Table of Contents
[O]nly because scarcity exists is there even a problem of formulating moral laws; insofar as goods are superabundant (“free” goods), no conflict over the use of goods is possible and no action-coordination is needed. Hence, it follows that any ethic, correctly conceived, must be formulated as a theory of property, i.e., a theory of the assignment of rights of exclusive control over scarce means. Because only then does it become possible to avoid otherwise inescapable and unresolvable conflict.
– Hans-Hermann Hoppe
Scarcity and Property
Chapter 3 covered the process of economizing as a consequence of the scarcity of human time. Chapter 4 examined how humans economize their time by making a choice between leisure and labor and explained the basics of the process of production. Chapter 5 examines the process of economizing with goods and the economic rationale for the emergence of property. After explaining the economic meaning of property, this chapter will discuss different types of property, the application of property to self-ownership, and how property as an institution helps in the eternal quest to increase the value and quantity of human time.
Scarcity, as discussed in the first chapter of this book, is the starting point of economics and the origin of all economizing. It is the mismatch between the desired and available quantities of a good that forces humans to treat the good carefully, try to maintain it in an optimal condition to serve its functions, and protect it from being taken by others. Scarcity is what compels us to value objects, and in valuing them, we develop command over them over time. Scarcity, then, is also the origin of property. As Menger explains:
Property, therefore, like human economy, is not an arbitrary invention but rather the only practically possible solution of the problem that is, in the nature of things, imposed upon us by the disparity between requirements for, and available quantities of, all economic goods.
To take ownership of a good is to exercise full control of the services that can be derived from it. Menger defines property as “the entire sum of goods at an economizing individual’s command for the satisfaction of his needs.” Legal scholar A. N. Yiannopolous writes:
Property may be defined as an exclusive right to control an economic good… ; it is the name of a concept that refers to the rights and obligations, privileges and restrictions that govern the relations of man with respect to things of value. People everywhere and at all times desire the possession of things that are necessary for survival or valuable by cultural definition and which, as a result of the demand placed upon them, become scarce. Laws enforced by organized society control the competition for, and guarantee the enjoyment of, these desired things. What is guaranteed to be one’s own is property… [Property rights] confer a direct and immediate authority over a thing.
Property is distinct from wealth, which Menger defines as the “the entire sum of economic goods at an economizing individual’s command.” One’s property includes all non-economic goods, but wealth refers only to economic goods.
The economic rationale for owning property is obvious and straightforward. If the use of an economic good does not consume it and render it obsolete, it can be reused for the same purpose, and the user would naturally seek to maintain its ownership until she needs it again. The hunter who builds a spear to successfully hunt a rabbit will instinctively understand that the spear can be reused for hunting another rabbit and will choose to maintain possession of it. Very few animals have the instinct to take property of objects, and perhaps nonhuman species assume ownership only of their homes, nests, or dens. Humans’ superior intellect allows us to develop ownership behavior in a much more sophisticated and complex manner, and we own things for years, decades, and even centuries through generations of the same family.
By taking property of valuable objects, humans can reduce the cost and time required to perform future tasks. The owner of durable property goods is capable of arriving at her desired end with a smaller exertion of effort and cost than someone who does not own the same property. Investing labor in the construction of a durable house for the long term is a more effective way of obtaining shelter than finding a new makeshift arrangement every day. Domesticating and husbanding animals can be a more reliable way of obtaining food than trying to hunt every day. Growing your own trees and crops can be more reliable and productive than needing to forage for plants every day. These are all methods by which humans economize to improve their chances of survival and to increase the value of their time, in other words, to increase the amount and value of time they have on Earth.
We can also think of property as a way to convert time spent in labor into future utility. By employing his labor to produce a durable good, man is forgoing present satisfaction in order to produce a good that provides continuous utility over a future period. Man’s most basic needs can be met more effectively by investing in durable property. Expending labor to cultivate a piece of land creates an incentive to stay on the piece of land and continue to benefit from it. Owning land allows for long-term investment and the improvement of its utility, more than if it had been left without owners, as a lack of ownership would discourage investment.
