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CBO: Tangled Web of Welfare Programs Creates High Tax Rates on Participants – Article by Charles Hughes

CBO: Tangled Web of Welfare Programs Creates High Tax Rates on Participants – Article by Charles Hughes

The New Renaissance HatCharles Hughes

The dozens of different programs that form our tangled welfare system often impose high effective marginal tax rates that make it harder for low-income people to transition out of these programs and lift of those programs and into the middle class. As the people in these programs enter the workforce, get a promotion, or work more hours, they can lose a significant portion of those earnings through reduced benefits and increased taxes. A new report from the Congressional Budget Office (CBO) illustrates this predicament: many households hovering around the poverty level face steeper effective marginal tax rates than even the highest earners. These prohibitively high tax rates can discourage work and limit their prospects, ultimately making them less likely to escape poverty.

Marginal Tax Rates at the Median and 90th Percentiles by Earnings Group, 2016


Source: Congressional Budget Office, “Effective Marginal Tax Rates for Low- and Moderate-Income Workers in 2016,” November 19, 2015.

Note: Figure created using Tableau. 

CBO’s analysis looks at the range of effective marginal tax rates households face at different levels of income. The median marginal tax rate for households just above the poverty level is almost 34 percent, the highest for any income level. Some households that receive larger benefits or higher state taxes have even higher effective rates: 10 percent of households just above the poverty line face a marginal rate higher than 65 percent. For each additional dollar earned in this range, these households would lose almost two-thirds to taxes or lost benefits. The comparable rate for the highest earners, households above 400 percent of the poverty level, is only 43.4 percent. If anything this analysis might understate how steep the effective marginal rates are for some households. CBO only considers the combined effect of income taxes, payroll taxes, SNAP and ACA exchange subsidies, so households that participate in other programs like TANF or housing assistance could face even higher rates. These results mirror some of Cato’s past work investigating the issues and trade-offs involved with these welfare programs.

The nature of the welfare system contributes to the prevalence of these poverty traps. A House and Ways Human Resources Subcommittee recently held a hearing on issue and released a chart illustrating the complex, labyrinthine nature of the welfare system.

WM-Welfare-Chart-AR-amendment-110215-jpegClick on the image for a full-sized view.

New programs were grafted onto the existing system over time, each intended to address a perceived problem afflicting people in poverty, but they can interact in ways that can deter people from striving to create a better life for their families. That’s part of the reason the status quo system, which the Government Accountability Office estimates spends $742 billion at the federal level each year, has achieved such lackluster results to date.

While these shortcomings would seem to indicate that the welfare system is in need of reform, this tangled web has proved resistant to change. One of the last major reforms happened in 1996, when Temporary Assistance for Needy Families (TANF) replaced Aid to Families with Dependent Children (AFDC). Even that reform only addressed one strand of the dozens that make up our tangled system, so while it might have improved that one aspect the larger flaws with the welfare system as a whole have to some extent continued unabated. Even within this one strand there has been little discussion of reform in the past two decades, TANF hasn’t even been properly reauthorized since the Deficit Reduction Act of 2005, it is usually thrown into short-term continuing resolutions or broader omnibus appropriations acts that do not incorporate any meaningful attempts to address the program’s problems. Absent comprehensive, the flawed current system will continue to fall short even as the government funnels hundreds of billions of dollars into it each year.

If the federal government is going to finance a welfare system, it should foster an environment that encourages work and makes it easier for participants to transition out of these programs as they strive to create a better life. The current system falls far short in that regard and needs comprehensive reforms.

Charles Hughes is a research associate at the Cato Institute, where he focuses on federal budget policy, poverty, entitlement reform, and general economics.  Originally from Texas, Hughes joined Cato in 2011 after graduating from the University of Chicago with degrees in Economics and Public Policy.

This work by Cato Institute is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 Unported License.

