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  • Net Neutrality Is Not about ‘Saving the Internet.’ It’s about Controlling the Internet

    Posted on by Azrael Comment

    In 2017, late-night host Stephen Colbert told his audience that it was “a sad day” because the Federal Communications Commission (FCC) had voted to repeal Net Neutrality, an Obama-era rule that required Internet Service Providers (ISPs) to offer “equal access” and speeds to all lawful websites and content regardless of their source, and prohibiting “fast lanes” for certain content.

    “What that really means, it means repealing regulations that prevented your Internet provider from blocking certain websites or slowing down your data,” Colbert said. “Now they can. And that’s wrong.”

    Repeal of these regulations didn’t just portend the death of the Internet. It marked the triumph of Russia, Colbert suggested, pointing to FCC Commissioner Jessica Rosenworcel’s claim that a half-million public comments came from “Russian email addresses.”

    “C’mon, Russia,” Colbert said. “Can’t you just leave America alone?”

    The implication was clear. Killing Net Neutrality would destroy the Internet (and may have been a Putin plot).

    Colbert was not the only person to make such claims, of course. Senate Democrats said that if we failed to save Net Neutrality, we’d get the Internet “one word at a time.” Actor Mark Ruffalo said that repeal was an “authoritarian dream,” and actress Alyssa Milano called it a threat to democracy itself.

    CNN was slightly less hyperbolic, calling repeal of the regulation “the end of the Internet as we know it.”

    Six Years Later

    CNN was right, in a sense. The repeal of Net Neutrality — which occurred in 2018 with the FCC’s “Restoring Internet Freedom Order” — did mean the end of the Internet as we knew it.

    Anyone reading this article can see the Internet didn’t die (hooray!). But few may realize just how much the Internet has improved since Net Neutrality was repealed.

    Data released by FCC commissioner Brendan Carr, the former general counsel of the regulatory body, show that not only did the Internet not die; speeds got exponentially faster. According to data from Ookla, a global leader in Internet access performance metrics, median fixed download speeds have increased by 430 percent since 2017. Median mobile download speeds have increased even more — by 647 percent, a more than sevenfold surge.

    Internet speeds didn’t just get faster, however. They became less expensive in real dollars.

    “In real terms, the prices for Internet services have dropped by about 9 percent since the beginning of 2018, according to BLS CPI data,” Carr points out. “On the mobile broadband side alone, real prices have dropped by roughly 18 percent since 2017… and for the most popular broadband speed tiers, real prices are down 54 percent…”

    This is just one part of the Internet boom that occurred following the repeal of Net Neutrality. As the Wall Street Journal recently noted, Internet access also exploded.

    In 2015, 77 percent of Americans had access to high-speed broadband. By January 2020, that figure had risen to 94 percent, and it didn’t stop there, the paper notes. In 2022, some 400,000 miles of fiber were laid by broadband engineers — more than double that of 2016.

    All of this investment didn’t happen accidentally. It was spurred by a return to laissez-faire Internet regulations reminiscent of the earlier days of the Internet, and was predicted by those who opposed Net Neutrality.

    “It’s basic economics,” former FCC head Ajit Pai said. “The more heavily you regulate something, the less of it you’re likely to get.”

    Pai’s point deserves attention. Supporters of Net Neutrality argued that the policy was necessary to keep ISPs in line so they didn’t rig the game against consumers in pursuit of higher profits.

    But it was precisely the lack of regulation (and the pursuit of profits) that spurred the Internet boom. Companies seeking profit poured capital into Internet services in an effort to attract customers by offering a better, faster, and less-expensive product than their competitors.

    Internet prices fell and service improved as a result, despite widespread fears that it would result in the “end of the Internet.” Why so many leftists might have genuinely believed the Internet would break without a federal bureaucracy holding its hand can perhaps be found in the views of the father of socialism, Karl Marx.

    Marx saw competition — especially market competition — as a destructive force:

    Competition engenders misery, it foments civil war, it ‘changes natural zones,’ mixes up nationalities, causes trouble in families, corrupts the public conscience, ‘subverts the notion of equity, of justice,’ of morality, and what is worse, it destroys free, honest trade, and does not even give in exchange synthetic value, fixed, honest price. It disillusions everyone, even economists. It pushes things so far as to destroy its very self.

