Why Have Property Rights?

The purpose of this essay is to flesh out some aspects and properties of property rights.  For many readers, this is probably redundant.  Nothing I will write here is original or particularly new.  However, following recent conversations I have had, I feel it is worth it to rehash some of these ideas.

Property rights, defined as the right to use resources*, exist to help resolve conflicts.  In a world of scarce resources with more than one person in it, conflicts will inevitably rise.  The prototypical Robinson Crusoe, who finds himself alone on a desert island, need not worry about conflicting uses of resources.  He can choose to eat the berries or plant them, and there will be no other objections to their use.

However, once Friday comes ashore, now there is the risk of conflict.  If Robinson wants to eat berries and Friday wants to plant them, then there is a conflict; doing one necessarily means the other cannot happen.  The clear delineation of property rights, who owns the berries, in this case, helps solve/prevent the conflict.  If Robinson and Friday agree that Robinson owns the berry bushes and Friday owns the fruit trees, then Friday can use the fruit trees and Robinson can use the berry bushes to their hearts’ content.  Indeed, they could even trade with one another!

But, what about if there are conflicts with the use of the resources?  Does Robinson have any right to object to Friday’s use?  In other words, are property rights absolute?  Let me be absolutely clear by what I mean by “absolute,” and here a very little mathematical formalism would be helpful: By “absolute,” I mean that the use of the resource will be determined by the resource owner with a probability of 1.  If Joe owns a resource, and its use is determined by Joe and Joe alone 100% of the time, then his ownership is absolute.  If the probability is less than 1 at any time, then the property right is not absolute.

Going back to Robinson and Friday, let’s say that one of Friday’s trees is a coconut tree.  I have already said above that Friday has the property right to the trees.  He can use the trees for his purposes.  But does Friday and only Friday determine how those resources are to be used?  Can we think of an example where his right might be restricted, that is its use would not be determined by Friday?  Yes: Friday may not use his coconuts to bash in Robinson’s skull.  One can think of many other examples.  Therefore, Friday’s property right is not absolute.

Another example: I own a crowbar.  I can use that crowbar for many things, but I cannot use that crowbar to pry open my neighbor’s door without his consent.  Therefore, the use of my crowbar is not 100% determined by me.  For a very select few set of cases, the use is determined by my neighbor.  The property right is not absolute.

The discussion of using property to harm another (whether intentionally or not) is of major importance in law and economics.  As Ronald Coase pointed out when property rights are ill-defined, that is to what extent their use is defined, then conflicts arise.  If rights are absolute, then conflicts are inevitable and cannot have a just resolution.

To be clear, just because property rights are not absolute does not mean they are arbitrary.  They cannot be revoked, renegotiated, or reneged without due cause.  But the glorious thing about common law is that it allows for the flexibility needed to address conflicts which are at the present unseen but may arise down the road without sacrificing the right itself.

This blog post is a little over 600 words.  I will not pretend to have done justice to the issue of property rights here.  For a more detailed discussion, I’d recommend the following readings:

The Property Right Paradigm, by Armen Alchian and Harold Demsetz

Toward a Theory of Property Rights, Part I and Part II by Harold Demsetz

The Problem of Social Costs, by Ronald Coase

*Source

3 thoughts on “Why Have Property Rights?

  1. Interesting. Jon. Would you say that we have absolute property rights in ourselves? The exclusive use of our own bodies?

    And the crowbar:

    Therefore, the use of my crowbar is not 100% determined by me. For a very select few set of cases, the use is determined by my neighbor. The property right is not absolute.

    I disagree, Jon, is it not you who decides to NOT use your crowbar to pry open your neighbor’s door without his consent? You have 100% control of the use – or non-use – of the crowbar, and decisions to use or not use it to pry open your neighbor’s door are separate ethical and moral considerations not directly related to your property right in the crowbar. You may value the mutually beneficial understanding of nonaggression and cooperation you have with your neighbor more than you you value any possible gain from using your crowbar on his door.

    Some people make a regular habit of using their crowbar to pry open their neighbor’s door, because their moral compass doesn’t work as well as yours or mine. Would you say that person has a greater property right in their crowbar than you have in yours, or is there something else going on here?

    Like

    • Any non-approved use of the crowbar leads me to prison (or some kind of fine). So, we cannot say I have the right to use the crowbar in that fashion.

      Same thing with a human body. We do not have 100% authority over the use of our body. I cannot kick you in the teeth, can I? 🙂

      Like

      • Any non-approved use of the crowbar …

        Non-approved by whom?

        Same thing with a human body. We do not have 100% authority over the use of our body. I cannot kick you in the teeth, can I?

        Yes, you can. Hopefully there are reasons you won’t – perhaps you value living in a peaceful and cooperative society and value my cooperation and friendship more than the temporary satisfaction of kicking me in the teeth, and then watching nervously over your shoulder for the rest of your life. 🙂

        Maybe you firmly believe it’s just wrong to kick other people in the teeth, so you refrain from doing so, but you certainly COULD could kick me in the teeth if you chose to do so. I have a negative right to NOT be kicked in the teeth, and you would be violating my rights by doing so, but I don’t think your ownership and control of your foot is in question. I don’t imagine having property rights in your foot.

        I’ll use a Crusoe example. I like them for their simplicity. Crusoe COULD have killed Friday as soon as he saw him, to protect his previously undisputed property rights to everything on the island, but he didn’t. No doubt he valued companionship and the prospect of future cooperative enterprises more than he feared any risk to his property rights. On balance, having Friday around was better than not having him around. Of course Friday had a negative right to not be killed, deriving from his right of self ownership.

        Before Friday, (on Thursday perhaps) Crusoe had complete and undisputed property rights in that dangerous looking club he used for hunting. Would you say he that LOST some property rights in it when Friday showed up?

        I see the NAP as a very useful guideline, similar to the Golden Rule, and one of the best ways ever conceived to avoid death and injury, but \I don’t see it directly affecting property rights, and it certainly isn’t inviolable.

        BTW your going to prison would most likely result from a Mutual Defense Agreement I and others are parties to that prohibits teeth kicking and prescribes punishments for offenders, not any property right others might have in your foot.

        Hopefully you’re not saying our rights are granted by others.

        Like

Comments are closed.