WeWork and Robert Shiller on the Efficient Markets Hypothesis
WeWork was and is, as well as being a hugely amusing tale of hubris, a lesson in the efficient markets hypothesis, the EMH.
As we might recall the little joke - economists aren’t all that good at this humour thing - the Nobel was awarded to Eugene Fama, Lars Peter Hansen and Robert Shiller, one for proving the EMH, the second for doing the maths, the third for disproving it. Which isn’t quite the way it did work. Shiller refined the idea.
That EMH not being a statement that markets are always the efficient way of doing things, nor that everything should be done by markets in order to be efficient. Rather, that markets are efficient at processing information. Thus things that are known are already in market prices.
Shiller’s addition was that this is only true when everyone in that market can trade their view. Thus, given the difficulty of going short housing the persistence and extremity of the American housing boom. And so his proposal that to limit future such problems there should be a futures market in house prices where people could bet on price falls. That would get the views of bears into market prices.
At which point, a comment on WeWork:
One of the great mysteries of modern finance is how to make money when you know there’s a bubble, or at least how to get much, much richer than everyone else. The obvious way is to bet against the bubble, but this is difficult, as its expansion can easily outlast one’s ability to finance the wager. It’s even harder if the bubble is primarily happening in the private markets, where it is very difficult, if not impossible, to directly bet against the fortunes of a company that you think is overvalued.
Quite so, it was the exposure of WeWork to those wider financial markets that precipitated the implosion. You know, the financial markets where a couple of months after the IPO people could go short the shares and thereby communicate their view that it was a dog. That echoing back in time to mean there was no IPO.
This also explaining why the EMH does indeed imply, even if not directly state, that markets are efficient ways of doing things. For the alternative to markets is command and control, usually by government. Which isn’t ever subject to that same reality confirming pressure of the opinions of those who are quite sure it’s a dog.
We offer HS2 as a confirmation of that contention. It’s only because it’s not subject to the oversight is people risking their own money that it’s lasted this long, isn’t it.
Building the Unity Bridge
As part of his campaign for the 2019 Conservative Party leadership election Boris Johnson suggested that he supported the construction of the bridge, describing himself as "an enthusiast for that idea", and adding that he believed it would be best "championed by local people with local consent and interest, backed by local business."
In September, 2019, the UK government had requested civil servants in the Treasury and Department for Transport undertake a cost and risk analysis of the proposed bridge, with special attention to be paid to possible funding options. The Department for Transport had reportedly already produced a factual paper on the subject for a former transport secretary. When asked to comment on the project the Secretary of State for Business, Energy and Industrial Strategy said the UK had "amazing ambitions for the future."
The Independent's Europe Correspondent suggested that the UK was lagging behind by not taking the construction of the bridge seriously, suggesting that other countries had already invested in such bridges. The newspaper cited the example of Japan's islands of Honshu and Hokkaido, which are linked by the Seikan Tunnel which exceeds the length of the proposed bridge. It also cited the examples of the Fehmarn Belt Fixed Link and the Helsinki-Tallinn Tunnel as evidence that the UK was lagging behind comparative European nations.
While addressing supporters for the bridge in Northern Ireland UK Prime Minister Boris Johnson is quoted as having said "With infrastructure projects, finance is not the issue, the issue is political will, the issue is getting the business community to see that this could be something that works for them, the issue is getting popular demand and popular consent for a great infrastructure project - and that is why you need Stormont."
In late September, 2019, a group of engineers wrote to the National Geographic magazine agreeing that it was "technically possible and far from unrealistic to build" the bridge. The architect, Alan Dunlop, has suggested two possible routes: a 12-mile span covering the shortest gap from Mull of Kintyre, or a Southern route from Portpatrick to Larne. The Northern one might be too remote, whereas the Southern one is closer to Belfast, and has current road infrastructure.
The depth, rather than the length, poses difficulties, but none that cannot be overcome. Dunlop suggests it might be constructed like an oil rig, anchored to the sea bed by cables. While seas in the area can be rough, he points out that the Hong Kong-Zhuhai-Macau Bridge, a 34-mile series of cable-stayed bridges, an undersea tunnel and four artificial islands, which opened in China last year, “was designed and built to withstand typhoons.” Furthermore, his route is in shallower water to the North of the undersea dump of post-World War II munitions.
