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A Thought on Property Rights

"(Economist Armen) Alchian had his largest impact on the economic analysis of property rights. Most of his work in this area can be summed up in one sentence: You tell me the rules and I'll tell you what outcomes to expect.

"In their textbook, for example, Alchian and (William R.) Allen ask why the organizers of the Rose Bowl refuse to sell tickets to the highest bidders and, instead, give up wealth by underpricing the tickets. Their answer is that the people who make the decision on the prices don't have property rights in the tickets, so the wealth that is given up by underpricing wouldn't have accrued to them anyway. But the decision makers can give underpriced tickets to their friends and associates.

"Thomas Hazlett, former chief economist at the Federal Communications Commission and now a professor at George Mason University Law School, used this same line of reasoning to explain why Michigan Congressman John Dingell blocked the FCC's early attempts to auction off the electromagnetic spectrum and, instead, favored giving it away. Auctioning would have reduced Mr. Dingell's power."

~ David R. Henderson

HT Op-ed, Wall Street Journal, February 20, 2013

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