CHAPTER 1: STAGE SETTING

Convince me I should care about property rights even if I am not a farmer or a lumber company

As any casual follower of the news knows, "property rights" is a hot-button issue. Pick up the newspaper. On the front page is a story about selling off factories and other assets in Eastern Europe or Russia, creating a system of private property where none has existed for half a century or more. Buried at the end of the first section are accounts of murderous conflicts over land rights in Mexico, South Africa, and Brazil. Turn to the business page and read about intellectual property and negotiations with China or Japan over protection of patents and copyrights. Next to this story is a column on creating property rights in material on the Internet.

The local news section details zoning disputes and fights over historic preservation, and the national news tells of the latest assaults on the Endangered Species Act mounted by landowners who think the government is seizing their property. Nearby is a report of a cabinet officer's speech describing the administration's latest proposal to get pension funds to invest in areas the government regards as socially desirable. Alongside it are descriptions of the latest Supreme Court cases on wetlands regulations and the assets of savings and loan associations.

If you drop the paper and wander down the street, you might find the headquarters of a local group devoted to the defense of property rights. Some people estimate that five hundred different advocacy groups have sprung up, ranging from mighty coalitions to one person with a newsletter. Judging by the pile of material in my files I could not prove to the contrary. In their offices are letters from people concerned about wetlands, endangered species, zoning, water, access to government timber, historic preservation, and a dozen other issues. Most of them ask for help: someone is doing something that devalues their property, and they do not know what to do. This is is a true grass-roots movement, not -- as its enemies would have you believe -- a corporate front, and property rights was one of the powder kegs that blew the Democrats out of their Congressional majority in 1994. Since then, the issue has expanded.

We usually associate property rights" with land, and certainly land is crucial. Until quite recently, it was far and away the dominant form of productive property. For tens of thousands of years people have cooperated to use it to create wealth and civilization. For just as long, they have killed each other for it. Sometimes the cause is almost mystical, as when whole peoples struggle over an ancestral home. More often the conflict is over wealth -- over the land's capacity to grow food or graze animals, its minerals, its water, its access to the sea and the riches of trade, or its strategic position as a defender of other land. Through history, land's importance has made it the fount of most thinking about property rights and the focus of most conflict. Who owns what, and how do you know, and what happens if A's use of his property conflicts with B's use of his?

ENGLAND, 1995
In a contemporary instance of a situation arising in one form or another for 10,000 years, a British rock star moves to the country. He is amazed, and outraged, to discover a neighbor fertilizing his fields with pungent pig manure. The aroma permeates the whole neighborhood. The star complains to the local Council. This body, somewhat baffled by the star's view that his right to use his property means they should shut down an entire rural way of life, says, more or less, in a polite British way, "So what does he expect in farm country, perfume?"

Despite the continuing importance of land, the industrial revolution of the nineteenth century and the information revolution of the twentieth changed the nature of property profoundly. Property is also the machinery to produce goods, or the pool of money needed to buy both land and machinery. It can be a franchise, the right to ply a particular trade. The goodwill of a brand name known to billions of people is a kind of property, as is having one's name in the address books of a roster of blue-chip clients. So is a patent or copyright. Education and training of all sorts are property, known to the economists as human capital, and U.S. workers and proprietors collect about three-quarters of the gross national income each year, largely as a return on investment in their own human capital. One of the best forms of property to have, though few think of it as such, is a tenured chair at a university. This provides reasonable and secure income and a platform to lecture about the evils of greed.

New kinds of property are invented constantly. The tax laws lead to the boxes in the air called condominiums, because homeowners can deduct mortgage interest and real estate taxes and renters cannot. Ergo, renters are transmogrified into owners with a stroke of a legal wand. Another instance: The computer makes possible records of almost any degree of complexity, so Wall Street invents ways of slicing ownership of securities and other financial interests into infinite degrees of complexity. The huge market in derivatives could not exist without the computer.

In an advanced industrial-information society like the U.S., land may no longer be the predominant producer of wealth, but make no mistake. This will not tamp the conflicts over the nature of property rights. Because of its crucial role in fostering the wealth and the very survival of individuals and human societies, land has always aroused great passions, mostly greed, fear, pride, and rage. The potential for violence, combined with the workaday need to promote its efficient use, have made it a preoccupation of both law and custom. The new kinds of property excite all the same passions as the old, and many, though by no means all, of the principles and conflicts remain constant even as the nature of property changes. The safest of bets is that the expansion in the nature of property is making the conflicts more convoluted, not eliminating them. If you do not think people feel passionately about property rights in their computer software you are not clicking on the right discussion groups.

