What is the relationship between the right to private property and a free and liberal society? Private property is the institutional precondition for individual liberty, yet the concept itself and its inherent link to liberalism is often misunderstood. Let me begin by defining what is meant by private property before discussing its relationship to liberalism.
Property rights do not define a right to an object, per se. Such a statement is incomplete, and raises more questions than answers. Rather, they define expectations regarding the ability to exercise choices over an object. For example, the exchange of money for an automobile implies that an individual has taken possession over an automobile, but possession of the automobile can imply renting it for a period of days, leasing it for a period of years, or owning it outright, perhaps for decades. Whether one is renting, leasing, or granted full title over a good or service, there exists a particular specification of what choices can be exercised over a good or service in relationship to another individual, and how liability is defined. Herein lies the central point I wish to make here, one that I’m paraphrasing from Ludwig von Mises’s Human Action (1949 [2007], p. 311): the right to private property implies a social liability, not a private privilege.
Private property rights are fundamentally a set of social relationships defining ability to use, exclude, and exchange resources in interaction with other individuals (see Furubotn and Pejovich 1972). Their existence does not imply an absence of social conflict over the assignment of resources. Rather, the omnipresence of scarcity implies social conflict over the allocation of resources. But, private property rights provide the institutional framework that allows individuals to learn how to compete for goods and resources in a peaceful and productive manner. This peaceful and productive form of competition manifests itself in the form of specialization and exchange, the defining attribute of private property. As Armen Alchian makes this point:
If ownership rights are transferable, then specialization of ownership will yield gains. People will concentrate their ownership in those areas in which they believe they have a comparative advantage, if they want to increase their wealth. Just as specialization in typing, music, or various types of labor is more productive so is specialization in ownership. Some people specialize in electronics industry knowledge, some in airlines, some in dairies, some in retailing, etc. Private property owners can specialize in knowledge about electronics, devoting much of their effort and study to learning which electronic devices show promise, which are now most efficient in various uses, which should be produced in larger numbers, where investment should take place, what kinds of research and development to finance, etc. (1965, p. 825).
How does this imply that private property rights are not synonymous with privilege? After all, one might object and state that private property is a zero-sum game, assigning an exclusive authority to exercise choices over a good, at the expense of others. This last point conflates the physical assignment of the good with the assignment of consequences of one’s choices exercised over that good, the latter of which is the fundamental purpose of private property, namely, to tie consequences to one’s action. Let’s take the example of a barber, named Gaetano, who exchanges his services with a prospective customer, named Hyman. Gaetano may have private property rights over various tools, such a scissors and a razor, with which he serves Hyman by giving him a haircut and a shave. This implies that Gaetano possesses exclusive authority to exercise choices over his tools, but this is not imply he has the privilege to threaten Hyman violently with such tools. Private property would imply, to say the least, that Gaetano loses Hyman as a customer, and most likely, suffers legal liability and criminal prosecution.
Another objection may be raised that private property grants an individual the privilege to exclude one’s goods and services at the expense of another based on one’s creed, gender, race, or sexual orientation. Returning to the previous example, Gaetano may deny his services to Hyman on the grounds of religious discrimination, since Gaetano is Roman Catholic and Hyman is Jewish. However, private property does not imply that Gaetano will not suffer the consequences of his action. At the very least, he will pay the cost of lost business from Hyman as well as other individuals of his faith once Gaetano’s religious discrimination is personally communicated. Furthermore, such imprudence on Gaetano’s part will be impersonally communicated in the form of a profit opportunity to a competing barber, Salvatore, further harming Gaetano’s business. Thus, private property provides the institutional context to communicate and learn moral behavior, and in turn communicate and correct for immoral behavior (see Storr and Choi 2019).
Moreover, private property implies that individuals will tend to interact on the basis of their merit and skill, acquired through their own effort, specializing not only in a particular trade, but more importantly specializing in acquiring knowledge of a business environment, neither of which are innate. Therefore, the privilege to assign wealth and resources based on racial, religious, or ethnic discrimination is antithetical to the concept of private property and eroded by the competitive process through which the market allocates resources. “The analysis also suggests,” as Alchian and Kessel state (1962, p. 175), “an inconsistency in the views of those who argue that profit incentives bring out the worst in people and at the same time believe that discrimination in terms of race, creed, or color is socially undesirable.” Thus, the civilizing effect of the profit incentive is preconditioned by the right to private property, which assigns a social liability to producers to provide goods and services that any individual may value, based on their willingness to pay. It neither assigns the privilege to discriminate against one group of customers over another based on non-monetary margins, nor for that matter the privilege to bar competing producers based on race, creed, or gender (and who would otherwise profit from serving alienated customers).
