17 November 2010

Cashing in and cashing out

 The free rider problem is in effect the same as is the open access problem. In both cases, each decision-maker ought to invest in a commonly held asset – in the free rider case it is, say, a park that would be non-excludable and non-rival; in the open access case it is, say, a thriving fish population that would be non-excludable and rival. The challenge is to create an institution that enables the possibility of respect for property not one's own. 
These (free-rider and open access) market failures occur because the definition of property extends only to the private. The critique of radical fundamentalist free markets is the critique of the curse of greed where the society countenances the arrogation to one's private property what by rights should flow traditionally. At the base of the argument for free markets is the implicit assumption that private property will foster craftsmanship. In fact, as we are seeing today, private property could just as easily foster the opposite of craftsmanship, the impulse to cash out. Indeed, the very intrusion of the free market and the restructuring of society to aggrandize private property is a form of cashing out where the tradita of quality and craft are cashed out by the purveyors of free market institutions and values. 
This impulse to cash out is a version of Gresham's Law where bad values drive out good values. Gresham's Law explains the action of private property and the free market driving out the high quality tradita of gift exchange. Cashing in and cashing out are two sides of the same coin, so to speak. In the one case, where the possibilities of growth and development are abundant, it makes for widespread investment in the future that results in a radical transformation of society and the unleashing of much pent-up creative energy in the population. In the other case, where the opportunities for growth and development are scarce, it makes for financial finagling that results in a radical re-structuring of society and the wastage of much built-up creative energy in the population. 
Private property works relatively well when the context is moderate general scarcity where each person must fend for himself but it's not a crisis. That is particularly true when there is not much in the way of social safety nets. Common wealth undermines the system of private property because it encourages free riding while it does not promote craftsmanship, because the market has already eliminated the traditional institutions of gift exchange. 

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