Self Enforcing Protocols

I just read this article on something called, “self-enforcing protocols”. I found this article interesting because it addresses a serious concern with defeating cheats. Basically, a self-enforcing protocol is one where no third party arbitrator is required to ensure fairness. The protocol itself is self-enforcing. An example given in the article is barter trade, where everything is at face value.

The homeowner decides the value of the property and calculates the resultant tax, and the government can either accept the tax or buy the home for that price. Sounds unrealistic, but the Greek government implemented exactly that system for the taxation of antiquities. It was the easiest way to motivate people to accurately report the value of antiquities.

That is one ingenious way of ensuring that the home-owners stay as honest as possible. If they arbitrarily under-value their property, they would ultimately end up losing the property entirely as the government would be able to buy it and sell it off at a higher price almost immediately (and probably back to the original owner).

What appeals to me with regards to this is the use of these protocols in so many areas in government and administration. Brain food!