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Property Rights

Takings, Liability, and Externalities:
The Appropriate Balance in Classical Liberalism

Jarrett L. Hale
Graduate, Belmont University, 1999
Nashville, TN
Property Rights

The most essential liberty protected in a liberal model is the right of property. This is, in large part, due to the fact that the right of property can be extended to encompass all individual liberties. If property is to be defined as that over which one possesses sole ownership, then intangible rights such as speech and religion must be included in the property category. Ideas, faith, and labor are all items of possession which are just as privately owned as any piece of land. To separate the two is a seemingly impossible task, for ownership indicates a right to handle what is owned at individual discretion. Individual discretion must, of course, have some limits, which will be discussed later in this paper when risk and liability are addressed.

The right of property is essential to the liberal model for two reasons. First, the right of property is the foundation for all liberty, with all rights being an extension of the justification of property rights. Secondly, the right of property ensures that liberty can be extended into the future, for the presence of future goods relies on a structurally sound framework of property rights in the present.

Our island with the ten individuals serves as a good example for the necessity of property rights. Let us assume that the only food on the island is coconuts, and there are limited amounts of trees which produce them on the island. As the ten people on the island begin to grow hungry, they will begin to eat the coconuts from the limited supply. When one begins to eat, the other nine will begin to eat as well, even if they are not hungry. This is due to the fact that the fear is present that the one may eat all the coconuts, and when the others get hungry there will be none left. All of the individuals will seek out the biggest and best coconuts, leaving the smaller coconuts. When the prime coconuts are eaten, they will inevitably move to the smaller ones and the ones that are not yet mature. After all, if one does not go ahead and grab it, another surely will.

The resulting dilemma produces a group of ten people who are eating all of the food supply even when they are not hungry, for the options in this scenario are not comforting. First, they can eat, hungry or not, before all the food is gone. Second, they can choose not to eat, and starve when they do get hungry because the others ate all the coconuts. Finally, claims can be staked to certain trees which can be defended by the claimer, which is the next step in the scenario.

The best option is for one of the islanders to build a fence around one of the trees still bearing coconuts, eat from the tree when hungry, and allow the tree to reproduce coconuts. The fence will likely deter the other nine until all other sources are expended, for why waste time confronting the fence when more time could be spent eating the other coconuts? When all the other coconuts are expended, the other nine will appear before the fence seeking the last coconuts.

Two options are available for the nine who ravaged the other trees and now appear before the fence. First, the nine can kill the fence - builder and embark on ravaging his tree once he is dead. The problem with this decision is that the attack on this last tree will resemble the attack on the others, and no coconuts will be left by the end of the day. This means that the fence - builder merely got the jump on the other nine on the way to the grave, for they will not survive long since they have destroyed all the food.

The second option available to the nine is to realize that appropriation of the trees is the only means by which survival will be attained. The other nine can begin to build fences around their own individual trees, trading labor in the upkeep of the one individual's fence for coconuts until their own trees begin to bear crops again. Once all the trees have been appropriated, the individuals respect the rights of one another's fences in fear that if they do not, the scenario will begin again and they will surely starve to death(Schmitz; 1991).

The destruction of the coconuts in this hypothetical example is known as the &quottragedy of the commons". All goods left in the commons will eventually be destroyed, for the dominant option for all involved is to take as much from the commons as possible before it is gone. To make matters worse in this situation, the greater the scarcity, the greater and faster the ravaging of the commons. Security of future survival in this situation is completely dependent upon some form of property rights structure, for without it all public goods will be destroyed by individuals exercising the only option available congruent with the liberal framework. (1)

It is this very scenario which denotes the dependence upon liberty in a liberal model, for individual rights are viewed as a necessity for future survival. These rights of property are not limited to land, however, for the same principles can be applied to other aspects, as well. Personal ownership denotes a property right, whether it be a coconut tree or a political thought, and both are ravaged when left in the commons.

Let us take speech or religion, for example. One's personal opinions and faith can be claimed as property due to the self - ownership of these intangible items. While the ideas or faith one possesses may have potential to drastically improve the lives of those around him or her, these will be successfully drowned out by the standing philosophy in the commons, for the overpowering influence in the commons will be those succeeding in savagery. Those winning in the survival of the fittest game will be unwilling to discern new ideas until it is too late, for why stop the game when you are winning? The tragedy of the commons affects all areas of liberty, for the nature of the environment is openly hostile and aggressive, serving only those who prove to be most powerful when playing the current game. Society, then, will be controlled by those who are most savage, whether it be in the fight for hunger - satisfying coconuts or intellectual solutions in the political arena.

