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Patents and Innovation Economics

Property Rights: The Foundation of Freedom

In the United States, we tend to study the Constitution to secure and understand our freedoms.  This is a bit strange as our freedom throughout history has been secured mainly by property rights.  This was understood by the founders and many others.

 

There is a “diversity in the faculties of men, from which the rights of property originate…. The protection of these faculties is the first object of government.”[1]

James Madison’s Federalist 10

 

“The reason why men enter into society is the preservation of their property.” John Locke

 

“No other rights are safe where property is not safe.”

Daniel Webster

 

“Ultimately property rights and personal rights are the same thing.”

Calvin Coolidge

 

Without property rights, no other rights are possible.

Ayn Rand “Man’s Rights,” The Virtue of Selfishness, 94, http://aynrandlexicon.com/lexicon/property_rights.html

 

“Property rights … are the most basic of human rights and an essential foundation for other human rights.”[2]

Milton Friedman

 

Property rights in the United States were a matter of state law for most of its history, with the minor exception of the Fifth Amendment.  Thus to gain a better understanding of how our freedom is secured, we need to study property rights.  This is a big subject and this post will focus on the historical development and the philosophical foundations of property rights.

The concept of property rights started with some sense of ownership of food and personal possessions among nomadic people.  People had the idea of a superior moral claim to the apple they picked or the deer they killed or the clothes they made and wore compared to other people.  With the advent of the Agricultural Revolution people began to think they had a superior moral claim to the land they cultivated and the crops grown on this land, which was the beginning of the idea of property rights in land.  However, these were not real property rights, because the King or other political body almost always reserved the power to trample peoples’ property rights when it was politically expedient.  In the Middle Ages “property rights” were thought to reside ultimately in the King or the sovereign.  Legal realists still hold onto this idea.  During the Renaissance legal theorist worked on a rational basis for property rights, starting with Hugo Grotius in the early 1600s.  Adam Mossoff has written an excellent paper explaining the historical development of property rights theory including the major theories today, called What is Property? Putting the Pieces Back Together.[3]

After Grotiuss, John Locke continued the work of developing a rational theory of property rights.  Locke’s formulation is that anything in a state of nature (unowned) that someone makes useful, results in them having a property right in the item they made useful.  So if you shoot a deer you have property rights in the deer or if you plant olive trees on some ownerless land you have a property right in the land and the trees.  This is true according to Locke because you have an exclusive moral claim over yourself (body and mind) and anything you create value in gives you property rights in the item.  This is commonly summarized as having property rights in one’s self.

It is important to understand that all of law is based on property rights logically (and historically).  Some libertarians have tried to postulate systems where property rights are some sort of contract.  You cannot have a contract unless you have an exchange and you cannot exchange something you do not own.  You also need to have property rights over yourself to enter a contract.  Contract law presupposes property rights law and to reverse the process results in nonsense.  Tort law makes no sense without property rights.  If you do not own yourself or some property how can you claim to have been harmed.  This is true of all other areas of law also.

Property rights law was developed in common law countries and in the United States along Locke’s theoretical formulation for at least a century or more.  For instance, in the United States the Homestead Act (of 1862) provided that any adult who had not taken up arms against the U.S. could acquire 160 acres of land by farming and living on the land for five years.  The Act made the implicit assumption that the land was in a “state of nature” and that people could obtain property rights by making it more valuable.  This is almost an exact formulation of Locke’s theory of property rights, except that the land had to be surveyed first and the acquirer had to put in an application.

There are several interesting things about the Homestead Acts.  One is that they were first proposed before the U.S. Constitution was ratified and many other homestead acts were passed after the one in 1862.  The Homestead Act of 1862 was clearly passed as part of the politics of the Civil War in the U.S.  Another interesting point is the Homestead Act implies that land grants by Kings did not result in valid property rights.  For instance, the land grants to George Washington for his military service from the British Crown did not confer valid property rights in the land.  Washington had problems with squatters on this land, who seemed to understand that Washington’s property rights in this land were invalid since he did nothing to create value in the land.[4]

Another interesting thing about the Homestead Act is that the surveyed plats were separated by roads.  There were no taxes to create or maintain these roads, so they were un-owned land or land in which no one could have property rights in.  It is important to note that property rights in land that cannot be accessed make those rights meaningless.  An essential element of all property rights in land includes access to and from the land and the rest of the world.  This does not mean that the owner of the land cannot exclude people from their land, but it does mean that property rights in land cannot interfere with reasonable travel.  This is one of those questions in law where the philosophy lays out the general theory, but the law has to work out some practical realities in which there is no exact answer.  In the Homestead Act, they decided that roads had to exist around every square mile block of privately owned land (one mile grid).  This obviously would have to be modified sometimes for terrain and another distance or pattern for the roads could have been selected without violating the general principles.

