Justice and Property Rights: The Failure of Utilitarianism
Until very recently, free-market economists paid little attention to the entities actually being exchanged on the very market they have advocated so strongly. Wrapped up in the workings and advantages of freedom of trade, enterprise, investment, and the price system, economists tended to lose sight of the things being exchanged on that market. Namely, they lost sight of the fact that when $10,000 is being exchanged for a machine, or $1 for a hula hoop, what is actually being exchanged is the title of ownership to each of these goods. In short, when I buy a hula hoop for $1, what I am actually doing is exchanging my title of ownership to the dollar in exchange for the ownership title to the hula hoop; the retailer is doing the exact opposite.1 But this means that economists’ habitual attempts to be wertfrei, or at the least to confine their advocacy to the processes of trade and exchange, cannot be maintained. For if I and the retailer are indeed to be free to trade the dollar for the hula hoop without coercive interference by third parties, then this can only be done if these economists will proclaim the justice and the propriety of my original ownership of the dollar and the retailer’s ownership of the hula hoop.
In short, for an economist to say that X and Y should be free to trade Good A for Good B unmolested by third parties, he must also say that X legitimately and properly owns Good A and that Y legitimately owns Good B. But this means that the free-market economist must have some sort of theory of justice in property rights; he can scarcely say that X properly owns Good A without asserting some sort of theory of justice on behalf of such ownership.
Suppose, for example, that as I am about to purchase the hula hoop, the information arrives that the retailer had really stolen the hoop from Z. Surely not even the supposedly wertfrei economist can continue to blithely endorse the proposed exchange of ownership titles between me and the retailer. For now we find that the retailer’s, Y’s, title of ownership is improper and unjust, and that he must be forced to return the hoop to Z, the original owner. The economist can then only endorse the proposed exchange between me and Z, rather than Y, for the hula hoop, since he has to acknowledge Z as the proper owner of title to the hoop.
In short, we have two mutually exclusive claimants to the ownership of the hoop. If the economist agrees to endorse only Z’s sale of the hoop, then he is implicitly agreeing that Z has the just, and Y the unjust, claim to the hoop. And even if he continues to endorse the sale by Y, then he is implicitly maintaining another theory of property titles: namely, that theft is justified. Whichever way he decides, the economist cannot escape a judgment, a theory of justice in the ownership of property. Furthermore, the economist is not really finished when he proclaims the injustice or theft and endorses Z’s proper title. For what is the justification for Z’s title to the hoop? Is it only because he is a nonthief?
In recent years, free-market economists Ronald Coase and Harold Demsetz have begun to redress the balance and to focus on the importance of a clear and precise demarcation of property rights for the market economy. They have demonstrated the importance of such demarcation in the allocation of resources and in preventing or compensating for unwanted imposition of “external costs” from the actions of individuals. But Coase and Demsetz have failed to develop any theory of justice in these property rights; or, rather, they have advanced two theories: one, that it “doesn’t matter” how the property titles are allocated, so long as they are allocated precisely; and, two, that the titles should be allocated to minimize “total social transaction costs,” since a minimization of costs is supposed to be a wertfrei way of benefitting all of society.
There is no space here for a detailed critique of the Coase-Demsetz criteria. Suffice it to say that in a conflict over property titles between a rancher and a farmer for the same piece of land, even if the allocation of title “doesn’t matter” for the allocation of resources (a point which itself could be challenged), it certainly matters from the point of view of the rancher and the farmer. And second, that it is impossible to weigh “total social costs” if we fully realize that all costs are subjective to the individual and, therefore, cannot be compared interpersonally.2 Here the important point is that Coase and Demsetz, along with all other utilitarian free-market economists, implicitly or explicitly leave it to the hands of government to define and allocate the titles to private property. Coase and Demsetz, along with all other utilitarian free-market economists, implicitly or explicitly leave it to the hands of government to define and allocate the titles to private property.
It is a curious fact that utilitarian economists, generally so skeptical of the virtues of government intervention, are so content to leave the fundamental underpinning of the market process—the definition of property rights and the allocation of property titles—wholly in the hands of government. Presumably they do so because they themselves have no theory of justice in property rights; and, therefore, place the burden of allocating property titles into the hands of government. Thus, if Smith, Jones, and Doe each own property and are about to exchange their titles, utilitarians simply assert that if these titles are legal (that is, if the government puts the stamp of approval upon them), then they consider those titles to be justified. It is only if someone violates the government’s definition of legality (for example, in the case of Y, the thieving retailer) that utilitarians are willing to agree with the general and the governmental view of the injustice of such action. But this means, of course, that, once again, the utilitarians have failed in their wish to escape having a theory of justice in property. Actually they do have such a theory, and it is the surely simplistic one that whatever government defines as legal is right.
