OTNS: Maximum Freedom in Complex Social Organizations
For this episode of OTNS, Primavera and I spoke to Eric Alston (@IncompleteRules), a researcher at Block Science and Scholar-in-Residence at the Leeds School of Business at the University of Colorado Boulder, focused on the study of institutions, namely property, constitutions and blockchains. During the interview we spoke about formal vs inform institutions, organizational complexity, and the issues of maximum freedom. Overthrowing the Network State (OTNS) is a series in collaboration ...
Top Keywords
No salient keywords identified yet for this episode.
Transcript
Hello everyone again. This is the Blockchain Socius Podcast and we are continuing our overthrow of the network states. I'm here with Primavera, the high priestess of BlockchainGov. And for today's interview, we're gonna be talking to Eric Olsen. He is a scholar in residence at the Business School of the University of Colorado Boulder and he's also a Research Associates with Block Science. He studies institutions, namely property, constitutions, and blockchains. So hi, Eric. How are you? And, yeah, maybe to start off, would you like to give us some of your high level thoughts on Balaji's book, The Network State? Absolutely.
So doing great. Really, really happy to be here. And in terms of the network state, I mean, I there's a lot to like, and there's a lot to potentially disagree with. And so to me, the reason I work with block science as well as dedicate a significant portion of my scholarship to governance questions surrounding distributed digital networks is I think this is a profound institutional and organizational innovation. I think we're seeing something emerge here that is the sort of nascent form of how we're going to coordinate ourselves online in an increasingly integrated and increasingly digital global economy. And so for me, the network state is pointing at something really important, which is we're finding ways to identify communities of like minded individuals through our increasing interconnectedness online and are forging important organizations with those individuals. And so for me, that's a direct testament to the importance of our governance choices in the digital realm. More and more people are associating digitally, meaning formal organizational governance is emergent in context where more and more people load into a particular area. So this isn't digital. This is ubiquitous to human ordering across time, across societies, which is you throw enough people into repeat play situations and rules emerge. But for rules to emerge, you need organizations to emerge to define and enforce those rules. This is the process of constituting an organization, including public organizations, AKA governments or nation states as we've come to know them. And so to me, at an overarching level, what I like is he's pointing at something that's happening that's important. But there is significant omissions in terms of how organizations actually govern themselves dynamically. In particular, I think the the analysis therein is relatively thin on how governance actually proceeds given a few axiomatic recognitions of of what governance is subject to in human groups at scale. And in particular, to me, it's all about unknown unknowns, AKA Knightian uncertainty, how to proceed in the face of those unknown unknowns, which is you need a decision making apparatus for any organization in order to resolve how to proceed when something happens that was unanticipated. Given that though and given heterogeneity of individuals that belong to any organization, and this increases with scale and complexity of the organization, then given heterogeneity of individuals within an organization, confronting how to proceed in the face of an unanticipated circumstance, conflict springs eternal within impersonal human organizational forms. And I think necessarily, there are elements of impersonality in the digital realm that the network state is correctly pointing at, which is the means by which we coordinate our interactions, especially using a blockchain network, but not necessarily. Those interactions are very much institutionalized. And given their if then nature, given their highly certain and final execution according to the terms of protocol, they are complete. But why do blockchain networks need updates then? Why do they have to face important decisions that must be wrought by individuals? Ideally, individuals specially empowered within that organization structure to make those decisions, how do those organizations proceed in the face of unanticipated circumstances? Protocol does not have an answer for that and will not have an answer for that. And so for me, one overarching concern, notwithstanding the coolness of our ability to associate in novel ways with people we've never met all around the world and assemble capital towards transformative purposes, again, with people we've never met around the world, two thumbs up to all of that. But it seems like his narrative has a bit of a kind of this will naturally progress, and we will have these almost sort of complete digital protocol governed organizations that supplant the state in some way. And to me, my biggest issue is what about the inevitable incompleteness of those organizational choices and the need for very human governance that will emerge therein.
So I want to sort of as well, ground this conversation in sort of defining maybe a couple of different terms that I think will be helpful for people who are listening, since, it's, pretty fundamental to your research as I understand it. One of the things that you talk about, you say you study institutions and you've made this kind of distinction between formal and informal institutions. Could you explain maybe briefly what are the differences between formal and informal institutions?
Absolutely. And that's one of the big questions out there for scholars of governance as well as institutions in particular. And I define governance as rule based ordering of people and natural resources. That's what our organizations are about. They're creating rules that people and importantly natural resources that we've, you know, applied valuable labor to in our natural environment and then highly abstract contracts that sit upon those organizational nexuses including all of our financial instruments as well as money. So under my definition, formal institutions are the rules articulated by organizations with the capacity and intent to enforce those institutions. Some measure of capacity to do so is necessary in order for them to condition other people's behavior. If an organization is saying these are our rules and we have no power to enforce them and therefore never can credibly do so, those are not operating like actual institutions. Those are just, hey, these are what we stand for whether or not we can enforce them. But again, formal institutions are those rules that an organization says you should do this, you shouldn't do this, and these are the guys that are going to enforce, or these are the people that are going to enforce upon a particular those subject to that organization's enforcement authority. Those are formal institutions. Those have gotten a lot of analysis across the history of this field of scholarship necessarily so. Why? Because they're very easy to observe. Notice and comment is necessary for most modern laws before they ever go into force, and once they're enforced, they have to be publicly promulgated. Similarly, you can find contracts because they've been written down by both parties because they have to be written down in order to be enforced by a third party. And so formal institutions are very observable relative to the other class of rules that create governance outcomes in complex human social orders. Those informal institutions, in contrast, and it's been called extitutions by, by a research group that I'm part of, but those informal institutions, those are very important social rules in their own right. Norms, culture are two of the predominant expressions of this class of social rules. In particular, norms will be present whether or not a third party enforcer is there. There are things I could do on this call that would violate your your norms and the listeners of those to those norms such that to me, they're present whether or not there's somebody saying I'm enforcing policy over this particular group of podcast speakers. That's definitely not the case. And so, nonetheless, those informal institutions are a critically important component of governance in terms of those rules that are an input to the ordering of people and natural resources.
