Okay. And just to correct one thing, I was an affiliate at Birkman up until Oh, sorry. Last summer, but but that was my last year there. So so anyway, I'm gonna give a talk, and hopefully there will be time for a discussion on the role of property systems and experimentation in self governing virtual worlds. It'll be sort of a 40,000 foot macro level talk, just because of the amount of time we have. So I'll cover some of the different types of property regimes, and some concepts that I think are very useful for thinking about this in the virtual world context. There are a lot of questions about how you bundle, different property rights, and actually implement this. And and there's just not time, but I'd love to talk to, individual folks, who are interested about those, sorts of issues. And I'm focusing on virtual worlds rather than sort of all online communities, because there are elements of virtual worlds that I think are particularly interesting for understanding property law and governance related governance issues. There's the element of sort of your corporeality where you're sort of making the world physical and objects physical. And you're also sort of creating this computational illusion that people experience and can participate in, and then you can extract data from that. So I just think that for property experimentation, they're particularly rich. So Josh already introduced me, but, I would just say, because I work for the government, I have to give the standard disclaimer, which is that the views expressed in this presentation are those of the author and do not necessarily represent views of the Federal Communications Commission. And just to give a little bit of background on what I do, because I think it may be helpful for understanding the presentation, the electromagnetic spectrum are invisible airwaves, that the government allocates and assigns to users for various uses, for GPS, for WiFi, for cell phones, for radio, just thousands and thousands of uses. And so the government sort of slices and dices all of those uses, sometimes on a licensed basis, which is like private property, sometimes on an unlicensed basis, which is like what Wi Fi and Bluetooth use, And then all kinds of sort of hybrid and shared regimes that the government can establish. And then if it's licensed, we usually auction it and have economists design it. It's an incredibly rich area for understanding property rights and economics. Most recently, actually two days ago, Paul Milgram and Robert Wilson won the Nobel Prize in Economics. And they designed the first spectrum auctions in the nineteen nineties. Before they did that, a lot of social scientists thought that game theory was kind of this neat theory, but, you know, it wasn't validated at all. And so I think substantially one of the reasons they got the Nobel Prize is because they use spectrum auctions to show that like you could get people to pay billions of dollars to the government by using by implementing game theory in auctions. And then those of you who are familiar with Ronald Coase also won a Nobel Prize. The first time he actually came up with the Coase theorem and expressed it was not in his famous article, it was in an earlier article on FCC spectrum. And so it's just a very rich way to it's invisible. It's a very rich way to understand property rights. And that's all to say that what got me interested in virtual worlds is I think that's sort of the next area. Because of some of those properties that I was talking about, I think that they make things visible that normally are invisible when we're trying to understand property and economics and governance. So moving on to what is property. Many people make

