Friday, October 6, 2017

Private Property

Private Property

Of the different configurations of property rights, only private property provides a workable basis for a free society, a productive economy, and justice. In the 18th century and earlier, the single word property was customarily used because it was understood intuitively that only private property provided the incentive to work hard. Treatises such as Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations did not specify that private property was the indispensable foundation of political economy because hardly anyone championed an alternative. Private property was “sacred” and, therefore, needed no intellectual defense. By the 19th century, however, and particularly in the Communist Manifesto (1848), the phrase private property began to be used pejoratively. Aristotle had defended it in passing, but the incentives and disincentives of the different configurations of property had, by the 19th century, not yet been systematically analyzed. It could be said that private property was attacked before it was fully defended. Karl Marx gave no indication of understanding why private property was essential to economic life.
Private property restricts government power and decentralizes decision making. It confers on an individual the right to use and dispose of some good and to prevent others from doing so. In a free society, there will be thousands or millions of such owners. They can sell their rights to specific property to the highest bidder and retain the proceeds. With communal property, in contrast, the rights to some good are shared in an undefined fashion by a definite or indefinite number of people. A good portion of the U.S. landmass was communal before the arrival of Europeans. Within a family, many goods also are treated as communal. As for state property, the managers who control access to it are employed by the state and cannot legally profit from the sale of such assets. Normally, state property is not for sale at all. If it is, the proceeds are expected to go into the public treasury, not into the pockets of state employees.
Since the time of the Roman Republic, it has been understood that some goods are naturally managed by the state—those that are needed to provide for the common defense, for example, or for administering justice and enforcing the rule of law. The provision of these goods runs into the difficulty that nonpayers cannot easily be excluded from sharing in their benefits. But most goods, as the Romans agreed, are best owned privately. It is assumed that the economic analysis of private property also embraces the freedom of contract.
From about 1870 to 1990, nonetheless, a majority of Western intellectuals viewed private property critically. Given that it may have been first acquired by force and inherited by heirs of no necessary merit, how could it then be justified? To this question, David Hume offered an answer: The “stability of possession” was so important, he wrote, that dispossession was unwise in cases where the origin of the title had become “obscure through time.” If we can only say that it may originally have been acquired by force, the injustice involved in seizing it is far greater than that involved in tolerating the mere possibility that remote ancestors were thieves. A distant and possible injustice would be “corrected” by a present and certain one.
Under the Stuart kings, Sir Robert Filmer had argued that all English law owed its existence to the royal will, and kings could therefore redistribute property as they saw fit. Replying in his Two Treatises of Government, John Locke located the right to property in labor. For every man, he argued,
the labour of his body and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that Nature hath provided, and left it in, he hath mixed his labour with, and joyned it to something that is his own, and thereby makes it his Property.
It is a measure of the unpopularity of private property among intellectuals in recent decades that a dozen academic works have been issued that attack Locke’s defense, using arguments that the apologists for the Stuart tyranny might have admired, among them those written by, for example, Jeremy Waldron, Alan Ryan, Andrew Reeve, and G. A. Cohen. But all such arguments were futile inasmuch as the case for private property depends not on the ingenuity of philosophers, but on intractable features of human nature. The need for private property would be just as great if no philosophical defense of it had ever been written. The simplest argument for it is the minimal one. Property rights have to be assigned somehow if chaos is to be avoided, and the only known alternatives to private ownership—communal or state ownership—do not and will never work.
Communal property has this great defect. If the members of a commune have the right to equal shares in the overall product, those who work hard will subsidize those who do little. Idleness is thereby encouraged and industry discouraged. This phenomenon is generally known as the “free rider problem.” It was restated in 1968 by Garrett Hardin in an influential article, “The Tragedy of the Commons.” If an attempt is made to circumvent this problem by apportioning reward to effort, the commune has already moved halfway toward privatization.
The free rider problem is encountered when a group goes to a restaurant and shares the tab equally or in a “master-metered” apartment building where the utilities bill is divided equally among tenants. The solution—separate checks, individual utility meters—is the equivalent of “converting” from communal to private property. When such a conversion is made, efficiency increases—utility companies report that electricity consumption may decline by 20%—but, more important, justice is introduced. Heavy electricity users and expensive eaters will pay more, whereas the frugal will pay less. In short, each person is given his due.
This notion corresponds to the classical definition of justice found in Aristotle and Thomas Aquinas. Private property is comparable to a set of mirrors that reflects back on individuals the consequences of their acts, thereby, in an approximate way, institutionalizing justice in society. That is probably the single most important argument in favor of a private property system. The pilgrims who came to Plymouth Colony on the Mayflower in 1620 at first tried communal property and were on the point of starvation when they shifted to private ownership. “This had very good success,” William Bradford reported, “for it made all hands very industrious, so as much more corn was planted than otherwise would have been.” As for the “common course” or communal arrangement, it “was thought injustice.”
Under stringent conditions, communes can be made to work. They must be small enough that members know one another, and they must be imbued with religious zeal or enthusiasm that imparts a spirit of self-sacrifice. This system would not be stable if its members were permitted to have children and to divide into families. Catholic, Orthodox, and Buddhist monasteries with communal property have survived for hundreds of years. The Israeli kibbutz attempted to preserve families and do away with private property, but was unable to do so. By 1989, the 3% of the population then living on kibbutzim had accumulated debts of $4 billion, which were paid by the state.
As for state ownership, the lengthy experiment in Soviet Russia proved that it could not be the basis of a productive economy. Central planners did not have enough information to know what commands to give, and the planning system reduced the people to a form of slavery. They had no incentive to do more than the minimum required to avoid punishment. The failure of this experiment was disguised for a long time by the Western acceptance of Soviet statistics. Both the Central Intelligence Agency and Paul Samuelson’s best-selling textbook, Economics, reported for decades that the Soviet economy was growing twice as fast as the U.S. economy. In the year the Berlin Wall fell, the Statistical Abstract of the United States maintained that the per capita income in East Germany was higher than in West Germany. It also was hoped that the abolition of private property would promote a change in human nature. But “New Soviet Man” stubbornly refused to appear.
A kind of taboo surrounded the discussion of property in the Western world while the Soviet experiment was underway. After it was over, books favorable to private property began to appear. Long obscured and almost forgotten, private property at once appeared as a kind of lens through which history could be reviewed. Empires that had succeeded in the past, such as the Roman and the British, were shown to have legal systems that gave security to property and so encouraged the accumulation of wealth. Countries that have conspicuously failed in our own day, often referred to as the Third World, have been shown to have lacked secure, transferable private property rights. Against all post–World War II predictions, the West has widened its economic lead, and the most important reason was that it had retained the institution whose importance Western elites had failed to grasp: private property.
In the decades ahead, the pressure to privatize property where it has not already occurred will grow stronger as the population increases.

Further Readings
Bethell, Tom. The Noblest Triumph: Property and Prosperity through the Ages.New York: St. Martin’s Press, 1998.
Bradford, William. Of Plymouth Plantation. Samuel Eliot Morison, ed. New York: Knopf, 1952.
Cohen, G. A. Self-ownership, Freedom and Equality. Cambridge: Cambridge University Press, 1995.
Hume, David. A Treatise of Human Nature, 1739–1740. Oxford: Oxford University Press, 2000.
Locke, John. Two Treatises of Government. Peter Laslett, ed

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