Property as Coordination Minimization

post by Vaniver · 2020-08-04T19:24:15.759Z · score: 39 (17 votes) · LW · GW · 35 comments

A friend recently noted that they were in favor of private property, but the best defense they had to link was instead a defense of finance. So I thought I’d give it a try. In light of a distinction people often draw between ‘private property’ and ‘personal property’, I’m going to work up to defending ‘impersonal private property’, starting with intuitions and examples grounded in personal property.

First, what even do we mean by property? To begin, observe that material things are sometimes scarce or rivalrous. If I eat a sandwich, you can’t also eat it; if I sleep in a bed, you can’t also sleep in it at the same time; if an acre of land is rented out for agricultural use, only one of us can collect the rent check. Beyond scarcity inherent to reality, we can also create it with rules; if I invent a cool new sandwich idea, society could decide that I have the right to decide who can and can’t make that sandwich for some amount of time. [The first patents were for restaurants, giving them exclusive rights for a year to new dishes they invented.]

Property, then, is the societally recognized right to decide who can or can’t do three different things: ‘use’, or deriving some personal benefit from the thing; ‘fruit’, or extracting some value from the thing without deeply changing it; and ‘abuse’, or making changes or transferring ownership of the thing. For example, consider an apple tree; climbing the tree is an example of use, picking the apples is an example of fruit, and chopping it down to make a chair out of it is an example of abuse. If I wholly own the tree, I get to choose all of those things; perhaps I just have usufruct, allowing me to use it or harvest the fruit so long as I don't damage it; perhaps I only have use, or perhaps I have no rights at all with regards to the tree.

In this view, the benefit of property is fundamentally preventative; if I own an apple tree, I can prevent other people from climbing the tree, or picking the apples, or chopping down the tree, even if they want to. Hence the slogan that ‘property is theft’; without it, you could do any of those things to my tree, and with property, you can’t. Also note how much joint ownership degrades in value; if everyone has the right to chop down the tree to make a chair, the fact that anyone could collect the fruit once it ripens becomes less valuable.

Interestingly, this view also makes NIMBYism seem natural instead of unnatural. If I own a house, I can use that ownership to prevent things from happening to the house that I don’t want. But do I just own the dirt and wood, or do I also own the ambient level of noise? The fragrance of the air? The view? The price? We can make our conception of property too large or too small, and can start drawing overlapping property claims, where I think my ownership of my house means no loud music on my property at 6am, whereas my neighbor thinks that his ownership of his house means he can practice the drums whenever he likes. [This sort of coordination is best done at a higher level, through ownership of the neighborhood or zoning district or city or whatever.]

This brings up the idea of ‘stakeholders’ and ‘decision-makers’. Stakeholders are those impacted by the outcome, and decision-makers are those who choose the outcome. Often, we get more desirable or just results by aligning the decision-makers and stakeholders, but this comes at additional coordination costs.

Suppose I’m ordering dinner for a group of people; there’s both the coordination question of which restaurant to order from, and the coordination question of what dishes to order. Sometimes it works for me to just pick a restaurant and dishes; sometimes it works for me to pick a restaurant, and then pass around the order for everyone to add their preferred dish; sometimes it works to jointly come to a decision on what restaurant to order from, and then everyone selects a dish; sometimes it works for everyone to manage their own order, including whether or not they should join in on an order with anyone else. That list was ordered roughly in ‘decreasing coordination cost’ order, with a corresponding increase in taste-satisfaction, but perhaps not net satisfaction, as smaller orders are more expensive, or the additional taste benefits weren’t worth the additional benefits of having to think about it. The size of the group has a huge impact on how much the coordination costs matter; coming to alignment on a restaurant for three people and thirty people are very different affairs.

Why have personal property, i.e. your own sandwich, toothbrush, clothes, house, or vehicle? A boring but essential reason is physical; a toothbrush used by Alice becomes much less valuable to everyone but Alice after that use, and this sometimes applies more broadly. The main reason, in my view, is that personal property is made much more useful by only having one decision-maker, and thus no coordination cost. Rather than having to petition the commune for a day’s use of a red shirt, I can simply decide to wear my red shirt today. I can make solid plans around decisions that I’m the only major input to. This will sometimes lead to socially suboptimal decisions if coordination were free--maybe I look really bad in red, and a wise commune would give me blue instead--but given that coordination is not free, this is often our best available option.

Why have impersonal property, i.e. a landlord who rents out houses, a company that owns factories, massive tracts of land owned by the same farm, a bank that chooses which loans to grant and which to deny? The same basic reason, I claim; the landlord can make decisions about the houses that they own without having to consult anyone else, and this means decisions can be made faster and more cheaply. Many different landlords can make many different decisions, whereas one Housing Bureau will either make one decision for everyone, or make unequal decisions in a corrupt way. Or if we had a property-less direct democracy, where all citizens voted on all decisions, there would be no time left over to do anything else but vote!

