Why Property Rights? 12:29
Brennan considers property rights: what they are, what justifies them, and what sorts of social problems they help avoid.
J. Bradford DeLong and Martha L. Olney, Macroeconomics
Brennan: We’ve been talking about how rights work and why they might be important in the abstract. We haven’t really talked so much about which rights we have and why so let’s start by talking about then property rights. How do property rights work and what value do they have if any? So if you think about it in the abstract what a property right is, is a bundle of many different rights that often come together. So if I say that this is my watch, what I mean is a number of different things this. In particular, I have a right to exclude other people from interacting with this piece of the universe, this one small part of the universe, this watch, and none of you can interact with it without my permission. So the central right is a right of exclusion but property rights usually include other rights as well: a right to use something without asking permission of others, a right to modify or destroy things. I could just destroy this watch if I felt like it, I’d be allowed to, a right to sell something or to give it away or to transfer the ownership to others, a right to rent it or sell it, make money off of it, and so forth. Now that’s what a property right is in the abstract. We can own different things in different ways. So if you own a cat, you can’t do everything to the cat that you can do to say your watch. I have a pool club membership and that comes with certain restricted covenants so I’m not allowed to just sell that for any price that I want, I can’t transfer it to anybody I want. I can only transfer it to people that live in my neighborhood. So some property rights are more extensive than others. We can own things in different ways. But in general, that’s what property right is. It’s the right to exclude others from interacting with something plus some other rights like the right to use, modify, and destroy.
So why should we put up with this? We have these conventions, these rules about property, why do we live with them in the first place? Are they a good idea? Not everyone thinks so. So here’s a quote from Jean-Jacques Rousseau on this very point. He says the first person who have enclosed a plot of ground thought of saying “This is mine,” and found people simple enough to believe him was the true founder of civil society. What crimes, wars, murders, what miseries and horrors would the human race have been spaced by someone who pulling up the stakes or filling in the ditch had cried out to his fellow humans, “Beware of listening to this imposter! You are lost if you forget that the fruits are everyone’s and the Earth is no one’s.” So Rousseau, not a big fan of property. I mean what war, all the disasters that have followed in human history, we could have avoided those if we just hadn’t invented private. Just get rid of it. Is he right? Well even if we disagree with Rousseau, he’s got point. There’s something kind of puzzling about property which is if I say “This is mine. You can’t interact with it,” why should you just go on with that? Why don’t you just say, “No, that’s everybody’s? Anyone can use that.” Why do I get to exclude people from some chunks of universe? So think of it this way: The starting point before anyone ever owned anything, everything was unowned. No one called anything. It wasn’t collectively unowned, just was unowned. No one had a claim to it anywhere. And in a sense, you had a lot of freedom there because you had that freedom to go anywhere that you want, whatever people around. They could just go wherever they want. They weren’t excluded from any parts of the world. You could travel anywhere, you could use anything, you could interact with anything. You could grab an apple from any tree you happen to see. Seems pretty great. So then someone comes along, puts up a fence, and says, “This plot of land here, this is mine. None of you can go here anymore. Yesterday, you were all free to walk there, now you’re not. And not only that. I take it you have an enforceable obligation not to step on this plot of land that I put a fence around. And what’s more, if I see you doing it, I might beat you up.” Well Rousseau seems he has a point. What could possibly justify someone doing that? We used to be free to go everywhere and now there’s this chunk of land here you’re not free to go there.
So John Locke was thinking about this as well and he said well, maybe we could have a rule that says you could acquire a property and resources provided you leave enough and as good for others. So you interact with the resource in some way you were productively on it, you make the resource a little bit more valuable, you use your labor on that resource, and then you can acquire that resource to be your own provided you leave enough and as good for others. But many people have reacted to that by saying, “That’s an impossible standard to satisfy” because let’s say let’s take a plot of land. Well it’s not like more land is being created like you imagine that this table is all the land on Earth, if I take a couple acres and say “This is mine,” well I’ve just reduced the total amount of land for everybody else by a few acres. And then next person comes along and takes a few acres and says, “This is mine,” and now we’re out ten acres or so and there’s very little new land being created, small amount of rocks in Hawaii and that’s about it. So it seems like every time someone privatizes things and acquires it for himself or herself, they’re just reducing the amount of stuff that’s available for other people. And it seems like come being a latecomer to the property game means you’re in big trouble. You show up and there’s nothing for you. All the land has been taken and you’re just going to starve to death and die. So that seems to be the complaint about private property. It seems like Locke’s standard, leave enough and as good for others, can’t possibly be satisfied. That’s probably a mistake actually. And Locke I think realized this as well.
