More on the Meaning of Property Rights

I outlined my own ideas on the meaning of property rights on the page A Definition of Property Rights, which I wrote last month. I want to restate a few things to clarify them here, and add a bit more to the understanding of property and what limitations the concept has to have in practice.

As I suggested before, we prefer to keep the things and money we call ours, and we want the right to sell or dispose of them as we wish. Most of us might agree that we need to surrender a portion of what we have or earn - perhaps even involuntarily - in order to have a civilized society. Governments protect us from each other with police, courts, and armies. They provide common goods and services we want, such as roads and welfare. But even here we want the taking of our property to be limited to a reasonable amount.

We all want to keep much of what we work so hard to create. If we undercut this idea too much, people no longer feel the incentive to create and produce. If you were taxed so heavily that you only got to keep 20% of your wages, for example, you might consider leaving the country, or losing your job and going on welfare. And if you couldn't make more as the owner of a restaurant than the workers in your restaurant make, you wouldn't risk your capital and spend the long hours to build such a business.

Now, some will argue that the way to keep taxation reasonable is to have governments which only function to protect rights. In other words, to prevent anarchy - which would perhaps result in even more of the fruits of your labor being taken - we establish laws, police, courts and national defenses. Since providing welfare or other social goods may not be necessary to prevent anarchy, so why not limit a government to taking only enough of our income to protect us? This argument has a certain appeal, but most of us are in favor of some additional functions for government, and even for some redistributive schemes, such as welfare.

Redistributing goods and money from some people to others is a slippery slope as they say, and can be taken to extremes, but we traverse slippery slopes all the time as part of life. And welfare is not necessarily an example of short-term thinking, because if a child dies there is no long-term. Some will argue that it's better if we can arrange the conditions necessary for all to feed their own families, so welfare is never again needed - and they're right - but that doesn't solve the problems faced by some right now.

So we allow for the taking of what is "ours." This seems to negate the concept of property rights. It doesn't if we see them as a matter of what is best for people - starting with what is best for the individual owner - but not excluding the interests of others. We seek our personal interests as individuals, but a government seeks (we hope) to serve the interests of everyone, or at least the people within it's jurisdiction. Thus we balance property rights of the individual against what is best for all the people in general.

This approach to property rights by governments should be taken with the long-view and broadest context in mind. For an example of how not to handle property rights, consider how local governments now take homes from individuals to give to others who want to build shopping malls or residential complexes for wealthy buyers. The argument is that it is better for the community because of the increase in economic activity and the increase in tax revenues on the property, which now has more taxable value.

This is a short-term view in my mind. The clear tendency towards abuse of this process (developers who have friends in government get to take your property for their uses) undercuts the historical understanding of property rights that has served us well. Most of us don't feel that we are better off as individuals or as a society when big developers and corporations can use government to take our homes for their purposes. If this becomes common it seems likely that corruption will rule the process far more often than the intent to do good for the people (and the concept of "good for the people" can be corrupted as well).

Also, the general ineptitude of governments when it comes to deciding how economies should develop argues against this kind of action. Some developments which started with such a government condemnation process have failed after people's homes were destroyed, meaning the original owners were forced out for no benefit - not even short term - to the local government or the community. It seems clear that there are better ways to help a community grow economically than to violate people's homes.

More Thoughts on the Meaning of Property Rights

At this point I may be rambling a bit, but there are other issues related to property rights which are worth exploring - even if I have not yet formalized them into theories or statements of principle.

For example, if we accept that there is a social-utility aspect to property rights, then we might accept that to some extent if a person does not use his wealth he loses his right to it. We already take this approach with patents, requiring their development to maintain the right to them. Fortunately, the fact that most wealth is held in the form of money takes care of this matter for us. If your wealth is in millions of pounds of corn and you sit on it as it rots rather than sell it for consumption, this seems wrong. But when you have millions of dollars, nothing of real value is withheld from society. More than that, you cant help but use that money. Doing something as simple as putting it in the bank makes it available to others who can borrow it for creating new businesses or houses or other things of value.

Interestingly, even if you hide your millions away as cash under the mattress, you can't take value away from society. Hidden cash makes the remaining cash in circulation of more value since it is rarer. This isn't an effect that is measurable on the scale of a few millions of dollars, given the trillions in annual output in this country, but the effect is real. Money then, is a way to prevent the withholding of value from society - an interesting though worth exploring further at some point.

I want to return to the point made on the page A Definition of Property Rights, about the water provider who decides to cut off the towns water supply. That we are offended by this suggests that we do not believe in taking the concept of property to any extreme. I was reminded of this by a memory from childhood. I owned a comic book and wanted to throw it away even though my brother wanted it. I didn't want him to have it. Now, under a concept of property rights as absolute, I had the right to prevent him from reading it, even if I just wanted to destroy it otherwise. This seems so childish now, yet perhaps we get caught up in the same kind of thinking as adults. Again, if we think that I should have given him that comic book, we must feel or think that the right to own something is lost if we have no use for it. Worth pondering...

As I was thinking about the meaning of property rights I also thought about land, and how it can sit empty for generations, unused, yet "owned." One of the things that made me think of this was the land "invasions" which happen so often in South America. Wealthy land owners sit on large holdings while people need a place to live, so the people organize and invade the land, building homes and then refusing to leave. At this point they can negotiate a price with the frustrated landowner.

A solution to this could be to tax undeveloped land more highly, to encourage owners to actually use it. In cases like that above, this would mean selling off lots to avoid the costs of holding the land. This fits with the social utility arguments for property, and still allows for the owners of land to profit, but I hate the idea of encouraging land to be developed more quickly than it is already being developed. In my opinion we need empty spaces and wild lands.

To apply this idea here in the states, then, we might charge higher taxes unless owners grant a conservation easement, or at least allow public access to their land for hikers and nature lovers. I understand that this will offend my libertarian friends, who have a different idea about the meaning of property rights. But again, take it to extremes and the fallacy of the "rightness" of absolute property rights falls apart. For example, who could feel that it is right for a man to burn up millions of pounds of food while people around him starve - just because he was the "owner" of the food? There's some food for thought.