Research Handbook on Political Economy and Law
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Research Handbook on Political Economy and Law

Edited by Ugo Mattei and John D. Haskell

Events such as the global financial crisis have helped reveal that the drivers and contours of governance on a national and international level remain a mystery in many respects. Set in this context, this timely Research Handbook is the first to explicitly address the constitutive relationship between law and political economy. With scholarly contributions from diverse disciplinary and geographic backgrounds, this authoritative book covers, in three parts, topics surrounding money and markets, the relations of organization, and commodities, land and resources.
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Chapter 31: Property, efficiency, the commons, and theft

Ramsi A. Woodcock


It is easy to get the impression from reading economics that property generally, and property in ideas in particular, is efficient. This impression is meaningful because it suggests that there is no efficiency rationale for government regulation of any kind other than the institution and defense of a property system itself. The purpose of this chapter is to explain why this impression is false. The chapter shows that two stories economists tell about the efficiency of property, the Tragedy of the Commons and what I call the Parable of Theft, do not establish that property or intellectual property is efficient. In the Tragedy of the Commons, an owner lacks the power to keep the crowd away from her valuable resource. As a result, the crowd overuses it, making everyone worse off. In a classic example, the inability to enclose a grassy spot of land results in its overgrazing by herders of cows. In the Parable of Theft, a producer lacks the power to keep thieves away from her output, so thieves take it. As a result, the producer lacks an incentive to produce, and shuts down her operation, making society worse off. The moral of both these stories is that the power to exclude others from things is necessary and sufficient for efficiency. If you have the power to keep the crowd off the commons, then you will preserve it.

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