Migration and Private Property

Today, guest lecturer Professor Openheimer from Oxford University brought up an interesting point. In discussing the possibility of Russian capital markets, Openheimer mentioned that it is impossible to harness entrepreneurial energy without property rights.

This rings true with what Professor Vladimir Mau also said earlier today in relation to innovation in Russia. Throughout Russian history, people have come to depend on the state for entrepreneurial direction and have not developed their own innovative/creative spirit. During the Soviet Union, for example, there were no incentives to find new ways of doing things – better, cheaper, more efficient ways – as there was a government set plan that had to be completed no worse and no better than what was planned from above.

Professor Mau brought up an example of the meeting of the Russian Council for Education and Science (something like that) with President Putin in Zelenograd (a city aspiring to be the Silicon Valley of Russia). The results of the meeting show that the Russian R&D sector insists on priorities set by the government about what scientific developments will be important in the future. There is a lack of innovation from below – triggered by these same scientists in response to real, immediate social demand and financed by private entrepreneurs – which again manifests itself in the old system of asking the government to set priorities, which like everything from above will be too late, inefficient, and biased (of course, this is a very liberal view from a typically American, capital-market economy perspective).

It is already easy to see that entrepreneurial energy is difficult to come by in Russia. Add to that the condition that for Professor Openheimer seems essential to have entrepreneurship – property rights – and look at when such property rights were given to Russians (I think that it is the privatization period immediately after the fall of the USSR, since before then everything for centuries back into Russian history was either state owned or collective), and we get a pretty desperate picture for growing an innovative environment in Russia. But this is getting away from the topic, which is migration…

When I think of property rights I immediately think of settled communities. Traditionally, only those people who were settled in one location could own property. Nomads, for example, did not own anything – they used the land and then moved on and used other land without possession. Pushink describes the difficulty of not possessing something (be it land or his wife) for a Russian officer who goes to live with a gipsy tribe in his poem “Tsygany” (see other blog entry about this poem). In fact, I suspect that Russians were trying to pin such nomadic communities down because if they did not own property then the government could not collect taxes from them.

Using this traditional model by which one could own property, e.g. by living in one place/being settled, and believing in the relationship between private property and level of entrepreneurship (why? Because by owning something you are given a stake in improving it and making it better from your neighbor, competition is born and with it incentives to innovate), it can be very interesting to posit a relationship between the amount of human movement historically and the level of innovation in a country.

Today’s world of fast information and communication technology and advances in transportation make private property ownership a completely different thing from the past. Today, in order to own property one no longer needs to be settled. New property is often intellectual or virtual, therefore does not abide by the rules of physical space at all, and what is still physical can be quite mobile – for example one’s car or phone or even house (just read the inflatable house article!). Therefore, by extending the theory of property ownership and innovation, it seems that migration does not disturb the process of innovation.

Again: the relationship between private property ownership and migration has changed. Whereas before to own private property one had to be living in one place, today private property can travel with his owner wherever he goes.