that you're mistake of thinking that property is mostly about rights that you have two things, and that's not quite right. That's an element of property, but most fundamentally, property governs rights among people that concern things. So it governs the relationship between people, and sort of overlapping rights that they often have to, things in resources and assets. And so, the definition that I'll use for property, which doesn't necessarily require a law, is that property defines the rights, customs, and entitlements that allow someone to control and derive value from a resource and expect that others will recognize those rights, customs, and entitlements. A really key aspect of that definition is the expectation. Right? Like, if I own my house, I can leave it for a month and come back and it will still be mine. Because whether it's a legal mechanism or expectations or social norms, other people in the community are going to recognize that property right. And, as I mentioned, it doesn't necessarily require law. And a legal property system or a state property system, I'll use those terms interchangeably, is comprised of the rights and entitlements that people have to resources that are enforced by those legal institutions. And oftentimes, one thing to avoid is, as well is a lot of people think that property is synonymous with private property. That's wrong in at least two ways. One is it's wrong as even a description of our legal system. That's not true, as we'll discuss and many of you already know. And also, it's certainly not true of sort of all the potential, you know, property regimes one could have. And so, kind of all of this is to say that property is fundamental to governance and that governance is fundamental to creating and administering property rights. And as as Hernando de So to has sort of very well articulated, creating property rights is a costly and painstaking process to implement. It requires asset definition, recognition of those rights, registration of those and preservation of those rights, enforcement of those rights. An analogy that he uses that I think is very useful is to think about a mountain lake. And many of us, if we looked at the lake and and its value would say, oh, it's beautiful. We could spend the day there. We could use it for things like swimming and canoeing. But an engineer would look at the mountain lake in its elevated position and think energy. Right? And it's gonna create this incredibly complex hydroelectric mechanism to extract the energy from a lake. And so a property system is kind of the same thing, but legally and economically, where it's creating this really complex mechanism that it's there and we don't really understand it and we need to understand how it works better, particularly for developing economies that, that maybe are missing a piece that's holding them back in some way from greater wealth. And so, you know, property is sort of gonna unlock all of that latent economic energy from those resources. So, property has sort of central and fundamental importance to societies. And that's why it's somewhat surprising that many property doctrines are a product of chance, history, path dependence, and network effects. Now I'll put a pin in network effects because we'll come back to it. But, you know, Oliver Wendell Holmes put it really well on why we have many property rules, which is, it is revolting to have no better reason for a rule of law than that it was so laid down in the time of Henry IV. It's still more revolting if the grounds upon which it was laid have long since vanished, and the rule simply persists from blind imitation of the past. And so, this is the reason that property experimentation in self governing virtual worlds offers the ability to understand the characteristics and effects of different property regimes and bundles of rights. And I'm not gonna get into the characteristics of property very much because that could be a whole eight hour lecture, but I will note that property can be tangible, which is physical, or intangible, which is not physical. Again, I'm not I'm trying not to assume that folks know a lot about property. I apologize if you do. And I all virtual assets are intangible, but because of that element of corporeality that I mentioned, they're very interesting because they're, tangible intangibles. And so this is the different property regimes that are these are sort of pure analytical types. They don't exist in the real world. In every jurisdiction, there's a blend of different types. So even in communist countries, usually people got to own like the photos in their homes. Right? So virtually any country you can think of is a hybrid country. And also for any given actual asset, it's usually a combination of more than one of these. So I own my house, but then the community has an easement to walk by it to go to the beach, and the government has the ability to run utility poles through it and so on and so on. And so starting with open access, I'll try to get through these pretty quickly because we have a lot to cover. But starting with open access, think about the ocean. There are territorial waters and there are a few treat you know, international treaties. But the ocean is pretty much open access. And when you think about the ocean these days, that raises the problem, which is that there are incentives for overuse. You know, those who use it get the full benefit of their activity and only a marginal part of the cost. And so that's the tragedy of the commons. Second is state property. And in many circles, it gets a bad name. You can have issues like rent seeking. You can have issues where there's a lack of incentives. You can have, all kinds of problems with certain resources. But it it it can be particularly good for resources in which stewardship is very important, and in which you want to allow everyone to use it, but under certain conditions. So those of you who have, like, in The US have experienced our national parks, which are run by the National Park Service. I mean, it's just this wonderful example of how, like, basically the best things in our in this in The US at least, are something that millions of people can enjoy. The park service does a wonderful job taking care of them. And so, I mean, it can be very useful. I mean, there is a whole history of government ownership of property. And then that moves us to private property. It can be useful because people have very well defined rights in private property. And so there are particularly there are good incentives to invest in private property, and particularly real property. And it can also result in what we would call allocate of efficiency, meaning that someone who has a lower value use of property sells it to someone who has a higher valued use. Although, that's not always true because you can have high transaction costs and you can have sort of problems that get in the way of allocate of efficiency. And you can also have what's called the tragedy of the anti commons, which is when property rights are sort of allocated in the wrong way. Maybe they're sliced too narrowly and or too small, and then no one can use it because the coordination costs are too high. So the classic example of this, which is really tragic, is that there is a really very misguided US government policy called allocation to Native Americans, in which, property was split up individually. And so Michael Heller, he he uncovered, like, one example where there was a small tract of land that it was valued at $8,000 and it had 439 owners. Right? So it the the ownership was so fragmented that, the coordination costs were actually higher than the value of the property. And then finally, we have commons. This is what, economists used to think that, you had the tragedy of the commons here as well. Eleanor Nordstrom has, really, done a wonderful job and and her followers have done a really wonderful job of showing how under certain conditions, you can have small particularly small communities that really flourish, with common property. So now I'm going to introduce a concept that I think is very useful in many ways, but I think particularly in the virtual world context, which is called localized property. And this is from a law review article by Abraham Bell and Gideon Aparchamlovsky. You can read the article. It's called Property Lost in Translation. And what that means is that there's a property system that's distinct from the state property system that operates alongside it. And so the rules of the localized property system function as a lock in device that binds the members of the group, but only the members of the group, not the society at large, and creates a complex set of trade offs for members of that group. So there are innumerable examples of this. One is the favelas in Brazil, where people who were moving or are moving from the country to the city, can't get formal title over property, but they'll actually sort of build a neighborhood that has well defined property rights within that neighborhood and has stores and all kinds of things, but they don't have any formal property rights. Another is the Cubic Seam in Israel, which early on, you know, the country as a whole had developed a more market based economy, but they wanted to have communities that were socialist and had those values. Another thing, another example is Assami herding rights. These are in Norway, and they're recognized by the legal property system, but it's a different way