Shut Out: How Land-Use Regulations Hurt the Poor – Article by Sanford Ikeda

Shut Out: How Land-Use Regulations Hurt the Poor – Article by Sanford Ikeda

The New Renaissance Hat
Sanford Ikeda
February 28, 2015

People sometimes support regulations, often with the best of intentions, but these wind up creating outcomes they don’t like. Land-use regulations are a prime example.

My colleague Emily Washington and I are reviewing the literature on how land-use regulations disproportionately raise the cost of real estate for the poor. I’d like to share a few of our findings with you.


One kind of regulation that was actually intended to harm the poor, and especially poor minorities, was zoning. The ostensible reason for zoning was to address unhealthy conditions in cities by functionally separating land uses, which is called “exclusionary zoning.” But prior to passage of the Civil Rights Act of 1968, some municipalities had race-based exclusionary land-use regulations. Early in the 20th century, several California cities masked their racist intent by specifically excluding laundry businesses, predominantly Chinese owned, from certain areas of the cities.

Today, of course, explicitly race-based, exclusionary zoning policies are illegal. But some zoning regulations nevertheless price certain demographics out of particular neighborhoods by forbidding multifamily dwellings, which are more affordable to low- or middle-income individuals. When the government artificially separates land uses and forbids building certain kinds of residences in entire districts, it restricts the supply of housing and increases the cost of the land, and the price of housing reflects those restrictions.

Moreover, when cities implement zoning rules that make it difficult to secure permits to build new housing, land that is already developed becomes more valuable because you no longer need a permit. The demand for such developed land is therefore artificially higher, and that again raises its price.

Minimum lot sizes

Other things equal, the larger the lot, the more you’ll pay for it. Regulations that specify minimum lot sizes — that say you can’t build on land smaller than that minimum — increase prices. Regulations that forbid building more units on a given-size lot have the same effect: they restrict supply and make housing more expensive.

People who already live there may only want to preserve their lifestyle. But whether they intend to or not (and many certainly do so intend) the effect of these regulations is to exclude lower-income families. Where do they go? Where they aren’t excluded — usually poorer neighborhoods. But that increases the demand for housing in poorer neighborhoods, where prices will tend to be higher than they would have been.

And it’s not just middle-class families that do this. Very wealthy residents of exclusive neighborhoods and districts also have an incentive to support limits on construction in order to maintain their preferred lifestyle and to keep out the upper-middle-class hoi polloi. Again, the latter then go elsewhere, very often to lower-income neighborhoods — Williamsburg in Brooklyn is a recent example — where they buy more-affordable housing and drive up prices. Those who complain about well-off people moving into poor neighborhoods — a phenomenon known as “gentrification” — may very well have minimum-lot-size and maximum-density regulations to thank.

When government has the authority to restrict building and development, established residents of all income levels will use that power to protect their wealth.

Parking requirements

Another land-use regulation that makes space more expensive is municipal requirements that establish a minimum number of parking spaces per housing unit.

According Donald Shoup’s analysis, parking requirements add significantly to the cost of housing, particularly in areas with high land values. For example, in Los Angeles, parking requirements can add $104,000 to the cost of each apartment. Parking requirements limit consumers’ choices and increase the cost of housing even for those who prefer not to pay for parking.

Developers typically build only the minimum amount of parking required by law, which indicates that those requirements are binding. That is, in a less-regulated environment, developers would devote less land to parking and more land to living space. A greater supply of living space will, other things equal, lower the cost of housing.

Smart-growth regulations

In the 1970s, municipalities enacted new rules that were designed to protect farmland and to preserve green space surrounding rapidly growing cities by forbidding private development in those areas. By the late 1990s, this practice evolved into a land-use strategy called “smart growth.” (Here’s a video I did about smart growth.)  While some of these initiatives may have preserved green space that can be seen, what is harder to see is the resulting supply restriction and higher cost of housing.

Again, the lower the supply of housing, other things equal, the higher real-estate prices will be. Those who now can’t afford to buy will often rent smaller apartments in less-desirable areas, which typically have less influence on the political process. Locally elected officials tend to be more responsive to the interests of current residents who own property, vote, and pay taxes, and less responsive to renters, who are more likely to be transients and nonvoters. That, in turn, makes it easier to implement policies that use regulation to discriminate against people living on low incomes.