To illustrate the continuity between land and other types of property, look at a progression of questions. If the government thinks it important to preserve an endangered species, can it order you to leave your property in a natural state to provide a home for it? If information on the effects of a drug is important to the protection of health, should a pharmaceutical company be told to publish the results of its research in a newspaper? If the Internal Revenue Service wants to study compliance patterns, can it order 153,000 randomly-chosen taxpayers to take leave from their jobs to spend a week or two on an audit from hell wherein they justify every penny of income and expense? Does the IRS have the right to appropriate your time this way, especially if you are a professional who bills by the hour?

After answering these, consider whether the needs of homeless people allow the government to order you to devote your second, vacation home to sheltering them. Next question: If poor people need legal counsel and medical care, should lawyers and doctors be required to devote 10 percent of their human capital to providing services gratis? If the government thinks everyone should have access to computers, can it tell you to allow any member of the public to use the home computer in your bedroom between the hours of 9:00 a.m. and noon each day? Suppose you write a piece of computer software. Can you be told to provide it free to all groups who perform public service, perhaps as defined by the United Fund? If you said yes to the first questions on the list, then bailed out at some point, where did you stop and why?

This book is about property rights, and the current political, legal, and intellectual struggles swirling around them. It focuses on the immediate conflicts, where political passion is at its peak: Land and natural resources. Over the long term, land may not be the most interesting area, but it remains the basis for our thinking about these issues. If a society does not get its principles right in the context of land, it is not likely to get them right for other forms of property, either.

WASHINGTON, D.C., 1996
The Federal Communications Commission issues six hundred pages of regulations on the Telecommunications Act of 1996. Several telephone companies charge that the rules require them to sell their services at a price below actual cost and that this violates the protections of the U.S. Constitution by taking their property for public use without compensation.

This book concludes that some property owners are being treated badly and that their rights deserve more protection. This is a matter of great importance for the sake of both justice and national economic health. It is also, perhaps counter-intuitively, crucial to the long-run success of the causes creating many of the collisions, such as environment protection, historic preservation, and even the production of software. This protection is also, again perhaps counter-intuitively, vital to the interests of knowledge workers and urban professionals who think they are far removed from anything so basic as concern about the soil.

Its basic orientation does not make the book a polemic in defense of property, though. The issues are often exquisitely difficult, and an abstract dedication to property rights does not answer concrete questions.

LITTLE ROCK, ARKANSAS, 1993-1995
During the 1993 Christmas season Jennings Osborne puts 3.2 million Christmas lights on his home, turning it into a tourist attraction that draws thousands of people. The neighbors sue. People labelling themselves advocates of property rights react in opposed ways. Some are distressed that the neighbors are trying to limit a person's right to do as he pleases with his own house. Others are equally appalled at his affront to the right of the neighbors to enjoy their property.

I find Little Rock an easy case (I'm for the neighbors), but the issues can get tougher. What if Osborne puts up only 1,000 lights, or he puts up blue lights when the neighbors like red? In real life, the neighbors win, and in 1995 Osborne is allowed to put up only 12,000 lights. But he wins, too. The original exhibit is moved to Disney World in Florida, where it becomes the hit of the Holiday Season.

MINNESOTA, 1995
An ongoing dispute pits an alliance of land owners and land users against the Mille Lacs tribe, which claims hunting and fishing rights under the Treaties of 1837 and 1855, untrammeled by state game laws, over large chunks of the state. Land owners, hunters, and fishermen are outraged, viewing this assault on state game and fish limits as an attack on their right to use the land, their property rights, and their livelihoods, which depend on the dollars spent by sporting tourists. They belong to the Alliance for America, the largest of the pro-property rights coalitions. As the Mille Lacs' see it, they are only asking for the return of property stripped from them in the past, so they too could claim membership in a property rights defense coalition.
Given that I am all for property rights, who do I root for?

