Property - Intro to Political Economy, Lecture3

all right welcome the third lecture in which we're going to talk about property which is a pretty difficult concept although it's one that you've been used to thinking about your whole lives you see a little bit at the beginning about economics there's a question whether economics is a science and Lord Kelvin famously said that science was about measurement and I'm not so sure that even if economics is a science it's about measurement but we certainly do try to come up with the concepts that need to be measured in order to argue plausibly that we can talk about relationships among those concepts so what Lord Kelvin said was your knowledge is of a meagre an unsatisfactory kind it may be the beginning of knowledge but you've scarcely in your thoughts advanced to the state of science and economists the only people who predict things worse than economists are meteorologists they can't tell you what the weather is going to be tomorrow we can probably tell you what GDP is going to be tomorrow but economists are not very good at predicting stuff partly because we're not very clear on what it is we're trying to predict meteorologists is mostly like rain and temperature what is it economists are trying to predict what is it that are the key features of the economy is one of the things we'll need to worry about and I should give you a picture of Lord Kelvin he looks like an Old Testament prophet he looks like this sort of person who would say something like that now Jacob Viner The Economist said yeah but even if you can measure it even if you can express it in numbers our knowledge will be meager and unsatisfactory and that's sort of the economists response it's not clear we know much and of course Viner looked more like your uncle Murray so you would expect something like that from your uncle Murray a little bit irreverent here's my own view a lot of what economists study turns out to explanations for why things have evolved in a particular way this is from my public policy book if you take a class in public policy here the introductory public policy class often uses this of my these are my textbooks on the left-hand side we have and you can't see the top so let me read it what it says at the top is those are the USDA requirements so over here are the USDA requirements for meat handling this is the kosher rules for Jews to handle meat it's from the code of Maimonides it's 1,500 years old and what's interesting is the two are very similar now this one's based on a germ theory of pathology how did they know well it may have been that they noticed that if you disobeyed these rules you died screaming in particular if you ate pork in a desert climate where trickin a-- which are small parasitic worms are in the meat those small parasitic worms move from your gut into your large muscle groups and having your large muscle groups eaten from inside is about as bad as it sounds you start screaming you start flopping and people say our God is a powerful God now so their theory was entirely different but over time if you use an evolutionary approach to finding what rules work you might come up with something very close to the same rules that you have if you have the correct which is a germ theory of pathology the question is can we think of economics the same way two lectures ago last lecture I mean I talked about our under Starling tuitions our moral intuitions in the face of the use of prices well a lot of what we do in an economy is actually a process of evolution and we may not have thought about why it works we may not understand why it works but it may work so let me compare economics and evolution go okay Chihuahua I had a kid there was a kid in high school I used to carpool always to drive carpool he kept talking about it you hua hua and none of us knew what a Chu hua hua was but when you look at it it makes sense it could just be at Yahoo hua but it's a chihuahua so which of these occur more frequently in the world call yo day or - hua hua there's actually more Chihuahuas well the Toyota is the product of evolution the Chihuahua is a product of human selection we actually bred Chihuahuas now so both of them the point is both of them are the products of a kind of evolutionary process but a very different one thistles are everywhere so our roses people try to stop thistles they buy all sorts of stuff to feed their roses so the roses are a process of selection but it's cultural selection thistles are a product of selection but their biological selection and most of you probably know wild turkeys are highly adapted to their environment domesticated turkeys are so stupid that when it rains they look upward and gape and a fair number of them drowned they're not well adapted they do however have very large white meat they almost tip over so there's far more domesticated turkeys than there are wild turkeys at least until about December 2020 for every year and then the population declines quite a bit so to give you a visual for that compare the process of biological evolution with you should be afraid I mean look at that which of those is more suited to its environment which of those is more suited to its environment and the answer is this one even though it's a giant fat purpose-to one it's wearing pearls so run because we like this this one survives a survival test this one survives a we like this test so you may never have thought of economics in those terms but what is it what conventions about markets are there that we should think of as having evolved and which ones have we chosen a couple of problems with economics this is one of my favourite comics xkcd so the guy says I used to think correlation implied causation then I took a stats class now I don't and she says well it sounds like the class helped and the guy says well maybe I mean after all you know as he took a class and now he doesn't believe that anything maybe it caused it maybe it didn't so in economics all the time we have this difficulty