RE: Property Rights
Fri, 28 May 1999 10:09:04 -0700

Billy Brown, <>, writes:
> wrote:
> > 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.
> You seem to be using a very limited definition of 'private property'. Water
> rights can be a form of private property. So can broadcasting rights,
> intellectual property, stock options, futures contracts, and many other
> abstract constructs.
> The key feature of private property is that it allows individuals to decide
> what is done with a resource. Any system in which individuals are allowed
> to freely own and trade a resource is a private property system.

You can describe many of these arrangements in terms of private property, where the property is abstract. We had a debate about this recently in which some people disagreed with the legitimacy of such forms of abstract property, and argued that "broadcast rights", for example, were a taking of their right to emit EM radiation on their own property using their own equipment.

Another questionable example is air pollution rights. This is something that Los Angeles has experimented with. Polluters can trade the rights to emit a certain amount of pollution per year. This is efficient in terms of allocating resources, given that the desired level of pollution is set. But not every person in Los Angeles was consulted about the total amount of pollution rights in existence. Some people may feel that this pseudo private property arrangement is actually a coercive tort against their health. Because clean air is a public good, they cannot effectivelly take part in the pollution market. So here we have the trappings of a private property solution, but one which by some standards imposes coercion on third parties.

The point is that private property is a matter of social definition. Society decides what things to treat as private property based on utilitarian grounds. As we move away from strict ownership of individual objects as property, we gain increasing flexibility to solve problems. But people will differ about when we have crossed a line and moved away from a free market approach.

> BTW - I've seen pretty convincing evidence that most of the water problems
> in Southern California could be alleviated simply by creating real water
> rights. The major problem right now is that no one is allowed to buy or
> sell their water rights without a special OK from the government, which
> means that water must be allocated by bureaucratic decree. Replace the
> water regulation boards with a water rights market, and water use would
> become both more efficient and more closely aligned with the desires of the
> people using it.

You may well be correct.

> > 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.
> When was the last time this list made a decision about anything? It is a
> recreational activity that makes no decisions, allocates no resources, and
> produces nothing of monetary value. Of course we don't need property rights
> or a formal market to make it work - we aren't doing any of the things that
> those institutions are designed to facilitate.

You seem to be using a very limited definition of monetary value (to echo your comment above). This list does have value to its participants, and presumably we would be willing to pay for access to this form of entertainment if it were not free.

In a sense your reasoning is circular. We don't pay anything for the opportunity to participate in this discussion, because it is free. It is free because we aren't using property rights to allocate the resources in question. But because it is (monetarily) free, you say it has no monetary value. By this reasoning any activity which is organized outside of property rights will have no monetary value. Hence any non-property-rights activity is excluded from economic consideration by definition. The result is that property rights are the only way to organize economic activity.

In fact, I believe that not only does this list have economic significance and value, but that in the future this kind of free sharing of information will be increasingly important and common. Entertainment is going to be an ever growing part of the economy. Already the music, tv, and movie business is huge. Online sharing of information, both discussions like this and sharing of music and other entertainment, is where people are going to be spending their leisure resources in the future.

How can you say that we allocate no resources here? We spend hours reading this list, engaging in discussion, doing research, composing responses. This requires the most fundamental resource of all, our time, attention, and energy. We make the decision to spend our time doing this rather than other leisure activities because it brings us value. Because the resource allocation is voluntary and mutual is no reason to disregard it.

> Again, having a private property system does not mean that all human
> activities must be mediated by property rights and markets. It simply means
> that individuals are free to use such methods wherever they wish to do so.
> I can give away my thoughts if I wish to do so, or I can try to convince
> people to pay for them. As long as I am the one who makes the decision, our
> system is based on private property.
> The collectivist alternative would be to have someone else decide how we run
> the list. The socialist middle ground would be to leave some decisions to
> us, and have others (usually the 'more important' ones) made by others.

I disagree with where you are drawing the line between private property and collectivism. You are assuming that only under private property do people make their own decisions about how to do things. I would say instead that this is a characteristic of a voluntary system, one in which people participate without coercion.

I think we can agree that voluntarism is the central feature by which a system should be ethically judged. If people are compelled to participate under threat of punishment, this is not acceptable. Everyone involved should participate freely and voluntarily. This does not imply that they are using private property to manage their resources.

The distinction I draw between private property and other systems is whether the resources in question are owned by individuals, and whether some kind of payment is associated with exchanging resources. The payment may be in the form of a barter system, where two people agree on an exchange of property they value; it may be in the form of a monetary system, where there is some general-purpose commodity which they will accept in exchange for giving up their property; it may be in the form of an accounting system, where records keep track of how much each person has owing to them.

