The Law of Diminishing Returns and Human Capital

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Most of us that have a rudimentary understanding of economics, are familiar with the concept of the Law of Diminishing Returns. It is quite evident that this premise is unquestionably applicable to physical goods. Does this enduring economic law also apply to intangible commodities? It is salient once a person has exhausted the optimal quantity of solid objects. This is conspicuous in the disutility of engaging in hoarding behavior. While the optimum number of chairs a person should furnish their home with is debatable and depend on several factors, it is obvious once a person has amassed too many. Once an individual has so many chairs that it makes restricts accessibility to certain rooms in the house, becomes a fire hazard, or the homeowner can no longer contain all of the objects they own within the confines of the physical structure of their house- then it is problematic. Then rightward shift from the equilibrium point is universally expressed. There is no foreseeable value in obtaining more or maintaining your current collection of chairs. The assessment of whether you have too many chairs is no longer a matter of aesthetic preferences, but a matter of physical limitations. It is easy to determine once we obtained too many physical goods. 

The saturation point is much more difficult to answer when about intangible goods (human capital, intellectual property, etc.). However, it could be argued that the Law of Diminishing does apply to human capital. The ultimate marketplace for human capital is the job market. Often we hear the term “saturation” be used to describe the labor market. Several factors can contribute to the overabundance of human capital available to employers. Periods of high unemployment leave firms with the ability to hire, a large pool of applicants to choose from. The saturation could be referring to a glut of similar skill sets or credentials. If history majors are a dime a dozen, but math majors are hard to come by, who is going to stand out in the job market? If everyone has basic Microsoft office skills, but there is one candidate in the resume heap that has an advanced certificate in Excel, needless to say, this will catch the eye of any hiring manager or human resources representative. 

Degrees and certificates are not so much human capital as documentation of skills and formal education. Couldn’t the soaking point of specific forms of human capital also be relevant to soft skills? Well, why not? If can be applied to credential and soft skills then it must apply to more innate qualities. Such as personality types. Pre-employment personality tests not only qualify if a candidate is a good match for a specific job role but also help to bring more balance to team dynamics. 

Going beyond even the job market or potential job prospects, human capital is integral in determining an individual’s overall trajectory in life. While other factors such as opportunity, motivation, and timing have a lot to do with success. Without the proper skills, most people will not rise above a certain point of attainment. One of the most coveted, but arguably overrated attributes in the panoply of human capital is general intelligence. General intelligence can only get a person so far. There is no one single factor that leads a person to success, but rather a multitude of different variables. The sum of the parts is greater than the whole certain applies. Providing some validation of  Scott Adams’s postulations regarding complementary skills. No one needs to a virtuoso, but it is better to be reasonably good at many related skills than to fully master one. General intelligence is the archetypal example of being a master of one domain. We all have heard the platitude “… jack of all trades, master of none…” so frequently that it is deeply ingrained in our subconscious. However, this old saying has little applicability to the real world. It isn’t the smartest or the most diligent among us that succeed. Then again, the village idiot and the local ne’er-do-well burnout aren’t the ones rising to the top either.

Malcolm Gladwell’s book Outliers (2008) presents an intriguing example of why general intelligence alone will not ensure success. Gladwell details the near-tragic trials and tribulations of Christopher Langan. A man who is a bona fide genius. Despite his expansive and impressive intellect he never had the opportunity to thrive as a universally praised academic. Langan boosted an IQ of 195 shadowing the IQ of Albert Einstein forty-five points (p.70). As impressive as it sounds to have an IQ of 195, there is one important point to remember. A veteran scientist with an IQ of 130 is equally as likely as a colleague with an IQ of 180 to win a Nobel Prize (p.80). Meaning that Lagan’s intelligence while awe-inspiring could even be viewed as being superfluous. If a person with an IQ thirty points lower than Langan can be a Nobel laureate what value does the extra IQ points effectively bring to the table? 

Despite Langan’s intimidating intellect he failed to even obtain an undergraduate degree. This was due to a string of unfortunate shifts in his vicissitudes. One notable incident transpired when he was enrolled at Montana State, he had car troubles and could not make his morning classes. He had a neighbor who offered to give him rides in the afternoon to school. Regardless of how much cajoled and begged the dean he was not allowed to change his class schedule and was forced to withdraw from his program (p.94-95). Langan’s foil must be Robert Oppenheimer who worked on the development of the atomic bomb during World War II (p.97). Here was a man who as a student attempted to murder his tutored (p.98). Not only did he get away with it, but later on after he completed his graduate program he managed to get on the prestigious Manhattan Project. It is evident his past transgressions did not dampen his career in any way. What truly separates both these men from one another? Both men were exceptionally bright, but one man couldn’t even convince his dean to do something as innocuous as changing his class schedule. Another got away with attempted murder. The difference was that Oppenheimer had a greater degree of practical intelligence (p.101).

