Intelligent Agents and Internet Commerce in Ancient Rome

In Ancient Rome, it is no exaggeration to say that the bulk of trade and commerce was carried out by slaves. Educated slaves would be entrusted with many aspects of their masters’ affairs, and the record shows slaves acting as shopkeepers, merchants, bankers and estate managers. However, the status of a slave as a ‘thing’, or res, was never in doubt. Consequently, slaves had no rights (and, as I explain later, no duties), and could not hold property. They could not sue or be sued. The Romans nevertheless created a social and legal structure which allowed slave-run commerce to prosper.

Similarly, intelligent agents are ‘things’, having in themselves no rights or duties, and are incapable of suing or being sued. If Internet commerce based on intelligent agents is to thrive, are there any aspect of the Roman model of slavery which can usefully be used as a model?

 

Intelligent Agents

Internet commerce will increasingly consist of intelligent agents, programmed to buy and sell financial instruments, commodities, goods and even services (for example, mobile phone minutes). The sophistication of these agents will increase: automated share trading systems initially relied on simple price targets and stop-loss thresholds, but now incorporate more complex algorithms. These agents can participate in arbitrage, monitoring data on sale and purchase prices, and executing transactions where they can make a profit. The power of their algorithms will doubtless increase, using artificial intelligence techniques such as heuristic and rule-based approaches.

These agents are able to establish rights and obligations between persons, and are able to cause damage. How should the law deal with the enforcement of these rights and obligations, and who should be liable for any damage caused by the agent?

It is tempting to think that the answer is straightforward: clearly the ‘owner’ of the agent should be liable for all the agent’s actions. However, aside from the fact that determining who the ‘owner’ is may be difficult, I will demonstrate that this answer is not entirely satisfactory.

eBay’s bidding mechanism, for example, can be regarded as an intelligent agent which places bids on the items selected up to a preset limit selected by the bidder. At one remove, bid sniping software and services aim to subvert the eBay technology and the psychology of bidding, by waiting until the very last moment before an auction closes before submitting bids. Thus the sniping service is acting as an intelligent agent which is instructing an intelligent agent. Even at the current state of development of intelligent agent technology, things can get quite complex. And this complexity is bound to increase over time.

Where a single purpose agent is controlled and instigated by one legal entity (the principal) within a set of constraints, the rule that the principal is responsible for all the agent’s actions functions well. However, as the agents get more complex, less constrained, and can begin to collaborate and trade directly with each other, more complex rules will be required: for example, if an agent runs amok and starts vastly overpaying for items because of a programming error, should the item vendors be able to claim the inflated price from the principal under the absolute liability rule, or should the principal be able to evade responsibility, because the vendor should have been aware that the agent was acting outside the scope of its authority (or usual functional parameters)?

If bid-sniping software allows a mechanism to exist whereby two competing users of the software on the same item can agree between them as to who will snipe, does that count as criminal bid rigging? What if the designers of the sniping software implemented a mechanism to do this without the users being aware of it? What if the agents acquired such a strategy independently themselves using AI techniques (this is not far-fetched: AI software has been used to develop strategies for Prisoners’ Dilemma – which is akin to this scenario – for many years).

The question ‘what can or should an intelligent agent be liable for?’ is a fascinating one, and is worthy of further investigation.[1] However, this paper seeks to consider a much narrower point: assuming that commercial liability is established, through contract, for example, who should be liable on the contract, and should that liability be limited?

There is one relatively straightforward way of dealing with this question: where the agent is constrained to act in one context (for example, where it is buying and selling commodities on a particular exchange) then liabilities and limitations can be established by a framework agreement, or set of framework agreements, between the exchange members. Thus whenever the agent transacts, the transaction is between its principal and (depending on the way the framework agreement is constructed) the exchange – with a corresponding transaction between the exchange and the counterparty – or directly with the counterparty. If the transaction goes wrong, the parties look to the framework agreement to assess the appropriate rights and liabilities between the parties.[2]

The problem with this ‘walled garden’ approach is that there is inevitably a barrier to entry to join the club, and by limiting the number of parties who can join, the market is made very inefficient. Network effects are very powerful: the number of potential transactions increases as the square of the number of counterparties, and thus the efficiency of the market increases. By severely restricting the number of players in a market, its efficiency is therefore lowered.

Therefore, if we agree that, from an economic perspective, it is desirable that intelligent agents have greater degrees of freedom, and therefore a greater choice of counterparties with whom to transact, and wider scope to negotiate the terms of the contract (other than price) on which they are prepared to transact, we need a legal framework which allows this to happen.

It is easy to assume that as these issues are triggered by emerging technology, that the laws to deal with them will have to be newly developed also. However, the jurists of Ancient Rome anticipated many of these issues by developing an advanced legal framework to cover the rights and obligations arising from slave ownership.[3]

 

Roman Slavery

Interestingly, the Romans regarded the human state to be one of freedom, under natural law (ius naturale). It was human-made law (ius gentium) which created the concept of slavery (strictly, chattel slavery: the ownership of one person by another). A slave was a thing, a res, albeit a thing with special characteristics. The slave’s master had (at least in the early Empire) theoretical power of life and death over him.[4]

However, slaves, especially in the early Empire, and especially educated urban slaves, were valuable things, and as such only foolish masters would maltreat them.

