A Critique of Property Rights

by Benjamin Studebaker

Property rights can be immensely helpful to society, increasing our collective productivity, motivating and inspiring people to work harder, and consequently augmenting our standard of living. There is however, another side to that coin–property rights can create a distribution of wealth that undercuts economic demand and leads to the replacement of wage-financed consumer demand with credit-financed consumer demand, leading to, as we recently collectively experienced, economic crises fuelled by unsustainable levels of private household debt. Clearly there is a balance with property–we need to maximise the benefits of this institution while minimising the societal costs. The trouble is that the political theory that lies at the foundation of right wing thinking in the Western world does not allow for this balancing, and these ideas continue to hold sway. Today I’d like to address where the difficulties in the right’s theory of property lie and what sort of negative consequences these difficulties have for the rest of us.

The most modern iteration of the right’s property rights prioritisation comes from libertarian theorist Robert Nozick. His argument goes something like this (a thank you to a recent lecture for organising it in this easily comprehensible format):

  1. Each person is the rightful owner of him or herself
  2.  The external world, in its original state, is not owned by anyone
  3. Therefore, each person may justly appropriate unowned natural resources provided that he does not thereby make anyone worse off
  4. Therefore, if a person appropriates resources that are unowned without making anyone worse off, then he is entitled to those resources
  5. If a person is entitled to a set of resources, then he is entitled to transfer it to others with their consent (either as a gift or for a fee)
  6. If a set of resources is justly transferred to another person, then he becomes entitled to it
  7. If a person is entitled to a set of resources, then it is unjust to deprive him or her of any of them without his individual express consent, by taxation or other means.

My fundamental problem with this (which went unmentioned in the lecture), is that this theory does not care at all what empirical results it produces. It justifies property retroactively, based on how the property came to be held, rather than based on what the impact of the holding of the property has on people in the society.

For example, imagine if you will that there is a group of agricultural villagers who are struggling to compete with the low prices of a neighbouring industrial farm. If things continue as they appear to be going, the villagers will no longer be able to make a living and will become deeply impoverished. Another nearby farmer who had a spectacular harvest the previous season wishes to help. He believes his exceptional crop yield was due to new seeds he purchased the previous year. He takes the excess seeds produced by his previous year’s plants and offers to sell them to the villagers so that they might experience higher yields as well and avoid bankruptcy. The villagers cobble together what little remains of their income to purchase the seeds. They plant the seeds, but, before they can harvest the crop, the village experiences a surprise drought, and the entire crop withers and dies.  The prosperous farmer appropriated the new seeds originally without making anyone worse off, then sold the seeds to the villagers, transferring the seeds to them with their consent. None of them could have known that a drought was coming, yet now the villagers have insufficient money to plant again, and will be forced to sell their farms (and, consequently, the livelihoods of their families) to the industrial farmer in order to survive the next year. That trade will also be made with their consent, and they may survive another year or two on the proceeds, but eventually all the villagers will be destitute. Their living standards and quality of life will collapse, and all in a manner that is consistent with what Nozick considers just, because Nozick does not care what results from property rights, only that the process leading up to them is fair. What we see here is that you can easily get a very negative outcome even though all the events in the process are free and fair.

Now, the right might look at this and respond by arguing that the community as a whole is still better off because now the farms of the villagers are being operated by the much more efficient industrial farmer. More food will be produced on the land, and food prices will fall. This is all true–perhaps some of the villagers will even be hired to work at the very lands they sold to the industrial farm (though certainly not all of them–the industrial farm is more efficient and consequently needs fewer employees for the same land area). I would agree with the right that the Marxist solution (nationalise the land and give it back to the villagers) would lead to chronic inefficiencies within this society’s agriculture that would eventually lead to it becoming globally uncompetitive, hurting the nation in the long run. However, it is still not optimal to take these perfectly capable villagers and just leave them unemployed or on the street, made redundant by the industrial farm. Society is inefficiently wasting these human resources. The optimal solution is to leave the lands in the hands of the most efficient farmer (in this case the industrial farm), but tax the industrial farmer (and the other wealthy people in the society) in order to fund some scheme by which the redundant villagers can once again be made economically useful. Possible uses of this money include:

  • Welfare–direct payment to the villagers in order to sustain their economic demand and increase the sales of the other businesses in the economy
  • State employment–the state can hire the villagers to perform some kind of public service (road construction/street cleaning/military service/whatever is needed). The money they earn also does the very same thing money given via welfare does in terms of augmenting demand.
  • Retraining–the state can pay to retrain the villagers in order to make them suitable for work in a different economic sector
  • Subsidy–the state can subsidise businesses to encourage them to hire the villagers, or subsidise the villagers’ start-up projects and businesses, again augmenting demand as well.

Knowing that adding to the amount of money customers have available to spend increases businesses’ sales and that improving the skills of the labour force is an asset to business, we could even claim that it is rational in this scenario for the wealthy people in this society to participate in this redistributive stream from a self-interested perspective. However, in practise, we know that many wealthy people only see the immediate losses and are unwilling to wait for for the long-term gains, even assuming that they acknowledge that they do exist. You would certainly not get universal consent (Nozick #7) for these sorts of redistributive schemes.

So in this situation, Nozick tells us to subjugate what is beneficial for the whole of society in the long run to the idea that property rights are more or less inviolate and sacred. What we have here is a classical deontology–do what the principle says because the principle says so, not because it leads to any kind of desirable result. Ideas are created to serve men, never to rule over them. In cases in which property rights are damaging to society and to people, they should be curtailed. When we elevate ideas over the needs of people, we stop being political theorists–we become priests.