something happens and then something else happened well was it caused and you already have an example about the stock market that we talked about last week anything that's going to happen for sure tomorrow already happened yesterday so when someone on the news said something happened today in the stock market fell that's absolutely right both of those facts are true his attempt to draw causation is nonsense it's very difficult to say why prices move in the way they do because prices capitalize all the existing information anything that's going to happen for sure tomorrow already happened yesterday and then here this is the cartoon leo the conceit of Leo is that the kid never speaks so Leo's in his spaceship and he crashed lands on the moon and now he can't breathe and you know why he could breathe here just it's a cartoon for God's sake but there's the space alien and it says because you can't hold your breath forever and he's holy selling spacesuits for $25 he's he a bad person well is he a bad space alien was the taco truck driver last week a bad person is it bad to sell people stuff they need is it bad to sell people stuff they need at a really high price is one of the problems that we're going to try to deal with and the answer is just not obvious well let's talk a bit about capitalism sometimes the argument for capitalism is that it rewards greed and I think that's nonsense greed is probably a bad thing but it's a fact like gravity if you were going to try to build a bridge you would take gravity into account you're going to try to build a system of human institutions you might want to take greed into account the interesting thing is that in an economy an economy sort of the definition of an economy is the evolved and notice that I've underlined evolved but it maybe evolved like a chihuahua not a coyote but it's still evolved and involved relation between property voluntary exchange and prices that has a connected set of consequentialist and natural rights implications there's no way to evaluate them separately because they can't really be disconnected so evaluating an economy is a difficult thing I'm going to try to give you some tools to do it but it's a difficult thing and at the end you'll reach your own conclusion but to start with John Locke John Locke lived from 1632 to 1704 and it's important to recognize that he followed another philosopher Thomas Hobbes who lived from 1588 to 1679 so they overlapped a little bit but not very much and there is a picture of Locke it would be perverse if that were a picture one else you probably guessed but let me say that is a picture of Locke basic ideas of the Lockean approach are that agents are rational and that you're trying to build a coincidence of self-interest in general interest now the whole all of book 1 for Locke is just a long film err nation he's fulminating against robert filmer but the message in book 2 is all government is limited in its powers and exists only by consent of the governed all people are born free however their lives are inconvenient this is almost verbatim the language that we find in the u.s. Declaration of Independence so an important example of Locke's influence is that consent of the governed notion the justification for Locke of the ability of the state to koware citizens is consent the justification for Locke for the authority of the state to exercise coercion is the consent of the governed wrote two treatises on government letter concerning toleration some considerations of the consequence of lowering interest and I put this up in part because we're going to read it but also in philosophy and economics you get some credit for discovering a piece by Locke this piece was basically unknown and still until I started writing about it five years ago it's pretty short so it's sort of pathetic for me to claim credit for finding this little four-page thing but I am pathetic that way so I'm going to claim credit this is a fascinating little piece and we're going to go over it it was something he wrote apparently in 1657 was written down transcribed in 1661 it was never published and then in 1695 it was found in a folio and it's been published a couple of times in books but it's pretty rare it's pretty unknown so if we start with the question what is pull article power what's the appropriate end and objectives of civil government his answer is political power is the right to make laws and to enforce them even with penalty of death that is enforced using force political authority is the right to make laws and to enforce them where does that authority come from consent it's the establishment what's the appropriate end an objective of civil government the establishment of penalties related to regulating and preserving property and defending the Commonwealth prefer foreign attack all for the public good so the reason that I would consent is that it makes me and everyone else better off sovereignty here lies in the individual not the king sovereignty here lies in the individual not the king that is a radical doctrine particularly if you're the king hey what the hell I'm the king another word for that is sovereign get a dictionary no sovereignty lies with the individual the individual made a choice to enter into a contractual relationship with the monarch or the government but it is for the benefit of the individual we could contrast that with Hobbes view which was that the state of nature was a war of all against all Locke thought that the state of nature is a state of perfect freedom and equality the problem is there's too much freedom and equality so the world was really never without political or social structure political social structures arise naturally within humankind so people living together according to reason with with without a common superior on earth with authority to judge between them is properly the state of nature what's wrong with the state of nature he was more optimistic than Hobbes was but he was pessimistic about the ability of people