The Switching Costs of Petty Tyranny Avoidance

Via Nick the G & Paolo The Wifehunter, a purulent little saga of petit neighborhood despotism. The short version: family puts up a playground for the kids. Playground is purple, so as to match the hue of the autumn foliage. HOA declares it an eyesore, threatens family with jail time (seriously?).

OK, by now all good libertarians are readying a logical and somewhat-convincing response to the Stout's troubles: You can just move. You agreed to live under the authoritah of the HOA when you moved into the neighborhood. So shaddup already.

There's more than a little truth to all that, but as Ekdahl wrote on Twitter in response to just that sort of response, "The 'rules' in this case are very vague and don't justify jail time." Things get even cloudier given that the Stouts apparently successfully appealed fines related to the construction of the swingset.

What would Coase say?

I suspect he wouldn't say "shaddup already." I suspect he'd acknowledge that part of the tacit package of rights when you buy into the governance of an HOA includes not being niggled and harassed by two-bit tinpot bullies who would be a caricature even in Kafka at his most Kafkaesque. I agree with the standard economic view that you can put a price premium (discount) on just about anything, including exceptionally nosy neighbors, I also agree that the many emanations and penumbras of too much discretion in the hands of uptight HOA directors is, effectively if not legally, an uncompensated takings.

And seriously, jail time? Are they even for real with that crap? It's a good thing our actual elected officials in the many legislatures of the land have better sense than to misuse the criminal code do flagrantly. Right?

Purple playgrounds: super non-euvoluntary, you guys. Totes magotes.

Ph'nglui mglw'nafh Tacky Swingset R'lyeh wgah'nagl fhtagn

Pole Tax

On Twitter, E.N. Brown asks:

Hey, #sexwork twitter: Any thoughts on Nevada declaring strippers employees, not independent contractors, who must be paid minimum wage?
— Elizabeth N. Brown (@enbrown) October 31, 2014

Concatenated, EE friend The Honest Courtesan replies: "I think it'd be better to leave them as contractors, but stop TREATING them like employees & cash cows. The biggest problem is that clubs SAY they're contractors, then charge extortive fees & impose draconian rules."

A glib take: the Uber of exotic dancing already exists, and it is called "escort services." The physical property of the gentleman's club (614 Wharf Ave.) acts as one or more of the following:

• A clearinghouse: it provides a centralized location to match clients with performers. A customer might want something in particular, but the act of browsing helps define specific desires. Nota bene, this works both ways. In a club, performers can quickly visually screen customers before approaching for private dances. Call-in services oblige escorts to haul clear out to the site before assessing whether or not the client is tolerable.
• A (for lack of a better term) sacred space. This land is for a single purpose. There may be libation here, but this is not where we drink. There may be food here, but this is not where we eat. There may be music here, but this is not where we go to get our Creedence fix (brb, getting my Creedence fix). This place is the place to see undulating flesh. This place is the place to be on the business end of an inviting smile. This place is the place to feel a tempting, inviting touch, to smell forbidden musk, to hear gracious lies, to forget your loneliness for a little while. This place is a place of great glamour, in the old sense of the word: a gratifying, glimmering shared falsehood that lifts the weight of the world if but for a fleeting moment. It is an important, valuable space and should be kept as such. 
• A warren. This is the less-charitable interpretation of the "sacred space" interpretation. Like it or not, a great many people are simply disgusted by sex work, no matter how sanitized or discreet it might be. Zoning legislation keeps exotic dancing segregated from the God-fearing, pearl-clutching types. I see quite a bit of this here in my uptight Northern Virginia suburban corridor. I won't Google any addresses here at my work machine, but I'm fairly certain that I'd have to make my way clear to DC to see a dancer half my age swivel her hips in my direction. The median constituent in my neck of the woods has uttered a pretty unambiguous "nope" towards pole grindin'. 
• A place of ordinary business. Payment for services rendered, like at the dentist.

Club owners can get away with extorting dancers because of the aforementioned land use restrictions (and if you think Nevada is some sort of free-for-all when it comes to opening a strip club, you have another think coming). In the terms of econ 101, clubs provide a rent, and the rents are generated by way of the first three above bullet points. The value added to the client, to the performer, and to the community accrue to the residual claimant, which under the ordinary rules of organization is usually the property holder, the person with his (and don't kid yourself, it's usually a man) name on the title deed.

