Blockchain, Crypto Infrastructure and the Transaction Cost View of Economic History

Blockchain, Crypto Infrastructure and the Transaction Cost View of Economic History

These materials will review the Transaction Cost View of Economic History starting with Hunter Gatherer Societies to the end of the Pre-Analog Era. Students are encouraged consider whether Blockchain / Crypto Infrastructure is the next logical continuation of this arc of history ? v1.02

0f2a473c07602f3dd53c5ed0de0c56b5?s=128

Daniel Martin Katz

February 04, 2019
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  1. @ computational professor daniel martin katz danielmartinkatz.com BLOCKCHAIN, CRYPTOCURRENCY AND

    LAW professor nelson rosario CRYPTO AND THE TRANSACTION COST VIEW OF ECONOMIC HISTORY nelsonmrosario.com @ nelsonmrosario BLOCKCHAINLAWCLASS.COM
  2. DANIEL MARTIN KATZ E D U | I L L

    I N O I S T E C H + S TA N F O R D C O D E X B LO G | C O M P U TAT I O N A L L E GA L S T U D I E S . C O M PAG E | DA N I E L M A R T I N K AT Z . C O M C O R P | L E X P R E D I C T. C O M NELSON ROSARIO B LO G | L AWO F C RY P TO C U R R E N C Y. C O M PAG E | N E L S O N M RO S A R I O . C O M F I R M | S M O L I N S K I RO S A R I O L AW P. C . BLOCKCHAINLAWCLASS.COM L A B | T H E L AW L A B . C O M E D U | I L L I N O I S T E C H - C H I C AG O K E N T L AW
  3. None
  4. FROM HUNTER GATHERER SOCIETIES TO A HIGHLY COMPLEX GLOBAL ECONOMIC

    SYSTEM(S) BLOCKCHAINLAWCLASS.COM
  5. OVER THE PAST 5000+ YEARS WE HAVE ENGAGED IN A

    MASSIVE TRUST SCALING EXERCISE BLOCKCHAINLAWCLASS.COM
  6. NOT BITCOIN PER SE BUT RATHER CRYPTO INFRASTRUCTURE PURPORTS TO

    BE THE NEXT CHAPTER … BLOCKCHAINLAWCLASS.COM
  7. IN THE TRANSACTION COST VIEW OF (ECONOMIC) HISTORY BLOCKCHAINLAWCLASS.COM (NOTE:

    THIS IS A HIGH LEVEL OVERVIEW OMITTING MANY KEY DETAILS)
  8. None
  9. ONE OF THE BENEFITS OF A LONGER FORM COURSE ….

    BLOCKCHAINLAWCLASS.COM
  10. IS THAT WE CAN HELP PUT THESE DEVELOPMENTS IN A

    PROPER HISTORICAL PERSPECTIVE … BLOCKCHAINLAWCLASS.COM
  11. SO TODAY WE WILL HARKEN BACK THOUSANDS OF YEARS AND

    WALK FORWARD … BLOCKCHAINLAWCLASS.COM
  12. None
  13. LIFE WAS ONCE BLOCKCHAINLAWCLASS.COM ‘NASTY, BRUTISH AND SHORT’ (NOTE IT

    STILL IS FOR SOME)
  14. HUNTER GATHERER SOCIETIES HUNTING OR FORAGING WAS REQUIRED FOR SUBSISTENCE

    (SOME STILL EXIST TODAY) BLOCKCHAINLAWCLASS.COM
  15. HOW WERE WE ABLE TO GET PAST MERE SUBSISTENCE ?

    BLOCKCHAINLAWCLASS.COM
  16. HOW WERE WE ABLE TO SLOWLY DEVELOP THE COMPLEX ECONOMIC

    ARRANGEMENTS THAT HELP DEFINE THE MODERN ECONOMY? BLOCKCHAINLAWCLASS.COM
  17. None
  18. ECONOMIC HISTORY TO DATE CAN BE SEEN AS A QUEST

    TO SCALE TRUST AND LOWER TRANSACTION COSTS BLOCKCHAINLAWCLASS.COM
  19. THIS HAS OFTEN BEEN FACILITATED THROUGH THE DEVELOPMENT OF INSTITUTIONS

    BLOCKCHAINLAWCLASS.COM
  20. THE ORIGIN AND MAINTENANCE OF TRUST INSTITUTIONS HAS LONG BEEN

    AN INTEREST OF ECONOMISTS, ANTHROPOLOGISTS AND OTHER SOCIAL SCIENTISTS BLOCKCHAINLAWCLASS.COM
  21. None
  22. HUNTER GATHERER SOCIETIES HUNTING OR FORAGING WAS REQUIRED FOR SUBSISTENCE

