political form and a constitution that has undergone only a few amendments? Why do Hong Kong and Singapore currently lead the world in economic freedom? Why did the fall of the Berlin Wall spell the end of European communist states? What political changes or changes to our own lives would give us stronger property rights and lower taxes?

What stands out about Singapore and Hong Kong --and other entities that have the most economic freedom in their region, such as Bahrain in the Arab Middle East -- is that they specialize in international trade. To encourage business travel, they must put few restrictions and tax penalties on travel. Large proportions of their population have strong international social ties. Large proportions of the population of these countries could easily move out of the country if their local rights were violated. Strong international personal and business ties allow them to quickly reestablish themselves in a different, but not so foreign, country.

In other words, when a small country specializes in mediation of international trade, the exit costs for the people from whom it collects most of its tax revenue is low. To maintain their tax revenues they must maintain a productive international trade business, and to maintain international trade these governments must thus maintain low exit costs for a large proportion of their population.

Laffer curve of tax rate versus tax revenue (black) and corresponding curve of GDP (green). When governments maximize tax revenue the prosperity and economic freedom of their taxpayers suffer. Credit: Mark Byron.

Governments of almost any form try to maximize their tax revenues, and government employees also often gain personal satisfaction from being able to control the lives and property of others (this goes under various euphemisms, such as the ambitions to "change the world" and "make a difference.") This process is facilitated primarily by high exit costs and is limited almost only by limits on governmental ability to increase exit costs. The maximum point on theLaffer curve -- the most tax that a government can collect -- is lower and occurs at a lower percentage tax rate in countries where exit costs are low. Thus the tax rates inHong Kong, Singapore, and Bahrain are lower than among their culturally similar neighbors that do not specialize in as internationalimermediaries.

At the other end of the spectrum from Hong Kong and Singapore are countries with isolated populations, with poor access to world communications and travel. Add to this countries where tax revenues can be gained from taxing agricultural land or minerals rather than potentially mobile "human capital." These countries tend to have the fewest freedoms. Even among highly developed countries, those with more homogeneous populations that speak a tongue seldom spoken outside the country -- and thus far stronger internal than international social ties -- tend to tax their "human capital" the most, e.g. the Scandinavian countries.

In other words:

(1) the governments of Singapore and Hong Kong have to encourage free travel to and from many other countries, to encourage the constant human interchange that is essential to international trade, making it impractical to set up onerous travel restrictions,

(2) most residents of Singapore and Hong Kong have strong social ties -- both business and personal -- outside the country, and

(3) the vast majority of residents of almost all other countries are tied to their territories by strong internal social networks and the lack of external social networks that could support them if they needed to escape. That makes it easy for governments to tax, regulate, and control the residents, for the same reason that it's easy for prison guards to abuse inmates -- it's hard to escape.

The American colonies and the early American republic both had remarkably strong property rights and very low taxes by our standards, despite sharp changes in the form of government. With few changes in the form of government since, taxes have risen almost tenfold and property rights often now mean little more than the right to keep after-tax capital gains.

The answer to this American puzzle is again exit costs. Farmland was the dominant form of wealth in the 18th and early 19th century, and practically free yet very good farmland was available in America on the western frontier. Any oppression, any high taxes or other violations of property rights could be countered by pulling up stakes and moving west. If you didn't want your local farmers to leave you had to respect their rights, in sharp contrast to the traditional form of agriculture where serfs were stuck on the land. On the other hand, black slaves in the U.S. provide a sharp contrast to the remarkably free white farmers -- a condition explained by state and federal fugitive slave laws, which spread a virtual Iron Curtain for slaves across the entire vast expanse of the United States, in free states as well as slave states.

Human capital is very easy to tax when it gathers in large organizations, such as modern corporations, as these organizations must be audited, and auditing provides the information needed for the income tax, by far the most lucrative form of tax ever developed. When America's frontier disappeared, when the good agricultural land was claimed and industrial wealth became more important than agricultural wealth, and industrial wealth was flowed in easily audited forms through corporations and to their employees, taxes rose and property rights for all started to erode, a process that continues to this day.

Countries that depend on human capital, as almost every country these days does, often throw up legal barriers to exit. Countries that worry about "brain drain" sometimes charge extortionate passport fees. These are examples of countries erecting virtual Berlin walls in order to raise the exit costs of their countries, suppress jurisdictional competition, and thus increase their tax revenues. Another form of this are long-arm statutes, especially when used to collect taxes on companies that have only "minimal contacts" with a jurisdiction.