Yeah. I I think maybe that's a that's an interesting place to, to try and analyze this in light of, network states, because so as part of this very important research group, we we analyze this, this perspective between the how the institutional framework can affect, the culture, the social norms, and so forth. And, in some way, like if we think about it, like when we, when, like when Balaji described the network state, it's also a way of, reducing the degree of, institutional scaffolding that existing states impose on people and therefore constraining the capacity to actually come up with the home government's rule and so forth. And so, in some way, like escaping, exiting from the national states and creating our own network state, which in fact, if you think about it, it's very it's at least driven from this strong alignment of individual that have, like, a particular common culture, common social norms, and therefore maybe need less of these institutional scaffolding than existing states are providing. And in this sense, that will be, an actual positive facets of the network state, which is let's let's if we manage to find a proper culture amongst ourselves and if we have a proper governance within this group of people, we don't really need, such strong institutional rules, such laws and so far because we are capable of doing it on our own. And in this case, improving the executional dynamics and and not needing as many institutional dynamics in order to bring people to a common set of social norms.
A lot of interesting things there. In particular, I fundamentally agree that the type of community driven governance that you're describing in terms of voluntary participation among like minded individuals, that's an ideal worth striving for. To me, there's no question about that. That is the ideal of representative governance. That often gets conflated with the term democracy, which I use less, except it's a it's a for many people, it has become a decent bucket to what do we strive for. We want our governance decisions to represent as many individuals in a particular group as possible. Ideally, all of them at once. That would be the largely unattainable idea in complex social orders, but nonetheless an ideal ideal worth striving for, make no mistake. So how do you get some of that? Allow voluntary associations. And so many human societies are case studies in a huge diversity of voluntary organizational forms for exactly the reasons we're describing. But where I'm more pessimistic surrounds this kind of utopian belief in the ability to exit from the enforcement authority of public governance governments as we currently see them. To me, that is an area of the network state that I'm less optimistic about the arguments surrounding, you know, diplomatic sovereignty, which is this ability to say, we now have a voluntary community. We're now in some way our own sovereign, not when it comes to the tax enforcement of a particular jurisdiction that you have to reside in. I don't think that that particular government or any government capable of enforcement is going to be willing to say, yeah, go ahead and secede. In particular, because it creates quite a quite a domino effect, which is to say, why can't other organizations secede? Indeed, I see the, the Danish government spending on the Faroe Islands as a deliberate attempt to keep Greenland happy, which is the Faroe Islands has an independence movement that has been successfully mollified by spending massive amounts on infrastructure within the Faroe Islands. That doesn't make a shred of economic sense based on what the Faroe Islands can produce until you realize that Greenland is also in a similar status such that if the Faroe Islands click independent, what on earth is gonna stop Greenland from doing so? And wow, does Greenland have some of the most untapped natural resource reserves
of anywhere on the planet. Yeah. That that makes me think of, like, also, like, in the EU you have, you know, whether or not, I mean, you have the issues of, like, Catalonia and, like, the Basque region in Spain as well. You have other types of different separatist movements, but, like, there is a question I believe it was, like, Scotland, potentially leaving or Northern Ireland leaving and then potentially joining the EU again. But a lot of these other countries have similar sort of, conflicts about, you know, regions in their country wanting to, have independence that if they accepted a country, a new country that earned its independence similarly to how regions within its country are trying to receive independence, then it could it could, you know, lead to they could they imagine that it could lead to some sort of domino effect of them, therefore, losing their own sovereignty. And I guess the, the the interests of the state is to, impose its sovereignty for as much and for as long as possible.
No. No. Absolutely. I mean, Catalonia clicks off. There goes Pais Bosco. Then Galicia emerges, then France might suddenly have a problem with its Provencal regions and so on and so forth. And so to me, the one thing that the vast majority, if not all nation states would agree on, we don't recognize splinter republics that break off from your nation because we'd prefer it if you don't do the if you also do likewise with us. You know? And so Right. It it to me, that's that's a deep issue in terms of the extent of autonomy from sovereign enforcement that network states can achieve. It's not to say it's not an ideal worth striving for or experimenting around. There's just upper limits to the extent to which a particular sovereign entity is willing to say, yeah. We actually don't have enforcement authority here. That's not the essence of public governance for better and for worse in many contexts.
Yeah. Yeah. And so like, to me, if you think about the network states, like what kind of, scares me a bit, is I think it's kind of related to, a certain idea in the political right about wanting, about kind of wanting to splinter off, to to have the world splintered into smaller regions and states being smaller generally. But, the way in which they would want that they kind of, like, I guess, profess that to happen is kind of like a a dystopian reality in which kind of, like, everything has just, like, broken down and, like, nothing works anymore. So then you are forced to go into a smaller level in which you have, like, sort of what ends up being, I think, probably, like, small fiefdoms, struggling for power, after this creation of a giant vacuum of power.
