Thursday, April 26, 2018

Resource Flexibility Requires Investment Flexibility

When does private ownership actually hinder allocative efficiency? Generally, ownership makes it possible for individuals to put resources to good use. Even so, ownership of property in particular, remains legally designated in ways that sometime make it a blunt instrument for personal intentions versus actual outcomes. In other words, present day legal property constructs aren't quite as optimal as one might expect.

For instance: Over the years I've observed too many properties sitting in limbo indefinitely, once ownership is cut short through death or other forms of separation. Even though surviving heirs can sometimes reach agreement re property settlement without discord and hard feelings, often the process is difficult for all concerned - including the communities which contain these properties within their boundaries.

Among the reasons I've sought flexible and incremental ownership means, is the fact legal property disputes can sometimes make the difference between personal success and failure, in the course of one's lifetime. Today's inflexible ownership patterns also encourage people to assume others aren't capable of committing to ownership and responsibility. But often, many individuals could live more meaningful lives, if ownership options were constructed so as to allow people to build wealth gradually - thereby creating stamina for potentially broader personal commitments at the same time.

These market design priors on my part, encouraged me to take note of property arguments in a recent publication, "Radical Markets: Uprooting Capitalism and Democracy for a Just Society" by Eric Posner and Glen Weyl. Since I've not yet had the chance to read the first chapter (which is included with the above link), I plan to read some of the book reviews whenever possible. For instance, Diane Coyle wrote:
It's extremely thought provoking and clearly brilliant - yet also barking mad. This is the territory of thought experiment rather than policy proposal.
At the very least, some thought experiments could be tried in local decentralized market settings - they just don't need to overturn general equilibrium scenarios and fully functioning municipal frameworks. Vitalik Buterin's review of the book has some particularly useful perspective about the investment problem of market efficiency and allocation:
As it turns out, it is absolutely possible to have a system that contains markets but not property rights; at the end of the year, collect every piece of property, and at the start of the next year have the government auction every piece out to the highest bidder. This kind of system is intuitively quite unrealistic and impractical, but it has the benefit that it achieves perfect allocative efficiency: every year, every object goes to the person who can derive the most value from it (i.e. the highest bidder). It also gives the government a large amount of revenue that could be used to completely substitute income and sales tax or fund a basic income.
However:
Re-auctioning everything once a year completely solves this problem of allocative efficiency, but at a very high cost to investment efficiency: there's no point in building a house in the first place if six months later it will get taken away from you and re-sold in an auction.
Even though it's not reasonable to subject traditional private property to yearly auctions, some aspects of yearly auctioning could apply, should people use building components to spatially organize for mutual workplace patterns. While spatial organizational patterns for resource flexibility have long been part of business organization, we've yet to apply these organizational options to the broader coordination of time based service activities.

How to envision a starting point? Any planning for walkable densities needs careful consideration for those whose could especially benefit by closer proximity to core economic activity. New communities might structure around a double core - one with more traditional forms of zoning options, alongside a service based core where young and old alike would be able to purchase and manage their own areas for daily interaction with others. Instead of being institutionally segmented off elsewhere, away from the general public, many who are now arbitrarily marginalized, could finally take part in life on more spontaneous terms. In core settings for services generation, perhaps a yearly auction for property arrangements would come in handy, so that participants could use the process to pay for the yearly operational costs for the relevant properties.

Again, what would make the auctioning process possible for yearly operational costs, would be the ownership of flexible building components which could be moved about across the utility grids which these communities already have in place. While the latter would also be a form of incremental shared ownership, as far as I can presently discern, this form of ownership has a continual aspect which would need to be constructed quite differently.

Granted, the forms of investment suggested in this post, may not have the path breaking quality associated with "cutting edge" investment opportunities since they're intended for individuals who are less concerned with monetary reward than gains in lifestyle options. These groups wouldn't be investing for "more of everything", but using resources already at their disposal to create something which might otherwise not have been possible. While it's not feasible to preserve investment flexibility for some resource capacity, fortunately, alternatives are possible. As Ian Hathaway wrote:
So before continuing down The More of Everything path, consider an alternative. Sometimes the answer is more of something. But often, a more relevant question is how well something is being done. Are you getting the most out of what you already have? What can be done to improve community cohesion today? To what extent are the existing pieces integrating in a productive way?
In my experience the answer to these questions comes not from adding, but from activating and transforming...It's not always the big moves that get you where you need to go.

No comments:

Post a Comment