The Classical Liberal Case for Privacy in a World of Surveillance and Technological Change

Palgrave Macmillan, 2018

How should a free society protect privacy? Dramatic changes in national security law and surveillance, as well as technological changes from social media to smart cities mean that our ideas about privacy and its protection are being challenged like never before. In this interdisciplinary book, Chris Berg explores what classical liberal approaches to privacy can bring to current debates about surveillance, encryption and new financial technologies. Ultimately, he argues that the principles of classical liberalism – the rule of law, individual rights, property and entrepreneurial evolution – can help extend as well as critique contemporary philosophical theories of privacy.

Available from Palgrave Macmillan.

The ABC, ‘Independent’ to a Fault

With Sinclair Davidson

It is appalling that a sitting government should have to complain that the ABC is repeating Labor lies as facts. The ABC itself should be ashamed to have received such a complaint. Yet that is precisely why the Labor Party supported the establishment of the ABC – to provide a forum for pro-ALP news and opinion. This points to questioning the precise meaning of what is meant by the ABC being “independent”.

The Charter describes the ABC as an “independent national broadcasting service”, and it is that independence which forms many arguments in favour of public broadcasting. But this notion of independence needs deeper examination. The ABC is a state-owned broadcaster, which is dependent on triennial funding arrangements drawn from the Commonwealth budget, which is set by the political discretion of the government of the day.

ABC supporters refer to the ABC’s independence in two senses. First, it has editorial independence from the government, insofar as it is a statutory agency that is self-managing and separated from the normal chains of political accountability. Second, it is independent of the interests of advertisers and private sector media moguls, providing the “independent information” that the commercial media might not.

Public broadcasting has always been defined against the evils of private broadcasting, and the theme of an independent bulwark against the commercial media (the moguls and monopolists) has been integral right from the start. In the early years it was claimed that a purely private media market would be simultaneously disorderly and monopolistic. In the debate over the 1932 bill, the Labor member for Kalgoorlie, Albert Green, warned of the “chains of newspapers … obtaining such a stranglehold over the eastern part of the Victoria, and disseminating its propaganda through the stations that it controls”. The private monopolisation of radio – “one of the most revolutionary additions to the pool of human resources” – was constantly invoked by Labor members throughout the early debates. This concern, they felt, was more than just theoretical. The 1931 election loss showed, they felt, that the private media was systematically biased against the Labor Party, and a public broadcaster would be able to right that wrong.

Control of the wireless was the high ground of the political contest. In New South Wales a few years earlier the Lang government had sought to establish a state government radio that would resist what Labor saw as the Nationalist Party-dominated private media. As Albert Green, the most forthright of the Labor members on this point in the 1932 debate, put it:

Some B class stations are controlled by newspaper combines, which use them to broadcast only one political opinion. I had hoped that the air would be free to all, and that at election time every party would be given an opportunity to express its opinions over the air. Unfortunately that has not been our experience. Certain newspaper combines are endeavouring to obtain a monopoly of B class stations, and I sound the note of warning that sooner or later some government will have to tackle the very difficult, but necessary task of dealing with the problem of metropolitan B class stations. Nothing short of a complete national scheme will do.

In this sense, independence was understood by the Labor Party as being pro-Labor – or, at least, not anti-Labor. The 1942 inquiry into wireless reiterated this concern, arguing that public broadcasting was needed “to prevent the service from being used for improper purposes”.

Similar concerns drove the introduction of television. The overwrought claims about the social and psychological power of television only intensified the concerns about the new technology’s political importance. The public position of the Labor Party and the ACTU emphasised the cultural good that public broadcasting television could bring, rather than its role countering political bias. But there is no doubt that politics was front of mind when the labour movement considered the significance of television.

