> There seem to be two models. In one, fraud and possibly libel is
> People assume that others are honest and react to them on that basis..
> People who are dishonest are punished. An infrastructure is needed to
> provide this punishment and to determine when proscribed forms of
> dishonesty occur.
> In the other model, fraud, libel and other dishonest actions are legal..
> People have to assume that others may not be honest. Reputation will be
> crucial for establishing relationships and trust. An infrastructure is
> needed to maintain information about reputations and to determine when
> claims of lying and other breaches of faith are true.
> It is not clear to me which system has lower costs. In each case you
> need an infrastructure, along with some mechanism for determining when
> lies have occured. I have a personal preference for the second system,
> as long as it is not much more costly. It relies more on voluntary
> relationships. There are fewer laws, fewer prisoners.
Enforcing an anti-fraud law is orders of magnitude cheaper than not having one. If you have such a law, you only have to expend effort in the rare cases where someone violates it. If you don't, virtually every commercial transaction in the entire economy requires reputation checks on both the buyer and seller.
Besides, it is a moot question. Under most circumstances it simply is not possible to check the reputation of the people you are dealing with. Information technology is not yet good enough to change this, and it is not at all clear that bad-reputation databases would work anyway (after all, providing *them* with false information would also be legal in your model).
Also, historical experience seems to suggest that in societies that do not prohibit fraud, it can drive honest business practices out of the market. If fraud is legal, the optimum business strategy is to be honest with your repeat customers and cheat everyone else. It is very easy for fraud to become a normal, expected business practice, which would render reputation-based enforcement useless.
> Would you suggest that breach of contract should also be a criminal
> offense? Or could it be dealt with through damage to reputation?
Actually, I would say that both breach of contract and fraud should be civil offenses.
> As with the case of fraud, a libeller takes the chance of damaging his
> own reputation. And the damage he can cause to others is limited in a
> system in which statements not backed by strong reputation are ignored.
Unfortunately, it simply doesn't work that way in the real world. In a small town, where everyone knows each other, this kind of approach can work. In a cosmopolitan setting no one is ever going to make the effort to learn much about your reputation - it would not make sense for them to do so, because the effort required is too large. A libeler who makes false claims is taking very little risk, because the vast majority of those who hear the statement will neither know nor care who the source is. Since most of them know absolutely nothing about the target except for the libeler's claim, they will also give that claim far more weight than it deserves. Finally, there is no way to retract such a statement - most of those who hear it will never hear anything else about the issue, even if it is resolved in a public forum.
Nevertheless, as I said before, I don't see any way to make a libel law that would reliably do more good than harm.
Billy Brown, MCSE+I