It would also be an abridgement of people’s right to travel if property rights in land could imprison people.  People exercised the right to travel over land before there were any property rights in land.  Thus property rights in land that unduly impinge on the ability of travel violate other people’s rights.

It appears the Romans understood this.  In the twelve ancient Roman tablets that set out the law, tablet seven appears to require land owners to maintain the roads.  “1. Let them keep the road in order. If they have not paved it, a man may drive his team where he likes.”[5]  Table eight requires “Where a road runs in a straight line, it shall be eight feet, and where it curves, it shall be sixteen feet in width.”[6]  Tablet nine requires “When a man’s land lies adjacent to the highway, he can enclose it in any way that he chooses; but if he neglects to do so, any other person can drive an animal over the land wherever he pleases.”[7]  The Roman tablet eight also require space between buildings, “A space of two feet and a half must be left between neighboring buildings.”[8]  This last law could have been for travel or to keep fires from spreading through the city.  Unfortunately, there does not appear any commentary to let us know.

Some people have suggested that this ownerless land for roads in the Homesteading Act is inconsistent with Ayn Rand’s Objectivism: “Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.”[9]  This mistake is based on a misunderstanding.  There is no such thing as property.  There are property rights and things in which people may have property rights.  In informal language we often use the shorthand property to refer to something in which we or other people have property rights.  Unfortunately, this shorthand results in confusion.  Correctly interpreted what Rand’s statement is saying is that governments cannot have property rights in land or anything else only people can.  What the government has is a custodial duty.  The government cannot have a moral claim to have made something useful, only individuals can do this.  Rand explained it this way with respect to the Homestead Act of 1862:

Thus, the government, in this case, was acting not as an owner but as the custodian of ownerless resources who defines objectively impartial rules by which potential owners may acquire them.[10]

Rand did not directly address the concept of property rights, however she laid out many of her ideas in two articles in Capitalism: The Unknown Ideal: 1) The Property Status of Airwaves, and 2) Patents and Copyrights.  Rand echoes Locke when she explains the origin of property rights, “Any material element or resource which, in order to become of use or value to men, requires the application of human knowledge and effort, should be private property—by the right of those who apply the knowledge and effort.”[11]  Rand is stating that because you made/created something valuable you have a moral claim to the item that is greater than other peoples’.  Rand’s main refinement over Locke is to make it clear that this includes mental effort (in a way Locke leaves more ambiguous), “thus the law establishes the property right of a mind to that which it has brought into existence.”[12]

One important point that should be clear from this discussion is that dead people cannot have property rights.  Property rights are a moral and legal relationship between a person and an item (tangible or intangible).  A related point is that when someone abandons their property rights by no longer making something useful, then it is ownerless again and therefore in a state of nature.  This means that someone else can come in and make the item productive again and therefore acquire property rights in the item.  This is a very complicated subject and covering it in even a cursory way could be a whole book, however I will point to some examples.  In common law there is something called adverse possession, which “is a situation when a person who does not have legal title to land (or real property) occupies the land without the permission of the legal owner” and gains legal title to the land.[13]  Another complicated situation where these principles come into play is when a person dies or estates law.  A dead person cannot have property rights in anything, so suddenly those items they had property rights in are ownerless.  Property rights in land do not go on forever as many people assume.  A detailed- discussion of this issue is beyond the scope of this article.

We have talked about how property rights arise, but not what they are.  Many people think that their property rights in their land are unlimited that they go up infinitely into the sky and down to the center of the Earth and they can do anything they want on their land.  Why do they think this?  Did they create value 500 feet below the surface of their land?  Did they create value 500 feet into the air above their land?  Of course not.  The property rights you obtain are related to the value you created.  The most common form of property rights is called “fee simple” in the law.  Fee simple allows you (ignoring building codes) to farm/ranch and have a house (building), run a business, etc. on your land.  It does not allow you to put a commercial hog sty on your farm next to your neighbor’s house.  This would violate nuisance laws, which ensure that you have reasonable enjoyment and use of your land.  On the other hand, you cannot buy a farm and then build a house next to your neighbor’s pig sty and then sue them for nuisance.

