In reading the 43 pages of Rizzo's notes on property rights, I saw how rights create justice, wealth, and peace, but there are still some problems. Property rights come from changes in the way of producing, changes in values, or changes in hopes. They are the human rights we have in regards to property. In order to protect these property rights, we have institutions that allow heterogeneity and scarcity in society.
I found all the notes interesting, full of historical examples and contradictions. I found the discussion on my decisions affecting society interesting as I don't really think about it that often. While people don't care about my personal decisions in wasting my property, they might disagree with my decisions as they sabotage society's goals.
I found the objections very interesting as counterarguments usually are. First, was that private property relies on selfishness. This argument is wrong because people want different things and do different things with their property and because it poses "false alternatives: love, trade, force."The second objection on the misallocation of resources (one man starving while other people starve) is true but is hard to regulate. I guess governments would like to think that the rich would feed the poor but the rich to waste food. But in reality when your mom says "don't waste the food, there are people in Africa starving!", are you going to ship them the leftovers? The third objection is very interesting especially today as it deals with the fact that men aren't really free. There is the threat of socialism and communism and Americans fear this impending doom under the new health care bill. The forth objection dealt with the origin of property rights and looked at Hobbes (saying rights come from the government) and Locke (rights are natural rights). This argument still is alive today. The fifth objection dealt with how property rights are truly just human rights in regards to property.
There was then a quick history lesson showing the feudal system and how monarchs would give property. Then through evolution property rights occurred spontaneously as individuals seek their own plans and properties.
The problems of property rights presented at the end were very interesting. First the government protects our rights but steals our property. Second, there is the fragmenting of rights shown in communist Russia. Then there are the problems of universality not always being possible, equity making it difficult to allocate property rights, an information problem,and markets making mistakes.
Despite the extensive notes, I had questions.
1. Playing off Hobbes and Locke, what is the origin of property rights? Government given or God given or a mix?
2. If people have the rights to delegate trade by property rights, what is the basis for governments to make laws preventing this trade? Ignoring mercantilism, why are there laws preventing property rights of scalping tickets or selling illegal things? The 5th amendment of the US constitution states that people shouldn't "be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation." When does the issue of government taking our property rights away become an issue under this amendment?
3. At what point does my "selfishness" that is purely me wasting my property on what I feel like harm society? It seems that almost all people are selfish and harming society under the definition of wasting property on whatever they want. So why isn't our society and economy horrible?
We read these notes because property rights tell individuals how to use our property in the market. The notes also explored the problems with property rights that have affected society. Also the notes dealt with trade under property rights.
Saturday, October 22, 2011
Rule of Law in Mel Weekend
This weekend was Meliora Weekend at Rochester, a weekend full of fun and excitement for parents and alum. However, there was a huge controversy over tickets to see the keynote speaker, former President Bill Clinton.
The controversy was that the tickets were limited and the alum and "big donors" got first dibs on the tickets. The rest of the university had to go online while the registration crashed and were unable to get tickets. There was then a lottery for some students to get tickets, but most students scalped these tickets.
The University of Rochester violated the Rule of Law. This says that there should be no special privilege given by a governing body to certain people. The University did just this as they gave the alum and donors the tickets to see Bill Clinton (indirectly because they had early registration) and had everyone else get what was left over.
Some students were in uproar and articles in the school newspaper showed how upset some students were at the Universities unfairness. They thought there should be no favoritism and if there was then it should be to the students who go to the University - the alum had their turn here.
Every group is going to say they should have the special privilege but no one should. If anyone should get the privilege, I can see why they would give it to the alum as they are the ones donating to this new $1.2 billion plan.
But there was no equity in the ticket distribution. There was no horizontal equity that treated everyone as equal people. Instead they favored one certain group, violating the Rule of Law.
The controversy was that the tickets were limited and the alum and "big donors" got first dibs on the tickets. The rest of the university had to go online while the registration crashed and were unable to get tickets. There was then a lottery for some students to get tickets, but most students scalped these tickets.
