Interested in papers about reputational systems?

@thezerg:  I agree with much of your posting - bitcoins have a large value in a situation without a reasonable reputational system in the darknet.  They allow for transactions where only one side has to loose a reputation.

But once we succeed to estasblish a reasonable system of trust online, and once I have no longer any problem to trust a bank which works as  a Tor hidden service, this advantage of bitcoins disappears.  And, instead, real values (that means, online promises of trustworthy people to give you these values) will be able to beat bitcoins.

So, bitcoins are an important intermediate thing - they will be helpful to establish online trust. But, once online trust is established, with a lot of trustworthy online banks in the darknet, they will cease.

@Kazimir:
Yes, we can.  But, clearly, we have to make a certain step toward it - to give up legality.

If bitcoins become important enough, states will forbid them.  But who cares - this will be similar to filesharing and copyright - the state cannot enforce it. 

Nonetheless, there is a mental barrier for many people - they want to be law-abiding citizens. 

But, in the long run, it depends on the ability of the law enforcement agencies to enforce such laws.  Once they appear unable to enforce them, people will use them.  Simply because it gives large enough advantages - you don't have to pay taxes for illegal transfers.

Hey guys, that's a luxery problem.

I remember the time when I have used one of the first pseudonymous remailers, after penet.fi failed (alpha.c2.org) In comparison, what is available today is easy and straightforward to use.

And I believe that this will simplify in future even more. You install a program and run it.  And you don't have to care much.  Ok, there always remains some danger of installing the wrong program - but this is not a danger for a network.  Those who install the correct software will be part of the network, and will be safe using it.

The problem of the Austrians is that they don't understand Popper, classify him as a positivist.

The problem of Hoppe in this case is bad education (Habermas).  Almost all opponents of Popper (Feyerabend, Kuhn, Habermas) seem to share the same error - a simple replacement of verification by falsification, but everything else remains as in positivism.  The number of people who understand that falsification is also only hypothetical, and not certain, or that it is not a particular statement, but a whole theory, even combinations of different theories, which have to give falsifiable predictions, seems minimal.

If one reads Mises, there are a few reasonable points about the difference between natural sciences and economics. In fact, we know from ourself how human society works - there are individuals with particular interests, and they try to realize them. Such things we don't know about atoms or quarks. So there is indeed a difference. And, of course, also the other one that our theories, if known, are able to change the game itself.  That's also impossible for quarks. 

But from a fundamental point of view it doesn't change much. So I agree with Popper that there is a unique scientific method, even if there are large gradual differences.

Given that the Austrians have not understood Popper, so that they are arguing, in fact, against variants of classical positivism, they are in some sense right: Theories cannot be derived from experience. One needs something a priori.  Now they make the Kantian error - a priori, means, not based on experience, means, it needs an independent justification, some sort of laws of thinking. 

Nice, but does not give much in comparison. If the Popperian is right, fine. If falsified, the falsification is also only hypothetical, not final.  He has now different possibilities - to modify the theory somehow. Or the assumptions about the initial data.  Or other assumptions and simplifications. Or to question the data. Given the complexity of human societies, one can always find ways to modify the theory so that it fits the data.

Don't worry, as an anarchist I'm used to harsh language in online discussions.  I guess I'm not fair to Keynesians too.

It is not a hypothesis.  It is an economic argument http://en.wikipedia.org/wiki/Parable_of_the_broken_window


Its not that simple. I would agree that the Austrians, in methodological considerations, overemphasize the case against quantitative measurements in economics. But in fact they also make falsifiable predictions - for example they predict the economic failure of socialism.

By the way I'm not an Austrian, similar to http://econfaculty.gmu.edu/bcaplan/whyaust.htm except that I have a higher opinion about the Austrian theory of the business cycle than Caplan.

Almost. I think the single purpose "does he obey his contracts" is the central question of a reputational system. It is itself as general purpose as the concept of a contract. 


Not at all. Everybody is free to work as an arbiter.  The only "qualification" of the arbiter is the agreement of the participants to accept this particular arbiter for their particular contract.

But, in fact, there is no way out of arbitrage. If you want to obtain nontrivial information about "X has violated a contract", you cannot wait for confirmation from X himself.  Nobody will blacklist himself.
So, you have to rely on information from others. But, then, how to make it hard to hurt reputation for no reason? Or you have a separate class of people allowed to blacklist somebody, which is independent of X himself, that means, some class structure or centralization, or you make it dependent on decisions X has accepted himself.

The second type is what is used in my proposal.  There are no centrally accepted trusted arbiters.  The arbiter is an arbitrary person trusted by X himself to be fair.

Not another one, but the same one.

