final_the tragedy of anticommons_prezentacija.pptx

7/28/2019 Final_The Tragedy of Anticommons_prezentacija.pptx

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Law and economics

The tragedy of anticommons:

Property in transition from Marx to marketsby

Michael Heller



Introduction

In a commons-multiple owners are each endowed with the privilege

to use a given resource, and no one has the right to exclude another.

When too many owners have such privileges of use, the resource is

prone to overuse - a tragedy of the commons.

In an anticommons-multiple owners are each endowed with the

right to exclude others from a scarce resource, and no one has an

effective privilege of use. When there are too many owners holding

rights of exclusion, the resource is prone to underuse - a tragedy of

the anticommons.

2



The Gradient of Property in Transition

3

Key Elements of Socialist Law

1. Hierarchy of Property - At the top was state socialist property, which

received the most protection. Next came cooperative property, which

received similar but less protection. Personal property received least

protection.2. Objects of Socialist Property - Because all productive assets were in

principle "unitary" and belonged to "the people as a whole," socialist

law did not delineate the ordinary physical and legal boundaries of

private property.

3. Ownership of Socialist Property - The law integrated ownership of physical assets within overlapping state structures, often linking

upward from a state enterprise, to a group of similar enterprises, to

the local and then central offices of a ministry responsible for that

branch of industry.



The Gradient of Property: Protection and Performance

more protection property received under socialist law, the lesssuccessful its performance has been in a new market economy -

inverse correlation between protection and performance

4



Within the legal and institutional context of the Moscow storefront,the main actors are a wide variety of state and quasi-state

organizations

April Harding notes that a major source of the ambiguity of local

government ownership can be explained by “conflicting efforts on the

part of the federal government to strengthen general ownership andproperty rights, while it is also trying to constrain the property rights of

local governments”.

four categories of rights-holders emerged during the transition:

- Owners

- Users- Balance sheet Holders

- Regulators

Case study of empty stores in Moscow



Emergence of the Anticommons

6



Moving Along the Gradient: Kiosks, Apartments, Komulkas

7

Individual Apartments - The creation of private property in

apartments lies at the opposite end of the protection and performance

gradient from storefronts. Apartments provide a useful counterpoint to

storefronts, in part because the physical space is often identical.

In socialist legal regimes, the standard property bundle for

apartments was divided between private and public actors.

One price of achieving these well-functioning bundles is thatgovernments have ignored certain distributive goals.



The apartment example suggests that:

Governments can avoid creating a tragedy of the anticommons by

transfering coherent bundles in familiar objects.

There may be a tradeoff between avoiding anticommons tragedy

and achieving distributive goals in the initial endowment of propertyrights.

When governments transfer coherent bundles of initial endowments

in familiar objects, well-functioning private property markets may

emerge even without supporting legal institutions. People can trade

standard property bundles when they own them.



Communal Apartments

9

Komulkas are a subset of apartments that have lead to a special

loathing across the former Soviet Union. Komulka performance also

proves to be a fruitful example to contrast with storefront anticommons

behavior.

Division of rights in the communal apartments helps introduce theconcept of a spatial anticommons, distinct from the legal anticommons

discussed so far.

In a spatial anticommons, an owner may have a relatively standard

bundle of rights, but too little space for ordinary use. By contrast, in a

legal anticommons, substandard bundles of rights are allocated tocompeting owners in a normal amount of space, such as a storefront.



The Property Bundler's Equation

10



Street Kiosks

11

Appearance of the Kiosks - During the early years of transition,

kiosk merchants were also faced with an anticommons. However, by

the early 1990s, merchants could acquire informal rights on the

streets to set up commercial outlets.

Kiosks provided an early solution to the problem of establishing

commercial outlets in a country desperately short of retail services.

The market for kiosks and storefronts real estate are linked.

A rapid increase in number of kiosks in Russia suggests that one

path to overcoming a tragedy of the anticommons may be bytolerating informal corruption contracts.



Disappearance of the Kiosks - Recently, the Moscow city

government has tried to eliminate kiosks from the streets, with mixed

results. The apparent reduction in the number of kiosks could be

interpreted in two ways that relate to the storefront anticommons:

1. The first interpretation is that the government has successfullyspecified a better set of property rights in retail storefront space, and

that market actors have relied on those rights to shift away from

kiosks.

2. The other interpretation is that with the use of sufficient force, the

city could enforce existing laws against kiosks and effectively rejectthe corruption bargains that kiosk owners have made with government

officials.



What is private property?

Distinction between private property and other property rights dependson these 3 elements:

1. The possibility of full ownership:

one owner has full decision-making authority over an object

2. Rights and bundles:

the bundle of rights represents all of the infinite number of potential

relations (and non-relations) people may have with each over any

particular object

(Honore´s „standard incidents“ that make private property - accepted as

a starting point for describing core bundles of private property rights)

3. Restriction on extreme decomposition:

...the owner may break up the bundle of property rights withoutpermission of others, but may not „decompose“ the bundle in the ways

that overly impair the object´s marketability (granting too many

„privileges of inclusion“ or „rights of exclusion“)

13



Anticommons property

Frank Michelman (1982) defined the regulatory regime to be a typeof property „in which everyone always has rights respecting the

objects in the regime, and no one is ever privileged to use of them

except as particulary authorized by others“

Dukenminier and Krier: „everybody has the right to excludeeverybody else, and nobody has the right to include anybody“

Heller: „anticommons property is a property regime in which

multiple owners hold formal or informal rights of exclusion in

a scarce resource“

14



Difference between private and anticommons property

An object is held as anticommons property if one owner holds onecore right in an object, a second owner hold also a core right in an

object etc.

