From: Wei Dai <weidai@eskimo.com>
Date: Sat, 12 Apr 1997 02:08:16 -0700 (PDT)
To: Cypherpunks <cypherpunks@toad.com>
Subject: anonymous credit
Message-ID: <Pine.SUN.3.96.970412015355.10438B-100000@eskimo.com>
MIME-Version: 1.0
Content-Type: text/plain


I used to think that the problem of anonymous credit is hopelessly
intractable.  I mean, who would loan money to an anonymous entity that may
disappear at any time without a trace?  Reputation, which is useful for
other types of anonymous cooperation, is not a good solution in this case,
since typically you need to borrow money to invest in reputation.
 
Recently, I came upon a solution, inspired by an essay by the economist
Steven Landsburg.  I have to admit however, that the solution is fatally
flawed.  But I present it here anyway in the hope that one of you can
offer an improvement that would make the scheme practical.
 
The idea goes like this.  The government announces a new series of
anonymous zero-coupon treasury bonds that mature in 10 years, backed by a
special lump-sum tax to be collected when the bonds mature.  The proceeds
of the bond auction and the tax are distributed equally among everyone.
So basicly, the government forces everyone to take out a loan on the
credit market and guarantees its collection.  Anyone who does not want the
loan anonymously buys treasury bonds with all of his distribution, holds
them for 10 years, redeems them at maturity and uses the proceeds to pay
off the lump-sum tax.

The fatal flaw, of course, is that there is no reason why the government
would want to help people get anonymous loans.  Can anyone find a way to
fix this?

BTW, if anyone is interested in Steven Landsburg's essays, they are
available at
http://www.slate.com/Code/Compost/Compost.asp?Sort=Section&Key=20.  I also
highly recommend his book, _The Armchair Economist: Economics and Everyday
Life_.

"All crypto is economics." - Eric Hughes