The Unity Bridge is technically feasible, and would unite the UK with a land crossing. Furthermore, it would also establish a land crossing between the Republic of Ireland and its EU partners. Lorries or trains could cross Northern Ireland, and head down to use the Channel Tunnel in the South. Some Irish and EU traders would find the bridge and tunnel tolls cheaper than loading and unloading ships.
The venture would be a bold one, creating thousands of jobs where they ae most needed. It would, furthermore, be a symbol of the nation’s new-found confidence. And it would be a physical link tying Northern Ireland to the rest of the Union it is part of. It could be built, and it should be.
Flying Tigers in action
The American volunteer flyers who fought for China against the Japanese invasion were known as the ‘Flying Tigers.’ They saw their first combat on December 20th, 1941. They had originally thought this would be earlier, but various delays meant that it happened a few days after the US and Japan were officially at war.
The Tigers, officially the American Volunteer Group (AVG), were the brainchild of Claire L Chennault, a retired US officer working in China. He’d acted as military advisor to Chiang Kai-shek, then as director of the Chinese Flight School. 100 volunteers were all recruited from US air forces, officially discharged so they could become civilian volunteers to fight with the Chinese. They were employed for “training and instruction” by a civilian military contractor (CAMCO), which paid them roughly twice what their US pay would have been.
Chennault took charge of the purchase of 100 Curtiss P-40 ‘Tomahawk’ fighter planes. They were marked in Chinese colours, and painted with the distinctive shark face up front after pilots has seen a photo of an RAF P-40 similarly decorated. Chennault was a good tactical commander, and trained his pilots to take advantage of the P-40’s rugged strengths. It featured armour and self-sealing fuel tanks, and had a higher diving speed that most Japanese fighters.
Chennault forbade his flyers from engaging the more nimble enemy in a turning fight, but trained them to dive into attack, then pull away for another attack. His early warning system had Chinese villagers give warning of oncoming planes so his own planes could have an altitude advantage when they arrived. Although this manoeuvre went against US and RAF teaching, he’s seen the Soviets use it successfully. It worked, and saw his Flying Tigers credited with downing 296 enemy aircraft for the loss on only 14 of his own pilots. When his pilots eventually returned to the US, they found a bonus of $500 had been paid into their bank accounts for every enemy plane they shot down.
At a time when Japanese forces were streaming seemingly unchecked across Asia in a series of victories and conquests, news of the successes enjoyed by the Flying Tigers provided America with a much-needed morale boost, showing that the Japanese enemy could be beaten. It also cemented in the minds of Americans that the Chinese were allies facing a common enemy. A friend pf mine at St Andrews used to display a Coca-Cola poster from the period showing US pilots fraternizing with Chinese soldiers by drinking Coke together, with the caption, “Have a Coke - Good winds have blown you here.”
It was neither the first time, not the last, when brave Americans have fought for the freedom of other peoples. It was Jefferson’s US Navy that took on and ultimately routed the Libyan pirates wreaking havoc on Mediterranean shipping in the early 1800s. It was US forces that tipped the balance in two World Wars, and it was a US-led coalition that liberated Kuwait in Operation Desert Storm. What was different about the Flying Tigers was that they were volunteers, fighting an enemy superior in numbers and equipment.
The Flying Tigers received many honours American and Chinese. About to celebrate their 50th reunion in 1992, they were retroactively recognized as members of the U.S. military services during the seven months in combat against the Japanese. Their team was then awarded a Presidential Unit Citation for "professionalism, dedication to duty, and extraordinary heroism." And in 1996 their pilots received the Distinguished Flying Cross and their ground crew were all awarded the Bronze Star Medal.
It's just such an odd contention
The idea of recreating victory gardens seems to interest various people and given that we’re all liberals around here why not? If digging the front lawn for vegetables is what turns you on then have at it. It’s just that in one piece of praise for the idea we find this claim:
Together, we helped meet each other’s basic needs through an exchange, rather than using money.
Clearly the implication here is that exchange without the use of money is in some manner more moral. Or better, outstanding in some way. Which is the bit that we think such an odd contention.
For without money you can only exchange with those you actually know. What money as a medium of exchange allows is to do those exchanges with people you don’t know. The web of cooperation can extend - a la “I Pencil” - to all members of our species, not just to those in the immediate vicinity.
So why is it moral, better in some manner, to only be cooperating with those few who share your geography, culture, location? We do have reasonable authority for the idea that all men are our brother so why shouldn’t we use the means, money, that allows us to cooperate and exchange with them all?
