For years I have been contemplating how society could exist in a truly free market of anarcho-capitalism, or what I call a Unanimocracy — governing by unanimous consent and contract. I looked at all the various problems I see with the State and all the market that seem to rely on the State: health care, insurance, education, infrastructure, etc.

It has always been my thought that the great majority of the State could be replaced if we had a way to gauge someone’s reliability, but with a free market perspective. Right now, if you want a credit card, you have to have a State-controlled identification number so that creditors can look at your history. This number is your Social Security Number, a number that was originally illegal to use as identification but now is almost a requirement in order to live. Insurance companies keep their blacklist of bad drivers and fraudsters by using the SSN. Many schools use the SSN as a way to keep students identified, and health care companies also use the SSN to track medical histories. How could society exist in the way it works today with this identifier? The Competitive Feedback System (CFS) would come into play, for sure.

The current best example of a CFS is eBay’s feedback system. When a transaction is made between two parties, both parties are allowed to give feedback to the other party concerning the entire transaction. You can give them a +1 feedback for a good transaction, -1 for a bad one, and a 0 or neutral if the feedback is gauged as neither good nor bad. The feedback system at eBay is very consistent and incredibly useful for many eBay users. It takes less than 1 minute to leave feedback, and the system limits how many letters you can use to verbalize the transaction — this keeps the feedback system efficient for those who want to see details of a transaction.

Some people have pointed to flaws in the eBay CFS when I’ve brought up the idea of a CFS-managed society. One flaw that is repeatedly brought up is the ability of someone to sell hundreds of very expensive items in order to gain many feedback points, then switch to selling a few dozen expensive items to mask the old points with newer “high priced” items sold, and then turn to selling really expensive items, collecting the money, never shipping anything and running off with the money, leaving a few people with nothing to show for the trade. I usually point out what I am familiar with that the free market provides to protect the buyer — insurance. When you transact a big purchase from Target or the car dealer, the chance of them running before they deliver the item is fairly low (if not almost non-existant). eBay, though, offers a higher reward (cheaper products) but a higher risk. In order to offset that risk, there are numerous insurance plans available to protect your purchase. Paypal offers one, many credit card companies have some built-in to your credit card agreement. As far as I’ve been able to tell, this debate topic is a non-issue and a non-starter — but I am interested in what others have to say about examples of scam-artists where the buyers never received their money or a product.

One thing I’d change about eBay’s CFS is the point value system. I don’t think that 15 items of different kinds and prices really should be rated as just +1 or -1. I think all users of the system should be given two values for feedback: one which is identical to the current system (+1, -1, 0) and one number which equals the amount of dollars of transaction history value. If you sell 15 items for $1 each, and you sell them all perfectly, you’d get +15 feedback points and +$15 “feedbucks.” If you sell 15 items for $100 each, you’d get +15 feedback points and +$1500 “feedbucks.” Now imagine you sell 100 items at $1 each positively, but try to sell one item for $100 and you blow off the buyer. You’d end up with +100/+$100 and -1/$-100 which would give you a net feedback of +99/$0. A simple code upgrade might even let different users display others’ feedback points differently, such as (Feedback/Feedbucks Positive, Feedback/Feedbuck Negative) which would display that last user as +100/$100, -1/-$100. This would also show you who the best providers are in any area.

Another area I think eBay is lacking but would be welcome in a CFS market would be “Historical Average Ability to provide” (HAA) data. This would work great for buyers and sellers alike. The HAA figure would be based on their current auction status — how many items they’re trying to buy or sell, and the total of those items, versus their historical average of the same figures based on the same period of time. If over the next 2 weeks someone is trying to sell 100 items with a total value of $10,000, their 2 week HAA would be 100/$10,000. If this person’s historical average for past 5 years was 5/$100 and for the past 1 year was 10/$200, you’d have to take caution with their current run. Of course they could be selling a car or a home, but you can easily see if what they are selling is something extraordinary to their average. Sellers could also gauge buyers the same way — how much have they bought, on average, in a certain period of time, versus their current buying attempts.

