Posts Tagged ‘regulation’

On the Concept of Ownership

Monday, 23 May 2016

I have long and often encountered discussion that implicitly or explicitly involves notions of property or of ownership, which discussion is rendered incoherent from a failure to consider what it means for something to be property, what it means to own something.

Some confusion arises because we have come often to use the word property casually to mean an object (physical or more abstract) to which some sort of ownership may apply, without our considering whether the object is well conceptualized for purposes of considering property rights,[1] and without considering that actual ownership associated with that object might be distributed in some complicated ways amongst multiple parties.

One might, for some reason, associate a plot of land with an object imagined as beginning at the center of the Earth and extending to some sort of limits of the atmosphere (or beyond); from such an association, and then from a presumption that the whole object were property, farmers were once known to shoot at airplanes as trespassing vehicles. Yet other folk would assert that owning a plot of land as such only entitled one to control things to lesser depths and heights, in which case the rights could be associated with a smaller object, representing a sub-object as it were. One person might be thought to have the right to farm the aforementioned land, and another to extract its mineral resources so long as he didn't thereby interfere with the farming. Possibly others would claim peculiar easements, allowing them to travel through some or all of the object without thereby trespassing. There might be purported rights entitling still others to flows of resources such water, air, and electromagnetic radiation travelling through the object. In the case of sunlight (an electromagnetic radiation), the rights would typically be presumed to involve only some space above the soil, and the farmer might both have claims against her neighbors doing things that reduced her sunlight and be constrained by similar claims for her neighbors.

If we are thinking in terms of one object, and then change to thinking of an object within it, previously relevant rights of ownership may become irrelevant. If we instead think in terms of an object of which our original object is but a part, then new claims may become relevant. Two objects, neither of which is completely contained in the other, may share some third object as a part; so that any thorough consideration of ownership involving these two objects containing the third may involve rights that are literally identical and rights that are different. The minimal object relevant to describe some asserted set of property rights might not be sufficient to describe other rights none-the-less associated with that object. The minimal object in each of the previously mentioned cases (of farming, of easement, of mineral extraction, and of unobstructed resource flow) is somewhat different from the minimal object in the other cases.

A farmer who somehow forfeits her right not to have sunlight artificially obstructed may still be imagined to own the plot of land on which she grew her crops, yet she doesn't own what once she owned. Likewise, a house-holder who somehow surrenders his right to come and go from the plot on which the house sits doesn't own what once he owned. And, though it would perhaps seem very unsual, one might imagine these rights not transformed into claims for those who have prior rights to surrounding spaces, but instead coming into possession of third parties. For example, perhaps I speculate that I can buy whatever rights I need to build a skyscraper, on the assumption that I can buy a right to block the sunlight to a neighboring farm; I could purchase that latter right first, then discover that I am thwarted as to other purchases. This might work nicely for the farmer, but she no longer has a right that she once had; she no longer owns something that she once owned.

We can still express what things are owned as if they are objects, but we must then select our objects to match our rights of use. And our discourse can become strained and unnatural if we insist on always treating the thing owned as a distinct object rather than as a right of use. For example, if Timo is exclusively entitled to inhabit a cabin in the Winter and james is likewise entitled to inhabit it in the Summer, and we must express them as owning distinct objects, then we must treat the cabin in Winter as one object and the cabin in Summer as another. Indeed, we will surely have to be far more contrived in our construction of objects to account for what the two jointly do not own of the cabin! On the other hand, we can say that each has a right to use the cabin in some way without necessarily specifying how other rights of use are distributed; the concept of the cabin is available without first settling questions of ownership.

I don't propose that we generally stop using the word property as in the ordinary sense of a piece of property, merely that we understand that this everyday use may be misleading. Nor would I suggest that we should somehow stop thinking in terms of objects when we carefully consider ownership. But we must be alert to the fact that our choice of objects with which to think is largely taxonomic and to some degree arbitrary, and we should not take results that are no more than artefacts of that taxonomy as anything more profound.

