In Radical Markets, University of Chicago law professor Eric Posner and Microsoft senior researcher Glen Weyl propose a radical restructuring of property rights, immigration policy, and voting, as well as a substantial change in corporate law. Their most radical proposal is to completely overturn property rights so that people would need to continuously “bid” for property they already own. They want to alter immigration policy to allow about 100 million more immigrants into the United States, but change who decides whether or not to allow particular prospective immigrants to enter. They want to switch to “quadratic” voting as opposed to the current one citizen–one vote method. They also want a major change in how investors can hold shares in corporations.

For all of these positions, they make clever and sometimes compelling arguments. The most compelling one is on voting. The least compelling, and also absolutely horrific, one is on property.

Worse off? / Posner and Weyl begin by making the case that the current political and economic situation in the United States is well short of ideal. Who could disagree? But in making their case, they claim that the U.S. economy has been stagnating for many years for most of its residents. They base this strong conclusion on thin evidence.

The closest they come to making their case is to cite a study by Stanford University economist Raj Chetty and co-authors, who found that only 50% of American children born in 1980 had a higher living standard at age 30 than their parents had at the same age. They don’t mention three huge problems with the study, all of which, if corrected for, would undercut that result.

First, as Chetty admits, the study measured income not for the individual, but for the household. Are 30-year-olds’ households systematically different today than they were in 1980? Yes. Today, 30-year-olds are less likely to be married and living with a spouse who earns income.

Second and related, today’s 30-year-olds are typically not quite as far along in their careers as their parents were in 1980. One reason for this is that many of them were in school longer than their parents were, getting undergraduate and even graduate degrees.

Third, to adjust for inflation so that they could compare incomes over time, Chetty and his co-authors used the U.S. Consumer Price Index. The CPI systematically overstates inflation by about 0.8 percentage points per year. Over a generation of 25 years, that’s an overstatement of 22%. Had they taken that into account, they would have found that well over half—I would wager over 60%—of today’s 30-year-olds earn more than their parents earned when they were 30.

Undercutting property rights / Posner and Weyl’s argument for overturning property rights is that private property inherently confers market power. Indeed, the title they choose for their chapter on this topic is “Property Is Monopoly.”

They are right in some instances. My home, for example, is the only house on the piece of property that I also own. Because there is no perfect substitute for that piece of property or that house, I have a small amount of market power. But there are close substitutes for my home. And there are even closer substitutes for my stocks, bonds, and car. So “Property Is Monopoly” is a highly exaggerated title.

They go from that idea—I’m skipping their fairly good exposition of 19th century economist Henry George’s idea for taxing land—to their proposal for a common ownership self-assessed tax (COST) on wealth. They would have the federal government impose a stiff 7% annual tax on people’s wealth. People would assess their own wealth, estimating, say, the value of their house.

What would prevent people from underestimating the value of their assets? This is where Posner and Weyl’s proposal is horrific. Once a homeowner, say, has stated the estimated value publicly, he would have to sell his house to anyone who offers more than that value. So, for example, suppose my aforementioned house is worth about $900,000 on the open market. If I estimated the value at $900,000, my annual tax under their proposal would be a whopping $63,000. If I estimate the value below that, I would risk losing the house to anyone who bids more than my estimate. To be safe, I would probably estimate the value at $1 million because I like living there. But then I would pay $70,000 in taxes on my home annually. (Notice that a 7% annual tax on an asset would amount to an implicit tax of over 100% on the income from many assets.)

In short, Posner and Weyl would fundamentally undercut property rights, making them conditional. If you’ve lived in your home for 32 years, as my wife and I have, and put a lot of sentimental value on the place where you raised your children, then you would have to put a number on that value. And in case you think you can handle that, you must remember that they want to do the same with virtually all of your net worth.

