Тег: Agreement

NAP and contract enforcement, a discussion

Yesterday’s post about whether violent actions to enforce payment for a completed contract violate the NAP, sparked a discussion, so I am returning to the topic.

As Ekaterina Schulmann loves to point out in her lectures, the world is extremely unfair, and societies where there is little trust, bear additional costs due to this, which exacerbates their poverty and further reduces trust—while trust cannot be restored by simple preaching. This observation applies not only to the citizens of a particular state in general, but also to other groups. In the context of the transition to ancap, we are most interested in the agorist society, those engaged in counter-economics, and therefore voluntarily or forcedly cut off from state services for ensuring contract compliance.

For example, any shadow entrepreneur can easily encounter a situation where they have incurred costs while fulfilling the contract terms, after which they are refused payment. In such a situation, you cannot not only file a lawsuit, but you cannot even bring the situation to public attention, because the activity is shadow, and publicity is even more disadvantageous than the losses from unpaid work. Without publicity, the institution of reputation does not work.

Take sex work in modern Russian society as an example. It is illegal, so in case of non-payment under a contract, these funds cannot be recovered through the court, and you cannot even draft a written contract with specified sanctions for non-payment, as it would be evidence. Therefore, even an individual entrepreneur usually has to cooperate with someone to whom she can turn for protection in such cases, so that they can achieve payment through force or the threat of its application. These are additional costs that society bears due to a lack of trust, suivante which allow such a business to remain stably profitable; without the purchase of contract enforcement, sex workers quickly become sex slaves.

In legal business, this manifests itself less often, but it is quite easy to imagine, for example, how a drunk debauchee is kicked out of a bar where he is unable to pay for the damage he caused (see also my old article on vigilantism). Here, a conditional mutual offset of damages is far more common, and not an invoice for payment post-factum, although variants are possible.

Nevertheless, it must be clearly understood that all cases where direct violence is practiced instead of civilized proceedings with installments, penalties, and seizure of property, etc., are precisely excesseses, and the more trust there is between people in society, the fewer such excesses.

In the post Libertarianism ex machina, I referred to Alexander Auzaan’s lecture, where the conditions necessary for the stable existence of a stateless society are discussed. He calls the balance of the potential for violence as the key condition. When a sex worker or a bar owner hires security, they level the balance of the potential for violence, countering the potential aggression of customers with the potential aggression of security. The second condition mentioned in the lecture is a stable community composition. This factor allows the transition from a classic prisoner’s dilemma to a repeated one, launches the institution of reputation, makes it possible to predict others’ actions—and gradually develops trust in society, even if the various additional measures proposed by Ekaterina Schulmann are not used—namely, joining various social organizations to build experience in peaceful, creative interaction (though with them the process is significantly accelerated).

The Internet allows such stable communities to form even without being tied to a specific compact territory: the transmission of information is extraterritorial, and communities are based precisely on the exchange of information. Transaction guarantees, through mechanisms of collateral, escrow, insurance, and other non-violent instruments—these are services that appear on modern markets at fairly early stages of their development, and immediately radically reduce both the level of costs from contract violations, and the level of potential violence necessary to operate in such a market.

So do not violate the NAP—it is not only unsightly, but also unprofitable, there are better tools.

Should one beat someone over the head with the NAP for non-payment under a fulfilled contract?

L29Ah (question accompanied by a donation of 0.00035466btc)

To start, I would like to recommend a recent column by Bitarch about contract enforcement. It provides several historical examples of how, in a free market, contract enforcement happened not through violence, but through the refusal to cooperate, and indicates that this is an inevitable consequence of a sufficiently balanced potential for violence in society — and ancap is presumably just such, otherwise a dominant aggressor would not be long in appearing. Therefore, relatively stable markets usually already possess all the necessary tools for peaceful conflict resolution — such as arbitration, rating systems, and sanctions.

Nevertheless, reputation works well only where it is easy to refuse cooperation by replacing a defaulting counterparty with their direct competitor, and where all other market participants also monitor such situations and strive to deal with counterparties who have a good reputation.

However, if you have a short planning horizon, and it is not very important to you what long-term negative consequences the person who did not pay for your work will face, but you would like to quickly receive the money under the contract and spend it on urgent needs — then it is important to have threats in reserve that are more serious than “I will no longer do business with you, and I will try to make sure everyone follows my example.” For example, the ability to shove a barrel into his liver, after which you offer to part with the car keys as collateral that the contract money will be paid tomorrow. Or, as you indicated in your question, simply beating him up.

