Weyl & Zhang (2017): Depreciating Licenses

Overview

"Depreciating Licenses" is a 2017 working paper by economists E. Glen Weyl (Microsoft Research) and Anthony Lee Zhang (then a Stanford PhD student, later University of Chicago Booth), posted to SSRN and later published in revised form.[1] It formalizes a core tradeoff in property-rights design: perpetual, fully-owned licenses give holders strong incentive to invest in an asset but block reallocation to higher-value users, while short-term licenses improve allocative efficiency but discourage investment, since holders cannot capture the returns to improvements they make. The paper proposes depreciating licenses — a mechanism in which holders periodically self-assess a value at which they commit to sell, and pay a fee as a percentage of that declared value — as a way to soften this tradeoff.[1]

This is the direct academic ancestor of the Common Ownership Self-Assessed Tax (COST), popularized by Eric Posner and Weyl's Radical Markets (2018, Ch. 1, drawing on this paper in notes 35, 44, 56 and 59) as a generalization of Arnold Harberger's self-assessment idea — the same self-assessment logic Georgists apply to land value.[2] Weyl and Zhang, with Paul Milgrom, extended the idea to a concrete policy application in "Redesigning Spectrum Licenses" (2017), proposing depreciating licenses for radio spectrum specifically.[1]

See Also

• Harberger Tax (COST) — the mechanism this paper's investment/allocative-efficiency analysis underpins
• Spectrum Auctions — the policy domain the companion paper (Milgrom, Weyl & Zhang) applies depreciating licenses to
• E. Glen Weyl — co-author
• Radical Markets — the book that popularized this paper's mechanism as COST
• William Vickrey — the earlier mechanism-design lineage (auction theory) this work extends

Sources

1. E. Glen Weyl & Anthony Lee Zhang (2017), "Depreciating Licenses," SSRN Working Paper — used for the investment-vs-allocative-efficiency tradeoff and the depreciating-license mechanism description; companion paper Paul Milgrom, E. Glen Weyl & Anthony Lee Zhang, "Redesigning Spectrum Licenses," Regulation 40 (2017), noted for the spectrum application. SSRN · PDF
2. Eric A. Posner & E. Glen Weyl (2018), Radical Markets: Uprooting Capitalism and Democracy for a Just Society, Princeton University Press, Ch. 1, notes 35, 44, 56, 59 — the discovery source; used for this paper's role as the technical basis of the book's COST proposal. Wiki book page