As things, slaves had no rights,[5] and it was impossible to enforce any form of agreement against them. Clearly, in the absence of any amending rules, this state of affairs would render it very unwise to enter into any form of contract with a slave.

 

Throughout the Roman period, therefore, laws were developed which enabled slaves to transact business on behalf of their masters. A balance was struck between protecting masters from excess liabilities arising from the activities of errant slaves, and giving counterparties comfort that it was safe to transact with slaves, and that the slaves’ obligations under the transaction were enforceable.[6]

Analogously, therefore, we can consider whether any of these mechanisms are applicable to the use of intelligent agents.

 

The Peculium

 

The most important and interesting mechanism is the peculium. Although a slave was incapable of owning property, the master could consent to him holding property for his own use and enjoyment. This is not limited to money: it can include any form of property, including other slaves (which could even have their own peculia).

Where a slave was involved in commerce, his peculium could be considered analogous to working capital. Although technically the peculium belonged to the master, it was regarded for most practical purposes as belonging to the slave, and indeed it became common practice for the slave to be able to buy his own freedom using the funds contained in his peculium.

The existence of the peculium was critical to giving comfort to people transacting with slaves.  The Roman law had a basic form of agency – any contract entered into by a slave would entitle his master to the benefit, but he would not be bound by the burden. If a contract could not be enforced by the slave’s customer, that was clearly a major barrier to commerce. The Romans therefore developed a rule allowing a contracting party to enforce judgments against the peculium. The action, known as the actio de peculio, allowed the master (paterfamilias) to be sued to the extent of the value of the peculium at the time of judgment[7] under contracts or debts entered into by the slave. This applied even where the transaction in question was unauthorised, or  for that matter forbidden, by the master.

This mechanism encouraged masters to use slaves as business managers, because the masters’ liability was limited to the value of the peculium, and it encouraged people to transact with slaves because of the perceived security of the peculium. In many ways, these was the same reasoning which resulted in the invention of the joint stock limited liability company in the 19th century.

As the law developed, the scope of the actio de peculio was extended so that in certain circumstances, the claim could exceed the value of the peculium. For example, where the transaction giving rise to the claim led to a tangible benefit to the master, the size of the claim could be extended to follow the benefit. Interestingly, food and clothing for the slave (if not excessive) would count as a benefit for the master – which of course naturally follows from the underlying fact that the slave is a res.

The parallels with autonomous agents are clear. The analogy (like any other analogy) is not a perfect one, but comparison may be instructive. Like a slave, an autonomous agent has no right or  duties itself. Like a slave, it is capable of making decisions which will affect the rights (and, in later law, the liabilities) of its master. By facilitating commercial transactions, autonomous agents have the ability to increase market efficiency.  Like a slave, an autonomous agent is capable of doing harm.[8]

 

Applicability of the Peculium to Intelligent Agents

 

What elements of Roman legislation could usefully be applied to autonomous agents? It is worth noting that in Roman society, an individual’s status (slave/free, Roman/foreign, family/independent)[9] was a matter of public knowledge. On the internet, no one knows you’re a dog:[10] clearly, not knowing the status of the entity with which a party is contracting is fatal to any scheme which depends on knowledge of that status. So I propose a system in which, by piggybacking on the back of existing trust networks (such as PKI) an intelligent agent can be granted an identity which can be authenticated. It may not be obligatory to sign up to such a scheme, but failure to do so will render the ‘owner’ of the autonomous agent strictly liable for any actions of that agent (or whatever default position exists at law, this being the most likely one). However, to encourage both people to use autonomous agents, and to trust transactions with them, if an agent is registered with the scheme, it is granted the privilege[11] of limited liability, subject to the provision of a ring-fenced peculium.[12]

The trust system would also hold the following information about any agent: (1) details of its owner, (2) details of the size of its peculium, and (3) details of any contingent liabilities. The peculium would be backed by a financial institution, such as an insurance company, the details of which would also held by the trust provider.[13]  In terms of infrastructure, this is similar to the amount of information held by DVLA in relation to each car registration, its associated insurance company and MOT status. The most problematic heading here is that of contingent liability: essentially the database would have to be dynamically updated each time a transaction was completed with an agreed maximum exposure negotiated as part of the transaction. There would have to be some mechanism agreed for striking these exposures from the database: this could include a limitation period for claims (after which the liability would disappear), or a mechanism (like the eBay rating system) for the parties to a transaction indicating their satisfaction with its outcome, and therefore agreeing to wipe off the prospective liability (on both sides, if the transaction is between two registered agents).

It is also worth noting that it is likely that there would need to be exceptions to the privilege of limited liability. The obvious ones would be in the case of fraud, or the supply of dangerous goods which caused death or personal injury.

The system does require an infrastructure, but it is significantly simpler than the ‘walled garden’ approach, and gives any contracting party the comfort that the transaction is secure to the extent of the un-earmarked peculium (and in the case of an agent-to-agent transaction, the peculia on each side).

 

This is the clearly the barest outline of a possible scheme, but I believe that it provides the lightest touch of regulation, allows the market to set prices for risk, and renders that risk transparent and makes mitigation accessible for traders, while at the same time encouraging trade by allowing the traders to shelter behind the privilege of limited liability.

 

Andrew Katz is a partner at Moorcrofts LLP, where he specialises in technology law with a bias towards open source software. In a former life he was a software developer and has released software under the GPL. He can be reached at Andrew.katz@moorcrofts.com.