The labour of his body, and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature has provided, and left it in, he hath mixed his labour with, and joined it to something that is his own, and thereby makes it his property.
This is nonsense. Animals engage in “mixing their labour” with things all the time, they do not thereby create property. In fact, one of the distinctive things about homo sapiens is our sense of property. Not a sense of “territoriality” (“this is mine”); plenty of species have that. But the sense of “yes, that is yours and I will deal with it and you on that basis“. Property, at its most basic, is acknowledged control, a game of reciprocal constraint. I acknowledge your property in the expectation you will acknowledge mine. If that happens, social possibilities massively expand.
[ADDENDA Hopefully the following clarifies and extends my argument in ways which are more persuasive: but that is a virtue of blogging; offering ideas for comment and testing. Locke's approach has plausibility because of belief that labour is worthy of his hire, so property as "reward for effort" has resonance. But that is not Locke's argument.
Locke's argument starts with the notion that we own ourselves. It does not rest on us being the creation of our own labour, but a notion of self-ownership. By "mixing our labour" with things acquired from nature we "create" property by a process of extension of our self-ownership.
There is a series of problems with this argument. First, if we own ourselves, do we really think that we can therefore sell ourselves, either entire or by amputation and alienation of bits? And, if not, in what sense is this ownership? Is there not something perverse about a concept which implies an acceptable separation of our physical self (in whole or in part) from ourself. To be property is to be owned by something that is not itself and which can be passed on to others. So, to be property, even of ourself, is to be lessened from what we feel is the proper status of being a moral agent.
A notion of self-dominion makes more sense; we control ourselves and property extends from that control. By taking some unowned thing from nature, we assert control over it; it is the assertion and acceptance of control which creates property.
As ever, slavery provides a limiting case. The institution of slavery contradicts Locke's notion that we own ourselves. Slavery is morally obnoxious (a violation of self-dominion, and so human autonomy, in the most profound sense) but it does not make slaves any less property. It is the acknowledged assertion of control over the slave that creates slavery, not the labour of the slaveowner (even if it is directed to that end) extending the slaver's self-ownership to cover the slave. Do we really think that the process of enslaving is a process of the slaver "mixing their labour" with the slave? Surely not; neither as a description nor as some act of legitimation. No amount of applied labour by the slaver makes slavery legitimate nor is it what makes slaves property.
The process of enslaving is a process of getting acknowledged control over the slave. The more difficulty involved, the more the slaver has to act to do so, but the effort required does not affect any "level" of being property, merely whether it is worth the bother. Locke's use of the term 'labour' directs attention to the effort and not to what is being effected. (Hence the connection to the labour theory of value, which makes the same error.)
Moreover, by starting with self-dominion, we can see how slaves can buy their freedom. Although their legal status as property formally precludes them from having any property, the degree to which they can control their own actions can give effective (i.e. economic) property rights.
Nor do we do think the recipient of property gained via exchange is somehow less legitimately the owner because none of her labour has been applied to the thing exchanged (though she has [trans]acted). Her ownership is hers, it has no connection to the labour of any previous owner, merely that it has been acquired by some legitimate process (which, for day-to-day transactions, in the absence of evidence to the contrary, we presume to be the case for any current possessor).
Property exists in acknowledged control; it rests on acknowledgement of a domain of authority by a person over an attribute which is accepted as constraining others (and so is quite dependent on a moral sense, upon which property law can be built) regardless of whether it was acquired from nature or by transaction with another.]
Property is fundamental
For once you have a concept of mutually acknowledged control of things, then you can engage in exchange. For exchange is a transfer of control. And with exchange comes vastly increased social possibilities. One can access resources that do not originate in one’s own area. People can specialise, so produce more, and swap what they have a surplus of for what they have a deficit of. (Or, more precisely, swap what they value less for what they value more.)
The gender-exchange of hunter-gathering (women mind children and gather; men go out singly or in groups and hunt) was likely what gave our foraging ancestors a crucial advantage over Neanderthals, by increasing both our foraging and our child-rearing success (a primordial application of comparative advantage).
Locke’s disastrous metaphor led to the, quite false, labour theory of value, which has things so the wrong way around. Things do not have value due to labour, we direct our labour to acquiring things we value. Our sense of value directs our labour (not always successfully). So Marxian studies which connect movements in use of labour to shifts in price (“exchange-value”) tell us nothing other than labour is more flexible than capital and that we direct resources we control to creating (or otherwise acquiring) according to our expectations of value. As such efforts are rewarded (or not) in commercial exchanges, the selection processes of markets operate.
According to a definition developed by economist John R. Commons:
A property right is an enforceable authority to undertake particular actions in specific domains.
Access: The right to enter a defined physical area and enjoy nonsubtractive benefits (for example, hike, canoe, sit in the sun).
Withdrawal: The right to obtain resource units or products of a resource system (for example, catch fish, divert water).
Management: The right to regulate internal use patterns and transform the resource by making improvements.
Exclusion: The right to determine who will have access rights and withdrawal rights, and how those rights may be transferred.
Alienation: The right to sell or lease management and exclusion rights.
If one includes the internet, then seven types of property rights can be identified:
Access: The right to enter a defined physical area and enjoy nonsubtractive benefits.
Contribution: The right to contribute to the content.
Extraction: The right to obtain resource units or products of a resource system.
Removal: The right to remove one’s artifacts from the resource.
Management/Participation: The right to regulate internal use patterns and transform the resource by making improvements.
Exclusion: The right to determine who will have access, contribution, extraction, and removal rights and how those rights may be transferred.
Alienation: The right to sell or lease management and exclusion rights.
