Coase v. Rand

Hi Jordan,

You wrote, "The question is: how should [the courts] determine who has the right? Should they just take a harder look at who was first? I suspect this is what you'd say, opining the any second-comers are really trespassers. But it's a false alternative to suggest that it's either "first in time" or "might makes right" because Coase poses a third option: allocate the right in such a way as to yield the economically efficient outcome."

Jordan, I'd like to challenge Coase's view that there can be an "economically efficient outcome" independently of free exchange, which itself depends on a respect for property rights. What is efficient in a given context depends on the satisfaction of your values. Consider two situations:

The first is that you are taxed in order to subsidize a failing business. The second is that you choose to subsidize it by buying its products. The first situation is economically inefficient; the second, economically efficient. What accounts for the difference? In the first example, I am supporting the business against my will; in the second example, I am choosing to support it. If my property is expropriated, the outcome will necessarily be inefficient ~for me~. The only way that an economic transaction can be economically efficient for both parties is if they engage in it voluntarily, because it is only a voluntary exchange that can be considered mutually advantageous.

Wealth is often thought to consist simply of material products regardless of their value ~to any particular beneficiary~. But if you think about it, material production is neither a necessary nor a sufficient condition for an increase in wealth. It isn't necessary, because people can increase their wealth without producing anything new, and it isn't sufficient, because something can be produced that nobody wants. Suppose, for example, that you have a copy of Atlas Shrugged and I have a copy of The Fountainhead. You've read Atlas Shrugged, but would like to read The Fountainhead, and I've read The Fountainhead but like to read Atlas Shrugged. So we trade. Are we wealthier than before? Absolutely, because we each have something we wanted that we didn't have before, even though no new products were created to account for our increase in wealth. And since we are each wealthier than before the trade, our transaction was economically efficient - economically efficient simply because pre-existing goods were ~allocated~ more efficiently, i.e., more in accordance with the wishes of each party.

But suppose that instead of offering you something you desired in exchange for your copy of Atlas Shrugged, I simply took it from you against your will. Does that constitute an economically efficient outcome? No, because the good in question wasn't allocated in accordance with the wishes of its owner. In contrast to the situation in which both parties become wealthier because of a mutually beneficial trade, we now have the opposite situation in which one of the parties (namely, you) is rendered poorer by being deprived of his property against his will. The latter example thus constitutes an economically ~inefficient~ outcome. It's no different with Coase's example. Insofar as someone is forced by the government to dispose of his property against his will, the outcome ~cannot~ be considered economically efficient, Coase's claims to the contrary notwithstanding.

- Bill

Post 81

Sunday, October 2, 2005 - 9:39pm

Ed,

That is precisely the crack that governments drive a truck through and perpetuate their legitimacy of abuse (believe it or not).

Human (especially individual) rights based on the nature of man are one thing. Human rights based on, say, the Koran are something else.

Both are human rights, though.

Once that becomes clear, then the nature of government becomes much more clear than it is now. (And no, rights in themselves do not exist by permission of a government, although in some structures they appear that way - government, every type of government, exists to protect and enforce rights, which are powers in relation to other human beings.)

Enough for now. Gotta wait for the article - and I am trying to finish another one on another subject for a dear friend that is long overdue.

Too much daydreaming about the rights (and wrongs) of bunny rabbits...

Michael

Post 82

Sunday, October 2, 2005 - 9:59pm

Roar!

=============
Human�(especially individual) rights based on the nature of man are one thing.
=============

There are no -- I repeat, no -- "human" rights that are NOT "individual" rights. ALL rights are individual rights.

=============
Human�rights based on, say, the Koran are something else.

Both are human rights, though.
=============

I disagree. The Koran does not do justice to the identity of man, and anything -- including any expositions of rights therein -- is ipso facto subjectivist and, therefore, ethically and politically illegitimate.

