I heard about this book (subtitle “how the hidden rules of ownership change our lives”) via this Econtalk podcast and “acquired” a copy.
The authors (Heller and Salzman, or H&S) turn what looks like a simple topic — ownership (or property rights) — into an engaging and though-provoking essay on the vague borders between what’s mine, yours and ours. (I reviewed Salzman’s 2012 Drinking Water: A History.)
Their main points are that (1) ownership is not always clear and (2) some actors try to leverage this vagueness into profits and/or advantage, i.e., “as valued resources becomes scarcer, people compete more intensely to impose their preferred ownership story, and entrepreneurs find ways to profit” [p 5]. Theme (1) is important in most of the work I do on the commons (where ownership is either unclear or impossible to assert), so I found their examples — coming from both economic and legal perspectives — to be very interesting.
Here are some notes on the book’s contents:
- Rights to private property are easier to understand, respect and protect than rights to “digital property,” which is both novel and non-rival. Non-rivalry occurs, for example, when I share my digital photo with you. Now both of us are “owners.” (Read more on different types of goods.)
- There are six ways to claim ownership: grabbing it first, physically possessing it, applying effort to it, linking it physically to something you own, its attachment to your body, and inheriting it.
- Ownership claims are often upheld by courts and governments, but they can impede larger social goods. Patent rights can keep a useful medicine (e.g., vaccines) from the poor. Slavery was terrible. Musical, fashion, artistic and technical innovations often depend on “stealing” from others. “Too much existing ownership can make it impossible for people to create new, more valuable things… creating ownership gridlock… When too many people own a piece of one thing, cooperation breaks down, wealth disappears, and everybody loses” [p 97].
- “All property conflicts exist as competing stories. Each side picks the story that presents its claims as the moral high ground, and each side wants ownership bent toward its view. But don’t be fooled. There are no natural, correct descriptions that frame mine versus mine conflicts. There are, however, better and worse choices that we can make to solve these dilemmas. And if you are not the one choosing, then someone else is making the choices for you” [p 15].
- Speaking of rights, their chapter title “who gets what and why” is a direct copy pasta of the title of Al Roth’s 2015 book. Thieves!
- Since property rights are complicated (subjective), it’s common for politicians to re-assign them to friends, lobbyists, the rich and powerful. The assignment of rights to the poor, under-privileged and/or deserving is more the exception than the rule. For example, “Being the first Christian European was what justified, as a matter of law, the claims of Spain to the Caribbean, Texas, Mexico, and California” [p 24] or “The ways some Native Americans hunted and gathered—moving in a seasonal pattern to follow wild game, fish runs, and ripening berries—simply didn’t count [for ownership]… labor led to ownership only if you made New England look like the Old England the colonists had left behind… [this shaky reasoning]… was enough for the Court to justify dispossessing the Native peoples of America” [p 83].
- Rights based on possession often lead to over-exploitation of a “free” resource (e.g., water or animals) by those hoping to establish ownership.
- Sometimes rights are “unfair” but efficient (e.g., fishers claiming a territory based on historic use), so it may be better to leave them in place.
- “Caught food was an important nutritional resource [in Colonial America]. So states favored labor and possession [of animals] over attachment [those animals are on my land]… as a deliberate anti-aristocratic rebuke to England, which reserved rich hunting and foraging lands to large landholders and the Crown” [p 125].
- Property rights should change if a resource’s scarcity or value is changing. When water is abundant, then anyone can use it. When it’s scarce, then rights need to change to reflect scarcity. (I wrote a book or two about such reforms 🙂
- Employers try to limit employee’s right to work (and increase their profits) with “non-compete” clauses. One reason Silicon Valley is still productive is because California prohibits non-competes.
- I can’t even tell you how disgusted I was reading about how Whites in the Jim-Crow South used inheritance laws to “trick” Blacks out of their lands, thereby impoverishing generations. Read this, this, this and/or this about “forced partition sales,” which are neither necessary nor common (German laws avoid the issue). Similar laws took land away from Native Americans. The English also used it against the Irish. I’d say these examples support claims of “systemic racism” more than respect for private property.
- “The reality today is that, overwhelmingly, wealth in market economies is held not by individuals focused on exclusion but by groups of people working together. Think about marriage, condominiums and cooperatives, unitization, trusts, partnerships, and corporations. All these are successful examples of… “liberal commons property.” [snip] To be successful, every enduring liberal commons must address three trade-offs. The first is the trade-off between individual choice and group authority… The second is the trade-off between enforcing majority decisions and respecting dissenting views… The last is the trade-off between protecting group values and allowing individual freedom to exit” [p 211].
- Lobbyists used lies and deception to convince Americans to weaken estate (“death”) taxes. How? “Nearly 40 percent of Americans mistakenly believed they were in the top 1 percent, or soon would be, and thus were potentially subject to the tax” [p 214]. This is not the first time America’s poor sided helped the rich: “Socialism never took root in America because the poor see themselves not as an exploited proletariat, but as temporarily embarrassed millionaires” — a thought inspired by Steinbeck.
- “America sustains the most unequal distribution of wealth of any major country on earth. Make no mistake: this transformation is not happening by accident, by magic, through the free market, or just naturally. It’s a brilliantly designed heist, engineered by family-dynasty lobbyists and accomplice legislators. And lower taxes for the super-rich mean higher taxes for everyone else” [p 227].
- H&S give some examples of success (Individually Transferable Quotas with fish) and failures (Certified Emissions Reductions with HFC-23) in creating property rights to address environmental issues. The HFC one is deservedly notorious: “These companies… duly incinerated every pound of HFC-23 they created. And for every pound of super greenhouse gas they destroyed, the companies were awarded CERs—which they then sold to polluting countries and companies in Europe and Japan” [p257].
- Digital rights, micro-ownership, the “sharing economy,” streaming, and other innovations are aimed at profits and consumption, not sustainability and simplicity. Beware the marketers!
- “And the sharing economy does not build wealth; for most of us, it consumes wealth. People lose the discipline of saving up for big purchases, taking out loans or mortgages, paying them off, and owning equity—in their jewelry, cars, and, most of all, homes… After mortgages were paid off, homes gave retired people a secure place to live or provided cash if they downsized. By contrast, renters pay month to month, and streamers day to day, accumulating nothing” [p 271].
- “Communities also suffer if everyone streams accommodations rather than makes long-term commitments… Community solidarity is intangible, hard to measure, but its loss is a real cost nonetheless. In this tragedy of the commons, individual homeowners rationally choose to profit by listing on Airbnb, but collectively we all lose connection to our sense of place, to what makes us feel truly at home” [p 271]. Read my op/ed on Airbnb’s assault on community.
Although the book is a bit heavy on examples, my one-handed conclusion is that anyone interested in prosperity, sustainability and the rules underlying our cooperation and happiness (as well as racism, inequality and corruption) should read this book. FIVE STARS.