No. I'm I'm I'm certainly both sympathetic to the kind of utopian ideal of the camping trip as it sometimes been proposed, where, you know, you're you're out there with your friends. You've self selected. Everyone's, you know, everyone's in harmony. I've been there. I've been on many such trips with my friends. I love it. Isn't that amazing? But there's two things that are really, to me, problematic with applying with applying that to a vision of national or international governance in the twenty first century. And the first surrounds the ability of minorities to exit from little geographic fiefdoms. And so the fact that these things are geographically delimited means, well, whatever's the dominant mode of preferences here is we're calling it. It's decentralized in this kind of utopian vision. And so but what about the people in that group who don't like decisions being wrought? There's diversity everywhere, including in places that are, you know, less known for diversity. North Dakota, Wyoming, you know, you name the state. Or, like, certainly, New York City's diverse, not this notwithstanding the fact that it's painted as this sort of monolithic liberal utopia, you know, certainly not so. And so for me, it's setting aside given that it's geographically delimited and this isn't subject to network state and this is part of where they're pushing, which is this allows for voluntary association in a way that geographically delimited governance jurisdictions do not. So the first concern though is, yeah, if you're doing it geographically, what about the minorities within your group that don't like the dominant decisions being made? This is the whole reason there are constitutional constraints on the exercise of democratic decision making, which is protect the minorities from the will of the majority where things unravel in pretty ugly and spectacular ways. The second, though, is there are certain things that as a structural matter, we are better off together at scale. In particular, insurance. Just the ability to pool across a much larger class of individuals is more effective. But that example, the tokens risks diversification in much more complex ways. So I view most of finance as highly sophisticated risk diversification intertemporally between people who have economic value today and those who want that economic value today. Setting aside the deep questions as to the distribution of rents associated with the provenance of this fundamental service that societies emerge, like that emerge within human societies. The function of inter temporal commitments of economic value and making those reliable at an impersonal scale, we want a lot of risk diversification as compared to the relatively tiny levels of risk diversification we can get if we're in a tiny community. And so for me, those are just two examples of things that are ubiquitous in modern human social orders that obtain in a much better way the more you scale them up. And so those two concerns are my rejoinder to the belief of why can't we just voluntarily associate into this tiny group and call all of our shots? It just doesn't work that way, and there are many things that actually work a lot better when we are pooling our resources at a much larger level. Yeah. I I think it's,
so you're, you're saying things that obviously also resonates, a lot with, what we discussed, previously with Zargan where, there is this kind of, there is those two axis. Right? There is the axis of, personal versus impersonal, relationship and, institution versus execution where the more personal the more personalized or not personalized. The more the more personal, the relationship is, the more value that you can also get from the relationship as opposed to interacting with this in person in personal institution. But then you also have the matter of, the outer axis, which is the axis of, like, local versus global or, like, small versus large, where in some way, this is actually why, like, how does it yeah. The reason we do create those institutional framework, those impersonal institutions is because we want to actually extend the reach of our community beyond a particular group which has enough of this personal relationship that they don't need the institutional thing. Right? And so in some way, there seems to be this, inherent trade off. I don't know if it's actually a trade off, but it looks like it is a trade off between, we do want to have as personal as possible of relationship, but then we are stuck into a very small close knit community. We also want to have the biggest reach in order to maximize, interdependencies and, and diversification, but then this requires the instantiation of, specific institutional frameworks. And, and I think and this is, like, of course, a big, a big ambition, but I think what we're trying to do so the network state is somehow creating, creating actually an institutional framework in a in a small localized community. So maybe it's the worst of both worlds. What we want to do with the combination, coordination, and and so forth, I think is this has the ambition of can we actually maintain those personal relationship because it is made of a community of people that are strongly aligned because of social norms, because of culture, and etcetera, while also enabling relying on digital technologies and whatnot in order to enable a reach that goes beyond the local, but but it's like this kind of, like, trans local I don't know what's the right terminology, but, like, basically, enabling personal relationship at scale, to specific, institutional scaffolding, of course, but also executional scaffolding. Right? And can we actually scale up, not necessarily in just like quantity, but scale up in terms of qualitative, qualitative alignment between people that we want to build personal relationship with, but also not being stuck into, small local community. No. Totally,
agree. It's although I do want to clarify one thing. There is a big trade off between the personal and the impersonal. But I really wanna emphasize, it's not a zero sum trade off in the sense that my ability to access impersonal financial instruments and diversify risk across many, many, many classes of human activity is me trading off personal management and knowledge of my resources for much more security in terms of my retirement, in terms of other health outcomes that are unknown in the future that I may need to be able to finance. But guess what? My being able to do that enables me to bring more of my whole self for my family, for all of my highly personal relationships in my day to day life. And so the things ideally that stick in an impersonal sense also have this kind of bootstrapping effect. And I think that a lot of them actually the reason that they're emergent in human social orders is precisely for that reason. To take but one example that's probably familiar to listeners of this podcast, money. Dirty old money, slips of paper that we all agree to coordinate around. What what are we coordinated around that? All of our costly human efforts to produce things that other people value. But until we develop this coordinated unit of account, we're back in a world where we have such incommensurability of wants as well as coincidence of wants between producing parties where I show up with, you know, a cow processed as meat to a farmer's market. How do I get everything I want bartering with that in in this protean example? Clearly, having the ability to exchange my cow now to many people for these slips of paper and then reliably exchange those slips of paper to other people enables me to save the surplus value of my labor in a way that absent that it becomes very hard and a lot is wasted. I eat way too much beef and not enough of anything else, and the converse is true for everyone else that's producing individual things. So societies developed. This is emergent across human social orders to have some unit of account. It doesn't need to be paper. It's been big stone wheels on a particular island. It's been, you know, it's been gold for a lot of human history. But this isn't about the history of money. It's just saying that these impersonal institutions ideally have highly positive personal implications for people who are subject to them. And so at a minimum, I don't it's it's not the case that impersonal is always a negative trade off. Although make no mistake, if you've ever had to get into an argument with your bank, with, you know, a massive corporate entity, there is a personal to impersonal trade off. But there's also elements of impersonal treatment that are actually really good for minorities. Do minorities want the personal treatment at hotels and or restaurants in The US South, especially during the, you know, the entire twentieth century? Absolutely not. And so impersonality guarantees a set of rules that are blind to the color of the skin, to the gender, to most everything else about the individual. And so that's another element of the network state that I do think is an ideal worth striving for, which is to the extent we can define valuable rules that everyone agrees with and that don't disenfranchise or otherwise adversely affect particular minorities within a given community, those are the rules we should be automating at an impersonal level. Although guess what? There aren't that many of those rules that we've reliably identified that don't have adverse consequences for members of a particular community. And so it's to say, that's an ideal worth striving for, but to the level of automating their application and enforcement, there aren't that many of those rules. Most of them surround highly abstract unitized, financial instruments, whether it be money or more complex, but nonetheless unitized commitments between individuals surrounding the allocation of those base layer units of account across time and across parties. So I've just described money as well as much more complex financial instruments built upon the back of a sufficiently reliable and scarce unit of account.