In fact, the right of use may be recognized as itself an object of an abstract sort, but the right to use a right of use is not distinct from simply that right of use, and thus cannot be dissociated from it.[1.5]


My laboring of the relationship of ownership to objects and their uses isn't quibbling nor pirouetting. People who imagine an object as such to be owned tend all too often to imagine it somehow being owned beyond any of its various possible uses. They thus imagine that it can remain the property of one person or group even as another party — most often those in control of the state — appropriate its use, and even as this second party seizes every right of use. It then also becomes absurdly thinkable that one person might retain every right of use that she had, associated with an object, yet transfer ownership to some other party. Ownership would be reduced to absolutely nothing more than something such as a formal title.

When the state regulates property, it is taking rights of use and hence ownership. This transfer is relevant to questions of compensation (as in the case of the guarantees of the Fifth Amendment to the US Constitution[2]), and of whether state regulation of the means of production is a form of socialism.


[1] The word object comes from the Latin ob-iacere, meaning throw-before, and referred originally to that thrown before the mind. What we now call objects are, however, mental organizations of what is thrown before us. Thus, to use a classic example, we can talk about my hand as an object, and my fist as an object; they seem to be the same object, yet only sometimes. (We may still, in good conscience, use the word objective for perceptible external reality. And extending it to include unperceived and imperceptible external reality shouldn't cause more than mild discomfort; the rightful demands of etymology are not unlimited.)

[1.5] This paragraph was added on 24 May.

[2] That Amendment (with an underscore by me) reads

No person shall be held to answer for a capital, or otherwise infamous crime, unless on a presentment or indictment of a grand jury, except in cases arising in the land or naval forces, or in the militia, when in actual service in time of war or public danger; nor shall any person be subject for the same offense to be twice put in jeopardy of life or limb; nor shall be compelled in any criminal case to be a witness against himself, nor be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.

Quite Different

Thursday, 8 October 2009

Consider two propositions:

  • The first is that markets are smart, to the extent that they cannot be tricked into anything unless one carefully hides most or all of the contrary evidence.
  • The second is that, left unregulated, markets produce some best possible outcomes.
These aren't at all the same proposition. On the one hand, something can be hard to deceive, yet work at purposes contrary to those that one favors. On the other hand, a mechanism can be vulnerable to some sorts of disruption but, in the absence of that disruption, perform some task well. I'm not saying that the propositions are contrary; they could be simultaneously true; none-the-less, they're plainly not identical.

The run-up to the latest economic crisis seems to have been founded in no small part by a confusion of these two distinct propositions. The Bush Administration represented itself — and may well have considered itself — free market, in-so-far as it expected considerable resilience on the part of the market in the face of remarkable levels of state borrowing and considerable other interventions (compassionately conservative or kleptocratic). And Alan Greenspan, who surely considered himself a believer in laissez faire, is these days explaining his optimistic proclamations from before the crisis as stemming from a failure to reälize that investors would not recognize that a boom could not last forever, to which lack of recognition he also attributes the crisis, as if irrational exuberance were simply a Keynesian animal spirit, rather than a product of things such as lending regulations and Federal Reserve interest rate policy.

Meanwhile, many of the Keynesians, socialists, and pragmatic technocrats (long-standing or born-again) are arguing that the fact that the market could be fooled shows that markets aren't clever and that thus various sorts of interventions are needed, as if any defense of free markets must hang upon a belief that markets are simply too clever to be fooled. Left unaddressed is whether the confusion were endogenous or brought on by state intervention, whether those prior interventions that may have been the cause of the confusion produce actual benefits worth the costs of that confusion, and whether more intervention would produce a more clever system or a less clever system.

In fact, there are various long-established free-market schools of thought that attribute economic crises to a propensity of state intervention to fool economic participants. For example, it is difficult to distinguish to what extent interest rates reflect the supply and demand of private savings for future consumption, and to what extent they are an artefact of central bank intervention for other purposes. In the face of Federal Reserve manipulation of interest rates, the market will not be sufficiently smart to see what the price of loanable funds should be, and therefore will almost certainly build too much or too little for the future.