It just seems so dreadfully odd to insist that voluntary exchange is wondrous but that it’s righteous to limit it.
The Penlee lifeboat disaster
The Royal National Lifeboat Institution is a private charity, not funded by government, that exists to save lives at sea in UK and Irish waters. It is manned by volunteers, people prepared to set out in heavy seas to rescue people at risk in maritime incidents such as sinkings, collisions, or incapacitated vessels.
On December 19th, 1981, one of their lifeboats, the Solomon Browne, a wooden 47-foot boat manned by a crew of 8 was contacted by the coastguard to go to the aid of the Union Star, adrift after its engines had failed in heavy seas. A rescue helicopter sent to assist could not winch people off because the winds were too severe.
The volunteer crew tuned up, ready to go, but when 17-year-old Neil Brockman turned up dressed and ready to sail with his father, Nigel Brockman, the lifeboat’s coxswain, Trevelyan Richards, refused to take him, not prepared to take two members of the same family out on such stormy seas.
The lifeboat made several attempts to get alongside the stricken ship, and radioed that they had successfully taken 4 people off. Nothing was heard after that from either vessel. Both ships were lost with all hands, 8 from the Union Star, and all 8 of the volunteer crew of the lifeboat. Some bodies were later recovered.
The RNLI has seen several such disasters in its honourable history. Always it recovers and renews itself. Within a day of the Penlee disaster enough people from Mousehole, the village where it was based, had volunteered to form a new lifeboat crew. The pilot of the helicopter that unsuccessfully attempted rescue reported that this was:
The greatest act of courage that I have ever seen, and am ever likely to see, was the penultimate courage and dedication shown by the Penlee [crew] when it manoeuvred back alongside the casualty in over 60 ft breakers and rescued four people shortly after the Penlee had been bashed on top of the casualty's hatch covers. They were truly the bravest eight men I've ever seen, who were also totally dedicated to upholding the highest standards of the RNLI.
The Christmas lights in the village are turned off briefly every year for an hour at 8 pm on December 19th in an act of remembrance. All of the crew were posthumously awarded the RNLI’s medals, with the coxswain, Trevelyan Richards, receiving its highest honour, the gold medal.
The RNLI is financed by private donations, not by government. At one stage it briefly accepted state money, but found that it was losing more private donations than it was receiving in public funds, so it reverted to being privately funded. Its volunteers have saved many thousands of lives, but they need and deserve support. Anyone wishing to help can do so here.
By George he's got it! Not that he realises this of course
George Monbiot tells us that the real problem out there is that power is too centralised, too concentrated. The answer therefore is to push everything down to the people:
But this is the less important task. The much bigger change is this: to stop seeking to control people from the centre. At the moment, the political model for almost all parties is to drive change from the top down. They write a manifesto, that they hope to turn into government policy, which may then be subject to a narrow and feeble consultation, which then leads to legislation, which then leads to change. I believe the best antidote to demagoguery is the opposite process: radical trust. To the greatest extent possible, parties and governments should trust communities to identify their own needs and make their own decisions.
Entirely so, we agree completely. George gives us the analogy of nature:
When you try to control nature from the top down, you find yourself in a constant battle with it. Conservation groups in this country often seek to treat complex living systems as if they were simple ones. Through intensive management – cutting, grazing and burning – they strive to beat nature into submission until it meets their idea of how it should behave. But ecologies, like all complex systems, are highly dynamic and adaptive, evolving (when allowed) in emergent and unpredictable ways.
Eventually, and inevitably, these attempts at control fail. Nature reserves managed this way tend to lose abundance and diversity, and require ever more extreme intervention to meet the irrational demands of their stewards. They also become vulnerable. In all systems, complexity tends to be resilient, while simplicity tends to be fragile. Keeping nature in a state of arrested development in which most of its natural processes and its keystone species (the animals that drive these processes) are missing makes it highly susceptible to climate breakdown and invasive species. But rewilding – allowing dynamic, spontaneous organisation to reassert itself – can result in a sudden flourishing, often in completely unexpected ways, with a great improvement in resilience.
We agree again entirely. That survival of the fittest - without straying into the social Darwinian area of ill repute - depends upon the interactions of all the other inhabitants of the biome. No one plans or even intends - or can do either - that the outcome be one way or another. Rather, all is emergent from what happens to be at hand.