The importance of property within the social context is that it prevents conflict over scarce resources. As Stephan Kinsella puts it:
There is always the possibility of conflict over contestable (scarce) resources. This is in the very nature of scarce, or rivalrous, resources. By assigning an owner to each resource, the legal or property rights system establishes objective, publicly visible or discernible boundaries or borders that nonowners can avoid.
Types of Property
Property in physical goods can be classified into four types: consumer goods, durable goods, capital goods, and monetary goods. Consumption goods are the ultimate ends of economic action, the goods that humans acquire for their own sake. A particular kind of consumer good is durable consumption goods, which are distinct from consumption goods in that they are held for long periods because their consumption can span long durations. Examples of durable consumption goods are houses, cars, televisions, or washing machines. Capital goods are the goods acquired for their ability to produce other consumer goods, and monetary goods are goods that are not held to be consumed or produce consumer goods, but to be exchanged for other goods later on.
In a social system conducive to individuals economizing and seeking to eliminate conflict as much as possible, property claims can be established based on “the existence of an objective, intersubjectively ascertainable link between the owner and the resource claimed,” as Hoppe puts it. In a free market, or in a social order free from coercion, there are three ways for individuals to obtain legitimate property, as explained by Rothbard:
- Homestead objects that were previously unowned
- Products derived from these objects
- Objects obtained from rightful owners willingly, either as part of a trade or a gift.
Since humans are scarce, and so is their time, it is only natural that the same implications of scarcity for economic goods would also apply to humans, and that property is the “only practical solution,” as Menger put it. While the idea of ownership of humans sounds jarring and morally wrong, in economic terms, it is inevitable. As humans and their time are scarce, the decisions about how a human behaves and what he does with his time must be made by someone, and that is the essence of property. The person who decides what to do with a person’s body and time de facto owns them, in economic terms. The abhorrent nature of the question is only applicable and appropriate when the question of ownership is resolved in favor of anyone other than the person himself.
There are only three potential ways of organizing the ownership of human beings:
- Self-ownership, wherein a person owns himself completely, and others have no ownership claims over his body and time.
- Communal ownership, wherein all members of society jointly own all their bodies and decide jointly what each body does.
- Slavery, wherein a person is owned by someone else, and his owners get to dictate what they can do with the body and time of the slave, from assigning his time to tasks to inflicting bodily harm. The rights of slave owners extend even to the right to murder the slave. In a social order of slavery, some people have ownership over both themselves and others, while others have no right to ownership over themselves or others.
The second option is not practically workable beyond the scope of a handful of people who know each other intimately, and even then, it would not be easy. Humans would find it very difficult to have all the knowledge to decide what others should do with their lives and time. The complexities of devising a mechanism for information communication, decision-making, and execution in such a system are practically insurmountable at any large social scale.
The third option fails on the grounds of consistency, ethics, and consequence. What ethical basis can there be to justify why some people should own themselves while others are owned by others? There can be no logically and ethically coherent way to justify this drastic difference in property rights assignment. Further, this difference is likely to be a recipe for conflict. The individual who does not have property rights over himself will seek to gain it and may feel justified in the use of violence against those who own him. Everywhere slavery has existed as a system, it has resulted in conflict.
Self-ownership is the only logically and ethically consistent solution to the problem of human ownership, and it is the only one likely to result in peaceful cooperation rather than violent conflict. Self-ownership means an individual has full claim over his own body and time. Once one accepts the premise of self-ownership, a coherent framework for understanding rights, justice, and non-aggression emerges. This principle extends to what a man may produce as a consequence of these choices, i.e., property. Aggression can be understood as the use or threat of violence to control another person’s body or time, and any physical aggression against an individual would be a violation of his right to property of himself.
It is difficult to argue against self-ownership and the system of property rights if one understands property rights as the only workable solution to economic scarcity and subjectively values peace and civilization. Any such argument can be seen as transparently self-serving hypocrisy. Rather than an intelligent argument arising from human reason, this argument is nothing more than an appeal that we return to the mores of subhuman animals controlled entirely by their instincts, unable to employ reason. Arguing against self-ownership is effectively arguing against your own personhood, because it makes it clear you cannot respect property rights and cannot be part of a civilized social order. It is a plea to be considered an animal. Although economic theory does not dictate political ideology, understanding economic scarcity and subjectively valuing peace and civilization will incline a person to adopt a libertarian outlook. There are no alternatives to self-ownership that do not result in propagating conflict and engendering enmity and resentment between individuals and groups.
