04/03/2017 Colloquium Series - Robert Fleck: “Increasing the Value of Property Rights by Limiting Transferability”
From David Price
We examine non-price allocation mechanisms when the incentive and information constraints faced by a democratic government may render the ideal (i.e., “first-best”) outcomes infeasible. Our model identifies a potential tradeoff between the misallocation of goods and the misalignment of incentives. This means that restrictions on the transferability of property rights may increase the value of those rights by reducing the misalignment of incentives over collective decisions. In this light, the holders of some types of property rights may collectively favor restrictions on transferability, even though—individually—they would stand to gain from the ability to sell their rights. We apply the model to the allocation of rights to hunt wild game (often done by lotteries) and the rights to build and occupy housing under “affordable housing” policies.