Is Aragon Court "rent-seeking"?

I’ve seen the term “rent-seeking” thrown around a few times wrt this proposal in the yEarn governance forum and want to share some thoughts I have about this. The thread raises an interesting question: is Aragon Court (or the Aragon Network broadly) a “rent-seeking” protocol? I would argue “no”, at least not today.

Rent-seeking is a term of art in economics to describe a specific behavior.

Investopedia defines the term: “Rent seeking (or rent-seeking) is an economic concept that occurs when an entity seeks to gain added wealth without any reciprocal contribution of productivity.”

The Library of Economics and Liberty further adds a political dimension, defining rent-seeking as: “[Rent-seeking is when people try] to obtain benefits for themselves through the political arena. They typically do so by getting a subsidy for a good they produce or for being in a particular class of people, by getting a tariff on a good they produce, or by getting a special regulation that hampers their competitors.”

Taken together, we can say that rent-seeking is an economic concept that occurs when an entity seeks to gain added wealth without any reciprocal contribution of productivity, typically using government policy to advantage themselves vs others. Note that rent-seeking is different than profit-seeking, although higher rents can of course confer higher profits.

Does Aragon Court or the Aragon Network “seek to gain added wealth without any reciprocal contribution of productivity”? While that could happen some day, I would say this is definitely not the case today, nor is it likely to be the case for the forseeable future. I believe the threat of forking and competition generally would protect Aragon Network customers against rent-seeking behavior.

The main impediment to competition in land-based economies is scarcity (artificially induced by government policy or otherwise). In contrast, in the digital economy of Ethereum the only inherently scarce resource on the blockchain is block space (and ETH to pay for that). Since anyone could spin up a competitor to Aragon Court and the Aragon Network for the price of gas, even forking the entire state of the court and the network if they wanted to preserve some network effects, this should keep the Aragon Network on its toes and responsive to price sensitivity among users. And since Ethereum is a global protocol not subject to the whims of any one government, I cannot see the Aragon Network ever using government policy to privilege itself over other protocols.

Regarding the narrower question of rents, I believe reciprocal value is provided for the cost paid to consume network services. The specific value is similar to that of insurance: in case anything goes wrong, Aragon Court is there to help. It is up to each court subscriber to decide if that cost is worth it to them, and that is their free choice, same as the choice to purchase any other good or service. If subscribers find the cost to not be worth it, they can seek to obtain dispute resolution services elsewhere, or forgo that service altogether. There is no rent: only free trade.

I’ve seen ‘rent-seeking’ used around the crypto community to mean ‘you’re asking me to pay for this service which I can do better and more efficiently myself’, or ‘I don’t need the service at all’

For example: I feel like banks and traditional finance are viewed as ‘rent-seeking’ by the crypto-community, not because they produce no value but because they’re deemed inefficient and exorbitant. Also the whole crypto mentality of ‘we can build it better than that.’

I think that’s a bit stricter than how it’s commonly used.

I mean, if the Court were truly rent-seeking it’ll fail real fast. As you said, it’s a completely opt-in system, people will only pay for the value they get from it.

Come to think of it, the ability to opt-in to the payment may be a critical piece of what’s considered rent-seeking or not. Banks have become increasingly difficult to opt-out of, at some point it’s no longer opting in and it’s a necessary part of participating in society, maybe then it does become rent-seeking. Same with land/shelter, not exactly an opt-in type situation. Same with monopolies.

I think in the context of the yEarn proposal thread, it’s my opinion that if someone sees the Court as rent-seeking then they either don’t understand the value it’s offering with its service, or they think it’d be trivial to do in-house. Both of which we can try to educate/sell them on. Or possibly they feel like it may be being pushed on them as necessary rather than a value-add, Governance is tricky in this way since it’s so critical if it fails.

Opt-in is part of it. As mentioned in my OP rents are driven by scarcity, generally artificial scarcity created by government policy. A rent-seeking entity will lobby government to create a policy that generates artificial scarcity, then the rent-seeking entity will capture the artificially scarce resource and charge “rents” in exchange for access.

Going off your examples, simply being a landlord or a banker is not enough to earn the “rent-seeker” label, but being a landlord who lobbies for regulation that restricts housing construction or being a banker who lobbies for regulations that make it harder for other people to create a bank would both earn the rent-seeker label. In these cases, since government policies are forced on the people who live in their jurisdiction, the policies are not “opt-in”. For those affected it’s more a “take it or leave” scenario, and most will choose to “take it” rather than physically move to another jurisdiction, thus guaranteeing to some degree an increase in rents for the rent-seeking entity.

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Does Aragon Governance create scarce resource around Aragon Court / ANJ / ANT-Stake by only using Aragon Court for the Aragon Agreements and not other solutions like Kleros natively integrated in it as well ?

Would be much nicer if Aragon is open to competition and embrace competition. It feels that Aragon is closing up.

I’ll explain what is meant by “artificial scarcity” here by way of example.

If the government creates a regulation that says “you can only start a bank if you get permission from us” this creates an artificial scarcity of banks. The reason the scarcity is artificial is because, before this regulation was enacted, anyone could create a bank so long as they had the necessary resources. Any scarcity in banks was a “natural scarcity” simply because there weren’t enough resources to create a new one. But when the government steps in and creates this new regulation, they can halt the creation of new banks for arbitrary reasons, thus creating artificial scarcity: now, the reason why a new bank might not be created is not based on a natural shortage of resources, but by artificial and arbitrary constraints imposed by the government.

In our case, there is no artificial scarcity. Anyone can create a competing court, competing tokens, competing interfaces, etc, with zero constraint aside from natural limitations like ability or resource availability (e.g. whether or not you have a computer and internet connection). We cannot stop anyone from creating another court, governments cannot stop anyone from creating another court either (though they could try, since it’s fairly easy to deploy this kind of system with a high degree of anonymity it is probably practically impossible to stop someone from doing it).

Does this answer your question?

Can Kleros create a Kleros Agreements on Aragon which can be integrated into Aragon DAOs as easily as Aragon Agreements?

I don’t know if it would be as easy, because I don’t know the technical details, but there are no artificial constraints stopping them from doing so.

If I could clone Aragon Court and and create Aragon-Agreements-Clone and Aragon DAOs could use it as easy as Aragon-Agreements then I don’t understand why users would say its rent-seeking. DAOs can use it or not no pressure/constraint at all. It’s up to them If they want the service or not.

Would you say youtube is rent-seeking? You can use other services but youtube is so big that it’s kind of a monopoly cause it has all the users. Aragon is far away from this and youtube/google doesn’t allow other platforms to access their users with a competing product.

If Aragon Agreement is rent-seeking then any tool which is build on an open platform and charges money for the service is rent-seeking. then any app on the google app store is rent seeking. I don’t get the argument at all.

Same, which is why I’m trying to bring better arguments to the discussion in this thread :smile:

I would tell yearn users that they could clone Aragon court and Aragon agreements to create their own yagreement rent seeking app.
(rent seeking definition based on some yearn users)