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October 24, 2005

Comments

Rob

I just wanted to say: I like the new subtitle.

Chris Brooke

"Instead, they are a social convention used to secure peace and prosperity."

No reason not to attribute this view to Hobbes in the C17th, too.

(And thanks for the kind words.)

AJE

Whilst it's true that Mises and Hayek showed that private property is a crucial institution for coordination reasons as well as ethical reasons, I think it's wrong to imply that the former could contradict the latter.

Above all, Hayek and Mises saw private property as the foundation of a free society, because without private property economic calculation becomes impossible. To suggest - as you do - that an egalitarian redistribution could improve the functioning of an economy is rediculous since it completely misunderstands Hayek and Mises' point: it's not a question of liberty and/or efficiency (and we can use government policy to swap between emphasis on either), rather both are founded on private property.

"Private property" that is at the discretion of a court to arbitrarily redefine cannot be considered to be private property.

Of course it'll benefit Mr Poor if we redistribute property from the rich majority, and this is why Mr Poor will vote for Labour. But it's a tragedy of the commons: if we violate private property to make a short term benefit for Mr Poor, the foundation of a market society collapses. Mr Rich will be unwilling and unable to produce future prosperity, and the signals which are required to allocate resources become lost.

This is not to say that private property is fixed, however.

"The right to property then becomes a mere empirical issue: do the gains from current property rights outweigh the possible gains from any changes in them?"

This is called trade! If I believe I can use your property in a more productive way than you come, I will buy it off you and not only will we both gain, but society as a whole does.

I do accept that certain issues (for example copyright) should be reconsidered so that the private property right is diminished, but these rights emerged not through voluntary exchange, but through the lobbying of government.

In conclusion, if you think property rights are less well founded than generally supposed, that depends on who is doing the general suppositions! Although Austrian economists are not the general public, we are the experts on Mises and Hayek, and I can assure you that property rights are - if anything - more well founded than is generally supposed in the popular media.

A lot of development economics have ignored property rights - probably by confusing them in the same way that you do - and thus neglected their protection in favour of communal ownership. From a casual look around the world, it's striking how important the rule of law, and the right to own private property free, is a prerequisite for growth and prosperity.

I think you're suffering from the classic egalitarian error of assuming the institutional outcomes of human action are somehow tools at your disposal. You witness something important, and immediately wonder how you can manipulate it to make it even better, or transfer it to others. I urge you to find the time and really read Mises and Hayek, and curb your enthusiasm to act as planner.

chris

AJE - I'm not denying that there are huge gains, as you describe, from having private property. My point is just that this is a utilitarian argument. What if someone who was a planner were to say that the gains from re-allocating property were to outweigh the losses from disturbed expectations? How exactly would you argue against him? Or what if a redistribution of property were the only way to buy off the clamour for state intervention? In the Limits of Liberty (p178
in my copy, James Buchanan wrote this:
The rich man, who may sense the vulnerability of his nominal claims in the existing state of affairs and who may, at the same time, desire that the range of collective state action be restricted, can potentially agree on a once-and-for all or quasi-permanent transfer of wealth to the poor man, a transfer made in exchange for the latter’s agreement to a genuinely new constitution that will overtly limit governmentally directed fiscal transfers.
And in The Fatal Conceit, Hayek wrote that there is "no reason to suppose that the particular forms property has assumed in the contemporary world are final."

AJE

Firstly, this strikes me as a crazy argument: you claim that Mises and Hayek de-emphasized the ethical basis for private property rights, and therefore you ask why not utilitarianism.

But the reason Mises and Hayek did that, was to explain why the utilitarian justification is wrong!

So lets go over the Mises/Hayek view....

"What if someone who was a planner were to say that the gains from re-allocating property were to outweigh the losses from disturbed expectations?"

I'd ask what his unit of measurement was. How the hell can you discover and compare this information? Without private property there's no prices, without prices there's no method of profit/loss and hence no basis for calculation.

What is your unit of analysis to compare people's expectations?

Instead of assuming that all information is given to the planner, Hayek showed that information is dispersed and often tacit. Prices are the means to generate and convey this information - without private property, it doesn't exist.

