Justifications for the institution of private property

JUSTIFICATIONS FOR THE INSTITUTION OF PRIVATE PROPERTY

By Kavosa Assava and Quincy Kiptoo.

Introduction
Most of the western traditional justifications for the institution of property are roughly divided into two; there is the notion of property as pre-social, a natural right expressing the rights of persons which are prior to the state and law[1] and the notion of property as social, a positive right created instrumentally by state or law to secure other goals[2]. Analysis of property is an ever continuing process as the meaning, function and existence of the institution of private property is not constant but changes over time, as the dominant classes of society change, so does the institution of private property[3].

Theories on the justification of property rights try to answer three fundamental questions:

       I.             What principles decide which individuals have ownership rights over what things[4]?

    II.              What are the social or public functions of private ownership?

 III.             What individual interests are served by the existence of private property as opposed to some other       property regime?[5]

A wide variety of justifications for private property have been offered. First, the institution of property provides an effective way of managing society’s resources.[6] Second, the institution of property provides a powerful set of incentives for persons to make investments in and engage in effective management of the resources they control i.e. it allows owner to “reap where he has sown.”[7]  Third, the institution of property facilitates the making of contracts regarding the use and control of resources.[8] Fourth, property is an important source of individual autonomy. Property provides the material means for individuals to achieve a degree of independence from others.[9] Fifth, property is important to the preservation of liberty.[10] Morris Cohen once wrote that property is a form of sovereignty; the right to exclude others from things is a source of power over other people.  We will discuss a few theories that justify the institution of property in this paper which include, occupation, utitlitarian, labour, personhood, economic and lockean theories.

Occupation Theory

This theory attempts to answer how things become the subject matter of ownership, we enjoy it when we are given things by people who pass ownership of the things to us, we however, do not question where this chain of ownership began, why was ownership of the thing recognized in the first place? Hugo Grotius argues that natural resources of the earth were given to mankind in common[11], since property was communal then private property is a human being invention, which was for his needs, this developed demand which consequentially led to scarcity, so to ensure peace and order and avoid disputes a system of allocation was to be adopted.

The system which gave rise to the institution of private property was first occupation, hence the occupation theory. The essence of this theory is that since all property was communal then private property arose through the express or implied consent of mankind. Express consent was in the form of agreements whereas implied consent was on the basis of first occupation. This is the first basic principle; that first occupation gives rise to private property[12].

Difficulties with this theory arise in the event of multiple efforts or competition at first occupation, the landmark decision of Pierson v Post[13] attempts to answer this, case was about trespass in which both Pierson and Post were hunters, Post was hunting on an abandoned beach, having caught sight of a wild fox, he led pursuit for it and had the fox in his gun-sight. Before Post had any chance of killing the fox, Pierson intercepted his pursuit and killed the fox and took away the carcass. Pierson's interception took place with the full knowledge that Post was in hot pursuit of the animal. Post claimed that his pursuit had given him property in the fox that had now been interfered with by Pierson. Judge Tompkins held that actual capture and control of the thing in question could give rise to first possession. The hot pursuit of Post was insufficient to give him any property in the fox. Furthermore, it mattered not that Post could have killed the fox had it not have been for Pierson's interception, possession meant a clear act whereby the entire world understands that the pursuer has "an unequivocal intention of appropriating the animal to his individual use’[14]. Two principles emanate from this decision; 1^st notice to the whole world through a clear act, 2^nd the reward of useful labour.[15]1^st principles states that first occupation takes place when there is a clear act to the whole world that control has been taken by the possessor. The second principle suggests that first occupation takes place by mixing one's labour, for example, by hunting the thing in question. The two principles work hand in hand as labour is important only in so far as making that communication effective. The rule emanating from the occupation theory of private property is that objects become the private property of individuals when such individuals have taken occupation of them.

It has been criticized as being very historical and primitive[16] as the conditions that existed during Pufendorf’s days no longer exist. However, it remains important in present day property law;

a.       It cannot be denied that the theory provides the most basic justification for private property

b.      The principle line of thought developed in the occupation theory still continues to be reflected in modem property law. In Parker v British Airways Board[17] a passenger who found a gold bracelet in the executive lounge of an airport was allowed to keep the proceeds of sale. His finding had given him an ownership right binding on the airport which had not made any attempts to control or appropriate lost objects in a public part of the airport. The passenger had, in the context of the occupation theory, made effective notice to the whole world by picking the bracelet and taking control thereof.

c.       The occupation theory is regarded by economists to have a special role to play in the facilitation of trade and the functioning of an effective market.[18]

