Sunday, May 21, 2006

Against Reification Of Property Rights (Part 3)

This continues some reflections on themes in Dean Baker's The Conservative Nanny State.

In practice, Austrian economics is frequently cited as justification for greed by many people who are just not very bright. But some of those who developed the doctrine were more sophisticated than many of those you encounter on the 'net who imagine they are followers of this school.

For Hayek, capitalism is a system in which many people work together to produce commodities, even though they may be unaware of one another's existence. This extended order did not come about through design, but through the evolution of institutions.

In The Fatal Conceit, Hayek argues that private property (which he calls "several property") is not natural, in that it is not innate or instinctual. Nor is it artificial, in that it is not consciously designed. Hayek rejects this dichotomy, as it does not apply to evolved institutions. Further, in Hayek's view, room exists for further adaptation and experimentation:
"The institutions of property, as they exist at present, are hardly perfect; indeed, we can hardly yet say in what such perfection might consist. Cultural and moral evolution do require further steps if the institution of several property is in fact to be as beneficial as it can be." -- Hayek (1988)

I take from Hayek that the distribution of income that comes out of capitalism can be said to be neither "just" nor "unjust". I think one can propose a change to property rights, in conformity to Hayek's view, with a view to affecting the distribution of income, as long as those changed rules remain impersonal:
" a system of free enterprise chances are not equal, since such a system is necessarily based on private property and (though perhaps not with the same necessity) on inheritance, with the differences in opportunity which these create. There is, indeed, a strong case for reducing this inequality of opportunity as far as congenital differences permit and it is possible to do so without destroying the impersonal character of the process by which everybody has to take his chance and no person's view about what is right and desirable overrules that of others." -- Hayek (1944)

Other Austrians also argue against the naturalization of property rights:
A property system may work well for a society with a specific technology, population density, and so forth, and may have to be modified as these features change. People raised in societies in which private property is highly developed may tend to hold a simplistic view of the nature of 'ownership'. Since 'ownership' (a typical bundle of rights related to some resource) becomes standardized, and incorporates the lessons of centuries of legal cases in tending to bring all the most relevant aspects of a single good under the same owner, 'ownership' comes to be seen as a straightforward, unproblematical relationship between a person and a material thing. Of course, we are all aware that ownership is frequently modified, as for instance, ownership of a piece of land by government zoning regulations, but there is a tendency to think of these regulations as leaving something called 'ownership' essentially unchanged.

Without prior education, someone coming from a technologically-advanced culture in which private property is prominent may be confused by the property rules found in more technologically primitive societies. She may find, for example, that the system of property rights in land is unlike that of private property, and she may be tempted to say that 'they don't have a concept of land ownership' or alternatively that 'their concept of land ownership is different to ours'.

The same person will, however, frequently also have an oversimple view of the meaning of 'ownership' in her own culture. Consider two adjoining pieces of land 'owned' by different individuals. Ownership of one of these pieces of land may or may not give one the right to: burn a fire sending smoke over the adjoining land; pump water from an underground reserve, lowering the water availability in the adjoining land; allow animals (mice, rats, lions) to proliferate on one's own land and thus invade the adjoining land; erect a tall building blocking out sunlight from the adjoining land; shine a light (a candle or a floodlight) that can be seen from the adjoining land; and so forth. According to such variations, the exact meaning of 'owning a piece of land' varies. (Steele 1992: 181-182)

  • Hayek, Friedrich A. (1944). The Road To Serfdom
  • Hayek, F. A. (1988). The Fatal Conceit: The Errors of Socialism (Ed. by W. W. Bartley III)
  • Steele, David Ramsay (1992). From Marx to Mises: Post-Capitalist Society and the Challenge of Economic Calculation, La Salle, IL: Open Court


Dean Baker said...

This discussion is very useful. I have of course benefitted from reading the Austrian economists, the legal realists, Marx and many others who have made arguments similar to the ones I lay out in the Conservative Nanny State.

I hope that my book can help make some of these insights as concrete as possible in their application to current issues in economic policy. It is important for people to realize that we are not just talking about abstract concepts, we are talking about trade policy, monetary policy, intellectual property (incentives for promoting innovative and creative work), and other key areas of economic policy.

Anonymous said...

The discussion of the development of US land law in Hernando De Soto's Mystery of Capital is a fine illustration.

Robert Vienneau said...

I cannot comment on De Soto. By the way, MaxSpeak is hosting a virtual symposium tomorrow on Baker's book.