WHY IS EXCLUSIONARY OWNERSHIP THE RULE?

-- By SamWells - 21 Feb 2010

Property describes not a relationship between a person and a thing, but a relation between people with respect to a thing. Property is power over others. An owner can arbitrarily choose to exclude others from activities utilizing a thing, or else include them. Exclusion is unfair on its face, to me, given its implication that, no matter how much more good something might provide a non-owner, the owner has no duty to share. Why, then, does society promote and enforce exclusion? Three explanations predominate:

EXPLANATIONS:

1) INDIVIDUAL RIGHTS

There exists a right to the fruits of one’s labor. Labor is the process by which a person’s body or mind acts on an object. An individual has the right to exclude others from impinging on her body and a corresponding right to exclude others from the results of her labor.

2) EFFICIENCY AND EXTERNALITIES

An efficient system should internalize costs imposed on others as externalities in order to ensure responsible, economized use of resources. Exclusion of all but one actor from the use of a resource can eliminate the tragedy of the commons. If others are allowed access a resource, the amount available to an actor at time B depends not on how much the actor saved from time A to time B, but on how much the group saved or used up from time A to B. If one or more members can be expected to take more than their optimal share (and selfishness is common), the only way to prevent a shortage for oneself is to do the same, but before the others. The result is over-consumption. A like effect applies to production: if one can capture benefits created by others, one will not make an effort to do the work oneself.

3) COMPETITION

If others can be excluded from the accounting of profits from work, the resulting accumulation makes comparisons possible. Comparisons allow competition, and competition breeds excellence and the creation of more wealth. Many see this wealth as an absolute good. Because property is measureable, it becomes meaningful, and therefore plentiful. Those who have less seek to catch up to those with more, and those with more seek to pull farther ahead for fear of falling behind. Because competition operates on a sliding scale, with no baseline, productivity does not halt prematurely at “enough.”

THESE EXPLANATIONS BETRAY FLAWS:

1) INDIVIDUAL RIGHTS

While an individual does have a right to the fruits of her labor, an simple, unadorned act of will has never created an iota of wealth. Education, family environment, technological advances, income, social background, race, sex, and other factors all contract or expand the range of opportunities available to someone. This occurs independently of one’s will. No one can choose who they are at birth.

At a macro scale, the immense stockpile of financial power held by the upper 1% of society, totaling 42.7% of financial assets, by definition does not increase in value through the owner’s labor, but through the labor of others. For the wealthy, money expands without any act of the owner. No connection exists between this property and the owner’s body, and yet exclusion is allowed. The right to exclude does not arise as a right from individual acts of labor.

2) EFFICIENCY AND EXTERNALITIES

Within the sphere of property from which one excludes others, greater efficiencies often do result. Outside that sphere, however, externalities are not captured. The larger the system of concentration, the larger the negative externalities imposed on others by that system. Serious harms can result.

Also, the transaction cost of internalizing externalities through bargaining is not necessarily reduced by private ownership as opposed to communal ownership, as Demsetz argues in favor of exclusion. It is probably easier for the public to enforce a fee to cover a $1 cost imposed by an act of throwing a piece of garbage on the ground in a park than it is for a homeowner to collect $1 for each piece of garbage thrown over her fence into her backyard.

When multiple small actors’ interests are opposed to one large, consolidated interest, the small actors are powerless to negotiate. Exclusion can prevent a socially optimal outcome due to the insurmountable transaction costs it imposes in many such situations.

3) COMPETITION

Possibly, placing value on wealth does tend to create wealth, because it engenders continuous competition. This only adds value to society if the wealth added at the margin creates actual well-being. Additional wealth and increased happiness do correlate for the physically disabled. Money can cushion the blow dealt to someone by a loss of mobility or independence due to age or infirmity. For younger, healthier members of society, though, almost no correlation exists. In one study, psychologists found that “economic indicators were extremely important in the early stages of economic development, when the fulfillment of basic needs was the main issue. As societies grow wealthy, however, differences in well-being are less frequently due to income, and are more frequently due to factors such as social relationships and enjoyment at work.” With these factors in mind, I would conclude that additional wealth can bring happiness only to those who have need of it, and offers nothing to those who have enough. Because it enriches the wealthy and impoverishes the poor, strict competition through exclusion is sub-optimal.

WHAT GIVES?

If the common explanations do not fully account for the primacy of exclusion, what does?

Property is only that over which the state recognizes one’s control. Who controls the state? The upper class, because they are the politicians, or else can exert control over politicians through wealth. The result? Redistribution does not occur. It is called by most people either morally wrong (point 1) or economically inefficient (points 2 and 3). This justifies the wealth of the wealthy and sooths the economic pain of the poor through sublimation. In this way, the system perpetuates itself.