Why are governments imposed on us rather than chosen? Why can't we shop for countries like we shop for cars? Why has progress in jurisdiction shopping movements such as the Free State Project been so slow? Because interstate travel is considered a fundamental right under U.S. law, the exit costs imposed by law on moving from state to state are very low. The slow progress of the Free State Project points up several factors:

(1) that many, if not most, taxes and other violations of property rights considered onerous come from federal rather than local governments, and moving just from state to state within the United States does not avoid these,

(2) that no state, not even New Hampshire, is so remarkably better than any other state to motivate many people to move, and

(3) that local social ties -- whether for personal or business relationships -- are much more expensive for most people to break than the gains to be had from increased economic freedom between one state and another.

In the United States and today in most of the world, exit costs are imposed primarily by the ways we live our lives -- and in particular by our personal and business networks -- not by artificial Berlin wall like barriers. Modern deprivations of liberty have much more to do with this fact than with the oftenexaggerated differences in forms of government or with supposedly crucial rights such as the right to vote. Today, never in the United States have so many people had the right to vote, yet never in the United States have we had so high taxes and so few property rights.

With the fall of communism, for most people in the world government restrictions on exit are no longer the dominant barrier to exit. Our lack of liberty has rather to do with the fact that the vast majority of our strong social ties lie within a territory monopolized by a nation-state. Any form of large modern nation-state that we can practically expect to encounter, as well as any state of any size that restricts emigration, will engage in extortionate deprivations of property that many people in many earlier times and places, such as colonial America, did not tolerate.

How, then, can one best protect one's rights? By living one's life in a way that makes exit costs low:

Be prepared to vote with your feet. Add interstate and international diversity to your social networks -- both personal and business. Lower your costs of exiting, if the need should arise, the jurisdictions that impose on the territories wherein you reside. Repeatedly in history -- from the old American frontier to the fall of the Berlin Wall to modern jurisdictions that specialize in international trade -- low exit costs have not only enabled liberty for the individual and the small group, but they have more than any other factor motivated the larger jurisdiction to provide the most important rights and freedoms for those who stay put. Grow interpolitical roots so that no single polity can chop down your tree. The good news is that modern communications, travel, and standardization of international languages (mostly on English) have made diversifying our social networks -- growing international roots - far easier than ever before in history.

Despite the closing of physical frontiers, which has had an extremely deleterious impact on freedom, other trends may be bringing about the lowering of exit costs. International communications networks and the international standardization on a few languages (and perhaps even just one, which quite fortunately for my readers is the one I'm currently writing in), combined with low international travel costs, are leading to the development of more strong personal and business social ties that cross borders. Multinational small businesses are joining multinational corporations in developing cross-border business ties.

But there are also many threats by governments to re-establish or increase exit costs by throwing up virtual Berlin walls and fugitive taxpayer networks. Extraterritorial assertions of jurisdiction, especially of tax jurisdiction, threaten to throw up enforcement networks akin to the old fugitive slave laws in the antebellum United States. Freedom of travel is being threatened by paranoid responses to the overblown threat of terrorism -- but at least one good group is fighting to counter this threat. To counteract these threats, basic freedoms must be protected by our courts from encroachment by other governmental branches. The U.S. Supreme Court counts both voting and interstate travel as fundamental rights. Of these fundamental rights, travel -- but especially international travel -- the right to pass through the airports and Brandenburg Gates and Checkpoint Charlies of the world -- is by far the more important.

Our new omniscient savior

"I hear from so many people that realize that they're just invisible to their government ... but they won't be invisible to me."

Hillary sees me! All hail Clinton, full of grace.

UPDATE: This is, of course, nothing new.

Ten ways to make a political difference

Ten ways to be an effective political activist, in a roughly decreasing order of importance:

1. Be prepared to vote with your feet. Add interstate and international diversity to your social networks -- both personal and business. Lower your costs of exiting, if the need should arise, the jurisdictions that impose on the territories wherein you reside. Repeatedly in history -- from the old American frontier to the fall of the Berlin Wall to modern jurisdictions that specialize in international trade -- low exit costs have not only enabled liberty for the individual and the small group, but they have more than any other factor motivated the larger jurisdiction to provide the most important rights and freedoms for those who stay put. Grow interpolitical roots so that no single polity can chop down your tree. The good news is that modern communications, travel, and standardization of international languages (mostly on English) have made diversifying our social networks -- growing international roots -- far easier than ever before in history.