    (SOME STILL EXIST TODAY) BLOCKCHAINLAWCLASS.COM
  23. BOB HAS RECENTLY KILLED A DEER WITHOUT SALT, BOB CAN

    ONLY PERSONALLY CONSUME A LIMITED AMOUNT OF DEER MEAT BEFORE IT ROTS BLOCKCHAINLAWCLASS.COM
  24. BOB HAS RECENTLY KILLED A DEER BOB WOULD LIKE TO

    BOTH TIME SHIFT AND PERHAPS DIVERSIFY HIS CONSUMPTION BLOCKCHAINLAWCLASS.COM WITHOUT SALT, BOB CAN ONLY PERSONALLY CONSUME A LIMITED AMOUNT OF DEER MEAT BEFORE IT ROTS
  25. ALICE IS GOOD AT FORAGING BERRIES BLOCKCHAINLAWCLASS.COM BERRIES ALSO HAVE

    A LIMITED LIFE WHICH IS LONGER THAN RAW MEAT (BUT NOT UNLIMITED)
  26. ALICE IS GOOD AT FORAGING BERRIES BERRIES ALSO HAVE A

    LIMITED LIFE WHICH IS LONGER THAN RAW MEAT (BUT NOT UNLIMITED) ALICE WOULD LIKE TO DIVERSIFY HER CONSUMPTION BLOCKCHAINLAWCLASS.COM
  27. CONSIDER THE SIMPLEST TRANSACTION BLOCKCHAINLAWCLASS.COM

  28. 3 FISTS OF BERRIES 1 FIST OF DEER MEAT BLOCKCHAINLAWCLASS.COM

    CONSIDER THE SIMPLEST TRANSACTION
  29. BLOCKCHAINLAWCLASS.COM BOTH SIDES CAN (IN THEORY) BENEFIT FROM SUCH AN

    EXCHANGE
  30. NO DEBT NO CURRENCY JUST A SPOT BARTER WITH REAL

    TIME DELIVERY IT IS PRACTICALLY THE SIMPLEST FORM OF TRANSACTION BLOCKCHAINLAWCLASS.COM
  31. BUT NOTE EVEN THIS SIMPLE TRANSACTION REQUIRES COORDINATION (I.E. IT

    HAS TRANSACTION COSTS) SEARCH: BARGAINING: NEED TO LEARN THAT THE OTHER PARTY HAS A SURPLUS ENFORCEMENT: BLOCKCHAINLAWCLASS.COM NEED TO AGREE UPON AN ACCEPTABLE RATE OF EXCHANGE NEED TO MAKE SURE THE OTHER PARTY DELIVERS ON THE DEAL
  32. None
  33. THE ECONOMIC ANTHROPOLOGICAL ACCOUNT REGARDING TRUST INSTITUTIONS VS BLOCKCHAINLAWCLASS.COM

  34. PURE ARMS LENGTH BARTER APPEARS TO BE PERHAPS LESS COMMON

    THAN SOME ECONOMIC SCHOLARS ACKNOWLEDGE BLOCKCHAINLAWCLASS.COM
  35. BECAUSE MANY LIVED IN SMALL SCALE GROUPS — THUS WERE

    INVOLVED IN REPEATED INTERACTIONS BLOCKCHAINLAWCLASS.COM
  36. BARTER INDIVIDUALS IN REPEATED INTERACTION STRANGERS ON THE SPOT MARKET

    CUSTOMS, REPUTATION + INFORMAL CREDITS = = BLOCKCHAINLAWCLASS.COM
  37. FOR EXAMPLE, GIFT ECONOMIES CAN BE SEEN AS RUNNING SOME

    SORT OF AN INFORMAL LEDGER ENFORCED THROUGH SOCIAL NORMS, ETC. BLOCKCHAINLAWCLASS.COM
  38. None
  39. NOW WE CAN INCREASE THE COMPLEXITY OF THE TRANSACTION 3

    FISTS OF BERRIES 2 FISTS OF DEER MEAT <LATER> <TODAY> <TODAY> + 3 FISTS OF BERRIES BLOCKCHAINLAWCLASS.COM
  40. OKAY NOW THIS HAS BECOME MATERIALLY MORE COMPLICATED DEBT BLOCKCHAINLAWCLASS.COM

  41. None
  42. THE BENEFIT OF DEBT IS THAT CREDITOR COULD THEREBY SHIFT

    THEIR CURRENT SURPLUS AND TRANSFER IT TO THE FUTURE (OTHERWISE IT MIGHT BE WASTED) BLOCKCHAINLAWCLASS.COM
  43. HOWEVER, THE DEBT MUST BE ENFORCED SOMEHOW … DEBTOR CREDITOR

    BLOCKCHAINLAWCLASS.COM
  44. NOW IT IS POSSIBLE THAT THE DEBT COULD BE SETTLED

    BETWEEN THE TWO PARTIES DEBTOR CREDITOR BLOCKCHAINLAWCLASS.COM
  45. THERE IS A HISTORIC DEBATE REGARDING THE EXTENT TO WHICH