of sort of enjoying that resource and that ability to engage in reindeer herding. Another one is office assignments, which those of you who are professors will know all about. Sometimes there are like very, arcane rules for who gets the best digs. Another one is ICANN, which assigns Internet names and numbers. My favorite example that I'd always thought about was parking spaces in some neighborhoods after snowstorms. So like in the neighborhood that I live in, if you dig your car out of like five feet of snow, people will put a chair there and they get to keep that spot until the street is cleared. And it's recognized by all the people on that block that like, you took three hours to dig it out, so like that's my spot. Right? And there's an expectation and a custom that is actually actually contrary to what the city would would say, but people just do it. And then there's households and roommates. You see, these are like literally everywhere once you understand this concept. And really actually may account for the majority of economic activity when you think about households, roommates, like when you think about sort of all of the instances in which we're allocating property, but it's contrary or distinct from the state system. So, that brings us to translation, which it that occurs when localized property holders try to operate outside of the localized system. And so they can do this by leaving the community, selling or removing an asset from the community, using an asset for something outside of the community, like collateral on a loan. To to think about translation, I'm coming back to network effects. It helps to think about the state property system as the equivalent of a dominant industry standard. So and that's in many ways, that's what it effectively is. Right? It's the dominant standard for allocating resources. So like any other standard, it benefits from the the the network effects of having millions of people that can automatically trade with anyone else that's in that jurisdiction. And that that's there's a tremendous amount of, like, financial benefit, liquidity, like, there are all kinds of benefits to that. But then localized property systems rise up to fulfill needs or wants that weren't being served by the dominant standard. But the as I mentioned in the second bullet, there will always be local property holders who want to interact in some way with the state system. Those of you who know about MMOs, like, will be shaking your heads. Right? Doesn't matter how many times the terms of service say you can't sell things on eBay, people are gonna sell things on eBay. Right? So properties localized property systems can discourage translation, but they can't prevent it. And there are three types of translation costs. Informational, which is that you need to like transmit the information about how the localized property system works into the larger system, into the state system. Second is incompatibility, where maybe your rules are actually contrary to the state system. And the third is enforcement, which is just that enforcing things outside of the localized system is going to have costs. And one of the key things that I I hope to get across is that informational costs and, incompatibility costs, they increase the more that the localized system diverges from the state property system. They get higher. And so that brings us to sort of what are the options for a localized property system. And one is the absence of a strategy. It's just sort of hope for the best. Maybe people will sue you or use the state property system, but, you know, we'll just see what happens. The second is to seek incorporation into the state property system. So this is something where, you know, you may just decide to end the localized property system, particularly if its rules are sort of largely compatible with the state system. And it helps to think of the state system as having this like immense gravitational pull that like sucks local prop localized property systems into it. And then, you know, if that strategy is successful, translation costs will be reduced, but they will never be eliminated. And in addition, some of the experimental promise and sort of radical divergences from the state system will probably be lost because you'll want to lower those information and incompatibility costs in order to be able to sort of interoperate be interoperable with the state system. And then fourth is to attempt to limit the role of the state or keep it out of your affairs, such as seeking formal recognition or using contractual clauses. And if successful, translation costs will be high. This actually can be helpful for some communities because it sort of it preserves those you may have defectors, but it preserves the experimental promise of the localized property system and the radical divergences and sort of the values and ideologies that are different from the state system. So this happened for decades and decades in the Cuban scene where they until the 1980s and 1990s, they were able to sort of preserve a lot of those socialist values within them. And so that brings us to the trade offs between that I think folks will experience between having on the one hand low translation costs and having on the other hand sort of radical divergence from the state property system. And sort of accompanying that, sort of preserving their ideological and value cohesion as a group. So, localized property systems that don't diverge greatly from the state system will have lower transaction costs, meaning that they'll have greater interoperability with this the legal property system. And that may lead to even more pressure to reduce, any remaining divergences from the legal property system, in order to make it even easier for folks to be interoperable with it, And we'll discourage property experimentation. And then as I said, if the community develops a localized property system that diverges greatly from the state property system, you may have some defectors or some folks who exit. But making it difficult to transact outside the system may actually preserve group cohesion and sort of any kind of experimentation that you're trying in the localized property system. And another key point is that the preferences of the localized property system, the advantages and disadvantages of that system, the costs that are associated with making it legal and legally interoperable with the state system, those costs are all dynamic and will change over time. So the unfortunate thing is that sometimes a localized property system can can almost be this perfect trap. Like if you think about favelas, they were these incredibly dynamic, ingenious communities that were developed by people who weren't being served by the state property system. But then decades and decades later, the perception in the state property system is that the cost of bringing them into compliance with the state property system are so high that it's not worth it, or that maybe we'll just only make a minimal effort to do it. And so it's like a trap where eventually the cost became really high. Maybe the community, like, you know, didn't think about it or maybe, you know, but suddenly it'd be they were sort of stuck in the localized property system. So localized property systems can be wonderful things, but that dynamic element, I think, is really critical. And so this comes to back to virtual worlds. So any prop I think any property system in a localized property system, at least for the foreseeable future, in virtual worlds, will be a localized property system. In other words, I don't think you can merge the virtual world with the state. I don't think that legal systems are willing to resolve every dispute in the virtual world, and I think the cost of doing that would be too high. But that's actually all to the good as far as I'm concerned, because as I was mentioning, the state property system and its network effects, because it has that sort of gravitational pull, the fact that it can't it can't actually fully pull a virtual world into it preserves that space for experimentation and governance and property and in other things. And so, the the second point is that, because virtual worlds run on co code, translatability has both technical and legal dimensions, meaning that it oftentimes is not enough to only translate in legally. You also have to do it technically, and vice versa. So you need to have interoperability along both those dimensions. And then except in fully governed, communities, users are going to have to navigate. So it's a sort of like multidimensional chest. They're gonna have to navigate their relationship with both the designer and developer of the game that has rights to it and also with the legal property system. And so their ability to create a a localized property system and their ability to influence translation costs are going to be very, very limited by those sort of two higher powers. And so self governance in virtual communities, particularly because of that dynamic element I was talking about, self governance will require careful observation, reporting back to members of the community, and then perhaps having regular property property referendums. Again, so that in deciding on the localized property system, as those costs change, some of which the community has no control over, People know what is happening and then can make adjustments and decisions, informed decisions about it. And so that sort of brings us to what is