Does letting agents stake a reputational 'trust' asset on the legitimacy of work-verification verdicts raise the quality-adjusted productivity of a fully autonomous agent production economy (requester -> producer -> paid validator, with audits, dispute votes, and adaptive strategies), compared with cheaper institutions at IDENTICAL total verification budget? Mostly no - with a precisely mapped exception, and sharp design rules either way. At matched budget, plain audit routed by accumulate-only validator reputation significantly beats every democratic variant at every tested adversary rate (Holm-corrected Mann-Whitney p<=0.033); when expert audits are cheap, a central noisy auditor dominates everything; and paid validation without accountability is worse than no verification at all. The stylized model's verifiability gradient is real (pooled slope +0.237 per unit of voter signal quality, cell-clustered permutation p=0.0035): truth-staked voting overtakes optimized audit only at jointly high signal quality and adversary rates, and reputation's remaining lead there is erased by identity-reset (whitewashing) attacks - to which truth-staking is intrinsically robust, since a reset identity just donates fresh stake to informative voters. Within democracy the ordering is unambiguous: settle stakes against later ground truth, never against the majority (the deployed coherence-settlement default has an absorbing rubber-stamp equilibrium and loses measurably, p=0.033 at 80 seeds). Staking buys almost no population-level honesty; it works by stake-weighted meritocracy - concentrating trust, hence voting weight, on an informative minority - which also makes it natively sybil-proof where one-agent-one-vote collapses. 'Legitimacy laundering' is second-order at steady state and becomes real only under epistemic finality, which simultaneously starves truth-staking of settlements; the institution's binding resource is eventual ground-truth revelation. A capability-gradient small-LLM instantiation (1B producers, 4B verifiers, hidden-test ground truth, all local) reproduces the model's behavioral premises - including a causal incentive-framing effect on LLM validator strictness (TNR 0.705 paid-per-approval vs 0.864 accountable) - and transfers the institutional structure across two measured operating points, significantly so (Spearman +0.79, permutation p=0.014) at a production-unviable point where the parameter-matched model predicts the observed regime inversion.This manuscript was generated autonomously by the AI Scientist running inside Claude Code (Anthropic); every reported number traces to the project's experiment outputs. It is deposited by the named curator, who takes responsibility for its release.Source & method: https://github.com/qurore/ai-scientist-cli
Abstract Decentralized finance (DeFi) platforms have gained in popularity over the last few years, as they offer a wide range of accessible, innovative, and complex financial services. Because they evolve quickly under limited regulation, it is easy for malicious parties to target them for profit when they notice a vulnerability in these emergent protocols. Existing work has focused on understanding typical attack flows and securing the technology to alleviate crime. However, little is known about what other attributes, beyond technical vulnerabilities, may put DeFi actors at risk. Drawing on Cookâs (Crime Justice 7:1â27, 1986) crime opportunity framework of target attractiveness, this study investigates which attributes are associated with an increase or a decrease in the likelihood of DeFi victimization. We compare actors victimized in 2022 with those that were not across several target dimensions: propinquity, vulnerability, potential payoff, main area of operation, and self-protection activities. Results show that being listed on a popular centralized exchange, operating on a layer-2 blockchain, offering lending services, and having high trading volumes are associated with an increased likelihood of victimization, while operating a dApp and having experienced past victimization are associated with a decrease. By contrast, self-protection measures such as publicly disclosed audits, and bug bounty programs show no measurable effect, likely reflecting variation in their quality and implementation or the fact that undisclosed audits could not be observed. By integrating criminological theory into DeFi security research, this study provides a holistic framework for understanding crime opportunities in this novel ecosystem, while informing potential prevention strategies to reduce associated harms.