At the same time, it is important to understand what exact reputation you are creating for yourself with such actions. If you are satisfied with a reputation as hot-tempered but forgiving (beat them up and forgave the debt) — well, go ahead, crack some knuckles, then write off the losses, and you’re even. If you prefer the reputation of a tough guy who isn’t to be trifled with, you can try beating them up first, and then declare that this was the interest on the debt, while the principal must be returned by a certain date, or new interest will be charged. But this is already a serious claim that you are capable of completely determining the rules of the game in this area (since you have de facto revised the terms of the contract unilaterally, which is no less of a blunder than a breach of contract by the party withholding payment), and many may find a reason to challenge such a claim, even if you were previously, in essence, irrelevant to them.

So I would recommend avoiding violence whenever possible and limiting yourself to threats of violence. Demonstrate to the contract violator your ability to cause them unacceptable damage, and then offer, as an alternative to such a miserable scenario, to revise the terms of the contract by providing the possibility of payment in installments — or, if that is clearer to you, putting them “on the clock.” And, again, it is better to get their consent to the new terms in an explicit form, because what use is it to you to let go of a person whose only desire is to get as far away as possible without actually paying the bills. It is far more profitable if they leave happy, understanding that they got off easy, that it is actually realistic to pay the debt under the new terms, that their business reputation will not suffer, and that they don’t need to run from anyone.

And in conclusion, if you are concerned specifically with the formal compliance of certain actions with the non-aggression principle, I will describe the conflict from that point of view.

You weren’t paid, you act in accordance with the clause of the contract regarding delays: usually, both a penalty and a specific arbitration body are specified there. The NAP is not violated.

You weren’t paid, you beat up the non-payer, after which you proposed to consider that the parties are even, and the beaten person agreed. There was a mutual violation of the NAP followed by a reconciliation of the parties.

You weren’t paid, you beat up the non-payer, after which you demanded the return of the debt — there was a violation of the NAP on your part, unless, of course, the beating was written into the contract as a disciplinary measure in case of payment delay or even as the payment itself (the classic description of labor relations known to us, ending with the words “you shouldn’t have chased after cheapness, priest”).

You weren’t paid, there is no hope for arbitration, you insist on a revision of the contract through threats, after which the new contract is fulfilled by the counterparty — there is no violation of the NAP (but if you overdid it, the situation may only become more complicated; this is a favorite plot of action movies, and they don’t make action movies about peaceful and cloudless market relations).

Contract settlement

Contract Enforcement

Bitarch’s Column

The question of permissible methods of contract enforcement was touched upon during Mikhail Svetov’s lecture in Novosibirsk. Svetov once again unequivocally expressed his position—physical violence (coercion) must not be used. The maximum that can be done against a violator is ostracism.

Unfortunately, not everyone accepts this moral position, so I will try to explain it, relying on utilitarianism and game theory. The example described below is an original illustration for the summary of the RAND Corporation study On the Doctrine of Deterrence, chapter “Local Balance of Power: An Important, but Not Always Decisive Factor.”

“Suppose I entered into a contract with you and decided to break it on my own. You dug in your heels and began to threaten me with ‘special forces’ who would forcibly seize my property. Assume you can send ten fighters, but I can guaranteedly destroy one of them. I make it clear that I am prepared to go to the end. For the fighters to agree to such a risk, you would have to offer each of them $10M. Suppose the contract amount is $100K, and I possess assets that can be liquidated for only $1000. You evaluate the ratio of benefits to costs—and tell me something like: ‘Get out, I don’t want to have anything to do with you anymore; people are right, it’s better not to touch shit!’. After that, we part ways, and you no longer enter into any deals with me. Under certain circumstances, you can retaliate by placing information about my behavior in the public domain, thereby prompting other people to join the ostracism.”

As seen from the example above, contract enforcement through physical coercion becomes impossible in a society where there is at least some balance of violence potential (different from the conditional ‘zero’ for citizens and ‘infinity’ for the state, as is usually the case in etatist societies).

In his book “For a New Liberty,” Murray Rothbard provides historical examples confirming the described theory and shows his affinity for it.

“The fact is that in the Middle Ages and up until 1920, merchants relied exclusively on the power of ostracism and boycotts by other local merchants. In other words, if someone refused to obey the decision of an arbitrator or ignored his decision, other merchants brought this fact to everyone’s attention and everyone refused to deal with the rebel, which quickly brought them to their knees. Woolridge provides a characteristic example of this:

‘Merchant courts were effective because merchants agreed that their decisions would be enforced. One who refused to obey was not sent to prison, but he did not remain a merchant for long after that. The influence of his colleagues and partners proved more effective than physical coercion. Take John of Homing, who made his living in the wholesale fish trade. John sold a batch of herring, all of which was supposed to be the same as in the three barrels presented to the buyer, but it soon turned out that it was actually rotten, and even mixed with sprat. He had to quickly reimburse the buyer in full under threat of ostracism from other merchants.’