what are we talking about in virtual worlds when we think about what is translatable. And I I thought that there's a short article by Abramovich that sort of lays out a layered approach that I think is somewhat helpful. The first layer is the underlying code. And traditionally, the companies own the copyright to that code. And so it's gonna be different for self governed communities, and it's a question of sort of who's going to own the code or parts of it, and that effectively translating that resource is going to have those legal and technical dimensions, meaning that successfully doing it will require folks to have interoperability in both ways. The second are tangible intangibles. These are like the objects or characters, I guess you could call them in a virtual world. And, in some cases, players can find sort of ingenious ways to to use technical interoperability to translate out of it. So this is like e bang and selling on gray gray markets. Although there are limitations to that, right, because the virtual world can shut it down or or lock you out of your character. And in other cases, translating might require legal cooperation. And then the third is intangible intangibles. So these are like in not only intangibles in the sense that they're in a virtual world, but also intangibles in the sense that even there, even in that corp semi corporeal environment, they are also intangible. So if I create a clothing line in Second Life and I want to use it in a different game, or I want to design a real world clothing line, right, that's another situation in which I might wanna have rights and translate them. So in in sort of discussing the progression of virtual worlds towards self governance, this is very crude but it just helped me think about it at least. One is that there's sort of virtual worlds one point o, which is most of the virtual worlds that are out there. The designer is a sort of a demigod that controls the code and imposes an end user license agreement on all the users as the price of admission. And so in this case, it's gonna be difficult for users to create a localized property system. And even if they manage to do it, they'll have little ability to control translation costs. As I mentioned, they'll face two higher authorities, both the legal property system and the designer or developer. And the external property system will usually enforce ULA's, end user license agreements, which usually prohibit virtual property. So market in the property will a market in that property will at best be a gray market, if not a black market. So users are going to as I mentioned, users are gonna have a hard time even creating a localized property system and even a much harder time engaging in translation. Although they will figure out ways to do it, it's just that the cost of doing it are going to be somewhat high. 1.5, I think is sort of the next generation that involves self governance. Maybe this applies to Seed or Minecraft where the designer is a company, it controls the code ultimately. It probably has a EULA and a user agreement. But it does want to incorporate some sort of self governance tool into the game, or the community in the game figures out some way of creating a localized property regime. And the the in this situation, the status of virtual property is going to hinge on the relationships and negash again, hinge on the relationship, between the user and the developer designer and the user and the state property system. And so they'll still be playing this sort of multidimensional chess, But I suppose they'll at least have a fighting chance. They should be able to create localized property systems as long as they have a cooperative designer. But they still could be thwarted and translate translatability costs may still be high. And then Virtual Worlds two point o, this is sort of self governed user communities, some of the tools that people are actually creating themselves, not as part of a for profit thing, just as part of an egalitarian, sort of virtual world community. And all the parties, users, coders, everyone agrees to be bound by the governance mechanism. And so users will only face one higher power, That's the external property system. The user will have an easy time creating the localized property system. And ultimately, it's still gonna depend on the state property system, what they recognize and what they don't recognize, and whether they make it difficult or easy to engage in translation. But there will be at least the ability to have a strategy to work with that system and present things to that system in a way that could influence translation costs in a way that the community wants and has decided. So I've done some very crude sort of illustrations of these. They were at least helpful for me. So for Virtual Worlds one point o, you have the sovereign, which is the only real sovereign. You know, when I use the sovereign in other cases, it's a digital sovereign. So it has some of the aspects of sovereignty and not others. And so again, this is a game in which the designer controls the code, imposes a EULA, and has powers that are analogous in some ways to sovereignty. In fact, in some ways, they have even more sovereignty than a real government because they're sort of a god functionally. And then there are users represented at the bottom. And so the only legal right that users have in most of these situations is to quit and to leave everything that they have in the game in the game. That that's literally the only right they have. And so in this version, the user is gonna have to deal with two higher powers, work through legal and technical obstacles just to create localized property. And then the only legal right that the users will have, as I mentioned, is to quit the game. In this game, every question, including questions about property, comes down to codes, contract code, contract, and what James Gremlin called, simple minded majoritarianism, which is that, again, you're imposing a user contract that gives the users very few rights, and, you the the designer controls the code. Simple minded majoritarianism means that on a day to day basis, the the thinking of the designer is going to be what when I have to make a decision, what is going to cause the least number of users to cancel their subscriptions? Right? And so you have this very weak mechanism for actually engaging in governments. So then we move to virtual worlds 1.5. This is when you have, again, you still have the legal system as a sovereign, still have the designer as a sovereign, but perhaps the designer, has a and it's still, you know, it still imposes contracts and code on users, Even if it agrees to be bound by a self governing mechanism, I mean, to sort of steal a concept from Carl Schmidt and and Georgio Gamba. And, like, in the in the state of exception or the unusual circumstance in which there is no answer, they'll still control the code and they'll still be able to do things in that circumstance. And so that there's a sort of ultimate sovereignty that they'll still have. And so this is a world in which there's some opportunity to to use this self governance mechanism, which, sort of the self governance mechanism, it replaced the sort of simple minded majoritarianism in its more sophisticated way to engage in governance and to give that sort of user community powers. But but so that would be it would be possible to use that to create sort of localized property systems, but you're still going to have to deal with both the external legal system and the designer when you're addressing translation and it may or may not be successful. And so just finally to wrap up, that brings us to Virtual Worlds two point o, which is very structurally different, as you can see. Still have the external legal system, but the sovereign, to the extent there is one, are the users and designers that have agreed to be bound by a self governing mechanism in any sort of contractual rights, that they've, entered into. So they'll have a great amount of flexibility to create a localized property system. So much flexibility that I suspect what will happen is that, as I note at the bottom, you'll have localized property systems within localized property systems. And so so they will still have to deal with issues of translation, but they'll be able to do so only with directly with the external legal system. And it will you know, they'll be able to overcome many of the technical limitations now that they control the code. And they will have more of a fighting chance to sort of, have an influence over their relationship with the external legal system. So that's the presentation, and and it's great because we have I'm sorry that I rushed through some of it, but I really wanted to have time to sort of discuss these concepts and to see if they had any resonance or they reminded you of anything that's related to virtual worlds. I'd also say that anyone I I haven't seen sort of who all is on, but if you're building a tool, like, as you can see, this is very complex and very dynamic. And this is, like, as I mentioned, just at the very highest level of thinking about prop how to govern property rights. So I'm really happy to, like, work with people and, you know, sort of try to advise you or give my input on on things as you develop them. And if anybody's interested in this, sort of these concepts in an academic way, I'd love to talk to you. But, yeah, I'd love to, love to hear folks, thoughts on this.