Abstract Central banks are increasingly experimenting with frontier technologies, such as Central Bank Digital Currencies (CBDC) and Distributed Ledger Technology (DLT) platforms, alongside advancements in traditional systems like the SWIFT network. While prior research has largely examined technology readiness and regulatory frameworks in isolation, their interactive effects on remittance costs remain underexplored. This study investigates how the Frontier Technology Readiness Index (FTRI) moderates the relationship between remittance costs and the Anti-Money Laundering (AML) Index. The lack of integration of these dimensions is a critical research gap that is addressed to help achieve Sustainable Development Goal 10c (SDG-10c) and G20 targets. Panel data regression, followed by fixed and random effects to test robustness, was employed using datasets for remittance-sending and remittance-receiving countries derived from Worldwide Remittance Price data. In remittance-sending countries, enhanced technological readiness combined with a less stringent AML framework is associated with lower remittance costs. On the contrary, despite high technological readiness, in remittance-receiving countries, higher AML stringency tends to increase costs. Technology and AML measures in receiving countries and the amount of remittance paid in sending countries, in isolation, donât have a significant influence on the cost of remittances. The analysis focuses solely on remittance cost efficiency and proposes incorporating transfer speed and transparency in future studies. Findings imply that the prevalence of informal channels like hawala and current pricing models does not encourage and reward higher remittance volume. Remittance cost reduction policies should focus on anti-money laundering measures and technology readiness in conjunction rather than in isolation. Incorporating national indexes provides a clear direction for improving the defined set of variables that are measurable and thus actionable to policymakers.
Sean Foley, Bart Frijns, Alexandre Garel, TaiâYong Roh
We examine the relationship between national culture and a country's Bitcoin activity. Given that Bitcoin is a high-risk currency/investment that is frequently used for illegal purposes and whose market is relatively opaque, we focus on the cultural dimension of individualism, which has been related to financial market participation, risk-taking behavior, and overconfidence. Using unique data that includes the originating country for Bitcoin transactions, we examine the relationship between individualism and a country's Bitcoin activity for a sample of 80 countries between 2009 and 2020. We find a significant and positive relationship between a country's individualism and its use of Bitcoin consistent with cultural values affecting the demand for such high-risk currency/investments.
The impact of Bitcoin-related Google queries, Facebook likes, reposts and comments on Bitcoin price is analyzed with the help of ARDL and GARCH models. Our results have led us to the following conclusions. Firstly, a sharp increase in Bitcoinâs popularity or hype, which manifested itself through a rise in the number of Bitcoin-related Google queries, has resulted in an increase in Bitcoin price. This effect corresponds to the description of the âcollective hysteriaâ that spread in the online community and was triggered by the increasing volatility of the Bitcoin market. Secondly, we found that Bitcoinâs popularity among ordinary Internet users has a positive impact in low-volatile and highly volatile rising markets but a negative one in a highly volatile falling market. Thirdly, Bitcoinâs popularity among informed Internet users has a negative impact on Bitcoin price in a period of low volatility. Fourthly, uninformed usersâ trust in Bitcoin has a positive influence on Bitcoin price in low-volatile and highly volatile falling markets. Finally, the main factors that shape the Bitcoin market are trust and popularity.
Web3 and DeFi are widely advocated as innovations for greater financial inclusion and democratization. We assemble the most comprehensive dataset to date on the largest Web3 ecosystem and use large-scale computing to investigate the claim. We discuss Ethereum's network structure, time trends, and distributions of transactions, mining, and ownership. Mining income and Ether ownership are concentrated in a few nodes, even after excluding exchange and mining pool wallets, with inequalities more exacerbated than observed in the real economy. Network activities are dominated by large transactions, shifting from peer-to-peer to user-DApps/DeFi interactions, and from Ether-based to ERC-20-token-based. High percentage transaction fees, congestion-induced gas-price fluctuation, suboptimal reserve setting, and large return volatility of tokens disproportionally harm small, unsophisticated, and new nodes, with high failure rates hurting all users. Finally, we present causal evidence that base-fee burning mechanisms (e.g., EIP-1559) and airdrop programs (e.g., OmiseGo Airdrop) promote inclusion and equality through monetary redistribution.