Zoning, minimum lot sizes, minimum parking requirements, and smart-growth regulations demonstrably and significantly increase the cost of housing for everyone by raising construction costs and restricting the supply of housing.

The average household in the United States today, rich or poor, spends about a third of its income on housing. But higher home prices hit lower-income households disproportionately hard because a dollar increase in housing expenditure represents a larger percentage of a poorer household’s budget. Indeed, the bottom 20 percent of households spends around 40 percent of income on housing.

In other words, these land-use regulations are unfairly regressive. Relaxing or even removing them would be a step toward achieving greater equity.

Sanford Ikeda is an associate professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism.
This article was originally published by The Foundation for Economic Education.
Commonly Misunderstood Concepts: Wealth (2009) – Article by G. Stolyarov II

Commonly Misunderstood Concepts: Wealth (2009) – Article by G. Stolyarov II

The New Renaissance Hat
G. Stolyarov II
Originally Published November 16, 2009
as Part of Issue CCXVIII of The Rational Argumentator
Republished July 24, 2014
Note from the Author: This essay was originally published as part of Issue CCXVIII of The Rational Argumentator on November 16, 2009, using the Yahoo! Voices publishing platform. Because of the imminent closure of Yahoo! Voices, the essay is now being made directly available on The Rational Argumentator.
~ G. Stolyarov II, July 24, 2014


Many of the economic and personal fallacies of our time arise from the mistaken belief that wealth and money are identical. In fact, while money is in many cases an important gateway to wealth, it does not even approach describing what wealth truly is.

In our time, money may be equated to wealth even less justifiably than it could have been in times past – when most money was identified with precious metals, such as gold and silver, which had uses other than as media of exchange. Currently, money in virtually all countries consists of pieces of paper which are decreed to be money by government fiat. Legal tender laws force individuals to accept these special pieces of paper as payment for products, services, or debts. The supply of these pieces of paper is controlled by the government’s printing press – typically located at either the central bank or the treasury department.

Why do people seek and hold this money? They do so because they expect to be able to purchase with it actual goods and services – either now or in the future. This means that the money is not seen as valuable in itself; it is seen as valuable because of the other things it can obtain. However, the supply of these other things is not dependent on the number of pieces of paper in circulation. Rather, it is dependent on real factors that affect individuals’ and businesses’ abilities to produce actual goods and services. Thus, having more pieces of paper does not automatically make one wealthier. If the government simply chooses to print more of them, while no external factors affect the production of goods and services, then there will simply be more pieces of paper for the same amount of real goods and services. We would therefore get inflation: prices in terms of the pieces of paper will increase in proportion to the volume of new pieces of paper introduced. Of course, inflation has disastrous impacts on individuals’ existing savings, incentives for frugality, and transaction costs. It also constitutes an unjustified redistribution of wealth from the producers who earn it to the politically connected elites who get priority access to the new pieces of paper. Creating more “money” can often destroy actual wealth and productivity.

But there is another respect in which money is not equivalent to wealth. Consider the fact that, even without inflation, the same amount of money will not purchase the same goods and services in every area. Indeed, a tiny, cramped apartment in the center of a major city may often cost more money than a spacious house in a small town. An individual earning the same amount of money in each area would be able to have a much higher standard of living in the small town. It is quite possible that the individual’s opportunities to earn more money in a big city will be greater, but the prices of goods will not increase in a one-to-one ratio with that individual’s relative salary increase. Rather, the prices are most likely to be higher in a ratio that is greater or smaller than the individual’s ratio of salaries – thereby making life in the city either less or more attractive to the individual. How much money one makes is not an indicator of the rate at which one accumulates wealth; a better indicator is what one can buy for one’s money.