Right. I get, it sort of what you were saying kind of reminds me of or it makes me think of, I guess, the, for example, the privatized health care system in The United States being a lot more complex and bureaucratic for the individual compared to universal health care systems in, at least in countries that I've lived in, being a lot more, I mean, easy easy to deal with as at the individual level. It's more impersonal, to a certain extent, I guess, because there's one, perhaps, entity that's sort of handling healthcare. Whereas in The United States, you have all these different, intermediaries, all these different insurance companies that are all back and forth with you, with one another with different types of payers and so forth and very complex plans. So sometimes I think there is a need for the reduction of complexity so that we can be able to live our lives in more personal ways. We don't have to spend our time doing things that we would rather not be doing, I guess. And that's what I think of as if I for me, if I think when I think of network states, I also think of, like, a privatized state, which kind of gets, like, the to me sounds like the worst of worst of both worlds. But, yeah.
It it sounds like when you when you need to, when you need to create an impersonal rule in order to ensure that something is not being abused or, so that things goes are not done wrong. There's also the danger that I mean, of course, if if the culture and if the social norm are not correctly designed, then you do need those impersonal role. But there is also the risk. It is it is actually a signal. The the vast the existence or the need of the impersonal real is a signal that there is something very wrong in the culture and in the social norms so that we need an institutional, constraints in order to prevent people from discriminating, each other. And and the danger, I think, is also that then we forget about fixing the problem at the source, which is, well, how do we actually modify the social norms? How do we actually improve the culture and, and actually make it such that eventually one day we can remove this in personal way because this in personal way also has its own collateral effect, which can also be negative for the for the intention that it was created for. And and in this sense, I think that's where if we if we stay with the concept of, like, diversity and minorities, this is this is perhaps the biggest issue, I think, with this conception of, network state as highly aligned group of individual moving into the same location is because all of Sudan, there is actually very little opportunities to ever interface with someone that is not aligned with you, with someone that is part of a minority given the majority of the, of the population that creates the network state. And in in a traditional in the traditional world, you cannot really escape from it because people are around you and you don't really choose. You can can choose your digital community. You can choose your community, but you don't really choose well, you can choose your members by choosing where you go. But there is there is this place in which you always have in some extent to to interface with people. And therefore, those those more institutional dynamics are created that can, if well designed, favor better, culture and better understandings. So there's also this, I think this challenge, and I think it goes back to your question of, like, governance as conflict is that if you do completely eliminate any possibility of conflict, even though it is theoretically impossible, but the event trying to minimize this type of conflict and this type of, exposure to diversity of opinion and diversity of cultures, then you're pretty much incapacitated to begin with to actually build up the expedition of muscles to engage with conflict and to also manage those conflicts and to, and to coexist with people that don't necessarily agree with you. So there's a lot there
to unpack, but I'm going to start with the question of the extent to which a private network state can ultimately be as monolithic as the public states that exercise considerable enforcement authority over their citizens, whether those citizens like it or not. And for a network state to have diplomatic sovereignty, as Balaji, argues, in some sense, individuals will not be able to exit from those network states as easily as they can exit from blockchain networks. This should be obvious for a variety of reasons, but at a minimum, if people can exit costlessly or near costlessly at any time, what does that do for their contractual
commitments within that particular network state community? It's not a state. Are those still Effectively.