Many of the problems we have now, I claim, are not caused by too much property but by too many decision-makers, or in this view, too little property. For example, I live in Berkeley, which has a housing shortage, and also incomplete individual property rights. By that I mean if I buy a house and want to tear it down and build a larger one instead, I need the city’s permission to do so, and the city will require me to allow ‘public comment’ from my neighbors and passerby on the desirability of such a change, and generally require various other permits and restrictions. If it were solely for the safety of the inhabitants, this could be handled by the building code, but the public comment isn’t in case my neighbors happen to be structural engineers; it’s because housing in Berkeley does not come with the full right of ‘abuse’, and that is instead owned by the neighborhood and city, and only some stakeholders get a say; the people who would rent out the additional floors I add to the house generally don't comment at the public meeting, whereas the retiree who would have to deal with more cars on the road or a blocked view of the Bay does.

Indeed, It’s Time to Build is, in many ways, a complaint about the Vetocracy of our times. Property, even impersonal property, even the existence of billionaires even if you’ll never be one, are good because it lowers coordination costs, allowing things to happen more efficiently.

35 comments

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comment by Kaj_Sotala · 2020-08-04T21:03:12.364Z · score: 15 (8 votes) · LW(p) · GW(p)

A related argument for property rights as solving a coordination problem is David Friedman's A Positive Account of Property Rights. In a nutshell, his argument is that:

  • Continuous bargaining is time-consuming and hard. Suppose that you and I are given a dollar to divide between ourselves. It is my incentive to argue for getting as large of a share as possible, and it is your incentive to argue that you get as large of a share as possible. We could in principle spend a lot of time on this. For instance, I might say that I'm going to insist on getting 70 cents and that I will settle for nothing less. You suspect that actually, I am willing to settle on 60 cents, so you refuse to let the deal go through until I lower my demand.
  • However, there exists a unique proposal for sharing the dollar: that both of us get 50 cents. What's more, both of us know (and know each other to know [LW · GW]) that the 50-50 split is a unique coordination point for situations like this one. As a consequence, if I say that I'm going to insist on getting 50 cents and will settle for nothing less, then this is a believable claim.
    • As Friedman says: "... suppose there is one outcome that is seen as unique. A player who proposes that outcome may be perceived as offering, not a choice between that outcome, another slightly different, another different still, . . . but a choice between that outcome and continued bargaining. A player who says that he insists on the unique outcome and will not settle for anything less may be believable, where a similar statement about a different outcome would not be. He can convincingly argue that he will stand by his proposed outcome because, once he gives it up, he has no idea where he will end up or how high the costs of getting there will be."
  • Extending this, let's imagine that we live in a Hobbesian society with no rule of law. Even without courts to enforce contracts, it can still be beneficial for us to formally make a contract. A contract establishes another unique commitment point: I expect you to uphold your part of the bargain, and you expect me to uphold mine. If you violate the contract, I can make a credible commitment to retaliating until the previous contract has been upheld. If not for the contract, we would again be in the position of endless bargaining, where I can threaten to hurt you if you don't do what I want, but you might doubt my commitment to this threat.
  • Extending this further gets a system of norms about property in general: we could have endless negotiations about who gets to use what, but if an accepted system of property rights exists, this coordination cost is eliminated. This is similar, though slightly different, from your argument: you focus on the fact that property allows a single decision-maker to act without needing to consult other people. Friedman's argument is that property rights save us from paying the transaction cost of endless negotiation to establish who gets to use what.
    • To use your example of a landlord, suppose that we didn't have a system of laws and norms establishing impersonal property. Now, someone who owned a house could offer to rent it out to other people, but once those people were in the house, they could suddenly decide that they didn't want to pay the rent anymore. The (ex-)landlord would then be forced to figure out whether paying the cost of forcefully evicting them would be worth it, and have an incentive to bluff that (s)he did, and the people in the house would need to figure out whether the threat was credible... and so on again.
I believe I have now resolved the apparent paradox of contracting out of the Hobbesian jungle. The process of contracting changes the situation because it establishes new Schelling points, which in turn affect the strategic situation and its outcome. The same analysis can be used from the other side to explain what constitutes civil society. The laws and customs of civil society are an elaborate network of Schelling points. If my neighbor annoys me by growing ugly flowers, I do nothing. If he dumps his garbage on my lawn, I retaliate—possibly in kind. If he threatens to dump garbage on my lawn, or play a trumpet fanfare at 3 A.M. every morning, unless I pay him a modest tribute I refuse—even if I am convinced that the available legal defenses cost more than the tribute he is demanding.
If a policeman arrests me—even for a crime I did not commit—I go along peacefully. If he tries to rob my house, I fight, even if the cost of doing so is more than the direct cost of letting him rob me. Each of us knows what behavior by everyone else is within the rules and what behaviour implies unlimited demands, the violation of the Schelling point, and the ultimate return to the Hobbesian jungle. The latter behaviour is prevented by the threat of conflict even if (as in the British defense of the Falklands) the direct costs of surrender are much lower than the direct costs of conflict.
comment by willbradshaw · 2020-08-07T18:05:59.078Z · score: 7 (5 votes) · LW(p) · GW(p)

A major quibble with a minor point:

[The first patents were for restaurants, giving them exclusive rights for a year to new dishes they invented.]