Toward the end of the book, they even toy with having people pay taxes on their human capital. They give an example of a surgeon who announces that she would perform gallbladder surgery for $2,000 and pay a tax accordingly. She would be obligated to provide that surgery to anyone willing to pay $2,000. So if the surgeon was thinking of retiring, forget it. The only satisfactory solution for her would be to estimate the value of her services at a number that really would make her indifferent between working and retiring.

The authors are aware that they’re treading on sensitive ground here, writing, “A COST on human capital might be perceived as a kind of slavery.” Might be? They claim that such a perception is incorrect, but the reasoning behind their claim is weak.

They implicitly admit that their proposal is coercive when they write that it would be a mistake “to think that the current system is not coercive.” How is the current system coercive? Here’s how: “Those with fewer marketable skills are given a stark choice: undergo harsh labor conditions for low pay, starve, or submit to the many indignities of life on welfare.” In short, to Posner and Weyl, being relatively poor is akin to being coerced. I would bet that a newly freed slave in 1865, though almost certainly poor, would understand the difference between poverty and coercion better than Posner and Weyl seem to.

And let’s not forget the huge transfer of wealth that COST would imply, a transfer that they claim is a virtue of their proposal. A family with a net worth of, say, $2 million would pay $140,000 a year. They estimate that a COST would raise 20% of GDP annually, half of which would replace “all existing taxes on capital, corporations, property, and inheritance” and wipe out the deficit. The other half would be given to each U.S. resident, which would mean a per capita annual payment of about $5,300. Elsewhere (“A Philosophical Economist’s Case Against a Government-Guaranteed Basic Income,” Independent Review, Spring 2015), I have described the huge problems with such a universal basic income. In short, Posner and Weyl advocate a huge wealth transfer.

Notice, also, that the biggest revenue sources for the feds—the individual income tax and the payroll tax—would be left in place. This means that Posner and Weyl are calling for a gigantic increase in the size of the federal government.

Making immigration benefit natives / Their other major economic proposal is on immigration. They would take away U.S. corporations’ power to hire immigrants and would instead give each of 250 million American adults the power to hire one immigrant. Then, the American doing the hiring could employ the immigrant or hire the immigrant out to someone else.

What’s the American’s incentive? Each would make an offer to an immigrant—they use the number $12,000 per year for illustrative purposes—that would be attractive to someone from a low-income country, and each native would then pocket the difference between that $12,000 and the value of what the immigrant produces.

Posner and Weyl estimate that only 100 million Americans would take advantage of this opportunity, but it’s hard to imagine 150 million other American adults all leaving thousands of dollars of annual value untapped. Although my first instinct was to find their proposal wacky, after I thought about it I found it more reasonable than I had thought at first.

Their immigration idea does, though, sound politically undoable. It’s hard to imagine Americans going along with at least 100 million new immigrants entering the country in a short time. I hasten to add that I would love it, even if I didn’t take advantage of the system (which I probably would). Posner and Weyl claim that their system is better than the late economist Gary Becker’s proposal to auction immigration slots, but it’s hard to see why.

An important argument for their proposal is that it would offer the average American a benefit that’s much greater than he receives from immigration today. That’s true, but Becker’s proposal would also do so if the proceeds from the auction were used to fund an equal grant to each American. They also claim that a pure Becker-type auction would ignore important factors such as the immigrant’s cultural fit to local communities or people’s willingness to welcome migrants. But a migrant bidding tens of thousands of dollars for the right to immigrate would surely take such factors into account in deciding how much to bid and where to settle.

Voting and corporate control / One of Posner and Weyl’s most promising ideas is for quadratic voting. The idea is that each voter could save up votes in order to cast more than one vote on a given issue that he or she feels strongly about. But under this proposal a voter who has accumulated, say, 64 votes would, by using up all those votes on one issue, be able to cast only the square root of 64, which is eight votes. They have a fairly good explanation for why they advocate the square root rather than the straight number, but it’s too complicated to explain in a short space. Suffice it to say that their proposal would do what the current system doesn’t: allow voters to back the intensity of their preferences and constrain voters to make tradeoffs among issues.

