The Technology of Property Rights

Property Rights Emerge Through the Competitive Process

Americans are used to thinking of property rights as a given, but as Terry Anderson and P. J. Hill point out in this splendid collection of essays (one of the many books to have come from the Political Economy Research Center—PERC), “the production of property rights is an economic activity determined by the expected returns to defining and enforcing property rights.” That insight is important in demonstrating how deep the spontaneous order of the marketplace is: property rights are not merely decreed by political authority, but themselves emerge as a part of the competitive process.

Anderson and Hill have here assembled eight scholarly contributions that explore the connections among technology, institutions, and the establishment of property rights. Much of PERC’s work has centered on showing how improved definition and enforcement of property rights would alleviate pollution and resource-conservation problems. With the current volume the contributors show that we need technological freedom to maximize the benefits we can derive from property rights.

To illustrate their basic point that property rights depend on technology, Anderson and Hill discuss the problem of establishing rights in the grazing lands of the American West. Cattle roamed freely on open range before it became feasible to fence large areas. The inefficiency of such arrangements stimulated innovation in fencing materials. The editors note that in the years 1866–1868, 368 patents were issued for fencing products. Barbed wire emerged as the best solution
to the problem and mass production thereof made possible large cattle ranches with an owner’s cattle kept in and predators kept out.

The book’s lead-off essay is Bruce Yandle’s “Legal Foundations for Evolving Property Rights Technologies.” Yandle gives several intriguing case studies on the evolution of property rights under different institutional environments. In one case, for example, he shows that scientific improvements reduced the costs of defining property rights in water. “Improvements in the science of hydrology,” he writes, “made it possible for common law judges to identify polluters who poached on the property rights of downstream owners and led to major modification in common law rules involving groundwater pollution.” Yandle’s essay ought to be read by all those officials who are prone to think that government regulation is the best or only means of controlling pollution.

Water is also the subject of Clay Landry’s essay, “The Role of Geographic Information Systems in Water Rights Management.” Landry shows how technology has changed since the early days of western mining and agriculture to permit precise definition — and thereby enforcement — of waterrights. State regulators and private parties are making use of aerial photography, satellite imagery, and other technologies to detect and stop illegal water use. Landry predicts that those technologies will soon facilitate a much-improved market for water making use of the Internet, but cautions that such markets “will have to overcome regulatory obstacles that could offset any speed and efficiency gains offered by electronic transfers.” Here we have the old story of sluggish bureaucracy getting in the way of modernization.

Barrett Walker focuses on storm runoff and pollution. He shows how the same geographic information technologies discussed by Landry make it possible “to more precisely identify the source and impact of storm runoff on watersheds and to charge polluters for their impacts.” His optimistic conclusion is that technological improvements “now make a property rights approach to environmental protection affordable for communities throughout the United States.”

Daniel Huppert and Gunnar Knapp examine the problem of overfishing. “Fishermen can gain from rational conservation of fish stocks, but without individual property rights to the fish or collective fishing rules, each has little or no individual economic incentive to sacrifice current catch for longterm future harvests,” they write. Can technology and property rights help overcome the well-known “tragedy of the commons”? The authors answer yes.

Anna Michalak’s “Feasible Contaminant Source Identification for Property Rights Enforcement” provides several case studies on the use of technology for identifying sources of pollution, making it easier to apply common-law remedies for pollution torts.

There is not enough space here to mention all the essays in the book, but all are worthwhile for anyone interested in the interface between technology and property rights.

As a final note, I’ll add that the book’s emphasis on the benefits of technology drives a stake through the heart of the mistyeyed Luddism that pervades much of the environmental movement. If you want a cleaner environment, you should be in favor of wide-open technological freedom rather than the foolish nostrum of ever-increasing government control.

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