Each arbiter accepts, volitionally, other arbiters to judge about his contracts and terms of service. These are also not some sort of a second class of higher arbiters, but, again, every person trusted by the abiter himself can be used.

And, so, there is no hierarchy of arbiters, but a network:  A general directional graph, where every node has at least one outgoing edge to an arbiter he trusts.  In particular, there will be loops in it.

Don't be afraid of loops - the terms of service may and will clarify that, at some point, the next arbiter is already unable to change the original decision of the first arbiter, but can only penalize or destroy the reputation of the first arbiter.

It is. The arbiter is a peer of the guy who accepts him.

BTW, if you trust the partner of your contract, you can accept him as the arbiter for the contract too.  And he can accept you as his arbiter.  So a simple peer to peer reputational system would be possible as a special case.

So or poor victims appear helpless, or rich people can destroy your reputation for  cheap.

Its clearly not that easy to distinguish pseudoscience.

The very point (a Popperian one) is that there is no theory-independent observation. You start with theories, and, then, use empirical evidence interpreted in the light of these theories, to test them, as well as to measure open parameters and so on. So, once the theories are pseudoscience, the empirical results will be pseudoscience too.

For example, there is the question how much of the price increases is caused by speculation. (The question already strongly suggests nonsense science.)  So one creates a simple model of what should be the true, fair price.  And, in this model, the difference between the fair price and the market price is caused by speculation.
Of course, using now such "empirical evidence", you can prove whatever you like about how harmful is speculation, and that it does not play the positive role suggested by Austrians.


This paper illustrates the point about the empirical data being interpretations in the light of particular models.

The comparison of the different models already strongly suggests their pseudoscientific character.  One "result" is that purchases financed by distortionary taxation lead to completely different results than spendings financed by deficit spending: "Results change considerably, though, when spending is financed with distortionary taxes."

But deficit spending is simply another method of taxation.  Those who receive the newly printed money have not obtained new values, but obtained part of the values owned by all actual owners of money. Of course, this form of taxation is different in form, and accompanied by a lot of side effects (on taxation, on long-term contracts in terms of money, on legal restrictions imposed by minimal wages and so on). 

But, sorry, I don't believe that these models take such complex side effect into account. And for rational, well-informed people and freedom of contract economics there would be no difference at all between printing money and some distortionary taxation. So if the models make a difference, they are BS.

And it is, by the way, exactly the type of BS predictable for victims of the broken window fallacy:

It doesn't. In fact, the argument of the paper is that if you use the same methodological principles which allow to justify ordinal utility, and add probability theory to the game, you can justify cardinal utility by the same standards.

So there remain two possibilities: Or ordinal utility doesn't follow, or cardinal utility follows, once we have a world full of probabilities.

It is a simple yes-no question, and I do not see much justification for intermediate numbers.

So my proposal is here for a global black list of persons who have cheated. The only valid record on this list contains

1.) the signature of the blacklisted person that it accepts a given arbiter,
2.) the signature of the arbiter that the person has not fulfilled a contract and not accepted the decision of the arbiter about it,
3.) additional information about the person as well as the contract.

So, to appear on the black list you have to be a total scumbag.

The point is that you can take risky cases, and, once you fail, the arbiter makes a decision about compensation. Then, all you have to do is to accept it and to do what the arbiter has told.  The penalties are themself established in the contract.

The idea behind this is to exclude only those who refuse any cooperation.  Everything else is (and can be) left to freedom of contract and the volitional choice of arbiters.

This black list is negative reputation.  There is, clearly, also a need for something different, a positive reputation. For this purpose, I would propose a system of guarantees which is based on it:  

So, you offer a compensation for the victim of A if A appears on the black list for violating a contract with the victim.

This is an information which suggests a simple metric: You can easily count the compensation you obtain if you are cheated.  

Not that easy, to be honest, because one should take into account the possibility of clones of A giving guarantees. A way to solve this problem would be the possibility to create persons connected with real life data, like passport data, biometric data and so on. These should not be necessarily public, it is sufficient to have them available to the arbiter, who makes them public in the case of a black list entry.  Without it, he gives only confirmation that he has a given set of personal data, and that there is not yet a record with personal data of that person on the black list.

Then, the simple case is that you have an expection of the worth of an open personal account (even a scumbag looses a lot if he appears on the black list with his personal data), so that you can compute - or I receive that much money as compensation, or even more money worth of reputation will be destroyed. The more complicate case is if the guarantee is given by a pseudonym - but this pseudonym is supported itself by other personal accounts.