The other main issue that the authors discuss is the ownership of corporations. They point to the tension between the interests of stockholders and the interests of high-level corporate managers. Economists who have addressed this issue, they note, believe that a market for takeovers “where another firm or group of investors buys an underperforming firm and fires the CEO” will discipline the management. It’s true that many economists believe that; the pioneering scholar in this area was the late law and economics scholar Henry Manne. But Posner and Weyl say nothing about one of the main impediments to a well-functioning market for corporate control: Section 13D of the 1968 Williams Act.

Under Section 13D, when someone acquires more than 5% of the voting shares of a corporation, he must report it within 10 days of the acquisition. The problem is that all the relevant players will suspect that the acquirer wants to purchase even more shares in order to have more control. Many shareholders will hold out for the higher expected price, making the takeover less likely and making it less attractive for firms to attempt to get control of other firms in the first place.

Here’s how Duke finance professor Michael Bradley put it to me years ago. Imagine that you make a living hunting for and reselling rare books. In a used-book store, you find an autographed first edition of a rare book, priced at $2. You know that you can sell it for $1,000. But what if a well-enforced federal law requires that you inform the seller of the book’s value. Then the seller will hold out for much more than $2. The consequence to you is that you are less able to make a living; the consequence to the rest of society is that fewer people will be out there moving books to higher-valued uses. Similarly, the statement that a firm has newly acquired more than 5% of the voting shares of a corporation is a signal to potential future sellers of shares that their shares are worth more than they had thought, and they will be less likely to sell. The result: a substantially hampered market for corporate control and more running room for top managers to ignore the wishes of shareholders.

Posner and Weyl do make a somewhat persuasive argument on cross-ownership of shares. They argue that when large mutual fund companies such as Vanguard, Fidelity, and BlackRock own a substantial amount of stock in multiple firms in a concentrated industry, the mutual fund companies have an incentive to motivate the firms not to compete against each other as aggressively as they otherwise would. The authors offer evidence that this happens. They propose changing the law to prohibit a given mutual fund from owning a large percentage of shares in more than one company. That way, there would be less incentive for the funds to discourage competition.

Posner and Weyl point out that the funds could still get the advantages of diversification because they would have many concentrated industries in which they could own substantial shares of one company. I couldn’t find any holes in that argument.

Interestingly, one of the concentrated industries that the authors worry about is U.S. domestic air travel, but they don’t mention an obvious solution to counteract monopolistic behavior: changing the law to allow foreign airlines to compete on routes between U.S. cities. Laws keeping out foreign airlines, which are called “cabotage” laws, are the main impediment to foreign competition in the U.S. airline market.

In their chapter on corporations, the authors blame “monopolistic conspiracies” for an industry practice, resale price maintenance (RPM), that has a far more cogent pro-competitive explanation. Suppliers engage in RPM when they require retailers to charge a minimum price on certain items. In a classic article more than 50 years ago, University of Chicago economist Lester Telser pointed out the problem with the monopoly explanation for RPM: suppliers would be facilitating retail monopoly, which would result in fewer items sold, hurting the supplier. A supplier with monopoly power would be better advised to simply charge a high price to retailers. So the monopoly explanation doesn’t make sense. Telser proposed an alternate explanation for RPM: encouraging retailers to compete not on price, but on demonstrating and exhibiting the product. This explanation seems to have stood the test of time, and I’m surprised that Posner, a law professor at Telser’s school, does not discuss this explanation.

Conclusion / I hope that policymakers and others will outright reject—with prejudice, as the lawyers say—Posner and Weyl’s drastic proposal for undercutting property rights and substantially redistributing wealth. On the other hand, I hope they implement the quadratic voting proposal and increase individual Americans’ ability—while not taking away corporations’ ability—to hire immigrants.