without political authority to fulfill their obligations so you and I have a contract reason tells us that we should probably both obey and fulfill the terms of the contract however if I cheat it's very difficult and inconvenient for you to force me so we're better off having a third party which for Locke was the state to enforce the contract we knew reason told us that it's better if everybody fulfills their agreements if we keep our promises so reason tells us that that's already true in the state of nature but we don't do it very well and so what we need is enforcement of that intuition that it is right it is moral you have an obligation to keep your promises so war is the use of force without right in peace there is no use of force without right so again I'm paraphrasing Locke Locke says they're inconveniences in the state of nature it's quite different from the Hobbesian war of all against all remember Hobbes characterized the war of all against all as life being nasty brutish and short no arts no letters no industry it's really terrible Locke thought life without the state was probably okay but there's a lot of inconveniences we're much better with a state and recognizing that all societies form something like a state so right and property pre-exists creation of the state the state is created as a way to secure those pre-existing rights this here you pretty much have to know verbatim this this last bullet point right and property pre-exists creation of the state but the state is created as a way to secure those rights and again that language appears almost verbatim in the Declaration of Independence so this is not a hypothetical doctrine it may be wrong you may conclude that it's wrong but it's not hypothetical in the sense that it was persuasive to the founders of the American government everyone then should pursue their own preservation but they're also obliged to pursue the preservation of the rest of humankind what if those duties conflict well aggression against others should say is a violation of the law nature so a course of conduct that tends towards self-preservation is in court in accord with nature all of us should want to survive which means that we recognize the rights of others to survive so aggressions against others is a violation of the law of nature problem is nature is not very good at enforcing its own laws and so we need a state to secure those rights one of the things that Locke is most important for in economics is property thought there was a natural distribution of assets particularly land things of value and he offers a theory of private property right starts with the assertion that every person owns himself in his labour so the foundation of all other property is I own myself and my labour if I combine my labour with something else I make it mine under certain conditions if I combine my labour with something I make it mine under certain conditions property acquired through just acquisition is earned I actually deserve it through the use of myself and my labour so the means of limiting accumulation is only required if there's less than a super abundance and we'll talk about that more in a minute but only labour can create property transfer doesn't create property just recognizes it so if I build a house and then sell it to you it's you it's yours because of the state enforcement of the convention of property but it was naturally mine because I built it still one aspect of property is the ability to sell it an important aspect of property is the ability to sell it but it is naturally only the property of the person who builds or makes it so here's a long quote from Locke and we'll just look at the first part there's this appropriation of any parcel of land by improving it any prejudice to any other man since there was still enough and as good enough and as good I'm going to say that again enough and as good that's lots Proviso enough and as good are you bored yet enough and as good you've got to remember that that's Locke's proviso there has to be enough and as good left and more than the yet unprovided could use so that in effect there was nevertheless left for others because of his enclosure for himself so there's really two conditions it would appear one is I combine my labour with something and make it mine and the other is that there's enough left for anyone else to do the same so it's a kind of right of first occupancy it's a presumptive right of first occupancy provided there's as much left for others to do the same thing so I come to the United States I come to the colonies I clear some land I grow some corn you show up and you say I want some of that corn inequality is bad I say ah this isn't really inequality because you are capable of clearing your own land there's plenty of land right over there so that's a kind of equality in the sense you have the same opportunity to do what I did to produce well so inequality that arises from my having done something that you could do would never justify you taking what I have done that's my that's my property because I've created it with my labor question is what would we do in the absence of the satisfaction of Locke's proviso since it is for all practical purposes in the modern world never satisfied because it's just not true all the land almost all the land in the world is used because there's not enough and as good for someone else so alright maybe as an historical theory for the origins of property you can justify this and maybe you can't but the point is even if you could even if you accept this as a justification what does it say about property now forelock political power must be limited who's in favor of at least a qualified kind of majority rule and separation of powers and there is there can be no freedom where there's no law however it is important to say that law and legislation are not the same thing because legislation might be even more unjust than the natural laws that we come up with to govern ourselves legislation is just the product