These thoughts should give pause to both advocates of the government’s power of the printing press and to indiscriminate salary chasers. Both may be devoting their time and energy to the pursuit of numerical illusions rather than substantive benefits. A much more sophisticated and nuanced understanding of wealth is needed in order to truly thrive and lead a good life.

To achieve an understanding of wealth, we need to ask ourselves why we seek money in the first place. Ultimately, every unit of money – even one saved or invested for many years – goes to fund some human consumption. Money can pay for either goods – material objects – or services – human behaviors performed for the benefit of the payer. It is actual goods and services that constitute wealth, not the money. Moreover, the money price of these goods and services is irrelevant from the standpoint of the wealth of the person who owns them. If I have a table, I am no less wealthy if I cannot sell the table at all – nor am I any wealthier just because I have the potential to sell it for five million dollars. I still have the same table, and its physical qualities are unchanged. If I actually do sell it, I might become wealthier, but only insofar as my five million dollars would enable me to purchase more tables, better tables, or other goods and services I value. The important principle to recognize is that one either has potential wealth in the form of money or actual wealth in the form of the goods and services one has purchased. One does not have both at the same time in the same object. Fiat money is wealth only insofar as it can reasonably be expected to procure actual goods and services. Goods and services constitute wealth in themselves while they last. Capital goods that can produce other goods can also be described as potential wealth – but it is also true that they are not money while one owns them as goods.

A further distinction should be made. Not all material objects are goods, and not all human behaviors are services. Some material objects – such as clouds of poison gas in one’s living room – are active bads. Likewise, some human behaviors – such as people raping or murdering one another – are active disservices. The only way to comprehensively define wealth is with regard to a standard by which goods and services can be identified. The most fundamental standard from both a moral and a practical standpoint is the principle that the life of every innocent individual is the greatest and most basic good – where an innocent individual is one who has not violated this principle through actions such as murder or the attempt at murder. Thus, any object that promotes any individual’s life is a good; any behavior that promotes any individual’s life is a service. The more life-promoting objects one has – and the more life-promoting behaviors one either is able to elicit from others or is able to initiate oneself – the wealthier one is.

Everything else is a matter of means and context. How one gets wealth – whether it be through money, barter, gifts, or one’s own work and transformation of raw materials – has no bearing on the nature of that wealth; all of us who are not self-destructive pursue a wide variety of means that fundamentally aim at the goal of improving our lives. Ethically, the means ought to be non-coercive; we must not intrude on other people’s prerogatives to control their lives just like they must not intrude on ours. Wealth is still wealth, even if acquired through dishonest or evil means – but immoral means of wealth acquisition will destroy other wealth on net, through damage to property and human beings and their incentives to produce.

Moreover, it is possible for the same object to be beneficial in some circumstances and harmful in others. For instance, a piece of rope used to tie a knot may be extremely useful, while the same piece of rope strung across the floor of a room might be a tripping hazard. However, the same item or behavior in the exact same context should produce the same results; actual situations are never precisely repeatable, but we can at least estimate an object’s usefulness or lack thereof by analyzing situations where it has been applied in similar ways.

This view has practical implications beyond the scope of one’s views on economics or politics. Most items in our lives should be viewed not in terms of how we might be able to resell them to others, but rather in terms of what use they are to us personally. There is nothing wrong with resale as such, but it is not a behavior that can be imposed on all objects – and, indeed, economic bubbles are created when the expectation of resale for continually rising prices is applied by enough people to too many commodities. Those of us who acquire an item for our own use – which includes our purchases of art, furniture, automobiles, and yes, even houses – are not in the same position as businessmen who produce or acquire items for the specific purpose of reselling them at a profit. Businessmen see their inventories as potential money generators – an indirect route to greater wealth; consumers ought to see their property as useful in itself and any resale as incidental or fortuitous – a kind of loss mitigation once one is no longer able or willing to make good use of the property. We have adjusted quite well to the idea that the resale value of an automobile or a computer is virtually always much lower than its purchase price. In the role of consumers, we should adopt the same default expectation for houses – and for everything else. But the silly notion that one is entitled to resell any property at a higher price than one purchased it must be discarded, as it results in the foolish pursuit of higher-priced items in the vain hope of their further appreciation in price – without any expert knowledge of how markets in these items actually work. This turns many a layman into a speculator, while enticing him to take out loans with his fanciful expectations as collateral – as happened all too often during the housing bubble. Moreover, it engenders the disastrous attitude that price decreases – which make goods such as houses more affordable for people – are in some manner harmful. But one cannot destroy wealth by making goods easier to earn through honest work – nor can one create wealth by piggybacking off of others’ expectations of price increases.

