Who Uses It Well Deserves It

Summary ：This article explores Coase's theorem and its application in real life, emphasizing the principle "whoever uses it well deserves it." Through various examples, including the ownership of Amazon online store data, Kindle e-reader note data, the balance between privacy rights and public safety, the application of economics in the TV show "Breaking Bad," and the issue of girlfriend ownership, the author explains the practical significance and scenarios of Coase's theorem. These examples demonstrate that in institutional design, priority should be given to the party that can better utilize the resources to achieve greater economic efficiency and social benefits.

An important implication of Coase's theorem is: Whoever uses it well deserves it.

Coase said we shouldn't view the problem as one party harming another but rather as both parties competing for scarce resources. This logic is easy to understand, but I need to give a few more examples.

Examples are quite important because without them, merely learning an economic principle dryly won't help you remember it. Only by repeatedly using these economic principles in real life can you finally develop your own economic thinking, like walking, swimming, and breathing, using economic thinking naturally.

Speaking of the importance of examples, I suddenly remembered a story. A few days ago, while having dinner with Professor Zhou Qiren, he told me a story. We all say that officials are also selfish. This statement is correct and understandable, but merely stating it won't make it memorable.

Professor Zhou gave an example: Friedman used to be an economist for the government. When explaining tax policies, there was an official who always asked him how personal income tax should be paid if one's income reached 1,500 yuan. Friedman was puzzled at first as to why this official was so concerned about the tax rate for 1,500 yuan. Later, he realized that the official's own income was exactly 1,500 yuan.

 1. Who Owns the Data of Amazon Online Stores?

Let me give you an example. Today, we talk about big data as an asset. Many customers browse stores on Amazon, leaving electronic traces, which is big data. Who owns this data?

You could say this data belongs to the customers because they browsed the stores and generated the data. Alternatively, you could argue that the data belongs to the e-commerce companies because customers left their electronic footprints in their stores. Amazon could also claim ownership because the data was generated and stored on their platform.

Each side has its arguments. Who do you think should own this data?

According to Coase's theorem, we can predict that this data, regardless of who originally generated it or where it is stored, will ultimately end up in the hands of those who can use it best.

Who can use this data well? Customers can’t utilize it effectively, nor can e-commerce companies to a significant extent. Amazon has a better chance of making good use of this data. In the end, it is those who design e-commerce product pages who are particularly sensitive to this data and find it extremely useful. They will strive to acquire this data to design more appropriate web pages.

Therefore, if we can design the system, it should facilitate the access of those who can better utilize the data, minimizing obstacles. This way, the data can generate greater benefits.

2. Data Ownership in Kindle Readers

Let me give you another example. When using a Kindle e-reader, you can highlight and make notes while reading. Do you know who owns the data of these notes?

You might say the Kindle is yours, the book was bought with your money, the reading was your effort, and the notes were made by you, so the data should belong to you. Alternatively, you might think that since the notes are made in the book, the data should belong to the author or publisher. Of course, Amazon could claim the data because it was generated and stored on its platform.

So, who should own it? Each side has its arguments. Ultimately, who owns the data? It belongs to Amazon. Why?

When you bought the Kindle and first used it, it asked if you agreed to the usage contract, and you said yes. At that moment, you had already given that right to Amazon. Did you read the usage agreement? Of course not. The agreement is long, printed in small 8-point font over dozens of pages that no one would read. You might say Amazon is sneaky for hiding such an important privacy clause.

But from an economic perspective, Amazon’s approach is reasonable. Why? Again, Coase's theorem: Whoever uses it well deserves it. The notes you make are a form of privacy with minimal value to you. However, if Amazon collects and statistically analyzes this data, then returns it to each book buyer, it will generate greater value.

For example, if you hear a book recommendation and buy it on Amazon, it’s downloaded to your Kindle within a minute. You can read the most highlighted parts of the book in just five minutes.

At this point, the value this book brings you far exceeds that of a brand-new, unmarked book. Clearly, Amazon can use this data much better. So, wouldn’t it be better to design the system such that the ownership of the highlighted data is defaulted to Amazon?

Understand, even if Amazon didn’t get this right, it would find ways to buy it back from each reader. However, this would increase transaction costs. Instead, hiding a clause in the usage contract that allows you to sell it to Amazon with one click is cheaper.

3. Balancing Privacy Rights and Public Safety

The use of big data today often raises the question of who owns privacy rights. Many people are very sensitive about privacy, believing it should never be compromised. I understand this sentiment.

Who you’re with tonight, who you’re having a candlelight dinner with, who you’re flying out with for a trip—this data might be trivial to others but very important to you, so protecting privacy is indeed important.

However, you need to understand that some data is also very important to the public.

For instance, data about criminals can be very useful to law enforcement, preventing significant losses. In such cases, should law enforcement have some right to requisition private data? I believe they should.

We know from Coase's theorem that the solution to privacy disputes won’t be one-sided. Neither will it allow the government to wantonly invade personal privacy, nor will individuals retain absolute privacy. Ultimately, there will be a balance, guided by Coase's principle: Whoever uses it well deserves it.

 4. Economics in "Breaking Bad"

There’s a TV show called "Breaking Bad." It tells the story of a high school chemistry teacher who, upon discovering he is terminally ill and poor, uses his chemistry knowledge to make drugs. He eventually becomes a top drug lord, a story of how knowledge changes fate.

In one episode, the protagonist, Walter White, steals methamphetamine precursors from other dealers. Unfortunately, he gets caught and is about to be killed. White argues with the dealers prepared to kill him.

He says they can only produce drugs with about 70% purity, while he can make it 99.1% pure, and the purity is very stable. Higher purity means customers will pay more. He says if they let him handle it, he’s willing to share 35% of the profits, which would be more profitable for them than their 70% pure drugs. The dealers are persuaded, and the precursors are left to Walter to use.

Seeing him calmly argue for his life, I suddenly thought, isn’t this Ronald Coase himself?

5. Girlfriends and Coase's Theorem

Economist Xue Zhaofeng once shared a true story. Many years ago, he was close to an economist. Xue mentioned he met a girl he really liked, but she already had a boyfriend. The economist immediately responded, "Oh, so you don’t believe in Coase's theorem."

Xue explained the economist meant that if you truly believe in Coase's theorem, you’d know that as long as transaction costs are low, the girl will end up with the person most suitable for her, regardless of who she is currently dating.