What is an Idea Worth?

Applying Philosophy to Business (and vice-versa)

This guest post is by a PhD student in philosophy from the Australian National University.

DEATH AND TAXES, the adage goes, are life’s two certainties. One might add commerce and philosophy to this list, for the trade of goods and services and the trade of ideas also seem to emerge everywhere that people do. Enterprising governments found a way to combine the expiration of citizens with the raising of revenue – and gave us death duties. So let us ask: what is the relationship between business and philosophy?

The fundamental requirement for commerce – or so it seems to me – is that participants and regulators agree that there is some notion of property rights which underlies the doing of business. Only if property rights are acknowledged by participants are the ideas of buying and selling coherent; only if the law protects property rights and regulators enforce them can the system work in practice.

Of course, developing a theory of property rights is something which has occupied philosophers for centuries. Broadly, the concern has been to understand what it is that gives someone a right to possess or control something to the exclusion of all others. Is there some special, intrinsic connection between a person and an object owned? Or is it merely agreed between people that one should not interfere with something owned by another?

Centuries of discussion notwithstanding, there is no consensus as to which, if any, of many theories regarding the above issues is the best. This is not without practical implications. The ideas about property which prevail in the community and in our politics feed directly into the laws and regulations which we have about property ownership and about doing business. Given the failure of philosophers to articulate definitively the nature of property, then, and given the reliance of commerce on property rights, it may be worth pondering exactly what, if anything, an ideal theory of property rights should be worth to a businessperson. A simple thought experiment will help with this.

Imagine that you are in business supplying widgets but that your only competitor in the widget supplying business is performing significantly better than you. Imagine that someone in your community announces that they have access to a perfect and absolutely infallible theory of property rights and that you have reason to believe that this person does in fact have access to such a theory (it does not matter how they got access to this theory – philosophical genius, divine inspiration, accident, whatever). Imagine also that this theory is for sale to either you or your competitor: for appropriate consideration, this (perhaps opportunistic) citizen will give to the buyer (and to the buyer alone) access to the theory.

Why would either of you want access to the theory? Assume that, once in possession of the theory, the buyer will be able to make a decision about the legal situation in the community. If the buyer (and now de facto legislator) wishes, the laws which govern property rights in the community will be made to conform to this (by hypothesis) ideal theory of property rights. Obviously, the buyer would choose this option if doing so would give his or her business an advantage as against the competitor. Otherwise, the buyer could simply leave the legal situation as it is.

What to do? How much would you be prepared to pay for access to the theory? If we had some more information about the extent to which your business is outperformed by its competitor and the expected outcome of altering the legal system, then it would be possible to calculate the best course of action. This, however, is not really the point of the thought experiment. What is striking is that, as a businessperson, you rely on there being a legal regime based on some vague ideas about property. It may or may not be in your interests, however, for this legal regime to reflect the best possible ideas about property – this may or may not give you an advantage. Regardless of how you would be inclined to act, the fact that the thought experiment is intelligible proves this point. We are able to conceive of something as abstract as the sale of access to a theory of property rights even though, on the terms of the thought experiment (and in reality), we are thinking about the matter only with the aid of the imperfect theories of property rights which we do have.

As for one businessperson, so for the business community. In order for business to work, there needs to be a legal regime which gives expression to some vague notion of property. It is not necessarily the case, however, that a legal regime which gives expression to the best possible theory of property would be the best regime for business and for the economy.

This is not a reason to give up thinking about property. Ideas about property are important to individual security, to social welfare and to our interactions with government and we might want to continue exploring the concept because we are concerned about these issues. Alternatively, it may work just as well in these contexts if we proceed on the basis that some undefined notion of property underlies our dealings.

Perhaps the point demonstrated by the thought experiment – that we do not all need to subscribe to the same, let alone the best, theory of property in order to do business – is just common sense. Philosophers spend a lot of time trying to prove results which do seem obvious; for sometimes the proof is much less obvious that the result. If the idea demonstrated by the thought experiment is in any way instructive, it may be because it borrows the currency of business and asks what a particular type of theory would be worth to those to whom it is perhaps most relevant. That is, it investigates the value of a theory. There is a nice symmetry here. Business takes as assumed certain philosophical ideas about property; philosophy can perhaps better illuminate the notion of property by borrowing the method of business.

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2 Replies to “What is an Idea Worth?”

  1. It’s a nice recursive thought experiment, but some of the conclusions seem a bit hasty to me. In particular, “It’s not necessarily the case…best possible theory of property would be the best regime for business and for the economy”.

    Arguably, business and the economy are systems of repeated interactions. As such, the fact that the best theory of property is of no benefit in an individual transaction, doesn’t mean that it wouldn’t best for business or the economy overall.

    If we view the best theory of property as “fair dealings”, then the thought experiment may well end up in Robert Axelrod’s territory of repeated prisoner’s dilemmas, where acting fair (and reinforcing others to act fair) results in the best pay-off for all.

  2. Richard,

    Thank you for your thoughtful comment. I agree that the best theory of property (whatever it is) may be the best for business and for the economy, even if it is not the best from the perspective of a party to a particular transaction. I just wanted to argue that this isn’t necessarily the case (maybe I should have said that it isn’t obviously the case).

    It’s a good point about “fair dealings” as well. My only concern would be whether this would provide a basis for a theory about property or whether it would only provide a basis for a theory about business or transactions etc. I can see that it would be arguable, though, that my thoughts in the main piece are also about business or transactions etc. rather than property.

    Best,
    Daniel

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