The Institution of Property

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The Institution of Property

• David Schmidtz

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• This article is an attempt to justify property
  rights by looking at historical examples of
  commons and communes.

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Property

• Property rights help us internalize externalities
  (it makes those who cause problems pay for them).
  
• Sometimes property rights evolve over time,
  naturally.

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• In our society property law is intended to let
  people get the benefits of their effort and avoid
  the costs associated with their neighbors
  mistakes.
• Nuisance and zoning laws and the regulations of
  the EPA attempt to take care of some of the
  problems with property laws.

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Property Law

• Society is a cooperative venture for mutual
  advantage, but it should be a positive sum game
  (people must gain from living together). This is
  what property laws are supposed to help us do.

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Decentralization

• Decentralization may or may not work. Private
  property and the commons both decentralize
  decision making but in different ways.

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Property Rights

• Property rights allow people to sell, lend and
  bequeath land to others and the right of owners
  to exclude other owners. Under this definition
  even national parks are private as are communes.

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Rights vs. Liberties

• Rights differ from liberties.
• Liberties can be legitimately interfered with
  (you can stop me from dancing).
• Rights can not legitimately be interfered with
  (you cant stop me if I have a right to dance).

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What Justifies Original Appropriation?

• Locke suggested then that we could appropriate
  land if we could leave enough and as good for
  others. This might be a call for sustainable use
  and the others might be people not yet born.
  This however does not license expropriation
  (taking land from others).

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• Note that in order to ask the question what
  justifies original appropriation? we have to
  assume that there was a right there to begin
  with.

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Is the Proviso Satisfied?

• Some argue that since the world is finite,
  Lockes proviso can never be satisfied. If we
  take something out of the cookie jar we must be
  leaving less for others.

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Resource Creation

• Scmidtz argues that this is not right. First
  appropriation allows resource creation. We are
  better off than people from the past - they had
  much harder lives.
• Diminishing the stock of what can be appropriated
  is not the same as diminishing what can be owned.
  Appropriation is a positive sum game.

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Property vs. The Commons

• Schmidtz argues that the history of property
  institutions shows how people can make themselves
  better off without making others worse off. They
  can escape the commons.

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Examples

• Examples to show that the commons before
  appropriation is typically a zero sum game The
  case of the Philippine Tongan Islands - bleach
  fishing blast fishing.
• Property rights solve this problem.

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More Examples

• Cayman Island Atlantic Green Turtle meat and the
  Cayman Turtle Farm originally helped the turtles.
  
• It was then made illegal by the Convention on
  International Trade in Endangered Species.
• So is the lesson that regulation of privatization
  needs to be stopped? Or can we have flexible
  laws?

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Justifying the Institution

• There is a difference between justifying
  institutions regulating appropriation and
  justifying particular acts of appropriation. We
  want the institutions even if some of the
  particular acts are bad. The game justifies the
  moves. A rule of first possession minimizes
  disputes.

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Exceptions

• Schmidtz says this wont be the case in societies
  where people dislike private property (with its
  attendant benefits like increased life
  expectancy). Some people want to be
  hunter-gatherers.

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The Problems of the Commons

• But he says that the option to live in an open
  access commons will not be around for long.
  People who want to live on a commons have two
  things to worry about 1. Those who conserve in
  commons dont get the benefits so have less
  incentive to conserve in hard times. 2. People
  who live in open access commons need to privatize
  their land to prevent oil companies and others
  from coming in.

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What Kind of Property?

• Should we have private property or some other
  kind of property?
• For instance, unregulated commons may evolve into
  family plots where only some commodities are
  privatized.

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Examples?

• Beaver pelts in the indigenous tribes on the
  Labrador Peninsula.
• Medieval land strips which became private only in
  growing (not grazing) seasons.

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Context Sensitivity

• There are three types of activities small e.g.
  tomato plant growing, medium e.g. damming a
  river, and large e.g. smokestack building

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• For small and medium sized projects privatization
  is best as this limits the number of people to be
  consulted and transaction costs. In addition,
  disputes from medium sized events can be handled
  within small communities who understand the local
  conditions.

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• With large projects its harder to tell,
  externalities are hard to trace and rights to
  some kinds of things like air, water, and
  migrating fish are hard to allocate.
  Privatization is not a panacea.

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Communes?

• One option is a restricted commons like a
  commune. These groups have a distinction between
  members and non-members.
• But communal management can lead to over
  consumption, and shirking of maintenance duties
  and waste dumping so monitoring must be
  intensive.

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Transaction Costs

• An advantage of private property is that owners
  can buy each other out and reshuffle holdings but
  there are transaction costs. A mixed regime
  might be best.

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Problems with Communes

• Historically communal regimes have not been great
  at handling large events although they have the
  advantage of risk sharing and are good at doing
  community projects that benefit everyone.
• And, when community success depends on small
  events communes can spell disaster.

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Historical Examples

• Consider Jamestown this English settlement saw
  2/3 of its population die of starvation and
  disease in the first year, when the governor
  arrived he observed bowling skeletons.
• When Governor Dale divided up the land and
  production increased 700.

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• The legend of Salt Lake sea gulls supposedly
  saved the settlers from locusts, but in the same
  year they also switched to private plots.

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But will Further Privatization Help?

• But there are trade offs in privatization.
• A small event on a large parcel becomes a medium
  event under crowded conditions.
• Population and technological growth can create
  externalities.

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More History - What Makes for a Successful
Commune

• One of the most successful communes was the
  Hutterites in 16th c. Europe. They had three
  good policies 1. A population cap 2. Communal
  dining and worship 3. A ban on birth control, and
  culture and level of education that was able to
  keep people together.

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• Another sort of communal regime that has been
  very successful is the family household although
  even here shirking on maintenance occur.
• Custom helps to govern in addition to local laws.
  Both incentives and methods of enforcement are
  necessary.

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Lessons?

• One might conclude from all of this that group
  solidarity is necessary for successful communes
  and may be a factor of 1. The extent of
  dependence and 2. The extent of monitoring and
  enforcement available (immediate feedback is also
  helpful).

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• But in Jamestown these conditions were met the
  problem was in the towns charter. Everyone was
  entitled to an equal share independent of his or
  her work and people abided by this.

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• Caring for each other is important but that does
  not mean people have to tend each others
  gardens, personal responsibility is necessary to
  foster caring.

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Summary

• Traditionally commons have not not worked very
  well in conditions of scarcity. Privatization may
  help. What can justify this in that wealth is
  created and maintained better than in commons.
  Locke thought appropriation is justified if we
  leave enough and as good for others. There are
  several ways to privatize. Communes have the
  advantage of risk sharing and when small they
  limit the number of people to be consulted and
  limit transaction costs.

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Continued

• They tend to work more if people are dependent on
  each other and there is an efficient method of
  monitoring and enforcement (one such method is
  custom). People have to take responsibility for
  themselves and private property may be the most
  efficient way of achieving this goal.

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Questions for Consideration

• What makes a commune work? What are they good
  for? What are their weaknesses?
• Describe your ideal society, what kind of
  property institutions would it have? Why?
• Recall the question What is a prisoners dilemma
  (create an example)? Now Tell me several ways
  of dealing with the dilemma. Which do you think
  would be the best? Why?
• What is a right? A liberty?
• What justifies original appropriation?