1For a sophisticated discussion of rights from the standpoint of moral philosophy, see Judith Jarvis Thompson, The Realm of Rights, (Cambridge: Harvard University Press, 1990.)
2Or the equivalent in civil rather than criminal terms.
3The approach presented here is an extension of arguments made in my review of Further explorations in the Theory of Anarchy, ed. Gordon Tullock, (Blacksburg: University Publications, 1974)., published in Public Choice in 1976. Elements of the argument also appeared in David Friedman, "Many, Few, One -- Social Harmony and the Shrunken Choice Set," American Economic Review, vol. 70, no. 1 (March 1980), pp. 225-232. A very similar approach is presented in Robert Sugden, The Economics of Rights, Co-operation and Welfare, (Oxford: Blackwell, 1986). The chief difference between Sugden's discussion and mine is that his argument is put primarily in terms of evolutionarily stable strategies where mine is put in terms of Schelling points. Sugden also provides interesting examples of the same general line of argument in the work of 18th century writers, in particular Hume.
Through most of this essay, I present the argument as the working out of my own ideas. Readers familiar with the literature may feel, with some justice, that I fail to acknowledge how much of it has been said before by other people, often in somewhat different terms. I have presented it in this form in part because I am trying to work out the logic of a set of related ideas, not their history, and in part because that is how it in fact developed; most of the material in Part I of this essay was first written down, and some of it first published, more than fifteen years ago. I am grateful to the organizers of this conference for providing an opportunity and incentive to compile and expand it.
4 I would like to thank James Buchanan for bringing Schelling points to my attention and Gordon Tullock for provoking me into exploring them further. See, especially, Winston Bush, "Individual Welfare in Anarchy," in Explorations in the Theory of Anarchy, ed. Gordon Tullock, (Blacksburg: University Publications, 1973).
5This point is made by Gordon Tullock in "Corruption and Anarchy," in Tullock (1974).
6 Lysander Spooner, No Treason: No. VI., The Constitution of No Authority (1870; reprint ed., Larkspur, CO: Pine Tree Press, 1966).
7 Winston Bush, "Individual Welfare in Anarchy," in Tullock (1973).
8 Thomas C. Schelling, The Strategy of Conflict, (Oxford: Oxford University Press, 1960), Ch. 3. While I am using Schelling's concept, my analysis of it, in particular my grounds for applying it to games with communication, is somewhat different from his.
9There is a semi-serious theorem according to which all integers are interesting. The proof is by induction. If some positive integers are uninteresting, then there must be a smallest positive uninteresting integer. But this unique characteristic makes that number interesting. So there can be no smallest uninteresting positive integer, so there can be no uninteresting positive integers. Similarly, mutatis mutandis, for negative integers.
10In practice, game theory sometimes smuggles subjective characteristics back into the argument in the process of choosing a particular strategy set. A famous example of this problem is the analysis of oligopoly. The assumption that the firm's strategy is defined as a choice of quantity and the assumption that it is defined as a choice of price lead to very different conclusions. See David Friedman, Price Theory: An Intermediate Text, (Cincinnati: South-Western Publishing Co. , 1990), ch. 11.
11 I have discussed this point, and the game of bilateral monopoly, at greater length in David Friedman, "Bilateral Monopoly: A Solution," Fels Discussion Paper #52, University of Pennsylvania, (March 1974) (unpublished, available from the author).
12 This approach is discussed in Friedman (1980).
13 Rudyard Kipling, "Danegeld," in Rudyard Kipling's Verse: Definitive Edition (Garden City: Doubleday, 1940), pp. 716-717.
14Robert Frank, Passions Within Reason: The Strategic Role of the Emotions, (New York: Norton, 1988). See also the discussion in Friedman (1990), pp. 288-290, which deals with the same strategy seen from the standpoint of the aggressor, the bully committing himself to carry through his threats even if doing so is not in his immediate interest.
15Danegeld as it actually existed did not entirely fit the pattern of behavior I am discussing here. The initial Danish invasions were for land and loot. In agreeing to be bought off, the invading armies may have been giving up an opportunity to do something they in fact wanted to do.
16Robert Ellickson, Order Without Law, (Cambridge: Harvard University Press, 1991).
17See my review of Ellickson: David Friedman, "Less Law than Meets the Eye," Michigan Law Review, vol. 90 no. 6 (May 1992),pp. 1444-1452.