A public disagreement between Arthur Calwell and H.V. Evatt as to whether Labor would nationalise the commercial television stations if they were returned to government pivoted on their different impressions of how sympathetic the ABC was to the Labor Party. Calwell, who had been Minister for Information during the Second World War, had a hostile relationship to the commercial press. He believed that Keith Murdoch, who controlled the Melbourne Herald and several other papers across the country, was “a fifth columnist”, “megalomanic”, and his network of papers “a law unto itself” and “Public Enemy No. 1 of the liberties of the Australian people”. Murdoch’s pernicious influence could not be let onto television. Evatt felt that if the hybrid system was maintained, at least the Labor Party would be able to buy a commercial station to air its views. For its part, the conservative parties were just as aware of the political significance of television, arguing in response to the Chifley government’s proposal to establish a monopoly broadcaster that Labor was “merely another milestone on the socialised road to serfdom”.

The modern ABC’s independence is often declared but in practice is hard to pin down. Unlike the BBC, the ABC was not established under a royal charter, and the 1948 move away from licence fees to funding through budget appropriations brought it more into the political window.

Yet how independent could the ABC be? Compared to private and non-government organisations, the fortune of any state authority is going to be closely tied to the government of the day. Public broadcasters have their budgets set by the same governments which they purport to keep a check on. Commercial broadcasters might be dependent on the goodwill of advertisers, but the fact that there are many potential advertisers is a protection against excessive advertiser influence. A public broadcaster has only one funder, and it is a funder whose interests are driven by political rather than commercial incentives.

Nor are commercial broadcasters required to constantly justify their activities to professional politicians. Public broadcasters are regularly brought in front of parliamentary committees to answer for editorial decisions, from the trivial to the significant. The Senate estimates committee procedure requires statutory agencies to present themselves in front of a committee of Senators three times a year. At her first Senate estimates hearing in May 2016, Michelle Guthrie was interrogated about the cancellation of livestock market reports on ABC regional stations, the ABC Fact Check program, how unionised the ABC’s workforce was, whether the ABC was too Sydney-centric, how many people it sent to the Cannes film festival and how long they were out of the office, and how much the ABC spent on a custom typeface to use across its brands. This sort of scrutiny is, of course, entirely appropriate for a state instrumentality. But the notion that independence is the ABC’s unique value as a media outlet is difficult to sustain.

It is not obvious that independence from a democratically elected government is desirable. The ABC is a state-owned organisation, and like any state-owned organisation it derives its legitimacy from its relationship to the democratic expression of voter preferences. Public broadcasters join a large number of other regulatory and bureaucratic agencies that have been deliberately separated from the normal lines of democratic accountability: rather than being the “arm of the minister”, in the classical Westminster bureaucracy formulation, they are protected from political interference and given independence. In an open market, private media organisations are subordinate to consumers and advertisers. In government, politicians and bureaucracies are subordinate to voters. Independent statutory agencies are, by intention, subordinate to neither. Even at their most benign, they are highly susceptible to capture by their employees and management.

Indeed, staff capture has been a longstanding concern of critics of public broadcasters. As Michael Warby writes, “‘Independence’ from government interference … comes to mean effective independence from whatever tenuous public controls over the ABC exist in practice—it amounts to independence from the direct legal owner”. One of the consequences of staff capture, of course, is political bias. The historical context shows that this political slant is a deliberate feature of public broadcasting, not a bug.

Not our ABC

With Sinclair Davidson

The Australian Broadcasting Corporation is a $1.04 billion piece of public policy and we treat it as exactly that: a government intervention into the market for news, entertainment and communications. Policy interventions are financially costly. Policy interventions are also costly in a non-monetary sense. They can have unintended or counterproductive consequences. They can crowd out non-government activity, stifle entrepreneurship or technological innovation, distort the marketplace, systemically favour particular political interests and ideologies, and create fiefdoms of unaccountable bureaucrats.

The ABC was established in a moment of history significantly unlike our own, facing a cultural and political environment greatly different to our own, with technological and economic challenges completely opposite to those we now face. Over the course of eight decades the ABC has embedded itself in the Australian political system and public consciousness. But the original rationales for the ABC have long since expired. Technology has made the concerns of Australian policy makers in the 1930s – or even the 1990s, when the ABC was last subjected to a major review – redundant or anachronistic. Economic justifications for a state-owned media broadcaster simply do not fit the modern media landscape.