of human action and kings or legislatures might be every bit as selfish as the citizens so there's no freedom where there's no law but law is the product of reason not of legislation certainly possible that legislation and reason coincide but there's no reason to define legislation as being law second thinker for today Rousseau I'm not going to go back to the other picture but Rousseau was much hotter no question Rousseau was much hotter we're so thought so but he was right 17:12 to 1778 so he overlapped a bit with Locke but you should think of make sure you think of them in that order Hobbes Locke Rousseau because it matters that they go in that sequence Rousseau was concerned with the relationship of the state in the individual society is based on an implicit contract which he wanted to call the social contract the contract delivers us from a state of nature and the contract implies that the ruler is the people's agent not their master which is an even more radical notion so not surprisingly Rousseau is one of the main philosophers of the French Revolution because the French Revolution actually resulted in a regicide Regicides a big deal saying we need a new king Kings can sort of deal with that they disagree regicide means we need a dead King all Kings tend to oppose that and all the other kings of Europe were certainly upset that France decided they needed a dead King and then France said we are now a republic because sovereignty lies with the individual so this is the key passage from the second discourse the discourse and inequality which was assigned for today's reading it's pretty long make sure you at least look at the first part the first man who having enclosed a piece of ground bethought himself of saying this is mine and found people simple enough to believe him was the real founder of civil society from how many crimes wars and murders how many horrors and misfortunes might not anyone have saved mankind by pulling up the stakes filling up the ditch and crying to his fellows beware of listening to this imposter you are undone if you once forget that the fruits of the earth belong to all and the earth itself to no one fruits of the earth belong to all and the earth itself to no one the logical extension of this is property by and largest theft property the claim of property is by and large theft the fruits of the earth belong to all and the earth itself to no one so he's making a distinction between common property and just things that cannot be owned fruits of the earth are common property and the earth itself simply cannot be owned the idea of ownership is nonsense so if you assert property that's theft and so what the person who tore up the stakes was doing was basically saying beware of this imposter private property is the source of pretty much all evil particularly psychological the origin of excessive self love and self interest and the establishment of the institution of private property led to a flawed society the only solution is to abandon excessive private property land houses so we're so recognized a right to claim property in civil society but involves the right of first occupant and it had three parts first is no prior inhabitation which sounds a bit like Locke's definition has to be based on need rather than greed no one can takes more land than they can work and the individual actually has to work the land that she claims so if we only take the amount that we can work and we only work the amount that we actually need then there can be four or so such a thing as property so it wasn't that all property was theft but our notion of the accumulation of property is theft so before people lived in societies their activities were mostly dominated by pursuits of their own welfare so that was the state of nature but not Nan's natural state man's natural state is the achievement of an inner subjective reconceptualization of their place in the society and yes I will say that again man's real natural state is to achieve an inner subjective reconceptualization so what that means is I don't think of myself as an individual I think of myself as being embedded in society and the fact is a lot of what we try to teach children and think of ourselves actually works this way most of you would not litter even if you knew you would not get caught so you're you're coming back from cookout it's 3:00 in the morning there's nobody around you've got the greasy hamburger wrapper you don't throw it out the window some do but not many it's not because oh I fear I'll get caught although maybe that's in the background I just think it's wrong it's harmful to other people so we have reconceived ourselves inter subjectively we think of ourselves as part of something larger than ourselves we try to think not of the particular but what we're so-called the general will what's good for the society and he was certainly right that that is an important motivation for a lot of how people think so man is born free and everywhere in Chains pretty explicitly used to wear lock we see in the Declaration of Independence where do we see this first one it's from the Communist Manifesto it's almost should say the Communist Manifesto by Marx and Engels took that phrase almost verbatim from Rousseau so in terms of intellectual history one branch goes lock through the Declaration of Independence another one goes Rousseau through the Communist Manifesto so a question does my dog on my house or since that's a surprising way to put it is property a constituted human institution or evolved one why does that matter well if Locke is right property pre-exists the state so the simple version is simply that my dog does not own my house well what's this stuff about a dog well you might imagine that a group of us live in houses nearby each other and so we say I'm really pretty tired of always having to stay up all night and protect my fields and so were you we can take turns but that's still a lot of work how about if we get a dog because dogs are pretty great in