How is this all related to liberalism? “The essence of the liberal position,” as F.A. Hayek states, “is the denial of all privilege, if privilege is understood in its proper and original meaning of the state granting and protecting rights to some which are not available on equal terms to others” (1956 [1994], p. xxxvi). The “true contrast to a reign of status is the reign of general and equal laws, of the rules which are the same for all, or, we might say, of the rule of leges in the original meaning of the Latin word for laws – leges that is, as opposed to the privi-leges” (emphasis original, Hayek 1960, p. 154). Thus, whereas competition based on productive specialization and exchange, preconditioned by private property, tends to liberate the individual from arbitrary assignments of resources and income based on creed, gender, race, or other legal status, competition based on privilege tends to confine an individual’s potential for self-actualization to such arbitrary assignments.
References
Alchian, Armen A. 1965. “Some Economics of Property Rights.” Il Politico 30 (4): 816–829.
Alchian, Armen A., and Reuben A. Kessel. 1962. “Competition, Monopoly, and the Pursuit of Money.” In Aspects of Labor Economics (pp. 157–183). Princeton: Princeton University Press.
Furubotn, Eirik G., and Svetozar Pejovich. 1972. “Property Rights and Economic Theory: A Survey of Recent Literature.” Journal of Economic Literature 10(4): 1137–1162.
Hayek, F.A. 1956 [1994]. “Preface to the 1956 Paperback Edition.” In The Road to Serfdom, Fiftieth Anniversary Edition (pp. xxvii–xliv). Chicago, IL: University of Chicago Press.
Hayek, F.A. 1960. The Constitution of Liberty. Chicago: University of Chicago Press.
Mises, Ludwig von. 1949 [2007]. Human Action: A Treatise on Economics, 4th Edition. Indianapolis: Liberty Fund.
Storr, Virgil Henry, and Ginny Seung Choi. 2019. Do Markets Corrupt Our Morals? New York: Palgrave Macmillan.
Rosolino Candela is a Senior Fellow in the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics, and a Program Director of Academic and Student Programs at the Mercatus Center at George Mason University
READER COMMENTS
Cobey Williamson
May 13 2021 at 10:10am
One only has a private right to property that has a lifespan shorter than oneself. All other “property” in the world belongs to the world at large and is exempt from the presumption of ownership.
Jon Murphy
May 13 2021 at 10:23am
I’m not sure that’s a particularly useful definition. An implication would be that as one gets older, one loses property rights. For example, my late grandfather bought a car shortly before he passed away. Indeed, when he bought the car, he stated that it would likely be the last car he ever owned. He knew the car would outlive him. Under your definition of property, Grandpa never owned the car; the world did (whatever that means). It would imply that when my father took possession of the car, Dad was stealing, rather than honoring Grandpa’s Last Will.
Indeed, your definition would make almost all forms of property obsolete. Real estate couldn’t be property. There’d be no inheritance. Indeed, governments or any form of social organization couldn’t exist.
Roger McKinney
May 13 2021 at 10:52am
It’s obvious that dead people have no property. But while alive they can give it to others or heirs who then have rights to it. On what grounds would you take that property away?
Roger McKinney
May 13 2021 at 10:54am
And so property requires free markets. Property doesnt exist without free markets.
Thomas Lee Hutcheson
May 14 2021 at 7:16am
The “freedom” of markets has varied over time, the present being one of the high points of freedom. Your statement implies that the existence of property has also varied over time, mainly in the non-existence space.
Mark Brady
May 13 2021 at 2:24pm
“Another objection may be raised that private property grants an individual the privilege to exclude one’s goods and services at the expense of another based on one’s creed, gender, race, or sexual orientation. Returning to the previous example, Gaetano may deny his services to Hyman on the grounds of religious discrimination, since Gaetano is Roman Catholic and Hyman is Jewish. However, private property does not imply that Gaetano will not suffer the consequences of his action. At the very least, he will pay the cost of lost business from Hyman as well as other individuals of his faith once Gaetano’s religious discrimination is personally communicated. Furthermore, such imprudence on Gaetano’s part will be impersonally communicated in the form of a profit opportunity to a competing barber, Salvatore, further harming Gaetano’s business. Thus, private property provides the institutional context to communicate and learn moral behavior, and in turn communicate and correct for immoral behavior (see Storr and Choi 2019).”
1. If Gaetano resides in a majority-Catholic community, not only may his business be unharmed, but he may enjoy additional business because of his policy of serving only Catholics.
2. You assume that Gaetano’s behavior is immoral. I suggest that is an unwarranted assertion to make, at least without further argument.
David Seltzer
May 13 2021 at 5:30pm
“If Gaetano resides in a majority-Catholic community, not only may his business be unharmed, but he may enjoy additional business because of his policy of serving only Catholics.” Are you suggesting some in Gaetano’s catholic community are anti Semitic?
Mark Brady
May 14 2021 at 5:57pm
No, it could simply be that they want to provide business to their friends, associates, and co-religionists rather than they seek to penalize Protestants, Jews, or non-believers.
David Seltzer
May 14 2021 at 6:42pm
Mark, thanks for clarifying.
