Will algorithms replace the law?

How can increased automation enhance the value from contracts and contracting?

When we think of the law we often think of the justice system with a judge and a courtroom. In the modern digital era, however, the proportion of issues and disputes that require a human ‘judge’ is increasingly low.

eBay is famously reported to deal with 60 million disputes between buyers and sellers a year and the vast majority of these are automatically triaged to resolution with no human intervention other than the parties.

Much of the law has a cascading decision-tree structure that can and will be expressed algorithmically and by network representation. Computer-mediated transactions enable new forms of contracts and the records created by computers can allow the implementation of conditional logic that can be automatically monitored and verified, enabling more efficient transactions (Varian 2010[1]).

The benefits of computational contracts are therefore very clear for both economic, operational and compliance/risk perspectives, however, there has been limited adoption and we continue to rely largely on traditional prose-based contracts and human intervention.

Increasingly though, standardised terms and templates, with minimal human touch, can increase deal velocity, decrease legal costs and even increment the monetisation of physical and digital assets. These benefits along with advances in technology and most importantly a move towards an enhanced Ricardian contract style approach will allow for the unlocking of increased benefits from both the contracting process and the contracts themselves.

So, while algorithms won’t entirely replace the law and justice as we visualise it, the role of algorithms and automation in resolving issues and disputes will increase and with benefits to all involved in many cases.

Imagine, in a world of enhanced Ricardian contracts it could well be a machine to machine interaction which identifies a misalignment between the contract and the deliverable and negotiates a contract change that benefits all parties.

[1] “Data is subject to diminishing returns to scale.” Is there a data barrier to Entry?, Hal Varian, Google. 2014 http://www.learconference2015.com/wp-content/uploads/2014/11/Varian-slides.pdf