Realist Property Rights, From the Rec Room to Mars

My apartment building is tumbling towards a legitimacy crisis. Recriminations are flying, coalitions forming, battle lines being drawn. The question is: who rules the rec room?

I live in a new building with extensive common areas. Pool tables, TVs, conference rooms, an outdoor theater, etc. A few months after everyone moved in, our manager sent us an email: from now on, we can reserve these areas for parties. Great! Also, you have to pay.

This caused some grumbling. It’s a common area! Didn’t we already pay for this?

Fortunately, there was a solution. Sort of. The building has an active Facebook group, and one of the organizers created a Google Calendar-based system for informally reserving rooms. Don’t pay up, just put your name down.

This is great, except that we now have two property rights systems: an informal, zero-cost one, and a formal, costly one. And not everyone knows about the informal one, so people are starting to worry that high-demand real estate will be double-sold on Friday nights. (So far, there haven’t been any serious issues, but Summer is Coming.)


This situation is pretty much what Hobbes was getting at. If you have an informal system for adjudicating disputes, you need some higher authority who can resolve conflict and tell people to knock it off. In Hobbes’ case, the guy in charge had cannons. In this case, he just has our security deposits. As everyone learns sooner or later, informal systems work great until you actually need them to work, at which point you have to formalize things. Spot your friend $10 for lunch, and you assume you get paid back. Spot your friend $20,000, I hope you got something in writing.[1]

New Property, New Rights

I’m increasingly focused on the cheap real estate over the long commute.

Maybe not exactly naturally, but: here we have a case where a new property right was formed out of nothing. The common areas used to be a commons, but demand was too high, so they were privatized and sold.

This happens more often than you’d think: many technology companies create new kinds of property and then earn returns from monopolizing access. Usually that’s a peaceful process. While there are some instances of violent action by incumbents, the implicit approach the government uses is that new property is owned by whoever discovers and mixes their labor with it.

But what do you do about literal property? Suppose SpaceX succeeds in its long-term mission, and sells a hardy band of weirdos transportation so they can found a colony to Mars. And further suppose that this colony discover some valuable palladium deposits or something, and start shipping ores back to earth. Do they owe taxes? Do they own the mines?

One theory is that if the rocket launches from the US, the colony belongs to the US. This has some precedents. It is, for example, the reason the Bishop of Orlando is also the Bishop of the Moon.

But there’s a possibility that the Martians will just say no, and sell their ore to whoever they want, probably — because they’re Martians — for Bitcoin. If USG demands taxes, and the Martians refuse, there are limited options to collect them. The US might embargo Mars, but that’s an embargo on all space travel. Even regular embargoes are hard to enforce, and enforcing them in three dimensions is even harder.

So to collect taxes, the US would have to invade Mars. Which might or might not be worth it; historically, our wars for natural resources have an uneven ROI.

As it turns out, the practical answer to who owns Mars is: whoever gets there first and is too expensive to dislodge.

This tells you something useful about space travel: government is a great business when it’s run as a business. Like other monopolies, it can charge a revenue-maximizing price without worrying about competition. So if you do plan to go to Mars, don’t bring mining equipment; bring killer death robots.

In fact, you don’t necessarily have to build the robots first: since government is such a profitable business, you might be able to finance your space voyage and your interplanetary conquest by selling a stake in the resulting business. This sounds like a completely ludicrous business proposition, but it’s quite established, and actually predates the joint-stock corporation. The business plan of the Norman conquest was, more or less, to buy men and materiel in exchange for real estate in newly-conquered England. It worked out just fine for the seed investors: nine and a half centuries later, the descendants of those Normans still have above-average incomes.

Lines on a Map

Property rights exist to create artificial certainty and avert conflict. But that always means they come into existence at the point where the expected return of conflict goes from slightly positive to slightly negative. Since circumstances will change, poorly-negotiated demarcations inevitably break unless there’s an artificial, legitimate force protecting them — whether that force is trying to prevent a war or decide who gets to use the movie projector.

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[1] Banking, like prostitution, is an industry that exists in part because it’s worthwhile to pay a middleman to make a mutually-enjoyable transaction less emotionally fraught.

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