RE: Property Rights
Mon, 24 May 1999 19:17:15 -0700

Billy Brown, <>, writes:
> wrote:
> > I say there are situations where other methods than private property work
> > best for organizing the use of resources.
> <insert assorted examples>
> Yes, there are situations in which a strict adherence to the idea of
> individual ownership of everything would not work. However, 'private
> property' does not imply that everything must be owned by an individual.
> Some resources have little or no economic significance, and thus are not
> worth the bother of keeping track of. So, regardless of our economic
> system, no one will worry about who owns which ant or which cc of air
> because no one cares.

What about water? That is something which people do care very much about, especially here in southern California. Tremendous fortunes have been won and lost fighting over water. But what the fight is over are water rights, an abstract form of property which involves the right to draw a certain amount of water at certain times of year. No one tries to keep track of individual parcels of water simply because it is impractical due to its fluid nature.

It's not that water is economically insignificant, it's that society has to set up organizational structures which are appropriate to solving the problem at hand. Water rights make more sense than ownership of parcels of water, when dealing with rivers. We have to move away from a literal application of property rights in pieces of matter, to a more abstract form.

The same thing happens with fresh air. Air pollution is economically significant. If the nature of air permitted it, property rights in air would be one way to address this problem. But nature forces us to use different methods to deal with air pollution, some of which I listed earlier. One such method does use an abstract form of property, in the form of pollution rights. This has some advantages over torts and regulation, and some disadvantages as well.

The point in each of these cases is that we must address the problem by the most effective tool. Wearing ideological blinders which insist that Property Rights decreed by Natural Law are the One Way will not allow us to solve problems effectively. Demonizing those who suggest alternatives, calling them "evil" and "looters", is counterproductive (not that you have done so, but others in this community have).

> Voluntary collectives can sometimes work, but only for very small groups
> with very strong social bonds. As the collective grows in size the
> connection between an individual's efforts and the rewards he receives
> becomes more tenuous, and the ability of the group to inspire contributions
> via social pressure diminishes. It also becomes more and more difficult for
> even an honest, hard-working individual to make an optimal contribution to
> the group, because there is no clear source of information to tell him how
> he should spend his time.

It's surprising that you should say this, when here and now we are engaged in a voluntary collective enterprise, in our participation on this mailing list. A very small group, yes, in a way; some dozens of active posters, probably a few hundred who listen in. But strong social bonds? Hardly. Most of us have never met, and when people disappear from the list, few people even notice.

Why do you contribute here? Who pays you for your time and energy? Your contributions are valuable, and I think many of us have profited by your insights. What do we offer in return? Only our own thoughts and ideas, which hopefully will be of some value to you. There is no quid pro quo here; nobody is keeping score.

I suspect that such voluntary relationships will become even more common in the future. As we move into an information economy, what we will be consuming and producing will be bits, not atoms. Already my own children spend almost every leisure hour online, as do I. Because of the many problems with controlling intellectual property in the information age, we may well see people become more motivated by intangible rewards than by monetary payment. The open source movement is just one example of this, as is the underground warez and music/video trade. Reputation becomes the reward, having a name and persona which is recognized and respected.

> Involuntary collectives, of course, have a dismal track record regardless of
> their size. Even in an individual family, where the forces of corruption
> are at an absolute minimum and the motivation for the rulers to be
> benevolent is maximized, those who are ruled are rarely happy about the
> situation.

Consider, perhaps, a marriage rather than a family. Usually those are not organized as ruler and ruled. There are conflicts of course, but most people find it more convenient to control most of their resources communally. And they are in fact happy with this arrangement.

> But perhaps I assume too much. Are you suggesting that we should be looking
> for ways to replace private property with collective ownership of some kind,
> or merely pointing out that there are occasional situations where the full
> private property treatment is more trouble than it is worth?

I do think that there will be more opportunities in the future for organization around collective ownership. There will also be opportunities to use private property at a scale we do not see today, like the "libertarian space station" where even the air is owned. I expect that there will be many experiments along these lines.

I think it was Mike Lorrey who posted a few days ago about Pacific islanders who supposedly had societies which didn't use property rights. He said that their lives were so easy, and the necessities so abundant, that there was plenty for all and so their culture went in other directions.

I don't know if this is anthropologically accurate, but it does seem that it could apply to an island (space station/asteroid) culture of the future. Self-contained, self-sufficient, relatively small, with the technology and resources to meet all the basic physical needs of food, shelter, etc. Individuals who are unhappy with such a society could leave and strike off on their own. In such a situation people could focus their attention on other goals than acquiring property. There would be no need for property rights in most cases. Conflicts would be resolved socially. Productive people would be rewarded by the respect and admiration of others.

