Conspiracism

'Conspiracy! Or, when bad things happen to good litigants...' by Kate Leader in (2024) 44(3) Legal Studies 498-518 comments 

 This paper considers the relationship between litigants in person (LiPs) and conspiracy theories and seeks to answer two questions: how, and why, do some LiPs become conspiracy theorists? The majority of LiPs, of course, do not become conspiracy theorists. There is also no evidence that LiPs are more likely than anyone else in legal proceedings to be conspiracy theorists, only, perhaps, that it is more obvious when they are. But there continue to be individuals who use conspiracy theories to explain the difficulties or failures they experience throughout legal proceedings. And while it is widely held that some LiPs hold eccentric beliefs about the law, there has been little attempt to understand how and why LiPs may come to acquire or articulate these beliefs. This is presumably because it has not been considered important to interrogate the views of people already often assumed to be ‘difficult’. This paper contends, however, that trying to understand how and why these beliefs are acquired matters very much. This is because conspiracy theories can give us insight into how negative experiences of litigation can result in a loss of faith or trust in legal institutions. 

I advance this argument through three key claims: first, that legal professionals and legal scholars tend to pathologise both those who believe in conspiracy theories and LiPs in an unhelpful way, by focusing on their individual competence or psychology. Whilst there is no direct research on LiPs and conspiracy theories, work that has touched on litigants and repeat litigation shares a traditional conception of LiPs as difficult, litigious or paranoid individuals. Consequently, the presumption in such cases has been that these are pathological individuals who happen to be involved in legal proceedings; their experience as litigants is less, or not, relevant. I argue instead that this is symptomatic of how laypersons are treated in the civil justice system and demonstrates how we can fail to take seriously LiP claims about their experiences. 

Secondly, I argue that examining how and when belief in conspiracy theories arises can provide insight into the legal consciousness of LiPs and how this is affected by repeated, negative experiences of litigation. Far from confirming litigant paranoia, this paper contends that these behaviours and beliefs are affected, reproduced and at times created by contact with legal proceedings. So, while the malign authority that conspiracy theorists may invoke to explain their experiences is fictive, what leads to these beliefs – a perception of deliberately unfair treatment – is rooted in genuine and systemic experiences of exclusion, and these exclusions happen to all LiPs to differing extents in the civil justice system. 

Finally, this paper argues that too often we make a distinction between ‘worthy’ and ‘unworthy’ LiPs, whereby we bracket off those we perceive as problematic actors, such as those who express conspiracy theories, from those individuals we implicitly frame as non-problematic, and therefore having a right to pursue or defend actions. I suggest instead that such a distinction is unhelpful and unsustainable. Belief in conspiracy theories is best understood as existing along a continuum rather than being a binary. Doing this allows us to move away from thinking in terms of ‘us and them’, and instead consider that how individuals perceive their treatment by legal actors and the courts may play a constitutive role in their faith in these institutions. What tips LiPs into believing in conspiracy theories? And what can this tell us about how we tend to characterise LiPs? Ultimately, I argue that the development of belief in conspiracy theories on the part of some LiPs can best be understood as at least partly the result of a crisis of faith that arises when idealised litigant perceptions of law give way to the mundane and distressing reality of legal proceedings. As I conclude, if some LiPs are ‘crazy’, we ought to consider the possibility that going to law has made them this way.

Cheating

'Responsible but powerless: staff qualitative perspectives on cheating in higher education' by Rowena Harper and Felicity Prentice in (2024) 20 International Journal for Educational Integrity comments 

Since its identification, contract cheating has evolved into a significant interdisciplinary field in higher education, encompassing both research and practice. This field informs institutional strategies, practices to mitigate contract cheating, professional development, and student education (Morris 2020). With many governments enacting legislation to combat commercial cheating industries, and quality assurance agencies establishing legislative standards for higher education providers, contract cheating has become a focal concern in the educational landscape. 

In Australia, the location for this study, a series of media scandals in 2015 sparked federal government concerns that students were increasingly using commercial contract cheating services to complete their assignments, and that universities were failing to detect it. Implications in some of the reporting that international students were amongst the users contributed to those concerns, as higher education was Australia’s third largest export industry at the time (behind iron and coal), with international students comprising over 25% of the higher education population. The prospect of reputational or economic damage to universities, or the Australian higher education sector more broadly, by a narrative that suggested compromised integrity led to widespread investment in understanding and addressing the issue of contract cheating at national and local levels. Demands on academics have expanded in parallel, with their roles given new administrative, research and pedagogical dimensions requiring new and evolving skills and resources. Their work requires a growing knowledge base that includes contemporary student behaviours that can undermine educational integrity, the individual, attitudinal and contextual factors that can motivate these behaviours, and security threats and cheating opportunities that may exist in the teaching and learning environment. This knowledge must then be applied in designing an engaging and supportive learning environment that develops students’ academic integrity and academic practice (Gottardello and Karabag 2022), acknowledges and scaffolds students’ diverse academic and linguistic abilities (Bretag et al. 2019; Slade et al. 2019), and utilises assessment practices that are authentic and meaningful, and as secure as practicable (Ellis et al. 2018; Dawson 2021). For the most part these teaching and learning activities align with teachers’ conceptions of their professional identity (Lynch et al. 2021). Less well understood is how teaching staff perceive their role in detecting and managing contract cheating and other forms of academic misconduct, particularly in an environment where academic misconduct responsibilities are increasingly distributed across different institutional roles (Ahuna, Frankovitch and Murphy 2023; Vogt and Eaton 2022). These roles may include faculty-based and/or centralised teams of academic integrity specialists who provide policy leadership, staff training, student education, or have responsibility for aspects of academic misconduct investigation and management. Roles may also include more senior academics to whom teachers are required to delegate certain forms of academic misconduct. 

Research into the institutional management of academic misconduct has focussed on the development of policies and procedures to prevent, detect and respond to incidents (Birks et al. 2020; Bretag and Mahmud 2014; Stoesz et al. 2019). These policies and procedures typically position teaching staff as having a policing role that feels inconsistent with and even anathema to their conceptualisations of their role and identity as facilitators of learning. For instance, in a comparative study across six countries, Gottardello and Karabag (2022) found that academics are often required to adopt the role of ‘intimidator’ to ensure students understand the consequences of academic misconduct. With the rise of contract cheating, the act of evaluating assessment tasks has increasingly become infused with a level of suspicion, as evidence suggests that the detection rate of contract cheating improves when academic staff maintain awareness of its potential occurrence (Dawson and Sutherland-Smith 2018; 2019). The gathering of evidence to identify and substantiate a case can require quasi-forensic processes such as linguistic and stylometric analyses (Ison 2020; Mellar et al. 2018), nuanced interpretation of text-matching software reports (Bretag and Mahmud 2009; Lancaster and Clarke 2014), scrutiny of document metadata (Johnson and Davies 2020), and surveillance of Learning Management System traffic to leverage information on user IP addresses (Dawson 2021). All this occurs against a backdrop of challenging organisational conditions that include dwindling resources, increasing workloads and increasing casualisation (Amigud and Pell 2021; Birks et al. 2020; Harper et al. 2019; De Maio et al. 2020). 

