HI! I’m wondering how would a COST scheme work on intangible assets such as stocks? Guess very similar as with the other assets, but I’m not sure. More specifically, how would COST manage the ownership of companies? I understand the fact that a company could be another name for the “cluster of assets” owned by that legal entity. But what about the legal entity itself? How participation in a venture/freedom to associate works under the COST system?
Hey @Alex1, the concept of “ownership” and more generally, fractional ownership is somewhat abstract with respect to the thing actually being owned. To own something is actually pretty abstract, and most things you “own”, your proof of ownership is a receipt or a deed or something the government holds for you in escrow.
The idea of a COST system works best for the class of assets that have inelastic supply, meaning that large changes in asking price can’t change the (short-term) demand, or for those that have few substitute goods. Those goods are vulnerable to rent-seeking, ie. asking for a large price, since there are few alternatives for the buyer.
Stocks are neither inelastic (large elastic supply) nor generally lacking in substitute goods (buy another stock). In effect, stocks already represent a COST system, since you can generally buy some at any time, at a price determined by the market, often with a tax on your gains for owning the stock (capital gains tax).
That is true up to publicly owned companies. Privately owned companies are a decent example of where you wouldn’t necessarily want a COST system. Specifically, a COST system provides the property that control of an asset is liquid (great for rent-seeking type assets, bad for assets whose value can easily be destroyed). Imagine not being able to control one’s own company, and watching powerful monopolistic competitors destroy it.