2. Influence our law in action. Serve on a jury and insist on protecting those who have not been proven to harm or intend to harm another.

3. Make your own law. For starters draft your own contracts, wills, prenuptial agreements, and property deeds. Even better if you can do this as a service for other people, but for that you will generally need to be a member of the appropriate legal guild. To draft law usefully, whether for yourself or others, you will need to learn the real law they don't normally teach in public schools: contracts, property, trusts and estates, and torts for starters, or else (often a second best choice to learning law yourself) retain the services of a sympathetic lawyer. Learn actual law -- don't turn into a whacko running around putting liens on other people's property based on interpretations of the UCC quite remote from what any judge would contemplate. But do start to make your own law. You cannot be free if you cannot make your own law.

4. Influence our law in action. Donate to or get involved with the Institute for Justice and other organizations of politically and legally savvy people defending our most important rights and freedoms in the courts.

5. Make your own law: use strong security to protect the people, relationships, property, and data you value. Learn to defend yourself and your loved ones with weaponry. Write and use cryptography, smart contracts, bit gold, digital cash, and other security protocols made possible by computer science.

6. Tell us about your good research and good ideas: write a blog, comment on a blog, write papers.

7. Start a multinational small business.

8. Vote with your pocketbook -- buy and sell the goods, services, stocks
and bonds that promote liberty, and boycott those that promote its
violation.

9. Get involved in a lobbying group or political campaign where you can make a difference: usually a local campaign, but on rare occasions a national one.

10. Vote for and against politicians, but don't be fooled -- of all these
ten ways to make a political difference, voting in a political election makes the
least difference.

Government for profit

There are may examples of coercive political power both today and in history that don't fit in to the academic idea of "the state" as a "monopoly of force." Federalism, separation of powers, and many examples of legally "taking the law into one's own hands" are just three categories of examples. Here, we look at another, mostly forgotten but once ubiquitous category from history: political power wielded by private individuals or commercial organizations, with profits or the equivalent as a primary incentive of the organization.

These were entities quite different from both modern governments and modern economic corporations. These wielders of coercive power for profit combined the efficiency of private enterprise with the often ruthless coercion of government.

In the Roman Republic there were a number of corporations that were granted various kinds of political power. The most notorious were the publicani, the ruthlessly efficient tax farmers. Tax farmers were private contractors to governments or other coercively funded entities (such as colonial corporations, examples of which we will see below). Through history tax farmers have been famed and reviled for their efficient operations and ruthless treatment of taxpayers. The publicani, for example, deployed crucifixion and other forms of torture to extract financial information from their victims.

Tax farmers were, however, at least more honest than modern tax collectors. Tax farmers knew who their customers were -- governments or other coercively funded organizations. Like any other collection agency their customers were the creditors, not the debtors. They never propounded the pathetic mythology of some modern government tax collectors that their quite involuntary debtors, rather than their respective governments, are their "customers".

It is not well understood by Romanist moderns that monarchy was based, not primarily on Burkean romantic worship or the divine right of kings, but rather on the political property rights of an individual and his heirs. The laws of inheritance for a monarch were usually the same as those for land. Furthermore, at most places and times the monarch did not have a monopoly of political power, but rather by prescription or grant many other entities -- nobles, burghers, and corporations chief among these -- also held political property rights. Modern "titles" are the shell of a system that once involved extensive political property rights. As I described in my paper "Jurisdiction as Property", the most basic aspects of the medieval and Renaissance English legal system -- from which much of the modern writs, common law, and constitutions of England, Commonwealth and United States legal systems are derived -- were the laws that defined the rights and trespasses involving political property.

After a long lapse from the records of history, the Roman corporate form reanimated in the form both of independent cities -- municipal corporations that gave rise to republics -- and in forms like the Genovese maone and similar organizations in other late medieval Italian republics. The maone issued securities that acted much like stock shares, effectively paying dividends, although technically they were treated as debt instruments rather than ownership shares. They engaged in colonial conquests and administration, tax farming, or other subsets of governmental functions. A fuller account of the maone and their role in originating the modern corporation can be found here.