Another problem is how to evaluate hidden personal accounts, there the personal information is known only to the arbiter.  Here, there may be many pseudonyms of the same person giving guarantees. This problem can be solved pseudonymously by a trusted notary who assigns ordering information to pseudonyms: An open personal account can give a signed confirmation with timestamp to this notary, where he confirms to own a pseudonym. Then, the notary returns a confirmation that this is the n-th pseudonym of a real person.  So, if pseudonyms supported by such numbers give guarantees, one can obtain information about the minimal number of involved real persons.

The remaining problem is trust in arbiters.  It has to be solved by iteration (arbiters sign open rules of behaviour, accepting second order arbiters) and personal trust to at least one arbiter as a starting point.

With this system, you can prove something: Whatever happens, or you receive a compensation, or at least one real person ends on the black list with personal data, or a person on your personal list of first order trusted persons does not deserve it. A scumbag on the black list improves the reliability of the network as a whole, so, or everything is fine, or the reliability of the trust information of the whole network increases, or at least your personal trust choices have been improved.  That means, you and the whole network learn from bad experiences.

Note that the failure to pay electronically is an objective question, the accused can prove that he has paid, so justice is easy for compensation payments, and, so, the failure of arbiters to punish this with black list entries is easily detectable too.  The notary who counts pseudonyms is also simple to implement as an automatic response, and cheating can be established easily after the fact.  So there is no problem of complex evaluations.
You have given a guarantee to A, but A is on the black list - pay, or you, or your arbiter, or his arbiter and so on appears on the black list.

How do guarantees appear?  If you have a successful cooperation, where you have made some profit, it is reasonable to exchange guarantees with a value which is some part of the profit. So, even if you have to pay for it, you have not made a loss - only a smaller profit.

I'm not that pessimistic. Of course, there remain weak points, but the whole idea of basing trust on past behaviour has similar weak points.  

What is important for a reputational system is that there are no scam patterns which may be easily repeated, so that professional cheating becomes impossible.

I'm thinking about the one-dimensional system based on "does this person obey his contracts".  I think it is central to reputation. And everything else can be based on it using freedom of contract. 

I acknowledge that there are a lot of different things reputational systems can be used to evaluate. But they are not worth much without the central one.  You may be highly competent in every question - if you are a cheater and a liar, it is dangerous to cooperate with you.  The stupid but honest guy is, then, preferable.

Ok, there may be some aspects of honesty - imagine some Muslims who consider everybody else except Muslims as fair game for cheating. Other Muslims, then,  may be interested in another type of reputation - "Muslim honesty": "does this person obey his contracts with Muslims". But this "Muslim honesty" can be organized in a system which focusses on a single general honesty - the Muslim creates two identities, one honest which makes contracts only with Muslims, and the other one for contracts with other people.

So I would say, reputation for obeying contracts is special for human cooperation, and deserves special treatment.  A reputational system should be, therefore, centered around this special question. If there is a reputational system which is optimal for this question, it is preferable.

Then, of course, one can think about extending this system of reputation to other questions. If this makes sense, fine, if not, one has to design other reputational systems for these other questions.

In other words, the reputational system has to be as good as possible for this single question, everything else being secondary.

Why this question is that special?  The point is that we can consider society as a large network of contracts. Such a network of contracts can be modelled in the net, using, electronic (Ricardian) contracts. Seeing these contracts, programs may evaluate them and extract a lot of useful information - but all this information is useful only if we can rely somehow on the reputation of the participants. Contracts and promises made by cheaters are worthless, anything based on it is worthless too.  So, whatever we want to do online about contracts depends on this particular type of reputation.

have an electronic system of

There are, of course, some pseudo-scientific aspects in austrian economics. There is, first, the rejection of cardinal utility (http://ilja-schmelzer.de/papers/utility.pdf).  Then there is the whole issue of methodology, which is worth to be criticized from a Popperian point of view (http://ilja-schmelzer.de/papers/againstCertainty.pdf). A third point is the use of the frequentist interpretation of probability instead of the Bayesian one (http://ilja-schmelzer.de/papers/frequentism.pdf).

But, sorry, in comparison Keynesian macroeconomics is much more pseudoscience. It is simply the broken window fallacy transformed into a theory.

I don't think it matters who are the early winners. The important point is that it cannot be traced.  If the early winners are part of the establishment, that's even good - it makes it less likely that bitcoins become illegal, because there will be an influental lobby behind it.

You think it works?  Which system do you have in mind?  Yesterday I have been pointed to
http://privwiki.dreamhosters.com/wiki/Distributed_Web_of_Trust_Proposal_2#Trust_Metric - the one of the topic of #bitcoin-wot.  I doubt it works. But, it seems, I do not yet understand some key issues of this proposal.

In particular I don't understand how one reaches the conclusion "The design is resistant to a number of possible attacks on the trust network, such as whitewashing and slander via bogus identities."

