Thursday, 16 April 2009

Why support private property?

Over at Defective Equilibrium, Tom M puts forward the interesting argument that
It is often assumed by defenders of largely unregulated private property that theirs is the system that takes liberty the most seriously - indeed the system with the most freedom of agency.
However I think many people forget to consider the flip-side, that private property is in itself a highly coercive institution. This is highlighted in the Sidgwick quote given at the start. Consider two situations. In Country A, the Government passes a law prohibiting people from boarding trains on Sunday. This is obviously a restriction on people's liberty, presuming that they were choosing to board trains on that day previously. In Country B however the Government is more laissez-faire and makes no such law. Despite this, the owner of the trains decides that in accordance with his religious principles, his trains will not run on Sunday.

From the perspective of the passengers of the train, the situation is identical (assume that the citizens themselves have identical demand for the trains between the two countries). They would like to ride the trains and are unable to do so because someone has told them that they cannot.

It seems to me that it is inconsistent to claim that one of these situations is an abrogation of liberty and one is not. However my general claim (and also Sidgwick's) if were actually concerned with the maximisation of individual liberty, we would not support the institution of private property. Indeed the very principle of private property is that the owner of the property is permitted to restrict the liberty of others to do what they want with it!
In a comment to this posting I argued, with regard to the train example,
In situation A the government has a monopoly on power, it can stop all people boarding all trains on Sunday, a private train owner can only stop people boarding his trains on Sunday. If there is competition in the transportation services then such an owner would loose business to other suppliers and consumers will not suffer much. On the other hand if there isn't competition then the problem is monopoly, not private property.
To expand on these points. If we are in a world without private property, what property rights are there? Is all property owned by the government? This has been tried and failed. Government ownership of the means of production has not shown itself as a means to more liberty for the average citizen. In fact the opposite, in countries where the state did own the means of production liberty was less than in private property owning countries. Where there are no guarantees of property there are no limits to state authority and no regulatory bodies of law and hence no guarantee of individual liberty or "civil rights". Historian Richard Pipes makes this argument in his book "Property and Freedom".

Of course it could be argued that a non-private property owning society is also a non-state owning property society in that all property is owned by everyone, in some sense. But economists would recognize that this would just be an example which would lead to the tragedy of the commons. Think of a groups of herders sharing a common parcel of land (the commons), on which they are all entitled to let their cows graze. It is in each herder's interest to put as many cows as possible onto the land, even if the commons are damaged as a result. The herder receives all of the benefits from the additional cows, while the damage to the commons is shared by the entire group. If all herders make this individually rational decision, however, the commons are destroyed and all herders suffer. As Ludwig von Mises wrote concerning the problem:
If land is not owned by anybody, although legal formalism may call it public property, it is used without any regard to the disadvantages resulting. Those who are in a position to appropriate to themselves the returns — lumber and game of the forests, fish of the water areas, and mineral deposits of the subsoil — do not bother about the later effects of their mode of exploitation. For them, erosion of the soil, depletion of the exhaustible resources and other impairments of the future utilization are external costs not entering into their calculation of input and output. They cut down trees without any regard for fresh shoots or reforestation. In hunting and fishing, they do not shrink from methods preventing the repopulation of the hunting and fishing grounds.
Under common ownership of all property you would just get a tragedy of the commons writ large. The answer to this problem? Private property rights. If you convert common good into private property, this gives the owner an incentive to enforce its sustainability. Harold Demsetz defines communal ownership as
[...]a right which can be exercised by all members of the community [...] The community denies [...] to individual citizens the right to interfere with any person's exercise of communally-owned rights. Private ownership implies that the community recognizes the right of the owner to exclude others from exercising the owner's private rights [...].
and goes on to note the problem and its solution,
Suppose that land is communally owned [....] If a person seeks to maximize the value of his communal rights, he will tend to overhunt and overwork the land because some of the costs of his doing so are borne by others. The stock of game and the richness of the soil will be diminished too quickly [...]

If a single person owns the land, he will attempt to maximize its present value by taking into account alternative future time streams of benefits and costs and selecting that one which he believes will maximize the present value of his privately-owned land rights. [...] It is very difficult to see how the existing communal owners can reach an agreement that takes account of these costs.
Communal ownership is unlikely to lead to a society where liberty is maximized, in fact its unlikely to result in much of a society at all and there are strong incentives for such a society to develop into a private property society.

So private property may restrict peoples' liberty but it will also protect these same people from the monopoly power of the state and leads to the best incentives for the efficient use of property.


TM said...

You make the case very well. I think though, and I think I may have mentioned this in comments in the original post, that you have to be careful with conflating positive consequences generally with positive consequences for liberty.

It may be that private property prevents authoritarian Governments encroaching on our freedom, but whether or not it provides necessary incentives (should be/ is probably irrelevant to a pure 'liberty maximiser', if such a person exists, and perhaps depending on how they define liberty.

I agree with you that consequences have to be taken into account, and I think private property is a good example for why that should be.

Brad Taylor said...

I think it depends entirely on how you define 'liberty'. It's a pretty ambiguous word.

Paul Walker said...

Fair point Brad. So how would you define liberty? I will go with Isaiah Berlin and negative liberty: "liberty in the negative sense involves an answer to the question: 'What is the area within which the subject — a person or group of persons — is or should be left to do or be what he is able to do or be, without interference by other persons'." Any better ideas?

Brad Taylor said...

I like Hohfeld's distinction (described here) between liberties and claims. A liberty is something you have no duty not to do, a claim is something another person has a duty to do or not do to you.

If we take this definition, perfect liberty would be the Hobbesian Jungle. Claim rights over property or your own body would necessarily reduce liberty by imposing duties - don't kill another person or go on their land without permission - but would also increase freedom as we commonly think of it (and negative liberty in Berlin's sense) by increasing the things you can do without being bothered by others.