When we come to humans there is a twist, as we are a species that creates its own environment, we’d not have fields or clothes or houses if this were not so. But we face that same problem of complexity which cannot be managed from the centre, as Hayek pointed out in The Pretence of Knowledge. The result is emergent from the voluntary interactions of the inhabitants.
We even have a name for the system which proceeds from this assumption of voluntary interaction creating the world - a market society.
We’re entirely with George Monbiot here, it’s not that society is better when left to emerge in this manner it’s that the only possible manner of gaining one which is stable and resilient is to do it this way. The centre cannot hold us as it were.
Of course, neither George nor anyone else who rails against the current world order is going to agree with us, or even be willing to recognise that they have just recapitulated the neoliberal argument. Yet it is still true - leave us all alone to get on with things as we wish and will, subject only to restriction in those times when our doing so limits the rights of others to do the same, and we’ll end up with the best that can be got.
Smith, Mill, Hayek and Friedman were right, the answer really is power to the people - individually.
International Migrants Day
On December 18th, 1990, the UN General Assembly passed a Convention on the Protection of the Rights of All Migrant Workers and their family members. Asian nations whose citizens worked in other countries as migrants lobbied for the date to be recognized as International Migrants Day, and in 2000 it was finally designated as such by the UN.
It emphasizes and publicizes the contribution of roughly 272 million migrant workers worldwide, stressing their human rights and campaigns for their fundamental freedoms and for their protection. Its concern was for migrants who leave their homes temporarily to work in other countries, usually to send remittances home to support their dependents. People from countries such as Thailand and the Philippines go to work in rich countries, such as those in the Middle East, and concerns have been raised at times as to whether some of them are being treated fairly. Migrants Day is thus a way of drawing attention to possible abuses, and encouraging employers to follow a code of conduct.
The Day was not primarily concerned with the migrants who have recently occupied headlines by seeking permanent homes in other countries, either as refugees from civil wars or tyranny, or those seeing to escape poverty in their own countries and to make a new home in a richer country that offers greater economic opportunity.
The recipient countries have faced a problem where their native population has, correctly or incorrectly, perceived the arriving migrants as a threat to their own economic well-being. Tensions have risen in several places, especially among relatively unskilled workers, since the migrants themselves are often themselves initially lacking in skills, and are therefore seen as competition. This has resulted in several European countries witnessing a rise in anti-immigrant feeling, and the emergence of populist parties based on an anti-immigrant message.
There were allegations that the 2016 Brexit vote in the UK took the decision to leave the EU because of resistance to the freedom of movement that membership of it required. Polls taken at the time did not really bear this out, in that roughly 50 percent cited sovereignty as their reason for voting Leave, as compared to only about 33 percent citing immigration. A few commentators suggested, however, that ‘sovereignty’ might have been for some a code word for opposition to immigration.
The key seems to be control. If people think their nation is in control of immigration, hostility to immigrants declines quite sharply. The opposition comes when people feel helpless and unable to exercise any say in the matter. The popularity of a points-based system of immigration enjoys support because it gives the destination country the feeling that it is in control of the process and can choose, to some extent, the type of immigrants it wishes to admit.
If the UK does adopt such a policy, as seems likely, it may or may not reduce the total numbers coming in, but it will probably reduce opposition to immigration, and enable the immigrants who do come to be accepted and to integrate more readily, and to make a valuable contribution to the economic life of the nation.
Reforming MoD Procurement: Here We Go Again
This week has seen reports that the new government regards the MoD’s procurement system as “disastrous” and intends radical revision. Major MoD procurement reviews come around every 10 years or so. The last one, 299 pages, was by Bernard Gray and his team in 2009. In January 2019, Louisa Brooke-Holland, of the House of Commons Library, provided an excellent update. She begins with National Audit Office concerns that the MoD’s planned 2018-28 expenditure (£186bn) is “unaffordable” and that is before factoring in the 30% over-runs, both in time and money, that we have come to expect. The MoD’s habit of delaying contracts, in order to meet Treasury short term cash limits, compounds the problem: the military do not get the kit they need and the price goes up.
“A third of the MOD’s total procurement spend in 2017/18 was on non-competitive contracts (£8.6bn out of £24.3bn)[1]. A few big suppliers dominate the defence industry – over 42% of total MOD procurement expenditure was with 10 suppliers[2].” It could be described as a hand in pocket relationship.
