[Editor’s note: the following is an essay by Dr Tibor Machan, professor emeritus in the department of philosophy at Auburn University, and current holder of the R. C. Hoiles Chair of Business Ethics and Free Enterprise at the Argyros School of Business & Economics at Chapman University in Orange, California. He is also a research fellow at the Hoover Institution at Stanford University, an adjunct scholar at the Cato Institute, and a former adjunct faculty member of the Ludwig von Mises Institute. Machan is a syndicated and freelance columnist; author of more than one hundred scholarly papers and more than thirty books. We are extremely grateful for his generosity in regards to sharing this article.]

Private Property Rights

The first step in the destruction of capitalism must be the abolition of the right to private property. Marx and Engels were clear about this in The Communist Manifesto. And many who sympathize with his idea of a socialist political economy agree. This is one reason many such thinkers and activists are champions of land use, eminent domain and related legal measures that render even the most personal of real property subject to extensive government control.

Of course, there are others who have argued that the right to private property is not only the basis for vigorous commerce but also the foundation of other individual rights, including freedom of speech, freedom of religion, and freedom of the press. It is arguably, in a somewhat roundabout way, the conceptual foundation of the right to freedom of political participation. Without some safe haven, one’s private domain, to return to after the vote has gone against one’s way, one will be vulnerable to the vindictiveness of the winners! And political advocacy without exclusive jurisdiction over one’s domain is difficult to imagine since advocacy, support and such political activities could not be carried out independently of other people’s permission.

Accordingly, it is no mere academic curiosity whether the idea of private property rights is well founded, sound, or just. Within American political and legal history there has been some confidence in the soundness of this principle but the basis of it has not gone unchallenged over the last two centuries. One need but consider the recent work by Liam Murphy and Thomas Nagel, The Myth of Ownership, Taxes and Justice (Oxford University Press, 2001) to appreciate how vulnerable is that confidence. Indeed, it is mostly members of the discipline of economics who see merit in the idea of private property, and then not as a feature of justice but more as a feature of an efficient system of resource allocation.

Yet, there is reason to think that the right to private property is a good idea, that everyone should be understood to have this right and that the institutions built upon it should be preserved. Indeed, they should be extended into areas where other ideas have held sway (for example, environmental public law). Let us consider this idea, then, and see whether we can be confident in its validity as a sound political-legal concept.

From Mixing Labor to Rewarding Good Judgment

John Locke advanced the theory that when one mixes one’s labor with nature, one gains ownership of that part of nature with which the labor is mixed. Thus, for example, if I gather wood from the forest for a fire, or for materials to build a shelter, I have a “natural right” to what I have gathered, inasmuch as I have “mixed my labor” with it and to that extent put some of myself into it. Since, by Locke’s account, I evidently have a right to my life, I would then have a right to what this life is invested in, provided it does not violate someone else’ rights. This includes my labor, as part myself, and what it produces whether as something I deserve or something I possess before others to inadvertently.[i] Though Locke held that nature is initially a gift from God to all of us, he argued that once we individually mix our labor with some portion of it, it becomes ours alone.

Locke’s is a good beginning but a revised Lockean notion, more promising that that of Locke’s, has been advanced in current free market thought by way of a theory of entrepreneurship, an idea advanced at about the same time by philosopher James Sadowsky[ii] of Fordham University, and economist Israel Kirzner[iii] of New York University. The novelist-philosopher Ayn Rand – perhaps the modern era’s most fervent advocate of capitalism based on a theory of the unalienable individual right to life, liberty, and property – also emphasized the moral role of individual judgment and, by implication, entrepreneurship.[iv]

According to the entrepreneurial model, it is the judgment and its follow-up action that fixes something as possessing (potential) value (to oneself or others), thus rendering it something one is justified in making one’s own. Thus the making of such a judgment and the acting on it, together, earn for oneself the status of a property holder in what is deemed to be valuable and isn’t already owned by another.[v]

The idea here is that the rational process of forming a judgment is neither automatic nor passive on the part of individuals, be this at the point of initial acquisition or free exchange via the market place; the process itself involves both mental and overt physical effort. It begins in the mind but it is transformed into an act of labor almost immediately.