Although societies are becoming increasingly secularized, religion continues to play an important role worldwide. However, few studies have focused on how religion affects the entrepreneurial emergence novel markets. To address this gap, I examine the impact of Islam, as a decentralized belief system, on entrepreneurship in the context of developing Islamic investment fund markets across countries. I focus on religious diversity within Islam as an instance of intrainstitutional complexity and analyze a country-level panel dataset of Islamic investment funds in addition to complementary qualitative data. Intriguingly, I find that religious diversity within Islam plays a paradoxical role: it promotes the entrepreneurial supply of Islamic investment funds in a country, but it also reduces the investor demand for these funds. This complex effect is moderated by interinstitutional forces: the market logic positively moderates the effect on supply dynamics, whereas the state logic negatively moderates the effect on supply and positively that on demand. This study contributes to the research on religion and market emergence, institutional complexity, and Islamic finance.
As a student of modern history (US diplomatic and military history), I tended to think that ancient history offered few insights into current life. Josiah Ober's book, The Rise and Fall of Classical Greece, has disabused me of such a sentiment. Ober, a classicist and political scientist at Stanford University, achieves a compelling history of the ancient Greek city-states and their relevance to modern times. Contrary to the view of many twentieth-century historians, the peoples of ancient Greece were relatively prosperous: Ober finds ancient Greece to have been richer, more populous, and more urbanized than most other premodern societies. More importantly, the ancient Greeks enjoyed greater economic equality (at least among its citizens, and especially in Athens) than many societies ancient or modern. Ober demonstrates that the ancient Greek-speaking city-states enjoyed an affluence comparable to that of seventeenth-century Holland or eighteenth-century Britain in the modern era. Ober also refutes the view that the relative prosperity during the golden age of Greece (roughly fifth century BCE) declined precipitously in the fourth century BCE.Because I am interested in modern, not ancient, events and people, I questioned the veracity of ancient accounts, given the vast time period (2,500 years) and the limited amount of surviving material. Ober, again, convinces me of my errors. He utilizes a wealth of data on ancient Greece from a variety of perspectives, including archaeological, economic, demographic, and the like. Especially important is the Inventory of Archaic and Classical Greek Poleis, compiled under the direction of Danish historian Mogens H. Hansen. This is a collection of data concerning 1,035 Greek poleis from the eighth to the fourth centuries BCE. Ober also consults a collection of data by John Bintiff, University of Leiden, which includes analysis of demographic change over time (5). Ober's work also draws on âthe new institutional economicsâ that have been pioneered by Nobel-winning economist and political scientist Douglass North, MIT social scientist Daron Acemoglu, and Harvard social scientist James Robinson. Ober shares their view that âinstitutions (i.e., the ârules of the gameâ) and organization,â along with markets and networks, âare the fundamental determinants of economic changeâ (5).Ober, being a classicist as well as a political scientist, also draws on original sources, such as the historians, Herodotus and Thucydides, and philosophers, such as Plato and Aristotle. In chapter 3, âPolitical Animals,â Ober contrasts Aristotle, who believed that human institutions, properly constructed, could steer his fellow Greeks toward beneficial cooperation, and away from selfish rivalry, to the seventeenth-century political theorist, Thomas Hobbes. Hobbes believed that selfish chaos was the natural state to which humans would revert without the intervening force of a centralized authority. While Hobbes thought efficient production and the fair distribution of public goods were impossible without a central authority, Aristotle saw human nature as social, interdependent, and justice seeking. Aristotle believed that individuals could be persuaded to cooperate through good public institutions, using a mixture of ideology, federalism, altruistic punishment and existential threats (70). In Athens and elsewhere, there were institutions (action-guiding rules) and civic culture (action-guiding social norms) that made cooperation feasible (not impossible, as in Hobbes's ânatural stateâ). Ober returns to Aristotle in his last chapter (311â313), agreeing with the fourth-century BCE philosopher, who believed, in Ober's words, that the âautonomous polisâ was the âbest, indeed the only possible, environment for the pursuit of an essential moral end: the fulfillment of human flourishing.