Over time, ostracism became an even more effective means, since a situation arose where one who had once disobeyed an arbitrator’s decision could no longer expect any other intermediary to deal with them. Industrialist Owen D. Young, head of General Electric, concluded that moral censorship carried out by other businessmen operates far more effectively than the official judicial system. Modern technologies, computers, and credit ratings make the threat of nationwide ostracism more effective than ever before in the past.”

Is it permissible for a libertarian party to become a vozhdist party with a strong vertical?

Judging by the charter that Svetov wants to adopt at the congress, that is exactly the case.

Anonymous question. A donation in the amount of 0.00099851btc

was attached to the question.

This question turned out to be today’s record holder among questions with an attached donation in terms of the time I needed to answer: usually, if an answer is paid for, I answer on the same day. The fact is that I have no relation to the Libertarian Party of Russia, so I had to scour both of your charters — the one currently in effect, and the one Mikhail Svetov expects to adopt at the LPR congress, which will take place on November 2 in Moscow (I was sent links to the cloud, but for safekeeping, I preferred to move the documents to my own site). The reading was not easy, so I apologize in advance to those who may find the answer a bit boring; it is a very specific question.

So, if we rely on the letter of the charters, then both now and in the wonderful Svetovian LPR of the future, you have a typical oligarchic party where all real power is held by committees that control the mechanisms of their own reelection. The changes proposed to be made are, in essence, cosmetic:

  • regional branches are prohibited from engaging in entrepreneurial activity (very strange for a party that, in theory, should treat entrepreneurship as a fetish).
  • on the other hand, regional branches are allowed their own symbols, albeit in agreement with the federal committee (I didn’t even know that previously your charter had only one symbol for the entire party; this norm was violated left and right).
  • the general meeting of a regional branch loses the right to expel members from the party (all power to the committees!).
  • the general meeting of a regional branch loses the right to consider an appeal against expulsion from the party by the branch’s steering committee (the power of the committees is indisputable!) .
  • the moratorium on the return of previously expelled members to the party is increased from three to five years (this reminds me of the constant extension of Disney’s copyrights for Mickey Mouse — it feels as if someone was expelled from the LPR whom they really don’t want back, and now they are extending the term during which this cannot be done).
  • previously, the federal committee was dissolved if more than a third of its members left; in the new edition, it is more than half (if the dominant faction has an absolute majority, the opposition is in principle unable to block the committee’s work).
  • a limit is introduced on the maximum size of the committees (increasing the administrative weight of each committee member)
  • the federal committee will be able to suspend the powers of individual members and dismiss the party chairman (expansion of the dominant faction’s power).
  • appealing to the ethics committee becomes paid. If you win the case, the deposit is returned. If you lose, the money goes into the party coffers. No sanctions are provided for those who made an unlawful decision upon which an appeal was won (very convenient, for example, to kick out the entire opposition from the party before the congress, and by the time the ethics committee reinstates everyone, the train has left, all decisions at the congress have already been made, profit).

I probably didn’t notice all the changes, but I hardly missed anything fundamental. Another feature of Svetov’s charter is that it contains two charters: the first part works until the party is registered, and the second part replaces the first in the event of official state registration of the party.

The volume of the documents is quite large. The current charter has 44 pages; the one proposed by Mikhail Svetov has 78 pages. Usually, when people draft such detailed agreements for joint activity, it speaks of an immense lack of trust they have for each other and a certain external force to which one can always appeal if something goes wrong in the joint activity. A charter is important specifically for an external judge who knows nothing about what is happening in the organization and for whom the map equals the territory. Organizations that are created naturally for the maximum efficiency of joint activity, and which do not intend to rely on someone’s external legitimacy, do not typically describe internal norms in such tomes.

A natural organization is characterized by first relying exclusively on informal agreements, then introducing some written norms as it grows, and then consolidating them into charters. An unnatural one, complying with the Russian law on political parties, is forced to take a template charter and demonstrate to the state that it lives by it. In fact, however, it will still operate within the framework of certain informal agreements.

And now I will allow myself to deviate from the charters and quote a fragment of a lecture by Mikhail Svetov, given by him on October 16, 2019, in Novosibirsk:

The Libertarian Party of Russia today is the only organization that seriously says that the regions need to be given broad powers, transferred in such a way that it would be impossible for Moscow to take them away again.

Mikhail Svetov

Mikhail has been talking for several months, and especially often in the last month as part of his unprecedented tour across the country, about how the regions should impose a new federal treaty on Moscow. So impose it!

A regional branch of the party brings together local politicians who interact directly with local politicians representing other political forces. It is with them that they form coalitions and alliances, agree on the distribution of candidates by district and the order of speeches at rallies, or arrange to borrow equipment or use an office. Moscow in all this real regional political activity is a disorganizing factor that can only contribute to the disruption of agreements carefully built on the ground, but is almost never able to help. This is especially relevant for parties without centralized funding from above. If the main source of the party’s money is membership fees from ordinary members, then how shell-shocked by the vertical of power must one be to pay any attention at all to the whims of the Moscow leadership! He who doesn’t buy the girl dinner doesn’t get to dance with her.