What gives this process its moral significance, so that one could see it as a justification of a system of private property rights, not merely some arbitrary way some people come by what they own? It is that it is a freely made, initiated choice involving the unique human capacity to reason things out, applied to some aspect of reality and its relationship to one’s purposes and life goals. And this capacity, being essential to leading a human life – we cannot survive and flourish without it – requires to be applied, actualized, for someone to live properly.[vi] As such, it is best characterized as the exercise of the virtue of prudence as applied to a vital aspect of one’s life, namely, productivity.[vii] One exerts the effort to choose to identify something as having potential or actual value. This imparts to it a practical dimension, something to guide one’s actions in life. Whether one is correct or not in any given instance remains to be seen, but in either case the judgment has as its social significance to bring the item under one’s jurisdiction on something like a “first come, first served” basis. It is this that may be seen as that important element of capitalism, namely, productivity, that has, unfortunately, been treated as something like an instinct or drive, as in “the profit motive,” which is widely admitted to be the source of much of capitalism’s capacity to encourage prosperity.[viii]

For example, assume that George identifies some portion of unowned land as of potential value. Having made (and recorded, as in homesteading, in the community) this judgment, George now has rightful jurisdiction over the property, so that others have no authority to prevent him from exploring it for oil, minerals, or use as a museum or a private home. His judgment may have been in error – the land may turn out to be unproductive, or otherwise unsuitable for his purposes. But, by his having first made and acted upon the decision to select the land, he has appropriated it. This is the most peaceful approach to wealth distribution, based on the moral significance of having prudently acquired something that may be valuable.

On this model, then, the appropriation of items in nature has moral significance because it exhibits an effort of the moral virtue of prudence, of taking proper care of oneself and those for whom one is responsible. George’s attempt to exercise the virtue of prudence by his judgment and subsequent use of what he has chosen to appropriate is potentially morally meritorious. Under this description, the act of appropriation is a moral act. Apart from actual outcomes, George’s exercise of his judgment here is prima facie valuable as an expression of his prudence, his industry, good sense, practical savvy. All of this being so, in order to live as a moral agent, as one responsible for oneself and perhaps others, George must be free to make such attempts without intrusion by others.

Critics would see such acts not as morally worthy, but as acquisitive or possessive, implicitly deeming as morally insignificant – a person’s attempt merely to benefit himself or one’s loved ones. Without supporting argument, the critics implicitly reject the idea that advancing one’s own well being, aiming for one’s own prosperity, is something morally negligible or demeaning.

Other critics then move on to reject the very institution of private property rights on the ground that it lacks a moral base, so that ownership itself is treated as artificial, conventional, even a myth.[ix]

The critics are mistaken because they fail to appreciate that the agent who is acting to advance his or her own interest is worthy of having this done. Certainly, if others, just as human beings, are worthy of beneficence, the agent must also be. And the agent is far better positioned to know how to benefit himself than are others, which makes the self-interested conduct for more likely to be successful than acts of generosity or charity. Even more importantly, however, the task of life is human excellence and each person ought to practice the virtues that achieve it, including the virtue of prudence. Private property rights make this possible, whereas its denial does not.

The case in support of private property rights is merely the beginning of the development of an elaborate legal system of private property rights. In complex social contexts such as industrial society, property acquisition occurs via thousands of diverse acts of discovery, investment, saving, buying and selling, with willing participants who embark upon the same general approach to life. Nor is anyone coerced into one particular approach, which accounts for what Harvard University philosopher Robert Nozick made note of in his defense of capitalism: the system’s hospitality to diversely conceived utopias, to experiments with great varieties of human conceptions as to the good social life. This is evident in all the experimental communities, churches, artistic colonies, economic education and scientific organizations that abound in what has come to be perhaps the largest, most closely capitalist, private property respecting society in human history.

Applied Rights Theory

Theoretical defenses of the system of private property rights do not begin to answer all the questions concerning the best application of that system with regard to the multitude of complex problems involving acquisition and use. Though the 1980’s ushered in the global movement toward privatization, including Eastern Europe’s substantial rejection of the planned economic system, we are far from having full confidence in the concept of private property rights to serve as a foundation for a sound socio-economic system. As we have seen, this lack of faith is not due essentially to problems inherent in the system of private property. Rather, resistance comes from the philosophical climate and attitude that has surrounded those who are perhaps the most visible beneficiaries of private property, namely, commercial agents, people in business, and entrepreneurs. Though countless others are just as much beneficiaries, this is less obvious. Consequently, capitalism is condemned roundly for lack of fairness and for permitting great inequities of wealth, as if these would not arise or would be more effectively addressed by another system! It is the simple failure to consider the alternatives to capitalism, coupled with an ignorance of its widespread benefits, that nurtures the anti-capitalist prejudice.

