Pasekoff on Richman’s Stateless Commerce

The speaker for the February 23, 2018 session of Corporations and International Law, Spring Semester 2018, was Barak Richman, the Edgar P. and Elizabeth C. Bartlett Professor of Law, and Professor of Business Administration at Duke University.  Professor Richman was discussing his recent book Stateless Commerce.  For this session, the highlighted reading selections were the Preface of the book, as well as Chapters 6 and 7.  The content of the selected readings focused on the potential economic and developmental implications of ethnic networks, highlighting the Jewish and Indian networks within the diamond cutting and trading industry.

 

At the beginning of today’s speaker session, Professor Richman opened the discussion by elaborating on the evolution of the project culminating in Stateless Commerce.  He gave background and additional context for the highlighted selections by giving a verbal overview of Chapter 3, which details how transactions are enforced in the diamond industry, and the credit sale characteristics of these transactions.  He then went on to discuss Chapter 4, which examines why other private contract enforcement mechanisms are not used, and why the traditional indigenous model is more efficient within the diamond trade today.  Finally, as part of his introduction to the session, he discussed his intentions behind Chapters 6 and 7.  Specifically, he explained that these chapters are intended to engage with ideas about economic history, international interests and the interests of parties involved with the trade.  Further, these chapters explore history unique to Jewish diamond trading communities.  Unlike other sections of the book, Chapters 6 and 7 are speculative in nature, trying to extrapolate how the characteristics of the diamond industry may apply to more general economic and developmental situations.

 

The first question involved whether the traditional private enforcement model resembled an insurance scheme.  Professor Richman explained that every diamond sale is an extension of credit, and that it’s more of a credit market than a market for diamonds.  It is insurance-like, because parties are sharing risks, reducing the risk of one party by distributing it between multiple parties.  This means that the industry thrives when the promises are credible, but without credibility the market will fail.  From there, the discussion ventured into ideas about what occurs if something goes wrong, such as a theft, where there is no fault by the parties and where credibility is not lost despite the problem.  This, Professor Richman theorized, might look like a typical breach of contract.  But rather than take it to the state, he suspected that the traditional market uses extreme care to try and prevent such problems before they occur.

 

Another question, (one that another student and I discussed at length before the session,) was whether a private technology platform such as blockchain had the potential to replace both the traditional model and the state model for agreement enforcement.  The idea was, that while the traditional model relied on high degrees of trust and low transparency, a blockchain model might have zero trust, but high degrees of transparency (at least among members of the ledger.) Professor Richman confirmed that there is potential for this idea.

 

Numerous other interesting questions were discussed over the course of the lecture.  Topics ranged from human rights challenges faced by the diamond industry, to comparisons between the oil industry and the diamond industry.  A powerful theme of the discussion was the pro- or anti- competitive effects of the traditional model, and a discussion of how it effectively functions as a type of cartel system.  Efficiency, the role of religion and its effects on the trade model, and whether the model would continue to survive into the future were all elaborated upon.  The discussion was wide ranging, extremely informative, and invigorating.  Sincere thanks to Professor Richman for his time.

 

 

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