Social Reputation Systems and their Outsiders

It's a big club, and you're not in it. (George Carlin)

We know that in Game Theory cooperation is enforced by so-called "punishment games." A punishment game provides an opportunity for a second player to perform a move that damages the first player and lowers their score across many games. However when no punishment exists (or the score with punishment is still higher) there is no reason to cooperate.

In particular this is looking at work I did on commission for someone who sells NFTs and then when I finished the job decided to just drop the work and never bothered to pay the commission fee. Thus my first official job in Defi space ended in getting shafted (probably didn't help my opinion of the space.)

So since we can't just kill the person (distance, and government laws) and we can't sue them (costs more than the wages on the job) what possible system exists that would make it possible to work?

A social reputation system.

Although actually, that doesn't save us either. Why? Look back at the problem of punishment games.

The reputation system says that you have done work in the past and so you can be trusted to do work going forward (social proof.) This gives the actor something to lose and so encourages cooperative behavior going forward. However the subcontractor who is not entrenched in this space does not have any of that. They have to do the work on a bad deal (because the person with the social proof holds all the influence) and *pray* they actually get paid. What happens if they don't?

Nothing. Since the subcontractor doesn't have any reputation in the system and the contractor does, the subcontractor can't materially damage the contractor. And the contractor's hirers still got their work product which makes them trust the contractor *more*. Putting the game theory together explains how someone trying to enter a social reputation system by doing work (which you are often told to do to "pay your dues" or some nonsense) is actually just there to get screwed, time and time again, because the members of the system only care about other members of the system. For the subcontractor they might as well just claim you did a bad job and since their reputation is higher everyone will just side with them.

So we have established that it is optimal for members of the social system (we'll call it the Club) to consume labor from outsiders that they then don't pay. If a person is actually given social credit and inducted in to the club they now qualify as a Real Actual Person and shafting them carries consequences. But until then you're just fresh milk to be churned.

This may also, indirectly, suggest why crime is so often involved with the poor.