Remembering Jeremy Bentham
Tags: Law, Philosophy, Economics, Distributed Ledgers

Remembering Jeremy Bentham

By James Cooper & Joshua James

Jeremy Bentham, Courtesy of https://ethics.org.au/big-thinker-jeremy-bentham/

It is no secret that utility is of particular interest to the FINTECH industry. After all, our regulators are still trying to determine whether cryptocurrencies are a utility or a security, a currency or a commodity. Some may consider a utility in a physical sense, as a necessary service to promote a better life: clean water, energy, communication, and transportation infrastructure. These all provide a foundation for a modern society to flourish. In a more economic sense, utility is the concept of ‘usefulness’ of a specific good or service.

With this understanding of modern utilities, we can modify our understanding of Distributed Ledger Technology (DLT). Utility tokens already exist; they are issued to fund the development of digital goods or services offered by the originator of the asset in both physical and digital spaces. This dynamic concept of a utility token may, in fact, provide a framework for the application of classical utilitarian philosophy in modern globalized economies.

The work of Jeremy Bentham (1748–1832) is most instructive here. The English philosopher created the idea of utility as an aggregate of positive action towards the common good. He laid the foundation for the modern philosophy of Utilitarianism, raised from the roots of the Enlightenment during a time of industrialization. Bentham focused on social reform from legal, economic, and philosophical perspectives as his world underwent rapid change. And that was before Discord, Tiktok, and Bitcoin.

Applying Bentham’s theories to FINTECH, we see that Utilitarianism may be a model to explore utility as a measurement of liberty itself in a distributed system, more-so than a way to discreetly track the exchange of commodities, securities, or even digital assets between peers. We know goods and services already move within these developing systems and yet, there seems to be a growing conflict around which goods and services should utilize the technology; further, who should have authority over such systems as they scale in the information age?

Bentham proposed that the less restricted a utilitarian system is for any individual, the better it becomes for all individuals. This is particularly so if each party is seeking to expand their own liberty without limiting that of their peers. Perhaps liberty exists in a system where authority is dynamically defined, unique to each jurisdiction it might serve. The answer may revolve around the abstraction of authority away from the individual, or any centralized group of individuals in the form of an organization or jurisdiction, and towards a liberty-utility contract operating dynamically between all peers and spaces equally.

Utilitarian contracts represented as smart contracts may interact in a digitally egalitarian system without creating conflict at a higher degree than an intrinsically centralized system. If they succeed, new systems of governance must also exist to enable these process-based systems to interact across recognized borders, while also limiting friction between modern and legacy systems. An even greater value proposition is possible if these actions could occur without introducing unnecessary complexity or additional costs.

As these new digital utility systems are developed, new forms of organizations may find their spotlight on the world’s stage as modern standards are redefined globally. These dynamic constructs, known as Distributed Autonomous Organization (DAOs), have a checkered past. Some would argue, however, they have a promising future. These process-centric constructs help data driven systems communicate securely by coming to consensus around rules and procedures that govern smart contract interactions. They also bring about efficient conflict resolution while distributing value back to individuals and other traditionally structured organizations such as non-profit and community-based groups.

With these rapidly distributed digital interactions defined, a comparative model for blockchain utility, based on the concepts of classical utilitarianism is made possible. Where the least restrictive limitations, that offer the most value to the most number of users, become the framework for governance in a dynamic socioeconomic system. Centralization in this technology stack is not only theoretically limited but structurally so. This decentralized nature may offer the most potential value for users who begin to store their own utility within it, thus helping to redefine the ecosystem in which they exchange their own labor for assets as a form of payment.

With global attention focused on advancing distributed finance across borders, in light of governmental responses to the Covid-19 pandemic, it is time to protect the value of liberty in relation to utility. With the right philosophy, an expansion of liberty through utility may increase the value of the economies they service without limiting the freedom of their users. Jeremy Bentham, we need you now.

An excellent summary of Bentham’s contributions to the philosophies of law, government, and socioeconomics can be found hosted on the Stanford Encyclopedia of Philosophy.