Ancient Warranties


In the early days of exchange, humans mostly traded consumables like food or stone tools. There wasn’t much room for misrepresentation because what you saw was what you got.

The was one exception: Brides. In many ancient civilizations, families sold their unmarried daughters to prospective bridegrooms. Barbaric, I know.

A bride was often the biggest purchase a man would ever make (these days it’s a house). But there was no way to measure the quality of the good before buying. A bridegroom couldn’t exactly, uh, take a test drive. To further complicate things, the brides were selected and paid for before they reached marriageable age. It’s kind of like how Tesla Model 3’s require a reservation deposit two years before the expected delivery date.

To protect buyers in uncertain markets, tribes created procedures to prevent deceptive business practices that were eventually codified into law.

We’ll start with Ancient Sumer.

Laws of Ur-Namma, ca. 2100 BC

If a son-in-law enters the household of his father-in-law but subsequently the father-in-law gives his wife to his comrade, he shall weigh and deliver to the jilted son-in-law twofold the prestations brought.

That is, if a prospective groom pays for his bride in advance, but her father sells her to some other guy before the groom can come claim his wife, he gets double the purchase price as a refund. “Weigh and deliver” usually meant that the penalties were paid in silver or tin.

This law was to prevent fathers from double-spending their daughters.

Laws of Lipit-Ishtar, ca. 1930 BC

If a man’s first-ranking wife loses her attractiveness or becomes a paralytic, she will not be evicted from the house; however, her husband may marry a healthy second wife.

That seems awfully subjective, but who am I to criticize ancient legal codes.

Laws of Eshnunna, ca. 1770 BC

Should a member of the awilu class [free persons] bring the bridewealth to the house of his father-in-law – if either should go to his or her fate, the silver shall revert to its original owner.

If he marries her and she enters his house and then either the groom or the bride goes to his or her fate, he will not take out all that he had brought, but only its excess.

Per 1 shekel interest accrues at the rate of 36 barleycorns; per 300 silas interest accrues at the rate of 100 silas.

If a groom pays for his bride, and one of them dies before marriage, his family gets a refund. If one of them dies after marriage, his family gets a pro-rated refund. Silas (grain) accrued interest at a higher rate than silver; maybe that had something to do with inflation.

Today, we commonly see similar pro-rated warranties on automotive parts and home repairs.

On to Babylon.

Laws of Hammurabi, ca. 1750 BC

If a man who has the ceremonial marriage prestation brought to the house of his father-in-law, and who gives the bridewealth, should have his attention diverted to another woman and declare to his father-in-law, “I will not marry your daughter,” the father of the daughter shall take full legal possession of whatever had been brought to him.

If a man has the ceremonial prestation brought to the house of his father-in-law and gives the bridewealth, and the father of the daughter then declares, “I will not give my daughter to you,” he shall return twofold everything that had been brought to him.

It’s similar to the legal codes above. No cooling-off period, basically.

Middle Assyrian Laws, ca. 1076 BC Assur

If a man presents the bridal gift to his father-in-law’s house and although his wife is dead there are other daughters of his father-in-law, if he so pleases, he shall marry a daughter of his father-in-law in lieu of his deceased wife. Or if he so pleases, he shall take back the silver that he gave; they shall not give back to him grain, sheep, or anything edible, he shall receive only the silver.

If you pay for a bride and she dies, you can choose one of her sisters. Alternatively, you can have a refund of the full purchase price except for the grain and sheep. This is like a lifetime warranty.


Arthashastra, ca. 200 BC Maurya

Any person who has given a girl in marriage without announcing her guilt of having lain with another shall not only be punished with a fine of 96 panas, but also be made to return the sulka and strídhana. Any person receiving a girl in marriage without announcing the blemishes of the bridegroom shall not only pay double the above fine, but also forfeit the sulka and strídhana.

Now we get into laws concerning deceptive business practices. Husbands who unwittingly purchase used goods are entitled to a refund, and the state will levy a fine on top of that.