In addition, there are other groups of property rights such as mining rights, which come in two varieties, lode and placer.  Lode mineral rights are designed to ensure that the person who discovers a vein of say gold is the owner of the whole vein.  Otherwise it would be easy for other people to say they discovered the obvious other end of the vein and profit at the expense of the true discoverer of the vein.  These rights may not include any rights to the surface land above them, while a place type of mineral rights does.  There are also grazing rights, water rights, easements, trademark rights, property rights in chattel, copyrights, patent rights (inventions), trade secrets, etc.  All of these property rights are different and come with different rights of action and rules, based on the value that was created.

The property rights you obtain are related to the value you created

Property rights are not monolithic as many people seem to believe.  As Adam Mossoff explains in his paper, Why Intellectual Property Rights? A Lockean Justification:

As Locke first explained, property is fundamentally justified and defined by the nature of the value created and secured to its owner … To wit, different types of property rights are defined and secured differently under the law.

Some property rights come with the right to exclude, however grazing rights do not include a right to exclude unless the person is interfering unreasonably with the grazing rights owner’s ability to graze the land.  Even with “fee simple” ownership of land your right to exclude is limited to using reasonable means to exclude people who are interfering with you enjoyment and use of your land.  This means you cannot shoot someone for crossing your land.

Property rights are a vast and complex area of law of which this article just touches on.  Property rights are the most important area to securing our freedoms and all law starts with and builds on property rights.  The key philosophical foundations of property rights are:

Property rights is the foundation of all law

Property rights are a moral and legal claim to take action with respect to an object

Property rights arise when a person creates value

The rights obtained with property rights depend on the value created

– they are not monolithic.

Property rights are the foundation of all our freedoms and

much more important than the Constitution in securing our freedoms.

 

[1] The Economic Principles of America’s Founders: Property Rights, Free Markets, and Sound Money, Paul Ermine Potter and Dawn Tibbetts Potter, accessed 4/15/17,  http://www.heritage.org/political-process/report/the-economic-principles-americas-founders-property-rights-free-markets-and#_ftnref3

[2] Milton Friedman’s Property Rights Legacy, Forbes, Ken Blackwell, accessed 4/15/17 https://www.forbes.com/sites/realspin/2014/07/31/milton-friedmans-property-rights-legacy/#238d1416635d

[3] Mossoff, Adam, What is Property? Putting the Pieces Back Together. Arizona Law Review, Vol. 45, p. 371, 2003. Available at SSRN: https://ssrn.com/abstract=438780 or http://dx.doi.org/10.2139/ssrn.438780

[4] George Washington, Covenanter squatters, http://explorepahistory.com/hmarker.php?markerId=1-A-28F accessed April 30, 2017.

[5] http://www.historyguide.org/ancient/12tables.html, accessed May 7, 2017.

[6] http://www.constitution.org/sps/sps01_1.htm, accessed May 7, 2017

[7] http://www.constitution.org/sps/sps01_1.htm, accessed May 7, 2017

[8] http://www.constitution.org/sps/sps01_1.htm, accessed May 7, 2017

[9] “What Is Capitalism?”Capitalism: The Unknown Ideal, 19 Ayn Rand Lexicon, http://aynrandlexicon.com/lexicon/capitalism.html accessed May 7, 2017.

[10] Ayn Rand, Capitalism: The unknown Ideal, The Property Status of Airways, p. 132.

[11] Ayn Rand Lexicon, “The Property Status of the Airwaves,” Capitalism: The Unknown Ideal, 122

[12] Ayn Rand, Capitalism: The Unknown Ideal, Patents and Copyrights, p. 141.

[13] https://en.wikipedia.org/wiki/Adverse_possession, accessed May 7, 2017.

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May 20, 2017 - Posted by | -History, -Legal, Legal Philosophy | , ,

1 Comment »

  1. […] significantly interfere with the right to travel.  I have written on this extensively in my post Property Rights: The Foundation of Freedom.  Ultimately, this is another rationalization to prevent some potential […]

    Pingback by What is Regulation? « State of Innovation | June 28, 2017 | Reply


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