While most ideologies will not argue for slavery explicitly, only libertarians consistently apply this standard to its logical conclusion. All other ideologies believe in at least some form of slavery, in the form of a legitimate claim by others against a person’s body or time. Supporters of taxation, conscription, drug prohibitions, or medical mandates may not like to think of themselves as supporters of slavery, but they are placing a partial ownership right over a person’s body in the hands of the state because they support the state treating its citizens like property when it forcibly takes their income, locks them in jail for consuming drugs, or bans them from employment for not taking statemandated pharmaceutical products.
Importance of Property Rights
Understanding the concept of property makes an individual able to economize more effectively and increase the productivity and value of his time. By investing his labor in the production of durable goods, man is able to draw on their services for longer, lowering his time preference in the process and learning to prioritize the future more.
When the acceptance of property rights becomes the prevailing norm in a society, individuals are able to invest in capital goods to trade with others, their productivity increases further, and the market economic order emerges, as will be discussed in subsequent chapters. Property rights can be understood as the social scaling mechanism that allows people to hold property in close proximity to others who might want to hold it. As Mises put it, “Private ownership of the means of production is the fundamental institution of the market economy. It is the institution the presence of which characterizes the market economy as such. Where it is absent, there is no question of a market economy.”
The market economy, and civilization itself, are predicated on the respect of property rights, as it is only when property rights are secure that individuals can accumulate any amount of capital significantly larger than what they can keep on their person for basic primitive needs. A society in which property rights are not respected is one where conflict is rife, and one where individuals cannot afford to think of investing their precious labor in the future, as all the property that can store this value is risky to own. Civilized society is only possible when the right to property in self and objects is widely respected, and individuals can expect to maintain their property into the future.
In the context of a market economy, Mises beautifully explains how the institution of private property ensures the responsible stewardship of resources:
The meaning of private property in the market society is radically different from what it is under a system of each household’s autarky. Where each household is economically self-sufficient, the privately owned means of production exclusively serve the proprietor. He alone reaps all the benefits derived from their employment. In the market society the proprietors of capital and land can enjoy their property only by employing it for the satisfaction of other people’s wants. They must serve the consumers in order to have any advantage from what is their own. The very fact that they own means of production forces them to submit to the wishes of the public. Ownership is an asset only for those who know how to employ it in the best possible way for the benefit of the consumers. It is a social function.
The absence of private property rights results in conflict between people, as well as the degradation of economic goods and natural resources. When economic goods do not have clear ownership rights, the individuals who happen to use and command them will do so without the expectation of utilizing them in the future, which will naturally lead to them deprioritizing the future state of these resources. This heavy discounting of the future is the inherent characteristic of utilizing resources without a clear owner. Private property incentivizes owners to care about the long-term state of their property, and thus to preserve it for the long term. As Mises explains:
If land is not owned by anybody, although legal formalism may call it public property, it is utilized without any regard to the disadvantages resulting. Those who are in a position to appropriate to themselves the returns—lumber and game of the forests, fish of the water areas, and mineral deposits of the subsoil—do not bother about the later effects of their mode of exploitation. For them the erosion of the soil, the depletion of the exhaustible resources and other impairments of the future utilization are external costs not entering into their calculation of input and output. They cut down the trees without any regard for fresh shoots or reforestation. In hunting and fishing, they do not shrink from methods preventing the repopulation of the hunting and fishing grounds. In the early days of human civilization, when soil of a quality not inferior to that of the utilized pieces was still abundant, people did not find any fault with such predatory methods. When their effects appeared in a decrease in the net returns, the ploughman abandoned his farm and moved to another place. It was only when a country was more densely settled and unoccupied first-class land was no longer available for appropriation, that people began to consider such predatory methods wasteful. At that time they consolidated the institution of private property in land. They started with arable land and then, step by step, included pastures, forests, and fisheries.