=============
Once that becomes clear, then the nature of government becomes much more clear than it is now.
=============

???

Michael, when you say the "nature of government," do you mean the nature of a government (a particular instantiation) or the nature of government (a generality of that which must be true -- always and everywhere -- of human governments)?

Ed

Post 83

Sunday, October 2, 2005 - 10:28pm

Ed,

Be careful with roars that come from the knee.

I hate to go Rand on you, but if you see a contradiction, check your premises. One will be false.

I really want to give more attention to this but I am out of time. Article coming on it later, though. (I personally think you will like it.)

Michael

Post 84

Sunday, October 2, 2005 - 11:10pm

Bill writes:
>Daniel, suppose the paper mill decides that it doesn't want to pay several million in damages - that it can more profitably divert its capital elsewhere - so it closes.

But why should we only make suppositions that are both highly unlikely and convenient for your argument?

Let us make a far more likely one - that someone who has invested years and millions of dollars in an industry is not going to up-sticks and vanish because they've killed a single fish of next-to-nil market value, and Daniel Barnes demands a huge payout over it! I'll leave it at that, but I believe this sort of idea is entirely unworkable. I do not know how accurately your view of this particular example represents the Objectivist view of the legal defense of property rights, but if it does, I think it will remain rather wishful thinking.

- Daniel

Post 85

Monday, October 3, 2005 - 1:06am

Michael,

=============
Be careful with roars that come from the knee.

I hate to go Rand on you, but if you see a contradiction, check your premises.
=============

I do see a contradiction. A contradiction in YOUR premises. I guess that you have not taken my advice (and gone back through Bidinotto's work -- substituting "exercise of" for "rights"). This will only harm your case. But that is for the future to make salient.

Until then,

Ed

Post 86

Monday, October 3, 2005 - 1:17am

I wrote, "Daniel, suppose the paper mill decides that it doesn't want to pay several million in damages - that it can more profitably divert its capital elsewhere - so it closes."

He replied, "But why should we only make suppositions that are both highly unlikely and convenient for your argument? Let us make a far more likely one - that someone who has invested years and millions of dollars in an industry is not going to up-sticks and vanish because they've killed a single fish of next-to-nil market value, and Daniel Barnes demands a huge payout over it!"

Let's say that the paper mill doesn't up-sticks and vanish - that it is willing to stay in business and pay what you ask. According to Coase, such an agreement is economically efficient, because it shows that the benefit to the paper mill of staying in business exceeds the cost of the lost fish to the fisherman. If the benefit to the mill did not exceed the cost to the fisherman, then a deal would not have been struck that allowed the mill to stay in business.

On the other hand, you seem to think that a business's variable costs are irrelevant, if its fixed costs are high. But if its variable costs increase to the point that its total cost exceeds its total revenue, it will have nothing to gain by remaining in business. For its fixed costs must then be regarded as sunk costs - i.e., as unrecoverable and therefore as irrelevant for future business decisions. So, how do you know that the huge payout you're demanding won't raise its total cost above its total revenue and force it to close down? If it's operating on a relatively low profit margin, as most businesses do, it may not take much in terms of an increase in total cost to make its continued operation unprofitable. Why would you risk driving it out of business, when you have more to gain by ensuring that it remain viable?

Daniel continued, "I'll leave it at that, but I believe this sort of idea is entirely unworkable."

On the contrary, it's eminently workable and is touted as an ingenious solution in almost every microeconomics textbook currently available. For what it's worth, Ronald Coase won the Nobel Prize in economics in 1991. Granted, there are circumstances that could prevent such a deal from being struck - for example, if the transactions costs made it unprofitable for the two parties to bargain - in which case, the paper mill could be forced to close. But where transaction costs are not prohibitive, there is no reason to believe that such an agreement could not be reached.

Daniel continued, "I do not know how accurately your view of this particular example represents the Objectivist view of the legal defense of property rights, but if it does, I think it will remain rather wishful thinking."