Defenders thus argue that the capitalist system has proven itself in comparison to all other alternatives. Furthermore, when problems do arise within this system, the courts adjudicating the difficulties can arrive at appropriate solutions concerning particular applications of the right to private property, in everything from radio signals to frozen embryos, and from the air mass to bodies of water. Without elaborate legal and technical discussion, which would be prevented within alternative models, the great potential of the system of private property will remain unexploited – for example, with respect to environmental and ecological concerns.

Thus, there appear to be two closely related candidates for grounding the system of private property rights. One is that the system is necessary for the provision of “moral space”; the other is that it makes the realization of prudential conduct possible vis-a-vis our natural and social world. (Natural in the case of initial appropriation, and social in the case of voluntary trade). Unless these are sound, the system of private property rights is eventually likely to be defeated as a political-economic model for the modern world.[x]

National Debt and the Tragedy of the Commons

We can now be practical about this topic by addressing an arguable public policy result of the weak role of private property in our legal system. This consequence is different from the more obvious problems identified by economists such as Ludwig von Mises and F. A. Hayek who have noted throughout that without private property rights the price system is corrupted, leading to the development of widespread economic inefficiency in the community.

Over 2500 years ago Aristotle demonstrated the social value of the right to private property when he said that “that which is common to the greatest number has the least care bestowed upon it. Everyone thinks chiefly of his own, hardly at all of the common interest; and only when he is himself concerned as an individual. For besides other considerations, everybody is more inclined to neglect the duty which he expects another to fulfill; as in families many attendants are often less useful than a few.” Thucydides noted this as well when he said, “[T]hey devote a very small fraction of the time to the consideration of any public object, most of it to the prosecution of their own objects. Meanwhile, each fancies that no harm will come to his neglect, that it is the business of somebody else to look after this or that for him; and so, by the same notion being entertained by all separately, the common cause imperceptibly decays.”[xi]

Garrett Hardin is to be credited with coining the modern expression of this problem as “the tragedy of the commons.” Hardin argued that, without enforceable borders identifying which area belongs to whom, the commons – that is, all public resources – tend to be overused, not from human greed, but because each user quite understandably wants to maximize the yield of his endeavors whatever the objective, commercial, scientific, educational or whatever. (The objective, by the way, need by no means involve economic or any other kind of private gain!)

The principle of “the tragedy of the commons” has been applied widely to the analysis of environmental problems, and some have credibly concluded that, without extensive privatization of public properties such as lakes, rivers, beaches, forests, and even the air mass, environmental problems will remain largely unsolved. In the commons the “solution” is democratic politics which tends to come to vested interest driven legislation that would seem to exacerbate the tragedy, not avoid it.

It seems to be generally agreed that there are inherent problems in common ownership, but less apparent, evidently, that what is required to solve the problems is to transfer common ownership into private. The political will to effect the solution is lagging far behind the analysis that identified the solution. Nevertheless, in this area at least, the identification has been made.

What has not been widely noticed is that a “tragedy of the commons” exists in our public wealth, kept, as it were, in our national treasury. We have here what by law amounts to a common pool of resources from which members of the political community will try to extract as much as possible to serve their purposes. Whether it’s for artistic, educational, scientific, agricultural, athletic, medical, or general moral and social progress, the national treasury is the trough for all citizens in a democratic society. Of course, everyone has noble reasons to access it, and their goals are usually sufficiently thought out so as to inspire confidence in their plans. All they need to further their goals is support from the treasury, so they devote great energy, will, and ingenuity, to extract from the commons whatever they can for their purposes.

Unfortunately, as both Aristotle and Hardin knew, the commons are fated to be exploited without regard to standards or limits: “that which is common to the greatest number has the least care bestowed upon it.” This explains, at least in part, the gradual depletion of the treasuries of most Western democracies. Japan, Germany, Great Britain and the United States are all experiencing this, as are numerous other societies that open their treasuries to the public for uses that are essentially private. How else can we view education, scientific research, the building of athletic parks, upkeep of beaches and forests and so forth, than as the pursuit of special private goals by way of a commons, the public treasury?