In addition to their roles in teaching, learning and detection, teaching staff have been described by some as ‘morally responsible’ (Sattler et al. 2017, 1128) for the ongoing problem of student cheating, with others suggesting that a failure to prevent and detect academic misconduct actively is indicative of ‘staff laziness’ and ‘lack of creativity’ (Walker and White 2014, 679). Some of the language used in the literature frames the problem as a combative one and positions teaching staff as the ‘guardians of integrity’ (Amigud and Pell 2022, 312) who are on the front line (Burrus et al. 2015, p. 100; Singh and Bennington 2012, 115), ‘in the trenches’ (Atkinson et al. 2016, 197), in an ‘arms race’ (Birks et al. 2020, p. 13) and ‘waging a losing battle’ (Asefa and Coalter 2007, p. 43) against academic misconduct. The combatants portrayed in this war seem to be the teaching staff and students, staring at each other across a moral divide. Given the critical task of teaching staff to address contract cheating, the ways in which they make sense of and navigate their competing roles and responsibilities needs to be better understood. The project reported in this paper was part of a nationally funded research project entitled Contract Cheating and Assessment Design: Exploring the Connection, which conducted parallel staff and student surveys at 12 Australian higher education institutions, including 8 universities, between October and December 2016. The surveys addressed four research questions:

1. How prevalent is contract cheating in Australian universities? 2. Is there a relationship between cheating behaviours and sharing behaviours? 3. What are university staff experiences with and attitudes towards contract cheating and other forms of outsourcing? 4. What are the individual, contextual and institutional factors that are correlated with contract cheating and other forms of outsourcing?

This paper reports only on the data gathered from the 8 universities. Notably, the data were collected at a time before the COVID-19 pandemic prompted an emergency pivot in teaching and assessment, and most significantly prior to the emergence of Large Language Model Generative Artificial Intelligence (GenAI). However, we assert that the fundamental challenges of ‘cheating’ remain the same, and that the organisational conditions and staff experiences illustrated here are only likely to have intensified as a result of the disruptions experienced since 2016.

CARF

Treasury has released a consultation paper on Australia’s implementation of the Crypto Asset Reporting Framework and related amendments to the Common Reporting Standard. 

 The paper 'seeks stakeholder views on options for Australia’s approach to implementing the OECD-developed rules for the Crypto Asset Reporting Framework (CARF) and associated amendments to the Common Reporting Standard, or CRS'. 

It comments

 The OECD CARF is a new tax transparency framework which provides an international standard for the automatic exchange of crypto related account information between revenue (tax) authorities. In general terms, crypto assets are a digital representation of value that an entity can transfer, store, or trade electronically – common examples include Bitcoin, investment tokens, and non-fungible tokens. 

The OECD developed the CARF to address the rapid growth of the crypto asset market globally. The CARF is intended to be a global minimum standard in tax information exchange and builds on the existing CRS (outlined below), which enables participating tax authorities to exchange (traditional) financial account information on foreign tax residents, serving as a deterrent on tax evasion. In this regard, the CARF preserves the gains in global tax transparency achieved under the CRS and is a key component of the International Standards for Automatic Exchange of Information in Tax Matters (a multilateral tax framework first endorsed in 2014 and implemented by Australia in 2015). 

In November 2023, Australia joined with 47 jurisdictions signalling an intention to implement the CARF by 2027. As noted in that announcement, the widespread, consistent and timely implementation of the CARF will improve the ability of jurisdictions to enforce tax compliance and clamp down on tax evasion. This will help to protect tax revenues by creating a fairer tax system. As at July 2024, 58 jurisdictions had since signalled their intention to implement the CARF by 2027. 

Implementing the CARF would complement the Government’s efforts to strengthen tax transparency. It would also ensure Australia contributes to the effective global implementation of the CARF and play our role in deterring tax evasion, via the exchange of crypto account information with other countries. ... 

The paper explores the following issues, with specific questions included to guide stakeholder input: • The policy merits of transposing the OECD model into our domestic tax law (compared to a bespoke policy approach). • Potential implementation considerations. • The timeline for implementation that would minimise compliance costs on the community. 

Subject to Government decisions and priorities, future consultation will test exposure draft legislation and specific design issues (such as reporting formats to the ATO). 

Implementing the CARF will also require amendments to the CRS, to ensure the CRS remains up to date. These amendments are consequential in nature and outlined on page 10. 

Introduction 

International tax transparency and exchange of tax information 

The automatic exchange of tax related information between tax authorities is one method to address tax avoidance and ensure that all taxpayers pay the correct amount of tax. This typically involves jurisdictions signing up to a global standard to facilitate the sharing (and receiving) of information on accounts held by non-resident individuals and entities. The global standard ensures that information is exchanged in a standardised format, which assists tax authorities (and complying entities) to collect the information. It also recognises that the effectiveness of international exchange of information regimes are dependent on widespread, standardised adoption by jurisdictions. 

In June 2013, the OECD released a 15-point Action Plan on Base Erosion and Profit Shifting as a roadmap for governments to address profit shifting behaviour – i.e. tax planning strategies that exploit differences in tax rules to avoid paying tax. The Action Plan was endorsed at the G20 Finance Ministers’ meeting in July 2013 and established the OECD/G20 BEPS project. 

The BEPS Action Plan included the Common Reporting Standard (CRS) which recognised that international cooperation and sharing of high-quality information between revenue authorities was vital to ensure compliance with local tax laws. In 2014, the CRS was endorsed by G20 Finance Ministers and Central Bank Governors as an international platform for automatic exchange of tax information between multiple countries. The CRS is the OECD version of the United States’ unilateral information exchange mechanism (FATCA, or the Foreign Account Tax Compliance Act). The CRS has since established a common international standard for the collection, reporting and exchange of financial account information on foreign tax residents. Under the CRS, banks and other financial institutions collect and report financial account information to the ATO who exchange that information with participating foreign tax authorities of those foreign tax residents. In return, Australia (via the ATO) receives financial account information on Australian residents from other countries' tax authorities . Australia passed legislation implementing the CRS in 2016. 

Developing the OECD CARF (outlining the problem) 

In April 2021, the G20 mandated the OECD to develop a framework to provide for the automatic exchange of tax-relevant information on crypto assets. The OECD proceeded to develop a set of ‘Model Rules’ to extend automatic exchange of information frameworks to new intermediaries in the crypto asset sector. In August 2022, the OECD approved the CARF. 

The momentum to establish the CARF was in response to the rapid growth of crypto asset markets across the globe, and the challenges it presents for governments when it comes to tax evasion and tax avoidance. 

This reflects that crypto assets can be transferred and held without interacting with traditional financial intermediaries (such as banks) and without any central (tax) administrator having full visibility on the transactions carried out via crypto intermediaries, investor income derived from crypto assets, or the location of crypto asset holdings (such as assets held in offshore accounts). 

This type of information asymmetry creates opportunities for tax non-compliance and offshore tax evasion, particularly as these transactions and investments are occurring increasingly beyond the remit of established exchange of information frameworks, as compared to more traditional financial products. 

That is, crypto intermediaries can serve to aid asset transfers across borders, and as these platforms become more prominent (and relatively less transparent), there is an incentive for economic activity to shift away from traditional financial platforms to more opaque transaction platforms. This can facilitate the non-disclosure of income, leading to tax evasion. 

The OECD’s response to this policy problem is the CARF – the CARF addresses this gap in tax transparency by providing a new multilateral framework for the reporting of tax information on transactions in crypto assets. 

As with the current CRS, the CARF would ensure crypto related information is reported in a standardised manner, with a view to automatically exchanging information between tax administrators. The CARF is intended to build on the success of the CRS, which has improved international tax transparency via the automatic exchange of financial account information. 

The success of exchange of information frameworks are dependent on co‑ordinated international action, to ensure the information exchanged is broad in scope and coverage. This underpinned the group of jurisdictions, including Australia, signalling an intent to implement the CARF by 2027. 

Crypto assets in Australia 

Since Bitcoin was introduced in 2009, the crypto asset industry in Australia has evolved to mainstream use, and now extends beyond Bitcoin exchanges to include many sophisticated service providers . Cryptocurrencies are the most common form of crypto asset. It is estimated that 20 per cent of Australians currently own a cryptocurrency, and that 82 per cent of Australian crypto owners claimed to make a profit. The average reported cryptocurrency profit in the 2023 calendar year was $9,627 . 