It's not a legal defense of property rights; it's simply an explanation of how the two parties might reach an agreement that would not require the offending business to cease operations. A legal defense of property rights would consist of nothing more than showing that the alleged owner has legal title to the property. I suspect that you're referring to a philosophical or moral defense of property rights. For the Objectivist view on that, see my reply to Jordan.

- Bill

Post 87

Monday, October 3, 2005 - 2:15am

Bill writes:
>Let's say that the paper mill doesn't up-sticks and vanish - that it is willing to stay in business and pay what you ask.

But Bill, I reckon that scenario's even *less* likely than the first one!

What I think is *most likely* to happen is...the stupid law will bankrupt/disrupt enough businesses and waste enough courts time in nuisance suits as absurdly large claims are filed for minor violations of property - if you allow open ended claims you are now introducing major economic incentives to do so. There will be a wave of protest, and the law will be changed, with some minimum harm standard introduced, arrived at through a mixture of negotiation and precedent, trail and error.

That's my take on it. Very interesting discussing it with you however, thank you.

regards
Daniel

Post 88

Monday, October 3, 2005 - 5:05am

     C'mon people: there are 'rights,' and, there are 'Rights.' (like 'Absolutes') There's more than one meaning...and context...that the term is applicable...differently (sometimes quite)...within. It seems that some are getting too hung up on ONLY one meaning and context, ergo, they lose sight of how to relate the other different ones to it and each other. As Sciabarra harangues: 'context, context.'

     Now, this thread has forked into 2 subjects: debates on interpretations of Coase's arguments, and, debates on the 'real' meaning of the term 'rights.' Methinks such was unavoidable, since to argue pro-or-con the former requires clarity presentation (and, most of all, consensus) on the latter; much of both is missing. Seems like all, like abortionist pros/cons arguers, are always arguing at (not to) each other from different pages (if not books.)

     I'll not argue anything about Coase's arguments, however interpreted. However, at the risk of sounding 'Randroid,' since this IS supposed to be an O'ist-oriented forum, methinks some basic referencing to Rand's ideas of 'rights' needs to be RE-clarified...via quoting.

    Rand/Galt: "...---the source of man's rights is not divine law or congressional law [my italics-JD], but the law of identity. A is A --- and Man is Man. Rights are conditions of existence required by man's nature for his proper survival." ~ ~ ~ If this doesn't establish/clarify/identify/'crystallize', not only the existential (hence, 'natural') base for the very idea of any meaning to the concept of 'individual' rights, I don't know what does. Further, it's a NECESSITY for establishing a base-'social'-agreement to do any arguing re the social-context, whether with or without a 3rd governing arbiter deciding a conflict-resolution between Robinson Crusoe and his man Friday (the cliched 'alone-on-an-island' scenario). If there's agreed meaning of 'rights' at this basic area, RC and F may have some conflicts, but, few of them would need a 3rd arbiter (presuming they agreed to go by whatever...she, the arbiter...decided) if they already agreed as to what EACH already had an existential 'right' to (land area, trees to cut, fishing locale, whatever.) The idea here is: when Friday shows up, does he 'recognize' any 'rights' that RC already, inherently has? If so, 'rights' were there before Friday showed up. Same applies from RC to F. Of course, if there's a dis-agreement, well, the disagreement is about inherent 'rights' of each. --- My point here is: any problem/conflict about the subject of 'rights' does show up in a social-context; but, any resolution of it requires referencing a NON-social context. The difference between the problem-source and the resolution-source methinks causes some confusion re the nature of the whole subject of 'rights'.