The arguments for public broadcasting in the twenty-first century are simply not compelling. It is certainly the case that the ABC has bound within it an enormous amount of cultural capital as a consequence of its eighty years of pre-eminence in the Australian media industry. But that should not be confused with either a claim that a publicly-funded broadcaster was necessary to build that cultural capital or that Australian culture would suffer in a world where the ABC had been reformed or privatised.

The ABC is an Australian ‘icon’ in the same sense that the Commonwealth Bank was an icon before its privatisation, and in the same anachronistic sense that Qantas, the ‘national carrier’, is imagined to be an essential part of the Australian psyche. We can celebrate the achievements of the ABC, its cultural significance, and its role in Australian history. But that should not prevent us from looking sceptically – as we should with all costly government interventions into the economy and society – at whether the ABC remains good public policy. Does it have a good reason to exist, now?

That question invites us to speculate as to the rationale for the ABC. The ABC itself denies that it is a market failure broadcaster, while the notion of it being independent is difficult to pin down. Independent of whom? It is publicly funded and its management are required to appear before parliament and answer questions posed by politicians. True, the ABC is independent of the demands of commercial reality, but it is not independent of its political paymaster. Of course that undermines the argument that the ABC is a bulwark of democracy. A free press may well be a necessary condition of democracy but that does not necessarily imply that the government should subsidise the press. To the contrary, many non-democratic nations have maintained very high levels of government ownership and subsidy in the media. A further argument undermining the ABC’s claim relates to the large and obvious political bias in its reporting and news coverage. A 2013 survey revealed that ABC journalists are almost five times more likely to be Greens voters than the average voter and twice more likely to vote Greens than the average journalist.

Other arguments for the ABC include quality programming, Australian content, and rural subsidy. What constitutes ‘quality’, however, is a value judgement. Australian content and rural subsidy can be provided for much less than $1 billion per annum. That is the challenge; the ABC is a massive government program with no clear objectives and no clear accountability.

Few Australians would realise that the ABC charter does not include the word ‘fair’ nor does it include the word ‘balanced’. The charter is at best only a loose guide to what the ABC does. Nor is it any constraint on ABC operations. While the charter is spelled out in legislation, section 6(4) explicitly states that ‘Nothing in this section shall be taken to impose on the Corporation a duty that is enforceable by proceedings in a court.’ Additionally, there is nothing in the charter that could be described as an enforcement mechanism, nor any penalties detailed for potential breaches. The charter is in law – insofar as it exists on the statute books – but it is not law that the ABC has to abide by.

What should be done about the ABC? It is certainly the case that doing nothing and muddling through is very much underrated as a government policy. Yet lower-cost alternative public policies are available and clear savings can be made. One possibility would be to refine the charter. In the first instance, the ABC could be redesignated to be a market-failure broadcaster. Alternatively, it could be required to be self-funding, i.e. commercialised. Here the ABC could be required to finance its activities through advertising revenue and then pay dividends to the government. A further option would be to reform the governance of the ABC.

Then there is privatisation. The ABC could be sold off to a single bidder or consortium. Or it could be listed on the stock exchange. Our preferred option would be for shares in the ABC to be given away, either to all Australians or to existing and previous staff. The staff are the best people to realise the value of the ABC – and they would pay for their shares over time through the capital gains tax as they sold their shares.

In this sense the privatisation of the ABC would proceed much like higher education is currently funded. ABC employees would receive their shares at zero-price and only pay for them when they disposed of the shares and only then if the shares had increased in value. The proceeds of the privatisation would be realised over time and would not constitute a ‘sugar-hit’ to the budget. Nor can the privatisation be characterised as a stunt to balance the Budget in the short term. Rather, it is a program to establish a newly-private ABC on a firm footing, vesting it with a cohort of new owners who have the most interest in making it a commercial success.