I'll just do that one since there's lots of questions. The other two are mainly clarifying questions.

rights, I think market exchange. I got into when I think property rights, I think market exchange. To the extent that we sort of have easy natural property rights, we can make a a a resource legible to a market system. And I think, you know, and my ideology is that our world relies a little too heavily on that, and so I got interested in non market institutions and a lot of my passion for the the community and my and my drive to get integrated in the community of Elinor Ostrom was that there was a science of non market institutions. So, I've been kind of dismayed looking recently at things like the design principles. If you look at the design principles for managing common pool resources, you can sort of see that a lot of them basically implement excludability on an inherently nonexcludable resource. You just sort of get some additional human constraints that that make this not not not normally exclude an excludable resource into an excludable one kinda given the the the rules of the game that we just created around ourselves. So my, you know, my lens has always been, oh, well, that's a non market institution. But kind of from this lens, you can sort of reduce a lot of the effort that that that Ostrom put into formalizing the systems as the creation of localized property regime sort of within which you now have excludability and subtractability. So you now within this bubble have a sort of viable market exchange system. And so so I'm I've been struggling and and this crystallizes it, especially the idea of of sort of local property. Do I change how I view that whole body of work from being a a system of non market alter alternatives or as a bunch of sort of market repair or market apology or a bunch of technologies for helping us get more and more market solutions when I wanted it to be the exact opposite. Am I yeah. Well, I'm I'm I know I'm not seeing this problem clearly because it's been bugging me for a while. But yeah.

