Property Rights

Lately I have been struggling with a very basic philosophical question. Are individuals obligated to respect the property rights of others? Put another way, is there any reason to not steal/kill/rampage besides the threat of retribution? Jeff’s recent post led me to write all this down, but the impetus for this inner monologue was a Saturday afternoon at the movies. Here’s what happened:

A friend and I were talking about seeing The Hangover, which she had never seen. Our plans happened to coincide with  the opening of Bruno, so I suggested we purchase tickets for Bruno (they would be checking stubs, since it just came out) and then afterwards just walk into The Hangover. Thus, two movies for the price of one.

My rationale was simple: the movie theater has the burden of keeping us from being dishonest. If they were really concerned about this practice, and conceivably we could have walked from theater to theater all day, they simply have to post an attendant at each theater at all times to check stubs. Problem solved. The reason the movie theater owners do not do this is it is cost-prohibitive. They are counting on each of us to be honest, and they recognize that the policy is only necessary on a popular movie’s opening weekend.

It cannot be denied that the movie theater has the right to prevent me from stealing movies in this manner. They pay the costs of distribution, and they are entitled to determine who is allowed to see the movie. If we want a more theoretical example, let’s imagine a simple society where you only have two rights, the right to yourself (no one may kill/hurt/imprison you without your consent), and the right to your property (no one may take it without your consent).

It is generally agreed that if you have a legitimate right to something, you can defend it by force. For example, if someone is attempting to kill me, I can stop him. This is all well and good, and I have no disagreements. But in this situation, the primary reason I would have for not attempting to kill one of my fellow men would be the possible consequences of my actions. Or if we consider stealing, I would only respect his property rights so long as he was watching me. There would certainly be a dilemma if I found a valuable item unattended.

So does he carry the burden of protecting himself and his possessions? Or do I carry the burden of respecting his personal and property rights? I believe the former to be true. Property rights exist only so long as we are willing to defend them. A man that abandons his property, or abandons himself (suicide bombers, hunger strikers, etc.), is not entitled to them anymore. While the cost to society is higher in the first situation (think of all the time and energy spent on defended yourself and your property), it is precisely this reason that government comes into being.

To believe the latter would presume too much of individuals. Enforcement mechanisms work better on some than on others, but generally the fear of retribution is what drives behavior. I do not believe that a world in which this mindset dominates would be incredibly violent, as some of you might be thinking. The deterrent against theft and murder, the forfeiture of your own life or property, still exists. There is just no presumption of saintliness on the part of the individual.

Right to a Home?

Regardless of how you believe the financial crisis came about, Congress’s insistence on providing incentives for all Americans to own a home played a large role. Even while the housing market crashed due to the large amounts of buyers that simply could not afford their homes, large tax rebates are offered to first time buyers. My question is: Why?

A specific house is just another good available on the market. Those that cannot afford them should not have them. We apply this logic to all other goods; we don’t subsidize people who get expensive televisions from rent-a-center, nor to we typically offer large subsidies on car ownership (cash for clunkers being a very specific instance).

Now, only a very cruel individual would say those without any housing at all deserve no support. My heart goes out to the millions of Americans who lack shelter each day, and I think that government may even have a legitimate role in providing housing (although public housing is a dismal failure). But I do not understand the sentiment that these people should own a home rather than rent it.

Renting exists for a reason. Some people simply do not have enough money to make a large purchase at one point in time (home, car, etc.). In order to enjoy these goods, they borrow them from someone who does have them. They then compensate the original owner for the privilege of using the product. This is a completely natural arrangement and has existed for thousands of years.

But when Congress decides that home ownership is a policy that should be promoted by the government, and when they disburse money to further that policy, individuals do not feel the full costs of their decision. The large number of dubious loans that were promoted by Congress to allow people to “own” a home who otherwise could not afford one exacerbated the housing bubble, eventually contributing to many of those same people losing their homes. Just another example of the law of unintended consequences.

Interesting Question

Where exactly does the loyalty of the government lie? Who do we mean when we say it serves “the people?” I’ll give an example:

The government is a large purchaser of goods and services. One such good is the fleets of cars that federal and local law enforcement purchase. So what should their priority be in buying these cars? For many years it has been generally acknowledged that foreign car makers have superior products at lower prices. Clearly this would be good for “the people,” since all purchases by the government are paid for by tax dollars. But if they choose to buy strictly American cars (which is their policy), that too can be seen to benefit “the people,” since it helps American companies and provides jobs and capital. So which is right? Are both? Neither?