Leave the house-flipping to the experts, and buy a house that you would want to live in, just as you buy clothes you want to wear and computers you want to use. That house would constitute real wealth for you, irrespective of its market price, and it will be there irrespective of financial market or currency value fluctuations – if you actually own the house or have a fixed-rate mortgage. To maximize your wealth, you should act in such a manner as to improve your access to actual goods and services that you value. Pieces of paper and expectations can only get you so far. And remember that your own ability to do useful work – including work that does not bring immediate monetary returns – is one of your most reliable gateways to wealth.

Read other articles in The Rational Argumentator’s Issue CCXVIII.

The Vital Importance of Property in Land: Part 3 – A Rational System of Land Ownership – Article by G. Stolyarov II

The Vital Importance of Property in Land: Part 3 – A Rational System of Land Ownership – Article by G. Stolyarov II

The New Renaissance Hat
G. Stolyarov II
November 11, 2012

In this third installment of my short series on land and property rights (see my first and second installments), I aim to outline a rational, libertarian system of land ownership that simultaneously respects each individual’s private property and allows each individual ample opportunities to obtain land of his or her own. This is a system that allows every individual his or her inviolate sphere of action and control, while at the same time ensuring that no individual who strives to obtain land through sufficient exertion will be denied the ability to own landed property.

The rational criterion for how land may be initially appropriated from the state of nature is the first-occupier rule. The first person to transform a piece of land from the state of nature becomes that land’s rightful owner – but only if the land is substantively transformed and put to a use that can be reasonably expected not to terminate at any fixed time. In other words, a person may only initially appropriate that land which the person actually uses and does not expect to stop using entirely. The use may be sporadic and intermittent, but as long as the land is not abandoned altogether and the reasonable possibility of using it remains, the right to ownership remains with the person who first transformed it. A person can indirectly “use” the land by hiring others to work on it or manage it. As long as there exists an economic connection back to the owner, the use criterion is met. The land’s original owner may sell it to others or give the land as a gift. At that time, the new owner obtains the same prerogatives as the original owner had.

The use criterion prevents arbitrary claims over un-transformed land and also minimizes the possibility of conflict by reference to a criterion that relies on an ongoing state of use of the land. If a piece of land becomes completely abandoned by its owner, in the sense that the owner does not himself, or through the employment of others, perform or intend to realistically perform any physical actions on or pertaining to the land, then this land reverts to the state of nature and legitimately may be claimed by any subsequent first occupant. The use criterion distinguishes the libertarian view of land ownership from certain arbitrary legal precedents in many parts of the world – e.g., the “right” of kings in various Medieval and Early Modern European countries to all of the prime forests of those countries, which denied their subjects the ability to obtain any of the produce of the forests without special permission, or the “right” of certain Latin American potentates to vast tracts of completely undeveloped land, on which thousands of people have lived for generations as “squatters” who possess the land de facto but not de jure. The use criterion suggests that it may be the case that laws treat as private property land which should, in fact, be considered a part of the state of nature and opened to be claimed by future first occupants in substance.  This could, in practice, result in considerable upward economic mobility and improvements in standards of living for many people.