According to Wikipedia, this is not true for patents in Europe, nor for patents in English-style common law, nor for patents in English-speaking North America, nor for patents in the USA.

The Wikipedia article on the history of patent law doesn't even mention the word "restaurant", nor indeed "food". In general it seems like the concept of patent has meant roughly what it currently does for many centuries.

What's your source for this claim?

comment by Vaniver · 2020-08-08T00:38:09.960Z · score: 3 (2 votes) · LW(p) · GW(p)
What's your source for this claim?

I first heard it... in a talk, I think? Which is where I picked up the narrower claim of "restaurants" over the more broad claim that you can find in the entry on Sybaris from A Classical Dictionary, which states:

On the other hand, great encouragement was held out to all who should discover any new refinement in luxury, the profits arising from which were secured to the inventor by patent for the space of a year.

That source I found from the Wikipedia page on patents, which I why I trusted my memory of the talk enough to include it in the OP. The other source Wikipedia cites is more direct:

And if any confectioner or cook invented any peculiar and excellent dish, no other artist was allowed to make this for a year; but he alone who invented it was entitled to all the profit to be derived from the manufacture of it for that time; in order that others might be induced to labour at excelling in such pursuits.
comment by RamblinDash · 2020-08-05T14:54:26.452Z · score: 7 (5 votes) · LW(p) · GW(p)

I feel like this:

Interestingly, this view also makes NIMBYism seem natural instead of unnatural. If I own a house, I can use that ownership to prevent things from happening to the house that I don’t want. But do I just own the dirt and wood, or do I also own the ambient level of noise? The fragrance of the air? The view? The price? We can make our conception of property too large or too small

Conflicts with this:

Many of the problems we have now, I claim, are not caused by too much property but by too many decision-makers, or in this view, too little property.

Above, you seem to be arguing that property can encompass all sorts of rights to determine things. If you tear down your house in Berkeley and build an apartment building, its true that you have more property (as you call it, the ability to abuse your house). But, by giving you this right, your surrounding neighbors necessarily have less property, because they no longer have property in these things that you list: noise, air, light, price, etc. So, we might argue about whether changing the balance of those rights is good or bad (in this case I think it's good), but you have to just make the case for that on normative grounds (consequences will be better, fulfills categorical imperative better, makes people more virtuous, whatever). You can't shortcut that by saying that one state involves more property, or more properly more rights, than another. Every person's right to act is the equal and opposite of other affected people's lack of right to control the thing that affects them. You can't get more total rights. This has been known and accepted for a long time in legal philosophy, most prominently and succinctly by Wesley Hohfeld.

This confusion about rights is most prominent in your reference to landlords and factory owners. You say:

Why have impersonal property, i.e. a landlord who rents out houses, a company that owns factories, massive tracts of land owned by the same farm, a bank that chooses which loans to grant and which to deny? The same basic reason, I claim; the landlord can make decisions about the houses that they own without having to consult anyone else, and this means decisions can be made faster and more cheaply.

These references conveniently don't mention the people who would actually be most affected by decisions about the private property -- the people whose livelihoods depend on it. A "landlord who rents out houses" may not care about any one house all that much, qua house. It is an income stream to him, and if it were replaced by a bundle of bonds that pay interest equal to the rent he receives he would be indifferent, or probably even happy (bonds are easier to manage). But there is someone who cares a whole lot about what is done with that house -- the tenant! To them, the house is not just some property, it is a home. Its where they live, they laugh, play, eat, raise children, etc. And the more rights you give to the landlord, the less rights the tenant has.

It feels like this post is effectively a stab at using the language of rationality to try to adjudicate age-old debates between socialism and capitalism. After all, it's an supposed to be a defense of [private] property. But if you want to do that (good luck!) its important to try to seriously engage with the socialist critiques of property instead of breezily eliding them, which are centered around this very concept. The fundamental point of the socialist critique of private property is that it assigns more rights to relatively disinterested absentee capital-owners at the expense of the rights that could otherwise be assigned to the person who is most affected. To use your shirt analogy, assigning the rights to the landlord/factory owner would be like assigning the right to choose what color shirt you wear to the shirt company instead of to the person who wears the shirt.