The comparison between these two men illustrates that not only is there a ceiling in the benefits of having high general intelligence. There are also limitations if the only skills you have are related to general intelligence. Without practical knowledge, a robust IQ is tantamount to be a weight. We all need the precepts requisite to tactfully navigate the world. In the absence of this scaffolding, our intelligence is of little use and only serves to weigh us down.

Native Americans Did Believe in Property Rights- Part III: Recognition of Property Rights

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Part I

Part II

It is well established at this point that the notion of Native American tribes not observing property rights is a misconception on the part of European settlers. Various tribes throughout continental North America have recognized individual property rights in several diverse ways. Historically, American Tribes have acknowledged an informal version of Tort Law. Signifying that native tribal societies held property in high regard. If a culture did not value personal property, there would not be any (whether centralized or decentralized) institutions requiring restitution for damaged property or bodily harm. That alone dispels the conventional wisdom that all tribes rejected the prospect of material ownership. Reducing this enduring fallacy to nothing more than an erroneous interpretation of Native American History.

Depending on the tribal nation, some subsets of natives had surprisingly sophisticated laws protecting individual property rights. Ranging from mutually acknowledged hunting rights to even intellectual property. None of these protected rights would exist in societies that subscribed to the norms of all ownership being communal. Reinforcing the fact that the common perception that rights such as individual landownership being European invention is nothing more than a myth. A one-dimensional caricature of the true reality of the history and culture of the ingenious tribes of the United States.

Intellectual Property

Some of the tribes residing in the Pacific Northwest and California possessed ownership of intellectual property. This was generally observed among shamans practicing within the northwestern region of the United States. Intangible commodities such as “… songs, dances, stories, legends, and curing ritual…” were owned by individual shamans. Unless these trademarked forms of verbal communication were passed down to an apprentice they typically were no longer used once the shaman had passed away (Bobroff, 2001, P.1590)[9]. The preservation of a right to exclusive use of songs, stories, and performances minors of modern-day entertainers Not to trivialize the religious rites of the native peoples of the Pacific Northwest, but the copyright laws protecting songwriters and authors are probably the closets modern analog. One only needs to look back a few decades to the whole Napster controversy to see the parallels [10]. There have also been more recent intellectual property disputes, few as ubiquitous in the mind of the lay public than as the peer-to-peer file sharing fiasco of the late-1990s. Demonstrating precisely how advanced the nature of ownership in the tribes of the pacific northwest. These were societies that not only valued protecting the right to own physical property but also the right to own intangible property.

The intellectual property extended beyond communication-related to religious rights. Individual families possessed ownership of “… carvings, paintings, and crests..” related to their lineage (Bobroff, 2001, P.1590)[9]. Transgressing against these acknowledged property rights resulted in server consequences. Violating the “copyright” ownership of a family symbol was perceived as being equal to engaging in a violent act (Bobroff, 2001, P.1590)[9]. Making it unquestionably evident that preserving intellectual property was of high priority.

Hunting Rights/ Land Tenure

Another form of informal property rights that have been historically acknowledged by native tribes have been hunting rights. In some instances, private hunting grounds. Similar rules were formulated regarding fishing rights. The aim of these “customary rules” was oriented towards preventing resource depletion (Yandle, 1998, p.44) [11]. Decentralized arrangements to manage CPRs are compatible with traditions of strong property rights. However, instances of customs that support exclusive use of hunting grounds provide more substantial evidence of a robust system of property rights. Informal resource management can still be done under a quasi-communalistic basis.

Private hunting rights were best exemplified by the practices of the northern Algonquian tribe. These rights were held for individual families and were generally delineated by salient geographic landmarks. Such as specific thickets of woodlands or bodies of water (Bobroff, 2001, p.1575) [9]. The exclusivity of these territories was transferred by inheritance. Rules were promulgated to enforce punishment for trespassing or collection of furs by “non-owners” water (Bobroff, 2001, p.1575) [9]. Per anthropological research, tribal members would even transfer ownership of land as a gift (Bobroff, 2001, p.1576) [9]. For the coast Algonquian tribe members, their systems of land ownership only became more solidified after contact with European settlers. Due to the circumstances of the flourishing fur trade (Bobroff, 2001, p.1577) [9]. The existence of private hunting grounds gives us a perspective on the Algonquian tribe’s perspective on land tenure. The land is passed down through familial ties isn’t a foreign concept in European law. Paralleling the commonly held tradition in Europe of inheritance serving as a mechanism for transferring property.  

