Property Rights: Necessary but Not Sufficient for Prosperity

At e3ne.org, I have posted some reflections on my last discussion with the Ethics & Economics Challenge students, on the topic of private property rights. The work of Acemoglu, Johnson, and Robinson on how property rights support high levels of development plays a prominent role. Here’s a scatter plot from their famous 2001 paper:

Source: Acemoglu, Johnson, and Robinson (2001)

Economies with greater protection from expropriation have higher per capita incomes. There are plausible reasons to think the relationship is causal. As I note in the post,

If I have a stock of lumber in a warehouse in Oregon, and I hear that a hurricane in New Jersey is causing prices to spike there, I have an incentive to ship lumber there only if I can enjoy the profits of doing so. If the government taxes my profits at 100%, I have no incentive to ship the lumber where it’s needed most. Even if the tax is only 70% or 60%, it reduces my incentives enough that I’m not going to incur a lot of time, effort, and cost to ship the lumber. Similarly, if the government owns the lumber, or no one does, then no one earns the profit from shipping the lumber where it’s needed, and so no one wants to ship the lumber where it’s needed.

Still, private property rights are not sufficient for development:

If private property rights are so great for the economy, why didn’t the economy grow tremendously during the age of classic feudalism, when aristocrats held absolute property rights in their land, and serfs had to work on their estates for low pay? It should be clear that just as prices without property rights do little good, so do property rights without real markets. When a small group of people own vast quantities of land and use their ownership of land to oppress everyone else, you won’t get economic progress. We need private property rights, but they need to be dispersed enough to prevent the biggest property owners from converting their wealth into effectively absolute political power.

For that reason, I’m willing to consider comprehensive redistribution of land in former conquistador states, where owners of the great latifundias work the land inefficiently with hired laborers and convert their market power in the rental market into political power.

The other benefit of private property rights I talked about with the students was environmental. Private property rights can solve the “tragedy of the commons,” whereby people tend to overuse and deplete open-access resources. In that vein, I shared with them this very interesting article on different property regimes in the Maine lobster fishery. Where (communal) property rights are strictly defined and enforced, lobster are not overfished: lobster caught are larger and more mature, and lobstermen earn higher wages.

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Against Natalism

There seems to be very little disagreement among market-oriented economists that the optimal number of people on the planet is much larger than the number of people currently alive (see here, here, and here for examples). Here are some reasons for skepticism about that claim.

• The main advantage of more people is a deepening of the market and the division of labor. More people means more ideas and more specialization. But the law of diminishing marginal productivity suggests that each additional unit of labor and of human capital is of less value. Furthermore, in a world of 7 billion people we are going to get roughly as many outlier geniuses as we do in a world of 9, 10, or 15 billion.
• Along with diminishing marginal benefits of people, there are rising marginal costs. The human footprint on the natural environment increases with population, and intrudes ever more into ever scarcer (and more socially valuable) undisturbed habitats. Some free-market types like Ron Bailey suggest that this is not the case by pointing to the possibility of peak farmland in the near future. But peak farmland is only achievable (if it is) through ever more intensive applications of synthetic fertilizer and pesticide. In one sense this capital-intensive agriculture may be “sustainable,” in the sense that human ingenuity will always find new fertilizers and new pesticides to keep agricultural productivity growing, but the negative externalities of these methods are considerable. The economic costs alone of invasive species are immense: think about the costs associated with the chestnut blight, Dutch elm disease, hemlock woolly adelgid, and emerald ash borer in North America alone. They run into the billions. A lot of people look around and say, “Well, I see a lot of green, so the environment must be doing OK.” But 91% of all land in the United States consists of human-disturbed habitats. Disturbed habitats are not necessarily bad for biodiversity, but undisturbed habitats are also important — and the fewer there are, the more valuable each remaining one is. More people means more disturbance, more invasions, more “dead zones,” and the like. And yes, the costs are not just economic, but aesthetic. I have no shame in admitting that I aesthetically value the environment, that other people do as well, and that those values should matter in any schedule of “social welfare.” Is a world without butterflies a world worth living in?
• People don’t like being crowded. Part of the reason why people move to suburbs and exurbs is not just high crime and costs in central cities, but distance from other people. Where do people go to “get away”? Generally rural and wilderness areas. The U.S. still has a lot of open space and could perhaps tolerate 50% more population without feeling intolerably dense, but even in this country, much or most of the wilderness is found in areas with little water or harsh climates.
• More people in a country mean more agency problems with the government. The people find it more difficult to constrain their rulers when their rulers don’t pay attention to individual voices, or even small clusters of people. As a country of over 300 million, the U.S. would face severe agency problems were it not for the federal system — and even so, agency problems are significant. In essence, the rulers are less constrained by the people. Higher populations around the world will mean more prevalent problems with mass democracy and mass dictatorship.
• More people will mean more infectious disease. It is a basic principle of ecology that a higher population of a species encourages greater parasitism on that species. As human populations have increased, so have human diseases. Epidemics of influenza have become more frequent. These viral infections are difficult to prevent and treat. Of course, as medical technology proceeds, humans will fight better against infectious diseases of all kinds. But organisms adapt, and medical technologies will of necessity focus on life-threatening diseases rather than chronic and periodic diseases that are not life-threatening. But even the common cold significantly decreases human well-being. In a future world much more densely populated, we could expect human beings to spend much of their lives ill with minor diseases.