    The great Austrian economist Ludwig von Mises knew better. He saw market competition as the engine of economic production — “the sharper competition, the better” — which is why he disliked comparisons of competition to war.

    “The function of battle is destruction; of competition, construction,” he noted in his 1922 book Socialism.

    The Revival of Net Neutrality

    The rapid expansion of Internet services over the last six years shows that Pai and Mises understand economics better than Net Neutrality proponents (and Karl Marx). Deregulation spurred investment and market competition, which ultimately resulted in a better Internet — not the end of the Web.

    Alas, even though the apocalyptic predictions never materialized, Net Neutrality is back.

    Last month, the FCC voted, by a 3–2 margin, to reinstate the policy in an attempt to, in CNN’s words, “reassert its authority over an industry that powers the modern digital economy.”

    What’s astonishing is that you wouldn’t even know the amazing story about the explosion in Internet services (or the failed predictions of 2017–18) if you read a news story about the reinstatement of Net Neutrality.

    The Associated Press mentions not a single word about the failed predictions or the improved speed and affordability of Internet services. Instead, we’re given this nugget from FCC Chairwoman Jessica Rosenworcel: “In our post-pandemic world, we know that broadband is a necessity, not a luxury.”

    CNN, PBS, and numerous other media outlets ran similar stories that failed to mention either the doomsday predictions or the explosion of Internet services over the last six years.

    One media outlet conceded that the sky didn’t fall following repeal of the regulation, but argued that this was because Net Neutrality never really left, since public scrutiny and state governments kept ISPs in line following repeal.

    “And so, it is fair to say we haven’t seen a world without Net Neutrality,” Stanford Law professor Barbara van Schewick, a Net Neutrality supporter, told NPR.

    ‘Cyber-Libertarianism’ and the Internet

    It’s nice to see NPR recognize the value of federalism, one of the most important checks on centralized power in the American system. Yet Schewick’s point that states have the power to regulate ISPs was curiously missing from the #savetheinternet campaigns of 2017–18. And there’s a reason for this.

    The reality is, Net Neutrality was never truly about “saving” the Internet. (If it was, we wouldn’t be witnessing new efforts to impose it even though the Internet has grown far more accessible and affordable in its absence.)

    Net Neutrality is about controlling the Internet.

    From the beginning of the commercialization of the Internet in the 1990s, the US adopted a largely laissez-faire approach to the Internet, a standard set during the Clinton administration.

    John Palfrey, a law professor who ran Harvard’s Berkman Center for Internet & Society, said there was a term for this “hands-off regulatory approach”: cyber-libertarianism.

    Cyber-libertarianism unleashed a wave of innovation in e-commerce and social media, he said, which led to an explosion of wealth unparalleled in US history with the possible exception of the Gilded Age. And though other countries such as China would also make strides, Palfrey said the results of the laissez-faire approach are apparent.

    “The United States remains the undisputed leader in virtually all aspects of the Internet, digital media, and computing early in this new millennium,” he explained in a 2021 Harvard Law School interview.

    Yet, Palfrey does not see “cyber-libertarianism” as a success. He regards it as a threat and a failure.

    “It made a small number of people — mostly men, mostly highly educated, mostly white and Asian — fabulously wealthy,” Palfrey said. “We need a regulatory regime today for technology that puts the public interest first, with equity and inclusion as a design principle and not an afterthought.”

    Like many others, Palfrey believes the Internet should be regulated as a public utility. He believes the current system gives too much to a handful of billionaires “all of whom happen to be men and white.”

    Net Neutrality has been sold to the public as a policy that will prevent Internet providers “from blocking certain websites or slowing down your data.”

    This isn’t a power politicians and bureaucrats fear so much as they envy, which is why they’re seeking to loosen private control over the most powerful communication system in the world “in the interest of a more just and inclusive economy and our very democracy.”

    Once one realizes that Net Neutrality isn’t so much about creating a better Internet as much as a key step toward an Internet under government control, the push to revive the policy makes a whole lot more sense.