    FORMAL VS INFORMAL MECHANISMS WERE USED TO SATISFY DEBTS DEBTOR CREDITOR BLOCKCHAINLAWCLASS.COM
  46. BUT OFTEN IT IS LESS COSTLY TO ALLOW AN INSTITUTION

    (SUCH AS THE STATE OR 3RD PARTY) TO HELP ENFORCE AGREEMENTS DEBTOR CREDITOR BLOCKCHAINLAWCLASS.COM
  47. OTHERWISE, EACH CREDITOR MUST DO ALL OF THE ENFORCEMENT THEMSELVES

    DEBTOR CREDITOR BLOCKCHAINLAWCLASS.COM
  48. IT IS MORE EFFICIENT TO ALLOW EACH PERSON TO SPECIALIZE

    RATHER THAN HAVE TO BE A JACK OF ALL TRADES … HUNTER FORAGER (NOT A PROFESSIONAL DEBT COLLECTOR) BLOCKCHAINLAWCLASS.COM
  49. None
  50. INSTITUTIONS (BROADLY DEFINED) CAN HELP COORDINATE THESE (AND OTHER) TRANSACTIONS

    BLOCKCHAINLAWCLASS.COM
  51. SOME SYSTEM OF DEBT RECORDING BECOMES IMPORTANT SUCH AS A

    LEDGER … ACCOUNTING LEDGER. TABLET WITH AN ACCOUNT IN SUMERIAN CUNEIFORM DESCRIBING AMOUNTS OF BARLEY BLOCKCHAINLAWCLASS.COM
  52. IT IS ALSO IMPORTANT TO HAVE LEGAL RULES SUCH AS

    CONTRACT LAW TO SUPPORT ENFORCEMENT BLOCKCHAINLAWCLASS.COM
  53. LEDGERS, LEGAL RULES AND CURRENCY ALLOW FOR A RANGE OF

    TRANSACTIONS TO OCCUR WHICH OTHERWISE WOULD BE DIFFICULT OR IMPOSSIBLE BLOCKCHAINLAWCLASS.COM
  54. None
  55. THIS IS JUST A TASTE OF INSTITUTIONAL AND TRANSACTION COST

    ECONOMICS BLOCKCHAINLAWCLASS.COM
  56. THE FIELD HAS MANY OFFSHOOTS BUT IT SEEKS TO CHARACTERIZE

    THE ROLE OF INSTITUTIONS (BROADLY CONSTRUED) IN FACILITATING TRANSACTING BLOCKCHAINLAWCLASS.COM
  57. WHAT ARE ‘TRANSACTION COSTS’ ? “In order to carry out

    a market transaction it is necessary to discover who it is that one wishes to deal with, to inform people that one wishes to deal and on what terms, to conduct negotiations leading up to a bargain, to draw up the contract, to undertake the inspection needed to make sure that the terms of the contract are being observed, and so on. These operations are often extremely costly, sufficiently costly at any rate to prevent many transactions that would be carried out in a world in which the pricing system worked without cost.“ Ronald Coase, The Problem of Social Cost, 3 The Journal of Law and Economics 1 (1960) BLOCKCHAINLAWCLASS.COM
  58. DENNIS P.KEHOE, DAVID RATZAN, AND URI YIFTACH (EDS.), LAW AND

    TRANSACTION COSTS IN THE ANCIENT ECONOMY, UNIVERSITY OF MICHIGAN PRESS (2015) “Transaction costs (TC) are the ‘friction’ in an economic system, and their analysis is vital to understanding institutional design and economic performance” TOWARD FRICTION FREE TRANSACTING? BLOCKCHAINLAWCLASS.COM
  59. WHAT ARE ‘TRANSACTION COSTS’ ? (1) SEARCH AND INFORMATION COST

    (2) BARGAINING AND DECISION COST (3) POLICING AND ENFORCEMENT COST BLOCKCHAINLAWCLASS.COM
  60. SOME COSTS FOR THE SIMPLE SPOT MARKET BARTER SEARCH: BARGAINING:

    NEED TO LEARN THAT THE OTHER PARTY HAS A SURPLUS ENFORCEMENT: BLOCKCHAINLAWCLASS.COM NEED TO AGREE UPON AN ACCEPTABLE RATE OF EXCHANGE NEED TO MAKE SURE THE OTHER PARTY DELIVERS ON THE DEAL
  61. SOME COSTS FOR THE BARTER WITH A DEBT OBLIGATION SEARCH:

    BARGAINING: LARGELY THE SAME ENFORCEMENT: BLOCKCHAINLAWCLASS.COM LARGELY THE SAME NEED TO MAKE SURE THE OTHER PARTY DELIVERS ON THE DEAL INCLUDING SECURING PAYMENT AT A LATER POINT IN TIME (I.E., THE DEBT OBLIGATION)
  62. None
  63. MESOPOTAMIA GREECE ROME MEDIEVAL ERA MERCHANT LAW RENAISSANCE PRE ANALOG

