The Theory of the Firm

The Theory of the Firm

Politics 3

Politics 3

Politics 3 is against: adversary justice and law; amoral science; lower need economics;jungle journalism; medicine from above; technologized nursing; separative expertness; docility education; anti-transcendent religion; intrusive and non-Taoistic social work; nonpersonal psychology and sociology; nonparticipatory ethnology; merely punishing criminology and jails; selfishly antisocial advertising business and industry; business-first radio and television; health as merely survival; the use of personal talents or superiorities primarily to acquire selfish privileges; the use of other human beings without regard to their personal growth; antiquality manufacturing; noncompassionate radicalism; polarizing or relation between classes, castes, subcultures; nonsynergic salesman-customer relationships; and despair art.

Politics 3 is against all that rests on a merely evil conception of human nature or of society, or on a merely good conception of human nature or of society; despair and hopelessness; any we-they polarizing; malice, hatred, revenge; the wish for one's own death or the destruction of others, or of the world; any splitting of mankind into inherent classes, castes, or subcultures; and the assumption that any polarizations or splits which do exist are inherent and permanent.

Smart Contracts: Building Blocks for Digital Markets

Smart Contracts: Building Blocks for Digital Markets

The contract, a set of promises agreed to in a "meeting of the minds", is the traditional way to formalize a relationship. While contracts are primarily used in business relationships (the focus of this article), they can also involve personal relationships such as marraiges. Contracts are also important in politics, not only because of "social contract" theories but also because contract enforcement has traditionally been considered a basic function of capitalist governments.

Whether enforced by a government, or otherwise, the contract is the basic building block of a free market economy. Over many centuries of cultural evolution has emerged both the concept of contract and principles related to it, encoded into common law. Algorithmic information theory suggests that such evolved structures are often prohibitively costly to recompute. If we started from scratch, using reason and experience, it could take many centuries to redevelop sophisticated ideas like property rights that make the modern free market work [Hayek].

The success of the common law of contracts, combined with the high cost of replacing it, makes it worthwhile to both preserve and to make use of these principles where appropriate. Yet, the digital revolution is radically changing the kinds of relationships we can have. What parts of our hard-won legal tradition will still be valuable in the cyberspace era? What is the best way to apply these common law principles to the design of our on-line relationships?

Computers make possible the running of algorithms heretofore prohibitively costly, and networks the quicker transmission of larger and more sophsiticated messages. Furthermore, computer scientists and cryptographers have recently discovered many new and quite interesting algorithms. Combining these messages and algorithms makes possible a wide variety of new protocols.

New institutions, and new ways to formalize the relationships that make up these institutions, are now made possible by the digital revolution. I call these new contracts "smart", because they are far more functional than their inanimate paper-based ancestors. No use of artificial intelligence is implied. A smart contract is a set of promises, specified in digital form, including protocols within which the parties perform on these promises.

From Capabilities To Financial Instruments

From Capabilities To Financial Instruments

A major aspect of the emergence of capitalism from feudalism was the rise of contract. By creating a contract, you could define and transfer an arbitrary bundle of rights. The complexity of trade could now bloom, unrestrained by the simple limits of physical matter. During the twentieth century, a great variety of financial instruments were invented. These instruments represent the discovery of many new kinds of rights, and ways of deriving these rights from more primitive rights. We should hope the growth of financial cryptography will only accelerate this trend. For this hope to be realized, we should seek not just the secure computational expression of the contracts representing existing instruments, but the creation of secure material from which similar new contracts can easily be built. Following Nick Szabo [Szabo97], we refer to a partially self-enforcing computational embodiment of a contract as a smart contract.

A Formal Language for Analyzing Contracts

A Formal Language for Analyzing Contracts

The author presents a mini-language for professionals and researchers interested in drafting and analyzing contracts. It is intended for computers to read, too. The main purpose of this language is to, as unambiguously and completely and succinctly as possible, specify common contracts or contractual terms. These include financial contracts, liens and other kinds of security, transfer of ownership, performance of online services, and supply chain workflow.

A Non-Technical Introduction to Bargaining Theory

A Non-Technical Introduction to Bargaining Theory

...
What variables (or factors) determine the outcome of negotiations such
as those mentioned above? What are the sources of bargaining power?
What strategies can help improve one’s bargaining power? What variables
determine whether parties to a territorial dispute will reach a negotiated
settlement, or engage in military war? How can one enhance the likelihood
that parties in such negotiations will strike an agreement quickly so
as to minimise the loss of life through war? What strategies should one
adopt to maximise the negotiated sale price of one’s house? How can one
negotiate a better deal (such as a wage increase) from one’s employers?

RELATIONAL CONTRACTS AND THE THEORY OF THE FIRM

RELATIONAL CONTRACTS AND THE THEORY OF THE FIRM

Relational contracts—informal agreements sustained by the value of future
relationships—are prevalent within and between firms. We develop repeated-game
models showing why and how relational contracts within firms (vertical integration)
differ from those between (non-integration). We show that integration affects the
parties’ temptations to renege on a given relational contract, and hence affects the best
relational contract the parties can sustain. In this sense, the integration decision can be
an instrument in the service of the parties’ relationship. Our approach also has
implications for joint ventures, alliances, and networks, and for the role of
management within and between firms.