18I apologize to mathematicians and my fellow economists for using using "local" and "global" in a sense that may seem inconsistent with their usual usage in classifying maxima; I will be happy to consider suggestions for alternative terminology. To make my usage of the terms less idiosyncratic, think of a change in norms involving only two people as a small change and one involving many as a large change, and think of an "improvement" as a change to a situation that is pareto superior for those who are changing. Then a locally efficient set of norms, like a local optimum, is one that cannot be improved by a small change.
For a more mathematically elaborate approach to defining small and large changes and using them to analyze the evolution of rules in a population, see Friedman (1974).
19A slightly different way of putting this argument is in terms of what Dawkins has described as the evolution of "memes": ideas evolving in an environment consisting of the minds of humans. See Richard Dawkins, The Selfish Gene , (NY: Oxford University Press, 1976), pp. 203-215. One reason a meme--such as the belief that "one ought to be honest towards honest people"-- will spread is that those holding it are observed to be more successful as a result. But in order for the process to get past the early stage, when the meme is still rare in the population, it must be useful to hold the meme even when most other people do not. This works for memes representing norms such as honesty, but it does not work for a meme for conservation of whales. It is accordingly puzzling that memes in favor of conservation have spread so rapidly in the current U.S. population-to the point where belief in conservation has become very nearly the secular equivalent of a state religion.
20To put the argument in something closer to conventional game theory terms, I am combining a familiar concept of dominance in multi-player games with the idea of transaction costs. Outcome A dominates outcome B if there is some set of people who together can produce A and who all prefer A to B. A small number of people can produce a change-such as the adoption of a norm among themselves-that only involves changing their own behavior. A large group, because of transaction costs, cannot.
21This point is discussed in David Friedman, The Machinery of Freedom, 2nd edn. (LaSalle: Open Court, 1989), chapters 41-43.
22The correspondence is not perfect; it would be in some ways closer if I were writing this essay a century ago. A particular form of the correspondence-the claim that the common law tends to be economically efficient-has been a central element of the work of Judge Richard Posner, one of the leading scholars in the law and economics tradition. See Richard Posner, Economic Analysis of Law, 4th edn., (Boston: Little Brown, 1992).
23Ronald Coase, "The Problem of Social Cost," Journal of Law and Economics vol 3, (1960),pp. 1-44.
24I am not claiming here that slavery is never observed nor that it is never efficient. One can imagine circumstances in which the self-enforcing element of contracts would be too weak to enforce the contract that would be superior to slavery. An example is the prisoner of war who is confined because there is no other way of enforcing his agreement to pay for his freedom. A counterexample is the institution of parole, as it in fact developed. See Bruno S. Frey and Heinz Buhofer, "Prisoners and Property Rights," Journal of Law and Economics, vol. XXXI (April 1988), pp. 19-46.
The argument given here provides a possible explanation for the Posnerian thesis that common law tends to be economically efficient. Common law presumably originated as a set of (locally efficient) norms converted over time into legally enforceable rules. If this interpretation is correct, we would expect common law to have become less efficient over time, since the mechanism that generates the efficiency of norms would not apply to legal rules defined and interpreted by a third party.
25The obvious example of such a claim is Judge Richard Posner's thesis that the common law tends to be economically efficient. Testing that conjecture is an extraordinarily difficult and complicated project, but it is in principle a positive one. See Richard Posner, Economic Analysis of Law, 4th edn., (Boston: Little Brown, 1992).
26This point is discussed at greater length in David Friedman, "Should the Characteristics of Victims and Criminals Count? Payne v Tennessee and Two Views of Efficient Punishment," forthcoming in Boston College Law Review, July 1993.
27Which is not to imply that legislated rules necessarily are designed for the good of society, but only that they might be.
28This is not the only way in which a positive account of rights might be developed. Sugden pursues a similar project in a framework where conventions develop as players of a many-player game learn by experience and alter their behavior accordingly (Sugden 1986). Another alternative would be a socio-biological explanation, in which respect for property is an inherited behavior pattern that evolved because it resulted in increased fitness-which is to say reproductive success.
It is unclear to what extent these are really competing explanations, rather than different views of the same elephant. The socio-biological account may be seen as simply Sugden's repeated game, repeated through many generations, or as my account in a world where humans' ability to alter property rights by contract simply reflects the richer set of Schelling points available to them. My sketchy account of the development of norms and Sugden's more detailed account of the development of conventions are the same, save that he emphasizes anonymous adaptation where I emphasize explicit contracts among small subgroups. His account of the underlying games takes the available strategy set as given, where mine takes it as a subjective fact about the players that may under some circumstances be alterable. The similarities among the explanations are close; it is unclear whether the differences are sufficiently great to lead to significant differences in their implications.
29By property ownership I mean the ability to control things, not the legal right to do so.