Interestingly, the law also protects the wife. If a groom turns out to have unannounced defects, he has to pay a fine — even though he was the one doing the buying. I wonder what it means to be defective. Maybe it’s referring to a husband who doesn’t put the toilet seat down, or forgets to take out the garbage.

If a person substitutes in marriage another maiden for the one he has before shown, he shall, if the substitute is of the same rank, be fined 100 panas, and 200 panas if she is of lower rank.

Don’t you hate it when you order one bride, only to receive a different one? In Genesis 29, Jacob worked for seven years to buy his cousin Rachel as a bride, except his uncle pulled a fast one and gave him Rachel’s ugly sister Leah instead.

It turns out this was a real enough problem that India had to formalize legal penalties to prohibit the practice of bridal bait and switch.


As legal codes evolved, they mostly reflected what was already customary practice.

It would be another several thousand years before George Akerlof published his model on information economics in “The Market for Lemons”. Information asymmetry between buyers and sellers can create messed-up incentives that cause markets to break down, particularly in the case of one-time purchases. In situations where the quality of a good is uncertain at time of purchase, fraud protection laws can help make business practices fair for both consumers and providers, ensuring peace and prosperity for all.

Law Collections from Mesopotamia and Asia Minor

The Theory of Incomplete Contracts

Ronald Coase: Writing a good contract is costly.

Oliver Williamson: Also, the world is complex and unpredictable. Humans don’t have the ability to write contracts that plan for all possible contingencies, so contracts are renegotiated and revised all the time1.

Oliver Hart: Yeah. And there’s no guarantee that parties will agree to a renegotiation when something unexpected happens. Better allocate those future decision-making rights up front2.

Ethereum: What if we put it on the blockchain?

See Also:
Smart Contracts Don’t Have to be Dumb –Bloomberg

1. Oliver Williamson in Why Law, Economics, and Organization? (2005):

Most contracts are implemented under conditions of uncertainty for which adaptation to disturbances is needed. Because an incomplete contract between bilaterally dependent parties (that is, those for which continuity has value) is often silent on or makes incorrect or inadequate provision for some of these adaptations, contractual conflicts prospectively arise. Thus although mutual gains will always be realized upon costlessly restoring a position on the contract curve, each party may posture and make opportunistic representations over the division of gains. Costly delays and imperfect adaptations result.

2. Oliver Hart in Incomplete Contracts (1989):

If it is too costly to state precisely how a particular asset is to be used in every state of the world, it may be efficient to simply give one party ‘control’ of the asset, in the sense that he is entitled to do what he likes with it, subject perhaps to some explicit (contractible) limitations.

Ancient Smart Contract, Circa 50 CE – 200 CE

The first known smart contract was a vending machine for holy water. It was designed by Heron of Alexandria because people were taking holy water from the temples without paying. (Why would anyone steal holy water?)


The vending machine was a coin-operated urn. A coin was dropped through a slot at the top, landing on a small plate attached to a lever. The weight of the coin depressed the lever, lifting a stopper to release the holy water. After the lever tilted, the coin would slide off the plate and the weight of the stopper would pull the lever back to the original position and close the valve.


The Ancient Greeks also invented Gordian knots — maybe used to secure their contracts.

See Also:
Old World, High Tech –Smithsonian

Transaction Costs in a Less-Cash Society


Hey, remember that time we got rid of thousand-dollar bills, and won the war on drugs?

How bout that time we discontinued five-hundreds, and ended both money laundering and tax evasion?

Just kidding. We didn’t reduce financial crime after discontinuing the $10,000, $5,000, $1,000, or $500 bills, but maybe we weren’t thinking small enough. After all, we have seven denominations left to go.

In a recent book called The Curse of Cash, former IMF chief economist Kenneth Rogoff describes a new master plan. …the author is none too happy with me right now, so I’m just gonna paste a chapter excerpt and let him explain it to you in his own words. (In the interest of time, I only typed in the first sentence of every paragraph.)


The largest-denomination notes, which are by far the most problematic, should be phased out first. In the case of the United States, the largest bills are the $50s and $100s.

A gradual phaseout of large notes could take a couple decades, but there are faster approaches.