Typically, Ray keeps the [value] streams separate through multi-part tariffs. The cover charge and the drinks minimum goes to the club owner, the dancers get their tips (or some fraction after they tip out the DJ and staff [I presume]). The details almost certainly vary from venue to venue. The idea of treating dancers as independent contractors renting out space is actually quite a clever one—by paying a fixed charge to perform, the club obliges dancers to deliver de minimus that much value to the clients, thereby increasing the prestige of the club. Paying wages and heavily garnishing tips gives dancers an incentive to shirk (on the margin) and to hide tips (on another margin). Shirking and evading is evidence of a hostile relationship between owners, performers, and clients. This is less euvoluntary than a situation of mutual respect and service.

How to collect and distribute rents is a matter of negotiation. The minimum wage idea is perhaps one way to get to a just outcome, but it isn't the only one. Relaxed land-use regulations help to strip the location premium from the owner. Re-formatting the multi-part tariff might also help. Most of all, it's important to recognize which property rights regimes lead to the most efficient allocation of scarce resources. Treating exotic dancers like factory workers is probably a lousy approach. Then again, treating factory workers the way they're typically treated is no great shakes either. Hm.

Obligatory:

Where's the Harm?

I don't see how this is taking value from NJTP. 

The products are not similar.  An interesting example of the state as patent troll. 

And, yes, I apppropriated the image, without permission.  The source is here.

Dirt Mall Blues

The story: elderly Houston couple runs routine garage sales to help make ends meet. Neighbor complains, city gets involved. The city's suit aims to shut the impromptu flea market down for violating the terms of the deed. Evidently, open-air commerce is not one of the sticks in this bundle of property rights.

Regular readers should recognize the essentials of this case from a notorious potato chip-themed video. Art and Betty are Jorge Ramos and the customers, respectively. Carl is the grumpy neighbor who presumably feels as if the noise and bustle of the ad hoc dirt mall infringe his own implied property rights of a peaceful neighborhood free of the sorts of undesirables that scrounge for attic treasures.

As Munger notes in his own voice (sadly absent the wig), the most Coasean of all Coasean solution is... wait for it... manners. The Whole of the Law includes, contrary to the prescriptions of A. Crowley, an ordinary respect for your neighbors. Mutual respect.

The news reports I've found don't say whether or not the aggrieved neighbor tried bargaining with Mr. Ramos before petitioning the government for redress of injuries. From afar, it seems tragic that a property dispute like this ends up in the courts. Let's hope they get lucky and end up with a mutually felicitous outcome.

Don't hold your breath though.

Part of conventional ownership is statutory, denoted in titles and deeds and whatnot. But the bulk of ownership conventions are tacit. Expectations for what it means to not be a jerkwad neighbor emerge from the complex daily interplay we learn along the grand boulevard of eudaimonia. It sure would be nice if we'd replace some of the burnt-out bulbs lighting the way. Bring back virtue ethics.

Property Fence

Munger draws our attention to an interesting Proudhon piece here. For those of you who don't already know, Proudhon is the 19th century intellectual famous for launching the modern anarchy movement and for having coined the phrase "Property is Theft," a notion seized upon by my favorite Twitter imp, Matt Bruenig.

Mungo's eye was almost surely caught by the same graf as mine:

Understand once for all: the most characteristic, the most decisive result of the Revolution is, after having organized labour and property, to do away with political centralization, in a word with the state, and as a consequence to put an end to diplomatic relations among nations, as soon as they subscribe to the revolutionary compact. Any return to the traditions of politics, any anxiety as to the balance of power in Europe, is based on the pretext of nationality and of the independence of states, any proposition to form alliances, to recognize sovereignties, to restore provinces, to change frontiers, would betray, in the organs of the movement, the most complete failure to understand the needs of the age, scorn of social reform, and a predilection for counter-revolution.

Delightful. And not just because it fits well with the spirit of Marx that the state shall wither, branch and trunk once ... something something something (I don't believe I have to explain to any of my readers how the central problems of production and exchange cannot be solved by appending residual ownership to the labor force). No, it's delightful because of that subjunctive clause: "after having organized labour and property." Boy howdy, way to pithily pack a punch. A result of all the blood and fury of the Revolution is that labour and property are now properly organized, as if the grand sum of human activity can be arranged as pieces on a chess-board.