ABC is about partisanship not diversity

With Sinclair Davidson

The difference between the ABC and Fairfax and News Ltd is that the ABC is a $1 billion government program that provides media services to Australians. Fairfax and News Ltd are private entities that do so at their own expense and hope to earn a profit. Those small details were missing from Laura Tingle’s defence of the ABC published in Weekend AFR.

As such we can expect somewhat different behaviour from the national broadcaster than from the private sector. Indeed, holding the public sector to a different standard is commonplace in our society. The ABC, very often, wants to have it both ways. For example, paying its employees market rates of pay when they don’t have to compete in marketplace for income.

But some criticism of the ABC is unfair. Of course the ABC would send journalists to cover the recent royal wedding. As every other serious media organisation did. That, however, should not detract from the mounting criticism that is being levelled at the ABC.

For all its protestations of “independence” the ABC as a large and generously funded government program can and should be scrutinised by government, the Opposition, and ultimately the taxpayers who pay for it. Having embedded itself into the Australian psyche and culture the ABC has managed to avoid serious scrutiny for a long time. The ABC – like all government programs – should be an election issue at every election.

To justify its existence the ABC and its supporters posit a range of mostly overlapping rationales. We hear a lot about independence, quality and diversity. Less about being a market-failure broadcaster. Rural subsidy also appears to play a role in justifying the ABC’s existence – although it seems to be very Sydney-centric for a rural audience. It was the diversity argument that Laura Tingle emphasised at the weekend.

>But it isn’t quite clear what is meant by the term “diversity”. The idea that media markets might lack diversity has its origins in a famous spatial economic model by the mathematical economist Harold Hotelling. In his model, firms, in a market with a small number of firms and not competing on price, would offer near identical products. Hotelling believed this explained the “excessive sameness” in capitalist markets. That is an interesting model but it does not explain the creation of public broadcasters in Australia and the UK.

To the contrary, public broadcasting in the UK was introduced explicitly to reduce diversity – the perceived cacophony and anarchy of radio broadcasting seen in the United States. The ABC was designed to follow the BBC model (albeit with a small commercial sector alongside). To argue that the ABC provides diversity where the private sector does not is entirely incorrect. What the ABC does is provide those very same services without having to attract an audience.

A generous interpretation of that feature is that there are some media services that should be provided that the private sector won’t provide. But it is difficult to imagine what those services might be. In any event, the ABC explicitly denies that it is a market-failure provider.

What the ABC does provide in excess, however, is partisanship. Any media organisation should be ashamed to be told that it is reporting political falsehoods as facts. Yet Mitch Fifield – the Minister for Communication and (very) nominally responsible for the ABC, did just that. No doubt he’ll be told something about consistency with “editorial standards”.

Those would be the same editorial standards that saw Emma Alberici publish Labor talking points on company tax cuts as if they were uncontroversial facts. The same editorial standards that saw two News Ltd journalists compared to a mass murderer just last week. Yet we are supposed to be fed up with News Ltd antics.

Let’s be blunt here: the ABC burns through $1 billion of taxpayers’ money every year. Not shareholder money, not a mogul’s money. Taxpayer money. The ABC is a not a blog run on a shoestring, or out of someone’s basement. To argue that being left-partisan is simply to compensate for right-partisanship in the commercial sector is to disfranchise all those coalition voters who pay for the ABC. Australians do not expect their government agencies – even nominally independent agencies – to exclude other Australians without excellent reason.

Regulation and Technological Change

With Darcy Allen. Published in Darcy WE Allen and Chris Berg (eds.),Australia’s Red Tape Crisis: The causes and costs of over-regulation, Connor Court Publishing, Brisbane, 2018

Abstract: This chapter explores the relationship between technological change and regulation in both directions. New technologies such as artificial intelligence, machine learning, and distributed ledgers are likely to drive structural changes in decades to come, not least in the way firms comply with regulation and how regulators enforce regulation. Regulatory technology, or ‘RegTech’, presents opportunities to reduce the regulatory burden on firms and make regulation more efficient and less harmful. On the other side, regulators need to come to terms with new technologies that may challenge existing business models or regulatory constructs, and we propose policymakers adopt a ‘permissionless innovation’ principle in response, ultimately allowing experimentation with new technologies by default unless direct harms can be demonstrated.