The time period of the exchange would need to be determined, but for the sake of concreteness, one idea would be for the process to give people 2 years to use private banks, and longer (say, 7 years) to use regional central bank offices.

The process by which the Eurozone countries exchanged legacy national currencies (e.g., the deutsche mark, the French franc, the Italian lira) for euro notes and coins provides helpful elements of a blueprint.

Smaller notes would be allowed to circulate indefinitely, say, for at least the first two decades of the overall transition. A final stage, optional but recommended, is to eventually require that even the small bills be turned in, either for electronic money or for the newly minted $5 and $10 coins.

The idea of shifting from small bills to coins is to discourage substitution.

The inspiration for going back to the future on coinage comes from ancient China, where coins were made of iron and other heavier base metals, rather than gold and silver, arguably accelerating the transition to paper.

Excerpt From: Kenneth S. Rogoff. “The Curse of Cash.”

It’s always good to draw inspiration from China, paradigm of monetary policy. During the Song Dynasty (960-1279 AD), most Chinese provinces didn’t have access to gold and silver ores. Not enough to mint coins for the entire population, anyway. Even copper was scarce. The ministers of the Chinese Financial Agency minted coins out of iron and lead because they had no better material.

It took four kilograms of iron coins to purchase one kilogram of rice. Merchants eventually began issuing their own private paper money because hauling around heavy coins was too damn inconvenient.

The purpose of money is to decrease transaction costs, not increase them — Remember?

But hey, I get it, we can’t put a price tag on fighting financial crime. Nor should we dismiss the intangible additional benefits, for that matter. How do we dollarize wealth redistribution? The magic of negative interest rates? Rent protection for the banks? An inescapable tax on savings? Surely the minor inconvenience of transacting in coins is worth the collective benefit of reintermediating everything?

Ordinary people engaged in legal, tax-compliant and regulatory-compliant transactions would hardly miss the big notes, at least according to extensive evidence that central banks and other researchers have accumulated.

As an ordinary compliant law-abiding citizen, I concur. A weekly grocery bill for the average US household is $196. My family spends a little bit more because we live in an expensive city and one of us has special needs. But still, $196 is only about ten pounds worth of quarters. Maybe only five pounds denominated in those future $10 coins. Quite manageable, really.

Except that by the time this master plan is complete, a basket of groceries won’t cost $196. It’ll cost more like $196,000,000,000,000. That’s fine, I’ll just hitch a tumbril to the back of my Ford Escape.

See Also:
The Cashless Society Is a Creepy Fantasy –Bloomberg
A Less-Cash Society, Not a Cashless One –Bloomberg

Japan’s Vending Machines

Does any country love vending machines as much as Japan?

Japan has 5.5 million vending machines. That’s one for every 23 people. You never need to go looking for a vending machine. Sometimes they walk around looking for YOU.


We tend to think of vending machines as technology-driven devices, but in Japan they evolved from unmanned fruit and vegetable stalls. Farmers would leave their fresh produce in roadside stands with a collection box for payment. Customers were generally honest because that‘s what kind of country this is.


Family farms aren‘t what they used to be, but today any property owner can drop a vending machine outside of a home or business to dispense just about anything.

There’s remarkably little incidence of theft. One of the first things I noticed here was that bicycles are rarely locked. I thought they might be part of some free bike sharing program, like the Cambridge Green Bike program that was terminated when all of the bicycles were stolen within a day. I was even tempted to borrow one. But nope, these are all private bicycles; they just happen to be sitting around without locks. Back home, I can’t even keep my bicycle in my own garage without someone stealing it.


Japan can put vending machines in the middle of dark alleys or the edges of nowhere without risk of tampering. I set up a jellybean vending machine at my office, and it lasted for all of two weeks before my coworkers broke in and stole all the jellybeans without paying. This is why we can’t have nice things 🙁


One more thing! Many Japanese vending machines automatically release their contents for free after a natural disaster. Makes sense, as it is cheaper to give the snacks away than to pay for damages if hungry people break in out of desperation. Meanwhile, less-civilized societies see disasters as opportunities for surge pricing.