Utilitarian Theory of Private Property: Property a Positive Right

The utilitarian theory of property regards property as a positive right as opposed to a natural right created instrumentally by law to achieve wider social and economic objectives. The essence of a positive right it is prescribed by and protected by the state. Jeremy Bentham argues that the total or average happiness of society cannot be maximized unless there exists rights to appropriate, use and transfer objects of value or interest[19]. Jeremy Bentham rejected that there could be any notion of natural law and natural rights. In his words, ‘natural rights is simple nonsense: natural and imprescriptable rights, rhetorical nonsense, -nonsense upon stilts’[20]. All laws flow from the state, the principle of utility alone governs what we should or should not do, in other words, the principle is used by state and sovereign and its law-making authorities to command rules. Property and Laws are born and die together[21]thus even where a person is to labour on a resource his only entitlement to the resource is the guarantee that the law will assure the enjoyment of his labour. The law provides security. The greatest or total happiness in society in respect of resources will only come about if such resources are in the hands of private individuals.

Criticisms

a.       The principle is inherently vague in that it is not entirely clear how it is supposed to be applied or how utility might be measured or -assuming satisfactory criteria for measurement are devised -how the utilitarian is expected to balance one-person's gain in utility against a loss in that of another[22]?

Bentham does not provide a precise way in which human happiness can be measured, instead, in his work[23] Bentham identifies what he calls "evils" resulting from violations of private property.

1^st is the evil of non-possession: The acquisition of a resource is a good thing whereas non-possession on the other hand is an evil since the resource is simply being wasted.

2^nd there is the pain of losing since, where I do have private property and possession of things, such property performs different functions and represents to the individual different values. Not only is there intrinsic value in property but also value affection.

3^rd the fear of losing what one already has, whilst having property future acquisitions are necessary to supplement what one already has, if there is no law to protect property then this is a bad thing as the enjoyment of this property becomes sombre, furtive, and solitary[24]

4^th the deadening of industry which arises from the insecurity of labour and the resulting fruits of labour, Bentham states that only the law can prevent this four evils.

b.      It does not address the question of how people become to own resources and how initial distribution arises in the first place. However Bentham wrote during the industrial revolution period thus did not need to worry about initial acquisitions of property but just justifying property rights during the capitalist expansion.[25]

c.       Considering that in utilitarianism those with the largest amount of property will have the greatest opportunity to maximize wealth. What about those who have nothing or very little? Is the utilitarian concerned about the distribution of welfare or is the divide between poor and rich not a concern for a utilitarian?

Distribution of welfare is a concern for the utilitarian and as such applies to any justification of the theory. It takes place on the theory of diminishing marginal utility which itself needs to be balanced with the objectives of maximization of welfare.

Marginal utility of a good or service is the gain from an increase or loss from a decrease in the consumption of a good or service[26]in a nutshell an extra £1 given to a millionaire will make an negligible contribution to his welfare, whereas £1 given to a very poor person might make a significant contribution to his welfare, enabling him, perhaps, to buy a meal which he would not have been able to afford. The £1 in the hands of the poor man has the effect of maximizing welfare on a much greater scale than in the hands of the rich man. However, marginal utility needs to be balanced with the fact that high productivity requires resources to be placed in the hands of individuals who have strong incentives to work hard. Strict equality of resources will inevitably bring about a reduction in the productivity and welfare in the long run[27]. Hence the principle is the maximization of welfare to which both redistribution of welfare and higher productivity can contribute.

The Labour Theory

This theory suggests that a person is entitled to the full produce of their labour. The basis behind this theory is that a society should encourage labour and property should be distributed according to one’s productivity.[28] This theory is based on the approach that originally all property was owned in common but people had the right to appropriate this property by co-mingling their labour with it.[29] John Locke and Karl Marx, both viewed the value or theory as the connecting link between labor and ownership in that labor enhances the value of objects, a commonality leading them both to argue that the laborer is entitled to the added value component.[30] Locke used this reasoning to provide a natural rights basis for ownership and Marx used it to argue for empowerment of the proletariat.[31]

This theory arose out of the English revolution that was based upon an attack upon the institutions of the monarchy and hereditary ownership of land. This was a time when the middle class emerged after ancient and medieval times when much of the work was performed by slaves and serfs.[32] This theory fitted the times for the middle class as they began to accumulate assets by their own labour. This theory was also one justification for ignoring the interests of aboriginal as well as Native American inhabitants. The European perspective was that native inhabitants did not have an entitlement to land rights as they did not make the land fruitful by cultivation or development.[33]

This theory has the difficulty of dealing with how one separates the efforts of various labour contributions to a product, for instance in cases where more than one person contribute their labour to produce one product, for example building a house. The question here is who now has entitlement or ownership over the product. This concern is especially relevant when it involves services not directly involved in the process for example the police force in preserving peace.[34] Another fact to be considered is that most societies, through a welfare system, choose to provide support to those who do not produce anything to avoid unnecessary poverty and deprivation to those who are unable to provide adequate labour. The Kenyan Constitution provides the right to proper housing under its bill of rights which then can be argued that regardless of the fact that a person has or hasn’t used their labour, they have the inherent right to ownership of property.