     Rand/Galt: (continued from above) "If man is to live on earth, it is right for him to use his mind, it is right to act on his own free judgment, it is right to work for his values and to keep the product of his work." ~ ~ ~ Here, Rand clearly is using the term 'right' as meaning nothing more than merely 'alright/nothing-wrong-with.' But, there's an added, hinted (connotated?) meaning: 'NOT-right-[ergo, wrong]-for-others-to-INTERFERE-with' --- With the latter connotation (as I interpret all so far) such a statement shifts/segues into a broader scope of meaning re 'rights', now hinting at social-context relevence, especially with her immediately following sentence...

     Rand/Galt: "If life on earth is his purpose, he has a right to live as a rational being: nature forbids him the irrational. Any group, any gang, any nation that attempts to negate man's rights is wrong, which means: is evil, which means: is anti-life." ~ ~ ~ Here, now, finally and clearly, she's segued into the application of the term within a 'social' context. NOW, not only is Friday relevent re ethical/moral/(social?) 'rights'-arguments regarding RC, but also everyone they both meet, whether local tribes or explorers from elsewhere...with whatever 'laws' such bring with them. And here is where the terminology-use gets sticky: such 'laws' Respect/Recognize the individual, inherent 'rights' of RC and F, or, they don't. Ergo, any arguments pro or con re such recognition/respect-by-others, logically, rationally, 'objectively,' require that such refer back to exactly what...existential...'rights' should be recognized of RC and of F, individually, separately, that they inherently had, originally, while on their own, before self-styled arbiters/power-gangs showed up.

      Rand/Galt continues with: "Rights are a moral concept..." and delves into territory not germane to this thread. ~ ~ ~ However, with THAT statement, she not only summarizes her now existentially (metaphysically?) ETHICAL base for her idea of rights...and morality...being relevent to RC (even if F never showed up), but also thence, in a strangely concatenated way, she shows thereupon, the beginning of a concentration on her future, and chronic, use of the term 'rights' as, apparently, only in a social (and, 'ethical') context. Such, methinks, causes a mis-interpretation by so many, of just how she really, at bottom-line, viewed her concept (at least of the actual source) of her meaning(s) of 'rights.' In turn, such, methinks, has caused pretty well most mis-interpretational arguments. They all seem to totally-and-all-consumably focus on only apparent conflicts between at least 2 (individuals or groups); hence, the 'social' context overwhelms all analyses of her idea of the fundamental base of the meaning of the term.

      At this point, no more quotes. Further, I'll definitely not (here, anyway) get into the problem of 'property rights', as she delineates about further on...the same page e-v-e-n. May I suggest that some re-read THAT section before venturing further comments re Coase's arguments?

      In finishing this, I must add something re the controverted idea of 'legal rights' as a valid, and quite different from 'moral rights,' (like 'fish' and 'carnivores') concept: 'Legal rights' definitely is a worthwhile, bona-fide concept, though each is nothing more than a 'permission' of/by/from the governing law-enforcing institution ruling (whether Yakuza or Mormon; taken-over, or grown-within) a community. They are societal/social laws (required/restricted behaviour with penalties for ignoring) with an enforced procedure that applies to a community with the community's (grudging) acceptance or (majority) desire.These are properly called 'Legal Rights,' and it's irrelevent that they may or may not be whimsically/randomly or consistently created and/or applied. Such 'Legal Rights' may, or may not be based (as they 'should' be) on what anyone (not just O'ists) would call 'Moral Rights.' --- However, 'Legal Rights' is a valid concept in-and-of-itself, regardless. The 'Moral Rights' are the basis for trying to get the 'Legal Rights' matched up so that at least most (?) of the 'Legal Rights' show an official, institutional, and enforceable, (that strange, unusual, quirky, word again:) recognition of the 'Moral Rights.'

     I hope this, as Rand would say, 'crystallizes' an identification of the worth, basis, and distinction, of the two concepts ('legal' vs 'natural/inherent') application to the concept of 'rights,' so as to forestall any more mis-paging of arguers with each other re these subjects.

LLAP
MTFBW...Me (after all this!)
J:D

P.S: Here I do 'Rand quoting' after I said in another forum I didn't have the time. Boy, am I gonna hear about this.