The University of Rochester violated the Rule of Law. This says that there should be no special privilege given by a governing body to certain people. The University did just this as they gave the alum and donors the tickets to see Bill Clinton (indirectly because they had early registration) and had everyone else get what was left over.
Some students were in uproar and articles in the school newspaper showed how upset some students were at the Universities unfairness. They thought there should be no favoritism and if there was then it should be to the students who go to the University - the alum had their turn here.
Every group is going to say they should have the special privilege but no one should. If anyone should get the privilege, I can see why they would give it to the alum as they are the ones donating to this new $1.2 billion plan.
But there was no equity in the ticket distribution. There was no horizontal equity that treated everyone as equal people. Instead they favored one certain group, violating the Rule of Law.
Class 21 - Making the World Richer and PPF/PPC
Today we talked about comparative advantage.
One example is Rizzo has a huge collection of baseball cards worth $8000 but is missing one card so it is really just $1000. He has an extra card worth $200 and trades it for the needed card worth $0.02. Rizzo turned something worth $200 into $7000 while his friend turned the $0.02 card into $200. Rizzo had $1200 and his friend had $0.02. After the trade Rizzo had $8000 and his friend had $200. $1200.02 was turned into $8200 and now the world is $6999.98 richer.
Another example is in yard work. Rizzo and Rich have the same size yard. Rizzo weeds his lawn in 80 minutes and mows it in 40 minutes. His neighbor Rich weeds in 120 minutes and mows in 120 minutes. Initially Rizzo does 120 minutes of work and Rich does 240 hours or work. Rich comes up with the idea that he will weed 3/4 of Rizzo's yard if Rizzo mows Rich's lawn. Now Rich does 120+90 = 210 minutes of work while Rizzo does 20+40+40 =100 minutes of work. Both benefit and the total work is cut by 90 minutes. Rich saves more time (30 min vs 20 min) but Rizzo's time is cut by a bigger fraction (1:6 vs 1:8).
We then talked about Production Possibilities Frontier (PPF) and the Production Possibilities Curve (PPC). These operate under the ideas that all points on the line are feasible and the ones outside the line are not. It shows the absolute advantage. The PPC shows productive efficiency. The slop shows that we must make tradeoffs between goods. You can see the law of diminishing returns from the lines. And economic growth comes from increasing resources, discovery/technology, and trade.
One example is Rizzo has a huge collection of baseball cards worth $8000 but is missing one card so it is really just $1000. He has an extra card worth $200 and trades it for the needed card worth $0.02. Rizzo turned something worth $200 into $7000 while his friend turned the $0.02 card into $200. Rizzo had $1200 and his friend had $0.02. After the trade Rizzo had $8000 and his friend had $200. $1200.02 was turned into $8200 and now the world is $6999.98 richer.
Another example is in yard work. Rizzo and Rich have the same size yard. Rizzo weeds his lawn in 80 minutes and mows it in 40 minutes. His neighbor Rich weeds in 120 minutes and mows in 120 minutes. Initially Rizzo does 120 minutes of work and Rich does 240 hours or work. Rich comes up with the idea that he will weed 3/4 of Rizzo's yard if Rizzo mows Rich's lawn. Now Rich does 120+90 = 210 minutes of work while Rizzo does 20+40+40 =100 minutes of work. Both benefit and the total work is cut by 90 minutes. Rich saves more time (30 min vs 20 min) but Rizzo's time is cut by a bigger fraction (1:6 vs 1:8).
We then talked about Production Possibilities Frontier (PPF) and the Production Possibilities Curve (PPC). These operate under the ideas that all points on the line are feasible and the ones outside the line are not. It shows the absolute advantage. The PPC shows productive efficiency. The slop shows that we must make tradeoffs between goods. You can see the law of diminishing returns from the lines. And economic growth comes from increasing resources, discovery/technology, and trade.
Class 20 - Mysterious Black Box
Today we talked more about the Bus Driver example under the rule of law. We shouldn't wait for anyone because it would be special privilege, but we have a knowledge problem. Social costs are impotent.
