Property as Coordination Minimization

by Vaniver4 min read4th Aug 202035 comments

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EconomicsCoordination / CooperationWorld Optimization
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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.

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