Part 4: Property Rights Bonanza

Wednesday began the concurrent seminar that you had to choose between. In this case, lectures and time are scarce resources, so I had to pick those that were ranked highest in my ordinal preferences. Ok, that was a bad joke. But still, all these lectures will have free mp3 files available online at www.mises.org starting next week, so maybe they lectures aren't so scarce?

Hans-Hermann Hoppe gave a dynamite lecture on law and economics that laid the framework for law starting with property rights. He explained the Austrian view of law in contrast with the Chicago school. He started, as he seems to always do, with a question: why do we need any rules at all? Imagine the Garden of Eden, which is characterized by super-abundance of goods. Conflicts cannot arise over the use of the Garden's food, because if you wanted something to eat you could instantly get it. We can conclude that conflicts can only exist when scarcity is present. That may seem a little far fetched, but it isn't as crazy as it sounds. You only have one body, you only can occupy a certain amount of space. In that case, even in the Garden of Eden there is scarcity of space and the possibility of conflict of bodily harm. The only way we can deal with this is to develop rules regarding the use of scarce resources. These are called property rules and property rights. In the Garden the rules become fairly obvious: if you want to do something to me, you must have my permission, and you cannot displace me for my space forcibly.

The real world is, of course, much more complicated. The real world is characterized by all around scarcity. Thus, all sorts of conflict arise. We need rules to avoid all these sorts of conflict for exclusive control of property. It turns out that rules have developed over time, especially in the west around the 1100s to 1700s.

These rules are as follows:
Self-ownership - Every person is the owner of his physical body. No one else can do something to your physical body without your permission.
First-use-first-own (original appropriation, homesteading) - Whoever is the first to use something that was previously unowned becomes the owner of such a thing. Scarcity in land is recognized, one appropriates that land, uses it, and now can exclude others from using it without permission.
Producers own products of his labor - If I make something out of what I own, it is mine.
Voluntary (contractual) transfer from earlier to later owner - Follows from previous rules. If I am the owner of what I have appropriated, than I have the right to voluntarily dispose of it as I please.

By and large, this is what people accept in their daily lives. You see it all the time in society, you see it even with kids playing! I was even thinking today that when somebody bumps into you accidentally, they often will apologize. Why is this? Because we know intuitively that our fellow man has property rights and that even in small cases such as this it is polite to apologize.

Think about what would happen if we didn't have these rules. What if, instead of self-ownership, the rule was "I own you, but you don't own me." That sounds like nothing more than slavery to me! You could also posit universal communism: "You own part of me, I own part of you." But you cannot even implement this! If you owned part of me, I would need your permission to even move to a different location. You would have to do this verbally, though, and you then run into another problem. Your vocal cords are now partly owned by somebody else whom you must gain permission from to use. But that person whom you need to get permission from would have the same problem. So you would have to do nothing, but even to do nothing you would need permission… Do you see how non-sensical this type of reasoning is? The other rules simply follow from in this sort of example. There is no way to deny these rules without getting yourself into deep intellectual trouble.

George Reisman did an incredible lecture on environmental and resource economics. He has been a very prominent critic of environmentalism, and has written extensively about this topic in his landmark treatise called Capitalism. He says the theme of environmentalism is that "continuing economic progress is impossible because of the impending exhaustion of natural resources, and dangerous to the extent that it is possible, because of harm to the environment."

But we must understand that the earth has a practically unlimited potential supply of natural resources - it's just that we don't know how to get at it all yet. The entire earth is full of matter that can be converted into useful things for human well-being with knowledge and skill. The earth isn't just going to "run out" of resources, all we have to do is find ways to harvest it.

Furthermore, clearly the environment only has value inasmuch as it is valued by humans.
The inherent tendency of production is actually to improve the environment, to better the relationship between the elements and man. This can be seen fairly readily when we see that the entire earth is packed of chemical elements. From the perspective of physics and chemistry, all of production of economic activity is the modification and change of location of chemical elements. We adapt the environment to ourselves to improve our well-being.