    ERA THE CORPORATION MARITIME LAW + INSURANCE HUNTER GATHERERS CODE OF HAMMURABI SOME EARLY TRANSACTION ENHANCING INNOVATIONS AND SOCIETIES
  64. WE WILL *NOT* DO COMPLETE JUSTICE HERE TO ALL NUANCES

    OF THESE SOCIETIES BUT WE WANT YOU TO SEE THE OVERARCHING THEMES
  65. None
  66. EARLY SOCIETIES

  67. HUNTER GATHERER SOCIETIES HUNTING OR FORAGING WAS REQUIRED FOR SUBSISTENCE

    (SOME STILL EXIST TODAY) BLOCKCHAINLAWCLASS.COM
  68. HUNTER GATHERER SOCIETIES DIFFICULT TO TIME SHIFT CONSUMPTION (SOME STILL

    EXIST TODAY) BLOCKCHAINLAWCLASS.COM
  69. HUNTER GATHERER SOCIETIES HUMANS BEGAN TO LIVE TOGETHER IN PART

    TO SPECIALIZE IN TOOL MAKING (SOME STILL EXIST TODAY) BLOCKCHAINLAWCLASS.COM
  70. HUNTER GATHERER SOCIETIES DEVELOPED COOPERATIVE CULTURAL PRACTICES IN AN EFFORT

    EXTEND TRUST WITHIN SMALL GROUPS (SOME STILL EXIST TODAY) BLOCKCHAINLAWCLASS.COM
  71. AGRARIAN SOCIETIES FARMING COMPLETELY (OR PARTIALLY) REPLACES HUNTER/ GATHERING FOR

    SUBSISTENCE (SOME STILL EXIST TODAY) BLOCKCHAINLAWCLASS.COM
  72. AGRARIAN SOCIETIES COORDINATION OF THAT ACTIVITY IS MORE CHALLENGING (SOME

    STILL EXIST TODAY) BLOCKCHAINLAWCLASS.COM
  73. MESOPOTAMIA WAS HOME TO A NUMBER OF EARLY CIVILIZATIONS BLOCKCHAINLAWCLASS.COM

    SUMERIANS, BABYLONIANS, ASSYRIANS, ETC.
  74. MESOPOTAMIAN TABLETS RECORDED CREDITS AND DEBTS ON A FORM OF

    LEDGER
  75. DEVELOPED A VARIETY OF TRANSACTION COST REDUCING INNOVATIONS CODE OF

    HAMMURABI (BABYLONIAN CODE OF LAW) BLOCKCHAINLAWCLASS.COM ACCOUNTING LEDGER. TABLET WITH AN ACCOUNT IN SUMERIAN CUNEIFORM DESCRIBING AMOUNTS OF BARLEY ACCOUNTING LAW
  76. None
  77. ROME

  78. FAST FORWARD NOW TO THE ROMAN EMPIRE BLOCKCHAINLAWCLASS.COM

  79. ROME IS ABLE TO VASTLY EXPAND ITS GEOGRAPHIC REACH BLOCKCHAINLAWCLASS.COM

  80. A MAJOR CHALLENGE WAS TO ENSURE A CONSISTENT FOOD SUPPLY

    AS MANY URBAN LOCATIONS HAD GROWN BEYOND LOCAL AGRICULTURE CAPACITY BLOCKCHAINLAWCLASS.COM
  81. TO FACILITATE THESE AND OTHER RELATED GOALS IT WAS NECESSARY

    TO DEVELOP AN INCREASINGLY COMPLEX ADMINISTRATIVE AND LEGAL INFRASTRUCTURE BLOCKCHAINLAWCLASS.COM
  82. MAP AVAILABLE AT HTTP://BIT.LY/2DUWNPK BLOCKCHAINLAWCLASS.COM

  83. THE ADMINISTRATIVE AND LEGAL INFRASTRUCTURE HELPED SUPPORT INCREASING LEVELS OF

    TRANSACTIONS OVER LONGER AND LONGER DISTANCES BLOCKCHAINLAWCLASS.COM
  84. IN ADDITION, ROME DID FEATURE MANY FAIRLY SOPHISTICATED FINANCIAL TOOLS

    WHICH LOOK QUITE FAMILIAR TO US IN THE MODERN ECONOMY … “ C O I N A G E , C O N T R A C T S , C O L L A T E R A L I Z A T I O N , M O R T G A G E S , A P U B L I C T R E A S U R Y A N D C E N T R A L BANKING” WILLIAM GOETZMANN, MONEY CHANGES EVERYTHING: HOW FINANCE MADE CIVILIZATION POSSIBLE, PRINCETON UNIVERSITY PRESS (2017) BLOCKCHAINLAWCLASS.COM
  85. THERE ARE ARGUABLY MANY REASONS FOR THE EVENTUAL FAILURE OF