Implementing the OECD CARF in Australia (why is government action needed) 

The OECD CARF reflects that global financial markets are evolving and becoming increasingly digitalised, and that coordinated action is needed to ensure revenue (tax) authorities can retain visibility of income derived from crypto assets. Implementing the CARF into Australia’s domestic legislation would create the legal framework to oblige crypto asset intermediaries to collect and report user and transaction data to the ATO. Exchange of information (between tax administrators) on crypto assets would allow the ATO to access standardised data to identify tax non-compliance and ensure taxpayers are meeting their tax obligations for crypto asset income and assets. Exchange of information under the CARF would only take place with jurisdictions who have appropriate confidentiality and data safeguards . 

The CARF would also ensure Australia continues to be a responsible jurisdiction in relation to combating tax evasion at the international level. Australia, along with many other countries, already shares information through automatic exchange, spontaneous exchange and exchange upon request facilitated through a network of tax treaties and tax information exchange agreements. Similarly, widespread implementation of the CARF would ensure a consistent and coordinated approach to the automatic exchange of information across participating jurisdictions regarding crypto assets. 

Legislative interactions with the Common Reporting Standard 

Reflecting the genesis of the CARF (and the evolving financial landscape), jurisdictions implementing the CARF would also be required to implement legislative amendments to the CRS, to ensure the CRS comprehensively covers transactions beyond the traditional financial sector (for which the CRS was initially developed) such as in the crypto asset market. For example, ensuring that indirect investments in crypto assets (such as through derivatives and investment vehicles) and certain electronic money products and central bank digital currencies are brought into scope of the CRS. 

The OECD identified the need for associated CRS amendments as part of the OECD’s review of the current standards, conducted in parallel to the development of the CARF. 

What is the Crypto Asset Reporting Framework (CARF)? 

The CARF is a new tax transparency framework which provides for the automatic exchange of tax information on transactions in crypto assets, between tax authorities. In the Australian context, it will allow the ATO to exchange information with other participating countries, to the extent the information relates to a person who is a tax resident in that jurisdiction. In turn, the ATO will also receive information on Australian tax residents from those tax authorities. The CARF requires information to be reported in a standardised manner. 

The CARF consists of three distinct components: • CARF Model Rules (and related commentary developed by the OECD) that can be transposed into domestic law to collect information from reporting crypto asset service providers with a relevant nexus to Australia (as the jurisdiction implementing the CARF). The rules focus on the: o scope of crypto assets to be covered; o entities and individuals subject to data collection and reporting requirements; o transactions subject to reporting, as well as the information to be reported in respect of such transactions; and o due diligence procedures to identify crypto asset users and controlling persons and to determine relevant tax jurisdictions for reporting and exchange purposes. • A Multilateral Competent Authority Agreement on Automatic Exchange of Information and related Commentary (or bilateral agreement/arrangement) to allow for the automatic exchange of information between participating jurisdictions); and • An electronic format (XML Schema) to be used by tax administrators for purposes of exchanging the CARF information, as well as by reporting crypto asset service providers to report CARF information to tax administrations (as permitted by domestic law) . The CARF would compel crypto intermediaries – for example, exchange platforms and wallet providers used for storing crypto assets – to report to tax authorities on certain crypto payment transfers, such as disposals (gross proceeds) and acquisitions (market value). Under the OECD model, information reported under the CARF would be subject to de minimis thresholds, specifically: • Values exceeding USD 50,000 or above would require specific customer data. The customer in this instance is identified as a user, and their details are exchanged. • Transaction amounts less than USD 50,000 are still reported, but done so as a ‘platform/merchant’ payment – effectively treated as an aggregate figure (with no specific customer user data). 

Australia’s implementation approach: Options 

The OECD’s CARF provides for a multilateral framework, establishing a common international standard for the exchange of information on transactions in crypto assets. Amendments to Australia’s tax legislation would be required to implement the CARF (along with legislative amendments to existing CRS rules, outlined further below). 

This paper considers two options – under either option, Australia would need to enter into a Multilateral Competent Authority Agreement (MCAA) or a bilateral information exchange agreement to enable the automatic exchange of information between tax authorities. 

The status quo option (no change) is not considered given that crypto use in Australia has become mainstream, and that the CARF is a global minimum standard developed to help deter tax evasion. 

Option 1: adopt the OECD CARF Model 

The OECD CARF Model Rules would be used as the basis for the enabling legislation within Australian law. This would adopt the same defined terms, concepts, due diligence procedures, de minimis thresholds, exclusions, and impose the same obligations on crypto intermediaries (reporting crypto asset service providers), as identified by the OECD. 

This approach would have the benefits of: • receiving information from other jurisdictions who have signed up to the OECD CARF model, assisting with tax compliance and enforcement. • avoiding duplication and deviations from international norms, supporting efficient reporting (by entities) and information exchanges (by tax authorities). • minimising compliance costs on some entities (e.g. if an in-scope entity has nexus with more than one jurisdiction). Similar to how the CRS was implemented in 2016, under this option, Australia would reserve the right to make some adjustments to adapt the OECD model to fit within Australia’s law (noting the above benefits are predicated on consistency with the OECD model). 

Option 2: bespoke approach 

Australia implements a bespoke set of rules. This would have the same policy intent as Option 1, with crypto asset service providers required to collect information on crypto asset transactions they facilitate, and report this data to the ATO to aid with its compliance activities. The information could be exchanged unilaterally with other jurisdictions where the taxpayer is resident, for use by those tax authorities, to ensure assets and income have been appropriately declared for tax purposes. Under a bespoke approach, Australia could more specifically target the reporting obligations to those service providers in the crypto industry whose customers’ information is seen as providing the most useful information to assist the ATO with its compliance activities. This could also include bespoke de minimis thresholds. A bespoke regime could have the same reportable information as captured under the OECD CARF but could offer the flexibility to exclude or add certain fields of information and types of transactions captured. It could also prescribe bespoke timing and frequency of reporting to the ATO. However, under this option many of the benefits of consistent reporting to minimise duplication and enable exchange globally would be lost and likely result in increased compliance costs for affected entities. The ATO may also receive less information compared to the OECD-developed CARF model, as bespoke regimes may not be considered compliant with the OECD standard. 

Who is required to report under the CARF? 

The CARF would apply to Reporting Crypto Asset Service Providers. The OECD defines (Section IV (B)) this term as: • Any individual or entity that, as a business, provides a service effectuating Exchange Transactions for or, on behalf of customers, including by acting as a counterparty, or as an intermediary, to such Exchange Transactions, or by making available a trading platform. 

The term “Exchange Transaction” is further defined to mean any exchange between: • Relevant Crypto-Assets and Fiat Currencies; and • One or more forms of Relevant Crypto-Assets (defined below). 

A Reporting Crypto Asset Service Provider would therefore apply to crypto asset exchanges and wallet providers, brokers, dealers, and automated teller machine providers. These types of entities (and individuals) are in scope given their central role in the crypto asset market in facilitating exchanges between Relevant Crypto-Assets, as well as between Relevant Crypto-Assets and Fiat Currencies. 

Reporting Crypto Asset Service Providers (connection to Australia) 

Under the OECD model, there would be five points of connection establishing a Reporting Crypto Asset Service Provider’s nexus to Australia, thus subjecting them to the CARF rules. These include if the provider is: (i) tax resident in, (ii) both incorporated in, or organised under the laws of, and have legal personality or are subject to tax reporting requirements in, (iii) managed from, (iv) having a regular place of business in, or (v) effectuating Relevant Transactions through a branch based in Australia. 

The OECD’s CARF model includes rules to avoid duplicative reporting where a Reporting Crypto Asset Service Provider may have nexus to more than one jurisdiction. 