Sir Francis Drake, commander of joint-stock navies.

There is also a long history of armed forces for profit -- of mercenaries, private escorts, privateering, and sheer piracy. The main colonial companies, such as the East and West India companies of Britain, the Netherlands, and other colonial powers, deployed their own naval forces to protect their own fleets and on occasion to attack rival shipping. Among the first English joint-stock corporations were the temporary joint-stock companies set up by Drake and Hawkins to trade with the Spanish colonies (from the Spanish point of view to smuggle) and raid the Spanish gold and silver fleets.

Despite their profit motive, which put a premium on trading and raiding rather than defense, these private navies also successfully defended England. The battle of against the Spanish Armada was won, not by the Royal Navy (which did not yet exist), but by the joint-stock naval corporations of Drake and Hawkins. Drake's circumnavigation of the globe in 1577-80 was also funded by a joint-stock company created for the purpose. The profits came from trading/smuggling and privateering against the Spanish Main.

Most of the British colonies overseas (and many of those of Brtitain's rivals) were organized as corporations for profit, and most of these at one point or another issued stock. The political consequences of such corporate colonies were highly controversial and highly varied. In America, the corporate charters guarunteed "the rights of Englishmen"; that and a large frontier (and thus low exit costs) produced a very libertarian political system. Some American charters, such as the Massachusetts Bay Company, guarunteed that all freeholders of land within the corporation's land grant could vote on the corporate by-laws, which effectively became the laws of the land. This set the stage for two of the most distinctive characteristics of the later United States -- both its democracy (in contrast to their status in England, most early English settlers in America were landowners ("freeman") and thus entitled by charter to vote) and its written constitutions enforced by judicial review (because the charter -- in modern corporate parlance the articles of incorporation -- trumps mere legislation -- in modern corporate parlance the by-laws).

Charter of the Massachusetts Bay Company, 1628

In Africa, by sharp contrast, the main business was slaving, and the charters of the African corporations authorized them to wield martial law, which they did with ruthlessnes. The most infamous of these African companies operated, however, after the era of individual slavery had ended. Instead of overt slavery the Congo Free State instituted a system effectively worse than slavery -- a tax system based on in-kind payments of rubber. The barbarous cruelty of the resulting system was immortalized in Joseph Conrad's Heart of Darkness.

In between these political extremes, the East India Companies and many other colonial companies operated across the globe, at first assisting local entities in military, tax collecton, and administration, but eventually taking over these governmental functions and reaping often immense profits as a result. They brought literacy and very efficient and modern administration but also often engaged in an exploitation that was widely percieved as so ruthless that the East India Company became profoundly unpopular and was eventually nationalized.

Administration by the colonial companies was usually far more efficient, for example in terms of European manpower deployed, than the later administration by the governments of European powers when these companies were nationalized in the 19th and 20th centuries. By the end of the 18th century these companies had become highly unpopular in government circles. The rise of democracy and the Romanist ideology of the monolithic state spelled their doom. Ideologists and scholars as varied as Adam Smith, Edmund Burke, and Karl Marx railed against the depradations of the colonial corporations. For Marx these epitomized the evil of capitalism generally, whereas Smith and Burke were careful to distinguish the wielding of coercive political power, which they found particularly destructive in this form, from the wielding of voluntary economic power, which they found highly beneficial.

Besides the links above, here are some further references:

E. Burke, "The Nabob of Arcot's Debts" -- a screed against the exploitation of "the Carnitic" (part of modern India) by the British East India Company

Charter of the Massachusetts Bay Company (1628)

G.R. Elton, England Under the Tudors, Third Edition (1991)

H.C. Hockett, The Constitutional History of the United States, 1776-1826 (despite the title has some good descriptions of pre-Revolution developments including corporate colonies and judicial of local legislation against the corporate charters)

A. Smith, The Wealth of Nations (esp. Book 4, Ch. 7 "Of Colonies")

N. Szabo, Charters and Judicial Review

N. Szabo, Origins of the Joint-Stock Company

N. Szabo, Jurisdiction as Property

Mobile redundancy

Orbital Express has demonstrated a number of interesting techniques of great long-term importance, such as the automated refueling of spacecraft. (Here is the biggest long-term reason why automated and on-orbit assembly and refueling are important). But the mission also demonstrated the feasibility of an idea that is probably also of great but nearer-term importance, which I call mobile redundancy. The idea is that if one has a constellation of standard satellites, redundancy can be provided with mobile spare parts rather than by building on-board redunancy into each satellite as is done now. This could result in a large overall savings in weight launched per year of useful satellite lifetime.