CSR

Those of you in the business world should be familiar with these three letters and what they have come to mean. Corporate Social Responsibility is the idea that not only should businesses contribute to the community, but they have an obligation to.

Before I seem like a heartless monster, which I often do, I should say that it goes without saying that I support business involvement in civic projects. I am even for consumers pressuring businesses to do so. In fact, that pressure by consumer groups is at the heart of a free market. If consumers refuse to shop at a store due to poor working conditions for the employees or unsavory management practices, then the business can either acquisce to the consumer demands or go out of business. With that said, I nevertheless vehemently reject the idea that businesses have any obligation to give back to the community.

My rationale behind this belief is very simple: every transaction that a business makes is an act of providing value to the consumer. The only reason that an individual makes a purchase is because they value that particular good or service more than the alternatives. Thus, any time that anyone buys anything, they are admitting that they want that good or service more than anything else available to them at that time. It is the businesses all around us that give us this opportunity. Companies cannot force people to buy from them; the definition of a market is that it is comprised of individuals acting of their own volition. 

The idea that a company merely sucks the life out of its consumers is ignorant at best and destructive at worst. Without suppliers, we would lack all but the most basic goods and services. Clearly, the business gains from each transaction as well, or it would not be in the market selling the good. That is the magic of free markets. Because of diverse preferences, every, yes every, trade amongst people and business makes both parties better off. Otherwise, one of the parties would not engage in it. Those who who view economics as a zero-sum game are quite simply wrong.

Back to the original point. Since the company provides value with every good or service it provides, it owes nothing else to its consumers. If the consumers are organized enough to demand a park for the community or other such charitable work, more power to them. But to suggest that companies have a responsibility to those around them is to ignore all of the good that they already do.

Do all Libertarians believe the same thing?

No.

One of the first lectures that we had at the Opening Seminar for the Koch Fellows program was on several of the different schools of thought that are generally lumped into libertarianism. I found it very informative, and I thought others might as well. Many thanks to Dr. Nigel Ashford of the Institute for Humane Studies for this lecture.

1) Freidman and the Chicago School: Yes, that Friedman. Milton Friedman was one of the most vocal proponents of limited government and free markets. However, he was by no means an anarchist. In fact, he recognized several instances in which the market could not provide goods and services properly, and in those instances he felt that it was the government’s duty to provide them. He was certainly concerned about the perverse incentives and unintended consequences of government, and he recognized that government failure could be worse than market failure. The instances that he thought government was justified were protection (internal and external enemies), justice (courts), public goods (such as dams), negative externalities (pollution, noise), and protection for the irresponsible (children and the mentally unfit).

2) Buchanan and the Public Choice School: My current favorite, although it doesn’t advocate so much for policies as it does a method of thinking about policy. It recognizes that government is full of self-interested individuals who are not transformed into altruistic angels upon their election. The primary goal of public choice theory is to get people to agree to a course of action, since that would eliminate the need for government agents to insert their own agendas. However, it recognizes that this is not feasible in most cases. Therefore, while it acknowledges government’s utility in some cases [protection, produce public goods (similar to Friedman)], it is extremely skeptical of government in general and is cognizant of government’s desire to expand over time.

3) Hayek, Mises, and the Austrian School: Both Hayek and Mises come to similar conclusions as Friedman about the role of the state, but they come to them in different ways. Hayek arguably most influential work was “The Limits of Knowledge in A Society,” which exposed the folly of central planning by pointing out that no one individual could possibly have all of the information that is dispersed amongst everyone at any one time. Mises liked to use what he called “axioms,” or principles that we can realize through experience and reflection. These led both men to conclude that government makes all kinds of economic mistakes, like under/overproducing and under/overinvesting. Mises especially went slightly further towards anarchy, advocating that government should only protect life, health, liberty, and property.

4) Rand, Nozick, and the Minimal State: This is often referred to as the “Night Watchman State,” because it advocates a government that only provides defense, police, and judges. Nozick starts from the premise that you own your own body, and that you are vested with certain rights because of it (such as the right to defend yourself). From this, he argues that government is wrong because it violates natural rights in most instances. Therefore, the only legitimate government is one that protects natural rights without violating them.