    ROME … WE NEED *NOT* CONSIDER THOSE AS MANY BOOKS HAVE BEEN WRITTEN ON THIS SUBJECT BLOCKCHAINLAWCLASS.COM
  86. OUR PURPOSE IS TO UNDERSTAND THAT IN PART ROME’S SUCCESS

    WAS LINKED TO THE ABILITY TO FACILITATE TRADE THROUGH INSTITUTIONS WHICH WERE TRUST ENHANCING AND TRANSACTION COST REDUCING …. BLOCKCHAINLAWCLASS.COM
  87. None
  88. ROMAN DECLINE AND FALL BLOCKCHAINLAWCLASS.COM

  89. ROMAN TERRITORY CHANGED HANDS MANY TIMES IN THE CENTURIES THAT

    FOLLOWED THEREBY FRAGMENTING UNDERLYING INSTITUTIONS BLOCKCHAINLAWCLASS.COM
  90. EUROPE BECAME A ‘COMPETITIVE PATCHWORK OF CITIES AND STATES THAT

    ONLY RARELY ORGANIZED THEMSELVES INTO A UNIFIED POLITY’ WILLIAM GOETZMANN, MONEY CHANGES EVERYTHING: HOW FINANCE MADE CIVILIZATION POSSIBLE, PRINCETON UNIVERSITY PRESS (2017) BLOCKCHAINLAWCLASS.COM
  91. THIS COMPETITION AMONG CITIES A N D S T A

    T E S W A S G O O D A N D HELPFUL FOR WHAT WOULD COME … THE PATCHWORK WAS BAD AS IT UNDERMINED THE FACILITATION OF TRADE FOR EXAMPLE, EACH CITY AND STATE HAD ITS OWN LAWS AND CUSTOMS W H A T W A S N E E D E D W A S A N I N S T I T U T I O N W H I C H C O U L D C O O R D I N A T E A C R O S S T H E S E VARIOUS POLITICAL UNITS … BLOCKCHAINLAWCLASS.COM
  92. A N I N ST I T U T I

    O N ( S ) W H I C H CO U L D COORDINATE ACROSS THESE VARIOUS POLITICAL UNITS WOULD NEED TO BE ABLE TO SUPPRESS THE DESIRE OF LOCAL RULERS TO CONFISCATE THE PROPERTY OF TRAVELING MERCHANTS (OR THEIR AGENTS) BLOCKCHAINLAWCLASS.COM
  93. None
  94. MERCHANT LAW

  95. AVNER GREIF, PAUL MILGROM & BARRY R. WEINGAST, COORDINATION, COMMITMENT,

    AND ENFORCEMENT: THE CASE OF THE MERCHANT GUILD, 102 JOURNAL OF POLITICAL ECONOMY 745 (1994) BLOCKCHAINLAWCLASS.COM
  96. “EUROPEAN ECONOMIC GROWTH BETWEEN THE TENTH AND THE FOURTEENTH CENTURIES

    WAS FACILITATED BY THE ‘COMMERCIAL REVOLUTION OF THE MIDDLE AGES” — THE REEMERGENCE OF MEDITERRANEAN AND EUROPEAN LONG-DISTANCE TRADE AFTER AN EXTENDED PERIOD OF DECLINE.” AVNER GREIF, PAUL MILGROM & BARRY R. WEINGAST, COORDINATION, COMMITMENT, AND ENFORCEMENT: THE CASE OF THE MERCHANT GUILD, 102 JOURNAL OF POLITICAL ECONOMY 745 (1994) BLOCKCHAINLAWCLASS.COM
  97. “ F O R T H I S C O

    M M E R C I A L EXPANSION TO BE POSSIBLE, I N S T I T U T I O N S H A D T O B E CREATED TO MITIGATE THE MANY K I N D S O F C O N T R A C T U A L PROBLEMS ASSOCIATED WITH LONG-DISTANCE TRADE” AVNER GREIF, PAUL MILGROM & BARRY R. WEINGAST, COORDINATION, COMMITMENT, AND ENFORCEMENT: THE CASE OF THE MERCHANT GUILD, 102 JOURNAL OF POLITICAL ECONOMY 745 (1994) BLOCKCHAINLAWCLASS.COM
  98. “IN THE LATER MEDIEVAL PERIOD, THE MERCHANTS OF EUROPE D

    E V E L O P E D A N E L A B O R AT E INFRASTRUCTURE SYSTEM THAT A L L O W E D F O R T R A D E O V E R L O N G E R A N D L O N G E R DISTANCES.“ AVNER GREIF, PAUL MILGROM & BARRY R. WEINGAST, COORDINATION, COMMITMENT, AND ENFORCEMENT: THE CASE OF THE MERCHANT GUILD, 102 JOURNAL OF POLITICAL ECONOMY 745 (1994) BLOCKCHAINLAWCLASS.COM
  99. “LONG DISTANCE PREMODERN TRADE TOOK PLACE IN A HIGHLY C

