Wednesday, August 27, 2003

Julian Sanchez responds to my second whack at homeowner's associations vs. zoning boards. Here's my response to that. I'll get back to homeowner's associations presently, but it seems best to first consider rights in a laissez-faire society more generally, as Julian does when he says that he does indeed prefer deciding things by contracts than by votes:

Actually, I prefer not to have any "votes" when it's at all avoidable, not where rights are concerned. The characterization of a preference for private contracts as "one dollar, one vote" is grossly misleading. It's still, after all, one person deciding to enter into the contract or not to.

Which is fair enough, as far as the rhetoric goes; "one dollar, one vote" is, at the very least, far too glib. But it misses the point I was getting at, which is that laissez-faire economic arrangements, the rich tend to wind up skewing things to their own benefit, and the general detriment of everyone else. As I've repeatedly observed, a lot of our existing regulatory structures arose because big business oligopolies really were cheating the little guy in the stock market, overcharging him for transportation services (compared to, say, Standard Oil's discount), cheating him in the stock market, and so forth. This is hardly an original observation; it was quite some time ago that one erstwhile critic of the bourgeosie noted:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.
and again:

We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and everywhere in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. To violate this combination is everywhere a most unpopular action, and a sort of reproach to a master among his neighbours and equals. We seldom, indeed, hear of this combination, because it is the usual, and one may say, the natural state of things, which nobody ever hears of. Masters, too, sometimes enter into particular combinations to sink the wages of labour even below this rate. These are always conducted with the utmost silence and secrecy, till the moment of execution, and when the workmen yield, as they sometimes do, without resistance, though severely felt by them, they are never heard of by other people.

Both passages are from Adam Smith's treatise on The Wealth of Nations; they only sound like Karl Marx.

The usual libertarian response to this sort of argument is that cartels are unstable because the incentives to deviate are so great. History proves these arguments half-right in the real world. Rockefeller's Standard Oil, unquestionably a cartel, was economically inefficient -- when it was finally split up, the parts proved in aggregate to be quite a bit more profitable than the whole had ever been. But government action was needed to break it up. In other spheres, de Beers has been a stable, if monstrous, cartel for most of its existence. And more recently in the United States, in industry after industry, from airlines to telecom to finance, the response to deregulation was a round of consolidation. These oligopolies may forgo profits under some circumstances -- but that's a price that their owners willingly pay to exert some measure of control.

So what does that have to do with individual rights? Let's consider the right to privacy, in the context of American national credit bureaus, like Equifax. As I mentioned some time back,

These are huge, unaccountable bureaucracies, which keep tabs on just about everyone in the United States. When they screw up, innocent people can find it difficult, if not impossible, to buy a house or a car, to enroll at schools, due to student loan difficulties, or even to get a credit card (and have you tried to travel recently without one?). Their databases are notoriously unreliable and insecure. Plain errors can take months to correct, even if the corrections don't get mysteriously undone later when the source of the bogus data resubmits it. This sounds like a libertarian horror story about intrusive government and insensitive government bureaucracies, but it's entirely in the private sector; government has nothing to do with it. And the finance industry's lobbyists are paid princely sums to make sure that it stays that way, and that the credit bureaus don't become subject to anything like European privacy laws.

It's arguably unfair to call this "one dollar, one vote" because, to the best of my knowledge, there haven't been many votes at all about the choice of this particular structure for the issuance of consumer credit. As for us, it's "one person deciding to enter the contract or not to", but all the available contracts are the same, and deciding not to enter into the contract is deciding to forgo consumer credit, including auto loans and mortgages, entirely. In short, this is an unambiguous case of credit issuers banding together to get power over the rest of us.

One response to my Equifax post was an email exchange with a libertarian blogger who proposed that

Of course, if sufficient numbers of consumers were to get totally fed up with the tyranny of Equifax-type operations, then in a free market, surely some smart entrepreneur would try to tap demand for privacy? Hey Charlie, let's set up in business!

"Of course," neither I nor, to the best of my knowledge, my correspondant had the financial expertise needed to run a functioning credit card agency, a sound way to estimate the risks we'd incur by forgoing credit reports, or a practical background into how to plug into payment networks (which are effectively owned by the existing credit agencies, who might not be entirely friendly to a project aimed at reducing their hard-won social control) -- practical matters of the sort that libertarians routinely ignore when glibly asserting like this that the only thing that keeps "the market" from seeing to all social needs is the eeeeevil government.