The Property and Personality or Personhood Theory

This theory is based upon the view that an individual’s ability to act as a free personality requires the ability to have dominion over property.[35] A theorist, Radin, working from a personhood perspective, divided the world of objects into two categories: nonfungible or personal and fungible.[36]

Nonfungible goods are those that are instrumental in constituting their owners' personalities and as a result, nonfungible objects, such as a wedding ring, have a special value for their owners above and beyond the object's market value.[37] Fungible objects, by contrast, lack uniqueness and serve no purpose in constituting the self.[38] Radin suggested that property law should track this distinction and treat goods differentially based on their classification as personal or fungible. For example, Radin proposed to restrict injunctive relief, or property rule protection, to cases involving personal goods and to offer only compensatory damages, or liability rule protection, in all other cases.[39] Radin's insight regarding the distinction between personal or nonfungible and fungible property may be viewed as a subset to a larger phenomenon: the gap be- tween reserve price and market price. This gap may be due to the sentimental reasons related to what Radin calls self-constitution or personal embodiment. The price at which the owner will agree to sell the asset, the reserve price, will exceed the price that ordinary market participants will pay, the market price.[40]

Other elements besides sentimental value may also account for this gap. An owner, for example, may have a unique skill that allows her to extract greater utility from a rare commercial asset.[41] The essential feature of all these assets is that they have unique qualities and, therefore, lack perfect market substitutes. This lack of substitutes engenders a rational gap between the owner's reserve price and the market price. For instance a car racer who can operate a classic car at high speeds, maybe as a result of experience, is more valuable than a normal car racer. His skill is unique.

The Economic Theory

This argument supports the view that private property creates the environment where maximum productivity is created based upon the profit motive.[42] For example, consider a field used for cultivation of corn where a farmer has no property rights in the land and the farmer could not stop anyone entering the land to remove the corn. Very soon the farmer would stop cultivation because the effort involved would not reflect in the likely result to be achieved.[43]

An important factor is the ability to assign interests. If the farmer is inefficient efficiency may be enhanced by allowing the farmer to transfer his or her property interest to another who could apply more efficient techniques. This economic theory supports the profit motive and the incentive it provides for developing and seeking out ideas and processes to support productive activity.[44] This view is based upon belief in the distributive and controlling influence of the market.

Barzel argues the theory is based on economic rights. To him, the ability to derive value from an asset constitutes an economic property right and law functions merely to recognize or fail to recognize this ability.[45] Barzel views ownership as residual claimancy on the value derived from an asset with the legality of the claimancy being of no consequence.[46] He does not ignore the law but to him, the law only affects the relative positions of the multiple claimants vis-a-vis one another, making value extraction easier for some and more difficult for others. Thus, legal protection may enhance the value held by a specific owner and change the relative positions of the various owners vis-a-vis one another, but it plays still strictly a secondary role.[47]

This theory gives little credence to broader social interests. It may be in the personal economic interest for a person to maximize profits by exploitation of people and the environment which may be to the long term detriment of those factors for the society as a whole.[48]

Lockean Theory

Locke’s theory is built around notions of moral desert. As Waldron has observed, the discussion of property in the second treatise adds up to a natural law argument.[49] For Locke, the natural law is the constellation of rights and duties that God has built into the fabric of the universe.[50] It is binding on all human beings, and the content of it is accessible to them through the use of their rational faculties.[51]

This natural law confers rights and duties prior to any social arrangements people make and it imparts moral force to and constrains private interests of individuals who, if given the option, would have the potential to acquire an endless amount of property at the expense of others. Locke says, “The rules that legislatures make for other men’s actions, must, as well as their own and other men’s actions, be conformable to the law of nature.”[52] The first, and most fundamental, precept of this natural law is that human beings, as God’s property, are to be preserved.[53] Individuals are therefore bound by duty to preserve themselves and, where this obligation of self- preservation would not be undermined, they must help others to survive as well. God created the world in order to allow human beings to fulfill this duty and, because the duty is one that each person possesses in equal measure, each person is equally entitled to the use of those things, which were serviceable for his subsistence, and given him as means of his preservation.[54]

Locke’s argument on property proceeds as a sort of narrative involving three interrelated stages of human existence.[55] The first is the state of nature, which is the stage in which private ownership first develops. The second stage arises with the introduction of money, which facilitates inequality in the possession of property. In the third and final stage, communities form governments, which regulate and formalize property rights.[56]

Conclusion

Although property has been applauded for these positive functions, certain general concerns have also been raised about the institution of property.  One pervasive problem goes by the name externalities.[57] The private property strategy entails dividing the world up into separate parcels of land and discrete objects of personal property, each with its individual owner. But the owner-managers of these individualized units of property may use them in ways that have spillover effects known as negative externalities, for the owner-managers of other units of property.