Reportable information under the CARF 

The CARF will require reporting crypto asset service providers to report information about in-scope crypto assets and transactions to the ATO. These core definitions are outlined below to assist readers, noting the CARF related commentary has a complete set of defined terms and reporting requirements.

• Crypto-Assets (Section IV (A)) are defined as a digital representation of value that relies on a cryptographically secured distributed ledger or similar technology to validate and secure transactions. This includes assets transferred in a decentralised manner outside the traditional financial sector such as stablecoins, derivatives issued in the form of crypto assets and certain non-fungible tokens (NFTs). Blockchain is an example of distributed ledger technology. 

• Relevant Crypto-Assets refers to all crypto assets that can be used for payment or investment purposes. It excludes crypto assets that pose limited risk to tax compliance (i.e. crypto assets which cannot be used for payment or investment purposes, Central Bank Digital Currencies, and Specified Electronic Money Products). 

• Fiat Currency is the official currency of a jurisdiction, issued by a jurisdiction or by a jurisdiction’s designated Central Bank or monetary authority, as represented by physical banknotes or coins or by money in different digital forms, including bank reserves and Central Bank Digital Currencies. The term also includes commercial bank money and electronic money products. 

• Relevant transactions (Section IV(C)) refer to: - exchanges between relevant crypto assets and fiat currencies; and - exchanges between one or more forms of relevant crypto assets; and Reportable Retail Payment Transaction refers to transfers of relevant crypto assets for payment of goods or services above USD 50,000 (including where an intermediary processes payment on behalf of a merchant accepting crypto assets). 

• Reporting requirements (Section II of CARF) specify the general information to be reported with respect to crypto asset users (and controlling persons), including jurisdiction(s) of residence, taxpayer identification number, information on the reporting crypto asset service provider (such as its name, address and any identifying number), and information on the relevant transactions (such as reportable relevant transactions and transfers to external wallet addresses). 

Timing of reportable information under the CARF 

The success of global exchange of information frameworks are dependent on co‑ordinated international action. A collective group of jurisdictions, including Australia, have signalled an intent to implement the OECD’s global tax transparency framework for the reporting and exchange of information with respect to crypto assets by 2027. Once operational, reporting of CARF information by crypto asset intermediaries is proposed to occur on an annual basis relating to data collected over the previous year. 

Subject to a final decision of Government, it is envisaged that CARF reporting requirements would commence from 2026, to ensure the first exchanges between the ATO and other tax authorities could take place by 2027. This timeframe would also be subject to future legislative priorities. 

This timeframe is intended to provide adequate lead time for reporting crypto asset service providers and intermediaries to update their systems. 

It is anticipated the ATO would also undertake public consultation on the CARF reporting format, such as the XML schema. 

Due diligence requirements 

Under the OECD CARF, the reported information must ensure the ATO has a reasonable level of assurance of: • the crypto asset user’s identity, • the possible tax obligations that may arise from trading or accepting crypto assets as payment, where the user is a non-resident for exchange of information purposes with partner jurisdictions. 

Reporting crypto asset service providers would therefore be subject to due diligence procedures which they must apply to identify their users (including controlling persons) and determine the relevant tax jurisdiction and beneficial owners of crypto assets held in certain entities. The due diligence procedures (explained at Section III) may vary depending on whether the customer is an individual or an entity, but in general, would include: • the collection of self-certifications from their customers as to their tax residency and their Tax Identification Numbers (TINs); • Reasonableness checks that those self-certifications reconcile with other information the entity holds to ensure validity (for example checking against documentation obtained in relation to Anti-Money Laundering / Know Your Customer (AML/KYC) purposes); and • Signing off on and submitting the data to the tax authorities. 

Additionally, reporting entities will need to have regard for ‘change of circumstances’ requirements regarding crypto asset users. This imposes obligations on reporting entities to ensure the original ‘self-certification’ remains valid. That is, if a reporting crypto asset provider has reason to know that a self-certification is unreliable, incorrect, or incomplete, the reporting entity is required to undertake procedures to ensure the self-certification is updated. 

In the case of pre-existing users, the CARF Model Rules stipulates that reporting crypto asset service providers must obtain a valid self- certification (and confirm its reasonableness) within 12 months after a jurisdiction introduces the CARF.

Digital Competition Policy

The Australian Treasury has released a proposal paper on A new digital competition regime. 

The paper states 

 1. Why do we need a new competition regime for digital platforms? The digitisation of the economy through the services offered by digital platforms has provided significant benefits for Australian consumers and businesses. However, the rise and dominance of large international platforms, their market power and ability to restrict competition, and their central role in facilitating interactions between businesses and consumers, have also created important regulatory challenges. 

Australian businesses rely heavily on a few global digital platforms and the services they provide to access and engage with consumers. The significant market power of these platforms provides them with the ability to impose ‘take it or leave it’ terms on businesses and make unilateral decisions that have significant consequences for Australian businesses and flow-on effects for broader commerce. These include direct financial impacts for Australians, where increased costs are passed on to consumers. 

There are multiple other examples of common pain points for Australian consumers and businesses. These include search engines and app stores preferencing their own products and services above those of rival businesses in rankings and search results; difficulties for a consumer trying to switch to a new brand of phone without losing data; difficulties for a small business trying to understand how their digital advertising dollars are being spent and whether they are getting value for money; and restrictions on app users trying to access payment options other than those offered by app store providers, including options which may offer cheaper prices on in-app purchases. 

The Australian Competition and Consumer Commission (ACCC) has examined competition and consumer issues regarding digital platforms in Australia since 2017. Throughout the ACCC’s current Digital Platform Services Inquiry (2020 – 2025) (DPSI), the ACCC has identified a lack of effective competition in a range of digital platform services. The ACCC has also observed that the positions of substantial market power held by large digital platforms give them the ability and incentive to engage in strategic conduct to entrench and extend that market power. These systemic issues can impact businesses and consumers through higher prices, reduced choice, and lower innovation and quality of products and services. 

The characteristics and dynamic nature of digital platform markets mean that enforcement of existing economy-wide provisions of the Competition and Consumer Act 2010 (Cth) (CCA) may not on its own be sufficient to protect and promote competition, or well-suited to addressing the range and scale of competition harms identified in digital platform markets. Further, the fast-moving nature of digital platform markets may mean that significant, and sometimes irreversible, damage to Australian businesses or consumers can occur, even where a successful outcome is achieved through litigation. The ACCC recommended the government implement a new digital competition regime with ‘ex ante’ or upfront rules.  Ex ante upfront rules aim to prevent anti-competitive conduct from occurring in the first place. Traditional ‘ex post’ competition frameworks intervene after anti-competitive conduct has occurred, when consumers may have already experienced losses and competition has been stifled. Multiple jurisdictions around the world have arrived at the same conclusion that traditional competition law is insufficient in addressing these issues. The European Union, the United Kingdom, Germany, Japan, India and Brazil have implemented or proposed new digital competition regimes with ex ante upfront rules. In the jurisdictions that have already implemented reforms, governments are expecting consumers to directly benefit from greater competition in digital platform services. For example, the European Commission has estimated a consumer benefit of EUR 13 billion (AUD 21.4 billion) per year, and the UK Government has estimated a consumer benefit of GBP 798 million (AUD 1.5 billion) per year. 

Treasury consulted on the ACCC’s recommendations from 20 December 2022 to 15 February 2023. Following Treasury’s consultation, the government released its response to the ACCC’s recommendations on 8 December 2023. 

The government accepted the ACCC’s findings that existing provisions by themselves are not sufficient to address current or potential future competition harms and supported-in-principle the development of a new digital competition regime. The government’s consideration of a new digital competition regime sits within the broader context of work underway in Australia to address issues and harms related to digital platforms. The proposed regime would complement the new Scams Prevention Framework being considered by Parliament, implementation of the government’s response to the Privacy Act Review, the passing of Digital ID laws, work regarding the News Media and Digital Platforms Mandatory Bargaining Code, and ongoing work related to artificial intelligence. These efforts seek to ensure Australia has the right regulatory settings for the digital economy. 