Yep. Exactly. And so so but I'm in I'm of a mind that thinks these network states are likely to be constrained significantly because people will be able to exit them and choose a different voluntary community that they that better reflects their preferences online. And so to me, that should be a constraint in part because I don't believe in the claims that anytime soon these voluntary communities of individuals coordinating their activities in the digital realm together will be fully sovereign. If they aren't fully sovereign, then people will be able to exit them. And that is a profound constraint on the abuses that the governance apparatus can obtain. That is not the case in public governance. But to turn to Primavera's important point briefly, I do think that there's an upper limit as to the extent to which you can ever iron out heterogeneities of beliefs, values, preferences, and interests within a particular group. And so while we do want governance to be as representative as possible, I don't think most profound governance challenges surround surfacing the right information. And so there is a narrative out there, which is with these two cool new tools we have, we can better surface preferences within a particular group and reach the right solution every time. To me, the biggest governance issues to in The United States and in the vast majority of societies with which I'm familiar worldwide surround fundamentally different priors on an issue about which there isn't just a it's it's more of a King Solomon thing where it's like, you we can't cut the baby in half. Neither neither group wants that. And so to me, in particular, it's not a question of just surfacing better information, and all conflict will go away within a particular group. But where I might humbly disagree with Primavera surrounds the fact that I'm a bit more agnostic as to whether personal or impersonal institutional remedies or governance impersonal and personal governance remedies are better for minorities. And I was reminded of my desire in a particular online group I belong to called Medigov. They're formalizing certain processes of their membership's governance right now. And a proposal I made was people should be able to object anonymously. And the reason for that is that the more your preferences are in the minority on a particular decision and the more intense those personal preferences are that are aligned against you, the less willing you are to voice your true beliefs and values in that particular context. And so the reason that it's thought that the emergence of anonymous voting was a good thing for democracies around the world that have come to adopt that institutional fix is the people with the least popular preferences are fundamentally repressed in public voting scenarios. But I don't know how you have a sort of personal remedy that facilitates the minority's objections in the way that anonymous, you know, anonymous objections do. And to me, that's an impersonal institutional remedy, which is we're all agreeing to this rule which enables anyone who wants to object to do so anonymously. And so I do think that there are interesting trade offs for the minorities to a particular decision within any group surrounding whether or not it's better governed personally or impersonally. I think there are other context where it's clearly the case that more personal governance is better for minority interests for a variety of reasons, including the socialization with diverse interests within a group that Primavera was directly suggesting. But my humble contention is those trade offs are pretty complex in terms of which is better for protecting minority interests at a given point in time.
Yeah. Yeah. So I just I completely agree with you, by the way. I what I was saying was not that, impersonal are always better. What I'm what I was saying is that when we do a personal one an impersonal one, it is necessary not to it it is it is a band aid. It is not the fix, and it is always necessary to keep in mind that there there remains a problem underneath in the in the more personal, institutional realm. And, and we need to also solve for that. And it's very dangerous to just find the institutional fix and then believe that everything is okay. But because the the the institutional fix will not cure the culture and the and the norms, if anything, it will it will accommodate it or it will make it more easy to cope with, but the problem remains. And, whereas if you fix it, and that might be more challenging, but if we find the ways to fix it at the institutional personal layer, then all of a sudden those institutional, fixes become still they can still be useful, but let's let's let's let's It's it's
this discussion has caused me to reflect on certain personal dynamics in which I might be a bit of a tyrant. And so Primavera has hung out with me in personal context discussing concepts like this. And if left to my own devices, I could filibuster for the remainder of this podcast without allowing either of you to speak again. Not joking. But for people who are more polite, for people who are less aggressive, highly personal context means Eric filibustered for three hours again. I got exhausted. I made maybe one point, and my concerns weren't heard. What is the quintessential institutional solution to that problem? You give people time delimited spaces in which they can make their points. And so everyone has an appropriate chance to be heard. Personal conversations with Eric do not proceed that way. And so to me, that's just
We we we have more executional ways too. You don't have, like, a a talking stick that you give to each friend when it's their turn to speak when you're hanging out?
That's just me. But in no. But in some sense, that's almost like the emergence of an institution is is what you're describing, where it's like these highly personal dynamics are leading to dude just talking to himself for hours, and that's not good for anyone. So we need to constrain these personal dynamics. But, no, it's not to say that there aren't highly personalized remedies to some of the interpersonal problems we face. I think in certain instances, they're definitely better for minority interests along the lines of what Primavera was describing, especially in terms of, like, the recognition of an issue or an underlying concern from a particular group member that can be countenanced in an ongoing sense. I don't know how you do that institutionally. And so point very well taken. My point is just these the trade offs are pretty complex when it comes to minority interests in particular.
Hi, everyone. If you're enjoying this episode so far, be sure to If you're enjoying the episode or find the content I make important, you can pitch into my efforts starting at $3 a month on patreon.com/theblockchainsocialistto help me out. As a patron, you'll get a shout out on an episode and access to bonus content like Q and A episodes you can submit and vote on questions you'd like me to answer, and I'll give my thoughts in roughly twenty minutes. In the last bonus episode, I analyzed applying an anti CAPTURE framework urgently made for DAOs, but applied it towards left wing organizing. Of course, I'll still be making free content like this interview to help spread the message that blockchain doesn't need to be used to further entrench capitalist exploitation if we put our efforts into it, So if that message resonates with you, I hope you'll consider helping out. Also, in case you didn't see it yet, I recently wrote a book review for Outland magazine on, no surprise, the network state focused on Balaji's misunderstandings of the role of land in statecraft and his insistence to think of everything as a codebase titled Fork Your Society, I Want Out. Additionally, I've written the piece under my real name, so I'm now officially doxxed. I can officially stop bleeping out whenever people say Josh, my name. It was time I came out of the Anon closet since this is all in preparation for announcements for a book that I've been writing over the past year and a half titled Blockchain Radicals, but more on that in a later date. For now, let's get back to the interview.