Adjudication of Property Rights

The Yurok tribe of California held property rights in high esteem. Even associated property ownership with social prestige (Benson, 1991, p.50) [7]. It can only be expected that the centers for decision-making within the tribe would strive to protect the property right of its tribal members. The tribe had a system of compensation for damaged property. Paralleling the English Common Law tradition of Tort law. For instance, if an individual used another person’s canoe and damaged it they would be held liable for compensating the owner for the damages (Benson, 1991, p.50) [7]. If a service provider fails to provide a promised service to a patron they were required to pay the customer restitution(Benson, 1991, p.50) [7]. The Yurok people did not settle property disputes with a centralized government but rather with a set of “sweathouses”. Groups of tribal members were tasked with settling disputes. Proceeding against the offender was arranged by the sweathouse and the victim. (Benson, 1991, p.52) [7].The victim did not have the right to seek extrajudicial forms of restitution outside of the group’s judgment. (Benson, 1991, p.52) [7]. The defendant would have the ability to obtain representation against the accuser in the cross-judgment (Benson, 199, p.52) [7].

If damages were due to the plaintiff the defendant was expected to pay back the sum indicated verdict of the proceedings. If the accused could not, they became the “wage-slave” of the accuser (Benson, 199, p.53) [7]. Per the economist Bruce L. Benson the Yurok  “model” for private-law held the below six characteristics:

“… These features are: (1) rules of conduct which emphasized a predominant concern for individual rights and private property; (2) the responsibility of law enforcement falling to the victim backed by reciprocal arrangements for protection and support when evolved to the level described above, but this homogeneity had to develop in conjunction with an evolving process of interaction and reciprocity facilitated by customary law. 15~egalsystems all over the world have, at one time or another, been characterizable in the same way that the Indian systems discussed above were characterized. Some anthropologists and legal scholars distinguish between “stages” of legal development, for instance, and would put such customary systems in one or more of the stages occurring before centralization of political power and formal institutions of government arise (e.g., Malinowski 1926; Diamond 1950). Also see note 14 above in this regard, as well as Benson (1988; 1989a). 56 The Review of Austrian Economics, Vol. 5, No. 1 a dispute arose; (3) standard adjudicative procedures established to avoid violent forms of dispute resolution; (4) offenses treated as torts punishable by economic payments in restitution; (5)strong incentives to yield to prescribed punishment when guilty of an offense due to the reciprocally established threat of social ostracism which led to physical retribution; and (6) legal change arising through an evolutionary process of developing customs and norms…”( Benson, 1991, p.54-55) [7].

Citations

  1. GALBRAITH, CRAIG S., RODRIGUEZ, CARLOS L., STILES, CURT H. EDITED BY ANDERSON, TERRY L., BENSON, BRUCE L.,  FLANAGAN, THOMAS G. Self-Determination THE OTHER PATH FOR NATIVE AMERICANS (2006). STANFORD UNIVERSITY PRESS. Page 19.
  2. CARPENTER, KRISTEN A. & RILEY, ANGELA R.  Privatizing the Reservation? (2019). The UNIVERSITY OF COLORADO. Pages 13-16, 21.
  3. https://www.cato.org/publications/commentary/mystery-capitalRetrieved November 17th, 2020.
  4. CANBY JR., WILLIAM C. American Indian Law: In a Nutshell 2nd edition. (1989). WEST GROUP PUBLISHING. Pages 19-21.
  5. FERNANDES, EDESIO. The Influence of de Soto’s The Mystery of Capital. (2002). LINCOLN INSTITUTE OF LAND POLICY. Page 6.

6.  Anderson, Terry L. Conservation—Native American Style. PERC Policy Series Issue Number PS-6. (1996). PERC. P. 1-2.

7. Benson, Bruce L. An Evolutionary Contractarian View of Primitive Law: The Institutions and Incentives Arising Under Customary Indian Law. The Review of Austrian Economics. Vol. 5. No.1. (1991). Ludwig Von Mises Institute.

8. http://fee.org/article/our-first-thanksgiving/  retrieved 11/23/2020.

9. Bobroff, Kenneth H. Retelling Allotment: Indian Property Rights and the Myth of Common Ownership. Vanderbilt Law Review.         Vol 54. Issue 4. (2001).

10. https://www.wired.com/2009/12/1207riaa-sues-napster/. Retrieved 12/21/2020.

11. Yandle, Bruce. Antitrust and the Commons Cooperation or Collusion? The Independent Review. Independent Institute. (1998).