I want to supplement Voluntarist’s yesterday’s post on transaction insurance.

In the Telegram comments, several points were quite rightly noted.

First, classical individual insurance is always based on statistics and probabilities, so it will primarily be applied where transactions are standardized and risks are sufficiently random. It is quite difficult to imagine, for example, insuring a bank against a borrower’s intentional non-payment of a loan while prohibiting the insurance company from forcibly recovering that very loan. If such an insurance service were provided, there would be a fairly strong temptation for bank employees to organize a scheme of issuing non-repayable loans to shell companies for kickbacks, with the bank subsequently receiving insurance when the loan is not returned.

Second, the use of escrow accounts is usually imposed on transaction participants by the platform owner who sets the trading rules. If transactions occur without an intermediary, the use of an escrow scheme is unlikely, especially if the freezing of funds is expected to be long, as in the case of shared construction agreements.

Third, I was reminded of my year-old post about, suddenly, juvenile justice, where I noted certain difficulties with liability insurance.

In this regard, I want to mention another convenient way to reduce the risks of contract non-performance that is not related to violent coercion. These are the good old insurance groups, meaning archaic collective responsibility. In the old days, a person’s entire kinship, tribe, clan, or community—in short, a group of relatives and possibly neighbors—was responsible for them. Therefore, one didn’t have to worry much about personal reputation; instead, a person was judged by who they belonged to.

Of course, in a stateless society, there is no need to necessarily restore communal living, although the factor of belonging to an insurance group would be a compelling reason to cluster in such a way. Then again, there is certainly no need now to organize specifically by kinship, as friends and like-minded people play the role of the kin today. But I want to discuss not interest-based circles, but how transaction risks can be further reduced.

Entrepreneurs wishing to earn the trust of potential counterparties can form associations. Admission to such an association can be based on various criteria. Some may be accepted for an already established good name. Others—for promises to conduct business with impeccable honesty and a large deposit. Others—under the guarantee of respected members of the association. For external counterparties, the association acts as a group guarantor for the transactions of its members.

Every member of the association is, on one hand, interested in the growth of its membership, because this means that in the event of collective responsibility, the losses of each member are reduced. On the other hand, everyone is interested in ensuring that only honest and reliable entrepreneurs enter the association—those who insure others rather than parasitize the collective. The association will cover the costs of a breached contract not only for classic insurance events, but also in cases of force majeure, and even if a member of the association turns out to be a fraudster. But, of course, in the latter case, it would mean a “wolf’s ticket” (blacklisting) for such an entrepreneur.

Finally, I will note that the proven, well-known dishonesty of an entrepreneur by no means means that he will die in a ditch because no one will sell him anything and no one will hire him for anything. It simply means he will not be taken at his word, and all transactions for him will operate on a “money upfront” principle.

Any attempts to depict a stateless society as something totally cannibalistic imply either an incredible scarcity of resources for which people must tear each other’s throats out, or a post-totalitarian syndrome of complete mutual distrust. Naturally, the gradual dying out of non-violent practices in general and the state in particular cannot be accompanied by such catastrophic symptoms.