Another concern about property is monopoly. Property, by its very nature, confers a monopoly of control on someone with respect to a particular resource. Every property right is in this sense a monopoly right. Granting property rights can create monopolies that do have troublesome social consequences.[58]

Another concern about property is that it leads to commodification of values and social relations.[59] Property conceptualizes the world in terms of owners dominating or controlling objects. The concern here is that the more we extend the sphere of property, the more we begin to think of things in a materialistic manner, consequently leading to the loss of society’s moral fiber.

Finally, property has long been attacked on the ground that it promotes inequality.[60] This is because property, by allowing the owner to exclude others, permits the owner to capture the fruits of the property without requiring of him to share it with the rest of society.

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[1] Views of Hugo Grotius, John Locke, Samuel Pufendorf, George Hegel and Immanuel Kant

[2] Views of Thomas Hobbes, David Hume, Adam Smith, Jeremy Bentham, Emile Durkenheim and Max Weber

[3] L. Becker, Too Much Property; Philosophy and Public Affairs, XXI, 1992, p 196-206

[4] R. Epstein, Possession as The Root of Title, 13 Georgia Law Review, 1979, p 1220

[5] Waldron, The Right to Private Property, Oxford, Clarendon Press, 1988, p 1

[6] Thomas W. Merill and Henry Smith, U. S. Law of Property, Oxford University Press, 2010, p 11

[7] ibid p 12

[8] ibid

[9] ibid p 13

[10] ibid

[11] Hugo Grotius, On the Law of War and Peace, Kelsey translation, Oxford, Clarendon Press, Book 2. Ch.2, 1, 4-5 1925.

[12] Megarry and Wade, The Law of Real Property, Sweet & Maxwell, 5th ed., 1984, p 105-106; See also Asher v Whitlock, (1865) LR 1 QB 1.

[13]  R. Posner, Economic Analysis of Law ,Boston, Little, Brown, 2nd ed., 1977 p 21-31

[14] ibid pg 178

[15] C. Rose, Possession as the Origin of Property, The University of Chicago Law Review, 1985, p 78

[16] R.H. Lowie, Incorporeal Property in Primitive Society Yale Law Journal, 1928, p 551

[17] [1982] Q.B. 1004; See also Mabo v Queensland, The Tubania case

[18] R. Posner, Economic Analysis of Law, Boston, Little, Brown, 2nd ed., 1977 p 21-31

[19] J. Bentham ,Principles of the Civil Code, 1830, p 45- 59

[20] J. Bentham, "Anarchical Fallacies" in Nonsense upon Stilts: Bentham, Burke, and Marx, on the Rights of Man, J. Waldron (ed), London, Methuen, 1987, p 53.

[21] J. Bentham

[22] N. Duxbury, Theorizing Private Property Rights, University of Manchester, Working Paper No. 20 1996 p 4.

[23] Ibid  (n.14) p 54

[24] Ibid

[25] C.B. Macpherson, Capitalism and the Changing Nature of Property in E. Kamenka and R.S.Neale (eds.) Feudalism, Capitalism and Beyond, London Press, Edwards Arnord, 1975, p 105.

[26] http://en.wikipedia.org/wiki/Marginal_utility Accessed on 6/23/2014

[27] N.E. Simmonds, Central Issues in Jurisprudence: Justice, Law and Rights, Sweet & Maxwell, 1986,  p 32; For more on utilitarianism, See also  J.J.C Smart and B. Williams, Utilitarianism: For and Against, Cambridge University Press, 1973

[28]Micheal Weir, The National Legal Eagle: Concepts of Property, Bond University Vol. 7 Issue 1 Autumn, 2001, p 2

[29] ibid

[30] Abraham Bell and Gideon Parchamovsky, A Theory of Property, Cornell Law Review Vol 90, p 566-567

[31] ibid p 567

[32] Micheal Weir p 2

[33] ibid

[34] ibid

[35] ibid

[36] Abraham Bell and Gideon Parchamovsky p 567

[37]ibid

[38] ibid

[39] ibid

[40] ibid p 568

[41] ibid

[42] Micheal Weir p 2

[43] ibid

[44] ibid

[45] Abraham Bell and Gideon Parchamovsky p 570

[46] ibid p 571

[47] ibid

[48] ibid

[49] Gregory S. Alexander and Eduardo M. Penalver, An Introduction to Property Theory, Cambridge University Press 2012, p 35

[50] Ibid p 36

[51] Ibid p 36-37

[52] John Locke, The Second Treaties of Mankind, p 135

[53] Gregory S. Alexander and Eduardo M. Penalver p 37

[54] ibid

[55] ibid

[56] ibid

[57] ibid p 14

[58] ibid

[59] ibid p 15

[60] ibid p 16