    O M P L E X A N D U N C E R T A I N ENVIRONMENT. MANY UNANTICIPATED EVENTS COULD OCCUR ALONG THE WAY AND IT WAS OFTEN DIFFICULT TO D E T E R M I N E R E S P O N S I B I L I T Y. INSTITUTIONS WHICH CAN OBTAIN AND INTERPRET INFORMATION PROVED NECESSARY.” AVNER GREIF, PAUL MILGROM & BARRY R. WEINGAST, COORDINATION, COMMITMENT, AND ENFORCEMENT: THE CASE OF THE MERCHANT GUILD, 102 JOURNAL OF POLITICAL ECONOMY 745 (1994) BLOCKCHAINLAWCLASS.COM
  100. MERCHANT GUILDS WERE ABLE TO BAND TOGETHER IN PART TO

    LOWER NEGOTIATION COSTS AND HELP SUPPORT LONG DISTANCE TRADE. THERE WAS REAL POWER IN NUMBERS WHICH WAS NEEDED TO HELP ENCOURAGE RULERS FAR AWAY TO RESPECT THE PROPERTY RIGHTS OF THE GUILD’S MEMBERSHIP. BLOCKCHAINLAWCLASS.COM
  101. AS GUILDS GREW IN THEIR POWER, THEY COULD CONDITION FUTURE

    TRADE IN A JURISDICTION ON PRESENCE OF PAST GOOD BEHAVIOR. OTHERWISE, THEY COULD BOYCOTT. THE BENEFIT OF COLLECTIVE BEHAVIOR IN THE CONTEXT WERE CLEAR BUT THE ORGANIZATION NEEDED TO PREVENT INDIVIDUAL MEMBERS FROM DEFECTING. BLOCKCHAINLAWCLASS.COM
  102. AGAIN WE SEE THAT MANY KEY HISTORICAL MOMENTS ARE FUELED

    BY INNOVATIONS WHICH CAN SCALE TRUST AND ALLOW TRADE AND/OR SOME CLASS OF FINANCIALIZATION TO OCCUR BLOCKCHAINLAWCLASS.COM
  103. THE INCREDIBLE INTELLECTUAL GAINS OF THE RENAISSANCE (IN ART, SCIENCE,

    ETC.) DERIVE FROM THE ECONOMIC SURPLUS GENERATED BY INCREASING COMPLEX TRADE NETWORKS RICHARD A. GOLDTHWAITE, THE ECONOMY OF RENAISSANCE FLORENCE. JHU PRESS, 2009. NOTE: THE PRECISE CONTOURS ARE A SUBJECT OF ONGOING ACADEMIC DEBATE SEE E.G. FOR MORE INFORMATION — BLOCKCHAINLAWCLASS.COM
  104. None
  105. THE (MODERN) CORPORATION

  106. THE CORPORATE FORM IS AMONG THE MOST IMPORTANT ECONOMIC INNOVATIONS

    OF ALL TIME BLOCKCHAINLAWCLASS.COM
  107. ITS ORIGINS CAN BE TRACED BACK MANY CENTURIES TO ROME

    AND LATER SWEDEN AND EVEN LATER TO 14TH CENTURY ITALY … BLOCKCHAINLAWCLASS.COM
  108. A CLEARER MANIFESTATION OF THE MODERN FORM CAN BE SEEN

    IN CHARTER COMPANIES SUCH AS DUTCH EAST INDIA COMPANY AND THE HUDSON'S BAY COMPANY BLOCKCHAINLAWCLASS.COM
  109. SUCH COMPANIES WERE TRAVELING THE WORLD AND OPERATED IN A

    RISKY GLOBAL ENVIRONMENT BLOCKCHAINLAWCLASS.COM
  110. WHEN PAIRED WITH LIMITED LIABILITY - THE CORPORATE FORM ALLOWS

    FOR THE SEGMENTATION AND SHIFTING OF RISK BLOCKCHAINLAWCLASS.COM
  111. FIRMS HELP SOLVE FOR CERTAIN FORMS OF TRANSACTION COSTS Ronald

    Coase The Nature of the Firm 4 Economica 386 (1937) BLOCKCHAINLAWCLASS.COM
  112. THE CORPORATE FORM ITSELF AND THE SIZE OF CORPORATIONS CAN

    ALSO IMPOSE COSTS OF THEIR OWN (IT IS A TRICKY BALANCE) BLOCKCHAINLAWCLASS.COM
  113. A SHORT ARTICLE WRITTEN FOR COASE’S 100 BIRTHDAY IN THE