The 10 yearly strategic reviews lead to much hyped solutions. For example, “Smart Acquisition” was launched in 2000 following the 1998 Strategic Defence Review. Apparently this was new as its purpose was “To enhance defence capability by acquiring and supporting equipment more effectively in terms of time, cost and performance.” A sizeable chunk of the consultancy fee must have gone into that.
Lord Levene’s review (June 2011) prescribed “a delegated model”, giving the three heads of the armed forces responsibility for managing their own budgets, including equipment. A small step but at least in the right direction. The MoD mandarins did not think much of that and have since conducted their own reviews which boiled down to plans and yet more plans.
Commercial procurement experts were hired and fired. Ministers came and went with equal rapidity. The MoD is impervious to change and only likes ministers who are good at extracting cash from the Treasury. The House of Commons Select Committee Report of December 2017 noted that procurement was a mess and the MoD was hugely over-spending but then just tinkered with the problem. Rearranging the deckchairs did not help the Titanic avoid the collision. The iceberg had a better solution: it got rid of the Titanic. Therein lies the answer to equipping our armed forces. When I told Nicholas Soames, then shadow Defence Secretary, that the Tories should take procurement out of the MoD, he fell off his chair. Being an open minded man, he agreed to discuss it with recently retired flag officers (current ones having too much skin in the game). He reported back, with some surprise, that they fully agreed. The armed forces are the customers and the manufacturers are the suppliers. The former know what they want and the latter know what they can make when and the prices they can offer.
We have only had the MoD since 1947. The idea that the armed forces should work more closely together was a good one. No one thought it would lead to a huge bureaucracy preventing the armed forces from carrying out their mission. MoD civilian personnel numbered 57,760 (FTE) at 1 April 2019, a small increase (1.6%) compared with the year before. Within that, the Defence Equipment and Support (DE&S), i.e. procurement, entity employs about 12,000 staff, 25% or so being military personnel. Arie de Geus, head of planning for Shell, showed that the primary goal of any organisation is to look after itself[3]; DE&S is no exception.
The two main roles of most government departments are to formulate policy (including managing legislation) and to distribute the funds provided by the Treasury as equitably as possible across the front line. In the case of defence, there are also two “sovereign” interlocking constraints: ensuring that the UK is independent, e.g. not being dependent on others for key weaponry or ammunition, and providing jobs for British workers. One can question which ministry should be responsible for godfathering British exports of military materiel: there are two or three other candidates.
If the armed forces were doing their own procurement, these constraints would need to be superimposed on their spending budgets.
Over the past 40 years or so, governments of all colours have declared fresh initiatives to cut extravagance, waste and incompetence from MoD procurement. None have succeeded because, over those years, the MoD has inoculated itself against interference. No senior executive, military or civilian, can ever be held accountable for the cost and financial overruns because they are no longer there when things come to a head. It is time to recognise that the MoD’s layer of fat between the armed forces and defence suppliers is simply unnecessary. It should be cut out.
[1] Ministry of Defence ‘Finance and economics annual statistical bulletin: trade industry and contracts 2018’, 6 September 2018, figure 2a
[2] Ministry of Defence ‘Finance and economics annual statistical bulletin: trade industry and contracts 2018’, 6 September 2018, figure 5
[3] "The Living Company" Nicholas Brealey, London (1997)
Planning doesn't work using the 30,000 foot view
The World Economic Forum tells us all that the gender pay gap in Britain is appalling, we really should be doing better. The problem with the claim being that they’re using the wrong figures. Which is something that Hayek rather warned us about, those well removed from the actual action of the economy never will have accurate information about said economy.
That the WEF is a private sector group sitting on a Swiss mountain doesn’t change this basic fact about the pretence of knowledge:
The UK has fallen six places down the global rankings for gender equality. Despite successive prime ministers pledging to take decisive action to tackle the gender imbalances in politics and wider British society, the UK has dropped from the 15th most equal nation in world to 21st.
That we’re 21 out of 149 doesn’t bother us it has to be said. But there’s always that little detail that this level of abstraction manages to miss:
The Global Gender Gap report 2020 said the gender wage gap in the UK was 16%, compared with 7% in Sweden and Norway. In the UK, more than three times the number of women are in part-time roles compared with men.
Well, yes, that is missing something important. The UK gender pay gap for those in full time employment is some 9% or so at present. It’s also true that the UK economy has much more part time working than most others.
Which is why we are all abjured to use not the blended - part and full time - gender pay gap but one or the other. Because it is simply a truth that part timers get lower pay per hour than full and thus if there’s a structural difference in the labour markets the blended number will not be comparing like with like.