For example, a simple design for self-promotion:  I use 20 identities, 19 of them completely honest, communicating with others. They all value number 20 very high in all regards.  Number 20 seldom does anything, but it there is a large contract, it cheats.

For every cheating, the cheater receives negative rating from the cheated. But all the other 19 nodes can give similar negative ratings to the cheated guy.  So it is the cheated guy who looks like a cheater (by majority of the ratings) and his negative rating for the real cheater looks like empty slander by a cheater.

But, anyway, the successful cheater may be simply killed, and a new one created.

One may think that as a consequence of this, the propagation rating of the 19 guards will decrease.  No problem, one creates second order guards. They recommend only first order guards, who never cheat themself, and so their external propagation rating remains high. They give high propagation ratings to the first order guards. But nobody else has any actual connections with them, so there will be no other ratings to them.  And only they highly rate the real cheater. 

So I think the claim is not really justified, at least I would like to see some more justification.

I think the central missing part of a modern agora (a market not controlled by government) is a reliable system of reputation.

There are proposals for systems of reputation based on ratings, often from arbitrary persons.  But I'm afraid such proposals are open to abuse by ideological enemies. Imagine, for example, some religion does not like something (be it marihuana, tobacco, porn, gays, or other religions). So, the fanatics may give extremal negative ratings to everybody who does not confirm to their religious values.  This is not the information which is interesting for those of different religions.

I see no way out of it, so I think such reputational systems are doomed.

What I would like to propose is a system which allows to establish a reasonable notion reputation also for minorities. So, bad reputation cannot be based on the fact that other people (like religious fanatics) do not like you. It should be based on something different.

The key for a reliable reputational system is the information if you obey contracts.

And the main point is that other parties (like ideological enemies) cannot destroy your reputation without reason. The solution for this is that only an arbiter you have accepted yourself can make the decision to destroy your reputation, and only if you not only violate a contract, but refuse to accept the decision of the arbiter.


For more about this reputational system seehttp://ilja-schmelzer.de/network.

Hi,

I have already more than 4 posts and 3 out of 4 hours.  And what I have to add has been already described as interesting (https://bitcointalk.org/index.php?topic=15672.msg948928#msg948928 https://bitcointalk.org/index.php?topic=15672.msg949330#msg949330).

I would be very interested to participate in discussions related with "Open Transactions" as fast as possible.

I expect bicoin will be the currency for extralegal payments in the darknet.

In the legal environment it will not play a big role, simply because it will be forbidden once it becomes important. But this will be without influence on extralegal markets. 

One question is, then, how important these extralegal internet markets will be, in comparison with legal markets, in the future. I think, the main problem of these markets is that there is actually no reliable reputational system.  Once such a system will be created and works, extralegal market will become increasingly important.

Bitcoins will be especially important during the development of the extralegal markets, until a reliable reputational system exists. The reason is that it is safe - once you have them on your account, everything is fine. The alternative on the free market are currencies backed by real values, but they have to rely on trust - you have to trust that the obligation to return some real values once you present internet money is reliable.  This is impossible without a reliable reputational system.

On the other hand, bitcoins will simplify the creation of a reputational system. The point is that one way to improve reputation of a pseudonym (pseudonymous reputation is the key for extralegal markets) are guarantees from persons who already have reputation: Somebody with reputation offers some compensation for those cheated by the pseudonym.  It makes the system much easier if there is an established currency to be used in such guarantees.

The very point that the value of a bitcoin itself does not depend on the reputation of somebody who creates bitcoins is the useful point here.

Another, quite different question is if the bitcoin survives once a state-independent reputational system works. Once it works, it would be much more reasonable to own obligations for real values (once these can be trusted) than to use bitcoins which do not have any inherent value.

I do not really use them (I have only tested them), but this is the main reason to support it.

Actually I think that for a future system the currency question is no longer relevant. With fast, and almost commission-free electronic exchange systems, it doesn't matte what is used as the currency - you can exchange immediately your personal "currency" (which would be reasonably based on obligations to give you real values) into whatever is used for exchange.

But if it is bitcoins, that would be fine. 

What is necessary is a reputational network which works pseudonymously.
For a proposal see http://ilja-schmelzer.de/network

This depends on us. If we use bitcoins, or other alternative currencies, without caring about governments, they cannot do much.

There is already the Tor network, and alternative banking may be done using Tor hidden services.

What is necessary for this to work on a large scale in a reputational network, with volitional arbitrage. See http://ilja-schmelzer.de/network for the concepts which have to be realized yet. But once such a system works, governments cannot do much to destroy it. To forbid it is simply not sufficient.

Fine. Maybe it's worth to establish contact already now?