Life, Liberty, but What About Property?

No, it’s not trendy in this particular day and age as a fundamental basis for good society, but here’s the thing: I unabashedly love property rights and their institutions. Of all the foundations that have made up free and prosperous societies in the past, whether you cite Democracy, Liberty, Equality, or what have you, I believe property rights receive the least appreciation and understanding of them all. Perhaps it is their complexity, the ease at which they can be taken for granted, the connotations of greed and shallowness too often associated with them in the culture, or the way that they can be exercised, like many effective tools, for evil purposes as well as good. Regardless, at their fundamental level, property norms play a powerful role in very often establishing societal stability, mutually beneficial outcomes, and a host of other benefits highlighted by numerous thinkers across economics. And they are profound.

As Alchian and Demsetz modeled, property norms have the quality of giving humans the noble ability to project their own individual and unique plans and passions regarding the world of today into the realizations of tomorrow through stable expectations and personal investment through foresight. As Adam Smith may have rightly pointed out, this a critical feature that makes humanity on this earth unique in scope, potential, and industry. Strong property rights, when combined with value for human dignity, indicate our ability to appreciate and pay respect to the plans, intentions, and dreams of others at a basic level. We may not always agree with those plans, but we certainly all want our own versions treated with respect and can find in our compromise the roots of cooperation and solution to some of the most pressing challenges of the human condition.

I hope that the economics profession can forgive me for waxing romantically on a topic so carefully and precisely studied partly for the purpose of exactly not being prone to whims and changing emotions regarding human behavior. To make up for this, and end on a formal note, I have here a classic, simultaneous game theoretic model underlying the fields of public economics and public choice that reveals the key variables of human decision making to admit a common situation in which property rights are proven a public good under the circumstance provided. When the properties of joint supply and absence of excludability are present together, any Samuelsonian public good, in this case, property rights and enforcement, can be demonstrated as having the capacity for mutual benefit from cooperation so long as the cost of enforcement is less than the joint benefits of the provisions. The model is technically a Prisoner’s Dilemma, but beyond that it demonstrates a framework for understanding how we move from the initial state of nature to the state of society. The model shows the way, but it is up to human ingenuity and the correct sets of rules to chart the real path to situations in which we all can find these improvements in our lives.

Feel free to ask any technical questions or offer correction. This is one of my favorite game theory models. I hope it offers some clarity on why property norms can be so important, and what we forsake when we abandon them.

Credit for introducing me to the model belongs to Dennis C. Mueller, author of Public Choice III.

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