Another way in which the future could be more cooperative would be by using computers to mediate decision making. Again, keep in mind that this would be done in the context of a voluntary community where everyone has agreed to use and be bound by this mechanism. One problem with collective control in the past has been corruption and greed on the part of those entrusted with control. Today it would be possible to use computer networks to allow democracy at a much larger scale than in the past. Online voting, especially combined with modern economic protocols like preference voting and auction based systems, can allow for group decision making without the possibility of corrupt rulers, because there are no rulers to corrupt. The effect of these technologies is to raise the threshold for community size in which cooperative relationships can be effective.

> > Even in the context of human creations, it is often the case that
> > property rights are not the most efficient means of deciding what will
> > be done with them. Families do not use property rights to make many
> > of their resource allocation decisions, and neither do corporations,
> > and neither do voluntary communities like our own. It could be done; we
> > could pay for each posting, and every object in your home could be owned
> > by a specific person. But we don't do that, because it is
> > not efficient.
> In all of these cases those who actually own the property are the ones who
> make the decisions about how it will be used - directly in the case of small
> groups like a family, and indirectly in larger organizations. I think what
> you are really trying to say here is that they don't use markets to make
> their decisions. That is true, and in some of these cases it is a good
> thing, but in others it isn't.

It is true that, in the case of a family, property rights are used to distinguish the family's property versus that of others in the outside world, at least in this country. Property rights prevent others from coming in and using those resources. At a larger scale, national governments with their military forces prevent other nations from coming in and forcibly taking and using the resources of the family.

These global issues are not relevant to the question of when and whether property rights are useful. The fact that the family exists in a larger scheme of property rights, which itself exists in a larger scheme of military forces holding each other at bay, does not tell us anything about whether property rights are useful and relevant within the family.

> A free market is a mechanism that a large group of people to efficiently
> allocate resources in a complex environment. It uses price signals to allow
> each person to locally optimize their own behavior, and over time these same
> signals will lead the entire system to allocate resources in a way that
> matches the desires of all of its participants as closely as is possible.
> No one ever needs to understand what is happening for this process to work,
> and no one ever decides what the ultimate goal will be.

We have the computing power to model the economy at a much finer scale than in the past. If it was just a matter of running an economy, making routine decisions, responding to shortages, allocating resources, we could probably do a good job with the computing resources which exist today. There are only 6 billion people in the world, and most people are price takers, so the task any one of them faces is not that difficult. If 6 billion people *voluntarily* decided to set up an economic system which used computers to allocate resources rather than property rights, I don't think it is true any longer that the computers would not be up to the job, although it would have been true in the past. And with computer power increasing exponentially, the argument against central planning based on lack of computer resources becomes ever weaker.

> Now, running a market involves certain costs. It takes effort to establish
> the market, effort to buy and sell things, etc. This inevitably means that
> for very small systems it is not worthwhile to establish a market. If a
> group is small enough that its members can simply discuss their situation
> and agree on their goals, there is no need for a more elaborate structure.
> If a system is simple enough that a single human mind can understand its
> behavior, appointing a manager makes more sense than establishing a market.
> If a resource has so little economic significance that it would cost more
> that it is worth to buy and sell it, then there is no reason to create a
> market for it.

What about Natural Law? Is it "evil" not to create a market in these situations? (This comment is directed at those who believe in such things.)

> However, this does not mean that there is never a need for markets. In
> fact, the opposite is true. In small organizations an authoritarian or
> collective system can work well, but as the scale increases they become
> increasingly ineffective. Central planning on the scale of a large
> corporation is very inefficient, which is why there is such a strong
> movement towards decentralized decision-making today. On the scale of a
> modern economy it is even worse - an economy without markets has its hands
> full just keeping people fed, as the Russians recently demonstrated.

Russia is mired in corruption. They have not succeeded any better with markets than without them. You can't build a society out of people who believe that the only way to survive is by breaking the rules.

> So, I would say that the best approach is to make free markets and private
> property the default assumption for all economic activity.

Economists will tell you that virtually all activities are economic.

What does "default assumption" mean in this context? Do you mean that most marriages should by default assume that all property will be individually owned? Should most businesses start off with the default assumption that each lamp and pencil will be owned by one employee?

I don't think you can prescribe a default assumption for society in this way. The only default is that people need to choose the organizational structure which is most appropriate to the job at hand. In practice they should choose by default that structure which others have successfully used in similar circumstances. That is the best default assumption I could recommend for them.

> If individuals
> find it advantageous to voluntarily pool their resources into small
> collectives from time to time, this system would leave them free to do so.
> They would also be free to form any other sort of organization they wish,
> which would presumably lead to the best overall results that we can hope
> for.

We can certainly agree on this.