No. Absolutely. And and I think that's also where the whole, you know, the whole complexity of the state as as as much as we can like, essentially, like, every institutional reel comes for a reason and whether advertently or inadvertently comes with a lot of collateral effects. Right? So you create you create a particular reel to protect, to protect on a copyright. Right? Like, you wanna protect, creative endeavor, but then you're creating censorship and this also. So in some way, there is there is always, like, collateral effect. And, and if if we think about it, like, we can it's so easy to find all the ways in which the existing state infrastructure is flowed because most of this flow derives from the collateral effect of actually a good intention of like, oh, we need an institutional scaffolding to fix that. And so in some way and I think that's perhaps and so like one of the important axes to analyze is that the the if you create a a small network state with, like, very, very basic rules, it also means that there is a lot of things that are not being dealt with unless unless and that's the important, point. Unless it is being dealt with in a institutional manner. Right? So either you have to have a very complex formation and constellation of institutional rules and then and then and then an institutional rule that is trying to counteract the collateral effect of the previous institutional rule, and then you keep patching and patching all these things. And then you you do get this insane bureaucratic machine that is the state. Or you just make it very lean, and you just have those few very, very clean and simple institutional hillside. But that means that you're also forgetting a lot of things that, the institution is not dealing with. And so who is dealing with it? Do do did we manage to create sufficient institutional scaffoldings for those lack of institutional real to be compensated by a better culture and social norms? Or do we just forget about it and we just ignore it because the majority doesn't care?
No. I I I agree with your underlying characterization of the trade offs. And in particular, I think it's I've cast this as the extent to which you can ex ante delineate the action space of individuals subject to a particular institutional enforcement authority versus the inevitable need for ex post resolution. And part of what you're gesturing at is often that ex post resolution needs to be fundamentally human. If left undefined, it will necessarily be in that informal institutional or, as you call it, institutional realm. There there no doubt about it. But another reason that we have sort of both arbitration as well as escrow, as well as the entire institution of the judiciary is the need for human ex post resolution surrounding the fit of those relatively impersonal and very narrowly defined institutional rules. And so for me, there is always going to be a human judgment component of governance that ladders back all the way to my points about Knightian uncertainty and the ability for an organization's designers to perfectly foresee all downstream contingencies. If you take that as an axiom, no organization is one that you can hit a button on and say go, and this is the perfect rule set for that organization in its entirety. That flies in the face of human social orders across every point in history.
Right. And and I think that's where look. So if we if we go back to try to think and elaborate about, like, an alternative, to the network state, so what you say is very correct when we take the network state as described by Balaji as being this kind of, like, little island of, exit based, governance structure. At the same time, I think one one model that can be interesting is if, because because the again, the the the big problem with existing state infrastructure is that it's, like, very big and there's a lot of thing that actually do not do not no longer serve a purpose, but they are stuck into this machine. And if we think about network state or combinations or coordination as, as modules of rules. Right? It's like this is a particular institutional scaffolding that we propose for this particular digital community. But then me as Primavera, I want to be part of different set of rules and I can plug myself into multiple of those communities and therefore be bound to a variety of those rules. And I don't it's there is no longer this. It's kind of like trying to find a solution to this trade off in which it's no longer like, am I into this one or am I into that one? And it's either or, but it's actually, I like a little I like this layer. It's like, if we think about layered network of hills, right, it's like, I'm gonna take this layer and this layer and maybe that one. But then maybe and I and I can interface with you because you have so part of the layer two, but you're not part of layer one. You're part of layer five. And so we can kind of like customize our home real set according to what we want to, well, what are the shelf culture that we have and what we want to be to be part of and what do we want to belong to? And of course the cost well, the the the, the counterpart of belonging to a particular community is that you have to fulfill and abide by the rules that are established by this community. But it's not because it's those rules are not the universal rules that apply to every every single member because I can I maybe I I have more needs? Right? I I want more, I want I want more protection or I want more, I don't know, more respect for specific, needs or values and whatnot. And so I'm gonna join the the the community that that provides this, this fulfillment, whereas you might have very different needs and then you can you can join data. But but we still can interconnect and there is still some kind of interdependence between those because it's more this composability of, real set as opposed to, either or and just a bunch of collection, but they are all isolated with each other. No. Quite a bit there in terms of layers and modules.
I was initially reminded of a book I liked exploring the complexities of many layered digital interaction as facilitating human humans interacting with one another. It's called the Quantum Thief. But one of the big takeaways from that book is inequalities in power have really weird implications when it comes to mapping people's ability to interact across many layers and subvert outcomes on a particular layer of interaction of choice. But more seriously, I think your suggestion of modules is very germane and hearkens for me back all the way to my law school years. Torts, contracts, property, crim. These are your one l courses as well as some constitutions. Why? This is the same reason I'm somewhat bored by very philosophical discussions about anarcho capitalist utopias. In great part because imagine a bunch of people managed to actually secede at a, you know, not at a camping group level, but at a level of a 100,000 people. They find their, you know, patch of land in this European river and they settle 100,000 people there. And everyone's on board. They get a good constitution and they're like, Yeah, this is what we're about. This is what we believe in. Do you think parties doing business with one another that enter into a particular contract will never then have a disagreement subsequently because of changed circumstances? That's the emergence of contract law. Do you think people living around one another at the level of a 100,000 will never accidentally harm one another? There's your tort law. And do you think that a 100,000 people living around one another will never give in to the temptation of, you know, more subversive human motives such as theft or even more insidious act actions? There's crim. And so for me, I it it I see notwithstanding the very important point raised, which is our public governance systems accrete without discarding. They're much better at articulating new rules, and so we've got a lot of baggage in terms of public governance in particular. Totally agree with that. But I also don't find particularly interesting discussions believing that somehow all of these kind of canonical forms of law governing human behavior, the need for them will magically go away in a group of a 100,000 people? And in particular, I think there's something really, really important lurking within contracts, which is I'm better off by being able to tie my hands in a commitment today. And if I can exit voluntarily in the future, no one in their right mind would commit to a costly intertemporal exchange of human value with me. And so the one of the sort of essential features of any system that provides governance to a group of people above Dunbar's number, so a group of people above 200 to 500 people, is one that viably figures out how to make people's commitments credible to one another. And absent some type of enforcement authority, it's very hard to make complex intertemporal human commitments cred credible to people who don't know one another. So that's what what spanning the personal to impersonal boundary means there. But for me go ahead. I've talked enough.