Hence planning is impossible. The assumptions made by Rational utilitarians are wrong, and have failed. The economy is not a stock of wealth that can be divided up at zero cost, it's a continual process of discovery, that can only function with a price system.

Sure, deviations away from a completely free market won't lead to an apocalypse, but we're not discussing whether a little bit of redistribution is ok, we're talking about the theoretical grounding of property rights.

"My point is just that this is a utilitarian argument."

Exactly. And socialism doesn't work, for the very reasons you somehow are now claiming are over-emphasized.

Finally, both Buchanan and Hayek used veil of ignorance arguments to explain how consensual government can emerge. Neither of them would claim private property rights are less well-founded than supposed, and both are talking about voluntary decisions. Again, I'm not claiming that property rights are fixed - the whole point of them existing is to facilitate their exchange.

How exactly would you argue against him?

I hope i've answered this question, but I think you're analysing Mises and Hayek within a neoclassical framework. If you think that they demonstrate how "property rights are less well-founded than generally supposed" then you've completely misunderstood them.

dearieme

"If an alternative set - a more egalitarian one - can be shown to benefit the majority, how can the rich minority argue in defence of their property?"
1) Because if you steal from the present property owners and hand property to some other people, you have undermined the very idea of property, INCLUDING the new set of property rights.
2) That same objection applies too if "an alternative set - a LESS egalitarian one - can be shown to benefit the majority".

Tim Hicks

Chris/AJE/dearieme,

Just to be sure I've got this right...

Chris is saying something along the lines of, "there's no such thing as a natural property right, it's just a social construction that came about to allow society to become more wealthy".

AJE is saying "yes".

Chris then says, "consequently, it is possible to conceive of alternative systems of property rights from what we have now. If they better suit our goals, say, of egalitarianism, then there is no philosophical reason not to make the switch".

At which point, AJE says "the current system is (approximately) the best, we'd be mad to switch" and dearieme says "and anyway, the act of switching destroys that which you are trying to create".

The point is, you do all agree about the first point, right?

chris

Well, I agree with it. And I agree with Anthony to a large extent - it's undoubtedly true that well-defined and respected property rights have enormous economic and social benefits. I think our disagreement is (only!) about the costs/benefits of possible changes in property rights.

AJE

I am not saying that I disagree with natural property rights, but accept Chris's position that there's another argument to discuss.

The greatest thing Mises did was turn the socialist debate away from issues of ethics and behaviour, and toward what can and can't be done, in the real world, where information is dispersed.

I might well one day use natural rights arguments to defend property, but in this discussion I'm willing to put that debate off the table, and simply talk about the utilitarian argument.

I don't think the disagreement is about the cost/benefits though, it's far deeper. If you redistribute then you undermine what private property rights are. I'd argue that redistribution is incompatable with private property rights, and it's one or the other. Since I think (as did Mises and Hayek) that private property rights are the foundation of a free society, it's insane to destroy them.

That's not to say that some redistribution is impossible. But then I'd argue that international redistribution is more just, and more "efficient" than national redistribution. And I also think that globalization - extending the division of labour and integrating people into the world economy - is the optimal means to promote prosperity.

I've you've not read Hernando De Soto then I encourage you to do so, since I find him the most compelling writer on the issues of property rights and development.

dearieme

"there's no such thing as a natural property right"...". Dunno. I'm no clearer on what a Natural Right might be, and whose Duty it might be to provide it, than I am about what Social Justice is, and which Court is to dispense it.

Robert Schwartz

Far be it from me to defend liberal political theory, but:

Property and Freedom by by Richard Pipes.
http://www.amazon.com/exec/obidos/tg/detail/-/0375704477/
Study Russian history and you will concieve a new fondness for property rights.

Dearieme: I liked that.

Rob

"Of course it'll benefit Mr Poor if we redistribute property from the rich majority, and this is why Mr Poor will vote for Labour. But it's a tragedy of the commons: if we violate private property to make a short term benefit for Mr Poor, the foundation of a market society collapses. Mr Rich will be unwilling and unable to produce future prosperity, and the signals which are required to allocate resources become lost."

This involves an empirical claim about which we surely have very good reason to be dubious: I can think of, off the top of my head, no state which does not involve some redistribution, and several states which have not seen the collapse of a market society.