Can I get a "yikes", people?

Proudhon's philosophical premise can pretty easily lead to this conclusion: if property occurs as the result of state violence, then it follows that it can be just as easily re-allocated through other acts of violence. And any improvements to the initial endowment of capital (land would probably be the extent of the initial endowment) would regress to that original act of violence (or, coercion, if you enjoy EE terminology), as the leaves regress to the roots. That is to say, if you can I,Pencil my wristwatch clear back to a canton Councillor in Switzerland granting claim to a patch of land (and all the exclusionary rights so appended), then the basis of my ownership of the watch on my wrist rests ultimately on a pseudo-arbitrary exercise of force.

So here's my question: if that initial exercise of force lacks moral validity, does the entire chain of ownership unravel?

Trafficking in stolen goods is illegal. If I buy a nicked radio from a fence, and it ends up confiscated by the police, I am due no recompense whatsoever, even if I thought I was buying it in good faith (though I can sue the fence under the UCC for breach of implied warranty, fwiw). In legalese, this principle is known as nemo dat quod non habet, or (roughly) "no one gives what he does not have." It's bedrock, antique common law, and I have a feeling that if you were to survey ordinary folks they'd agree with it.

Up to a point, anyway. Maritime salvage is a finders-keepers rule. And if you can't trace mens rea back to the initial parting of the legitimate owner with her property, you might find the subsequent adverse possession case contested. Also, there are exceptions for making trades using stolen legal tender. Still, what I'm curious about is what folks' moral intuitions would be about the whole kit and caboodle: if the median jurist were to suddenly accept the Proudhon/Bruenig suite of arguments about the origin of property, would she then be eager to dissolve all current claims, to then reconstitute according to the Spirit of the Revolution? Or would she hew to Hume and Locke when they argue in favor of legitimacy in property as arising from making improvements to existing stocks?

Is property euvoluntary? If not, how far down the rabbit hole would the typical citizen be willing to chase historical injustice?

Treading on Snow

My pal Nate is where I usually go for questions of jurisprudence. I wander into his territory, uninvited, without regret.

Cynthia Nixon on marriage equality:

When women got the vote, they did not redefine voting. When African-Americans got the right to sit at a lunch counter alongside white people, they did not redefine eating out. They were simply invited to the table. That is all we want to do; we have no desire to change marriage. We want to be entitled to not only the same privileges but the same responsibilities as straight people.

 Equality before the law implies a non-discrimination standard under the law. The law is an ass, suited to the mulish task of bulk imposition of clearly understood rules. The inelegant artlessness of parsing complexion, social status, sexuality, or belief is a chore unfit for a legislature distant in cognition and void of meaningful accountability.

Seek not dominion, for surely it shall find you first.

Nota bene, friends: this longsword cuts on the backstroke too. If you object to statutes that restrain folks from contracting (or not) based on sexual identity, it's consistent to object to statutes that restrain folks from contracting (or not) based on which side of the counter they stand on. The lunch counter example is particularly noteworthy in Nixon's choice of words. The Civil Rights Act of 1964 did more than just repeal the ass of Jim Crow, it inserted its own ass into every space, both public and private.

Sidebar: in case you weren't aware, the "ass" in "the law is an ass" is "ass" qua donkey. The law is a stubborn, single-minded entity. And like the common ass, is quite useful for certain tasks, though you wouldn't ask ius or lex to pen a sonnet.

Substituting one form of dominion for another invites spiteful retribution under the petticoats of Lady Justice. Equality under the law, a fine principle, demands that any two fit people have access to the marriage contract in the eyes of the state. The principle here is not that gay people are great and deserve special protection, it's that under the US Constitutional order, all constituents are equal before the law. If it seems as if I'm repeating myself, it may be because this fairly obvious little slice of jurisprudence seems utterly lost in these discussions. This is a founding principle carried over from the Enlightenment that appears to be buried in the din of bristly moralizing on both sides.

But people, while severing the tether that forces that ass to discriminate is consistent with good statesmanship, it's an error of the same type that pinions this dumb creature to the task of discriminating along new dimensions. It was an act of justice to lift the statutes that imposed segregation. But consider the cost of yoking business owners to the common will: some people obtain the obligation to enter into contracts they would have not otherwise entertained. This is perverse. The antidote to oppression is liberty, not coercion.

