Date: Mon, 29 Aug 1994 18:05:05 -0700
From: Hal <hfinney@shell.portal.com>
To: cypherpunks@toad.com
Subject: Cyberspatial governments?


I have been very impressed with the imagination and depth of Jason
Solinsky's ideas, especially considering his apparent youth.  However, I
want to take issue (not semantically this time!) with the idea of a
government in cyberspace, which IMO Jason tends to rely on too heavily.

As I understand Jason's proposal, his government does not rely on force,
but rather it acquires authority by people voluntarily putting themselves
at the mercy of the government to a certain extent.  The principal
mechanism I have seen suggested is for people to put some money into
escrow or a bond which they will surrender (according to agreed-upon
rules) if they break the laws of the government.

Now the simple objection I offer is that most people don't have enough
cash lying around to effectively obligate themselves.  Most people,
unfortunately, spend their money rather than saving it.  Even people who
do have large sums of cash are, for that very reason, able to tolerate
larger losses, so they will apparently have to put up very large bonds,
which would have to be a strain on their liquid capital as well.

And, for people who do have the money, how can they tolerate tying up a
large sum of cash for such a long period of time?  Does the government
offer interest?  How are the funds invested - safe or risky?  Low
returns or high?  People want to diversify their investments, and I
don't think they are going to be willing to put all their cash into
this one lump sum bond.

When people do save money, it is often with the intention of spending
it later.  They save money to put their kids through college, or for
retirement.  Sooner or later their comes a time when they have to start
consuming the nest egg.  Will this entail withdrawal from the benefits
of the cyberspace government?

To sum up, I don't think most people's lives are structured in such a way
that they can credibly obligate and commit themselves to a potentially
risky contract.  With physical governments people might say "as long as I
live on this island I agree that the government can shoot me if I kill
someone," and I will be inclined to believe that they will not try to
commit murder.  But that promise is much less credible if all they will
do is forfeit a $2,000 bond, if that's all the money they've managed to
save.

Hal