    This article originally appeared in The Daily Economy at AIER.org.

    https://fee.org/articles/net-neutrality-is-not-about-saving-the-internet-its-about-controlling-the-internet/


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  • The “Internet Taxation” Fight Isn’t Really about Internet Taxation

    Posted on by Azrael Comment

    One of the key principles of a free society is that governmental power should be limited by national borders.

    Here’s an easy-to-understand example. Gambling is basically illegal (other than government-run lottery scams, of course) in my home state of Virginia. So they can arrest me (or maybe even shoot me) if I gamble in the Old Dominion.

    I think that’s bad policy, but it would be far worse if Virginia politicians also asserted extraterritorial powers and said they could arrest me because I put a dollar in a slot machine during my last trip to Las Vegas.

    And if Virginia politicians tried to impose such an absurd policy, I certainly would hope and expect that Nevada authorities wouldn’t provide any assistance.

    This same principle applies (or should apply) to taxation policy, both globally and nationally.

    On a global level, I’m a big supporter of so-called tax havens. I’m glad when places with pro-growth tax policy attract jobs and capital from high-tax nations. This process of tax competition rewards good policy and punishes bad policy. Moreover, I don’t think those low-tax jurisdictions should be under any obligation to enforce the bad tax laws of uncompetitive countries.

    There’s a very similar debate inside America. Some states—particularly those with punitive sales taxes—want to force merchants in other states to be deputy tax enforcers.

    I’ve written about this topic and I think even my writings from 2009 and 2010 are still completely relevant. But let’s check some other sources, starting with a column in the Wall Street Journal. It’s from 2016, but the issue hasn’t changed.

    The state of Alabama is openly defying the U.S. Supreme Court in an effort to squeeze millions of dollars of tax revenue from businesses beyond its borders. …This unconstitutional tax grab cuts to the heart of the Commerce Clause, which gives Congress the power to regulate trade “among the several States.” Alabama’s regulation directly contravenes the Supreme Court’s 1992 ruling in Quill v. North Dakota. In that case, the court held that North Dakota could not require an out-of-state office-supply company to collect sales taxes because the firm had no offices or employees there. …Alabama’s revenue commissioner, Julie Magee, is putting forward an untested and suspect legal theory: The state claims that if its residents buy more than $250,000 a year from a remote business, then the seller has an “economic presence”… There are around 10,000 sales-tax jurisdictions in the U.S., with varying rates, rules and holidays, and different definitions of what is taxable. Keeping track of this ever-changing patchwork is a burden, and forcing retailers to scramble to comply would profoundly hinder interstate commerce in the Internet age.”

    And here are some excerpts from a column published that same year by Fortune.

    When politicians call for “fairness,” it’s important to take a closer look at their definition of fair. See, for example, the nationwide push in state capitols to slap online sales taxes on out-of-state retailers—a simple tax grab… states are constitutionally prohibited from collecting sales taxes from retailers that have no presence within their borders…thanks to the U.S. Supreme Court’s 1992 ruling in Quill Corp. v. North Dakota… Any national online sales-tax system will burden online retailers to a degree never felt by brick-and-mortar businesses. Local businesses only have to deal with a limited number of sales taxes—usually only the state, county, and local levies that apply to specific stores. Online retailers, on the other hand, would have to calculate and apply sales taxes across the entire nation—and roughly 10,000 jurisdictions have such taxes. Complying with this convoluted system would necessarily raise costs for consumers and stifle competition.”

    And the debate continues this year. The Wall Street Journal editorialized against extraterritorial state taxing last week.

    A large faction of House Republicans are pressing GOP leaders to attach legislation to the omnibus spending bill that would let states collect sales tax from remote online retailers. South Dakota Rep. Kristi Noem’s legislation…would let some 12,000 jurisdictions conscript out-of-state retailers into collecting sales and use taxes from their customers. …Contrary to political lore, sales tax revenues have been increasing steadily in states with healthy economies. Over the past five years, Florida’s sales tax revenues have grown 27%. South Dakota’s are up by nearly 30% since 2013. …Twenty or so states have adopted “click-through” taxes to hit remote retailers that have contracts with local businesses. In 2016 South Dakota invited the High Court to revisit Quill by extending its sales tax to out-of-state sellers. …the Court could enable broader taxation and regulation of out-of-state businesses. This is what many states want to happen. …Raising taxes on small business and consumers won’t be a good look for Republicans in November, nor an inducement for investment and growth.”

