15 November 2010

Weakening and strengthening property rights

Market failure analysis should really be about how well the alternative systems to market allocations and price mechanisms work, and under which circumstances.
  • Excludable-rival goods are well suited for market allocation. 
  • Excludable-non-rival goods (like information) should be produced by tradition rather than by trade. Such excludable-non-rival goods gain their value from the quality rather than the quantity of the good, and quality is best engendered traditionally. 
  • Non-excludable-rival goods suffer from the open-access problem (the tragedy of the commons problem) which is really a covenantal problem. The good is over-harvested because the original owner is not being recognized. 
So in the one case property rights need to be weakened so that the matter of excellence can be passed on; in the other case property rights need to be strengthened across the covenantal divide. 

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