Purpose of consultation 

This proposal paper seeks stakeholder views on the proposed approach to implement the government’s response to recommendations for a new digital competition regime. 

Your feedback will inform the government’s consideration of the design of a proposed new digital competition regime and more broadly, how to regulate digital platform harms while still positioning Australia as an attractive economy for digital innovation. 

By ensuring Australia has the right regulations to be a leading digital economy, Australian consumers, businesses and the economy can continue to enjoy the benefits and opportunities afforded by technology. 

A consolidated list of questions can be found at section 7.1. 

2. The proposed framework and legislative approach 

The proposed framework would introduce new, upfront requirements for certain ‘designated’ digital platforms with a critical position in the Australian economy. 

Amendments to the CCA would establish overarching principles, the ability to designate identified digital platform entities in respect of a specific service, broad obligations, enforcement and compliance mechanisms, and a framework for making subordinate legislation with detailed obligations applying at the service-level. Once a digital platform entity has been designated in respect of a specific service, the ACCC would be responsible for enforcing the obligations. The legislation would set out the scope of digital platform services which would be subject to designation. 

It is proposed that the first services to be investigated for designation under the regime would be app marketplace services and ad tech services. Comment is also sought on whether social media services should be similarly prioritised. 

2.1. Overview of the government’s proposed approach 

Treasury has worked closely with the ACCC to develop the proposed framework and key features of a new digital competition regime. The proposed framework would introduce new, upfront requirements for certain digital platforms with a critical position in the Australian economy. These requirements would complement enforcement of existing competition law. 

As set out in Figure 1, the overarching framework would be established in primary legislation (likely the CCA) and supplemented by subordinate legislation (such as regulations): • Primary legislation would contain key features such as designation, broad obligations, enforcement and compliance mechanisms and a framework for making subordinate legislation, and • Subordinate legislation would impose further detailed obligations on specified digital platform services at the service level and would be developed by the government, in consultation with the ACCC. 

The framework would provide the ability to designate digital platform entities in respect of specific services in primary law and impose upfront obligations to address identified competition harms. The objective of the CCA is “to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection”. We consider this proposed new framework sits appropriately within this objective. Further principles would be included as part of the regime’s provisions to clarify the goals of the framework. 

The proposed new digital competition regime would be administered by the ACCC through pro-active monitoring and compliance arrangements, which would be supported by effective enforcement powers with international coordination. 

The proposed regime is intended to be a model that is fit-for-purpose for the Australian context whilst being complementary and cohesive with international approaches. It has been informed by significant international developments in digital platform regulation in jurisdictions such as the European Union, the United Kingdom, Germany, Japan, and India (summaries of some of these regimes are set out at section 7.2). 

As noted above, the proposed new digital competition regime sits within the context of other work underway in Australia by government to address policy issues and harms related to digital platforms, including scams, privacy reforms, the News Media and Digital Platforms Mandatory Bargaining Code, Digital ID and artificial intelligence. Treasury will engage with relevant agencies to ensure any new regulation is coherent with other policy work related to digital platforms. ... [schematic omitted] 

2.2. Scope of the proposed framework 

The proposed framework would address identified competition issues in specific digital platform services that are not adequately addressed within the current competition framework. The proposed regime would be targeted to certain digital platforms in respect of services that have a critical position in the Australian economy and where there is the greatest risk of competition harms. It is not intended to be applicable across the economy. To ensure the proposed regime is appropriately targeted, the legislation would specify what parts of the digital economy would be captured by the new regime. The term “digital platform services” is not currently defined in Australian legislation. The proposed regime would not adopt an all-encompassing general definition of “digital platform services”, as this is unlikely to provide adequate certainty for industry and may result in over-capture of services which are not the intended target of regulation. Instead, the proposed model draws on the current list-based approaches used in Australia and overseas. The Ministerial Direction for the ACCC to conduct the Digital Platform Services Inquiry 2020-2025 lists “digital platform services” including internet search engine services, social media services, online private messaging services, and electronic marketplace services. Internationally, the European Union’s Digital Markets Act features a broad list of ‘core platform services’ and India’s proposed Digital Competition Bill similarly specifies a list of ‘core digital services’.   It is proposed that legislation would stipulate a list of digital platform services that would be regulated under the regime. The proposed list would include the digital platform services listed in the Ministerial Direction for the Digital Platform Services Inquiry and could substantially align with the types of ‘core platform services’ subject to potential regulation under the European Union’s Digital Markets Act. For example, the list could include:

• app distribution services (app marketplace services) • digital content aggregation platform services • social media services • search engine services (including general and specialised search services) • electronic marketplace services (e.g. general online marketplace services) • video-sharing platform services • online private messaging services (including text messaging, audio messaging and visual messaging) • operating systems • web browsers • virtual assistants • cloud computing services • online advertising services (including ad tech services) • media referral services. 

At the same time, the digital competition regime should be capable of addressing new and emerging digital platform services resulting from changes to technology and market dynamics. To do so, the framework would include an ability to update the list of specified digital platform services. For example, following advice informed by the ACCC’s proposed compliance and monitoring functions and a consultation process, the relevant minister could specify additional types of digital platform services that would be subject to the new competition regime in subordinate legislation. 

 2.3. Priority services 

The ACCC’s inquiries into digital platform markets including the DPSI have uncovered harms on a number of digital platform services. Building on the extensive work completed by the ACCC, Treasury sought further feedback on priority harms and priority services during its previous consultation. Treasury has also engaged extensively with international counterparts developing or implementing new regulation to inform the focus for the digital competition regime. 

Throughout these processes, competition issues in the supply of app marketplaces and ad tech services were continually highlighted as priority concerns. In addition, ongoing and emerging concerns in the supply of social media services (including closed channel display advertising) might warrant action. The ACCC raised issues related to these services, including anti-competitive self-preferencing, anti-competitive tying, lack of transparency and the lack of interoperability between products and services. It is proposed that these would be the first services to be investigated for designation under the proposed framework. 

App marketplace services 

The Apple App Store and Google Play Store are the most significant app marketplaces in Australia. For developers to reach customers, they must comply with the relevant terms of service, including restrictions on the use of alternative in-app payment systems and strict terms of access. These app marketplaces are either mandatory to use or have entrenched use on the relevant mobile operating system (OS) in Australia. The ACCC found the importance of app marketplaces for developers, and Apple and Google’s dominance in mobile OS, gives these providers market power in mobile app distribution in Australia, and that it is likely that this market power is significant.   

App marketplaces have been a focus of international regulation, with both Japan and South Korea implementing specific regulation, and the European Union designating relevant app marketplace providers as part of the Digital Markets Act. Anti-competitive conduct in the supply of app marketplaces has also been the subject of numerous investigations and court proceedings by regulators and the business users of platforms. During Treasury’s consultation in 2022, a number of concerns were raised by stakeholders, including a lack of options for in-app payments, and issues with the app review process. 

Ad tech services 

Advertisers and publishers use technology services called ‘ad tech services’ to facilitate the buying and selling of digital display advertising through open display channels. Google is a major supplier of ad tech services in Australia, with products including Google Ads and Google Ad Manager. The ACCC completed the Ad Tech Inquiry in 2021, making a number of findings and recommendations related to the supply of ad tech services. 

Many Australian businesses, including small businesses, depend on the ad tech supply chain to sell advertising space online (publishers) and to purchase advertising space to target potential customers (advertisers). However, the ACCC found that there is a lack of transparency in the supply chain, and that Google’s vertical integration and strength in ad tech services has allowed it to engage in a range of conduct which has lessened competition over time and  entrenched its dominant position. Multiple international jurisdictions have also initiated investigations or court proceedings against Google in respect of alleged anti-competitive conduct in its supply of ad tech services. 