Some might claim that all these goals involve a pubic dimension, a public benefit. Indeed – so does nearly every private purpose, including the widely decried phenomenon of industrial activity, which produces the negative public side-effect of pollution and the depletion of a quality environment. Private enterprises can certainly have public benefits, but their goal is to serve the objectives of private individuals. When the public treasury is tapped for, say, AIDS research, the primary beneficiaries of success would be those with AIDS, not the general public; when theater groups gain support from the National Endowment for the Arts, the primary beneficiaries are those working in theater; when milk producers gain a federal subsidy by price regulation, or by being compensated for withholding production, the dairy farmers are the first to gain, not some wider public.

So we find, one after the other, to the thousands, “public” projects which in reality are supporting private goals, first and foremost. One need only observe who lobbies for the money. But, since the “treasure chest” is public property, it is impossible to rationally allocate the wealth consistent with proper budgetary constraints. Such constraints arise from considering the implicit limits on spending that are determined by the wealth of the individuals who comprise the society, as well as their credit worthiness. Without reference to specific individuals or companies of such, no limits and thus no clear constraints can be identified. Instead, politicians spend to the extent that they can borrow and print money, using only anticipated funds; or, they reduce the value of existing moneys, funding requests with hardly any restraint other than public opinion. This tendency is fueled by the urgency of various groups of constituents, who express their urgent desires in the ballot box. The inevitable result is the tragedy of the commons, as the public treasury gets looted

Without structural remedy, there is no end in sight to this process. Only when the country loses its credit worthiness in the world community will this near-Ponzi scheme come to a halt. The country will then have to declare bankruptcy, leaving those citizens who had nothing to do with the tragedy – our children and grandchildren – holding the empty bag. Such is the final end of treating with cavalier disdain people’s right to private property and individuals’ efforts to enrich themselves. When intellectuals commonly pit human rights against property rights, as though the right to what one owns is not a human right, we are increasingly impoverished, not just individually, but as a society and government as well.

According to Bernard Mandeville and others, “private vices [make] publick benefits.” Here is economic insight, but moral ignorance: indeed, if we denigrate the private pursuit of prosperity, we will produce general misery for everyone, but what these political economists failed to realize is that the striving for personal prosperity is not a vice, but an aspect of the virtue of prudence. It is private prudence, not vice, that leads to public benefit, so we ought not demean that which enables us to obtain personal prosperity.

An additional fallacy common to social philosophizing is the view that what really matters as we consider public affairs, is the general good, a rather vague idea of collective utilitarianism whereby the “greatest happiness or good or well-being of the greatest number” is the central goal of politics. It is not to our purpose to enter that debate here. Suffice it to say that such remnants of tribalism draw heavily on an initial discrediting of the worthiness of individual human lives.

Some Moral Mistakes About Property Rights

Philosophers Peter Unger and Peter Singer, as well as others, have argued that we owe our wealth to others who are much more poor than we are around the globe. Unger claims that we “must give away most of [our] financially valuable assets.” Presumably, then, others, in turn, may take these assets from us, via the legal system and its administrators, in the form of taxation or similar schemes of redistribution. Which then could well recommend socialism as the proper political order for human community life.

What is wrong here? Unger’s precept not only does violence against our right to private property but also demeans us because it grants us no chance to flourish unless we pay a ransom to others. Nor does it credit human beings with the capacity to be generous, a moral virtue that needs to be practiced voluntarily, not as a result of legal regimentation that robs the agent of any moral credit for doing the right thing.

The call for confiscatory charity holds, furthermore, that while others are entitled to our wealth, we aren’t. As if we were less important, less significant than those others. It also fails to recognize that often others who lack wealth either choose to live that way because they judge it proper for themselves to do so, have made mistakes that have led to their poverty, in which case they may not even deserve generosity, or, more importantly, have been prevented from pursuing sane economic policies in their lives and for this none of us should be punished by depriving us of the fruits of our own labors in a relatively free market economy.

The ethics of altruism, the broader ethical theory underlying Unger’s claim, is seriously flawed. But neither is it the case that there is no moral virtue attached to helping others. Indeed, an ethical outlook that places the individual agent’s overall well-being first has a great deal of room for generosity, benevolence, kindness, compassion and similar other-directed practices and attitudes. But it recognizes that the pursuit of happiness for the agent is his first though not only ethical responsibility.

The institution of private property is the societal principle that renders the practice of such an ethics practically possible. This principle does not rest on crass selfishness, narrow self-interest or automatic utility maximization. It rests, instead, on the idea that everyone has the responsibility to choose to live properly and without a sphere of personal jurisdiction this would not be possible to achieve in one’s community. Accordingly, it is a vital element of a just human community.[xii]