    Jeff Jacoby also just wrote on this topic for his column in the Boston Globe.

    First, the flow of interstate commerce must not be impeded by one state’s impositions. And second, there should be no taxation without representation; vendors should not be liable for taxes in states where they have no vote or political recourse. The Supreme Court upheld this “physical connection” standard in a 1992 case, Quill v. North Dakota. …the high court should reaffirm it. In the 26 years since the justices rebuffed North Dakota’s claim, the case against allowing states to exert their taxing power over remote sellers has grown even stronger. …there are now 12,000 taxing jurisdictions—not only states, counties, and cities, but also parishes, police districts, and Indian reservations. A lone online seller, unprotected by the Quill rule, could be obliged to remit taxes to any combination of them, with all their multitudinous rules and definitions, tax holidays, and filing deadlines. …South Dakota can impose onerous burdens on companies operating within its borders, but not on vendors whose only connection to the state is that some of their customers happen to live there. The court got it right the first time. No merchant—whether selling online, via mail order, or in a traditional shop—is obliged to be a tax collector for states it doesn’t operate in.”

    And here are some passages from Jessica Melugin’s article for FEE. She makes the key point that extraterritorial tax powers would undermine—if not cripple—the liberalizing impact of tax competition.

    …the Remote Transactions Parity Act (RTPA)…seeks to get rid of that physical presence limit on state taxing powers. It would let states reach outside their geographical borders and compel another state’s business to calculate, collect, and remit to that first state. …the long-term effect is that this arrangement will lessen the downward pressure on taxes between jurisdictions. Think of it like this: it’s the difference between driving your car across the D.C. border to Virginia to fill up with lower Virginia gas taxes—that’s how it works now and that’s what keeps at least some downward pressure on D.C. tax rates. If D.C. made the rate high enough, everyone would exit and fill up in Virginia. But if the approach in the RTPA is applied to this thought experiment, it would mean that when you pull into that Virginia gas station, they look at your D.C. plates and charge you the D.C. gas tax rate. …it’s a makeshift tax cartel among the states. …the RTPA is a small-business killer—which is why big box retailers support it. It crushes small competitors with compliance costs. State politicians are for it because they’d rather tax sellers in other states who can’t vote them out of office. Consumers will be left with less money in their pockets and fewer choices.”

    By the way, there are some pro-market people on the other side. Alex Brill of the American Enterprise Institute has written in favor of extraterritorial taxation.

    …lawmakers have proposed legislation to allow (not require) states to collect sales tax on goods purchased from out-of-state sellers. …critics of this legislation…argue that “internet freedom is under attack by politicians willing to distort markets and tilt the playing field toward their favored businesses.” Internet freedom is certainly not being “attacked” by a policy to improve enforcement of existing tax liability. Second, these critics oppose the legislative reform based on the belief that just because the internet benefits people, online retail activities should be advantaged by public policy. If public finance were based on this type of specious logic, we would have a tax code far more unfair and distorted than it currently is.”

    I actually agree with both of his arguments. Giving states extraterritorial tax powers isn’t an attack on the Internet. And I also agree that tax policy shouldn’t provide special preferences.

    But neither of his points address my concern that extraterritorial tax powers give too much power to governments and undermine tax competition.

    Unless he’s going to argue that Nevada’s no-income-tax status is “distorted” compared to California’s punitive system. Or unless he’s going to argue that Delaware’s no-sales-tax status is “unfair” compared to New Jersey’s onerous system.

    For more information, here’s my speech to congressional staffers from 2012.

    P.S. For folks who like technical details, this fight is not about Internet taxation. It’s a battle between “origin-based” taxation (basically territorial taxation) and “destination-based” taxation (basically worldwide or extraterritorial taxation). I favor the former and oppose the latter, which helps explain my opposition to the border-adjustment tax and the value-added tax.

