Originally published at Machine Lawyering with Aaron M Lane and Marta Poblet.
Blockchain-enabled smart contracts can change how we exchange value over the internet. We now have the technology to code agreements into blockchain protocols, enabling those agreements to self-execute when particular conditions are met. This execution happens without relying on centralized intermediaries—such as banks or governments—but rather through decentralized blockchain networks.
Today, entrepreneurs are experimenting with smart contracts on blockchains, aiming to disrupt an enormous array of industries including property registries, prediction markets, voting and supply chains. These frontier contracting technologies are now widely considered to shift the way that we arrange our economic, social and political activities.
Published in New Perspectives on Political Economy
Abstract: We extend the Institutional Possibility Frontier (IPF) — a theoretical framework depicting the institutional trade-offs between the dual costs of dictatorship and disorder (Djankov et al. 2003) — by incorporating the notion of subjective costs. The costs of institutional choice are not objectively determined or chosen by society; they are subjective to the political actor that perceives them. Our methodologically individualist approach provides a new, highly adaptable extension of the IPF enabling examination of the political bargaining process between dispersed actors, the bounds and evolution of institutional innovation and discovery, and follower-leader dynamics in long-run institutional changes. Our new Subjective Institutional Possibility Frontier (SIPF) helps to integrate ideas into the economics of political systems, creating the foundations for a more subjective political economy.