In an ideal libertarian system, owned land is truly owned – i.e., it is free of any encumbrances that the owner has not voluntarily entered into. The owner has the complete right to utilize the property as he sees fit, as long as he does not infringe on others’ rights to life, liberty, and property. There may be some role for the law to restrict the use of certain activities that necessarily infringe on others’ rights, such as spilling sewage into a river that runs adjacent to numerous owned plots of land – or emitting disease-causing chemicals into the air. These activities with negative external effects may be permissible in some cases if the affected other individuals consented to their conduct (with their consent possibly accompanied by compensation from the person engaging in the negative-externality-causing activity). Furthermore, the first occupier of a region has a greater prerogative to engage in such activities if the adversely affected neighbors voluntarily move in after the activity was known to be underway. (In other words, the neighbors could have avoided the adverse effects by going elsewhere, but they knowingly chose to move in anyway.)

An ideal libertarian system would have no property taxes or any other taxes that depend on one’s present wealth in any way. Irrespective of what other taxes may exist (and I have elsewhere argued for a system that can fund the government without relying on compulsory taxation at all), the concept of ownership should not be tied with any ongoing payment, unless the property was purchased by means of assuming a debt obligation. Even with regard to debt obligations, foreclosure on a property should be prohibited until the purchaser’s equity has been reduced to zero by an accumulation of amounts equal to the sum of delinquent payments, plus interest at the agreed-upon loan rates.

An owner of land may agree to an easement on the land in the form – for instance – of allowing a utility to place its infrastructure there, or allowing public traffic through a portion of the land. This easement should be entirely voluntary on the part of the owner, and it is legitimate for the owner to request compensation for granting the easement if he wishes. Likewise, the owner may rent the property to others at a mutually agreed-upon price, or, at his discretion, allow others to use or live on the property at no cost. A contractually conferred easement or tenancy may limit the owner’s subsequent ability to deny certain prerogatives to the tenants or parties using the easement, and a free market would facilitate the evolution of contracts that allow such parties the ability to use the land, subject to certain basic conditions, without fear of unilateral or arbitrary cessation of an arrangement on which they rely.

How would roads be built in such a world? How would utility lines be laid? Perhaps a contractually irrevocable perpetual easement might be the way to facilitate such arrangements while fully respecting private property. Instead of being bullied by eminent-domain legislation to sell the land or grant the easement, the owner may be enticed to collect a perpetual stream of income from the private road company or private utility. The road easement would be priced at prevailing market rates – not through a judicial fiat determining “fair market value,” but rather through negotiations based on millions of data points regarding what owners of similar land used for roads have been willing to accept without any compulsion.

As Roderick Long points out, it is also possible for a libertarian view to accommodate a type of “common” land which is neither private nor governmentally owned. This category of commons could be created by means of a private owner opening his land to common use in perpetuity – as in a landowner designating his property a public park or thoroughfare. Such common land does not revert to the state of nature, because it continues to be used regularly – e.g., by means of moving through it. The latest private owner retains a certain degree of rights to the land, in the sense that his designation for how the land may be used must be respected. However, as long as this designation’s terms are obeyed, the latest owner has surrendered his discretion over any particular instance of the common land’s use. The ability of common land to arise could be facilitated by the formation of voluntary cooperatives that purchase private land and declare it to be common. These cooperatives could then also supply services to keep the land in proper order for the purpose to which it is intended to be put. An example of this might be a group of shop owners in a busy urban area deciding to render the street adjacent to the shops to be common, so that any person could approach the shops without paying fees to any party, or being otherwise restricted. The shop owners could form a cooperative to purchase the land constituting the street. The cooperative would then declare such land to be common and would provide maintenance and security services to ensure that the street remains clean and accessible, and that no one significantly obstructs passage.

A true libertarian system would likely lead to the creation of numerous common spaces that would give people without substantial wealth the ability to use land for certain purposes which may bring them economic benefit and enrichment. For instance, it is conceivable that a common working area could be established, where individuals may bring their tools and utilize certain space for the period of their presence – on a first-come, first-served basis.