Hohfeld without "the state"

Words like "rights," "freedoms", "liberties", "duties", and so on describe crucial ideas but are often used ambiguously in politics and the law. Lawyer Wesley Hohfeld early in the twentieth century in the United States developed a classification and technical terminology for these ideas that goes far towards eliminating much of this ambiguity.

First Hohfeld defined these ideas as relationships between persons. Second, he organized them into binary opposites and correlatives. Here are the binary opposites -- you either have them or you don't:

right/no-right
freedom/duty

(I'm substituting "freedom" where Hohfield and his followers have used "privilege" , "liberty", or even worse "permission" -- for reasons that should become apparent below). With respect to a given subject matter and under a given set of laws governing that subject matter, you either have a right or no right, never both. And you either have a freedom from duty or a duty, never both.

The most crucial aspect of this terminology is that these ideas are also related as correlatives -- the existence of one implies the existence of the other. Thus

right of A => duty of (at least) B
freedom of A => no-right of any other

Hohfeld's terminology is often described (e.g. by the legal scholars Corbin and Singer) in terms of "the state" that whose enforcement actions create rights (and thus duties) and whose lack of enforcement action creates "privileges" or "permssions". Regular readers of the blog will see at least one problem with this approach, but does Hohfeld terminology make sense independently of "the state"?

Not only do these terms make sense without "the state", they make even more sense without "the state" and even make sense independently of the existence of anything like a state. Stateless scenarios help to illuminate the meanings of Hohfeld's terms, and getting rid of "the state" will shed light on analysis of the origins of rights. For example, by distinguishing a "right" from a "freedom", I will create a much clearer description of John Locke's theory of a "social compact" which highlights some of its strengths and weaknesses. This generalization of Hohfeld terminology also allows us to apply it to real world situations involving conflicting jurisdictions and laws rather than the mythological monolithic state.

Let's start with a Mr. Robinson Crusoe stranded alone on his tropical island. Crusoe is able to do anything he likes without legal or other coercive restriction, or indeed without a negative response by another person of any kind -- he has perfect freedom. But he can't sue or otherwise punish anybody, so he has, in Hohfeldian terms, no rights. Robinson Crusoe expemplfies the correlatives "freedom" and "no right".

Now let's strand a Mr. Geoffrey Dalrymple on the island with Mr. Crusoe. In a state of pure amorality and lawlessness (which is to be sure purely theoretical and in practice would not last for long), there are no rights of any kind. Crusoe has no duties and thus perfect freedom to do anything (kill Dalrymple, steal his food, and so on), and correlatively Dalrymple has no rights. Dalrymple for his part has no duties and thus perfect freedom, and and Crusoe has no rights.

Do we require a state to introduce rights into this situation? In fact we don't even need the introduction of a third party. To introduce rights and duties into this situation, Crusoe and Dalrymple merely need to enter into an agreement, a la Locke. This agreement could be as informal as a common cultural understanding or as formal as carving words on stone. Let's say Crusoe agrees not to commit a tort (battery, theft, etc.) against Dalrymple and Dalrymple agrees to not commit a tort against Crusoe. Crusoe now has rights (defined by tort law as he understands it, unless stated explicitly) against Dalrymple and Dalrymple now has tort rights (defind by tort law as he understands it, unless stated explicitly) against Crusoe. Crusoe correlatively has duties towards Dalrymple, and vice versa, and both correspondingly have their freedoms reduced. They have traded some freedoms for some rights. (This is a much clearer way of saying, in the older terminology in which "freedom", "rights", and so on were overlapping and often indistinct concepts, that people have traded away some rights in order to preserve other rights).

Of course the consequences of a right -- in particular the remedy available for the breach of a right -- is hardly the same as in a mature legal system with courts, police, etc. If one of Crusoe's rights is breached, for example by Dalrymple stealing his food, his only remedy is to take an action himself -- for example, steal back some food. Crusoe and Dalrymple would be wise to specify such remedies in their agreement. We can see how a third party, or even better courts and police, would help enforce such a remedy, but they, and much less "the state", are not necessary for the basic Hohfeldian ideas of right and duty to arise.