I upvoted your post because I think the discussion is a good one to have, but I think you have yet to have it.

comment by Vaniver · 2020-08-05T20:44:12.267Z · score: 3 (2 votes) · LW(p) · GW(p)
Above, you seem to be arguing that property can encompass all sorts of rights to determine things.

Right; it's a social agreement, and so it could be altered if the relevant parties decide to alter it.

I think you're right to object to me calling it "too little property"; like, if the thing is a two-dimensional object, rather than saying "too little area" I should be more precise and say it's "too short". That is, a vetocracy is what you get when you have too much distributed ownership and too little concentrated ownership.

You can't get more total rights.

Seems right, although importantly you can maximize the sum of individual benefit minus coordination costs; I think my overall sense is that's how you determine what the correct level of rights is, but that's a longer argument (where I would mostly be leaning on Hayek, I suspect). Of course this gets you into the problems inherent in aggregating benefit across people, and other thorny territory; I'm not saying it's easy, just that there's a target.

The fundamental point of the socialist critique of private property is that it assigns more rights to relatively disinterested absentee capital-owners at the expense of the rights that could otherwise be assigned to the person who is most affected.

Eh, I'm not very sympathetic to this. I've rented something like a dozen apartments in a dozen years; to the best of my knowledge, all of those places are still standing and rented out to someone else now. It seems odd to claim that when I was there for a year, my interest in the place outweighed the landlord's interest, because it requires forgetting about the interests of every other renter that the landlord contracted with.

comment by RamblinDash · 2020-08-06T13:50:05.751Z · score: 1 (1 votes) · LW(p) · GW(p)
although importantly you can maximize the sum of individual benefit minus coordination costs

Although you have to be careful how you measure this. If you naively measure it in dollars, you can pretty easily come to the conclusion that the optimal distribution of property rights is for Jeff Bezos and Elon Musk to own everything. But I don't think that Jeff Bezos's life changes one whit if his wealth changed from $185b to $300b, or $100b, or $10b, or even $1b.

Obviously there are positional aspects, but if you imagine that his wealth is being reduced by generally applicable laws then those laws would obviously apply to others too.

comment by Vaniver · 2020-08-06T19:06:36.412Z · score: 2 (3 votes) · LW(p) · GW(p)
you can pretty easily come to the conclusion that the optimal distribution of property rights is for Jeff Bezos and Elon Musk to own everything. But I don't think that Jeff Bezos's life changes one whit if his wealth changed from $185b to $300b, or $100b, or $10b, or even $1b.

So, let's set aside the contractual question, where society lets Jeff Bezos and Elon Musk keep their stuff because society agreed to do it, and holding up society's end of the bargain is important. Instead let's ask the question: what does society get out of Musk owning something instead of someone else owning something?

I argue society really doesn't get much benefit from Musk eating additional capital; like, if he buys really fancy steaks or really fancy yachts or whatever, this is mostly benefiting him instead of us (the indirect benefits, like being able to vicariously consume it on Twitter or Youtube or whatever, are probably pretty small and entertainers probably have a comparative advantage here).

I do think society gets a significant benefit from Musk owning additional capital, because he turns it into businesses that are plausibly beneficial, many of which seem like the sort of visionary longshots that otherwise wouldn't happen. Similarly for Bezos, altho his focus is pointed at a particular company. The world where Amazon has $100B of assets and MediocreCorp has $100B of assets will be poorer than the world where Amazon has $175B of assets and MediocreCorp has $25B of assets.


I think a similar story goes through for many historical titans. On the for-profit side, it's easy to see the creation of massive fortunes through increased efficiency; like, Ikea became massive and Kamprad hugely wealthy because they had a better way of doing things than the competition. The more money Kamprad was 'allowed' to direct, the more things he improved. On the non-profit side, it's also easy to see examples where they applied the same efficiency and long-sightedness where selecting programs was more difficult than 'just writing checks'. Carnegie's decision to fund libraries seems like a significant example here, but probably more central is Rockefeller, himself a fan of homeopathic medicine, setting up a medical research institute that would actually figure out the truth instead of just pushing his favorite. Both of these were pioneering projects in a way that seems easy to 'fade into the background', in the same way that Ikea might seem like "just how furniture is" to someone young enough. [Both of them, of course, also have efficiency stories behind how they made their wealth, but they're distant enough in the past that they might be hard to empathize with.]

comment by RamblinDash · 2020-08-07T14:10:10.069Z · score: 2 (2 votes) · LW(p) · GW(p)