Post 89

Monday, October 3, 2005 - 7:41am

Ed,

Just a small hint.

The contradiction is that man is a volitional being. Ethics based on such nature are chosen, not moral imperatives.

Rights, being derived from ethics, are claimed to be inherent to man's nature by the same people who claim that ethics are chosen.

Rights are either intrinsic or they are chosen. They can't be both at the same time.

Just as with ethics - good and bad (evil) ethics - there are good and bad rights. It depends on the standard you use to choose. The choosing and needing to choose part (volition) is man's nature, including conceptual thought, reason and logic, and a few other goodies that bunny rabbits don't have. That is the part that is absolute.

You can't put rights above that without falling into a contradiction.

Michael

Post 90

Monday, October 3, 2005 - 7:44am

Bill, you wrote: �I thought your comments involved a sarcastic objection to the idea of absolute rights.�

They were. I think I fell into double reverse sarcasm, sorry. I do object to absolute property right, at least as you support it in the fish example. I reject your reasoning that the gov�t will strip man of all property right if we allow anything less than absolute, because the greater risk is in your interpretation, whereby environmentalists and various leftists will be able to close down every factory and prevent any new ones on the pretext of the slightest smells, noises and pollutions they emit.

There are six billion of us. We�re going to hear, smell and affect each other a little now and then. I don�t think the confectioner should have to pay any attention to the doctor. The paper mill should rightly ignore my dead fish and me, and the courts should ignore my complaints. The only case in Jordan�s original examples where I think something should be done is the cattle. The rancher should be forced to fence his animals. No negotiations.

Jon

Post 91

Monday, October 3, 2005 - 7:50am

Michael,

I hope Linz sticks to his promise to put it in Dissent.

Post 92

Monday, October 3, 2005 - 7:50am

Edit to delete double-post

(Edited by Jon Letendre
on 10/03, 9:24am)

Post 93

Monday, October 3, 2005 - 8:08am

Jon,

You can live happily and blindly with contradictions. I cannot. Part of my love of truth, etc.

Michael

Post 94

Monday, October 3, 2005 - 9:15am

Michael, we disagree very much on this. I know you don't like my zebra-tiger argument style, but it's how I think ...

===============
The contradiction is that man is a volitional being. Ethics based on�such nature are chosen, not moral imperatives.
===============

We are free to choose ethics, but not to succeed when contradicting our identity. Identity prescribes some moral imperatives to us. See John Dailey's Rand quotes above.

===============
Rights, being derived from ethics, are claimed to be inherent to man's nature by the same people who claim that ethics are chosen.

Rights�are either intrinsic or they are chosen. They can't be both at the same time.
===============

They are intrinsic (see Rand quotes above). Individual rights aren't ever given or taken away from folks -- though the exercise of these inherent rights, ones we have because of the kind of creatures we are, are.

===============
Just as with ethics - good and bad (evil) ethics - there are good and bad rights.
===============

This smacks of man-made rights which were created via legal/logical positivism, I'm talking about metaphysical rights -- which weren't thusly penned. We are not even using the same definition of rights here. This poses a large problem for us. I'm thinking out loud now. Oh! Sorry!

John Dailey's post 88 above strikes at the heart of our differences, Michael. Please read it before responding.

Ed

Post 95

Monday, October 3, 2005 - 9:38am

Ed,

I not only read John Dailey's post, it shows just how much confusion there is on this issue at the source.

That you can seriously use the phrase "metaphysical rights" at all shows the extent that the mystical (God endowed) version of rights has penetrated into Objectivist - but especially Libertarian - thinking. Would you also talk about metaphysical ethics or metaphysical epistemology? How about metaphysical politics or metaphysical esthetics?

I strongly adhere to Rand's conclusions about what constitutes individual rights. (I am particularly biased towards the life, liberty and pursuit of happiness thing.) I am just trying to clarify what the source and nature of rights are. God is not the answer.