Social media services 

Social media platforms provide important services for all Australians and are key intermediaries for businesses and advertisers to reach consumers.   Significant concentration in this market can increase the risk of conduct that harms competition and consumers. Meta (through its Facebook and Instagram platforms) is the most significant and widely used supplier of social media services in Australia.  The ACCC found that Meta has significant market power in social media, and relatedly, has a strong position among social media platforms for display advertising services on closed channels.   Limited competition in the supply of social media services may result in consumers accepting terms and conditions that result in excessive data collection and use, which in turn provides dominant platforms with significant competitive advantages from its accumulation of data. 

With respect to closed channel advertising, the ACCC’s DPSI March 2023 interim report found some social media platforms do not offer advertisers sufficiently transparent or verifiable information about the performance of their advertisements. This can increase advertisers’ costs, which are ultimately passed on to consumers. Various issues in closed channel display advertising, such as a lack of transparency, price increases and poor customer service, were raised in Treasury’s consultation. Multiple international competition authorities have issued fines, investigations, or initiated proceedings against Meta in respect of alleged anti-competitive conduct in the supply of social media services, including its data practices.  Ex ante regulation in Germany and the European Union have also targeted competition concerns in the supply of social media services

Art Prices

'Art in times of crisis' by Géraldine David, Yuexin Li, Kim Oosterlinck and Luc Renneboog in (2024) Economic History Review comments 

We trace the long-term performance of the UK art market across a broad set of crises: world wars, economic recessions, financial crises, inflationary periods, and changes in monetary policy. By means of digitalized historical auction archives, we construct art price indices from the early twentieth century onwards and disclose that annual art auction value grew, in real terms, more than seven-fold over this period. The arithmetic annual real return and risk amount to 3.6 per cent and 20.1 per cent, respectively. Art returns plummeted at the onset of wars, but turned positive in the second half of wars when they outperformed stocks, suggesting that art was seen as a safe haven in times of political turmoil. During wars, smaller – and thus more transportable – paintings obtained higher returns. Art returns are sensitive to economic and financial crises, with the largest slumps occurring during the Great Depression, oil crisis, recessions of the early 1980s and early 1990s, and the Great Recession. We also document changes in art preferences for paintings’ sizes, schools, liquid art, and artists’ nationalities across crises. Art enters a broad optimal asset portfolio both in non-crisis periods and during war times.

The authors state

In January 2021, Sandro Botticelli’s Young Man Holding a Roundel, one of the most significant portraits of any period within art history ever to appear at auction, was hammered at Sotheby’s New York at a record price of USD 80 million (approximately USD 92 million, including the commission). The artwork by the Renaissance painter was being sold by the estate of the late real estate billionaire Sheldon Solow, who had bought the painting at Christie’s London in 1982 for merely GBP 810000 (USD 1.1 million). Prior to its sale, doubts were raised about the willingness of global art collectors to invest in art amid the coronavirus disease 2019 (COVID-19) pandemic and considering the equity market’s high volatility. To stimulate demand from collectors and potential bidders, Sotheby’s spent 4 months on a marketing campaign, displaying the painting around the world. The result was a new auction record for a Botticelli painting. The hammer price was also the highest price paid for an Old Master since Leonardo da Vinci’s Salvator Mundi was sold for USD 450 million in 2017. This example suggests that considerably large returns can be obtained from artwork sales, even in times of crisis (in this case, a global pandemic). Even more surprisingly, Sotheby’s sales for 2021 surpassed USD 7.3 billion, the strongest total in the company’s 277-year history, and its counterpart, Christie’s, achieved similar annual sales of USD7.1 billion for 2021, the auction house’s third-highest total ever. 

In this paper, we ask whether art, in general, is a good investment during crises such as wartimes, economic recessions, or financial downturns, after digitalizing historical UK auction archives from the early twentieth century onwards. Despite the growing popularity of art as an alternative asset class, the role of art as a safe haven or an investment in times of crises has rarely been studied over the long term. This is mainly because of the lack of available art market data for long periods. An analysis of art performance in rare disasters is impeded by gaps in data that cause sample-selection problems, especially during the worst crises when data are more likely to be missing. We aim to resolve this limitation by manually collecting historical auction records from various (even handwritten) sources to investigate the long-term performance of art markets and their determinants from the early twentieth century onwards. The microlevel auction datasets enable us to estimate the prices and returns over the long run, including the most difficult periods (e.g. wars), whilst also providing us with cross-sectional details of the art market. We focus on the British art market, primarily based in London, which was a pivot market throughout the greater part of that century and continues to hold significance today. In contrast to art markets of other countries, the UK market maintained its dominance over our entire sample period. Before the Second World War, Paris held significance as a market, particularly for avant-garde movements, however, after the war, the market became much more locally oriented. Subsequently, the US art market, initially localized, began its ascent to become the principal centre for modern art in the 1960s. In comparison, the prominence of the Chinese art market is a relatively recent development, emerging in 2005. The focus on the UK art market guarantees that our analysis is conducted on a market that maintained prominence throughout the entire sample period. This centrality is further reflected by the closely aligned price levels between the UK and US markets in the final quarter of the twentieth century, signifying that the UK market authentically represents the international art market. The century is characterized by numerous crises, from political to economic and financial shocks, each of which may have impacted the risk and returns of the art market or its segments. Our rich datasets enable us to provide a detailed overview of the evolution of the British art market over more than a century, including the pre-war period, the First World War, the interwar period and Great Depression, the Second World War, the Bretton Woods period, and the post-Bretton Woods era. To the best of our knowledge, this study is the first to examine the performance and risk of art markets over a long time series with large cross-sectional detail, focusing on major crises. 

The development of the art market per se crucially depended on the emergence of mass demand and the evolution of mechanisms for selling works of art either directly by artists (or their representative galleries) or via intermediaries, such as dealers and auctioneers. During the past centuries, new art movements arose, first selling on the primary market through galleries and, subsequently, as demand grew, through the secondary market, composed of both a private market (through dealers) and a (public) auction market. In the second half of the fifteenth century, primary markets for paintings arose in places such as Bruges and Florence as a derivative of the market for commissioned artwork. As markets emerged in the sixteenth century with non-commissioned artwork on offer, dealers and agents emerged as specialized art professionals in, for instance, Antwerp, which grew to be one of the main European centres of art production. In the seventeenth century, art collecting became a more visible activity, and professional intermediaries, especially dealers, dominated the art market. Regular auctions of paintings were held by the Amsterdam Orphan Chamber in the early decades of the seventeenth century. The first auctions for which there remain printed catalogues with rules were held in London later that century. Whilst the seventeenth century was the era of the dealer, the eighteenth century was the era of the auctioneer.The most reputable auction houses, such as Sotheby’s (London) and Christie’s (London), were founded in 1744 and 1766, respectively. In the closing years of the eighteenth century, two other auction houses were founded in London: Bonham’s in 1793 and Phillips in 1796, and these businesses also survive to the present day. 

The art markets of the twentieth century were defined by the two world wars, the triumph of modern and contemporary art, the chase for record prices, and by the end of the century, the rise of the Internet. The growth of modern art markets reflects the culture of societies, but the evolution of art prices also follows the concentration of wealth and economic development. As such, the art market’s evolution has been closely associated with an increasing interest in art as an investment because of its dual nature. It not only yields an ‘aesthetic dividend’ derived from owning these ‘passion’ investments or collectibles, but is also expected to be a store of value and even yield positive real returns. Given the low correlation of alternative investments such as art with traditional financial assets (equities, bonds, commodities), investing in art can expand the efficient portfolio frontier. 