We then talked about feedback loops. If FedEx fails, we would use UPS. However, FedEx cares when it loses a package and it is their interest to hire trustworthy people.
We looked at trade and specialization. The point of economic activity is because things are scarce and we want things. The challenge is to figuring out what gets produced, how we do it, and how to distribute it. The factors of production are land (place to do stuff), labor (people), and capital (stuff needed to produce stuff - physical and human ability to increase ability (i.e. education))
Production process: Inputs --> black box --> stuff. Black box is where cool things happen (production).
We do this by being self-sufficient, specialization and exchange (PSST - patterns of sustainable specialization and trade), and discovery.
Economics is a matching problem as self-sufficiency causes less economic activity. We need to match technology, skills, and consumer presences.
We then talked about feedback loops. If FedEx fails, we would use UPS. However, FedEx cares when it loses a package and it is their interest to hire trustworthy people.
We looked at trade and specialization. The point of economic activity is because things are scarce and we want things. The challenge is to figuring out what gets produced, how we do it, and how to distribute it. The factors of production are land (place to do stuff), labor (people), and capital (stuff needed to produce stuff - physical and human ability to increase ability (i.e. education))
Production process: Inputs --> black box --> stuff. Black box is where cool things happen (production).
We do this by being self-sufficient, specialization and exchange (PSST - patterns of sustainable specialization and trade), and discovery.
Economics is a matching problem as self-sufficiency causes less economic activity. We need to match technology, skills, and consumer presences.
Class 19 - The Silver Rule
Today we talked about the Golden Rule and how it fails economically. If we "do unto others as we want them to do unto me"then our motivation for trade would be for the benefit of others. However, this only works in small societies and not in large markets. This fails in big societies like Stalin's Holomodor in Ukrain in the 1930's and Mao's Great Leap Forward because of a knowledge problem.
We operate under the idea that production for profit causes production for the people. But this is frowned upon. We celebrate self-interest in everything but the market (going to the gym/not smoking is good for only me and celebrated). So apparently the person who jogs is good but the person who makes the jogging shoes is evil.
We then looked at reciprocal altruism and the ethics of paying for organs. Say Tony needs a kidney and Tina gives him one. Ten years later, Tina runs a fundraiser and Tony gives her $20,000. These two events are very altruistic, but shrink the time span and the proximity of the people and the actions are horrific.
We looked at the definition of self-interest as people pursuing actions that interest them. Under this definition, Gandhi and Mother Theresa are self-interested, but not selfish.
We then talked about the Bus driver example in terms of the Rule of Law. If Rizzo is late for his buss, what is the effects. There is a knowledge problem for the bus driver to know the cost of being late. In Ecuador, lateness has caused the GDP to drop by 4%. There is a knowledge problem.
We then talked about the Silver rule. This says that "do not do to others what is unfair/unjust if they did it to you." This is better than the Golden Rule in a large population where we have a knowledge problem.
We operate under the idea that production for profit causes production for the people. But this is frowned upon. We celebrate self-interest in everything but the market (going to the gym/not smoking is good for only me and celebrated). So apparently the person who jogs is good but the person who makes the jogging shoes is evil.
We then looked at reciprocal altruism and the ethics of paying for organs. Say Tony needs a kidney and Tina gives him one. Ten years later, Tina runs a fundraiser and Tony gives her $20,000. These two events are very altruistic, but shrink the time span and the proximity of the people and the actions are horrific.
We looked at the definition of self-interest as people pursuing actions that interest them. Under this definition, Gandhi and Mother Theresa are self-interested, but not selfish.
We then talked about the Bus driver example in terms of the Rule of Law. If Rizzo is late for his buss, what is the effects. There is a knowledge problem for the bus driver to know the cost of being late. In Ecuador, lateness has caused the GDP to drop by 4%. There is a knowledge problem.
We then talked about the Silver rule. This says that "do not do to others what is unfair/unjust if they did it to you." This is better than the Golden Rule in a large population where we have a knowledge problem.
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