We have actually had the UK’s Statistics Ombudsman, Sir Michael Scholar, snarling at Harriet Harman for making this mistake.
And if the WEF is incapable of getting the important details like this right then why should we listen to them at all?
Mining the Moon: How Private Property Rights in Space Bring Limitless Opportunities
Introducing private property rights in space would incentivise private companies to mine it. This could protect the earth’s environment and provide limitless growth and prosperity. The sky is not the limit: there are no limits.
Earth has never run out of any raw material. Yet in today’s Climate Emergency hyperbole the assertion that we are plundering the earth and need to limit our consumption is deafening.
The scarcity of raw materials argument was first stated in 1972 in the book ‘Limits of Growth’. It had been commissioned by the Club of Rome, a group of scientists, politicians and bureaucrats who calculated the speed at which the earth’s resources would run out at specific levels of consumption and population growth. Specific years were predicted at which specific raw materials would disappear. Not one did in the indicated years or since.
Notwithstanding all the empirical evidence to the contrary, environmentalists the world over stick to the theory of the earth’s depletion and demand rationing by government.
The free market economy is the main reason why we have not run out of anything. In a market economy, when supply outstrips demand, the prices rise - thereby incentivising users to become more efficient, to find replacements, or to look for additional supplies. Cars and white goods have become more efficient through inventions; finding additional fossil fuels; mining new deposits and so on.
But we can do even better. It is undeniable that excessive mining destroys part of our environment. It is also not inconceivable (contrary to all current evidence) that at some point we may run out of one or the other raw material. Fortunately, there is an easy market solution: space mining.
Every known raw material is available in space . We simply need to go and get it. The added advantage is that few care about the environment on, say, the moon.Nobody lives there and, apart from ensuring that it continues to exists, who would care? In addition, when we mine on the moon we can mine less on the earth and thereby preserve our own habitat better.
How to achieve mining in space? As always the market provides the most efficient solution. Yet we need to make it profitable for private companies to do so. The problem is that there are currently no property rights in space. So any private enterprise there remains fraught with both insecurity and uncertainty. It is thus no surprise that nobody is willing to take the very high financial risk.
Activity in space is governed by the 1967 Outer Space Treaty (formally named the Treaty on Principles Governing the Activities of States in the Exploration and Use of Outer Space, including the Moon and Other Celestial Bodies). 109 countries are signatories. It was mainly aimed at keeping space nuclear free and limits the use of space to peaceful purposes. Unfortunately it is woefully inadequate in providing property rights for potential entrepreneurs. The wording about lunar or asteroid mining is ambiguous at best.
Under the Moon Treaty, no state is allowed to appropriate the moon or other celestial bodies by way of claim of sovereignty, by means of use or occupation, or by any other means. It is contested whether under this wording extraction of resources is prohibited, or not. The US has unilaterally introduced the US Commercial Space Launch Competitiveness Act of 2015 to give guidelines to private companies. Other countries have replicated this. The controversy on legal claims for mining for profit remains.
As long as there is legal uncertainty, private companies will not invest the billions needed to go mine the moon.
It is pretty straightforward what needs to be done: a new treaty establishing private property rights should be negotiated. This could take the form of a multinational treaty; or could involve the United Nations.. There are precedents for both: The Moon Treaty is a multinational Treaty; whereas the customs, treaties, and agreements relating to the sea were united in the United Convention on the Law of the Sea. Antarctica is governed by a multinational treaty.
The main aim for any country wanting to promote free market prosperity should be to establish property rights, probably beginning with the Moon. To reach United Nations consensus one could, for example, give every country in the world a part of the Moon (perhaps proportionally to its population/economy/land surface, or a combination of factors). Countries could then mine themselves, sell the rights to private companies, or sell their plot to other countries. It could also give unexpected capital to undeveloped countries.
The main danger, especially if we go down the United Nations route, is the excessive length of negotiations, and the potential collectivist approach which many may promote. If it transpires that a market hostile outcome is likely, free market economies should go it alone and conclude a multinational treaty instead. There is also a danger that the environmental lobby will hi-jack the negotiations, as they successfully did with regards to Antarctica (a vast territory for the exclusive use of a handful of scientists and four million penguins).
Private property rights in space could bring unheard of scientific advances and prosperity. The sky is not the limit: there are no limits.