To investigate how art prices, returns, and volume evolve in acute crises and intermittent quiet periods, we follow the chronology usually adopted in economic history by distinguishing the following periods: the pre-First World War period (1907–13), the First World War (1914–8), the interwar period and Great Depression(1919–39), the Second World War (1939–45), the Bretton Woods period (1944–73), and the post-Bretton Woods era (1974 onwards), which includes the Great Recession (2008–10). We assess the relationships between the art market on the one hand, and on the other, macroeconomic indicators [e.g.changes in gross domestic product (GDP), national debt, inflation, exchange rates, term structure, and income inequality], financial markets (equity, bond, and treasury bill markets), and other alternative investment markets (e.g.gold and housing). We focus on crises and how art markets react specifically to wartime shocks, financial crises, and systemic troubles. Furthermore, we study the cross-sectional performance of art by price segment, liquidity, size, and artist nationality across crises. Finally, we investigate art’s role as an investment by assessing optimal portfolio allocations where art is included in and excluded from broad asset portfolios for non-crisis periods, economic and financial crises, and war times. 

We find that the annual real (geometric) return averages 3.6 per cent (1.6 per cent) and 8.0 per cent (5.8 per cent) in real and nominal terms, respectively, spanning more than a century (and starting from 1908). Except for the initial years of the First World War, returns consistently exceeded inflation. The art returns are highest in the Bretton Woods (1944–73) period, followed by a subsequent downturn. Generally, art demonstrates lower performance than both equities and bonds in terms of Sharpe Ratios. This trend is particularly evident during financial crises and economic recessions(the only exception is the Great Recession, where the art market exhibited greater resilience than the plunging stockmarket). Examining war periods, we find that art returns begin modestly but significantly improve mid-war (when the odds are turning). Subsequently ,they exceed the returns of investment alternatives. During these years, smaller and more portable artworks, as well as the highest-quality art (belonging to the highest price segment), command a premium. Notably, we find no significant relationship between economic cycles and the volume of art works offered in the auction market. Although higher prices may attract more volume, volume does not significantly collapse in recessions. The reason may be that part of the sales may be forced (triggered by the four Ds: disaster, debt, death, and divorce, of which the former two may be correlated with recessions).We also document that art enters an optimal portfolio of investments in equities, bonds, real estates, commodities, and gold in all periods, including the war years, but not in periods of financial and economic crises. The results suggest that art can be a safe haven in political crises (such as wartimes) but not during the financial crises and economic recessions. 

The rest of this paper is organized as follows. Section I reviews the literature, section II describes the methodology and data, section III documents the evolution of art prices since the early twentieth century, and section IV reports the empirical results on art returns and crises. Section V concludes.

Guidance

'Regulating Robo-Advisors in an Age of Generative Artificial Intelligence' by Daniel Schwarcz, Tom Baker and Kyle D Logue in (2025) Washington and Lee Law Review comments 

New generative Artificial Intelligence (AI) tools can increasingly engage in personalized, sustained and natural conversations with users. This technology has the capacity to reshape the financial services industry, making customized expert financial advice broadly available to consumers. However, AI’s ability to convincingly mimic human financial advisors also creates significant risks of large-scale financial misconduct. Which of these possibilities becomes reality will depend largely on the legal and regulatory rules governing “robo-advisors” that supply fully automated financial advice to consumers. This Article consequently critically examines this evolving regulatory landscape, arguing that current U.S. rules fail to adequately limit the risk that robo-advisors powered by generative AI will convince large numbers of consumers to purchase costly and inappropriate financial products and services. Drawing on general principles of consumer financial regulation and the EU’s recently enacted AI Act, the Article proposes addressing this deficiency through a dual regulatory approach: a licensing requirement for robo-advisors that use generative AI to help match consumers with financial products or services, and heightened ex post duties of care and loyalty for all robo-advisors. This framework seeks to appropriately balance the transformative potential of generative AI to deliver accessible financial advice with the risk that this emerging technology may significantly amplify the provision of conflicted or inaccurate advice.

Heller

'Hermann Heller’s critique of liberalism' by Michael A. Wilkinson in (2024) Jurisprudence comments 

Hermann Heller’s interwar polemic against the authoritarian liberals governing late Weimar just before the Nazi seizure of power has recently received significant attention. This should come as no surprise. The decade following the financial crisis of 2008 offered many echoes of the 1930s, notably with the exercise of executive and emergency powers in defence of economic liberalism and market rationality. And, as in the 1930s, there has also been a backlash against austerity and against liberalism itself, just as Heller had predicted in his own time. 

Heller’s critique of liberalism may seem intriguing, but essentially conjunctural, limited to an exceptional period, and from which we should be reluctant to draw more general conclusions. Similarly, it might be argued, the current doubts over neoliberalism should not call into question the broader commitment to liberal constitutionalism, but can and should be bracketed, so as not to throw out the baby of ‘political liberalism’ with the ‘neoliberal’ bathwater. The reluctance to draw general conclusions from Heller’s critique of authoritarian liberalism might be reinforced when it is noted that the target of his polemic was not only the Presidential Cabinets ruling Weimar by diktat and decree, but also the jurist who was advising them, Carl Schmitt. If this appears to call into doubt the orthodox view of Carl Schmitt as a thoroughgoing anti-liberal, Schmitt’s embrace of the ‘feudalist clique’ that effectively ‘put Hitler into power’ might be thought to have been entirely opportunistic. 

Schmitt’s attitude towards liberalism was more complicated than commonly presented. As a matter of political conviction, he viewed liberal relativism with disdain. But as a matter of economic orientation, he was ambivalent and even defensive of it. His attachment to the practice and ideology of economic liberalism – particularly the belief in protecting private property by a strong state – predated the turbulence of late Weimar. It was driven, and accentuated, by a fear of democracy and the parliamentary (as well as revolutionary) route to socialism. Schmitt was initially drawn to the liberal aspects of Weimar constitutionalism to the extent they might obstruct this route and help to preserve the status quo. 

Does Heller’s critique of liberalism mirror this view of Schmitt’s embrace; was it entirely conjunctural, shallow, and bracketed to the economic variety? The publication in English translation of Heller’s 1927 book Sovereignty: A Contribution to the Theory of Public and International Law (‘Sovereignty’), provided a renewed opportunity to tackle this question, as it presented a fuller account of Heller’s views on liberalism. In Sovereignty, the closest Heller comes to a decisive claim – in what is a short, abstract, and not always entirely lucid text –, is that, ultimately, sovereignty is an expression of the collective will, the ‘general will’ of the people.  In defending a resolutely political conception of sovereignty, Heller tried to restore a conception of the state explicitly traced back to Rousseau via Hegel, and which he thought was in danger of being eroded, particularly by liberal legal theorists such as Hans Kelsen. 

But Heller was also keenly aware, if less explicit, about the knot in this Rousseauvian conception, that is, the difficulty in forming a ‘general will’ in conditions of social heterogeneity, extreme levels of inequality and, in Heller’s own terms, the presence of class conflict. If it is the Rousseau of The Social Contract that Heller tried to retrieve in Sovereignty, it is the Rousseau of the Second Discourse, the Discourse on the Origins of Inequality, that captures the tension in Heller’s comprehensive worldview. Both ‘Rousseaus’ can be used to target liberalism, but in distinct ways, the Social Contract by insisting on a conception of the common good that transcends individual interest and the Second Discourse by critiquing the egoism of modern man and his inflamed sense of amour propre in commercial society. It is only in combination that we can make full sense of Heller’s constitutional theory, integrating his abstract reflections on sovereignty with his situational commentary on the fate of the Weimar Republic, where his substantive views on the need for social equality – alluded to but underdeveloped in Sovereignty – are clearly expressed. 