$5.833 Billion

Monday, 3 August 2009
SEC Charges Bank of America for Failing to Disclose Merrill Lynch Bonus Payments from the SEC

The Securities and Exchange Commission today charged Bank of America Corporation for misleading investors about billions of dollars in bonuses that were being paid to Merrill Lynch & Co. executives at the time of its acquisition of the firm. Bank of America agreed to settle the SEC's charges and pay a penalty of $33 million.

The SEC alleges that in proxy materials soliciting the votes of shareholders on the proposed acquisition of Merrill, Bank of America stated that Merrill had agreed that it would not pay year-end performance bonuses or other discretionary compensation to its executives prior to the closing of the merger without Bank of America's consent. In fact, Bank of America had already contractually authorized Merrill to pay up to $5.8 billion in discretionary bonuses to Merrill executives for 2008. According to the SEC's complaint, the disclosures in the proxy statement were rendered materially false and misleading by the existence of the prior undisclosed agreement allowing Merrill to pay billions of dollars in bonuses for 2008.

So, the SEC asserts that the officers of Bank of America stole about $5.8 billion from their stock-holders, but has agreed to settle the case in exchange for $33 million from, uhm, the stock-holders.

Compromising Health Insurance

Tuesday, 28 July 2009
Senate group omitting Dem health goals by David Espo of the AP
Like bills drafted by Democrats, the proposal under discussion by six members on the Senate Finance Committee would bar insurance companies from denying coverage to any applicant. Nor could insurers charge higher premiums on the basis of pre-existing medical conditions.

[…]

Individuals would have a mandate to buy affordable insurance, but companies would not have a requirement to offer it.

Let's walk through what it would mean if insurers could not deny coverage to any applicant and could not charge higher premiums on the basis of preëxisting medical conditions.

The out-lays of insurers would of course increase, so the they will do one and likely both of two things:

  • Increase premiums for all subscribers: Those without preëxisting conditions would pay more than previously, to off-set the out-lays for those with preëxisting conditions.
  • Reduce coverage for all subscribers: The contractual liabilities of insurance companies would be reduced in the case of conditions that could be preëxisting, so that subscribers who developed such conditions after subscription would receive less treatment or face greater out-of-pocket expense.
So the buck-per-bang price of insurance (and probably the absolute price) would increase. This would occur regardless of whether subscription were mandatory, but I think that the consequent increase in price would be greater were coverage not mandatory.

In the absence of requiring people to purchase coverage, fewer people would buy insurance voluntarily. Those most likely to reduce their demand for insurance would be the less affluent and those who perceived themselves as relatively healthy. A significant share of the latter would indeed be relatively healthy, and their departure would mean that the average out-lay per subscriber would increase, which would push-up costs. The departure of the less affluent would tend to push-down out-lays, as the less affluent tend to lead less healthy life-styles, but it would be unreasonable to expect the less affluent to depart in sufficient numbers to restore the lower price, and I'm not aware of anyone advocating a strategy of pricing the poor out of the insurance market.

In fact, without compulsory subscription, it becomes less reasonable to subscribe until one actually needs treatment. Coverage would no longer function as insurance because it needn't be purchased on a precautionary basis. Instead, subscription would simply be a buy-in for some programme of medical care. When the expected cost of needed medical care were less than the buy-in price, one should not purchase a subscription; when the expected cost of needed care were greater, one should buy a subscription.

The proposal is to make subscription compulsory, in which case it's not clear why insurance companies should continue to be involved at all. Insurance premiums would have been replaced with a tax (regardless of whether it were called a tax or called a user fee or called a premium), and the insurance companies would be functioning as extensions of the state. Possibly a bona fide insurance could be offered to supplement coverage provided under the proposal, but it remains none-the-less unclear what legitimate reason there might be for using insurance companies to collecting a tax or to reïmburse those who provided state-mandated coverage. I'm inclined to interpret the intent in part to be to buy-off the insurance companies, giving them what will seem a guaranteed source of revenue, and in part to give a private-sector façade to a state monopsony.

Returning to the issue of the increase in buck-per-bang price, a consequence is going to be that most people who would insure in the absence of the proposed measures are going to have less coverage in their presence, unless they are required to have as much or more coverage than before, at the greater prices implied by not imposing higher fees on those with preëxisting conditions.