The Libertarian Party of the Russian Federation does not need a charter. It needs a federal treaty. I will allow myself to quote again a fragment from the same lecture:

What is the libertarians’ criticism of democracy? That democracy adopts equal inconvenient laws for everyone. There is no such law that is equally suitable for Muscovites, Novosibirsk residents, and residents of Yuzhno-Sakhalinsk.

Mikhail Svetov

Well, if it doesn’t exist, it doesn’t exist. Thank Mikhail for the useful lecture and do as he suggests. If you can manage to impose a new federal treaty on Moscow within the party, it will be the first step toward imposing it on Moscow within the state. If you can manage to limit such a mild and intelligent leader as Mikhail Svetov, it will be the first step toward limiting such a brutal and unpleasant type as Vladimir Putin.

Mikhail Svetov and the new federal treaty

Mikhail Svetov, lecture in Novosibirsk

On October 16, a lecture by Mikhail Svetov took place in Novosibirsk, for which I recently asked you to chip in money. A huge thank you to everyone who responded to the call!

The organizers of the lecture were unable to spend this money for its intended purpose because absolutely all the venues they tried to negotiate with backed out. As I understand it, it was theoretically possible to mislead the venue owners and not inform them that Svetov would be speaking—then we would have enjoyed power outages, a police visit in the middle of the lecture, some kind of fire alarm—or simply the doors being closed half an hour before the start. Instead, all the details were told to everyone immediately, and the venues honestly refused to cooperate. Whether it made sense to act in exactly this way, I will leave to the organizers’ conscience.

One way or another, the lecture eventually had to be held at the headquarters of Sergey Boyko. About one hundred and fifty people crowded into an office of about a hundred square meters (there were over eight hundred registrations on Timepad), it was very stuffy, one person fainted, I was close to it as well, and there was no sound amplification—in general, the impression was not very good.

Brief financial report:
A total of 42,570 rubles were collected.
15,560 went toward stage rental, printing, transportation costs, and partial compensation for the ticket cost to the federal tour organizers.
The remaining money will be returned to the general sponsor or will be used by them for other projects.

On the other hand, Libertarian band released a surprisingly decent recording of the lecture—for once, Svetov’s performance can be watched without straining; even the questions from the audience are clearly audible. So, I have now re-watched the performance in a more human setting, and at least I can comment on its content.

Briefly, Svetov’s message is as follows: uniform legislation for all regions is completely unsuitable for Russia; such a large and diverse country can only be a federation. But it is pointless to wait for federalization to be handed down from Moscow: however it is granted, it will be taken back later if desired; we went through this under Yeltsin. The demand for federalization must come from below; ideally, Moscow should simply be presented with a fait accompli: that we have these rules, this economic policy, and now let’s agree whether we pay you any taxes at all, or simply tell you to get lost. If you want taxes—give us representation and guarantees of autonomy, something like that. Of course, this is all my interpretation; Svetov expressed himself carefully so as not to trigger a criminal article.

I assume it is precisely because any specificity leads to a criminal charge that Svetov offers no plan of action for federalization. On the question of methods, he is extremely laconic: do something, anything.

I was pleased that, standing in front of a banner about contractual jurisdictions, Svetov mentioned those very contractual jurisdictions several times in a complimentary key, which is a further development of the idea of federalism. I also cannot fail to note Svetov’s thesis on how nuclear weapons specifically gave humanity the possibility of the practical implementation of libertarian ideas, since it makes the concept of the Westphalian state meaningless—this is either a direct borrowing from our article on the deterrence doctrine with Bitarkh, or an independent invention. Similarly, the thesis about the church as an example of a contractual jurisdiction is either taken directly from Laxi Catala or also invented independently. Thus, one can state the gradual formation of a quite specific Russian school of libertarianism, which is not reduced to the dogmatic reproduction of the rhetoric of the founding fathers of the teaching.

My main grievances with the considerations presented by Svetov concern the expression “non-aggression pact,” and especially the monstrous phrase “a child becomes a subject of law when they conclude a non-aggression pact.” Such rhetoric is well-suited as material for stupid memes, as well as for forming a sect around oneself, but certainly not for conscious acceptance by a wide circle of people.

At the end of the lecture, Svetov gave a short interview to Ekaterina Khudoleva (Just in case—that’s not me! Yes, also from Kuzbass, yes, also a journalist, yes, roughly the same age, but not me). In the interview, I was pleased by the answer about Nozick, where Svetov’s grievances with Nozick’s analytical philosophy were laid out quite clearly. I hope that in the book Svetov is writing, according to his words, he will expand on them in more detail.