Property, Private

Property, Private

BIBLIOGRAPHY

The institution of private property is one of humankind’s principal social arrangements. By defining and assigning legal ownership, property tends to promote the production, exchange, and accumulation of wealth. Property is especially lauded for the protection it is thought to provide against overbearing, arbitrary, and capricious government action. The institution, however, is more complicated than that laudatory view might lead one to believe.

Numerous theories of property have been formulated over the centuries. These are theories of the origin of property, the justification of property, the nature of property qua property, the evolution of property, the operation of the institution of property, and, among other things, how property interacts with other institutions. Some or many of these theories share a preoccupation with or defense of the received details of the institution. The typical argument is that the defense of a detail is instrumental to the defense of the institution as a whole. But these theories tend to be applied to different instantiations of property. If a proposed change in the law of property be designated B, then it is likely to be opposed insofar as it would change property provision A ; then, after B is adopted, and another change, C, is proposed that will alter B, B is defended in much the same terms as A was defended. The argument is to conserve existing rights. The same is true of multiple jurisdictions, the details of whose respective property institutions vary between them. The arguments used in defense of different existing sets of details are likely to be the same. To be in favor of property, therefore, is to be in favor of the results that the institution likely will promote. Whether a particular system of property is to include some detail is quite another matter.

One important implication of the foregoing is that different instantiations of property will yield different results. Putting it again formally, rights structure I will generate market structure I and demand-and-supply structure I, and these in turn will result in resource allocation structure I and distribution (of opportunity, income, and wealth) structure I ; and similarly with rights structure II ultimately resulting in distribution structure II. That is to say, there is no unique result, only results specific to the initial structure of rights, and so on.

One group of theories of property presumes that property is, or is derived from, the natural order of things. This presumption commits the naturalistic fallacy, namely, to intuit that because something exists it does so because it is either natural or derived from nature. This is fallacious in part because of the multiplicity of property systems and in part, indeed especially, because every property system is socially constructed, a product of human collective action, and not given by nature.

The institution of property is, for most practical purposes, the law of property, and the law of property is generated by government. Property is a mode of protecting interests, and any actual property system protects certain interests and not others. If A and B are in the same field of action and have conflicting interests, protecting A ’s interest by law is substantively different from, but the analytical equivalent of, protecting B ’s interest. To see that property is a mode of protecting interests enables one to see other aspects of property. One aspect is that property is not protected because it is property; property is property because it is protected. Another aspect is that litigation and lobbying are the means of promoting one’s interests to be protected as property by either changing or not changing the law. A corollary is that the right to petition government about its protection of one’s interests is a very important right; where one group has such access and another does not, it is more than likely that the former group will more largely and more effectively get its interests protected as property than the latter group. Another aspect of property has to do with regulation. If property is defined as antecedent to government (as in saying it derives from nature), then any regulation by government is a taking of part of that property. If property is defined as a product of government, then no such taking occurs: government is only changing the interest to which it is giving its protection. Thus, as a corollary, regulation may be formally identified as the protection of A ’s interest against B ; in which case, so-called deregulation does not mean that government is no longer regulating. Rather it means that A ’s interest is no longer protected against B, and that government is now protecting B ’s interest rather than A ’s. Such regulation (or deregulation) is a principal mode through which the law of property and therefore the institution of property changes.

Not all government protection of interests is designated property. What makes the institution of property so special is that a higher level of protection is generally thought to be given to interests protected as property than to interests not so protected, that is, protected as ordinary rights. For example, the right to be paid by one’s employer in lawful money, or to have so many restrooms per hundred workers, or to have clean air at work (no more than a certain maximum of impurities and toxic elements) are rights that government can withdraw or change much more easily than it can change the property right to pollute; this is so even though the three specified rights may be seen as checks on property rights.

This latter point underscores another aspect of property: while the institution of property provides some measure of protection against government, that is, providing a check on the power of government, the government is itself a check on the power of property. This conflict is central to the institution of property and its evolution; what is important is what people are led to believe concerning which power should be checked. Moreover, determining which power needs to be checked by the other, and how, is largely a matter that is worked out by government, typically the courts. But such is only largely the case, inasmuch as voting for senators, representatives, and judges is in part a matter of providing citizen input into the process of whether A ’s interest or B ’s interest is to be protected or whether in a particular situation property owners or government itself is to be held in check.

Property, it is important to see, is relativist and is so in several ways. First, property rights are relative to the actions of the government that generates them. Second, property rights are relative to each other. And third, property rights are relative to the situation in which they exist. The economic significance of a right, therefore, is a function of: (1) the law that protects it relative to other protected interests; (2) others’ rights; and (3) the buying and selling activities, macroeconomic conditions, and other variables that comprise the economy. Competition itself is a way of destroying the value of others’ property insofar as one competes to attract their customers to you.

The institution of property is so important not merely because of its status among other institutions, nor its function in promoting production and material well-being, and so on, but because of the decision making that goes into making and adjusting the rights that constitute property. Property is sometimes described through the analogy of a bundle of sticks. Each stick constitutes a potential ability to act or to be immunized against the consequences of others’ actions. This decision making is about who can do what to whom and has several dimensions. These are evident in the transformation of the economic system from one in which landed property had both economic significance and governance authority, to one in which both landed and nonlanded property, as well nonpropertied persons, participate in economic and political decision making. Apropos of the conflict between continuity and change, both small and large, or systemic, changes in property systems have taken place. Apropos of the conflict between freedom and control, the most fundamental changes are those that involve changes in the decision-making or power structure of the economy.

Also evident is the legal-economic nexus in which polity and economy do not simply interact but mutually help form each other. At the heart of both the transformation and the nexus is property and other rights as both cause and consequence. The total structure of rights constitutes the structure of decision making in markets and in government. Although rooted in the past, with decision making over changes in property keeping a selective eye on past legal precedents, seeking justice through continuity, the institution’s social function is oriented toward the future, in the encouragement it provides for economic activity and the structure given to that encouragement, as well as to the path to be taken by legal, social, political, and economic change. Not all sources of property need be normatively equal, nor are all property and other rights substantively equal.

SEE ALSO Private Interests; Private Sector

BIBLIOGRAPHY

Auerbach, Carl A., Lloyd K. Garrison, Willard Hurst, and Samuel Mermin. 1961. The Legal Process: An Introduction to Decision-Making by Judicial, Legislative, Executive, and Administrative Agencies. San Francisco, CA: Chandler.

Commons, John R. 1924. Legal Foundations of Capitalism. New York: Macmillan.

Hamilton, Alexander, James Madison, and John Jay. 1961. The Federalist. Ed. Benjamin Fletcher Wright. New York: MetroBooks.

Lindblom, Charles E. 1977. Politics and Markets: The World’s Political Economic Systems. New York: Basic Books.

Mercuro, Nicholas, and Warren J. Samuels, eds. 1999. The Fundamental Interrelationships between Government and Property. Stamford, CT: JAI.

Samuels, Warren J. 2007. The Legal-Economic Nexus: Fundamental Processes. New York: Routledge.

Schmid, A. Allan. 1987. Property, Power, and Public Choice: An Inquiry into Law and Economics. 2nd ed. New York: Praeger.

Warren J. Samuels