    ECONOMIST “HIS CENTRAL INSIGHT WAS THAT FIRMS EXIST BECAUSE GOING TO THE MARKET ALL THE TIME CAN IMPOSE HEAVY TRANSACTION COSTS. YOU NEED TO HIRE WORKERS, NEGOTIATE PRICES AND ENFORCE CONTRACTS, TO NAME BUT THREE TIME-CONSUMING ACTIVITIES. A FIRM IS ESSENTIALLY A DEVICE FOR CREATING LONG-TERM CONTRACTS WHEN SHORT-TERM CONTRACTS ARE TOO BOTHERSOME.” BLOCKCHAINLAWCLASS.COM
  114. A SHORT ARTICLE WRITTEN FOR COASE’S 100 BIRTHDAY IN THE

    ECONOMIST BLOCKCHAINLAWCLASS.COM “THE PROPER BALANCE BETWEEN HIERARCHIES AND MARKETS IS CONSTANTLY RECALIBRATED BY THE FORCES OF COMPETITION: ENTREPRENEURS MAY CHOOSE TO LOWER TRANSACTION COSTS BY FORMING FIRMS BUT GIANT FIRMS EVENTUALLY BECOME SLUGGISH AND UNCOMPETITIVE.”
  115. None
  116. MARITIME LAW + INSURANCE

  117. THE DESIRE TO MANAGE RISK AND RETURN HAS FUELED OTHER

    IMPORTANT INNOVATIONS BLOCKCHAINLAWCLASS.COM
  118. SHIPPING HAS BEEN CRITICAL IN VARIOUS PERIODS OF ECONOMIC HISTORY

    BLOCKCHAINLAWCLASS.COM
  119. EVEN TODAY SHIPPING AND WORK ON THE HIGH SEAS IS

    AN INHERENTLY DANGEROUS ACTIVITY BLOCKCHAINLAWCLASS.COM
  120. THE SIZE OF LOSSES COULD BE LARGE AND THUS IT

    WAS CHALLENGING FOR AN INDIVIDUAL TO BEAR THE GIVEN LOSS BLOCKCHAINLAWCLASS.COM
  121. MARINE INSURANCE IS ONE OF THE OLDEST FORMS OF INSURANCE

    BLOCKCHAINLAWCLASS.COM
  122. THE ORIGINS OF MARINE INSURANCE CAN BE TRACED BACK TO

    GREECE AND ROME (EVEN EARLIER) BLOCKCHAINLAWCLASS.COM
  123. MODERN FORMS COULD BE SEEN IN AS AN IMPORTANT INGREDIENT

    IN THE EXPANSION OF THE BRITISH EMPIRE BLOCKCHAINLAWCLASS.COM
  124. LLOYD'S COFFEE HOUSE (ORIGIN OF MODERN INSURANCE) BLOCKCHAINLAWCLASS.COM

  125. UNDERWRITING BEGAN WITH INDIVIDUALS WHO SIGNED UNDERNEATH THE LINE ON

    THE BOTTOM OF INSURANCE CONTRACTS BLOCKCHAINLAWCLASS.COM
  126. HMS LUTINE (1799) BLOCKCHAINLAWCLASS.COM “Lutine sank during a storm at

    Vlieland in the West Frisian Islands on 9 October 1799, whilst carrying a large shipment of gold. The gold was insured by Lloyd's of London, which paid the claim in full. The underwriters therefore owned the gold under rights of abandonment and later authorised attempts to salvage it. However, because of the state of war, the Dutch also laid claim to it as a prize of war.”
  127. LLOYDS UNDERWRITING ON TITANIC BLOCKCHAINLAWCLASS.COM

  128. LATER THIS BECAME A CORPORATE EXERCISE … BLOCKCHAINLAWCLASS.COM

  129. KEY IDEA IS THAT MARINE INSURANCE SOLVED A REAL NEED

    IN THE RELEVANT MARKET BLOCKCHAINLAWCLASS.COM
  130. AN ENTIRE RANGE OF ECONOMIC ACTIVITY WOULD LIKELY *NOT* OCCUR

    WITHOUT SOME CONTINGENCY FOR DOWNSIDE RISK BLOCKCHAINLAWCLASS.COM
  131. UNDERWRITING BEGAN WITH INDIVIDUALS WHO SIGNED UNDERNEATH THE LINE ON

    THE BOTTOM OF INSURANCE CONTRACTS BLOCKCHAINLAWCLASS.COM
  132. TWO CORE QUESTIONS HOW TO EX ANTE VALUE THE RISK

    ? HOW TO ENSURE PAYMENT IN THE EVENT OF LIABILITY ? BLOCKCHAINLAWCLASS.COM
  133. None
  134. CONCLUSION

  135. GREATER COORDINATION OF EXCHANGE GREATER ABILITY TO TIME SHIFT CONSUMPTION

    ABILITY TO SCALE TRUST LOWER TRANSACTIONAL FRICTION BLOCKCHAINLAWCLASS.COM
  136. OVER THE PAST 5000+ YEARS WE HAVE ENGAGED IN A