âThe ancient Greek public institutions worked because they were democratic, even though they lacked important aspects of modern liberal democracies (15â17). Slavery existed and only males had full citizenship rights. Nonetheless, the ancient Greeks, particularly the Athenians, had a strong tradition of civic rights. Ober explains that, for the ancient Greeks, civic rights meant immunity against arbitrary action by powerful individuals or governmental bodies, security against physical assault, freedom from humiliation, and security against the confiscation of property (16â17). Much of the work of governance in democratic poleis, such as Athens, was done by amateurs or, as Ober writes, âcitizen farmers,â âcitizen shoemakersâ and âcitizen soldiersâ who chose to âdedicate themselves to the tasks of rule-making, judgment and administrationâ (18). And it was this political system of âcollectively created and collectively managedâ citizens who played a fundamental role in the creation of the ancient Greece efflorescence. The âgoodâ political institutions that were designed for organizing the dispersed knowledge of citizens were decentralized and democratic (that is, for free males over eighteen years of age). In Athens, Ober writes, success came by setting up a democratic federalist structure: demes (neighborhoods), tribes (larger groups that were supposedly ethnically related, but were in fact artificially constructed), and the city (or polis) as a whole. The large political bodies, such as the Council of 500 and the citizen Assembly, were organized on a polis (or citywide) level, but these larger institutions worked because they were based on the smaller social networks (chapter 7).As an example of how these institutions worked, Ober discusses a key meeting of the Athenian Assembly in 483 BCE at which the Athenians decided to construct a great fleet of warships. When the state-owned silver mines at Laurion produced an unexpected windfall, a proposal was made to divide the profits among all the Athenian households. But the Athenian statesman, Themistocles, persuaded the Athenians to forego individual payoffs and instead build and man a fleet of warships. The implications of this decision were enormous. An enlarged navy would give employment, as rowers, to thousands of poor Athenian men, recently enfranchised; previously, these new citizens would have been unable to serve in the military, which had been limited to those who could provide their own arms and armor. Ober argues that Themistocles achieved good policy by making a persuasive argument in a public decision-making forum. His argument was persuasive because ordinary Athenians knew enough to know that the proposal would work (168â69). Moreover, writes Ober, there is no hint in the sources that the hoplites (Athenian infantrymen) felt the need to protect their monopoly on the art and practice of warfare. In other words, the decisions about the âAthenian military, how it would be developed, and how deployed, were being made by the citizenry and not by a closed coalition of specialists in violenceâ (169).Another example of successful public decision making occurred in the Athenian Assembly's debate on the Persian invasion of Greece in 480 BCE. The Athenians faced the choice of fighting with their ships or surrendering to the much larger Persian army and navy. In the Assembly's decision-making process, they began by seeking religious counsel. But the Assembly, which included âordinaryâ men (rowers, steersmen, marines), understood the operational capacity of the Athenian navy and rejected the advice of the traditional sources of authorityâsupposed experts in oracle interpretation or community eldersâboth of whom urgently warned against the sea fight. And in this new institutional order, the âdemocratic value of âequality in respect to public speechâ ensured that the opinions of neither oracle interpreters nor elders would be authoritative. Because the advice of experts in relevant domains was given proper weight, both by the Council and by the Assembly, the choice of âfight at seaâ was selected over the other optionsâ (173â74). The outcome was victory at sea at the Battle of Salamis.In contrast, however, the Athenian Assembly's decision to undertake the ultimately disastrous Sicilian Expedition (415 BCE) was made under conditions of ignorance and suppressed dissent (217â220). According to Thucydides, âAthenian voters were largely ignorant of the physical size, demography, and political history of Sicilyâ (217). Furthermore, the Athenians were misled both by the overly optimistic arguments of the hawkish Alcibiades and by the equally manipulative arguments of the dovish general, Nicias. Nicias's arguments against the Expedition backfired, causing the Athenian voters to irrationally decide to ârisk everythingâ for the chance of enormous profits. As a result, Ober concludes, âAthens' most important single decision of the long Peloponnesian War was thus made under a cloud of constitutional violation, explicable but potentially disastrous irrationality, and false consensus bought at the cost of stifled dissentâ (219). Once again Ober arguesâthis time through a counterexampleâthat open, honest, and fact-based discussion among equal citizens who trust one another and communicate freely for the benefit of the common good is the best way to produce a happy and flourishing human society.Ober's arguments are, for the most part, persuasive, but his use of social science jargon can sometimes be maddening for the average reader. Consider Ober's explanation of how the Athenians bonded through âperformance-enhancingâ institutions (171): As men's lives extended beyond their home deme to the level of the tribe and the polis, possibilities opened up for the formation of âweak tiesâ that bridged the gaps between deme-level âstrong-tieâ networks, which were trust-based, but potentially exclusivist and parochial. By identifying âstructural holesâ in the burgeoning web of Athenian social interactionsâthat is, by making connections linking local networks that had formerly been isolated from one anotherâsocial entrepreneurs could gain material benefits for themselves (e.g. potentially lucrative marriage alliances). Weak-tie bridges between local networks thus benefited individuals who, in a sense, became specialists at networking. As a positive externality, their bridge-building helped to increase the flow of social knowledge and useful information across the citizen body as a whole.Ober has argued forcefully that clear communication is the key to success, but such esoteric verbiage may inhibit his ability to communicate successfully with his readers.