Available at SSRN

Regulation and Red Tape in a Small Open Economy: An Australian Overview

Published in Darcy WE Allen and Chris Berg (eds.), Australia’s Red Tape Crisis: The causes and costs of over-regulation, Connor Court Publishing, Brisbane, 2018

Abstract: It is widely acknowledged in political circles that Australia has a high red tape and regulatory burden. However little scholarly attention has been directed towards understanding the extent and significance of that burden. This paper describes why red tape and regulatory reform should be treated as a particularly significant priority for a small, open economy such as Australia’s. Australia faces a number of economic and fiscal challenges and is likely to become more exposed to macroeconomic fluctuations in coming decades. Red tape and regulation slow adjustment to changes in that environment among individuals and firms. The red tape and regulation reform program should be seen as a central element in making Australia more resilient to local and global economic shifts.

Available at SSRN.

Australia’s Red Tape Crisis: The Causes and Costs of Over-regulation

Edited with Darcy Allen. Connor Court Publishing, 2018

Red tape costs the Australian economy as much as $176 billion a year. Governments create and enforce thousands of regulations on our workplaces and our communities. These rules slow and prevent businesses forming, people from flourishing, new technologies from being adopted, and hold back Australia’s global competitiveness.

Australia’s Red Tape Crisis is an exploration into the economics, politics and culture of over-regulation. How should we structure our federation to achieve reform? Why should political responsibility sit with the elected? Does Australia have a deep desire for a federal bureaucracy? What is the future of red tape reduction policies?

Together, the contributions of economists, philosophers, politicians and lawyers help define a path for overcoming Australia’s red tape crisis.

Available from Connor Court Publishing

Against Public Broadcasting: Why we should privatise the ABC and how to do it

With Sinclair Davidson. Connor Court Publishing, 2018

The Australian Broadcasting Corporation is a media colossus with a reputation for integrity and quality. It is also a billion-dollar government program that lacks any coherent justification for its existence. Chris Berg and Sinclair Davidson provide a highly readable account of how and why the ABC has come to be in this position. This is the first serious analysis of the rationale for the ABC and its existence in decades.

When the ABC was founded in the 1930s the problem was a scarcity of media. Now that we live in a world of media plenty, it is hard to see why the government is still subsidising a media empire. This book provides an outline of how policymakers can dispose of the ABC, while at the same time preserving its value and realising that value for the benefit of taxpayers.

Available from Connor Court Publishing

Blockchain is (now) a competitive industry

With Sinclair Davidson, Jason Potts and Ellie Rennie. Originally a Medium post.

With the anniversary of the Bitcoin whitepaper looming on October 31, it is remarkable how far and fast this industry has come since it was anonymously launched on a crypto bulletin board just ten years ago. Ethereum, which gave us smart contracts and ICOs, was only started in 2015. The Consensus conference, only in its fourth year, packed over 8500 attendees into the New York midtown Hilton with representatives from most major corporations and industries being present.

Blockchain is quickly becoming mainstream. The industry is entering the phase of industrial competition — and this is happening on a global scale.

Consensus is the centerpiece of Blockchain Week in New York City, and the main global industry conference for cryptocurrency and blockchain technology. It is also increasingly a platform for major industry announcements. Two clusters of announcements in particular are propitious markers of where we’re up to in the development of the industry.

In politics, David Burt, Premier and Finance Minister of Bermuda, announced his country’s Parliament had tabled the Digital Asset Business Act, staking an ambition and claim to be the world’s leading crypto-regulator. On Tuesday, Eva Kaili, Chair of European Parliament Science and Technology Options Assessment, announced the Blockchain Resolution had passed the European Parliament.

