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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?
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