Just as Rousseau’s two discourses sit uneasily with one another, Heller faces a bind. On the one hand, Heller argues that social homogeneity is required for popular sovereignty to channel a genuinely democratic expression of the general will. Unlike some of the radicals on his left, Heller defended the possibility of achieving this goal in the constitutional circumstances of the Weimar Republic. As such, he belonged to a socialist tradition that is often labelled ‘reformist’ rather than revolutionary, heir to figures such as Ferdinand Lassalle and Eduard Bernstein, founding fathers of German social democracy. But Heller also notes that such a formation of a general will was practically improbable in the society of his day due to its social condition. 

If this all suggests that Heller’s critique of liberalism was situational and contingent, a close reading of Sovereignty shows that Heller was an unforgiving critic of liberalism in general. In that work, Heller offers a complete rejection of the liberal worldview, from a philosophical and historical perspective as well as a political and economic one. This is clear not only by how much he seeks to retrieve Rousseau and Hegel, but how often he takes aim at Kelsen – at Kelsen’s rationalism, legalism, normativism, at his basic errors of jurisprudential methodology, and, above all, at his liberalism. 

Even though fragile in the concrete political order of the Weimar Republic, Heller viewed liberalism as intellectually strong in Germany, and as responsible for the erosion of the idea of popular sovereignty. This loss mattered not because it buried an interesting relic in the history of ideas but because it unsettled the ground on which any legitimate polity rests. In contemporary vernacular, liberalism had ‘hollowed out’ the state, undermining the relationship between rulers and ruled in its insistence on individualism and private rights. 

Although defending the Weimar Republic at every step until the last, Heller equivocated in his prognosis of the likely consequences of its deteriorating social situation. In the conjunctural politics of late Weimar, Heller had initially advocated a ‘policy of toleration’ towards Chancellor Brüning’s authoritarian regime, neglecting his own democratic convictions for fear of the greater evil of National Socialism. It was only at the end point of the Weimar Republic, in one of his final publications, that Heller changed his position, identifying the regime as based on a capitalist economy, and predicting the bourgeoisie would turn to increasingly authoritarian solutions to maintain order. Heller went into exile after the Nazi seizure of power in January 1933 and died in Madrid in November of that year. But he had already predicted that the bourgeoisie would turn to a cult of violence and an irrational appeal to a strong leader, reducing the masses to a ‘radical nothing’. With the Nazi seizure of power, authoritarian liberalism would be replaced by a movement of totalitarian dictatorship that superseded ideas of the state and of sovereignty altogether. 

This fuller overview enables us to bring together into one arc Heller’s critique of liberalism in the immediate conjuncture and over the long durée. For Heller, liberalism’s tendency to move towards authoritarianism was not contingent, it was profound: both warp and weft of the erosion and ultimate breakdown of the democratic project of popular sovereignty across the preceding century. 

The paper proceeds as follows. First, Heller’s attempt to recover the concept of popular sovereignty is laid out, with Heller arguing for its juristic significance against both Kelsen’s legal normativism and Schmitt’s political decisionism. Heller insists on sovereignty’s connection to the ‘general will’ of the people, in the fashion of Rousseau and Hegel, and argues that in a democracy this must involve a dialectical formation of political unity and material equality. In a second part, we turn to the concrete political and constitutional context, with Heller refusing the revolutionary path to socialism urged by those on his left, contending that equality could be achieved in the ‘neutral state’ of the Weimar Republic, and even advocating a policy of toleration to the suspension of parliamentary democracy. In part three, we then examine a shift in Heller’s diagnosis. Towards the end of the Republic (and of his own life), Heller identifies Weimar as a capitalist state and predicts that the bourgeoisie will increasingly turn to authoritarianism and ultimately to the fascist movement to protect its material interests, a transition that would bring an end to the Rousseau-Hegel tradition of state theory and sovereignty.

Personality

'Generative Agent Simulations of 1,000 People' (https://arxiv.org/pdf/2411.10109) by Joon Sung Park, Carolyn Q Zou, Aaron Shaw, Benjamin Mako Hill, Carrie Cai, Meredith Ringel Morris, Robb Willer, Percy Liang and Michael S Bernstein is hyped by MIT Technology Review as

Imagine sitting down with an AI model for a spoken two-hour interview. A friendly voice guides you through a conversation that ranges from your childhood, your formative memories, and your career to your thoughts on immigration policy. Not long after, a virtual replica of you is able to embody your values and preferences with stunning accuracy. That’s now possible. 

The actual paper states 

 The promise of human behavioral simulation—general-purpose computational agents that replicate human behavior across domains—could enable broad applications in policymaking and social science. We present a novel agent architecture that simulates the attitudes and behaviors of 1,052 real individuals—applying large language models to qualitative interviews about their lives, then measuring how well these agents replicate the attitudes and behaviors of the individuals that they represent. The generative agents replicate participants' responses on the General Social Survey 85% as accurately as participants replicate their own answers two weeks later, and perform comparably in predicting personality traits and outcomes in experimental replications. Our architecture reduces accuracy biases across racial and ideological groups compared to agents given demographic descriptions. This work provides a foundation for new tools that can help investigate individual and collective behavior. ... 

 

General-purpose simulation of human attitudes and behavior—where each simulated person can engage across a range of social, political, or informational contexts—could enable a laboratory for researchers to test a broad set of interventions and theories (1-3). How might, for instance, a diverse set of individuals respond to new public health policies and messages, react to product launches, or respond to major shocks? When simulated individuals are combined into collectives, these simulations could help pilot interventions, develop complex theories capturing nuanced causal and contextual interactions, and expand our understanding of structures like institutions and networks across domains such as economics (4), sociology (2), organizations (5), and political science (6). 

 

Simulations define models of individuals that are referred to as agents (7). Traditional agent architectures typically rely on manually specified behaviors, as seen in agent-based models (1, 8, 9), game theory (10), and discrete choice models (11), prioritizing interpretability at the cost of restricting agents to narrow contexts and oversimplifying the contingencies of real human behavior (3, 4). Generative artificial intelligence (AI) models, particularly large language models (LLMs) that encapsulate broad knowledge of human behavior (12-15), offer a different opportunity: constructing an architecture that can accurately simulate behavior across many contexts. However, such an approach needs to avoid flattening agents into demographic stereotypes, and measurement needs to advance beyond replication success or failure on average treatment effects (16-19). 

 

We present a generative agent architecture that simulates more than 1,000 real individuals using two-hour qualitative interviews. The architecture combines these interviews with a large language model to replicate individuals' attitudes and behaviors. By anchoring on individuals, we can measure accuracy by comparing simulated attitudes and behaviors to the actual attitudes and behaviors. We benchmark these agents using canonical social science measures such as the General Social Survey (GSS; 20), the Big Five Personality Inventory (21), five well-known behavioral economic games (e.g., the dictator game, a public goods game) (22-25), and five social science experiments with control and treatment conditions that we sampled from a recent large-scale replication effort (26-31). To support further research while protecting participant privacy, we provide a two-pronged access system to the resulting agent bank: open access to aggregated responses on fixed tasks for general research use, and restricted access to individual responses on open tasks for researchers following a review process, ensuring the agents are accessible while minimizing risks associated with the source interviews. ... 

 

To create simulations that better reflect the myriad, often idiosyncratic, factors that influence individuals' attitudes, beliefs, and behaviors, we turn to in-depth interviews—a method that previous work on predicting human life outcomes has employed to capture insights beyond what can be obtained through traditional surveys and demographic instruments (32). In-depth interviews, which combine pre-specified questions with adaptive follow-up questions based on respondents' answers, are a foundational social science method with several advantages over more structured data collection techniques (33, 34). While surveys with closed-ended questions and predefined response categories are valuable for well-powered quantitative analysis and hypothesis testing, semi-structured interviews offer distinct benefits for gaining idiographic knowledge about individuals. Most notably, they give interviewees more freedom to highlight what they find important, ultimately shaping what is measured.