In enterprise, Fred Smith, CEO of FedEx called blockchain the next big disruption in supply chains and logistics with the potential to completely revolutionise the global trade system. Circle, a Goldman Sachs backed crypto finance company, announced it will be issuing a fiat stablecoin, which is to say a crypto-version of the $USD. And buried in the announcement by Kaleido — a blockchain business cloud — of a partnership with UnionBank i2i (a Philippines Bank specializing in rural banking), was a joint partnership with Amazon Web Services.

These announcements indicate that we have entered a new industry phase, moving well beyond the first entrepreneurial phase of highly speculative market-making start-ups operating entirely in a disruptive mode, and are now at the onset of a second phase of industrial dynamics, that of industrial competition. While still incredibly young, because of the speed and scale at which it has developed, the blockchain industry has now entered the phase of market competition.

The Bermuda announcement is a competitive response to the innovative regulatory frameworks built by jurisdictions such as Singapore, Zug (CryptoValley), Estonia, Gibraltar, Isle of Man, and other crypto-havens. The Bermuda announcement clearly signals that we’re now in the phase of global regulatory competition, and that crypto-regulation and legislation in countries such as the US and Australia will be held by the competitive pressure of exit-options from departing too far from the competitive equilibrium.

The announcement by Kaleido is in itself less significant than that of the AWS partnership, which signals the new shape of competition in cloud computing. Technology companies such as Microsoft, Oracle and IBM are competitively positioning themselves to provide foundational infrastructural services and standards in this new space, and the Fred Smith’s pronouncement signals that the logistics industry is about to be competitively disrupted again.

The difference between the first and second phase of industrial dynamics is that in the first phase entrepreneurs are inventing new technology, disrupting existing markets, and seeking to create new business models. It’s a process of de-coordination of an existing economic order. But this is not generally well described as a competitive market process, usually because markets themselves are still forming, and uncertainty is very high. Cooperation in networks and innovation commons is the predominant institutional form.

Competition emerges when uncertainty begins to clear as the outlines of how the technology works and what it will be used for, which markets are affected and how, and which firms will be involved, and a speculative game turns into a strategic game because it becomes clear who the players are and what they are doing. Investment is not just for R&D, for discovery of new technology; but is strategic investment to compete for market share, and ideally for market dominance.

This is where we are up to now: the phase of global market competition.And further evidence of this is that the main concern of industry participants is global regulatory uncertainty, which is to say the rules of the competitive game.

Now to be clear, crypto and blockchain is still an experimental technology. But we’re now past the early innovation phase — the start-up phase — and have investment is now a C-suite concern, and a parliamentary agenda item.

What does competition mean for Web 3.0?

So blockchain is being absorbed into the economy and global political system. But what does this mean for the future of the internet?

The other big question arising from the Consensus 2018 announcements was the extent to which the involvement of incumbent internet platforms, such as Microsoft and AWS, will affect the distributed nature of the emergent blockchain ecosystem.

Joseph Lubin, co-founder of Ethereum, argued that the technological foundations for a distributed future have been built and that the essential task now is to achieve scalability. Data storage is an important aspect of scalability that will be essential to the success of decentralised applications (dapps), and more radical solutions (such as the InterPlanetary File System, IPFS) are apparently not ready for widespread adoption.

The involvement of AWS in Kaleido enables enterprise participation in the Ethereum blockchain whilst ensuring that the data (including oracles) are housed securely. While numerous self-sovereign identity dapps are available (as displayed through Civic’s identity-checking beer vending machine at the conference), common standards are necessary for those providing verified information.

Microsoft’s partnership with Blockstack and Brigham Young University is a development towards these standards that is potentially significant for this new approach to online privacy.

Neither development necessarily threatens Web 3.0, but this is now being driven by a competitive logic of market forces.

Crypto constitutionalism

With Sinclair Davidson and Jason Potts. Originally a Medium post.