I mean, I I wonder if I wonder if also it's helpful to start look for you to start looking at some of the other regimes or mixed regimes because I think, like, the the a very undertheorized regime is the government property regime. I mean, it it almost, to some people, seems like an oxymoron, but, but if you if you think about it, in many cases, they don't exclude anyone. They don't, you know, sort of blanket exclude anyone, including non citizens from using, resources like the national parks. And I think that there are cases in which, sort of hybrid, regimes can also, get away from you know, at least potentially get away from some non market things. So, you know, I think that, you know I mean, one example I mean, this isn't a talk about Spectrum, but there's a lot dynamically that's going on in Spectrum that I think could be analogized to to property rights right now in which there's sort of a mix of property and non property. So one is that we have something called the Citizens Band Radio Service, where there are several tiers to use, and the highest tier is, folks who pay for the licenses at auction, and they get access no matter what. But then you have, like, lower tier you have a lower tier where, like, anyone can use it as long as the property owner isn't using it. And so that's, like, a mix of a market and a non market. And so I think you can I think you can play around with it in ways that are very interesting? And the other thing you said that that kind of triggered it in in in me is just that I think that we need to be careful sometimes when we're possibly when folks are studying these communities that they are rendering the way things work in those communities into market concepts. And I I wonder if sometimes that's not quite right, and I think we need to figure out, how it's not quite right.