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Best Sentence I’ve Read Today – On Minimum Parking Requirements

Donald Shoup of UCLA:

“Minimum parking requirements act like a fertility drug for cars.”

HT: MR citing NYT.

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In Which the Town Comes for My Garden

I’m a native plant gardener. I’ve removed all of my back lawn and replaced it with native trees, shrubs, vines, wildflowers, ferns, and grass and grass-like species, and I’ve removed most of my front lawn and done the same, apart from some mown paths. Why? Because native plants are better for the environment. Our wildlife, from insects to birds, coevolved with these plants and are well adapted to using them for survival. Alien plants often require special help to survive (watering, fertilizing, spraying with pesticides, none of which I do), or else they take over because they lack their natural predators to keep them in check. My native garden has attracted many species of birds, including things like flycatchers that one rarely sees in cities. The garden is awash in bees, moths, and butterflies the entire summer. Here are some pictures of the gardens:

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Today I received a notice of code violations. Supposedly someone complained about my front yard, and now the town is giving me two days (!) to remedy the violations, or the town will come and mow the garden down and bill me for the pleasure.

The first violation is straightforward and easily dealt with. The town prohibits trees and shrubs from obstructing vision from private driveways and requires them to be no more than three feet in height. No problem – I try to keep the shrubs by the sidewalk trimmed for public convenience, but some of them are as tall as five feet. I’ll give them a bad haircut now, and then in the fall, as per usual, I will cut them to the ground (these species respond well to this kind of hard pruning).

It’s the next citation that I find very troubling:

According to the notice, “weed and plant growth” in excess of 10 inches is prohibited. Well, that would prohibit pretty much any garden, wouldn’t it? But they clearly misrepresented the text of the ordinance, the definitions in which read as follows:

GRASS, WEEDS or PLANT GROWTH
All grasses, annual plants, trees or vegetation that are harmful to the public welfare, including stumps, roots, filth, garbage, or trash. The term “grass, weeds and plant growth” shall not include cultivated flowers, healthy trees, shrubs, or gardens.

NOXIOUS WEEDS
Plant growth deemed by the Town of Tonawanda Code Enforcement Officer as potentially dangerous to the public welfare, or such plant growth that is an unattractive public nuisance or grows in an undesirable location.

In short, my garden is fully exempted from this ordinance. Furthermore, the code enforcement officer followed the wrong procedure in citing my property. From the ordinance:

B. Written notice may be given by registered mail addressed to the owner of the parcel of real property in question together with posting at the parcel of real property in question or by personal delivery to the owner. Service shall be deemed complete upon the deposit of the registered mailing in a postpaid envelope and the posting at the real property in question and, if by personal delivery, upon the delivery of notice in person to the owner of the parcel of real property.

C. Such notice shall specify the violation(s) as determined by the Code Enforcement Officer and shall direct the owner of the parcel of real property in question to remedy the violation(s) and bring the parcel of real property into compliance with the provisions of this chapter within 10 calendar days of service of notice.

The notice did not come by registered mail; it came by regular mail. The letter does not give me 10 days from the date of service; it gives me 7 days from the date on the letter (just 2 days from the date I received it).