terms of defending property they're territorial they're really bonded to particular people and they can be trained at least to bite anybody else that comes on the property in fact it's a real problem to train them not to its what dogs do that dog bit me yes he's a dog that dog did not go to paraphrase Chris Rock that dog did not go crazy that dog just went dog because that's what dogs do well alright so after a year or so things are going pretty well the dog bites anybody who comes onto the property and so we're thinking this is great I can spend much more time farming because this dog that our community has defends the whole community against anybody from outside he tries to steal stuff so one day I come home the dog smoke in my cigars he's got my beretta he's growling at me the dogs growling at me and I say yo Dawg what is that he said I was thinking you wouldn't actually have this property if it weren't for me you didn't build that I did you wouldn't have this property if it weren't for me so all this stuff about it being your property okay if I say it is but I'm the dog I got the guns well I didn't tell you the dog's name he was state as soon as we got in we named him state your state your state how do you keep the state from doing that if a group of people got together and said we'd be better off if we had somebody specialized in protecting us and that's called the state how do you keep the state from thinking it owns your house because the state really does protect it it's true well the Lockean conception was the prop that the property pre-exists hiring the dog it was mine before I just hired the damn dog and while it's true that I wouldn't have the house if it weren't for the dog the house wouldn't have been painted if I hadn't paid the painter I paid him I feed the dog that's enough his ownership doesn't extend to the entire house it's not true I could have hired a different dog or so on the other hand would say it was the acquisition of the dog in the first place that made the ownership of the house possible in a fundamental sense that's when we became a society so the extent to which the society creates property is the question the extent to which society creates property is the question if the property pre-existed society but it was inconvenient that's the Lockean story then your dog does not own your house if on the other hand it's the creation of the society itself that makes property possible the Risso vien story then the whole metaphor of the dog is flawed because when we create the society we become something better rather than individuals that already had a community it was the creation of the society in the first place but I wanted to try to give you something to understand the distinction if property is created defined and enabled by the state then my dog does in fact own my house if the dog's name is state so it's a very deep question this is a very difficult question and I want you to think about it and you will come up with your own conclusions let's talk about two cases as illustrations to court cases as illustrations of the problem of property first one is Hinman versus Pacific air transport Hinman versus Pacific air transport and you see that it was decided in 1936 the Ninth Circuit it was in California the key concept is the latin phrase ad Coelho ed Coelho means to the heavens to the sky so the legal issue was how do we do that we divide trespass and nuisance how do we divide trespass and nuisance so the simple fact I'll come back Hinman who is the plaintiff sued to enjoin Pacific air transport what is enjoying me it's a legal writ that prevents you from doing something it says you can't do this it's not a fine do an injunction is a legal writ that prevents you from doing something and so injunction is the noun in enjoying with an e is the verb and I'm sorry English is crazy so injunction with an i' is the now enjoying with an e is the verb Hinman asked the court to enjoin pacific air transport transport the defendant from flying its ear pain planes over his house and separately asked for damages resulting from the flights that had already occurred so he's asking for an injunction in a tort judgment both an injunction and a tort judgment the facts are that airplanes that are operated by pacific air transport regularly flew over his farm they really did there's there's no question that they did that pacific air transport admitted that they did that he communicated a couple times with them I think sometimes by like killing your dime airplane stop flying over my land but most of the time by letter you damned airplanes please stop flying over my land they continued these flights he then sued arguing that the Edco Whalum rule gave him the right to prevent aircraft from flying above his land and that such rights were trespass so let's go back so just to give you an idea this is from the Hitchcock movie North by Northwest this 1936 these were large biplanes and they were carrying mail and cargo it wasn't a passenger service they were carrying mail and cargo but they were flying pretty low over his land and what ADCO Eila means enact the doctrine really is from the from the center of the earth so if I own a square meter of land that goes to the center of the earth and to the heavens was the doctrine of Roman law so I have some land it goes up and it also goes down now the fact that it goes down is pretty well-established so if I owned land I also owned the mineral rights underneath it if I owned land I owned the oil that's underneath it for example so I can sell I can tear those apart I can sell you the mineral rights but not the surface or I can sell you the surface and keep the mineral rights less established what about when it goes up now here's the distinction I said before that's important between trespass and nuisance trespass means that you are going on my property without my permission trespass means you're going on my property without my permission a nuisance means that you are causing me damage without