Nov 28, 2012

Aristotle, democracy, communism, citizen-ownership

"What is common to many is taken least care of, for all men have greater regard for what is their own than for what they possess in common with others." - Aristotle.

Communal vs. Private Property Rights : The Freeman : Foundation for Economic Education:

"In the Soviet Union, most farmland is cultivated collectively. The output of the collective farms goes to the state."

"Families living on collective farms are permitted to cultivate a private plot, the area of which is not to exceed one acre. The “owners” of these private plots are allowed to sell their produce in a relatively free market. Although these private plots constitute approximately one per cent of the land under cultivation in the Soviet Union, the Communist press reported that in 1980 about one-quarter of the total value of agricultural output was generated by these plots. The productivity per acre on the private plots was approximately 33 times higher than that on the collectively farmed land!

Property rights make a difference even in the Soviet Union. Clearly, the farm workers take better care of the plots they own privately than the land they own communally."

A citizen-ownership democracy is not about communal properties. There is common ownership, but management need not be everybody. An example is a sovereign wealth fund. Citizens share ownership of a sovereign wealth fund, but the fund is run by professionals.

Using the Soviet example of collective farms, ownership will be by citizens but the collective farms will be auctioned periodically to private owners. The auction proceeds will be distributed to all citizens. After winning an auction, the private owners will be highly motivated to work and get their profit, just like owners of the private plots.

Aristotle had not considered a "communal" property that distributes dividends to all. For the Alaska Permanent Fund, which is "communally" owned and distributes annual dividends, the Alaskans are fiercely protective of the dividend.

"But Alaskans are fiercely protective of the dividends they receive from the fund, and a "leave it alone" mentality is prevalent, creating a major political problem for Knowles. In a non-binding, advisory election two years ago, 83 percent of Alaskans voted "no" on a proposal authorizing the Alaska Legislature to tap into fund earnings to help balance the budget. A controversial 30-second ad aired before the election portrayed lawmakers who favored the plan as swashbuckling pirates bent on raiding the fund."

Tapping into the Alaska Permanent Fund to balance the budget will be a highly regressive taxation.

If and when people see a direct tangible benefit from their "communal" properties, they will be motivated to watch the communal properties very carefully.

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