So yes, it's obvious on its face that consenting people should have the right to voluntarily enter into mutually agreeable contracts. That's just as blatantly, obviously true for marriage as it is for cake decoration services and renting out the privately-owned grounds of a bed and breakfast.

Everyone deserves the right to say "no", even if—no, especially if—the answer may be frustrating for others. The alternative is illiberal and unjust.

Tapping the Creative Commons

It can be challenging to refrain from curmudgeonry when it seems like every time I switch on a Top 40 station and hear the latest pop drivel, it seems fueled by something I heard done better 20 years back.

My rough estimation for the formula to making a hit song in 2013:

1. Find a track that Rhys Fulber engineered somewhere in the Caustic Grip to Millennium era.
2. Strip it of any complex or meaningfully assonant elements.
3. Plop bland lyrics on top.
4. Autotune to taste.
5. Lather, rinse, repeat.

Importantly, it's not the ripping off that turns me into a discount Oscar The Grouch, it's the uninspired craftsmanship. Leeb and Fulber (& al) are nothing if not prolific and unapologetic samplers. They've lifted from a pretty wide swath of movies from the Alien franchise to Robocop 2 (seriously) to Hellraiser to the Michael Douglas tour de force Falling Down to that old chestnut The Atomic Cafe. And on Millennium, they lifted guitar riffs wholesale from mainstream metal acts. And I thank them profusely for that. 

"Immature poets imitate; mature poets steal"
-T.S. Eliot

I tend to agree with Tabarrok that there is an optimal level of intellectual property protection, and that it's possible that copyright statutes are on the dy/dx < 0 side of the hump.

My public choice discipline tells me that ex ante formal rules signed by legislatures will probably be penned by and in the best interests of established industries. This could be bad news for nascent firms looking to sail down that long road to the top (if they want to rock and/or roll). Contrariwise, ex post litigation is cumbersome and costly for the little guy, viz. the dust-up between The Honest Toddler and The Honest Company. It's tough peach pits to balance the Type I and Type II errors here. How much prior restraint is optimal? How much redress?

And is Eliot right? Is IP "theft" euvoluntary under the right conditions? If so, what are those conditions? Shakespeare's thievery would put Selina Kyle to shame. Do we see him as history's greatest villain? How is he different from Vanilla Ice (now there's a question I never thought I'd ask)? Is artistic cachet important? If so, how?

This sort of stuff is, I think, wrangling over conventional ownership and exchange. I'm not sure these questions are adequately settled in the realm of IP. We have decided to "coordinate" (I'm still not sure it's a symmetric game) on a set of formal rules, but without emerging from well-established informal rules, they seem awfully subject to change. Is there a better approach? Is that better approach in the core of the game?

Is Ronald Coase a Euvoluntary Exchanger? (Deadmaus Edition)

We get abstracts! From Mungo:

Morals and Markets
Armin Falk & Nora Szech Science, 10 May 2013, Pages 707-711

Abstract: The possibility that market interaction may erode moral values is a long-standing, but controversial, hypothesis in the social sciences, ethics, and philosophy. To date, empirical evidence on decay of moral values through market interaction has been scarce. We present controlled experimental evidence on how market interaction changes how human subjects value harm and damage done to third parties. In the experiment, subjects decide between either saving the life of a mouse or receiving money. We compare individual decisions to those made in a bilateral and a multilateral market. In both markets, the willingness to kill the mouse is substantially higher than in individual decisions. Furthermore, in the multilateral market, prices for life deteriorate tremendously. In contrast, for morally neutral consumption choices, differences between institutions are small.

The experimental design is straightforward: 3 treatments, one unilateral, one bilateral, one multi-lateral. Participants have a choice between cash (expected value 10 pounds sterling) and saving the life of a surplus testing mouse that would have otherwise been destroyed since it's unfit for use in the lab. Long story short, folks in the unilateral (i.e. you can have £10 and we kill this mouse, or you take no money and the mouse lives out its remaining natural life in comfort) treatment decided to save at a much higher rate than in the bilateral (i.e. two folks negotiate a trade if they wish. If a deal is struck, the parties receive the terms of trade [they have £20 to split] and the mouse dies, otherwise no deal and the mouse lives). There was no statistically significant difference between the bilateral and the multilateral markets, except in the equilibrium price (see Vernon Smith's work for a critique of this part of the experiment).