    P.P.S. I was afraid that congressional leaders would attach a provision to the new spending bill that would allow extraterritorial taxation by states. Fortunately, that didn’t happen. So the “omnibus” plan is a pork-filled affront to fiscal sanity, but at least it’s not a state-goverment-empowering, pork-filled affront to fiscal sanity.

    Reprinted from International Liberty.


    Daniel J. Mitchell

    Daniel J. Mitchell is a Washington-based economist who specializes in fiscal policy, particularly tax reform, international tax competition, and the economic burden of government spending. He also serves on the editorial board of the Cayman Financial Review.

    This article was originally published on FEE.org. Read the original article.



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  • The Internet Revolutionized Communications, But That’s Just the Beginning

    Posted on by Azrael Comment

    Because of the Internet, our lives are significantly different. Writings on any topic, no matter how obscure, can be found with a quick Google search. Citizens can challenge powerful authority figures such as the police by publishing videos of their misdeeds. Remote workers can participate fully in company life, and relatives can video chat each other cheaply from nearly anywhere in the world.

    Yet, these innovations are only a fraction of what the adopters of the early Internet hoped to accomplish. Google searches and blog posts are innovations of a particular type: innovations in communication. That is, the rise of the Internet has revolutionized publishing. Anyone can be a creator and distributor of content, and anyone can access and read it. However, a subset of early Internet adopters (who go by many names: cypherpunks, crypto anarchists, and Internet Exceptionalists, to name a few) thought the Internet would go further. They thought we would have an Internet revolution in economics and in law.

    Instead of relying on government-issued money, we would have digital cash, the ability to pay any person on the Internet instantly and anonymously. Instead of being regulated by our brick-and-mortar governments, we, the new settlers of the Electronic Frontier, would make our own rules.

    These were the expectations of the Internet as of 1994 or so. What happened? Life has changed, certainly, but in the United States, we still use US dollars and US law. Perhaps these ideas were only fantasies.

    But maybe these ideas were merely ahead of their time. By building on advances in cryptography and distributed systems, blockchain technology promises a future with globally available digital cash, tamper-proof property records, auto-enforced commitments, and even private law. In this piece, I’ll explore these hopes for the Internet, the attempts that failed, and the future possibilities of blockchain technology.

    Crypto Anarchists Declare the Independence of Cyberspace

    In 1996, John Perry Barlow, co-founder of the Electronic Frontier Foundation and lyricist for the Grateful Dead, wrote a grandiose declaration of independence. “Governments of the Industrial World,” he wrote, “you weary giants of flesh and steel, I come from Cyberspace, the new home of Mind.”

    He argued that cyberspace represents a new frontier, a place separate from where our bodies live. Moreover, on the Internet, geographic borders (the usual markers of where government power begins and ends) don’t exist. In Barlow’s view, the citizens of cyberspace are subject to “increasingly hostile and colonial measures [that] place us in the same position as those previous lovers of freedom and self-determination who had to reject the authorities of distant, uninformed powers.” His solution? “We will create a civilization of the Mind in Cyberspace,” he proclaimed. “May it be more humane and fair than the world your governments have made before.”

    Barlow’s declaration had its detractors. As David Bennahum put it, “I’m wondering what it means to form a social contract in cyberspace, one with the kind of authenticity and authority of a constitution. It sounds great in theory, but I don’t actually live in cyberspace: I live in New York City, in the state of New York, in the United States of America. I guess I’m taking things too literally. Apparently my mind lives in cyberspace, and that’s what counts. It’s my vestigial meat package, also known as my body, that lives in New York. Government, geography, my body: all are obsolete now thanks to ‘cyberspace, that new home of mind’” (Bennahum 2001).

    Less snarkily, Harvard law professor Jack Goldsmith argued that cyberspace is “no different than real space” because many other communication technologies also involve people making transactions across borders. “To this extent,” he explained, “activity in cyberspace is functionally identical to transnational activity mediated by other means, such as mail or telephone or smoke signal” (Goldsmith 1998). In other words, the Internet is nothing more than a smoke signal with a better tech team. No legal changes are necessary.

