Sunday, April 17, 2016

Property and Decision Rights

Joe Dudley: I take great pleasure in nominating Mr McDonald Walling for the presidency of the Tredway Corporation.
Jesse Grimm: Second
Fred Alderson: I move we make it unanimous.
Erica Martin: All those in favor? Ms Tredway?
Julia Tredway: Yes.
Erica Martin: Mr Caswell? Mr Shaw? So voted.
--Executive Suite

Why is it that only stockholders of a company (or their agents) get to vote on issues material to the firm? The answer, obviously, is that the stockholders own the company's assets. Since they are the property owners, they control the disposition of those assets. With property rights come decision rights. And their decision rights are weighted by the fraction of the company's shares that they own.

It would be absurd to allow non-shareholders to vote on internal issues material to those property and decision rights.

Yet in conventional political elections, votes are permitted by people who don't own the property that is being considered for disposal. When those who don't own property are permitted to vote on its disposition, we can be confident that non-owners will vote in a manner that will favor redistribution toward their interests.

Under such situations, democratic process becomes, as the saying goes, two wolves and a sheep deciding what's for dinner. And make no mistake, voters who are permitted to vote on the disposition of others' property have been granted a privilege.

If voters could only cast votes on the disposition of property that they owned, and those votes were weighted by degree of ownership, then political elections would produce different results--results grounded in more equitable, peaceful outcomes.

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