Now, this piece was in Science, which for those of you who aren't familiar with the publication is a multi-disciplinary journal, somewhere between a popular magazine and a general interest academic journal. Articles have strict length requirements, and the pieces have to be written sans disciplinary jargon. So I can forgive quite a bit of elision when it comes to the details of the experiment. What I find troubling is the interpretation the authors present. They pirouette out of the bounds of their sample to conclude that markets are immoralizing. The act of exchange in the bilateral and the multilateral results in more rodent deaths, therefore there's something about market trade that strangles other-regard and generates negative externalities (and I'll generously refrain from critiquing the erroneous depiction of what constitutes an externality in their opening remarks). That's one way to look at it. Another way to look at it is that wealth exposes compassion.

Consider what an alternative control group might look like. For most of human history (and all of human prehistory), the probability that anyone would have forgone the equivalent of £10 of wealth to save the life of vermin would have been close to zero. It is only because of the spectacular opulence offered by the modern economy that we gentle souls can even begin to consider the lives of mere brute animals with anything approaching tenderness.

Which brings me to the Coase (Demsetz too) point that what the researchers have exposed isn't so much some moral failure of markets, but a property rights gap. The mice have no agency. To me, this is the intriguing result. You see, we here from our lofty vantage point in history look back on our dreadful ancestry and pity them their benighted morals. They did indeed indulge in some godawful behavior: human chattelry, forced marriage, savage public execution, racking, breaking on the wheel, crucifixion, on and on and on. With the nightmarish examples of Stalin's purges, Mao's Great Leap Forward, and Hitler's Holocaust excepted, these modern times bear the hallmark of a sharp decline in violence, most notably venal, but there's a case to be made for institutional as well. I can imagine a future where our descendants would look on us with sad disdain at our lust for bacon. If you're willing to grant some agency to livestock, a particular progression of morality would be to grant beasts property rights over their own life. Yes, this may seem a bit silly to many folks, but who would have predicted in 1600 that people 400 years hence would be so tender as to grant reprieve to mice of all things? How much more gentle will doux commerce make our descendants?

Tough to say of course, but it is encouraging that so vastly much more exchange can be counted as euvoluntary these days. It really is quite remarkable.

Avast, Ye Scurvy Dogs!

American Teeth has a great piece on [IP] piracy that would fit right in here at EE. The crux of the argument:

If euvoluntary exchange is always just, then for piracy to be wrong it has to break one of the rules above. However, for piracy to be stealing, it has to break the same rule that stealing breaks, in the same way. This is where the argument that piracy is stealing breaks down, because, as I will show, stealing is a coerced transaction and piracy is a transaction with an uncompensated externality. It's a rule five [coercion by human agency] violation versus a rule four [uncompensated externality] violation. [emphasis in original]

To me, there are two parts to discussions of IP. There's the practical, consequential bit, summarized nicely in the Tabarrok Curve, and  there's the deontological, perhaps metaphysical question of ownership. When I buy a recording, am I buying the excludable media on which the non-excludable composition is imprinted? Am I buying an aetheric arrangement of airborne distortions? Am I buying the pleasure the music brings?

The consequential arguments are easy to address. It's an empirical claim whether or not online piracy impinges on the Income Statements of record labels. I'm not so sure the other questions can be answered quite so simply. The discipline of economics has a lot to say about the nature of ownership. Here's what probably the greatest microeconomist of the 20th c. wrote about property rights:

A property right is the exclusive authority to determine how a resource is used, whether that resource is owned by government or by individuals. Society approves the uses selected by the holder of the property right with governmental administered force and with social ostracism. If the resource is owned by the government, the agent who determines its use has to operate under a set of rules determined, in the United States, by Congress or by executive agencies it has charged with that role.

Private property rights have two other attributes in addition to determining the use of a resource. One is the exclusive right to the services of the resource. Thus, for example, the owner of an apartment with complete property rights to the apartment has the right to determine whether to rent it out and, if so, which tenant to rent to; to live in it himself; or to use it in any other peaceful way. That is the right to determine the use. If the owner rents out the apartment, he also has the right to all the rental income from the property. That is the right to the services of the resources (the rent).