    The Internet is Fundamentally Different

    Yet, there is a real truth to the arguments of the crypto anarchists: the Internet is fundamentally different. Unlike a telephone call, the Internet persists even after a person signs off. And unlike a letter sent in the mail, an Internet posting can affect thousands of people in other countries without giving any indication that borders will be crossed. With the telephone or the mail, recipients must be selected and the communication must be paid for, the cost increasing with each new recipient. However, a post on the Internet can be freely available to all. No prior form of communication creates this kind of virtual space.

    Renowned cyberlaw1 legal theorists such as Jack Goldsmith, Timothy Wu, David Johnson, David Post, and Lawrence Lessig spent much of the 90s arguing this point. Goldsmith and Wu occupied the pro-regulation, “Internet is merely communications technology” camp, whereas Johnson and Post represented the Internet Exceptionalists, arguing that cyberspace should govern itself. (Lessig is harder to pin down.) In 1996, Johnson and Post presciently claimed that the Internet would throw “law into disarray by creating entirely new phenomena that need to become the subject of clear legal rules but that cannot be governed, satisfactorily, by any current territorial sovereign.”

    Over twenty years later, the Internet Exceptionalists were finally proven right. One of the major dreams of the 90s, digital cash, has been implemented. Cryptocurrencies definitively show that the Internet is more than the sum of its parts, more than a leap in communications technology. Instead of making transfers from one centralized ledger to another (which Goldsmith correctly observes could be done over a telephone) cryptocurrency ledgers are stored and updated simultaneously on thousands of computers at once. This radical decentralization gives digital currencies an emergent property—the feeling that they are native to the Internet, more than transfers of data from one physical place to another.

    The Empire Strikes Back

    Historically, territorial governments have been very successful in their attempts to force multinational Internet companies to comply with their demands. In an early cyberlaw case, France effectively banned Nazi paraphernalia on Yahoo’s auction sites, even though Yahoo’s servers were in the US. It was enough that the sites were accessible in France, and that Yahoo had French assets that could be seized and French interests that could be thwarted (Goldsmith and Wu 2008, 8). More sinisterly, China has forced search engines to censor their results, removing anti-government and pro-democracy sentiments (Waddell 2016).

    Despite Barlow’s declaration of independence, governments have been reluctant to loosen their grip, leaving website owners effectively subject to all legal jurisdictions in which their assets could be seized.

    As Goldsmith and Wu explain,

    There’s an old European joke that captures the problem. In heaven, the joke goes, you find French cooks, English government, Swiss trains, and Italian lovers. In Hell, by contrast, you find French government, Italian trains, English chefs, and Swiss lovers. Territorial control of the Internet seemed to promise a parallel version of legal hell: a world of Singaporean free speech, American tort law, Russian commercial regulation, and Chinese civil rights.”

    These territorial governments, Barlow’s “distant, uninformed powers”, cling to the belief that they are providing a needed service. After all, how else will order be created, if not with government? This argument sounds an awful lot like Hobbesian legal centralism, the belief that government is the “wellspring of social order” (Ellickson 1991, 10). However, whether the government can provide social order and whether only the government can provide social order are two different claims, and the arguments for regulation usually depend on the latter.

    Goldsmith and Wu illustrate this line of thinking when they explain how eBay dealt with fraud. At first, eBay was a small community and social norms against fraud sufficed—people could be presumed to be well-intentioned. But it became apparent that extra measures were necessary.

    …eBay quickly learned that to prevent fraud, enforce its contracts, and ensure stability in its auction services, it would depend critically on government coercion and the rule of law provided by a stable country like the United States,” Goldsmith and Wu argue. “These are a few of the many complex benefits that only territorial sovereigns can bring, and without which most aspects of the Internet that we love and cherish would not exist” (2008, 129).

    Blockchains as a Tool for Private Ordering

    At the time, eBay may have required government coercion, but the idea that “only territorial sovereigns” can prevent fraud is false. Law and economics scholars such as Robert Ellickson have shown that people can often find ways to trust each other without the state. Furthermore, blockchain technology and smart contracts offer a different solution.