Yeah. I don't have to stick. No. I I think I mean, absolutely. I think I I just wanted to tell me because, yeah, you're you're I think you're describing, again, like, the the more, like, libertarian crypto libertarian approach to, we don't want any of those rules Maximum freedom. Recreate They may say. Everything. Exactly. Maximum freedom, which means that you have no freedom to leverage any of the existing infrastructure, which actually makes it very, very big freedom leads to very little capacity to do anything. Right? And that's I think that's your point, Eric. So in some way, it's about for me, like and this is this is maybe, like, an interesting, discussion between, like, if we if we only focus on freedom, it means that I should never ever be able to constrain myself or Otter to do something. And that means that I can only depend only and exclusively on myself, which gives me very little freedom to do anything beyond what I can do on my own. And if I want to expand my capacity and affirm my freedom to act in the future, I do need to create interdependencies. I do need to create relationship personal and impersonal with other people, and I need some kind of mechanism to ensure that those relationship be, sustainable and not broken in the middle of the of the endeavor. And and therefore, like, if the focus is actually freedom, then we should actually recognize the importance of interdependency and and, and collaboration in some way. And and and to this point, I think that when we talk about, like, when we talk about those basic, like, basically, what the nation states have established as, like, the base rule in order to enable coordination and, interaction between humans to emerge. Like, if you if you live from that, you will just have to recreate them, and most of those network state will probably end up recreating exactly the same basic rules. Where I think it's interesting is more about thinking, given the current rules that we live in, what is it that we can add that can even further expand our capacity to act as a collective action perspective between a particular group of people that have a particular shared societal value and, an an objective and mission to to instantiate. And it's not about like in fact, we don't wanna waste time recreating property laws and contract laws. They exist, and we have an enforcement authority for them. Thank you. Instead of, like, replicating every single reels from from scratch because we have exited the existing system. We want to leverage existing infrastructures. We want to leverage existing real sets that enable co cooperation and coordination amongst people. And then and that's when the the culmination comes about. It's like, well, still, could we not do even more? Could we not actually create even better coordination amongst people that have communality of value, shared societal vision, and what are those particular institutional and institutional, frameworks that we can set up in order to facilitate this collective action.
No. That's I think that's apt. Although, the sort of snarky contrarian in me says, if you if an individual holds the very sort of stylized anarcho capitalist values that you are describing, maybe the network state is their commutation or coordination. And so it may be that in rather than overthrowing the network state per se, you're providing an alternative vision for people who are like, those are not my shared values. Those are not my sort of vision for a society. You know what I'm saying? And so to me, it's it's it depends on whether you presume that they're either the individuals to whom that vision appeals, are they wrong in terms of the beliefs they hold, or do those beliefs make those individuals terrible citizens of the coordination and very good network state citizens?
I yeah. I kind of see it as, like, perhaps in in some ways, we're trying to, reevaluate, network states so that they can be more more optimized for reality.
I'll do. I think that there is an ontological distinction between, like, I don't think it's just that we want to inject a different set of values into the network state. I think that we are talking about something that is ontologically different, and and that's because the network state is trying to create another state. And we are actually trying to create a coordination mechanism for digital or non digital nation, meaning group of people that don't want to create a new institutional infrastructure, but rather that wants to, coalesce as a particular type and nation and don't want to escape or exit from any existing state, but rather wants to build those additional layer of sovereignty on top of it. And that's for me, this is like, if if the crypto libertarian whatnot, they wanna do combination. I'm very happy as long as they are not buying buying territories out in order to create their little island of,
of nothingness because they have to I think it's also just besides the fact that, I mean, already similar attempts of these libertarian kind of enclaves have already happened and they've all kind of failed to ever achieve the sovereignty part or the, diplomatic recognition. You see Prospera, I mean, they have to pay a 100 in taxes. You know? Like, they they they try to get out of it and try to to to claim sovereignty, but they they have not been able to do that so far.
And in fact, it's interesting because I wonder, like, if I if I I I I would love to actually have a group of extreme libertarians, thinking about, hey. How do we make a combination for our own vested interest? Because, in fact, I think most of the interest of the extremely battalions is usually about removing removing reels and, therefore, potentially removing capacity of collaboration as opposed to increasing the opportunity of coordination and, therefore, potentially adding new type of norms or rules. So I'm not sure what would the combination of, an extremely authoritarian hope look like to be fair. Except nothing. Just like a name. A name with no with no added rules.