Finally, a private property right includes the right to delegate, rent, or sell any portion of the rights by exchange or gift at whatever price the owner determines (provided someone is willing to pay that price). If I am not allowed to buy some rights from you and you therefore are not allowed to sell rights to me, private property rights are reduced. Thus, the three basic elements of private property are (1) exclusivity of rights to choose the use of a resource, (2) exclusivity of rights to the services of a resource, and (3) rights to exchange the resource at mutually agreeable terms.

-Armen Alchian in The Concise Encyclopedia of Economics

This idea of alienability, that one of the most important, perhaps the most important stick in the bundle of rights, is absent (or at least muted) whenever whizzing electrons are involved is an interesting puzzle for folks like me who are interested in the intersection between philosophy, economics, and policy. The very notion of what conventional ownership is is at stake in this debate. It's tough to claim euvoluntarity when one of the core assumptions is at the crux of the squabble.

The Importance of Endowment in Exclusion

This post inspired by conversations with friends of EE Pam Stubbart, Daniel Lin, Austin Middleton, Blake Johnson and Zac Gochenour.

Is Ronald Coase a Euvoluntaryist? (Part 2 of 2)

In my last post, I discussed the advantages of consolidating legion euvoluntary trades into fewer voluntary exchanges within a firm with the end of eliminating wasteful bargaining sessions. In this post, I'd like to broaden the idea of bargaining consolidation to transactions that happen outside the firm. In our quest here at EE to envision a more euvoluntary world, we now consider whether Coase's other watershed paper, The Problem of Social Cost points us towards the euvoluntary end of the spectrum.

Many of you will be familiar with this paper already. It boasts close to 20,000 citations in the academic literature, probably hundreds of thousands more in graduate and undergraduate term papers. Despite being one of the cornerstones of modern economics, it suffers misinterpretations similar to distortions of Say's Law. The Problem of Social Cost is the origin of the famous "Coase Theorem". My best stab at describing Coase's arguments are as follows: because harm is reciprocal, part of the calculus for the assignment of rights over relief should include lowest-cost determination. Coase, with his background in law, motivated his ideas using vivid case examples. When I explain this to undergraduates, I like to use examples from my time in the Navy. Undergrads living in dorms can probably better relate to barracks life than to apothecaries or cattle rights of way.

My favorite examples are ones where no rights are established ex ante. Recall that emergent law and custom is vested in precedent. If you leave your coat draped across the back of a restaurant chair, we know from prior experience that this means we have a temporary claim over that seat. Quite a lot of civil interaction is suffused with tacit rules so long as the interactions are routine and well-ordered. We know not to jump the line at the grocery store, we know to hold the door open for pregnant women, and we know to take our hats off in church. Things change a little bit once we step out of a world filled with well-established priors. When I joined the Navy back in tumpety-tumpety-tumpety-three, I had fewer references for acceptable behavior in certain contexts than when I was a snotty high school kid. So, evidently, did some of the gentlemen with whom I shared living quarters. I will spare you the less-than-savory details, but I will say that there existed no well-established property rights over the condition of the shower drains nor were there rigorous norms about the range of acceptable activities conducted in their proximity. Note the reciprocal problem: if it's my own shower, I have full exclusion rights, so I'm free to obstruct the drain with whatever debris as pleases me. Note also the undefined property right: in some nebulous sense, the shower is "owned" by the US Navy, an intangible concept to junior enlisted personnel until it wears a uniform bearing an extra chevron or two. In those A-school barracks, there was no regular senior enlisted oversight the way there was in Boot Camp, so many of the young men took rather unfortunate liberties with some of the facilities. Coase might argue that the remedy for this state of affairs would be to synthesize a de jure owner to resolve the problem rather than having plaintiffs individually investigate and wrangle bargains haphazardly. In the case of befouled drains in open bay barracks, a novel remedy was public, collective shaming. Highly visible signs warning of the consequences of untoward showertime activities were posted throughout the building in public areas. The offending behavior promptly ceased.

