Property Rights, Possession and Objects

There appears to be considerable confusion differentiating property rights, possession and objects in the economics including academic papers. Property rights are a moral and legal concept. Historically, the moral reason for property rights is based on the natural rights concept that you own yourself and therefore you own the product of your labor, both physical and mental. Property rights in an object mean that you have a legal title to an object, which gives you the right to exclude others from using the object in which you have title. This is exactly the same whether the property right is in the object of land, chattel, inventions, or writings.

Possession is a relationship between a person and an object. If a person is holding something they clearly have possession of the item. When they lay the object down they no longer have possession of the object. Land cannot be held and the only space that a person can have possession of at all times is the space they take up. Possession is an important concept in ownership. Possessing something you own is lawful, while possession of something you do not own is often, but not always, unlawful. An example of lawful possession of something you do not own is when a car mechanic is servicing your car. He does not own the car, but he is in possession of the car. In either case the owner can compel the person who has possession to return the item to him. Note that you do not lose your property rights in an object if you do not retain physical possession of an item of all times.

If an object exists in a state of nature, meaning it is not owned, then a person can become the owner of the object by taking possession of the object. Possession demonstrates that the person input their labor to remove the object from nature. This concept is enshrined in English common law cases on the ownership of wild animals by hunters. Homestead Acts are examples of this concept with respect to land. The law recognizes your ownership in the things that you produce, since the act of creation by definition includes the act of possession. Copyright law recognizes that an author created something that did not exist before. The creation of the writing shows the author has possession of writing. Note that there can be multiple types of property rights in an item. The owner of a book has property rights in a physical book. This does not give them rights in the copyright, which is originally owned by the author. A copyright protects the right to reproduce the book. Patent law recognizes that an inventor created a new technological device or method. The creation of the invention demonstrates the inventors possession of the invention.

Objects are things like land, chattel, books, movies, inventions, etc. Defining legal boundaries around these objects to determine title to them is the subject of property law. These objects do not have inherent boundaries. There is no natural boundaries we draw around land except that originally someone took possession of the land by improving it. Their ownership of land extends only to the land they improved. For practical reasons most homestead laws define the area of land to which someone can obtain title. Chattel, books, and movies appear to have inherent boundaries, but this is illusory. Chattel can be owned by two or more people in an undivided manner, for instance you and your child may own a car together. There are no boundaries between your ownership of the car and your child’s ownership of the car.  Or you may lease the car, but it is owned by a finance company.  It is an important concept in property law that property be divisible (legally) in as many slices as possible.  Even ownership of land may be divided in multiple ways.  For instance, you have title to farmland, but not the mineral rights or the water rights.

A lack of understanding of the origin of property and legal concepts of property rights is the source of all sorts of mischief in economics.  Economists who write about antitrust law often confuse property rights with monopolies.  Some economists have followed this to its logical conclusion and suggest that all property right provide some monopoly power.  This demostrates the non-sense propagated by economists when they do not properly define property and monopoly.  The antitrust laws are derived from the English “Statute of Monopolies.”  This statute was a limitation on the power of government, not a limitation on private people, companies or private property.  Antitrust law has turned this on it head and is used to limit private property and private action.

The only logical definition of a monopoly is a government granted right to a market, separate from any property rights of both the monopolist and other private citizens.  So for instance, the government may grant a monopoly over the salt market in the US.  This monopoly precludes other people from selling salt in the US even if they own a salt mine or manufacturing plant.  Patents and Copyrights are property rights.  They do not provide the holder an exclusive right to a market and they do not change anyone’s rights to their property.

Many of the followers of the Von Mises Institute seem to be particularly confused on this issue.  They believe they are supporting free markets, by advocating the destruction of property rights.  Their philosophy that people should not earn a return on their mental labor is more consistent with Marx’s physical labor theory of value.