There is no hierarchy among these owners or clear rules for

conflict resolution

Each of these core rights can function / may be used as a right of exclusion

Private property breaks up the material world „vertically“ with each

owner controlling a core bundle of rights in a single object (allowable

form of decomposition), while anticommons property creates„horizontal“ relations among competing owners of rights in an object

with an right of exclusion.

15



Private property Vs. Anticommons

Boxes represent familiar objects (stores, appartments) The lines represent the innitial endowments of property rights

16

1 2

A

3

B

21

C

3

C

B

A

Private property Anticommons property



Tragedy of commons / anticommons

Tragedy of commons: occurs when too many individuals haveprivileges of use in a scarce resource. Rational individuals, acting

separately, may collectively over-consume scarce resource (each

finds to benefit by consumption even though this individual

imposes larger costs on the community

Tragedy of anticommons: occurs when too many individuals

have the rights of exclusion in a scarce resource. Rational

individuals, acting separately, may collectively waste the resource

by under-consuming it compared with a social optimum

17



Overcoming anticommons tragedy

In time, anticommons property will probably be converted to privateproperty, although the process may be brutal and uneven

The regulatory mechanisms of goverment interventions do not always

insure these results.

Reasons:

Markets may fail because of transaction costs Goverments may fail because of the cost of compensation, the

administrative complexity, and the fear of demoralizing

potential investors from uncompensated property rights

reforms

Some anticommons may make the transition to private property but

many are going to fail. The sollution may be comparing anticommons

(understanding anticommons as) to a prisoner´s dillema18



Overcoming anticommons tragedy- game theory

For simplicity assume:

Player A and B have same exclusion rights

(veto) and symetrical payoffs

Excluding = blocking the other owner from

use of the storefront in an exclusive manner

(loss of lease, loss of contigent and optional

value)

Cooperating= tolerating the other owner´s use or not holding out in a sale

to a private property bundler

Highest payoff

is if one owner cooperates and the other

one excludes (starting situation)

If A und B both exclude, store remains

empty and it is wasted from eficciency

perspective

19

cooperate exclude

c

o o p e r a t e

e x c l u d e

3,3

3,3

2,6

2,6

6,2

6,25,5

5,5

B

A



Rewarding individual cooperation

20

Goverment increases net payoff by increasing

the security of property rights in general

(e.g. setup of property registers that provides

low cost, transparent identification of owners

and their rights)

Emergence of real estate brokers

Property rights more secure > cooperation

increases net payoff by 2 > If A rents out the

place, then B may be in stronger position if

he cooperates (his rights of exclusion can be

easily verified in the register)

B could also demand a portion of the rent andmay suffer less of a loss to his contingent values.

cooperate exclude

e x c l u d e

c

o o p e r a t e

B

A

7,7

7,7

4,6

4,6

3,3

3,3

6,4

6,4



Rewarding joint cooperation

21

Again we have an increase in net payoff by

2 due to improvements in enforcement of long-term leases , or the developement of

property insurance (this is only the case if

both players cooparate and the storefront is

converted to private property)

Cooperation will be rewarded and exclusion

will not generate as much net payoff, as inindividual cooperation

It represents a „Nash Equilibrium“ :

- for both players to cooperate

- for both to exclude

- or to randomize between the two pure

strategies The players may adopt the cooperative Nash Eq.

which is in their joint interest, even if they have

no way of reaching a binding agreement

cooperate exclude

c

o o p e r a t e

e x c l u d e

B

A

7,7

7,7

3,3

3,32,6

2,6

6,2

6,2



Punishing individual exclusion

Informal sanctions:

ostracism and negative gossip in close-knit groupsto detect and punish exclusion

Problem:

player A and B are most likely not a part

of a close-knit groups, or solidary

A more promissing path of

punishing defection:

by devaluing player´s contingent claims, so

they don´t attempt to excersise them in

political markets

The goverment could achive this through a

stable property rights regime

22

cooperate exclude

c

o o p e r a t e

e x c l u d e

B

A

5,5

5,5 2,4

4,2

4,2

2,4

1,1

1,1



Punishing joint exclusion

Another policy approach for goverments is to

punish joint exclusionIn storefronts context this would mean imposing

a vacancy tax on each empty storefront that

would translate into negative payoff of

-2 for each storeowner

(this tax is to be imposed only if bothexclude and the store stays empty)

This is a so called „game of chicken“ with

multiple Nash Equilibria and the best strategy

for each player is to do the opposite of that

what the other player doesPlayers are likely to randomize between

strategies with the result that storefronts usually

(but not allways) are put to some use

23

cooperate exclude

c

o o p e r a t e

e x c l u d e

B

A

5,5

5,5

1,1

1,1

2,6

2,6

2,6

2,6



Repeat play

Another possibility for overcoming tragedy of anticommons emerges if the two

storeowners must make repeated decisions weather to cooperate or to exclude

Over time cooperative sollutions may evolve and players could adopt strategies such as

„tit-for-tat“ in each round players would generate a joint surpluss, that would be partially

used for future property registration

Cooperative norms and cooperative tendency in repeated games would dominate even

without goverment intefering

Problem:

Post-social transition may appear to the

storeowners more as a one-shot game

of musical chairs

They expect each round to be the last,so it is unlikely they would practice cooperative

strategy (the risk of cooperating today is not

to be able to play the game tomorrow)

24



Conclusion

Other questions



26

Other questions

or discussion points?

final_the tragedy of anticommons_prezentacija.pptx

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