A High School Economics Guide

Supplementary resources for high school students

Definitions and Basics

Property Rights, from the Concise Encyclopedia of Economics

A property right is the exclusive authority to determine how a resource is used, whether that resource is owned by government or by individuals. Society approves the uses selected by the holder of the property right with governmental administered force and with social ostracism. If the resource is owned by the government, the agent who determines its use has to operate under a set of rules determined, in the United States, by Congress or by executive agencies it has charged with that role….

What happens when property rights don’t exist? The Tragedy of the Commons, from the Concise Encyclopedia of Economics

In 1974 the general public got a graphic illustration of the “tragedy of the commons” in satellite photos of the earth. Pictures of northern Africa showed an irregular dark patch, 390 square miles in area. Ground-level investigation revealed a fenced area inside of which there was plenty of grass. Outside, the ground cover had been devastated….

The explanation was simple. The fenced area was private property, subdivided into five portions. Each year the owners moved their animals to a new section. Fallow periods of four years gave the pastures time to recover from the grazing. They did so because the owners had an incentive to take care of their land. But outside the ranch, no one owned the land. It was open to nomads and their herds….

How Property Rights Solve Problems, by David Henderson at Econlib. April 2, 2012.

Should restaurants allow smoking or not? Should schools teach evolution or intelligent design or both? Should insurance companies cover contraception? Should I be able to take off my shoes in your living room?

… here’s the kicker. If property rights are respected, none of the other three questions is a public-policy problem either. Consider each in turn.

Are property rights only for the rich? The Power of Property Rights, at LearnLiberty

Private Property and Opportunity Costs, by Dwight Lee. At CommonSenseEconomics.com.

Too Costly to Drive: Assume you win a Rolls Royce Silver Shadow, with insurance, maintenance, gas, and taxes paid. While this isn’t quite as nice as winning the state lottery, the going price for a Silver Shadow is around $250,000. That’s the good news. The bad news is that you’re probably not wealthy enough to drive this car. Your first reaction is likely: What do you mean I can’t afford to drive it? Everything is paid for by someone else.

True, but I still predict that you will find the car too costly to drive. Regardless of how you got the Rolls Royce, the cost of driving it is the price someone else is willing to pay for it. And because the car is your private property, you can’t ignore that cost….

In the News and Examples

Parking space rights after blizzards: Snow Jobs, by Fred S. McChesney. Econlib, October 15, 2001

The most important concept in all of economics is property rights. Most of what people do can be explained in terms of establishing, protecting and maximizing the value of personal property. The property may be real estate, or it may be intellectual property like a copyright or trademark (or, these days, even a patentable “business process.”).

Or it might be a parking space. Observing how parking spaces are allocated in Chicago provides a fundamental lesson in property rights economics….

Boldrin on Intellectual Property. EconTalk, May 18, 2009.

Michele Boldrin of Washington University in St. Louis talks with EconTalk host Russ Roberts about intellectual property and Boldrin’s book, co-written with David Levine, Against Intellectual Monopoly. Boldrin argues that copyright and patent are used by the politically powerful to maintain monopoly profits. He argues that the incentive effects that have been used to justify copyright and patents are exaggerated–few examples from history suggest that the temporary and not-so-temporary monopoly power from copyright and patents were necessary to induce innovation. Boldrin reviews some of that evidence and talks about the nature of competition.

Can you have property rights in intangible assets? Intellectual Property, from the Concise Encyclopedia of Economics.  

Although expression and invention must be transformed into physical embodiments before they can have market value, they can also exist, and indeed must originally exist, in the creator’s mind. As such, traditional laws of property, which require physicality, do not apply. Traditional laws of economics, such as the assumption of scarcity, also seem not to apply because individual expressions and ideas cannot be used up.

Can Artists Make Money Without Copyrights? at LearnLiberty

Is it legal for Google to scan millions of copyrighted books without asking permission? Is it economically efficient? Is Google Book Search “Fair Use”? by Lawrence Lessig. Video at YouTube (30 min.)

So, everyone knows about this company, Google. Some of you might have heard about this project, which Google announced last December, 2004, called Google Print, and that they renamed in November, 2005 the Google Book Search project…. They imagine to take books and to make it possible for people to see inside…. 9% of those books are books that are copyrighted and still in print; 16% of those books are books that are in the public domain—meaning books whose copyright has expired. And that means that 75% of the 18 million books that Google originally intended to copy and then index are books that are under copyright in the United States but out of print….

An Interview with Lawrence Lessig on Copyrights, at Econlib

Does Congress have the right under the Constitution to extend copyright protection for ever-longer periods of time? Should the law treat intellectual and physical property differently? What are the key economic aspects of digital property? How much, if any, control should we put over the Internet? How does the evolution of creative culture build on past creation?…

A Conversation with Harold Demsetz. A professor at the Graduate School of Business at the University of Chicago in the 1960s and a primary figure in Chicago School Economics and in the field of Law and Economics, Harold Demsetz has contributed original research on the theory of the firm, regulation in markets, industrial organization, antitrust policy, transaction costs, externalities, and property rights.

A Conversation with Steve Pejovich. Svetozar “Steve” Pejovich, one of the most dynamic and insightful theorists writing on property rights, reflects on his experience in economics. With characteristic sagacity and humor, he demonstrates the power that empirical cases can bring to bear on theoretical problems.

A Little History: Primary Sources and References

Strategies to handle water pollution, historical and modern: Bruce Yandle on the Tragedy of the Commons and the Implications for Environmental Regulation, EconTalk podcast episode, October 2007

Bruce Yandle of Clemson University and George Mason University’s Mercatus Center looks at the tragedy of the commons and the various ways that people have avoided the overuse of resources that are held in common. Examples discussed include fisheries, roads, rivers and the air. Yandle talks with EconTalk host Russ Roberts about the historical use of norms, cooperative ventures such as incorporating a river, the common law, and top-down command-and-control regulation to reduce air and water pollution.

Property rights, incentives, and slavery throughout history: Stanley Engerman on Slavery, EconTalk podcast episode, November 2006.

Stanley Engerman of the University of Rochester talks about slavery throughout world history, the role it played (or didn’t play) in the Civil War and the incentives facing slaves and slave owners. This is a wide-ranging, fascinating conversation with the co-author of the classic Time on the Cross (co-authored with Robert Fogel) and the forthcoming Slavery, Emancipation, and Freedom (LSU Press, 2007). Engerman knows as much as anyone alive about the despicable human arrangement called slavery and the vastness and precision of his knowledge is on display in this interview.

Advanced Resources

Satire illustrating a common logical pitfall about property rights and voluntary exchange: Your Dog Owns Your House, by Anthony de Jasay on Econlib.

Did you know that your dog owns your house, or rather some portion of it? If this is not immediately obvious to you, you will find it helpful to consider some aspects of the ethics and economics of redistribution.

Your dog is alert, plucky and a fearsome guardian of your property. For all we know, without his services, you would have been burgled over and over again. Your belongings would be depleted and the utility you derived from your home would be much reduced. The difference between the actual value of your home and its unguarded value is the contribution of your dog, and so is the difference between the respective utilities or satisfactions you derive from it….

How does something come to be owned in the first place? Property or “Property Rights,” by Anthony de Jasay. Econlib. January, 2014.

Historic Self-Preservation, by Fred S. McChesney. Econlib, January 7, 2002.

Government control over private owners’ use of their property empowers politicians to advance their own agendas. In particular, it allows politicians to threaten property owners with historic preservation status when the conditions do not justify political intervention….

Related Topics

Economic Institutions

Market Failures