The tragedy of the commons scenario gives impetus to the rationale behind the focus on liberty in a liberal model. The liberal model will rationally follow a prescribed pattern on the little island I have used as an example. Once the respect of property rights becomes apparent for the survival of all involved, the search begins for an acceptable framework which will protect the liberty of all ten individuals. This is the point at which consent enters the picture, for a system must be derived which provides security to tend to the property, without spending all waking hours protecting it from expected attack.

The right of property will sustain itself so long as the agreed upon contract is a fair representation of individual liberty. The one fence - builder cannot, for example, build a fence around all the trees and claim them as his own, for this would be a violation of the others' right to property, and would result in his eventual overthrow. The only acceptable outcome which will provide the desired security is a unanimously agreed upon contract which is seen by all involved to be mutually beneficial. The logical outcome in this scenario would be a dividing of property which allows all individuals to possess some ownership. The ownership does not have to be of the trees, however, for ownership of the nails to build the fences or the ladder to reach the coconuts would be equally beneficial. This is the birth of the liberal model free market system, for each individual is mutually dependent on another to meet his needs. This structure allows for free exchange at the discretion of each individual. The free market, however, invariably leads to questions of how it shall be enforced.

The right to punish is an essential part of the social contract when dealing with property rights. While the contract may be beneficial to all, provisions must be made for those who choose to violate the agreed upon rules to enhance individual standing. The contract must entail punishment for those who violate the contract, enforced by the other members of the contract in support of the one violated. In the island example, for instance, should one member climb the fence of another to attain the coconuts, the other nine will administer the punishment agreed upon in the contract as deserved for a violation of another's rights. The law, then, is the contract, and the government becomes the nine people who must enforce it. On a larger scale, the same rules apply, for the members of the contract move to punish the violator, and the government is nothing more than the extension of the contract members.

Punishment in a liberal society is directly related to the violation of the right of property. The contract which is entered to protect individual property rights must contain some method of punishment for those who violate the contract. While all individuals have the liberty to punish prior to the contract, the contract removes this liberty and reduces it to what Robert Nozick terms a &quotsecond order right". A second order right obviously implies that there are first order rights which must remain preeminent in the liberal model, which would be the right of individual property.

A liberal model cannot remove first order property rights, but for these rights to produce the desired benefits of the liberal framework, the second order right of punishment must be produced. The liberty of &quotself - help" punishment is removed in a liberal contract and limited to a second order right as prescribed in the contract. The right to punish is lowered to second order because it cannot be exercised until a violation of the first order right occurs. The right to punish is also limited by the measures agreed upon in the contract, which in a liberal society is based upon equivalency. The punishment, then, cannot exceed the violation (Nozick; 1974). The island example can again give an illustration of this point.

The ten islanders enter a contract which agrees to respect the property rights of one another, some owning the trees, and others owning different essential aspects to survival on the island. This cooperative framework ensures that all the members of the society are needed for survival and must respect one another if slipping back into the commons tragedy is to be prevented. The contract stipulates that violations of the first order property right will be punished by equal retribution. Should one member of the island steal the coconuts of another, the violated member takes his grievance to the other eight members uninvolved in the theft. These nine members must determine an equal restitution for the theft, which must not exceed the value of the coconuts and other losses entailed in the theft.

In this liberal system, punishment can only be enacted when the contracted first order rights are trespassed. In a community of this size, an institutional government of representation is not needed, for all of the members can be readily called to pass judgment on the issues. The threat of excessive punishment is removed by the fear of the breakdown of the contract should this occur, resulting in the loss of the mutual benefits. Larger societies, however, are likely to install institutional judiciary governments which serve to act in the same capacity. The institutional government, however, is bound to the same restrictions as the nine members on the island, because it is bound by the contract and can draw power only from the consent of the society.

I have sought to define the parameters within which a liberal model must operate in the previous sections. I have stressed the emphasis on individual rights, all of which can be encompassed in the justification of the right of property. The emphasis on individual property obviously leads to a free - market philosophy in all respects -- economic, intellectual, or otherwise. The existence of the liberal community is strictly tied to individual liberty, for to step beyond these bounds would carry the society into a different political construct. The institution of government must necessarily remain in a limited capacity, for it is bound in a contractual framework which depends on the consent of the people who must value individual liberty. While the focus of the liberal model is liberty, license for the individual is not the result. Increased responsibility is the result of the social contract, for each member must be contractually bound to respect the rights of the other. However, individual responsibility is not enough to guarantee provision of many of the goods needed in society, which are known as public goods. While individualism is foundational to the liberal model, unchecked individualism can cripple a liberal society. The issue remains, then, concerning the creation of public goods in a society which places such strict limits on the role of government.