The seventeenth century had seen the creation of the first British Empire, but the beginning of the end for the Ottoman and Mughal Empires and the complete collapse of the Ming Empire. These events coincided with differences in the capacity of these states to realize fundamental transformations in their finances: (i) military spending (from small cavalry armies paid in kind to much larger forces armed with gunpowder weapons and paid in cash); (ii) fiscal structure (from direct taxation of production to indirect taxation of transactions) ; (iii) organizational control (from decentralized noblesâ households to centralized bureaucracies). In England, these fiscal transformations were facilitated by the increasing standardization of the written and spoken vernaculars. However, in Asia the ruling dynasties were handicapped by the high cost of decoding information written in classical literary languages . These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
Vertical decentralization, either at the deconcentration, delegation or, more rarely, the devolution level, has been instituted in most countries of Sub-Saharan Africa. It usually has the effect of increasing the quantity as well as the quality, in terms of health and education, of public goods. More neglected in the literature is the issue of horizontal decentralization, shifting the decision-making power from the central ministry of finance to the ministries of education and health, as well as strengthening the legislative and judicial branches of government. We examine the relationship between horizontal decentralization with its important ethnic dimension and vertical decentralization. Local governments are accountable to the center under vertical and to democratic forces and civil society under horizontal decentralization. Smaller local units are more likely to be more homogeneous ethnically, leading to a larger quantity and higher quality of public goods.
Vertical decentralization, either at the deconcentration, delegation or, more rarely, the devolution level, has been instituted in most countries of Sub-Saharan Africa. It usually has the effect of increasing the quantity as well as the quality, in terms of health and education, of public goods. More neglected in the literature is the issue of horizontal decentralization, shifting the decision-making power from the central ministry of finance to the ministries of education and health, as well as strengthening the legislative and judicial branches of government. We examine the relationship between horizontal decentralization with its important ethnic dimension and vertical decentralization. Local governments are accountable to the center under vertical and to democratic forces and civil society under horizontal decentralization. Smaller local units are more likely to be more homogeneous ethnically, leading to a larger quantity and higher quality of public goods.
This article explains (1) the origins of central banking and (2) variations in the spread and durability of central banks across nations. Early central banks helped bind governments to honor their debts and thereby furthered governments' capacities to efficiently finance military expenditures. The origins of central banking are problematic because government credit-worthiness and efficient wartime fiscal policy are public goods, subject to the free-rider problem. Applying a variant of the joint-products model, I argue that governments offered private benefits (monopoly privileges) to select creditors to induce participation in central banks. To explain cross-national differences, I argue that the level of domestic political decentralization negatively affected the incidence and durability of central banking. Countries with decentralized political systems faced regulatory competition from strong local authorities as licensers of banking monopolies, making it difficult to adopt or sustain central banking. Qualitative and statistical evidence from Europe and the United States to about 1850 support the arguments.