my permission so the nuisance in this case is the noise and it's pretty clear that Pacific Air Transport was imposing a noise nuisance the planes were pretty low at first they started flying higher so the plane flies high enough we might say that the sound is not important enough to worry about so it's like a party next door how much sound can the people next door make well if it's really really loud that's a nuisance you can tell them to stop and if you don't you can call the police but what if it's just a little bit of noise so the point is that's a whole separate question the planes were probably a nuisance let's forget that this is a trespass case were the plains trespassing forget the noise problem were the plains trespassing well according to this doctrine that's his property and in fact 10 miles up is just as much his property as if it were a car on the surface of his land now there is no question that if Pacific Air Transport were a truck line and there were trucks going across his property without an easement that would be a trespass question is what if it's an airplane and it's pretty high well it had not been settled now it would never occur to us if you see if you have land you live in Connecticut or New Jersey you see an airplane go over about every 30 seconds now you know you probably don't hear it sometimes you do you think god darned airplanes doesn't occur to you to go to court and if you did you'd lose because of this case which tells you what the judge decided well remember that what risso said was the first man who having enclosed a piece of land said this is mine how many crimes would have been saved if you'd pulled it up and said beware of listening to this imposter you're undone if you once forget that the fruits of the earth belong to us all and the air high over the earth to know what he might have said because the judge seemed to make a decision based on what he thought was the best public use of the air above the earth so he found for the airline and he had to it's much more efficient there's otherwise too many opportunities for hold up so the judge questioned whether it was ever really the law which is what the judge does when he overturns a really fundamental doctrine without any good reason I'm not sure this was ever really though of course it was there's no question that it was the law at Ko a lemn really was the law but suppose that airplanes had to obtain permission for every piece of land they were going to fly over they're flying from st. Louis to Los Angeles to deliver cargo they're way up high it's not a nuisance it would make this form of Commerce impossible because I'd never be able to secure all the permissions of all the hundreds and thousands of landowners so the judge said there's no trespass now this was a change by the order of the judge in the nature of property rights all over the United States and without compensation the judge just thought about it and then decided what made economic sense in the aggregate is this Locker result pretty clearly or so the state is deciding what property rights what's the basis of the decision what's good for society the state is deciding how to define property rights and the basis of the decision is in this case the judges opinion about what's best for society so farmer you had this right no you didn't because the state didn't decide to enforce it didn't decide to defend it so that's an example and it's hard to disagree it's pretty hard to disagree but that's the an example of a situation where it's plausible to say rights are the product of a kind of set of social conventions about how to allocate resources in a way that produced the most value for the society and then a second case Jacque versus Steinberg Holmes I love this one this one is so great 1997 so it's pretty recent Steinberg is the defendant Steinberg sold a mobile home to jacque's neighbor the neighbor is not named in the suit it should be pointed out so what happened is there a marker there's not so I'll just use my arms it's the dead of winter let me skip forward so here's this is an actual photograph of the mobile home in its final location deep snow and the ground is frozen solid and it's a farm but it's winter deep snow the ground is frozen solid and steinberg sells a mobile home to the neighbor of Jacque but the neighbor lives at the end of a driveway that has a 90 degree turn in the woods so there's a really short 90 degree turn in the woods there's no way to get the mobile home around that corner they could cut down trees but they don't want to do that because those are jacque's trees they're going over his land to get to the neighbor or the the road is on the border between the land they can't cut down the trees so what Steinberg says is yo Jacque can we take this mobile home and just run it right across your field it's frozen solid it's not going to hurt anything so we'll just plow it and then we'll run it across he says no it turns out that he had lost an adverse possession suit a few years earlier and was very worried about this kind of thing what is adverse possession adverse possession means that there's something that's yours but you're not using it and I am using it beyond a certain point the common law recognizes my ownership over even though you own it formally so the way this usually happens is I have some land you have some land and we have a fence but the fence is actually on your property the surveyor did it wrong and the fences on your property we both agree the fences on your property well after 20 years I say you know I think that the fence is actually on the property line you say oh hell no we knit we both know the fence is entirely on my property and I said yeah but there was a fence I was using this land right up to the fence the judge will usually find for me the fence becomes the new de-facto property line because of adverse possession because I had possession of it with York knowledge and consent and we didn't write anything saying that this was an easement I