As I see Chris' argument, it runs something like this: private property rights allow actors to plan by giving them stable holdings; this solves a series of coordination problems by allowing the exchange of reliable information; solving coordination problems is good, because it both distributes resources and encourages the creation of more resources; any set of private property rights which fulfills these purposes is, by the failure of other arguments to ground private property, an adequate set of private property rights; the set of all the sets of private property rights which fulfill these conditions is large and includes private property rights which would be substanially to the benefit of the less well-off; because we are more concerned about the less well-off, we ought to move to one of the adequate sets of private property rights which benefits them more than the current one.

I'm skeptical about the claim that there are no other good arguments for private property rights, and that there is a pro tanto case for distributing to the less well-off (at least, without argument to show it: of course, anyone who thinks they have much right at all to the fourth Porsche when there are people who can't afford a car is fooling themselves, but at least we need to show it). The other good argument for private property has nothing to do with economic efficiency, or even liberty in the market: it's that, most of the time, in order to be able to live a life in the full sense, you need to have resources which you alone have control over, where you don't have to live your life in public. Hannah Arendt's very good on this.

AJE

"we ought to move to one of the adequate sets of private property rights which benefits them more than the current one."

Please read through my comments again Rob, my point is that such a sentance completely misunderstands what property rights are. If "we" (who is "we"?) move from different property rights regimes via force (e.g. the Mayor of Washington DC confiscating people's land to build a baseball stadium) then there are less property rights than before. You can't transfer them at zero cost.

If people freely exchange them - which is why they exist, and what happens with every trade - then they are reallocated to benefit the highest valuation.

You say: "This involves an empirical claim about which we surely have very good reason to be dubious: I can think of, off the top of my head, no state which does not involve some redistribution, and several states which have not seen the collapse of a market society."

I pre-empted that point at least twice: A COUNTRY COULD STILL FUNCTION IF IT REDUCED THE AMOUNT OF CLEAN AIR IT HAD, BUT WOULD NOT SURVIVE IF IT DISPENSED WITH ALL AIR. The debate it a qualitative, not quantitative one, so no it's not an empirical issue.

rjw

I fully agree on the general point on the importance of property rights. But the discussion seems to miss a trick. I rather think that in many contexts rights are rather fuzzier than has been implicitly assumed. And the value of the "redistribution = destruction" argument is affected by that.

Clearly if you "redefine" away my bank account to someone else, that has some problems attached. But that's a nice clear cut case. What about where we redefine the terms of fuzzy rights - like the rights involved in the (incomplete) employment contract, or rights over the environment?

Or the apportioning of the ownership of the risks attached to just about any economic enterprise? (Or - the converse - the ownership of the insurance protection that NOT holding the residual risk implies). Lawyers get rich on this stuff on a daily basis.

It seems to me is that Hayekian and Mises style arguments are sometimes used very opportunistically to defend the sanctity of property rights or more generally socially constructed rights in general that are not clear cut or naturally stable at all when you look more closely.

After all, Thatch told us managers had a "right to manage". Presumably because in the distant past the owners of firms were the managers. It had a certain veneer of plausibility then. But that's no longer obviously true because the system of stock ownership has evolved.

Rob

AJE,

on the first point, no: if the Mayor of Washington DC confiscates some property, and gives it to some other people, then the other people have that property, and so the total amount of property rights - if such a concept makes any sense at all - remains the same because the property x, which y did have, z now has. Besides, the conclusion you erronously extract from that example has nothing to do with the point I was making: the point I was making was that if property rights are a solution to a coordination problem, and there's more than one solution, we should use the solution that scores highest across a number of values.

I think you're mistaking my use of the term property rights, as in a right to do some list of things with some physical object, with your use of property rights, which seems to mean the particular set of property rights - those associated with laissez-faire capitalism, I'd guess - you happen to favour. On your meaning of property rights, unsurprisingly, moving away from the set of property rights you favour 'reduces' property rights. Chris and I are saying - or at least I am, I think this is what Chris is saying - if there's more than one way of solving this co-ordination problem, if there are other systems of property rights which would also solve the coordination problem, then we need to think about what benefits systems of property rights can bring other than the solution to coordination problems and assess how good they are in light of those other benefits (and presumably costs). That makes your definition of property rights irrelevant, since it refuses to countenance that anything else counts as a property right, when the point in dispute is the relative benefit of different systems of property rights (not different distributions, different systems: property rights which allow you to do different things with the same property).

