Well, if I’m going to get beaten to the punch on an essay I’ve been incubating for a couple of weeks, at least it’s by Susan Lee. Her Wall Street Journal editorial from Wednesday (subscription required) does a superb job of addressing the “how and why” of Iraqi oil privatization. She also does a great service (and, again, beats me to it!) by pointing readers to this 1999 Cato Policy Analysis by Terry Anderson, Vernon Smith, and Emily Simmons on privatizing federal land.
The actual mechanism would look something like this: As the oil land is surveyed and divided into discrete units, an open auction for the deeds of each unit would be held. The deeds won by auction would be paid for in certificates. Buyers of the deeds — anyone from an Iraqi citizen to a giant oil company — must pay with certificates purchased on the market either before or right after the auction. (The existence of a futures or option market would allow potential buyers to hedge their purchases.) Holding a rolling auction — probably over several decades — has several virtues. The economy avoids the inflationary impact of a huge, sudden capital inflow; certificate holders can time their cash flow by deciding whether to sell early in the process or at the end of the auction period; and prices for individual certificates could be kept low by declaring “stock splits.”
And I wholeheartedly endorse her conclusions advocating their approach (you’re shocked, shocked to hear that, I’m sure!).