Jon Murphy
May 15 2021 at 9:03am
Not necessarily. Even in the Deep South after the Civil War, there were establishments that arose that served under-served consumers. Indeed, that’s why Jim Crow was needed in the eyes of segregationists: the market was providing.
Even to this day, we see arguments against free markets and competition explicitly because they serve people some group things are undeserving. Phil H made that exact argument just the other day here:
Many populist arguments for minimum wage rely on the same reasoning of “the market is bad because it serves undeserving people.”
Mark Brady
May 15 2021 at 12:51pm
I wrote that Gaetano may enjoy additional business because of his policy of serving only Catholics, not that he necessarily would. And I certainly don’t deny that Jim Crow laws prohibited those who would offer their goods and services to those of a different skin color. That said, I submit that your observation does not address the argument in Rosolino Candela’s post.
Jon Murphy
May 15 2021 at 1:30pm
I’m addressing your point. The people who discriminate, even in the face of a highly discriminatory society, still face increased costs because they are excluding a potential customer base
Mark Brady
May 15 2021 at 1:58pm
“I’m addressing your point. The people who discriminate, even in the face of a highly discriminatory society, still face increased costs because they are excluding a potential customer base.”
I suggested that you are not addressing Rosolino Candela’s post.
You assert that “[t]he people who discriminate, even in the face of a highly discriminatory society, still face increased costs because they are excluding a potential customer base.” Possibly, but not necessarily. It all depends on two factors, the relative sizes and incomes of the two groups (in this case, Catholics and non-Catholics), and the possibility that his fellow Catholics prefer to deal with Gaetano (an exercise of consumer choice).
Debbe
Jun 11 2021 at 12:01pm
Correct me if I’m wrong but doesn’t the basic tenents of Libertarianism allow the indivdual to choose to discriminate even though “increased costs and excluding a potential customer base” might effect their bottom line? It’s their property, it’s their choice. Why should you be concerned with MY bottom line?
And NO, I’m not referring to discrimination based on race. What if I owned 500 acres and Joseph Smith came up to my house one day offering to plant the Magic Seeds of Maroni on my land. In return, he promises to give me one golden tablet of Maroni after the plant has matured. Now, I’m not a big believer in the LDS Church and Joseph’s strange request gives the creeps so I tell him “thanks but no thanks” and escort him off my property. Isn’t this MY perogative, since I own the land and the rules of my land are mine to make?
I agree with Jan’s way of phrasing the answer – she/he frames it in true Libertarian style…
Jan
May 14 2021 at 10:50am
>What is the relationship between the right to private property and a free and liberal society?
There is a relationship if and only if the private property is interpersonal liberty-in-practice as derived from an abstract theory of liberty-in-itself (https://philpapers.org/rec/INDNLA). Much private property under statism flouts interpersonal liberty.
>This peaceful and productive form of competition manifests itself in the form of specialization and exchange, the defining attribute of private property.
One can own private property without engaging in “specialization and exchange”, hence that cannot be “the defining attribute of private property”.
>Another objection may be raised that private property grants an individual the privilege to exclude one’s goods and services at the expense of another based on one’s creed, gender, race, or sexual orientation.
That is not a “privilege … at the expense of another”. It is the universal libertarian property right to withhold a benefit for any reason. It is woke bigotry to object to this as “immoral behavior”.
>the privilege to assign wealth and resources based on racial, religious, or ethnic discrimination is antithetical to the concept of private property
The right to do this is inherently part of libertarian private property.
> and eroded by the competitive process through which the market allocates resources.
There may be a price to pay, and it may be worth paying. Only the individuals in question can, and have the right to, decide whether they will accept or reject their culture, religion, etc., being “eroded by the competitive process …”.
> the right to private property … neither assigns the privilege to discriminate against one group of customers over another based on non-monetary margins …
It’s not a privilege; it’s a universal liberal/libertarian right.
>How is this all related to liberalism? “The essence of the liberal position,” as F.A. Hayek states, “is the denial of all privilege, if privilege is understood in its proper and original meaning of the state granting and protecting rights to some which are not available on equal terms to others” (1956 [1994], p. xxxvi).
This is far too vague to characterise ‘liberalism’ in any sense that protects interpersonal liberty. It is logically compatible with everyone’s having an equal right to do something that is quite illiberal.
> The “true contrast to a reign of status is the reign of general and equal laws, of the rules which are the same for all, or, we might say, of the rule of leges in the original meaning of the Latin word for laws – leges that is, as opposed to the privi-leges” (emphasis original, Hayek 1960, p. 154).
That fits universal hand-amputation for petty theft, or stoning for adultery, etc. It doesn’t specify a liberal/libertarian system. Virtually all classical liberals and libertarians are hopelessly philosophically confused. This is a real obstacle to the promotion of the ideology.
jens
May 15 2021 at 10:33am
If you don’t talk about the content of the law, then a commitment to the rule of law contains some information, but not so much. Above all, you then know that the author does not believe in arbitrariness. But that’s almost it, because there is a lot of law and there is also a lot of competition and conflicting goals within it.
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