I think I think, actually, it might be actually not under the terms of the network state, but given that libertarians care deeply about the enforcement of economic institutions. And so it's not correct to say that libertarians don't want contract enforcement. That's the limited set of institutions that they're like, it's okay for the government to have a strong role there precisely because of the intertemporal commitment problems that a credible third party enforcement authority resolves in its very presence is the glue that makes impersonal contractual commitments binding. So for me, I'm like relatively narrow, kind of lean economic institutional organizations already exist. Those are called blockchain networks and the smart contracts built on top of them. And so for me, in one sense, people's voluntary participation in networks whose enforcement hinges at best imperfectly, if at all, on the presence of a government enforcement authority, I'm like, there's your kind of quasi libertarian commutation. But the extent to which that ladders up to an ability to secede from sovereign enforcement authority, as we've been discussing, is another thing entirely. So for me, I'm like, cool. To the extent we can automate these economic institutional interactions, let's do it. That's awesome. But that to me just leaves greater space for more ultimately, like more important human impersonal connections that are the lifeblood of living, so to speak. I mean, hearken back to my example about why a diversified retirement portfolio makes me a better father and husband. Those are highly personal relationships, yet they're enhanced by an economic institutional layer that's very impersonal.
So we've reached about an hour. So I just want to check to see are there any last points that either of you would like to touch upon before we close it out? I guess
I would just emphasize that my words about the inevitability of conflict can often be taken to mean dude just likes to fight. And if you've argued with me, you would you would be forgiven for thinking that. But in truth, I see it as more of an example of a consequence of countenancing the inevitable diversity or header heterogeneity of human social orders. And so I take the inevitability of conflict as a constraint that emerges if you recognize the inevitable heterogeneity of groups. And so for me, it's not a dismal vision. It's a constraint of the environment that is unavoidable if you're trying to embrace governance in all that it entails. And so countenancing conflict doesn't mean loving it, but loving human social orders and their more effective governance necessarily entails countenancing conflict.
Yeah. I I'm
Naysa, is there any any last words for me, Primavera? You just you're cutting in and out. So I just want to maybe throw a last minute invitation for Eric to,
elaborate on, your conception of, like, the extent to which, network states versus combination as how we have if you want to elaborate on how, the extent to which you see, more or less strong correspondence between combination and, the more executional dynamics and state, not just network state, but really state. And in fact, nation as executions and state as institution.
So a lot there. I'll try to elaborate briefly, although that may be a challenge, but to me, there's the question of what is a nation versus what is the state that governs that nation? What is a big C constitution versus the fundamental values surrounding governance that make up the little c constitution of a particular nation. All of these are identifying the fraught juxtaposition between the sort of highly personal mesh of individuals interacting sometimes infrequently, sometimes highly frequently across complex human social orders. Those individuals have beliefs, values, and preferences that inform their preferences for how other people behave around them. And so at a fundamental level, a nation's culture reflects that. You have more collectivist and more individualist nations. And, yes, those cultural expressions are influenced by institutions, but fundamentally, the precedent step to articulating institutions is a set of sufficiently strong preferences within a given group to institutionalize them in the first instance. And so for me, it's these informal institutions, these institutions that proceed and ultimately determine on the first instance, the institutional expression of that same institutional firmament. And so necessarily, a nation is more than its state, even though the state greatly influences outcomes for better and for worse for that particular nation. And so it's such an endogenous knot in terms of how those things actually play into one another, But I do think the informal institutional layer has a strong kind of advantage over institutions, which is institutions persist. My preferences for other people's behavior will be there whether or not there's an enforcement officer observing other people's behavior. And cultural preferences also will persist in ways that the state's enforcement apparatus can find quite vexing, such that it's to me, there is a massive way in which institutions fill the inevitable gaps within institutional orders. But if you take that argument seriously and posit that there are inevitable gaps within a network state, then the interesting question becomes how effectively can that network state coordinate the ultimately sort of persistent, and I would argue, more fulfilling, highly personal human interactions that always, when you drill down to them enough, become institutional in practice.
Yeah. One of the things that sort of came up to me when you were talking about that is kind of like maybe as an example for people to to read a little bit more into, is the example of the Kurds and Kurdistan being, a nation, I guess, there's like the Kurdish nation of people who sort of exist in four different states, in the Middle East. And you had this, in the past in Turkey, you know, the, the Kurdish party was very pro, very pro separatist where they wanted to, cut away from from Turkey to create their own nation states, but sort of over time have come around to changing their view from being a separatist one to sort of instead embracing and leaning into the fact that they are a nation and that, they do not want to recreate sort of the problems with the states, but just with a new kind of like ethnic association with it instead. So maybe I would encourage people to to look into that as a as a interesting example of what of what I think Eric is talking about. And languages often form the common glue for the type of national identity that you're describing.
So all the nations we talked about earlier in passing have a tightly defined identity that is a distinct language from that of the state in which they happen to reside. Catalonia and Catalan, Galicia and Gallego, Pais Basco and Euskara. To give but a few examples, the Provencal regions of Southern France.
And so Belgium, I would even argue as well if you know about that. It's a very it's so complex of a thing. No, absolutely. And a lot of it's tied up in language. Yeah. Yeah. But alright. Thanks so much, Eric, for coming on. Maybe just to end it off, if you wanna share with people,
where they can keep up with you and your work. Awesome. No. Thanks for having me on. This has been a fascinating discussion. I've learned quite a bit from partaking, so thank you. I'm found on Twitter at Incompleterules and otherwise as an academic, I have a fairly public profile. So you can find me on Google Scholar, on SSRN, on a few other academic research focused sites, as well as some of my more applied output in digital governance can be found through Block Sciences blog on Medium and other outlets.
Thanks so much. Thank you.