have de facto possession and that possession is 99 percent of the law so adverse possession then becomes actual possession well this is had this had happened to Jacque Jacque didn't want to end up giving an easement to these people to be able to drive across his field so he decided to nip this in the bud they send him a letter he said no they sent him a certified mail letter saying please let us do this he said no so one day they just did it and you can see it doesn't look like the ground is damaged here and it wasn't in fact no one said the ground was damaged what they did was they took a plow and then they ran the moat they used a truck to pull the mobile home across the frozen ground is only about a hundred yards it's only about a hundred yards all they're trying to do is deliver the mobile home to the neighbor now is Jacques a jerk probably what happened well what should happen Jacques called the sheriff sheriff comes and said Steinberg did you really take this mobile home across this land Seabrook says yes I did Jacques is a jerk so the sheriff says whoa that's outrageous you have to pay a $45 fine here's the ticket you had to pay a $45 fine well what kind of property right is that said Steinberg forgive me said Jacques so the owner of the land said that's not sufficient punishment because it clearly didn't deter this person from trespassing on my land so Jacque sued Steinberg for trespass the jury awarded the awarded Jacque $1 in nominal damages and $100,000 in punitive damages because there's no damages so you tore up the snow a little bit so his actual damages were one dollar problem was Wisconsin law doesn't allow a punitive damage award unless the jury also Awards compensatory damages and which that they didn't require and so the the plaintiff appealed so it had been set aside so the jury found for the landowner saying you're right that's not right hundred thousand dollars in punitive damages you don't get to just violate my land even if you didn't do any damages who does this sound like well that's more like luck in social terms clearly I should be able to take that across it doesn't actually hurt job and it really helps both Steinberg and the person who wants the mobile home but that the the jury found for damages and then it was appealed because it was pointed out that the law didn't actually allow punitive damages in the absence of damage the law didn't allow punitive damages in the absence of damage so this is one of the reasons that I like tort cases the judge who heard the case finally cited an Old English tort case from 1814 and it's hard not to read this in a Monty Python voice but I'll try a landowner was shooting birds this is from 1814 so this is an Old English tort case landowner was shooting birds in his field it was approached by the local magistrate the magistrate is the sheriff the sheriff shows up who wanted to hunt with him well that's pretty weird so the guy says no Sheriff you cannot hunt with me but the magistrate proceeded to hunt the landowner continued to object the magistrate threatened to have him jailed and dared him to file suit although little actual harm had been caused the English Court upheld damages of 500 pounds explaining in a case where a man disregards every principle which actuates the conduct of gentlemen what is to restrain him except large damages woe is ungentlemanly behavior actually the issue that's pretty subjective it was a trespass case so the judge in this case in 1814 comes up with a hypothetical this is one of the best things I've ever read suppose a gentleman has a paved walk in his paddock before his window and a man intrudes and walks up and down before the window of the house and looks in while the owner is at dinner is the trespasser permitted to say here's a Happiny for you which is the full extent of the mischief I had done would that be a compensation I cannot say that it would be so you imagine the gentleman sitting down to dinner and he looks out and he says Edna he's here again he's watching me while I'm at my dinner well he's walking on the paved part he's not hurting anything except he's violating my property and the reason why we have a state in us in the first place is to secure my rights to that property and my rights are not conditional on what society or other people want this is my property and so the judge in Steve Burt found for the plaintiff and the claim was that in the plaintiff is jock who is the land owner the right to exclude has social benefits the individual has sovereignty over property the goal of home ownership is to promote civic responsibility to care caring for your property actually provides a solution against violence so one of the reasons the judge gave is interesting suppose that the only solution that the law offers is that $45 fine what is Jacques likely to do well suppose they try this again Jacques is going to shoot Chuck's gonna start shooting because the state is not protecting his property rights now I think most people are probably sympathetic to this too the question is how do you reconcile the findings in these two cases I think in both cases the social right thing to do would have been to violate the property right but in the second case the violation was so narrow and so individual that we're going to find for the landowner in the first in the first case the airplanes the property that we're talking about is so enormous and of such big consequences for a restriction of Commerce that we might find in favor of society over the owner of the individual so there's two views here of property property might be a bundle of sticks it might be decided by majorities or by judges that are chosen in a republic and that's that's the Hinman decision so rights in personam are rights against a small and defined class you have the rights that are specified by the state only so I have the right to protect myself against trespass by trucks but not by airplanes or we have the right to exclude majorities or others be damned and those are rights