Corbin, in describing Hohfeldian terms, invoked "a giant" as a metaphor for "the state." It's easy to see that if a wise giant lived on the island it would be profitable for Crusoe and Dalrymple to agree to use that giant to hear their cases and enforce the remedy they had agreed upon. This corresponds to the "choice of forum" clause found in many modern contracts. But let's say there were two wise giants on the island, Giganticus and Gargantua. This multiplicity of giants would certainly confuse Corbin's (and Singer's) explanations of Hohfeld, but is in fact readily explicable in Hohfeldian and choice-of-forum terms. There are often great advantages to division of labor. Crusoe and Dalrymple could thus agree to divide up the subject matters of their agreement. They might, for example, choose Giganticus to adjudicate and enforce tort and property law, and Gargantua to adjudicate and enforce contract law (include this meta-contract).

Alternatively, if Giganticus is strong and Gargantua is wise, they might agree that Gargantua should decide the cases regarding any subject matter (i.e. act as a judiciary) and Giganticus should enforce them (i.e. act as an executive). As another alternative , the giants could agree on the division of subject matter jurisdiction betweem them, or divide between them adjudication and enforcement, and force their agreement on Crusoe and Dalrymple.

Each of these scenarios is a plausible one. None involve "the state", but each involve rights and correlative duties as well as freedoms and correlative lack of rights. The probability that the giants would enforce their own brand of law, rather than just enforcing whatever Crusoe and Dalrymple agree to, casts some doubt on Locke and other "social contract" theorists as providing an actual history rather than an ideal of the formation of legal systems or states. More likely is the model of Mancur Olson, in which "stationary bandits" out-competed "roving bandits" in the coercively competitive business of collecting taxes and thereby formed states (and, I'd add, formed other kinds of political property rights as well). All fodder for future posts.

Ref: Hohfeld, W. N. Fundamental Legal Conceptions as Applied in Judicial Reasoning, ed. by W.W. Cook (1919); reprint, New Haven, CT: Yale University Press, (1964).

UPDATE: I have clarified my recasting of Locke's analysis and corrected a typo pointed out by a commentor.

Quo Warranto and the Presumption of Nonauthority

The current debate over statutory restrictions on the uses of the writ of habeas corpus should lead us to re-examine the foundations and context of that prerogative writ. The only explicit mention of it in the U.S. Constitution is in Art. I Sec. 9, as one of the restrictions on the powers of Congress:

"The Privilege of the Writ of Habeas Corpus shall not be suspended, unless when in Cases of Rebellion or Invasion the public Safety may require it."

From this language we may reasonable conclude two important principles:

1. Habeas corpus may only be suspended by an act of Congress (which raises the question of what is to be done if Congress and the courts cannot convene).
2. Habeas corpus is presumed to be a right that precedes the Constitution and is incorporated by it, by restriction on when it may be suspended.
   

But if the writ of habeas corpus precedes the Constitution and is incorporated into it, does that make it one of the unenumerated rights of the Ninth Amendment, and if so, what about the other prerogative writs that have a similar status in common law, such as quo warranto, mandamus, prohibito, procedendo, and certiorari? We don't hear much about these in current jurisprudence, except the last, in discretionary appeals.

I have argued in a paper in progress, "Presumption of Nonauthority and Unenumerated Rights", at http://www.constitution.org/9ll/schol/pnur.htm , that all of those writs, and more, are indeed among the unenumerated rights of the Ninth Amendment, and that, contrary to current doctrine, these are not creatures of statute but fundamental rights that may not be constitutionally burdened. For evidence of this we can find among the proposed amendments from the New York ratifying convention not just a declaration of the writs as rights, but of a right to petition for the rights "in the name of the people", that is, as private attorneys general. That we have the rights was taken for granted. Only the standing of any person to petition for them was thought necessary to be asserted in an amendment.

Habeas corpus can be considered a subset of quo warranto. The former demands an official prove his authority to detain a person, but the latter demands an official, including a private official, prove his authority to do anything he may be doing or threatening to do, including holding an office. The former requires the official to produce the detainee in court. The latter requires him to suspend his activity until proof is made.