5) Rothbard, Friedman, and Anarch-Capitalism: Milton’s son is a little more radical than his father. David Friedman (who wrote The Machinery of Freedom, a great read for anyone interested in Anarcho-Capitalism) argues that in all cases, government is more inefficient than the market. He admits that there are certain goods and services that the market is not perfect at providing, even so called public goods, but that the government is worse at providing them in all cases. Rothbard uses the non-coercive axiom to arrive at Anarcho-Capitalism. This states that force is always wrong, except in self-defense. Because government is by its very nature coercive, government is wrong.

Well, that is five of the branches of Libertarianism. There are many more, and of course this is a poor summary for anyone actually interested in their ideas. I highly recommend a more thorough reading of any of the authors listed above, even if you happen to not be a Libertarian.

Certification > Licensure

Alright, maybe not in every instance, but for the vast majority of occupations licensure is unnecessary and actually detrimental to consumers.

Licensure has two explicit goals: improve quality and restrict supply/increase wages for suppliers. The argument for increased quality states that by removing unqualifed providers of the good or service from the market, average quality in the industry will increase. As quality increases, so does demand, and everyone is better off. There is only mixed empirical evidence for this argument, and at the very least it should be viewed skeptically. The most compelling reason that I can give for why this argument should be rejected is that high quality providers will exist regardless of licensure, so how could demand fluctuate any meaningful amount?

The second argument makes far more sense, and it essentially takes money from consumers and hands it directly to the suppliers. If a profession can get itself licensed (usually by petitioning the legislature), then it can restrict the supply of practitioners in the industry. Fewer practitioners means less competition for current suppliers, thus wages and income increase. Good evidence for this explanation of why licensure exists is that it is almost always the professions that ask to be licensed, not the general public.

So why should we prefer certification to licensure? Quickly let me explain the difference. Licensure means that it is illegal to practice an occupation with government approval. Certification means that anyone can practice, but there are some standards that can be met in order to gain a “certificate,” which is some designation that proves you are qualified to perform the service or provide the good. Consumers win with certification. Not only does increased competition mean more providers and lower prices, but the certification process identifies the poor performers from the good ones. Even better, individuals, for financial reasons, can choose an uncertified practitioner if they wish. This option does not exist under licensure. Under licensure suppliers get more money, rich people get guaranteed better service, but poor people may lose service altogether.

However, there are some instances where licensure may be appropriate. These are instances in which there are significant externalities if an unqualified supplier makes a mistake. A good example is a demolitions user. Hiring an uncertified practicioner could have serious negative consequences for many people who had no say in the decision as to which supplier to hire. Thus, occupations that have significant risks to a large part of the population could be justified in their requests for licensure. Notice, however, that that classification excludes doctors, dentists, lawyers, cosmetologists, barbers, and a whole host of occupations that have traditionally been licensed. A switch to certification would promote competition, decrease costs, and greatly benefit consumers.

Eminent Domain: All or Nothing

Today, instead of going to work, several other interns and I went to a small conference about eminent domain abuse. There was a lot of discussion of Kelo v. New London and how terrible it was, and the keynote speaker was Jeff Bennedict, who wrote Little Pink House, a story about Suzzette Kelo. The last part of the speaker series was a roundtable discussion by several attorneys, a former legislator, and a woman from a private utility company that had the power to exercise eminent domain.

I was primarily interested in what the utilities company employee had to say. She was quick to draw distinctions between what they do (taking land or forcing easements to run utilities lines through) and the kind of taking that happened in Kelo. Meanwhile, I start to ponder whether or not there is any logical foundation to say that some takings of private land for the “public use” are ok, but others are not. The term “public use” is so nebulous that any attempts to rule something out beg the question “why draw the line here?” For instance, why couldn’t a shopping mall be considered public use? It is certainly used by people once it is in place, and they would only shop there if it created value for them. So why do we consider hospitals and highways to be public use but not a shopping mall or a theme park? And who gets to decide what constitutes public use?

While this may be untenable in practice, I believe that either all property is availale for taking and for anything that will be used by everyone else, or nothing justifies eminent domain in any instance. I don’t understand what exactly separates a highway that people drive on from a mall that people shop in. And the publicly owned/privately owned distinction doesn’t matter to me at all. In both cases, private property is being taken so that other people may use it; who actually manages the land is hardly important to the person being kicked off.