A legitimate question may arise as to how far up and down a right to legitimately acquired land extends. Again, the boundaries of such ownership should be circumscribed by considerations of use, as well as considerations of personal safety. It is reasonable to conclude that one’s owned airspace does not extend 10,000 meters into the air – which would have restricted the ability of airplanes to pass overhead. However, it is also reasonable to conclude that airplanes should be prohibited from flying at 50 meters above a residential area – even if they do not directly damage any property during a particular flight – because the risk of such damage is too great. The precise amount of owned airspace cannot be given a priori through philosophical argument – but use and safety do set some minimum bounds for the owner to rely on, and a rational legal system would work out the implications of these principles for various types of situations and technological possibilities.

Similarly, to what extent could a land owner lay claim to resources underneath the land? Clearly, one owns the land on which one’s house stands, to a depth that is sufficient to ensure that the house would not subside into the earth. However, does a land owner have the right to a mineral deposit 5 kilometers underneath the land? Perhaps so, if extracting the mineral would require transformation at the surface of the land. However, if a vast underground cave network leads to the mineral deposit from an entrance external to the land’s surface – or if such an access route can be created without any risk to the land on the surface (or the health, safety, or comfort of the owner), then does the owner still have a property right to the mineral – particularly if the owner does not intend to do anything with it and lacks the technical skills in any event? This is again a question that can only be addressed fully by considering the technological possibilities at hand, as well as the circumstances of a particular case. The general principles of use and safety would, however, result in the land owner receiving some claim to most underground resources in most real-world situations.

A libertarian system would penalize violations of others’ private property using Murray Rothbard’s “two teeth for a tooth” rule. In other words, a person who has infringed on another’s rights to property owes the victim twice the amount of the economic harm inflicted. A person who steals a television owes the victim two televisions (or the market value thereof). A person who breaks a window owes the cost of replacing two windows. This treatment both fully compensates the victim and punishes the violator by having the violator forfeit an equivalent item to the item of which the rightful owner was unjustly deprived. Monetary compensation may often be an appropriate way to address this when the property damaged could not easily be conceived of as a discrete unit.  It is important for the punishments for violations of property rights to be proportionate and only directed toward true violators. In other words, there are limits to the kind and degree of force that a property owner may wield to protect his property – depending on the circumstances and the nature of the threat. However, deadly force may be used if the property owner has justifiable reason to believe that his life or the lives of others on his property are threatened. When only inanimate property is threatened, incapacitation of the violator should be pursued instead of deadly force.

The great opportunity-promoting effects of a true libertarian system of land ownership would arise from the absence of any zoning laws and building restrictions – or restrictions of any sort on land use that does not pose negative externalities. Even private associations that attempt to foist such restrictions would be limited by law from prohibiting non-coercive, non-damaging uses of unencumbered property, over which the owner would remain sovereign. Thus, the tyranny of zoning and the tyranny of homeowners’ associations would both be absent in a libertarian system. Rapid economic growth and a flowering of individual expression on private property would result. Furthermore, more convenient economic arrangements  would arise – such as the pre-zoning-era practice of a store owner living with his family on the second floor above the store he owns on the first.  A libertarian system of true private land ownership would result in many more “mixed-use” areas arising, where functions of life and business are not artificially segmented from one another, but rather occur together in such a manner as is most convenient to the residents. Travel times to one’s place of employment would be greatly reduced, resulting in immense savings on transportation costs and improvements in personal safety. More rapid construction would occur, as building permits would not be required.

Under a libertarian system along the lines described above, much land currently in the state of nature would be converted to useful purposes, including the construction of residences for people who find the currently available stock of housing to be too expensive. The massive increase in the supply of housing would cause prices to fall to truly affordable levels for most. Furthermore, the freedom to build would result in an increased and accelerating rate of technological and design innovation – since no third party would be permitted to prohibit a structure for employing unusual esthetic elements or a method of construction that differs from what prevails in the area. More generally, esthetic criteria would never justify coercive prohibition of property use in a libertarian system; only physical harm to other persons would. Ultimately, the result of recognizing a genuine, rational regime of property rights would vastly enhance individuals’ standards of living not just through increased material prosperity, but through the improved satisfaction of living as a true master of one’s own sphere of life and activity.