Was there ever a time, following the Declaration of Independence, which made the people the sovereign, when any individual could go to court with a petition for a writ of quo warranto and get an official activity suspended until that official proved his authority? Yes, there was, in the early republic, but so seriously did officials take the threat of such a writ that they took great care not to exceed their authority, so that the remedy almost never had to be carried forward, or precedents established. It should come as no surprise that officials don't like the right and have done almost everything they can to deny or deprecate it or make people forget about it.

Perhaps it's time to change that.

Most law schools don't teach much about the prerogative writs, not even habeas corpus. It should come as no surprise that many lawyers and judges are unclear on the concept or how it is supposed to work, if we followed the original standard of due oprocess. Too many judges treat a petition as an ex parte motion to show cause, with the burden on the petitioner. It is not. The writ is not an order from the court to produce the prisoner and the proof. The petition itself is the order to do that, much like a citation in a civil case, to respond to the filed petition. the writ is the finding by the court of whether the official has the authority, ordering release of the prisoner if he does not.

The only statutory component of habeas corpus, or the other writs, was a prescription of how much time the official has to comply. Originally, that ranged from three to twenty days, depending on the distance of the official from the court.

The question may arise, what happens if the court fails or refuses to hold a hearing, or accepts the authority of the official without the proof? This question is critical to an understanding of the role of courts in the Anglo-American legal tradition. The answer, by original standards of due process, is that the writ issues by default if the respondant fails to respond, or even if the court fails to hold a hearing. If the judge accepts the official's claim of authority without proof, then by those ancient standards, the judge himself may be removed from his position by a writ of quo warranto. In 18th century England this became a serious matter, and "peasants with torches and pitchforks" burning down courthouses and hanging judges was something that actually happened. If courts were derelict the people, as militia, took the law into their own hands, enforcing writs that by common understanding issued by default. But that process was not always so "due", and the line between militia enforcing the law and an enraged mob was often crossed.

We now live in an era of increasing tension between the judiciary and the public. This is a matter that deserves our constructive attention, or history could repeat itself.

The origins of dialectics and the hubris of Hegel and Marx

Hegelianism was an exercise in intellectual hubris which easily misled its followers into political hubris. Hegel's antithesis-thesis-synthesis structure came straight out of medieval law schools. This dialectical method was (and with some variations and changes of terminology still is) used where, under the facts of a dispute, the law as it stands is arguably ambiguous. Legal scholars analyze the legal arguments of plaintiff (thesis) and defense (antithesis) and reconcile these arguments in order to reach a just verdict and a more comprehensive and clear rule of law (synthesis).

Later in the Middle Ages, but still long before Hegel, the dialectical method spread, with variations and changes of terminology, to some other branches of university study (e.g. theology and science), but its success was still quite dependent on the availability of a rich set of facts from which to use the method to induce laws. Thus, for example, phrases like "law of nature" and "scientific law" stem from this origin of the inductive scientifc method.

The real value of dialectics in interpersonal matters comes from taking a specific dispute between two specific people, with very specific and well investigated facts, and inductively reaching a new clarification or minor variation on a rule of law, custom, or manners (synthesis) that achieves a just outcome for this dispute.

This is how the law is supposed to evolve, inductively, slowly, case by case over many centuries. This is how good law is "made" by judges. But in the hands of a dogmatic philospher like Hegel or Marx, dialectics became an exercise in faux implied omniscience -- the idiotic but compelling hubris we can trace the broad path of history itself through the movements of major opposing ideas (Hegel) or economic factions (Marx), and through this cabalistic exercise learn the "laws of history" which culminate in the idealistic outcome already desired by the philosopher, whether the supremacy of the State (Hegel) or an egalitarian utopia (Marx). Divorced from the reality of details and the patience of evolution, the outcome in real socieities, though labelled "progressive" (in honor of the direction of history as "discovered", i.e. as desired and cabalistically justified, by these philosphers) -- though called "progressive", the actual outcome was more often than not quite in the opposite direction. The actual outcome was analogous to what a genetic engineer would get if (with our limited knowledge of the workings of genes and the proteins they code for) said bioengineer cut and hacked thousands of genes and then reassembled them in a more "rational" manner. All that bioengineer would get out of such a naive and radical procedure is monsters and death. Our genetic code is far too complex to change more than a few genes at a time. Our interpersopnal relationships, and thus our society and our politics, is far more complex still. That is why we got even more monsters and death from Hegel, Marx, and their many naive and radical followers.