    For instance, OpenBazaar, an online marketplace that uses cryptocurrencies as payment, allows users to use very simple smart contracts (actually, 2-of-3 multisig addresses) to prevent fraud. As OpenBazaar describes it, “When a buyer wants to purchase a listing, instead of sending the funds directly to the seller, he will send the funds to the multisig account. The three people who control this account are the buyer, the seller, and a trusted third party selected beforehand.”

    In the simplest case, the transaction goes smoothly, but if there is a dispute, the trusted third party decides whether to release the funds to the buyer or seller. Importantly, no one has control over the transaction apart from the buyer and seller (and only in the case of a dispute, their arbitrator), preventing fraud and making government seizure not only unwelcome but impossible.

    This approach may seem bizarre, but this sort of private arbitration is used widely to resolve disputes in commercial agreements. It also has historical precedent: in medieval times, merchants who engaged in international trade, frustrated with the inadequacy of local courts to enforce contracts, created their own rules and their own courts. Rather than having to travel to the court of a distant noble who likely knew very little about trade practices, these new rules, known as the “law merchant,” allowed merchants to resolve disputes quickly before knowledgeable courts (Hadfield 2017).

    Legal scholars such as Johnson and Post recognized that the law merchant provided an example for Internet dispute resolution. In 1996, as part of the Cyberspace Law Institute, they launched the Virtual Magistrate Project, an experiment in which a pool of “neutral arbitrators with experience in the law and in the use of computer networks” would resolve disputes in a timely manner. Unfortunately, the project hit a snag—there was no way to enforce decisions, and therefore the experiment ended after only a few cases. However, with smart contracts and cryptocurrencies, enforcement is relatively easy and well-defined. An arbitrator only has the power consensually granted to them in code, but once a dispute occurs, they can use that power to direct the money sent to a smart contract as they see fit.

    “The scope of all these efforts is certainly narrow,” Peter Ludlow admitted, talking about the Virtual Magistrate Project, “but it would be a mistake to conclude from this that they will not evolve into full-blown legal systems with profound impact on future legal theory worldwide. It is important to remember that our current systems of law have humble and in some cases whimsical beginnings… Rather than be dismissive,” he continued, “perhaps we should consider the possibility that we are witnessing the birth of the juridical systems and practices of the new millennium” (2001).

    Ludlow’s statement was made before blockchain technology existed, but the same spirit applies today. It is a mistake to assume that only government can provide certain services. As Johns Hopkins cryptography professor Matthew Green made clear, “If you think something is impossible but you don’t have an impossibility proof, then what you have is an open problem.” Blockchain alternatives to government services are still an open problem, but the solutions thus far indicate that order can be achieved without government coercion.

    Works Cited

    Bennahum, David S. “United Nodes of Internet.” In Crypto Anarchy, Cyberstates, and Pirate Utopias, 39-45. Cambridge, MA: The MIT Press, 2001.

    Barlow, John Perry. “A Declaration of the Independence of Cyberspace.” Electronic Frontier Foundation. February 08, 1996. Accessed February 28, 2018. https://www.eff.org/cyberspace-independence.

    Ellickson, Robert C. Order Without Law: How Neighbors Settle Disputes. Cambridge, MA: Harvard University Press, 1991.

    Goldsmith, Jack L. “Against Cyberanarchy.” The University of Chicago Law Review 65, no. 4 (1998): 1199.

    Goldsmith, Jack L., and Tim Wu. Who Controls the Internet?: Illusions of a Borderless World. Oxford: Oxford University Press, 2008.

    Johnson, David R., and David G. Post. “Law and Borders: The Rise of Law in Cyberspace.” Stanford Law Review 48, no. 5 (1996): 1367. doi:10.2307/1229390.

    Waddell, Kaveh. “Why Google Quit China-and Why It’s Heading Back.” The Atlantic. January 19, 2016. Accessed February 28, 2018. https://www.theatlantic.com/technology/archive/2016/01/why-google-quit-china-and-why-its-heading-back/424482/.

    1. The “cyber” prefix has apparently been hard to shake. ↩

    Reprinted from Libertarianism.

    Kate Sills


    Kate Sills

    Kate Sills holds degrees in Computer Science and Cognitive Science from UC Berkeley.

    This article was originally published on FEE.org. Read the original article.



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