Academic journal article Iowa Law Review

Slicing Spontaneity

Academic journal article Iowa Law Review

Slicing Spontaneity

Article excerpt

I. INTRODUCTION

Spontaneous order, as famously explored by Friedrich Hayek, is the antithesis of top-down control; it emerges from a multiplicity of individual responses to dispersed informational signals.1 Hayek's work emphasizes the role of market forces in providing those signals, and the role of law in providing the background conditions under which a spontaneous marketbased order can arise and thrive.2 Private property fits cleanly into this model. Yet there are many domains of great economic and social significance in which private property rights have not (or have not yet) been established; rather, resources are held in common. Examples range from shared roads and parks, to fisheries and forests, to the ambience or bustle in a neighborhood or business district. Establishing and sustaining spontaneous order in these contexts means finding ways for individuals to coordinate their dispersed actions in the absence of formal private property rights or top-down coercion.3

This Essay focuses on the role of resource segmentation-the natural or artificial division of resources into appropriable units-in eliciting and maintaining coordination among resource users in the absence of formal property rights. My claim is that the appropriate segmentation of resources can reduce informal governance burdens and help to produce convergence between privately optimal and socially optimal choices.4

To take a simple example, a pie that has been divided into single-serving slices is easy for a group to share in a strife-free manner. Even if social norms might cut against taking "too much" of an undivided shared resource (such as a milkshake accessed with multiple straws, or a natural gas reserve lying under land held separately by a number of neighbors), it can be difficult to know how much is too much in the absence of visible, pre-divided shares. Selfserving bias takes on a rather literal meaning in such settings,5 and excessive claims by multiple parties can generate losses through overly rapid or contentious extraction.6 Segmentation is relevant not only where resources are extracted from a common pool, but also where effort or other resources must be contributed to a common project. Here too, success may depend on how the solicited contributions are broken up.7

There are two basic reasons that resource segmentation matters to spontaneous order: It can reduce informal governance burdens by facilitating measurement, and it can produce convergence between privately and socially valuable choices by constructing choice sets. Consider first how resource segmentation supports governance. Segmentation, whether given by nature (individual animals, trees, pieces of fruit) or artificially constructed (boatloads, bushels, pie slices) provides a measuring rod for assessing draws on, or contributions to, common pools. Measurement enables monitoring by other participants that can facilitate the enforcement of social norms.8 It also allows parties to monitor their own behavior and compare it with that of others. This process of comparison can support internalized norms of fairness and reassure actors that their own efforts or acts of forbearance are being reciprocated by others.

Resource segmentation also helps produce convergence between privately and socially optimal choices. This result follows from two underappreciated concepts: irrelevant externalities and lumpiness.9 A simple example illustrates the intuition. People who attend festivals create positive spillovers for others in attendance.10 These positive spillovers create no inefficiencies if the person is motivated to attend the festival for her own reasons and would not do anything differently if she were able to collect payments from those who benefit from her presence. This last proviso-that she would not do anything differently-is more likely to be fulfilled if "attending the festival" is a discrete, binary action that must be performed in its entirety or not at all. …

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