That can hold if you assume that a dollar collected is a dollar of value produced. As more and more wealth is concentrated in fewer hands, it becomes easier and easier to extract monopoly rents through market power rather than actually produce value by innovating. For example, Amazon is so big that it makes money by squeezing suppliers. One way it does this is by "accidentally" allowing low-quality counterfeits on its site and only making any effort to remove them when the supplier of the genuine item pays up. It's not clear to me that shifting the producer surplus from the manufacturer to the retailer generates any marginal value for society, but it does earn Jeff Bezos a lot of money.

comment by romeostevensit · 2020-08-04T20:19:42.555Z · score: 5 (4 votes) · LW(p) · GW(p)

Seemingly abstruse political/legal theories, then, can be better understood through the lens of whether the decision-relevant representations they undergird are more or less liable to create good fit between varying levels of stakeholders and the scopes of their decisions. The best high level fit metric I've come across is the interaction between freedom and responsibility. I.e. a system that does a good job of matching the two, such that people don't have freedoms they are fundamentally incapable of taking responsibility for the outcomes of.

comment by G Gordon Worley III (gworley) · 2020-08-04T20:18:01.279Z · score: 5 (3 votes) · LW(p) · GW(p)

Outing myself as this friend, for what it's worth I actually think the linked article about finance does make a case for private property in general, but it requires making a couple of additional inferential steps on your own to see it. This post makes a slightly different line of argument to support private property, and I also support it. I think there are many reasons why private property is a good coordination mechanism, and this is one of them.

comment by Dagon · 2020-08-05T15:08:42.522Z · score: 5 (4 votes) · LW(p) · GW(p)

What's the actual proposition here? just "Yay private property!", or something more specific like "perpetual inheritable private land and physical capital exclusivity rights to individuals are better than time-limited non-transferrable power structures"?

Personally, I don't follow the personal property vs capital distinction - the continuum from one's body to one's training/knowledge to one's access to tools to one's creativity to one's ability to coordinate (and to be coordinated with) to larger shared tools and resources to larger coordination of people and resources seems pretty smooth to me. Private property is pretty fundamental in my mind, and I don't see a sane alternative.

But that doesn't keep me from thinking that our current societies have gone too far in legal and cultural protection of large-scale ownership, accumulation over long periods, and directed transfer based on personal relationships. All of these aspects can be tuned without breaking the fundamentals of private ownership of things.

comment by G Gordon Worley III (gworley) · 2020-08-05T17:40:41.443Z · score: 7 (4 votes) · LW(p) · GW(p)

My original Facebook post was just saying something like "yay private property" and expressing some dismay at how popular "boo private property" has become among some of my Facebook friends, and that I think the "boo" camp seems to be making arguments that are so far removed from the "yay" side that there's not really a way to object or make a case for "yay", sort of like people just have different intuitions about what property is that makes it very hard to do anything other than talk past each other. That points to needing a way to explain the basic intuition for why we should even have private property, strange as that may seem.

I agree that I don't see a real distinction between personal and private/capital property. On the one hand I feel like this is an after-the-fact categorical distinction created to deal with intuitive objections people have to abolishing private property. On the other I feel like it's an attempt to rehabilitate a forager notion of what property is private vs. communal, i.e. whatever you can carry on your back is yours, whatever you can't is shared.

comment by Dagon · 2020-08-05T19:48:54.689Z · score: 2 (1 votes) · LW(p) · GW(p)

Ah, yeah. I generally ignore the yay/boo crowd. If I did want to respond, I would probably reject their category of "private property" as not cutting reality at the joint. In most cases where I have had a real discussion, the steelman is about perpetual residual ownership of very-long-term assets, and generational transfers of large quantities of such ownership.

I have a much harder time supporting "yay dynasties".

comment by Vaniver · 2020-08-05T20:46:37.005Z · score: 2 (1 votes) · LW(p) · GW(p)
I have a much harder time supporting "yay dynasties".

I don't know, waqfs seem pretty great to me.

comment by Dagon · 2020-08-05T21:52:27.428Z · score: 2 (1 votes) · LW(p) · GW(p)

Seriously? Seems horrible to me - even more problematic than other perpetual exclusivity of capital. It has all the problems of accumulation over time and failure to (re)distribute in the far future based on need/use, and additionally limits even the "owner" from efficient use or disposition.

comment by Vaniver · 2020-08-06T00:56:38.921Z · score: 3 (2 votes) · LW(p) · GW(p)

So it's a little hard to say, because most of the historical evidence we have of them has them is situations where they're the only stable property rights, and so likely they were over-utilized. It also seems inflexible in important ways, and so I'm more of a fan of the modern American system of trusts.

But the central premise--that rather than willing your property to people, you could will it to a purpose--seems pretty great, once you've incorporated the lesson of lost purposes [LW · GW], and so can write a will that will fail gracefully with time.

comment by Dagon · 2020-08-06T14:05:16.943Z · score: 2 (1 votes) · LW(p) · GW(p)

I think prioritizing wishes of the dead over the those of the living is egregiously wrong.

