Lessons from Iceland: Liberty, Technology and Property

This week, a group of legal scholars, high government officials, Nobel prize recipients and economic experts gathered for the Mont Pelerin Society (MPS) meeting in Reykjavik, Iceland, to discuss e-government, telecommunications and intellectual property, among other issues.

One of the more colorful speakers was Mart Laar, former president of Estonia. On his watch, that nation rose from poverty to become one of the fastest growing economies in the Baltic region. Flat taxes and privatization were key to Estonia’s success, but technology also played a part.

According to Mr. Laar, Estonia was the first paperless government in the world and 100 percent of Estonia’s public sector is now on the Internet. This transparency of government actions has made the government both less popular and more efficient.

Addressing the Future

Estonia’s government has become less popular because citizens can see proposals for laws before they are fully formed, increasing the level of debate and criticism. The upside of this vigorous discussion is something America is known well for harnessing in the low-tech space. That is, input from a number of different factions means that no one group dominates the direction of public policies, making laws better and more efficient. Of course, Estonia is not a completely free market.

Many Estonians currently access the Internet through government-provided WiFi. That’s a workable situation for now because it’s so newly implemented, but those who understand the important connection between innovation and property rights know that in the long run, government-owned networks will become as outdated and run-down as government-owned food and clothing stores. When asked about this future problem, Mr. Laar simply said he supports privatization and then put on his politician’s hat, changing the subject to his other successes.

Privatization of telecommunications continued to be a key theme as former FCC chief economist and George Mason law and economics professor Thomas Hazlett took the stage. In order for wireless and mobile voice technologies to reach their maximum potential, spectrum markets need to be liberated, he argued.

History’s Course

Historically, spectrum has been treated as a “commons” managed by government with great inefficiencies. But it is possible to create a market in spectrum by auctioning off parts and letting users treat it as property. This would be the best direction to go, said renowned economist Harold Demsetz.

Just as the introduction of private property historically saved the fur trade by stopping the over-hunting of animals in North America, the future of wireless communications can be secured by creating markets in scarce spectrum. But while property rights are a key element of a strong and free society, not everyone accepted them point-blank.

Santa Clara University law professor David Friedman argued that property rights are not always superior to the commons. Consider intellectual ideas, he said. If someone fully owned each idea, it would be difficult to have conferences like MPS and for academics like Professor Demsetz to write papers about Nobel Prize-winner Ronald Coase’s economic theory. While Friedman makes an interesting point, his statement seems to assume an all-or-nothing approach to property rights.

The very fact that Demsetz cites Ronald Coase in discussing his own ideas shows that Coase still maintains a property right in his work. That is, a thinker can’t exclude someone from using his ideas as he could exclude someone from using his car, but perhaps one can look at property in ideas as being reflected in concepts such as fame, which can then translate into physical benefits such as speaking engagements, prizes and so on.

Respect for Incentives

“The question really is not what to do with the idea after it’s created,” Demsetz said, “but how to get Coase to write it in the first place.” Indeed, incentives do matter, and if one were to make one’s efforts fully part of the commons, creative fires would be certainly be extinguished.

Conference participants discussed many more elements of technology and society, but the overarching theme was clear: Technology is changing the way that people live and interact, but it does not change the rules of economics.

Sonia Arrison, a TechNewsWorld columnist, is director of Technology Studies at the California-based Pacific Research Institute.

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