As in so many other areas of social philosophy, then, we see that utilitarians, in pursuing their vain goal of being wertfrei, of “scientifically” abjuring any theory of justice, actually have such a theory: namely, putting their stamp of approval on whatever the process by which the government arrives at its allocation of property titles. Furthermore, we find that, as on many similar occasions, utilitarians in their vain quest for the wertfrei really conclude by endorsing as right and just whatever the government happens to decide; that is, by blindly apologizing for the status quo.3
Let us consider the utilitarian stamp of approval on government allocation of property titles. Can this stamp of approval possibly achieve even the limited utilitarian goal of certain and precise allocation of property titles? Suppose that the government endorses the existing titles to their property held by Smith, Jones, and Doe. Suppose, then, that a faction of government calls for the confiscation of these titles and redistribution of that property to Roe, Brown, and Robinson. The reasons for this program may stem from any number of social theories or even from the brute fact that Roe, Brown, and Robinson have greater political power than the original trio of owners. The reaction to this proposal by free-market economists and other utilitarians is predictable: they will oppose this proposal on the ground that definite and certain property rights, so socially beneficial, are being endangered. But suppose that the government, ignoring the protests of our utilitarians, proceeds anyway and redistributes these titles to property. Roe, Brown, and Robinson are now defined by the government as the proper and legal owners, while any claims to that property by the original trio of Smith, Jones, and Doe are considered improper and illegitimate, if not subversive. What now will be the reaction of our utilitarians?
It should be clear that, since the utilitarians only base their theory of justice in property on whatever the government defines as legal, they can have no groundwork whatever for any call for restoring the property in question to its original owners. They can only, willy-nilly, and, despite any emotional reluctance on their part, simply endorse the new allocation of property titles as defined and endorsed by government. Not only must utilitarians endorse the status quo of property titles but also they must endorse whatever status quo exists and however rapidly the government decides to shift and redistribute such titles. Furthermore, considering the historical record, we may indeed say that relying upon government to be the guardian of property rights is like placing the proverbial fox on guard over the chicken coop.
We see, therefore, that the supposed defense of the free market and of property rights by utilitarians and free-market economists is a very weak reed indeed. Lacking a theory of justice that goes beyond the existing imprimatur of government, utilitarians can only go along with every change and shift of government allocation after they occur, no matter how arbitrary, rapid, or politically motivated such shifts might be. And, since they provide no firm roadblock to governmental reallocations of property, the utilitarians, in the final analysis, can offer no real defense of property rights themselves. Since governmental redefinitions can and will be rapid and arbitrary, they cannot provide long-run certainty for property rights; and, therefore, they cannot even ensure the very social and economic efficiency which they themselves seek.4 All this is implied in the pronouncements of utilitarians that any future free society must confine itself to whatever definitions of property titles the government may happen to be endorsing at that moment.
Let us consider a hypothetical example of the failure of the utilitarian defense of private property. Suppose that somehow government becomes persuaded of the necessity to yield to a clamor for a free-market, laissez-faire society. Before dissolving itself, however, it redistributes property titles, granting the ownership of the entire territory of New York to the Rockefeller family, of Massachusetts to the Kennedy family, etc. It then dissolves, ending taxation and all other forms of government intervention in the economy. However, while taxation has been abolished, the Rockefeller, Kennedy, etc., families proceed to dictate to all the residents in what is now “their” territory, exacting what are now called “rents” over all the inhabitants.5 It seems clear that our utilitarians could have no intellectual armor with which to challenge this new dispensation; indeed, they would have to endorse the Rockefeller, Kennedy, etc., holdings as “private property” equally deserving of support as the ordinary property titles which they had endorsed only a few months previously. All this because the utilitarians have no theory of justice in property beyond endorsement of whatever status quo happens to exist.
Consider, furthermore, the grotesque box in which the utilitarian proponent of freedom places himself in relation to the institution of human slavery. Contemplating the institution of slavery, and the “free” market that once existed in buying, selling, and renting slaves, the utilitarian who must rely on the legal definition of property can only endorse slavery on the ground that the slave masters had purchased their slave titles legally and in good faith. Surely, any endorsement of a “free” market in slaves indicates the inadequacy of utilitarian concepts of property and the need for a theory of justice to provide a groundwork for property rights and a critique of existing official titles to property.
Toward a Theory of Justice in Property
Utilitarianism cannot be supported as a groundwork for property rights or, a fortiori, for the free-market economy. A theory of justice must be arrived at which goes beyond government allocations of property titles, and which can, therefore, serve as a basis for criticizing such allocations. Obviously, in this space I can only outline what I consider to be the correct theory of justice in property rights. This theory has two fundamental premises: (1) the absolute property right of each individual in his own person, his own body; this may be called the right of self-ownership; and (2) the absolute right in material property of the person who first finds an unused material resource and then in some way occupies or transforms that resource by the use of his personal energy. This might be called the homestead principle—the case in which someone, in the phrase of John Locke, has “mixed his labour” with an unused resource. Let Locke summarize these principles:
every man has a property in his own person. This nobody has any right to but himself. The labour of his body and the work of his hands, we may say, are properly his. Whatsoever, then, he
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