And, like all such things, context matters so much - the root question (for all of this post's topic) is "compared to what?". It's possible this was more effective than available alternatives (state or bandit seizure of the property), and possible that it happened at a scale where it was fairly efficient use of the property for a long-ish period of time.

comment by Vaniver · 2020-08-06T19:19:03.309Z · score: 15 (8 votes) · LW(p) · GW(p)
I think prioritizing wishes of the dead over the those of the living is egregiously wrong.

The narrowing circle in action!

comment by Dagon · 2020-08-06T19:59:43.230Z · score: 2 (1 votes) · LW(p) · GW(p)

Absolutely. Abandon all hope for a better past! I un-apologetically prioritize the future half of my light-cone.

comment by Vaniver · 2020-08-06T21:19:59.425Z · score: 4 (2 votes) · LW(p) · GW(p)
Abandon all hope for a better past! I un-apologetically prioritize the future half of my light-cone.

Uh, does this also involve 2-boxing in Transparent Newcomb's Problem?

comment by Dagon · 2020-08-06T22:09:10.094Z · score: 3 (2 votes) · LW(p) · GW(p)
Uh, does this also involve 2-boxing in Transparent Newcomb's Problem?

I honestly don't know - a huge amount depends on context and whether my brain can actually deal with the implication of perfect prediction. Omega technology doesn't exist and may or may not be possible.

In other words, yes. If Omega predicted today-me, I don't think I'd get to actually test it - there would only be $1k on one box and the other would be empty. A different me in an imaginary universe where Omega was possible and well-known enough for me to not fight the hypothetical, might be able to believe the setup, and therefore one-box.

Does your jump to this topic imply that you believe human ancestors have Omega-like prediction powers and I should apply reverse-causality to their wishes?

comment by jmh · 2020-08-08T01:04:09.323Z · score: 1 (1 votes) · LW(p) · GW(p)

Lacking a source to support the claim but I am very confident in the statement here, that sound very similar to the critique James Buchanan (Public Choice economist) made of Friedman's Machinery of Freedom. Basically the machine can work as long as everyone has the same understanding of property rights. Once that assumption is lost the machine is broke.

comment by korin43 · 2020-08-04T23:03:08.149Z · score: 4 (3 votes) · LW(p) · GW(p)

Rather than having to petition the commune for a day’s use of a red shirt, I can simply decide to wear my red shirt today. I can make solid plans around decisions that I’m the only major input to. This will sometimes lead to socially suboptimal decisions if coordination were free--maybe I look really bad in red, and a wise commune would give me blue instead--but given that coordination is not free, this is often our best available option.

It's also worth pointing out also that coordination isn't always desirable. If the average member of the commune thinks the best way to deal with a disease is to direct resources at empty passenger airlines and military helicopters, but you think spending time and resources developing vaccines is more important, you can use your own property to develop them instead of trying to get permission.

I think the general case of this is that private property lets you do things that the government* doesn't think are worth it, at the expense of not being able to direct as many resources as the things the government thinks are most important.

* I'm not sure of the right term to use here but government seems like the best word for it

comment by Dagon · 2020-08-04T22:41:28.482Z · score: 3 (2 votes) · LW(p) · GW(p)

In addition to the coordination problem, there is often an incentive problem. Too many decision-makers can be a problem, but even a small number of decision-makers who don't get the benefit/harm of their decision can be problematic.

Private property is one way to ensure that the cost or reward of a decision is felt by the decision-maker.

comment by RamblinDash · 2020-08-05T16:51:18.915Z · score: 2 (2 votes) · LW(p) · GW(p)

Yes, and no. The cost and reward of a decision financially impacts the decisionmaker, although sometimes the magnitude of that effect can be pretty small due to the diminishing marginal utility of money. Meanwhile, something like closing a factory can devastate an entire town, and none of the factory workers, lunch counters, teachers, families, etc. have any say in the decision, whereas their day-to-day experience of their lives is impacted far more profoundly by that decision than the life of the factory owner is.

So it seems like if you want the decision to be made by those who have the most skin in the game, who are affected the most by its outcome, then private ownership of productive capital seems like actually extremely misaligned with that. Now, there may be other reasons to organize society that way, but if you want to align decision-making power with those who are most affected by those decisions, there can be no doubt that the most effective way to maximize that particular metric would be to have factories democratically controlled by the workers and/or the towns.

comment by Dagon · 2020-08-05T19:14:15.256Z · score: 3 (2 votes) · LW(p) · GW(p)
So it seems like if you want the decision to be made by those who have the most skin in the game, who are affected the most by its outcome, then private ownership of productive capital seems like actually extremely misaligned with that

There's a VERY difficult temporal problem with that framing. That is, whether you're talking about cumulative PAST investments as "skin in the game" or just the future rewards/value. I worry about the decision to have a factory in the first place AT LEAST as much as whether to replace the factory with an apartment or mall or whatever.

comment by RamblinDash · 2020-08-05T19:39:10.147Z · score: 3 (3 votes) · LW(p) · GW(p)

Right, the parent comment wasn't necessarily intending to argue that all decisions about whether to open/close factories should be made by workers and/or towns, just to say that private ownership of productive capital does not in fact maximize the metric of "the cost or reward of a decision is felt by the decision-maker," which was what you proposed.