I believe I am on firm legal ground. The concern, however, is that the town will come and mow down my gardens without due process. This has happened all over the country and in Canada. Here’s one example from Illinois, and here’s another from Toronto. The Environmental Protection Agency even provides advice to homeowners on fighting their town governments!

From a utilitarian perspective, government should probably be subsidizing my work rather than prohibiting it. I’m providing benefits to the community and the environment. I’m still optimistic that this will end well, that I’ll be able to get in touch with either the inspector or the mayor, and the town will come to their senses. If not… watch this space.

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Greens and Nuclear Power

Environmentalists are coming around to the idea of nuclear power.  This is good news – though we should be just as critical of any rent-seeking by the nuclear power industry as we would of other “green” technology companies and their allies in the government.

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The Ethics of the Prisoner’s Dilemma

The Prisoner’s Dilemma is a concept used to model a strategic interaction in which actors choosing their behaviors rationally according to their own self-interest make everyone worse off than they could have been otherwise. This particular “game” is used both to understand failures of cooperation such as arms races and ethnic warfare and to prescribe particular solutions designed to elicit cooperation. The key feature of the game is that, when the game is played only once, no matter what another player does (cooperating with me or trying to exploit me), I am better off trying to exploit the other player – so in the end, every player exploits rather than cooperates, and they are all worse off than they would have been could someone have “forced” them to cooperate. What has been less often analyzed, to my knowledge, is the ethics of the Prisoner’s Dilemma game.

Whether one has a duty to cooperate with others in Prisoner’s Dilemma-like situations is an important question both for policy and for daily life. Take the question of one’s duties toward the environment. The environment is in many aspects a public good subject to Prisoner’s Dilemma problems. Clean air, clean water, and biodiversity are benefits that we all enjoy, and from which non-contributors cannot feasibly be excluded. Therefore, people have an incentive to take less care of the environment than they would could the environment be privatized. Whether other people “do their part” or not, I’m better off not trying to contribute.

So let’s take some examples of things one could do for the benefit of the environment: eating less meat; polluting less by, e.g., driving less; propagating native species and destroying invasive species; reducing, reusing, and recycling; not littering; not spraying pesticides. Assume for the sake of argument that we will all benefit if everyone did these things. Do we then have a duty to do them? Would it be wrong not to do them?

I’ll derive my view from a very simple starting point: One has a duty not to exploit others, but one does not have a duty to allow oneself to be exploited. In the simple Prisoner’s Dilemma game, each player has only two options: cooperate (and be exploited) or defect (and exploit). In real life, however, there are different gradations of action, from, e.g., walking or riding a bicycle everywhere to driving a Hummer. Moreover, cooperation isn’t actually zero, and therefore cooperation doesn’t always entail being exploited. These considerations imply that some degree of cooperation in Prisoner’s Dilemma situations might actually be morally mandatory, but that devoting your life to providing public goods for others would not be.

Now, the latter part of the starting point could be made even stronger. Let’s say that not only does one not have a duty to allow oneself to be exploited, but one does not have a general duty to sacrifice one’s own interests for the benefit of others. Then, the benefits of the existing scheme of mutual cooperation, including your own, must be greater to you, individually, than the costs of your individual contribution, for that contribution to be morally mandatory. To see this, suppose it were otherwise. Suppose that your efforts on behalf of the environment, say, actually made you worse off than you would be if no one did what you did, including yourself. If that were the case, then you would be making yourself worse off for the benefit of others. That would count as a praiseworthy and supererogatory sacrifice, but not a moral requirement.

So here are my tentative conclusions. If your efforts, combined with the really existing efforts of everyone else, make you better off (taking opportunity costs into account) relative to a situation in which no one undertakes effort, then you have a moral duty to make those efforts. To do otherwise would be to free-ride on the efforts of others and thus to exploit them, which is wrong. If this condition is not satisfied, however, you do not have a duty to contribute – but it would still be praiseworthy to do so, unless the effort is clearly hopeless, in which case the impartial observer is more likely to have pity on your madness than praise for it. I actually think this is a rather strong conclusion and implies that we have a duty to undertake some (but not extraordinary) positive action on behalf of the environment, for instance. What remains interesting and unusual about the Prisoner’s Dilemma is that it models a set of cases for which the rightness of one person’s actions apparently depends on what others are doing.

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