Prepaid Arbitration

How do you settle disputes in the absence of a legal system? Or more bluntly, how do you get people to uphold their end of a deal without pointing a gun at their head?

The best answer I've found came from someone who named his avatar Judge Jude.  His avatar and the project we were mutually involved in passed into the aether long ago, so I can't provide any references.  I also haven't seen this idea anywhere else, but I only claim copyright for these words, if anyone wants to take the idea and implement it, please feel free.

There already is a mechanism for settling disputes without resorting directly to the legal system: arbitration.  All the "judges" you see on television, whether they were judges previously, are technically acting as arbitrators.  One feature of most arbitration is that the arbitrators only get involved after a dispute is arisen.  This can make it a contentious and expensive process.

Judge Jude's innovation was to get involved before the contract was signed.  His fee was a certain small percentage of the contract.  (How small can be an area of competition between different arbitrators.)  The contract wasn't binding until both parties and the arbitrator signed off on it.  This makes for great incentives.  The arbitrator has a huge incentive to make sure that everyone understands and agrees to exactly what they're getting into, so there won't be a dispute later on.  The better he does this job, the more satisfied his clients will be, the better his reputation, and the more he can charge.

What if a dispute does come up, and someone does not want to comply with the arbitrator's decision?  That person then gets blacklisted: the arbitrator will no longer adjudicate any disputes or sign off on any contracts for that person.  If they do that several times, they will soon find no one wants to do business with them.

Settling disputes before they arise will be key to prosperity on the Long Ascent.