Unfortunately, there is an attempt to "take over" a term - rights - and state that ONLY Objectivist/Libertarian type rights exist, which cuts off over 99% of human history and human societies. Meanwhile, people can and do look at all civilizations and see court systems trying people and passing judgments on what their rights are.

They don't hear Objectivists/Libertarians state that the rights being judged are based on false premises or whatever. They hear that the rights they see being judged don't exist. (Sort of like saying that governments don't exist.)

They stop listening. Just more fanatical foolishness to them.

Back to me now. Not only that, there is a contradiction in the premises that needs to be weeded out. I do not intend to change the end conclusion of what rights are proper to individuals. Merely seal up that logical crack.

btw - I am sure that several people would have loved to see my addiction article moved to Dissent, also. They get real uncomfortable when Objectivist premises are used for real thinking instead of paying lip service to dogma.

There I go writing too much again. Gotta run...

Michael

Post 96

Tuesday, October 4, 2005 - 12:05am

Michael:

     I gather that you dislike the term 'metaphysical' as an adjective that Ed used; at least as applied to the concept of 'rights.' (Strictly speaking, that's why I put the term - 1 time- in a parenthetical question: I'm unclear on it's broad, proper, useage. Indeed, I've argued in another forum the difference between term-useage of 'existential' vs. 'metaphysical.')

     So, I must ask: do you have any problem with *my* use of the term 'existential,'...or, especially... *my* arguments in analyzing implications from Rand's quoted ideas? If so, as you appear to in your generalized argument about God, mystical arguments (mine, perhaps?) and 'taking over' (uh, from whom? and...by whom? Certainly not by Rand, right?) , could you specify where you disagree with me?

     Methinks our problem area would be primarily (as I've gathered from some of your other posts) that I, as Rand, see the use of the term 'rights' (and, 'morality/ethics') fundamentally in a non-social (solitaire/individual) context, which thereby would have causally-social effects (especially by any said individual), on views of such, into the social area. --- I gather that you see 'rights' (and, 'morality/ethics') ONLY within a social milieu. I.e, that, until Friday comes along, Robinson Crusoe has no...existential need...for anything worth calling 'Morality,' ergo, no need to be 'right,' to justify to later others (nevermind, 1st-and-primarily, to-his-own-'self') that he is 'right,' ergo, that he has a 'right,' which others have no justification interfering with.

     You give the impression that you see 'rights' as having meaning ONLY within a law-making context, Mike. This raises questions re logically-arguable moral justifications for such laws. If I'm off-base here, please correct me...but don't, don't imply or even innuend that I'm a 'mystic' or even 'take-over'er of libertarian (vs Randian?) arguments. --- You clarified that you agree with Rand's 'conclusions;' I ask: what are...your...arguments for the same?

     In short: just exactly what are the 'false premises' you assert are being used?...and...by whom?

LLAP
J-D

(Edited by John Dailey on 10/04, 12:20am)

(Edited by John Dailey on 10/04, 1:50am)

Post 97

Tuesday, October 4, 2005 - 8:46am

John,

Dayaamm. This thing is interesting to me, but I really don't have time to go into it.

Saying that Robinson Crusoe has rights is the same as saying that he has a government. Without at least two people, there can be neither rights nor government.

I mentioned the following once before. What rights does he have against a hurricane or the ocean or the sun or a snake?

None.

If he finds another person someday, then he can have rights (based on good or evil premises). But if my aunt had balls, she would be my uncle.

Until he finds that person, there are no rights - by definition. (Er... that is unless there is a God who endows them like he did for Adam - before Eve came along - in the Garden of Eden...)

Reality thing.

Michael

Post 98

Tuesday, October 4, 2005 - 9:42am

Oh my - yet another child of Dewey...

Post 99

Tuesday, October 4, 2005 - 9:58am