    MASSIVE SCALING EXERCISE BLOCKCHAINLAWCLASS.COM
  137. FROM HUNTER GATHERING TO A HIGHLY COMPLEX GLOBAL ECONOMIC SYSTEM(S)

    BLOCKCHAINLAWCLASS.COM
  138. CRYPTO PURPORTS TO BE THE NEXT CHAPTER … BLOCKCHAINLAWCLASS.COM

  139. IN THE TRANSACTION COST VIEW OF (ECONOMIC) HISTORY (NOTE: THIS

    IS HIGH LEVEL OVERVIEW OMITTING SOME KEY DETAILS) BLOCKCHAINLAWCLASS.COM
  140. WE HAVE HIGHLIGHTED SOME IMPORTANT HISTORICAL EXAMPLES FROM THE PRE-ANALOG

    ERA BLOCKCHAINLAWCLASS.COM
  141. MESOPOTAMIA GREECE ROME MEDIEVAL ERA MERCHANT LAW RENAISSANCE PRE ANALOG

    ERA THE CORPORATION MARITIME LAW + INSURANCE HUNTER GATHERERS CODE OF HAMMURABI SOME EARLY TRANSACTION ENHANCING INNOVATIONS AND SOCIETIES BLOCKCHAINLAWCLASS.COM
  142. NEXT TIME WE HIGHLIGHT ANALOG, DIGITAL AND COMPUTATIONAL INSTITUTIONS …

    BLOCKCHAINLAWCLASS.COM
  143. TELEGRAPH TELEPHONES INTERNET LONG TAIL COMMERCE (MERCHANT LAW TAKE 2)

    CRYPTO INFRASTRUCTURE ANALOG ERA DIGITAL ERA COMPUTATIONAL ERA INTERNET OF THINGS FIAT CURRENCY EARLY COMPUTERS GLOBALIZATION PERSONAL COMPUTERS ARTIFICIAL INTELLIGENCE AUTOMOBILE CREDIT CARDS CHARGE CARDS BLOCKCHAINLAWCLASS.COM
  144. None
  145. SOME OPTIONAL READING OLIVER E. WILLIAMSON, THE ECONOMIC INSTITUTIONS OF

    CAPITALISM, SIMON AND SCHUSTER (1985) DOUGLASS NORTH, INSTITUTIONS, INSTITUTIONAL CHANGE AND ECONOMIC PERFORMANCE, CAMBRIDGE UNIVERSITY PRESS (1990) BLOCKCHAINLAWCLASS.COM
  146. SOME OPTIONAL READING AVNER GREIF, INSTITUTIONS AND THE PATH TO

    THE MODERN ECONOMY: LESSONS FROM MEDIEVAL TRADE, CAMBRIDGE UNIVERSITY PRESS (2006) DENNIS P.KEHOE, DAVID RATZAN, AND URI YIFTACH (EDS.), LAW AND TRANSACTION COSTS IN THE ANCIENT ECONOMY, UNIVERSITY OF MICHIGAN PRESS (2015) BLOCKCHAINLAWCLASS.COM
  147. SOME OPTIONAL READING DAVID GRAEBER, DEBT: THE FIRST 5,000 YEARS,

    MELVILLE HOUSE (2014) WILLIAM GOETZMANN, MONEY CHANGES EVERYTHING: HOW FINANCE MADE CIVILIZATION POSSIBLE, PRINCETON UNIVERSITY PRESS (2017) BLOCKCHAINLAWCLASS.COM
  148. SOME OPTIONAL READING GILLIAN HADFIELD, RULES FOR A FLAT WORLD:

    WHY HUMANS INVENTED LAW AND HOW TO REINVENT IT FOR A COMPLEX GLOBAL ECONOMY. OXFORD UNIVERSITY PRESS, 2016. BLOCKCHAINLAWCLASS.COM
  149. BLOCKCHAINLAWCLASS.COM FOR MORE MODULES VISIT

  150. DANIEL MARTIN KATZ E D U | I L L

    I N O I S T E C H + S TA N F O R D C O D E X B LO G | C O M P U TAT I O N A L L E GA L S T U D I E S . C O M PAG E | DA N I E L M A R T I N K AT Z . C O M C O R P | L E X P R E D I C T. C O M NELSON ROSARIO B LO G | L AWO F C RY P TO C U R R E N C Y. C O M PAG E | N E L S O N M RO S A R I O . C O M F I R M | S M O L I N S K I RO S A R I O L AW P. C . BLOCKCHAINLAWCLASS.COM L A B | T H E L AW L A B . C O M E D U | I L L I N O I S T E C H - C H I C AG O K E N T L AW
  151. @ computational professor daniel martin katz danielmartinkatz.com BLOCKCHAIN, CRYPTOCURRENCY AND

    LAW professor nelson rosario CRYPTO AND THE TRANSACTION COST VIEW OF ECONOMIC HISTORY nelsonmrosario.com @ nelsonmrosario BLOCKCHAINLAWCLASS.COM