On the second thing, what? "if we violate private property to make a short term benefit for Mr Poor, the foundation of a market society collapses". You think redistribution violates private property; violations of private property cause market societies to collapse; we have redistributed; therefore, market society has collapsed - except, it hasn't, so far as I can see. If you mean that 'reductions' in property rights are like reductions in the amount of clean air, then the argument doesn't tell against redistribution per se, because having dirtier air is not the same as having no air, i.e., we can make the air dirtier without starving ourselves of oxygen, so we can 'reduce' the amount of property rights without destroying the foundation of market societies.

AJE

Rob:

Ok, you're not understanding my point, so lets make things a little clearer with some good old Conjectures and Refutations...

I'll make several statements which I feel are consistant with my previous comments, feel free to pick which ones you object to.

1. Chris' article suggested that a Mises/Hayek view might imply that property rights are less well-founded than generally supposed

1a. I claim that the Mises/Hayek view makes property rights even more important than is generally believed - they're the basis of a free society

2. Property rights are a spontaneous institution that facilitate exchange, and provide incentives for investment

3. The current assignment of property rights is irrelevent for this discussion. I am NOT defending the status quo

4. Without the institution of private property rights there's no basis for rational calculation

5. There's two ways to redistribute resources: through voluntary trade, or through government coercion

6. The Rationalist Utilitarian socialist (a "Planner") views property rights as being an existing state of affairs, and a possible policy tool

7. The Austrian economist views property rights as the spontaneous outcome of a complex pattern of social relations

8. The Planner underestimates the effect of policy - due to time (lags), uncertainty

9. Knowledge is scattered throughout an economy, and is impossible to be centralized.

10. Hence, the assumption that "we" can have another system of property rights (other than that which emerges from a free market) presupposes that out calculations about utility are correct.

11. Calculations require private property

12. The Planner claims to offer a system that increases social welfare

13. There is no social welfare

14. etc etc etc....

A question:

Do you think the institution of private property rights has been damaged by Mayor Williams? In other words, does this action make it more or less likely that people will invest in their homes?

And you say:
"the point I was making was that if property rights are a solution to a coordination problem, and there's more than one solution, we should use the solution that scores highest across a number of values."

Please refer to my original response to Chris, which i'll repeat:
I'd ask what his unit of measurement was. How the hell can you discover and compare this information? Without private property there's no prices, without prices there's no method of profit/loss and hence no basis for calculation.

What is your unit of analysis to compare people's expectations?

Regarding the air analogy, i think i've been very clear, read through my previous comments.

J.C. Ernharth

AJE –

My guess is the question will be turned again to the existing examples where private property is less respected and more collective-centric policies are the norm. I usually hear something like, "Well - -Sweden and Norway have far greater social nets and yet they don't go bankrupt. It’s just that their people are culturally open to alternatives (e.g. not so selfish)." So, while students of Mises would point out the expenses that are unseen, as well as the costs deferred, the argument continues: "obviously rational calculation is overrated, AND it is far more noble / a greater benefit to society to help the poor vs. allow Mr. Rich purchase his 14th Porsche." What could be more rational?

Oh, and when the planners have failed in the past, it is only because those were rational utilitarian socialists who were not quite progressive / smart enough to pull it off. (read: This time it'll be different because we are smarter!)

This is where the deliberately confined argument you are attempting to make becomes more difficult. We are engaging a form of the seen vs. the unseen, and moreover, the length of time for consequences to play out can be glacial compared to the immediate gratification of, say, a fat prescription drug program financed stealthily by central banks, and by saddling future generations with absurd amounts of debt that the Governments will attempt to deflate with precision planning over the next 50 years– a long term tightrope act if ever there was one given that short-term success seems to breed ever more irrational prescriptions for intervention and long-term overconfidence within the financial community and citizenry (which we witness currently in the U.S.).