So, can you just elaborate that last point a little bit? When you say rendering, not being the rendering not being quite right, you mean my representation, is is like artificially market y, or you're saying it's not right to paste markets onto this type of problem?

It's markets are describing it in terms of markets is not the way that people that are actually doing it think of it. I mean, this is like if you think about I mean, it's kind of a similar issue if you think about, the sort of propertizing of what indigenous people, were using the land for before sort of colonization or encroachment, which is that they were allocating resources, but perhaps it wasn't in something that you would call perhaps it was, but perhaps it wasn't something that you call a market, or that's not the way that they conceived of it. And the problem is that we can't we can't avoid speaking about it in in the sort of vocabulary of the market because that's all we know when you're allocating resources.

So you maybe you're saying I again, I'm just trying to clarify. You're saying that the the the the vocab I have access to or we have access to is a little bit too blunt of an instrument for kind of faithfully describing what we're actually looking at and dealing with.

Yeah? Okay. Thanks.

Yeah. I mean, there are all kinds of ways that this happens. One is in in some cases, you can have the state legal system that recognizes the local property system. So that's what they had in Israel with the Kibbutzim, where they were an official cooperative entity that had certain abilities to engage in localized property. But that isn't the same thing as merging the localized property regime with the state property system, because it's still different. And you're still going to have to translate and have information costs in order to sort of decisions or allocations in the local property system explaining them to the legal system or the state system that there's still gonna be costs associated with that. And so it's still a localized system. Sometimes they can be in conflict, and it's actually funny. Like, sometimes they can be in conflict, but then the people who are running the state system actually say, no, ignore, like, what our laws say. So that was what, happened in Chicago, at one point with the, with the parks the parking spaces after it snowed, where Richard Daley was asked about it because some people didn't like it that people were doing that. And he said, Listen, like if somebody spends eight hours digging their car out of the snow from 12 feet of snow, like they should get that spot. Right? Like that's not what the city code said. Right? But the decision maker just kind of unofficially recognizes it. And then there are cases in which the localized property system is, like, very incompatible, and translation costs are just going to have to be very high. And there's gonna be a risk. There's always going to be a risk that the state property system is going to, you know, sort of in some way step in and violate the localized property system. I mean, you can almost think about like organized criminal organizations in this way, where, you know, they're trying to sort of translate their ill gotten gains into the larger property system. But if they're they're so incompatible with the state property system, that that if the state property system, you know, knows about it and knows about the incompatibility, they're just gonna put a stop to it. So those are sort of, at a high level, some of the options.

Yeah. It's it's not something that I've given up much thought, but I think that, it's really it's really quite interesting and important. One thing that I would note is that I don't think that oftentimes that won't avoid having to deal with the external legal system. Right? So if you have two virtual worlds, for instance, and you're you're transmitting property between them, including property that in some way could be considered intellectual property, the legal system is going to have things to say about that, even if people in each of the virtual worlds are generally in agreement about it. Someone, a disgruntled person, can still sue and say, No, this actually violates the external legal system. So I don't know that you can consistently avoid the external legal system, but I agree that, like, I I'd love to think about sort of cases in which localized property systems figured out how to translate and interoperate with each other. I think that that would be, like, a really rich area and very interesting.

Yeah. And one of the things one one of the significant things there to always be mindful of is because it's a contract, it only binds the two people to the contract. So, you know, like, property binds, like, everyone in that jurisdiction. Whereas in that contract, if there's someone if there's a third party out there that has rights or who has been harmed in some way, they're not bound by that at all, and they can still always run to the external legal system. And so there are always those dynamics even if you can get away with it sometimes and just, you know, on a one off basis.

