Author: Andrew Odlyzko

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Property rights and Brett Frischmann’s social value of infrastructure

Brett’s book is a very valuable addition to the literature on the governance of infrastructures. Just the collection and summary of a huge variety of references would be valuable by itself, as a guide to literature. And then there are Brett’s own contributions in this volume, only some of which have been published before.

I was only able to skim through Brett’s book, so cannot provide a careful evaluation of it. But one point that might be worth making explicitly is that at a basic level, his argument for a commons approach to infrastructure regulation is the same as that of the currently dominant private property rights movement.

Why are clear and secure property rights important? Because they provide assurance to entrepreneurs and investors that the fruits of their money and efforts will not be misappropriated by some Robber Barons. But lack of restrictions on infrastructure providers means that they can act as Robber Barons with regard to other businesses, appropriating the fruits of their investments. Lack of regulation of monopolies is similar to a lack of law.

That this is an issue can be seen in numerous instances, such as the article about U.S. railroads in the Sept. 26, 2011 issue of Fortune by Mina Kimes, “Railroads: Cartel or free market success story?”  A chemicals company covered there decides to expand in Texas and not in West Virginia because in Texas their site “has access to three railroads,” whereas in West Virginia it is captive to a monopoly that can charge far above its costs.

Thus the issue is really about protecting property rights of either the infrastructure providers or the economy at large. Where should the balance lie? It should be said that this is not a rhetorical question, as historically, it has often been the case that infrastructure providers were often given more leeway to engage discriminatory pricing when the costs of the infrastructure were high.