Otherwise, while the noble social agenda of some new version of collective property rights is hinted at (a moral / ethical calculation), little credence is given by your oponents to the core morality of natural property rights to begin with.

After all, who owns us?

Property tends to be nothing but an extension /product of one’s labor, and any other entity or group claiming higher authority to it is, in the end, bears little difference to authoritarian slave-master. We are but the history of our actions. We've all heard it: If I were to turn a stick into a spear, and then sell it for one hundred dollars… and the planners lay claim to fifty of it (or whatever percentage they deem to be moral based on the class they have subjectively assigned to me), they have merely confiscated a portion of my labor after the fact rather than during. They may launder the transaction as some sort of contract with society, but at its core is that i have no first-claim right to my own labor,and by inference, I do not own myself: the collective does. Of course, this spirals us into another abyss over what is liberty.

Otherwise, I'll concede that perhaps the only area where property is a collective issue might be with land, and, in some ways, the natural resources harvested from it, about which Henry George made some well reasoned objections re landlord dominated societies. After all, land is the air of liberty. However, even Georgist / Geoist ideas always beg the question, what central authority would manage land? And, what incentives would private interests have for engaging in expensive exploration for those unfinished resources that are at the core of why Mr. Rich is able to afford 19 Porches, or conversely, Sweden its “free” healthcare, in the first place..

Rob

AJE,

I think I'm probably inclined to disagree with 2, if by spontaneous you mean coming into being without deliberate human action; with 5, if by comparing voluntary trade and coercion you mean that they are mutually exclusive; I have no idea what you mean by 6 at all; with 10, 12 and 13 since I have never invoked utilitarian or social welfare considerations. I'm also still not sure what you mean by private property rights. I would appreciate it if you could clarify whether what you mean is some particular set of property rights, or the larger set, which includes that set of property rights and all other sets of property rights which solve the coordination problems associated with lack of predictability, since it would make the precise reference of a number of your lemmas much clearer.

I also find it difficult to answer your Mayor Williams question until I am confident about what exactly you mean by private property. As for the claim that in the absence of prices, there's no way of assessing the value of anything, I remind you of the joke that starts by asking if you'd sleep with your sister for a tenner.

AJE

"if by spontaneous you mean coming into being without deliberate human action"

of course not, I mean of human action but not of human design

"I have never invoked utilitarian or social welfare considerations"

but you said "the point I was making was that if property rights are a solution to a coordination problem, and there's more than one solution, we should use the solution that scores highest across a number of values."

that sounds pretty utilitarian to me...

"As for the claim that in the absence of prices, there's no way of assessing the value of anything,"

I never said that, I said that prices are a rerequisite for rational economic calculation.

"I'm also still not sure what you mean by private property rights. "

The institution in which someone can have the legal right to own and use a particular resource. Whilst there's an interesting discussion on the de facto vs de journo issue, all i'm saying here is that private property rights must be rested upon voluntary exchange. If the state can control who has legal entitlements, then it's not private property.

Rob

"Scores highest across a number of values":

can't be utilitarian, as utilitarians believe there is only one value, utility.

"prices are a pre-requisite for rational economic calculation":

what's so great about rational economic calculation? What does it even mean?

"if the state can control who has legal entitlements, then it's not private property":

since you earlier in that passage invoke the legal right to use and own a particular resource, a legal right which must be both set up and enforced by some state (taking the Weberian monopoly of legitmate force sense of a state), not only are there no private property rights anywhere in the world - as states can and do control who has and how they use legal entitlements - there couldn't be any, because it seems
setting up and enforcing private property rights is pretty much controlling them. It also has nothing to do with what Chris and I were talking about, but that's less important than the fact that it a) has no actual reference and b) could have no reference.

AJE

"can't be utilitarian"

That's being very pedantic...

"what's so great about rational economic calculation? What does it even mean?"

Come off it.... you're kidding right?

re: your last point

We have an independant judiciary.

Two of your last three points are just silly, so if you're not going to answer the question I've asked twice (regarding your unit of analysis to add up people's expectations), I'm going to stop entertaining you.

If you want to challenge me on specific issues, that's fine, but reading through our exchange I think you're missing the whole point.

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