If I can find the right button to unmute here here. Yeah. I think the other question is more interesting. The the Second Life point was just it it seems like what Second Life is trying to do in terms of recognizing that you could own the IP in the virtual assets you create and having the Linden as a virtual currency where they set up an exchange rate and had multiple points where it could be exchanged with with fiat currencies seem like an example of shortening the gaps and potentially overlapping the localized property system and the general state property system. That was the first question. The other question I had is really the opposite direction of that. It seems like some of these new blockchain based virtual worlds like Decentraland are kind of a three point zero in your chart because the argument is if you can cryptographically secure the rights in the virtual asset, and for Decentraland it's plots of land, but we think about non fungible tokens and things like CryptoKitties. And do that in a way where it doesn't matter what state based property rights you have, the cryptography enforces the integrity of that virtual asset. Maybe those can go entirely the other way where the the virtual system subsumes the the governmental state based system.

There's there's there's a bunch of stuff there, not necessarily a question, but I'd I'd love your thoughts on both of those.

Yeah. Yeah. So the Second Life example is kind of interesting because my recollection of it is that, it it started out where they were very clear in their EULA that folks would have intellectual property, And then they got sued. I can't remember the name of the Bragg. They got they got sued by a guy who had been locked out of his account allegedly for doing, you know, something that he wasn't supposed to do according to the the EULA or the user agreement. And so then they they actually amended and and and so then that gets into the issue we were talking about with translation costs, which is that the the people running the game didn't want to deal with the enforcement costs of having to actually give users IP. And then anytime someone is aggrieved or gets kicked out, even if it's legitimate, they're gonna have to deal with a lawsuit. And so they my recollection of it is they moved to an a EULA that was much more similar to their original EULA, but then provided sort of very vague and limited rights to users. So that's part of the problem that you get in the 1.5 that I was talking about, is that I think one point those companies are always going to have lawyers and and risk officers. And 1.5, there will be a tendency to become 1.1 or one point o five, just as those issues sort of occur. On your other point, I mean, I think that's really interesting. I think that, I I don't know as much about it, but was what was interesting about it to me is that you can make the, the system, and the technology involved in engaging in trade and translation so foreign to the external legal and financial system that it just is not something that they could possibly ever translate and maybe they're just not interested in it because it's like so different. And as long as it's not creating some negative externality that the state is worried about, like, they're fine. So I think that's a really interesting case again of, like, having such a divergent system that you can maintain it and you don't have that constant pressure of having users who want to engage in some form of of translation.

How are how are you thinking about formality?

Yeah. So I mean, I I guess I would think that with more formal sometimes that there are going to be information costs because sometimes they'll need to actually understand what it is saying formally. But that it will be much easier to resolve disputes, whether it's disputes that are within virtual worlds or between virtual worlds or between virtual worlds and the legal system. I mean, there are there are what I would call local localized property systems that are just occurring in the absence of any kind of certainty, about who should be allocated the resource. So if you think about, like, seats on subway trains, that's a situation in which it usually comes down to, like, aggressiveness versus politeness and first in time. Right? But there's not we haven't sort of universally agreed as a society on, like, how that should be done. So that's a situation that is, I guess, what I would call, like, the least formal that you could possibly be. And in that case, it's going to be difficult for the state property system to make a decision. And some of the enforcement costs and some of the problems associated with it are going to be very difficult if you're interoperable with the state system or if you interoperate with a different virtual world that doesn't do it the same way or has doesn't have some agreement with you. Whereas, I think the more formalized you get, there are gonna be some information costs. But I think otherwise, it will go much more smoothly is at least my intuition.

Yeah. And I think, just really quickly, I think that another thing that if if you allow sort of a formal mechanism to dominate, I I think what you're saying, but just to say it a different ways, you lose the flexibility and adaptability of the localized property system. And that's precisely what's great about localized property systems, is that people in a community just sort of work it out and can change norms on the fly in ways that are useful to them. So