in rem rights against the large and indefinite class so you have the rights unless they are prescribed and so either I have the rights the state grants me and everything else I have not or I have all the rights that the state does not specifically say you do not have those two views of property are always in conflict okay a lot of y'all are about to fall asleep we're going to make this we're almost done you're going to make this Jake your head a little bit a little bit come around here these two views of property I don't think you can say that either one is always correct I don't think that you can say that either one is the one that we always use they're both sort of analytical extremes but to understand the property law of most countries you need to recognize that these two things are always in tension so a few definitions Liberty I am at liberty to use some product P means that I have no duty to refrain and what Hobbes would have said is that we have too much Liberty in the state of nature all of us had no duty to refrain no one had any duty to refrain I had my stuff and I had your stuff you had your stuff and I had your stuff so there's no ownership there's just Liberty I have a right to P means that I am at liberty to use P and others are not at liberty that's ownership that's the difference between a right and a Liberty if it's a Liberty everybody can do it if it's a right I can do it and you can't if we're talking about property so we're talking about a property right so a property right in the full sense implies a right to say no if I can't say no it's not a full property right there's three ways of protecting property we can have a property rule so there's no transfer without my permission and that would include trespass transfer means that you're using it temporarily there's no transfer without permission a liability rule would say that there's no transfer without compensation and the way the law is going to work is pretty different in those two instances in the first case we would have to have threats of punishment in the second case we would have threats of fines probably including damages that are large enough to deter but a property rule and a liability rule are quite different and an innate ability rule means no transfer at all so it is certainly not true that property always requires alienability most people I think would claim that we have autonomy we own our own bodies now my ownership of my own body does not allow me to punch you in the nose because then I'm infringing on your rights to your body but can I sell myself I can rent myself because I can get a job but I can't even rent myself for anything because prostitution is illegal most places at least in the United States so there even some things that restrict my ability to rent myself there are limits on what the law will allow me to accept money to do but I certainly can't sell myself in the sense that I can become a slave so there are conditions where ownership might also still involve in alienability so there were truths that the judge was trying to track in the Hindman er case he wanted to and these are the sort of truths that you should worry about in a property right system these are the truths you should worry about in a property right system what institutional framework enables people to live well together what enables people to mind their own business and how do we avoid creating property rights that empower people to hold each other for ransom so in the case of Hinman in effect every land owner could have held up the airlines for ransom and we'll talk more about this later in the context of rent seeking so the this is I encourage rent seeking and I haven't defined that yet but it is one a foreshadow so a working or evolved property system puts people in a position to produce puts producers in a pitched position to trade fosters actually fosters creative destruction if I come up with the iPod Sony cannot say wait we sell Walkmans it's true that Walkmans aren't nearly as good as ipods but we're going to go out of business a lot of people are going to use jobs iPod should be illegal companies try to do that but we actually want to encourage creative destruction better products should replace worse products we want to limit externalities both in the forms of pollution and common-pool resources we want to limit transactions cost we want to enable producers to have their businesses grow and yet it also should conform to moral intuitions about justice and we've talked about this in the previous class it's not clear you can do all these seven things you're trying to navigate trade-offs why then is private property so important because private property could be state common open or private well it allows individual autonomy and self ownership it allows use of the price mechanism and signals about scarcity which is what I said at the outset was important about capitalism so there's a problem with state property because we can't use the price system it internalizes externalities on common or open property one of the readings for today was Garret hardens piece on tragedy of the Commons and we'll talk more about that later but cotton Hardin was actually wrong Hardin was mistaken that it was necessary for the state to intervene it might be useful and he may be right that it's useful but another solution is to use private property unexpectedly maybe we can also solve the controversy of Locke's proviso so we'll talk more about that later but we're going to need to explore the problem of truly voluntary exchange to do that thank you for listening I'll see you on Wednesday you

Channel: Duke University Department of Political Science

Views: 46,446

Keywords: Michael Munger, macroeconomics, Duke University, property, capitalism, greed, voluntary exchange, consequentialist, natural rights, John Locke, Thomas Hobbes, Jean Jacques Rousseau, Hinman v. Pacific Air, Jacques v. Steenberg Homes

Id: HQPeJZ7dXqM

Length: 62min 17sec (3737 seconds)

Published: Sat Apr 02 2016