So a good way of thinking about this is that property rights regimes actually leave more and better for others. What we’re thinking about that is this: I own some land in Virginia. I’m much better off though than the people who originally got there. So you might imagine it as some people got to Virginia first, they snatched up all the land, and they were really rich and happy, and then the latecomers like me get nothing. That’s not actually true. I’m actually much better off than they were. Why? Because part of what happens when you privatize things is you allow people to work on that stuff more productively. Locke himself said this. He says a bit of land that’s sort of left in the commons that no one’s using, that might produce very small amounts of food but if you allow someone to privatize that and farm on it, he might increase the supply of the stock of food coming out of it by a factor of ten thousand. And then what he’ll do is trade that with other people and then everyone will be much better off. And that’s actually true. Our standard of living is much, much higher than people who came before us. I mean a good way of thinking about that from an economic perspective is throughout human history, the typical person worldwide lived on less than a dollar a day. As of 1 AD, if you look at say Brad DeLong’s economic textbook on this, per capita income in current dollar is about 250 dollars at most. The average person worldwide, a typical person worldwide is living with the UN now considers extreme poverty. But now we’re much richer. Why? Because we privatized things and traded. So one way of thinking about that is Locke is saying that when we privatize things and start trading back and forth, we become so much more productive and the amount of stuff that we can own is much higher. So it’s true that by originally appropriating some land or some resources, we reduced the stock of resources that can originally be appropriated, it doesn’t follow from that that we reduced the stock of what can be own. If we’re among the richest 1% of people alive today and easily the richest 1% of people that have ever lived because we benefit from being latecomers to the game, not the first people. Early settlers don’t do that well. It’s people who come later who do better. The United States right now produces more than the entire world produced in 1950 just by itself. So the amount of stuff that we have is higher. What’s more, it’s not just about taking things out of the commons, we can kind of compensate people by giving them more stuff. Leaving in the commons might not be enough to leave enough and as good for others. So Locke says you can appropriate things as long as you leave enough and as good for others. Well it might be that deciding not to appropriate things actually means that people don’t get enough.
So there’s this concept in economics called the tragedy of the commons. The worry here is that sometimes when you leave things in the commons, unowned, unappropriated, and nobody has ownership of it, what happens is it gets destroyed. A way of imagining that is suppose we’re all shepherd and this is a common pasture. And we each own our own sheep but the pasture is not owned. Well the pasture is going to have something called the carrying capacity which is the amount that you can use that pasture in a given way before it starts to be destroyed. It is that when you put a certain number of sheep, the grass will grow back and you can keep getting value out of the pasture. But if you put on too many sheep, at some point they’re going to turn the pasture to dust because they’re going to overgraze. So suppose we’re right at carrying capacity, right now at it and we each have a certain number of sheep. And I decide to add an extra sheep. Well what will probably happen is now there’s not enough grass for all the sheep to be fully fed, the sheep won’t be worth quite as much but maybe I’ll benefit from that because I’ll have eleven kind of mostly fed sheep, and I’ll get a little bit more money, and it’s a little bit more valuable to me, I’ll do it. But what happens though is you look at your flocks and you see that your sheep aren’t as quite as good and then you’ll probably react by throwing more sheep as well, and then there becomes this mad scramble to get as much benefit from the land as we can we end up destroying in the process. Or I take a more mundane example. When I’m with my in-laws sometimes, I like to order kind of a group dessert. And the dessert comes and gets plunked in front of the table and it’s there. It’s in the commons. And everybody “Garfields” it up, just eats it very, very quickly, and they don’t really get to savor and enjoy it. Why not? Because they’re worried that if they take their time to eat it, other people will get more bites first. So some other life examples of this, in the Tongan Islands, there are people doing subsistence level fishing among the coral reefs. And someone came up with a new technology for fishing. They will take bleach and pour it into the coral reefs which would suffocate the fish, and they could catch a large number of fish. Now if people are used to catch fish with spears and other kind of traditional methods, they’re only catching a few fish at a time, they bring that to the market, each individual fish is worth a lot. But when someone does this, he catches hundreds of fish at one time, he brings them to the market, the per unit price of fish goes down dramatically. So one person starts bleach fishing and the other people have to react by bleach fishing as well. Otherwise, they’re not going to be able to feed their families. The problem with bleach fishing of course is it doesn’t just kill the fish, it kills the coral reef, the very thing on which they’re depending.
So throughout history, you keep finding that when people hold things in common collectively, the problem is they have this incentive to overuse it and destroy it, and this is called the tragedy of the commons. So one imperative there is if you want to leave enough and as good for others, you’ve got to find some way to control what’s a common resource. And there’s two basic ways of doing that. One is you create a leviathan and you let the leviathan control and tell other people what to do. And the other option is you parcel and privatize it and let people have their own stuff.
Question: It’s easy to think of property rights with tangible items like your wrist watch for example, but what about ideas and intellectual property rights where it’s not a tangible thing?
Brennan: Yeah. That’s a really good question. And it’s actually a big puzzle in political philosophy how to think about intellectual property because it is very different if you have a car and I take your car, you’re out of car, and I gain one. It’s a clear loss to you. If you have a bunch of information on your computer, say music, and I get a copy of that music, you don’t lose anything. You still have the music so we’re just duplicating it. So it seems like it’s going to be different whatever rules of that we’re going to apply here. it’s weird to thing that these rules that apply to physical objects will be exactly the same as the rules that apply to abstract objects. There are such things.
So there are these arguments out there about should we even have such a thing as intellectual property. And one common argument that people give is just we’re in fact creating that institution because it’s useful. The thought is we’re worried that people won’t innovate or be willing to bring ideas to the market if they can’t benefit from them, like if I invent something, put all this effort into inventing some idea, and then I bring it to the market and someone else can just copy it immediately, they can get all the benefits for my work. And when I realize I won’t be incentivized to work. And so a lot of the arguments for patent protection and copyright are based upon that thought. But notice that that’s really an economic theory and it might turn out to be false. It might turn out that when we study this more that people are able to innovate and so on even if they don’t get patent protection. So we have to sort of punt it over to the economist and see what they have to say about that.