Property law is concerned with rightful control: who has it, how far it extends. In day-to-day interactions, what matters is effective control. But that has a notion of acknowledgement built into it. It is effective in part because other people acknowledge it. But we do not have complete information about past interactions, hence the possession-presumption. If you have current possession of something, we presume it is rightfully yours, so it becomes effectively yours (in the absence of any specific information to the contrary).
Which leads to the definition of an economic property right as effective control. A classic example of the difference is that slaves cannot own property, they are property. Yet slaves did, on occasion, buy their own freedom. How can someone not legally entitled to own anything assemble enough wealth to buy their own freedom?
Because there is a difference between property rights recognised by law and property rights in the sense of the ability to use or control something. If this was not so, there would be no point to theft.
An economic property right is effective control over something. What do I mean by ‘something’? I mean some identifiable attribute of something. These can have positive or negative value. Warranties take on (usually conditional) obligation to restore attributes that have been damaged or lost. Insurance consists of paying someone to take on negative attributes (e.g. risk of breaking).
Property is based on implicit or explicit rules. Rules that set limits to action, whether by the holder of the property right or by non-holders. A rule constrains actions (which can create, expand, reduce or eliminate property rights and create, increase, decrease or eliminate their their value). But, without rules (implicit or explicit), property does not exist.
About official discretions
An official discretion over use of another’s property creates a zone of power for designated official(s). In doing so, it shares control of attributes between official(s) and owner. It creates rights vested in officials over property otherwise owned by someone else. Typically, a right of veto over its use. Such a regime we can call a permit raj.
If we use John Commons’s definition of a property right as being an enforceable authority to undertake particular actions in specific domains, then the official with discretionary authority has a property right or rights; their approval is required, a form of property right. Specifically, using Ostrom’s language, management and exclusion rights.
Shared control is diluted control. That raises transaction costs, discouraging use of the property in any way which activates the discretionary power and so the delay, negotiating costs and uncertainty involved therefrom.
The official granted the management and exclusion right has quite different incentives than a full owner. They get no return directly from the property, so have no direct incentive in its productive use. They do have an incentive to find ways of benefiting from their veto rights. This is an open invitation for corruption–corruption being the market for official discretions; the wider the range of official discretions, the wider the potential market for corruption. (Ironically, ordinary corruption can reduce economic inefficiency, by giving officials benefit from expanded use of property.)
But there are other ways of benefiting than overt corruption. Generating political donations to gain access to officials, for example. Or restricting supply, thereby benefiting incumbents who may vote or donate accordingly, and raising property values (and so revenue), or otherwise imposing one’s social preferences without having to bear the cost thereof.
But we can also expect that use of such discretions will be biased against change in the use of property within its ambit, since the official generally does not gain from expanded or new use, but does run the risk of reputational or career damage if anything goes wrong, and new or expanded use has more unknowns than continuation of the familiar. This “comfort zone” effect can be expected to extend to innovative, and thus unfamiliar, uses.
There can also expected to be a social bias in the application of official discretions, as people with access to officials, and who share a common set of preferences and “social language”, can be expected to be more able to get official discretions exercised in their favour. So, we can expect well-connected folk with minority preferences to generally like official discretions being granted over use of property. (In Australia, that means we can expect inner city folk to like official discretions; in Australia, the name for well-connected inner city rich folk is ‘progressive’ aka Greens, the Party with by far the richest voter base on Australia and whose electoral support is concentrated in the inner city.)
All these effects–retarding of economic activity, corruption, the generation of other returns to officials, blocking innovation and insider bias–can be observed in discretionary regimes. Such as in India (pdf) or in the Middle East.
It is very different if there are clear rules, no matter how restrictive. People have clear (i.e. not shared) zones of authority over attributes and can act and transact on that basis. In terms of efficient use of, and equitable decision-making over, property, a rule-based system is highly preferable to a discretionary one.
Making common property work
One of Ostrom’s research findings is that government action has frequently enforced open access to resources by blocking attempts to develop common property regimes. In the case of resources such as fisheries, this has been less than optimal.
The issue of which property rights regime suits given circumstances is quite complex. Formal titling, for example, is not a panacea. As Ostrom notes:
In societies that do not yet have high population densities and where customary rights are still commonly understood and accepted, formal titling may be an expensive method of increasing the security of a title that is not associated with a sufficiently higher return to be worth the economic investment.
substantial evidence exists that many communal proprietorships effectively solve a wide diversity of local problems with relatively low transaction costs … Performance of communal property-rights systems varies substantially, however, as do the performance of all property-rights systems.
A (housing) corporate body is a common-property regime. Like many such regimes, it operates in conjunction with full private property. While a corporation attempts to manage a common pool resource—its income. And there are notorious difficulties with corporate governance.
Ostrom identifies the following variables as important for the effectiveness of common property regimes:
1. Accurate information about the condition of the resource and expected flow of benefits and costs is available at low cost to the participants.
2. Participants share a common understanding about the potential benefits and risks associated with the continuance of the status quo as contrasted with changes in norms and rules that they could feasibly adopt.
3. Participants share generalized norms of reciprocity and trust that can be used as initial social capital.
4. The group using the resource is relatively stable.
5. Participants plan to live and work in the same area for a long time (and in some cases, expect their offspring to live there as well) and, thus, do not heavily discount the future.
6. Participants use collective-choice rules that fall between the extremes of unanimity or control by a few (or even bare majority) and, thus, avoid high transaction or high deprivation costs.
7. Participants can develop relatively accurate and low-cost monitoring and sanctioning arrangements.
The wider system of governance can affect deeply the operation of these variables.
Discretionary power to officials creates a form of common property. If we apply Ostrom’s checklist, discretionary regimes do not come off well.
As Ostrom points out, a property rights regime is itself a form of common property. We have a general interest in living under an effective property regime, and creating a permit raj degrades any even mildly functional property rights regime. Say no to permit raj’s!