So how would a CFS work in today’s market? Every feedback point in every transaction could be tagged by both parties. If it is an insurance transaction, they can tag it “insurance” in their profile. If a buyer of insurance has an accident, the insurance company can flag their transaction with some negative feedback in terms of the value of the accident. This would not necessarily bring down their feedback totals as other parties that want to trade with the person who has the accident might sort their feedback values by ignoring insurance or education or health matters (or they might actually sort their numbers with those figures). If a person wants to pick the best insurance company, they could also sort insurers by feedback numbers to see which insurers offer the best safety and time to pay. It is very hard to beat that system through fraud since all previous history (with a timeframe you pick) would be visible.

What about parties that are targetted by a massive amount of “feedback spammers” who make transactions in order to defeat the party? Currently, eBay offers some third party arbitration for negative feedback, at a fee. This is an option - if the seller of an item is wrongfully spammed with negative feedback, they can choose to pay for arbitration. If the feedback spammer decides not to arbitrate, the feedback goes away. Also, every transaction that the spammer attempts costs them money. They have to buy an item in order to acquire the opportunity to leave feedback. If 10,000 feedback spammers try to harm someone, there is a great cost to the spammers to do so. Would a large company try to do this to their competitors? It is absolutely a possibility, but again it would require great financial capacity, and the company spammed would just need to prove delivery of the item bought to negate the feedback. UPS and FedEx have saved me from 2 negative feedback points on eBay when someone said I never shipped an item — it only took me faxing eBay the signed delivery receipts to get them to remove the negative values. For 30 days or so I had negative feedback, but it was painless and didn’t cost me a dime.

What about people who run up a huge negative profile and then sign on with another CFS? The market provides for these situations: other parties are less likely to transact with someone who has no history. If you decide you don’t like your current CFS, but you have a positive feedback score, you can always point parties to your old score but tell them to develop your new CFS profile from now on. Some parties might want to use multiple CFS providers (at a cost per transaction) in order to prove they are reliable.

I believe the Competitive Feedback System is a great way to overcome much need for the State. Each and every transaction has the opportunity to be judged by both parties, and there are almost no loopholes that I can think of to create the madness that happens with the State today. Look at the identity fraud that occurs with the State’s mismangement of the Social Security Number system — you have almost no recourse since the State has no competition in providing excellent service at an excellent price. eBay, though, has had to build consumer trust and confidence, or they would lose their business to others providing the same system.

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I posted this to Slashdot this morning in this post:

Here is one area that is very difficult to win the anarcho-capitalist debate on — the cartelization of this particular market in this particular industry sounds very insidious and hard to compete with without the government intervening and bringing the hammer down.

Most people believe that memory manufacturing is a VERY expensive business. This is true in terms of overall numbers (billions), but it is false in terms of actual products required on the market. Memory is used in much more than just computers (cars, microwaves, cell phones, digital cameras, DVD players, etc), and it is a huge market, possibly a trillion dollar one coming soon. When you have a big market, a big demand and a low supply of manufacturers, it doesn’t take much to raise the billions needed to enter a market where there is obvious collusion. 1 million Americans risking US$3000 in a market that you can prove is selling at a overwhelming profit is not a big risk — and many people were aware of the over-priced memory market back in the 90s.

Yet I think the debate is won by the free marketeers when you realize that one of the biggest reasons for the cartelization in this case is patent and copyright law. Memory chips are heavily burdened by patents, and many of those patents are cross licensed by those in the cartel. This smacks of government-paternalism and is one reason why patents generally help the cartels and the State rather than the inventor. The cartel:inventor ratio in terms of who is helped by patents is very very high (more cartels are helped than individual inventors).

I believe the government is wrong for starting class-action lawsuits. We all know that few companies are hurt by class-action lawsuits, and even fewer “victims” are helped. The lawyers (who are the biggest supporters of the expanding State) win the most! Why don’t we roll back before the cartel-State collusion and see what the real cause of this problem is? The biggest barrier to the market is NOT money — stop thinking that! No matter what the financial cost is, if there is a profit to be made, people will invest. I don’t care if it is quadrillions that are needed, as long as it is profitable (and cartels can always be beaten in price), people will risk money. The real barrier is the State — no one can raise enough “force” to overcome the force of government patents and copyrights.

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