But putting all that aside, this exchange puts in a nutshell the problem I have with the libertarian attitude toward individual rights: You want privacy? Pay for it! And similar thinking can be seen in Julian's arguments about zoning vs. homeowners' associations. Julian concedes in his first post on the subject that:

If you look at a narrow case, many years down the line, it may well be that the choice faced by someone moving into a home bound by contract to an association is the same as that of someone moving into a zoned area. But this elides the very different processes by which the degree of collective control over property was arrived at. The private process should give us far greater confidence that the tradeoff is efficient than the majoritarian one, whether or not it yields the same outcome.

In other words, we should prefer homeowner's associations to zoning boards not because they are necessarily better at protecting the liberties of individual homeowners, but rather because the arrangement is more economically "efficient", or in other words, we can be more certain their liberties were sold off -- perhaps by someone else, in the relatively distant past -- for the right price. Liberals like myself believe that some rights ought to be held inalienable, but in Libertaria, everything is up for grabs, and there is no right so sacrosanct that it cannot be bargained away. That logic has to end somewhere, or as I suggested a while ago, libertarians wind up defending the "right" of desperate people to sell themselves into slavery (dressed up, if you like, in the debt bondage livery that modern slavers are happy to use because it amounts to the same thing). But perhaps that's just my personal view -- if there's a price at which that market will clear, then who am I to judge?

One last point. Some of the more thoughtful libertarian commenters on this exchange have admitted that they find the behavior of homeowner's associations troubling. Well, guys, you're the ones who want government replaced with private contractual arrangements. Here's a worked example. If you don't like the way it's working out, can you be so confident that other markets in government services would work more to your tastes in the real world?

A few other, more carping points in response to Julian's latest salvo. First off, I had earlier pointed out that some homeowner's associations are not formed by the sort of extended individual bargaining process which Julian imagined, but are instead created by the developer and exist from the word go. To which Julian now responds:

When setting up the initial contract, the price they're able to fetch (their ability to fill all the units) will be a function of both the pervasiveness and intensity of different levels of desire for control. So maybe 51 percent of prospective owners have a mild preference for more control. Under a zoning regime, they get their way. But those who want more latitude may care more about it, with the result that the effect on the price at which the housing market clears is nevertheless lower at higher levels of initial control. And when the initial allocation is inefficient, it's at least easier for people to buy their way out, either wholesale or piecemeal. The horizons of control over each piece of property can at least be clearly specified and altered.

Perhaps I'm just getting baffled by the jargon here, but I'm not persuaded. At the beginning of the arrangement, this seems to suppose that people who know about homeowner's associations are able to rationally price their displeasure with them in a way that people who know about zoning boards are not. And as a practical matter, no you can't buy your way out of a homeowner's association -- but if you stop paying the dues or break the rules, they can buy you out of your house, whether you want to leave or not.

Also, in response to my discussion of ownership as a socially constructed relation, Julian responds:

Just about all of our rights are underdetermined at the edges by pure moral theory. From speech to privacy, it's probably necessary to have the edges drawn either legislatively or by common law evolution, or some other such process. But this "constructed" nature doesn't vitiate the core of the right. The fact that we need politics to deliniate the borders of libel law or fair use under copyright doesn't entail that all of free speech is up for grabs, that a majority may therefore decide to "draw the boundaries" in a way that excludes all speech promoting a disfavored religion. When politics is needed to specify boundaries, best to do it far in advance, and as neutrally as possible: Use politics to establish a framework that makes further politics unnecessary.

Well, I've never seen a "pure moral theory" that was fully satisfactory even on its own terms, so I'm a little reluctant to trust them as a basis for practical politics. Particularly not when we're talking about the balances of rights in such purely artificial social arrangements as loans, bank accounts, ownership of stock in joint stock companies, or ownership of patents (where what is "owned" is the right to prevent other people from making, say, a crustless peanut butter and jelly sandwich with crimped edges). But beyond that, it seems surreal to suggest that the boundaries of rights can be ever be drawn in such a way that new technologies and new social arrangements cannot raise new questions. Answering those questions is largely what politics is about, and I can see no answers yet which make the old Roman's question, "cui bono?", obsolete...


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