The populations of species and the quality of water and air supports this proposition. We are not wantonly destroying the species, we are radically multiplying the species that are of benefit to us. We have had amazing success at doing this with animals, such as cattle, and plant species, such as grains. What about water quality? Are we destroying the water supply? Just go to a third world country, the water is horrible! Industrialization means a vast improvement in the quality of water What about air quality? Air conditioning, heating, humidification - these are all improvements to our environment! Before the automobile, people had to deal with the stench of horse manure and urine (and human excrement for that matter) all over the road. Reisman said that similar to the phrase "stop and smell the roses," we should all every once in a while "stop and appreciate the products" that come from all our efforts to improve our environment.

This type of view of environment is completely rejected by the environmentalist movement. They hold to an intrinsic value doctrine, that the alleged value of nature is in and of itself, totally apart from all conection to human life and well-being. Even though things ultimately derive their value from human beings, environmentalism completely rejects that idea of value at all and regards value in things that aren't even living (like rock formations). Consider that the environmentalism movement is not concerned with cases of real harm to people, but concentrates on cases where there is no one who can be found who are being perceptively harmed. Humans have the capacity to adapt to situations, and we will continue to do so in response to environmental changes.

I've found here at Mises University that Walter Block is a really funny guy, and he continued to make me laugh and think in his lecture on private property. He said that the general case for privatization is to privatize anything that moves, and after that to privatize anything that doesn't move. That sort of sums up the whole of the world, don't you think? He gives two reasons for this rather radical viewpoint. The first is moral - when something is privatized it becomes part of the system of freedom. When it is public, it necessarily brings in the ethical problem of coercion. The second is practical - socialism can't calculate (see previous post on economic calculation).

He focused his lecture on a not-often-talked-about subject that happens to be one of my favorites - the privatization of roads. It just so happens that Block is rather famous for this subject, so I was quite excited to hear him speak on this. Block started thinking about road privatization for many reasons. First, if the case for privatization is to be robust, it needs to be just as effectively dealt with in the tough cases as in the easier cases. Not necessarily completely solved, mind you, we know just as much about roads as the next interstate driver, but robust. Second, 40,000 people die on roads every year. People don't get riled about this number often because they look at it like death and taxes - it's an inevitable part of highway systems. However, that number should give us pause. Third, traffic congestion. Everybody hates it, nobody deals with it very well, and it is the reason many of those deaths occur. Third, groups like Mothers Against Drunk Driving (MADD) can't be as effective because they can't own highways to help get rid of the problem. Instead, what we have is the Sovietization of highways. Let's be blunt (or just Block), most people are just road socialists.

Now, the argument for the privatization of roads really isn't as strange as it sounds. There are examples in history of private roads, that charged for various services. There's nothing about long thin things that automatically require them to be a government operation. How do we explain the hostility of so many mainstream economists towards these ideas? Well, maybe it's because so many are employed by transportation administrations? I don't know, just keep following the money and you may find the answer.

Generally, the top three reasons given that we have fatalities on highways (according to mainstream economists) is speed, drunk driving, and weather conditions. Block says that these are confusions of proximate and ultimate causes. Suppose a restaurant went bankrupt and the reasons I gave you were that the waitresses were bad, the food was bad, the place was dirty, it had a bad location, and the like. Those obviously are reasons I didn't like the restaurant, but in reality we wouldn't accept this as an answer. The real reason the restaurant failed is because of poor management. In the case of the roads, the fault is the government's, but there's a slight problem. They can't go "bankrupt" and get put out of the market.

What will this privatized road system look like? Well, we can't answer this question absolutely, we can only speculate. So let's speculate a little… How might we have more safety? We could institute higher penalties for infractions of rules set up by the owners. You could set out road markers for where people have died in accidents. This is already being done and reminds people that highway driving is dangerous. You could put up wrecked cars on poles like a billboard and show people what a wreck can do to you and your property. Let the price system deal with the peak times of traffic to relieve congestion. Again, we can only speculate to deal with these things, ultimately entrepreneurs would be able to handle these issues most effectively.

So, now that roads are privatized, how are we going to privatize oceans?