In a cooperative or collective system, these features are absent. People contribute without expecting immediate or propertional recompense. Of course, over time, they must expect to get more out of the system than they give, otherwise they would not participate. But there is no quid pro quo, nobody keeping track or keeping score of how much is owed to/by each person.

This is exactly the kind of system we use here to manage the time and resources we contribute to our discussion. Nobody is getting paid or paying. But we each feel that what we get out of the conversation is worth what we put into it.

> > 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.
> If you want to make a serious proposal out of this, you need to address the
> following questions:
> 1) Who decides how the resources of the group are used? This covers
> everything from where the station is set up to what kind of icing goes on
> the desert cakes.
> 2) Who decides what personal resources each member of the group will enjoy?
> Obviously, this is closely related to #1.
> 3) What happens when someone wants something the above mechanisms don't
> allow them to have? Don't tell me it won't happen - the only way to prevent
> it is to have infinite resources, and even nanotech can't give you that.
> 4) If a new member joins the group, what happens to their property?
> 5) If someone leaves the group, what do they get to take with them?

It's hard to answer these questions with any degree of specificity. Any community will evolve their own answers. Do you agree that voluntary communities exist which do have answers to these questions? Do you agree that such communities include corporations, extended families, communes, kibbutzim, and other examples?

> Until you address these issues, we don't have a concrete enough proposal to
> examine in any realistic fashion.

On the contrary, we are surrounded with such communities! There is a whole economics literature on the theory of the firm, which examines whether and when a market/property system is more efficient than a voluntary cooperative system for allocating internal resources.

The existence of corporations is something of a challenge to traditional economics. If a property/market system is so good, why is it not used within companies, large and small? (Some do use it; garage mechanics often own their own tools, and some businesses use independent contractors rather than employees.) There is a great deal of literature looking into the tradeoffs which exist.

If you work for a company, you can answer your five questions yourself. Just consider how things are organized within the business where you work.

> > 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.
> I refer you to the same list of questions. If you answer a question with
> "The computers decide.", then you need to explain who programs the computers
> and how they make their decisions.

I don't really know if democracy by computer could work. Some people might want to try it. The recent novel EarthWeb by Marc Stiegler showed another model for decision making, based on Idea Futures. I expect that we will see many experiments along these lines.

> > 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.
> Even the most socialist of economists would not make this claim, and for
> good reasons. It is not even remotely feasible to model a modern economy
> with existing computer systems - the volume of data that you would have to
> process is far larger than even the most massive computer system could hope
> to handle. I can go into detail if you want.

This may be correct. As you say later, the biggest problem is getting access to people's preferences. This is not only a problem of data volume, but also of incentive compatibility - whether people will be honest.

> The basis of a market system is the idea that individuals should be allowed
> to set up whatever arrangements they find mutually agreeable. In most cases
> they will choose to stick with property and markets, but if a group decides
> to pool their property into some kind of communal arrangement that is
> perfectly OK.

So, what do we disagree about? Is it purely a matter of definitions? Do you call "private property" any voluntary arrangement, even the most leftist, anti-capitalist, Marxist commune you can imagine? In my view that stretches the phrase beyond reasonable boundaries.

Beyond definitions, I think there is still ground to discuss the degree to which voluntary but not property based interactions will be used in the future. The main question in my mind is, will this occur to a greater extent than now? Or, perhaps, will the opposite occur, with computers reducing the costs of establishing markets in areas where they are not practical now?

I have been surprised and impressed by the growth of the net, this incredible voluntary community. People put tremendous resources into their online activities, making web pages, engaging in discussions, sharing resources. And all this is done without payment in other than intangibles like reputation.

This is starting to change, perhaps; more and more I run into sites begging me to click on their banners to bring them a few cents. Will this become the norm? With HTML email will we start to see signatures with hot links that will offer payment to the poster? It will be very interesting to see how it works out.

> What some of us consider "evil" is when some outside agency gains the power
> to dictate to individuals how they must handle their affairs.

I don't think it is so simple. If the individuals in question voluntarily agreed to the arrangement (as when I agree to allow my boss to dictate how I must handle my work affairs), then it is not evil. If I join a commune and agree to allow the community to dictate how I must handle my obligations to them, it is not evil. The essential aspect in my view is the voluntary nature of the arrangement.

> > 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.
> I was referring to Russia under communism.

I may have misunderstood your point, when you originally wrote:

> 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.

So you meant that Russia under communism recently demonstrated that an economy without markets has its hands full just keeping people fed. I'm not sure this is the case, although I don't know exactly what time frame you had in mind (the 1980s?). I have mostly heard of Russia having problems with food within the last couple of years.