Such dilemmas are common, and people end up in surprising positions. While Minnesotans want to promote effective state regulation as means of safeguarding their property rights, in other places landowners regard government regulations as a serious impingement on their rights. Westerners staunchly defend the sanctity of property but protest when the federal government, as owner of a piece of land, acts like a landowner and raises grazing fees or limits access. To some people, the crisis over property rights is the local industrial plant or pig farm's release of contaminants that migrate to their land. To others, the crisis is government restrictions on their historic right to emit contaminants as a part of their use of the land.

The list of surprising positions can be extended. Political conservatives who lecture on the need for people to exercise self-reliance and bear their own risks sometimes seem bent on protecting land owners from the vicissitudes of the real estate market. They want "to socialize losses while privatizing gains," a societal trend roundly damned in conservative journals when it arises in other contexts, such as welfare. To chide the other end of the political spectrum, many liberals who never meet a victim of social injustice they do not like are amazingly callous toward the pain of landowners being ground in the mills of wetlands or endangered species law. These mills grind exceeding small, and the number of horror stories is multiplying.

Yet another layer of complexity is created by the complicated nature of the various specific programs. Zoning is not the same as wetlands, and neither duplicates historic preservation. The West has a unique history and presents a series of unique problems. Getting rid of a panoply of outrageous government subsidies, a need about which liberals and conservatives agree in principle, is made difficult by the investments people have made in reliance on their continuation and by the capitalization of the subsidies into land values. Applying doctrines about rights developed in the context of real estate to intellectual property or to the switching equipment used in telecommunications introduces more difficulties. The basic themes remain the same, but each new twist raises its own set of problems.

The property rights controversy connects to many major trends in politics and society. The shift in the nature of wealth caused by the industrial and information revolutions has changed the political muscle of various contestants, reducing the power of landowners vis-a-vis other groups, and opening land up to raids. By one view, the holders of new forms of property, financial assets and intellectual capital in particular, are expropriating the wealth of landowners. Another dominating factor is the government's budget crunch, which encourages Congress, states, and cities to distribute largess by giving favored constituencies power to take wealth from other private citizens instead of giving them money out of federal tax dollars. Still other megatrends include the extraordinary expansion in the use of criminal sanctions during the past two decades, the multiplying failings of the legal system and legal profession, the rise of single-value government agencies devoted to a remorseless pursuit of their own narrow vision of the public good, and the spread of scientific theories of dubious validity.

These linkages present both a problem and an opportunity. The problem is that they complicate analysis of property rights. The opportunity is that they make the story more entertaining and important. Property rights is not only an interesting battle in its own right, it is a fine vehicle for examining fundamental issues that are perplexing the American public.

The linkages between property rights and these megatrends make another important point. Many knowledge workers and urban professionals do not see themselves as involved in these disputes. To them, property rights is a problem for farmers or loggers. Knowledge workers may obsess about the worth of their houses or condominiums, but real estate is not their important property. Their true estate lies in their professional degrees, connections, and civil service job protections, possessions shielded from appropriation by governments, and in the financial assets produced by these resources.

They are less shielded than they think. If the government gets into the habit of dealing cavalierly with land and resources, it will treat other forms of property and their fruits in similar fashion. What is the distinction between "regulating" land to protect wetlands and "regulating" to require a lawyer to spend 10 per cent of her time on designated environmental causes, or "regulating" to require a telephone company to provide free switching services, or a writer of software to make the product available free to people designated as worthy by some government agency? If the Department of the Interior can direct the devotion of private land to habitat for a species of animal, regardless of the impact on the owner, because this is pro bono publico, then explain to me why the Department of Labor cannot require pension fund assets to be devoted to "socially useful" purposes, as defined by itself.

In A Man for All Seasons, Robert Bolt's great play about the sixteenth-century conflict between King Henry VIII and Archbishop Thomas More, More's son-in-law says he would be willing to cut down all the laws of England if necessary to get the Devil. More rejoins: "And when the last law was down, and the Devil turned round on you--where would you hide, . . . the laws all being flat? This country's planted thick with laws from coast to coast . . . and if you cut them down . . . did you really think you could stand upright in the winds that would blow then? Yes, I'd give the Devil the benefit of law, for my own safety's sake." Even inveterate urbanites should care if the principles protecting farmers, loggers, and other landowners are cut down. If these go, where will they themselves stand for protection against the political winds that then will blow?