I admitted in my comment that there might be other reasons to have private ownership of productive capital, one of which you identified -- that building factories is good and we should organize society so as to encourage it. But I do want to note an imbalance: In order to create an operate a factory, many people/entities have some ability to affect the decision, which actually does seem commensurate with how they are affected:

  • Entrepreneurs/managers decide when an where to pursue factory projects
  • Providers of financial capital decide whether to lend or purchase securities, and if they do, they can receive monetary
  • Workers can decide whether to work in the factory at the offered wages/conditions, if no workers choose to do that there can be no factory
  • Towns can democratically choose to allow the construction of factories everywhere, only in certain areas, or even ban it completely; the residents of the town are affected in their environment, secondary business opportunities, and tax revenue by that choice

So, nobody can unilaterally open a factory, even in the relatively capitalist USA. They need buy-in from workers and towns, at a minimum, and often also banks. "The cost and reward of a decision" is felt by all these decision-makers, and they all have at least some ability to make the decision. Contrast this with closing a factory:

  • Owners of factories can close a factory unilaterally
  • As long as the decision to close a factory is for outsourcing or whatever, such that it's profit-maximizing, financiers have no reason to stop that decision
  • Workers have no ability to prevent a closure, even though it affects them greatly
  • Towns have no ability to prevent a closure, even though it affects them greatly

The "reward" of a decision to close/outsource is felt by owners and financiers; the direct monetary cost of closing is felt by them if and only if that decision turns out not to be profit-maximizing, and even then, it often represents a small overall impact on their lives. The costs of a decision to close/outsource can be totally devastating to workers and towns, they feel the results to a far greater extent, and they have no ability to participate in the decision.

comment by Vaniver · 2020-08-05T20:52:17.166Z · score: 2 (1 votes) · LW(p) · GW(p)

Tho it should be noted that given the way union / strike law is in the US, isn't it also the case that workers can close a factory unilaterally? [Like, even if the owners could find other workers, they're often prevented from being able to use those other workers instead.] And it is also the case that local governments can close a factory unilaterally (as happened recently for health reasons in many places).

So it's not obvious to me that the owners are uniquely privileged in this regard; for any deal that requires the continued consent of all parties, any of them could back out even though it affects others greatly.

comment by RamblinDash · 2020-08-07T14:01:55.822Z · score: 1 (1 votes) · LW(p) · GW(p)

They are allowed to hire temporary replacement workers, and permanent replacements under some circumstances. Unions typically try to bring a lot of social pressure on said replacement workers ("scabs") to discourage them from agreeing to be such a replacement worker.

comment by ChristianKl · 2020-08-06T10:34:41.124Z · score: 2 (1 votes) · LW(p) · GW(p)

Without property rights you don't get people to invest to build factories. For a long time China was ahead of the West in many regards but without stable property rights you didn't have capital investment and the economic growth that comes with investing capital to make humans more productive. 

comment by Wei_Dai · 2020-08-06T08:20:59.037Z · score: 2 (1 votes) · LW(p) · GW(p)

Many different landlords can make many different decisions, whereas one Housing Bureau will either make one decision for everyone, or make unequal decisions in a corrupt way.

In our economy we have all three of:

  1. individual landlords making decisions about property that they directly own
  2. groups of people pooling capital to buy property, then hiring professional managers to make decisions on behalf of the group (c.f. REIT)
  3. property (e.g., public housing projects, parks) that is owned by various government departments/agencies, and managed by bureaucrats

The point is that 2 and 3 aren't that different in terms of "corruption". In both cases, we (at least in theory) made a deliberate trade-off to accept greater principal-agent costs ("corruption") for some expected benefit the arrangement brings, e.g., greater diversification / spreading of risk in the case of 2. Why isn't the same true for letting the government own everything or a lot more things? (Not sure who you're arguing against, but presumably there's a steelman-version of them that argues that we should accept the "corruption" in that case too because the benefits are greater.)

the people who would rent out the additional floors I add to the house generally don’t comment at the public meeting, whereas the retiree who would have to deal with more cars on the road or a blocked view of the Bay does.