The comfortable junction of Coase and the principles of euvoluntary exchange can be found in the first two conditions, conventional ownership and conventional capacity to exchange. Coase noted that when these elements exist and are well-defined, it's much easier to correct violations of the fourth condition, uncompensated externalities. Broadening the scope of ownership might plausibly increase the euvoluntary opportunities for trade and dispute resolution. A Coasean world tends towards greater euvoluntarity. A world that strips property rights from sovereign individuals (or groups, as keenly noted in the research projects of, eg, Elinor Ostrom) restricts the universe of peaceful collaboration and vests dispute resolution in the hands of third parties; parties who might plausibly be better employed in value-creating work elsewhere.

Questions for consideration:

• The Coase Theorem is often caricatured as, "as long as transaction costs are zero, it doesn't matter who owns the property right, as the parties can bargain to the efficient outcome." What is wrong with this interpretation?
• Empirically, how big do you reckon is the deadweight loss of poorly or inappropriately assigned property rights? Whose responsibility is it to correct errors in property rights assignment?
• Under what conditions are property rights undesirable? In what ways might the Coase Theorem lead us away from euvoluntary outcomes?
• The discovery process is an important aspect of rights assignment, but discovery is costly. Under what conditions might it be wise to revisit traditional rights assignment schema to update for changing states of the world? Think patent and copyright norms, tort procedures or liability rules. How might Coasean insights affect the criminal code?

Lost and Found Redux: Lost and Founder

In my last post, I referenced a classic opportunity cost exam question. The scenario stipulates that you've camped out overnight for tickets to a concert whose box office price was $300. Before you got to the window, the tickets had been sold out. Dejected, you slog back to your car, but on the way you find tickets being sold by scalpers for a fivefold markup. Unwilling to shell out $1500 for the tickets, you hop in your Volvo Taco Truck and head to the nearest Waffle House for some smothered hash browns and watery coffee.

In your booth, you find an envelope. The envelope is not sealed, so you peer inside. Lo and behold, you find tickets to the very concert you were camped out for. At this point there is some hurried lip service to discharging a moral duty to return the property to its rightful owner, then the professor gets to the real meaty question: what do you do, attend the concert or head back and sell your windfall find? The answer tells you whether or not your students picked up the idea of opportunity cost (hint: many of them haven't). That's fine, but the scenario got me to thinking.

Assuming that there is indeed a moral imperative to find the original owner, does that obligation depend on the contents of the envelope? Is there a similar moral duty to return $1500 cash as there is to return $1500 worth of concert tickets?

We all know that value is subjective, but the closest thing we have to objective value is cash (nod to Nathanael Snow for reminding me that the value of cash is more contextual than subjective), so $1500 cash is worth $1500. $1500 in tickets is subjectively worth $1500 or more to the original owner. They were somewhere up there on the upswing of the demand curve.

So given this self-evident premium, should there be more consideration given to restoring goods to the original owner than to a market-equivalent amount of cash? Is this trash-treasure relationship relevant? If the owner of a booger collection who valued his lost or stolen boogers at half a million dollars be as deserving of restoration as a half-million dollar sapphire necklace owner? What are the relevant margins? Presumed social status? Does your own subjective valuation matter? When you find something, what assumptions do you make? Which of these are relevant to the effort you spend reuniting property with the rightful owner?

How do we form moral intuitions over found property and how do those intuitions change when we find cash instead of stuff?

And why would you go to der Waffle Haus when you drive a perfectly good taco truck?

Lost and Found

Rights over found property are legal curiosities. Marine laws of salvage predate many modern legal systems, yet ships' captains scrupulously hew to their tenets. Many countries, to a greater or lesser extent, observe squatter's rights. Homesteading (or Seasteading, if you're so inclined) is a bit like claiming found property. Lost and Found bins in daycare facilities, public libraries, stores, museums, amusement parks and university bowling alleys all occur not as a function of gaseous legislators scribbling away in the halls of legislature, but as spontaneous order, as natural law. Lost and found rules operate in the secret nooks of the social labyrinth, formed from a curious blend of playground rhymes, folksy economics, tradition and intuition. In some instances, "finders keepers, losers weepers" applies. In others, found goods are held in trust and publication requirements are to be satisfied before the finder obtains a legitimate claim. In the case of mining or homesteading claims, the ball bounces on a nebulous and uncertain criterion of "property development". Adverse possession is a rather large islet in the skerries of conventional ownership, so let's pilot the taco truck through those reefs. Yes, we've converted the taco truck for maritime use--big ol' inflatable tires and an outboard.