Blockchains are constitutional orders — rule-systems in which individuals (or firms, or algorithms) can make economic and political exchanges.

In this sense, blockchains look a lot like countries. They have currencies (tokens), property (digital assets), laws (protocols), corporations (DAOs), and security systems (proof-of-work, or proof of stake, or delegated byzantine fault tolerance, etc.).

And like countries, blockchains have systems of governance.

Satoshi built one system of governance into Bitcoin: how the network comes to a consensus when miners announce two equally valid blocks to the network. The protocol (the constitution) resolves this problem by incentivising nodes to prefer the chain with the most work.

But this is a tiny fraction of the governance questions that just surround Bitcoin. How should the Bitcoin network be upgraded? Who decides? How should the various interests be accommodated — or compensated?

In these blockchain governance debates — disputes about whether governance should be on-chain or off-chain, who writes the rules, who can be a node, the role of voting, and the relative position of protocol developers, miners, block producers, HODLers and third party applications — we’re seeing the history of thinking about political economy being rediscovered.

Happily there exists an enormous body of thinking on governance, constitutions, the function and efficiency of voting and voting mechanisms, and how power is allocated in a political and economic system.

Blockchains as constitutional experiments

Historically, experimenting with new constitutions has involved things like civil war, secession, conquest, empire, and expropriation. The English fought civil war after civil war to limit the power of the monarch to tax. Expanding the franchise involved protest and violence.

In the real world, constitutional experimentation is costly and slow: limited by the rights and preferences of real populations and the real endowments of physical land and property.

By contrast, blockchains offer a space for rapid, hyper-experimentation. New constitutional rules can be instantiated by a simple fork. New protocols can be released in months or weeks.

Blockchains are an environment for institutional innovation — a place to apply hundreds of years of thinking about political governance.

Why vote?

For instance, networks such as Decred, NEO and EOS use voting to manage their decentralised consensus mechanisms. Vitalik Buterin and Vlad Zamfir have argued that on-chain governance is overrated.

What this debate is missing is an understanding of the economics of politics. Blockchain developers aren’t writing protocols — they’re writing constitutions. And we know a great deal about constitutional design and voting mechanisms.

The first thing we know is that choosing the rules of a voting system is effectively choosing the result of the vote.

The eighteen-century mathematician the Marquis de Condorcet found that a three cornered vote using a simple majority rule might not come to a clear consensus on the winner. A might beat B, B might beat C, but C might beat A. The ‘ultimate’ winner of this cycle will depend on how the votes are ordered.

Kenneth Arrow generalised this into his impossibility theorem: there’s no unique procedure that reliably comes up with a stable ordering of aggregated preferences. A set of quite reasonable institutional assumptions — such as no dictator, the independence of irrelevant alternatives and so forth — can’t be combined.

The lesson economists have taken from all this is: tell me what you want, and I’ll design you a mechanism to get it. What matters is how we decide how to decide.

Public choice scholars have focused on problems how political agents shape their policy positions to suit median or marginal voters. Retrospective voting models suggest that voters assess how happy they are (in general, not just with politics) at the time of voting and vote for or against incumbents on that basis.

Other scholars have focused on why people even bother to vote — given there is a miniscule chance that they can change the outcome of a vote. This had led scholars to the theory of ‘expressive voting’, where voting is effectively a form of consumption or signalling.

This is a rich body of political and economic theory that has been absent from the blockchain governance space. For instance, is voting a positive or negative externality?

It depends on what the purpose of the voting is. If preference aggregation is your goal, ‘low-information’ voting is a problem — it introduces noise. Blockchains should then tax voting.

However, if simple legitimation is the purpose of voting (as Vlad Zamfir argued at the Ethereal conference) then even low-information voters add value. Ideally the mechanism would subsidise all voting.

The incentive design problem for blockchain voting depends on what you think the purpose of the voting is.

And it turns out that this question has been one of the over-riding concerns of economists, philosophers and political scientists for hundreds of years.