This isn't as bad as it sounds, because one of these is a priced externality, and the other one is an unpriced externality. That is, since you would get rent from the renter, you already have an incentive to speak on their behalf at the meeting. The alternative to such meetings is either you just ignore the unpriced externality (the retiree's blocked view) when you make your decision or the externality has to be handled some other way, like the retiree paying you for a "no additional floor" covenant, or suing you through the court system, both of which also involve coordination costs (that can add up quickly when there are many externalities). Again it's not that clear, at least from this post, that the current system (where everyone who may be affected speaks at the meeting and then some bureaucrat makes a decision that at least supposedly takes all of them into account) isn't actually optimal given the constraints we face.

ETA: Consider if there is in fact a bunch of negative externalities that together outweigh the benefits of building another floor. Without this meeting how would all those affected people realistically coordinate (supposing none of them individually has enough incentive) to stop you?

comment by Vaniver · 2020-08-06T18:38:52.731Z · score: 2 (3 votes) · LW(p) · GW(p)
The point is that 2 and 3 aren't that different in terms of "corruption".

My impression is that this is mostly because of external competitive pressures; my impression is that when the Housing Bureau is the primary source of housing, it is mysteriously the case that better connected people get better housing. When you can buy your own house or enter the affordable housing lottery, most of the rich choose to buy their own house. (It might still be the case that the politically well-connected poor end up with disproportionately many affordable housing slots compared to the unconnected poor, but that's less of a corrupting force because the stakes are smaller overall.)

Like, a system where people are free to coordinate at whatever level makes local sense seems like it's obviously superior, and there are ways in which having corporations allows you to hit better points in the 'aggregated individual benefit minus coordination cost' space.

Consider if there is in fact a bunch of negative externalities that together outweigh the benefits of building another floor. Without this meeting how would all those affected people realistically coordinate (supposing none of them individually has enough incentive) to stop you?

The basic question here for me is something like "rule of law" vs. "rule of men"; for example, Washington DC has the Height Act that prohibits buildings above a certain height (actually related to the street width, but in general it's about 11 stories tall). This gives DC its particular character, and ensures the major government buildings remain impressive compared to their surroundings. When embarking on a construction project in DC, there's no question about how high the government will let you build; it simply won't be above the height cap.

Similarly, a rule that banned backyard cottages in general, or third floors in general, might make sense, as would a law that caused property taxes to be proportional to demand on public services (like traffic and sewer and trash) or to be periodically reassessed (so that improvements in the property lead to increased taxes) instead of simply reassessed at sale. Similarly it could make sense to tax ongoing construction proportional to the length of the construction. That way the externalities would be priced in, either with a clear policy restriction or a tax based on the estimated cost.

Instead, there's a system which has increased uncertainty and coordination cost. Does it make sense to canvass your neighbors before making a change, in order to reduce their opposition? Well, what if you're looking to buy a property in order to improve it? Now pricing a lot becomes much more uncertain, as it also involves estimating the development-friendliness of all neighborhoods in question. This also makes the rules apply unevenly between people; quite possibly more attractive people have an easier time convincing the commitee and their neighbors to let them build than uglier people, for example.

comment by Kenny · 2020-08-27T23:10:04.082Z · score: 1 (1 votes) · LW(p) · GW(p)

This is a great post!

It reminded me (IIRC) of something in a Mencius Moldbug post (or maybe something more recently, under his given name) along the lines of 'property rights are peace treaties'.

comment by clearthis · 2020-08-05T07:14:25.334Z · score: 1 (1 votes) · LW(p) · GW(p)
First, what even do we mean by property? Well, there are material things that are sometimes scarce or rivalrous. If I eat a sandwich, you can’t also eat it; if I sleep in a bed, you can’t also sleep in it at the same time; if an acre of land is rented out for agricultural use, only one of us can collect the rent check.

Why do you describe property as being material things here?

Possible Nitpick:

If I understand you correctly, you use 'excludability' as a defining feature of property. As far as I understand, property comes with varying degrees of excludability and are sometimes not excludable at all (e.g. public property, common property). Maybe it would be useful to think about property more generally as things that come with certain rights (the right to use and transfer it, the right to earn income/interest off of it).

comment by Vaniver · 2020-08-05T18:52:50.843Z · score: 2 (1 votes) · LW(p) · GW(p)

As the end of the paragraph suggests, property can also be immaterial, but I agree that sentence should be tightened up a bit.

As far as I understand, property comes with varying degrees of excludability and are sometimes not excludable at all (e.g. public property, common property).

A lens on public property is that it's where the public uses its right to exclude others from taking ownership of the thing. As Sherlock Holmes is in the public domain, I can't say "Sherlock Holmes is my IP!", whereas I could say that about characters I invent that aren't in the public domain. And the public domain doesn't just extend to things that are currently known; there are whole swaths of intellectual effort where society has decided discoveries cannot be patented.