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Laissez-Faire in Tokyo Land Use – Article by Alex Tabarrok

Laissez-Faire in Tokyo Land Use – Article by Alex Tabarrok

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The New Renaissance HatAlex Tabarrok
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Tokyo, Japan’s capital city, has a growing population of over 13 million people but house prices have hardly increased in twenty years. Why? Tokyo has a laissez-faire approach to land use that allows lots of building subject to only a few general regulations set nationally. Robin Harding at the FT has a very important piece on the Tokyo system:

Here is a startling fact: in 2014 there were 142,417 housing starts in the city of Tokyo (population 13.3m, no empty land), more than the 83,657 housing permits issued in the state of California (population 38.7m), or the 137,010 houses started in the entire country of England (population 54.3m).

Tokyo’s steady construction is linked to a still more startling fact. In contrast to the enormous house price booms that have distorted western cities — setting young against old, redistributing wealth to the already wealthy, and denying others the chance to move to where the good jobs are — the cost of property in Japan’s capital has hardly budged.

This is not the result of a falling population. Japan has experienced the same “return to the city” wave as other nations.House_Prices_2

How is this possible? First Japan has a history of strong property rights in land:

Subject to the zoning rules, the rights of landowners are strong. In fact, Japan’s constitution declares that “the right to own or to hold property is inviolable”. A private developer cannot make you sell land; a local government cannot stop you using it. If you want to build a mock-Gothic castle faced in pink seashells, that is your business.

But this alone cannot explain everything because there was a huge property price-boom in Japan circa 1986 to 1991. In fact, it was in dealing with the collapse of that boom that Japan cleaned up its system, reducing regulation and speeding the permit approval process.

…in the 1990s, the government relaxed development rules, culminating in the Urban Renaissance Law of 2002, which made it easier to rezone land. Office sites were repurposed for new housing. “To help the economy recover from the bubble, the country eased regulation on urban development,” says Ichikawa. “If it hadn’t been for the bubble, Tokyo would be in the same situation as London or San Francisco.”

Hallways and public areas were excluded from the calculated size of apartment buildings, letting them grow much higher within existing zoning, while a proposal now under debate would allow owners to rebuild bigger if they knock down blocks built to old earthquake standards.

Rising housing prices are not an inevitable consequence of growth and fixed land supply–high and rising housing prices are the result of policy choices to restrict land development.

The policy choices were made–they can be unmade.

tokyo-japanThis post first appeared at Marginal Revolution.

Alex Tabarrok is a professor of economics at George Mason University. He blogs at Marginal Revolution with Tyler Cowen.

Nazis on Twitter? That’s What Blocking Is For – Article by Jeffrey A. Tucker

Nazis on Twitter? That’s What Blocking Is For – Article by Jeffrey A. Tucker

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The New Renaissance HatJeffrey A. Tucker
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I’ve followed the fascinating case of Jonathan Weisman, The New York Times’s deputy Washington editor, and his conflagration with the legions of Nazis on Twitter. After he tweeted an essay about the rise of fascism in the U.S. — an essay not unlike the one I wrote this time last year — he was dogpiled by a variety of crazy alt-right accounts, and bombarded by some deeply malicious messaging.

You wake in the morning and find 100 notifications from people calling you a tool of the Jews.It might have been new to him, but for most curious Internet users of a certain generation, this is nothing new. For Weisman, it came as a shock, and understandably. The tweets featured photoshopped images of Weisman being marched to the gas chambers, for example. They threatened him with vile anti-Semitic and hard-core racist rhetoric.

He knew that if he merely claimed that this happened, he would be met with incredulity by a mainstream audience. To make sure that people believed him, he spent the day retweeting the vile messages to his followers, as if to say: “this stuff really does exist.”

I know exactly what he means. After my first critical article on Trump last year, one in which I reported on an early campaign speech I watched, I was trolled hard too. You wake in the morning and find 100 notifications from people calling you a tool of the Jews, slamming you with racist cartoons, telling you that you have sold out the white race, and even calling for your death.

These are people who perhaps begin their trajectory with some harmless anti-PC racial banter, but it escalates to become a full-scale political ideology, one that eventually crowds out all concern for human rights and decency. What they have joined isn’t a real army with guns, but when you are targeted it is still emotionally draining and politically frightening to say the least.

It’s supposed to be. That’s why they do it. The point is to shake you up, and make you feel like you are being bombarded.

When I told people about it, they didn’t believe it, or didn’t want to believe it. I too ended up screenshotting and posting in private messages, just to make the point that these vile movements do indeed exist. Even then, people doubt, probably because the sheer aggressiveness of this crowd is rather new in public life, at least in the US.

Hatred, Left and Right

For most of my writing career, I’ve been called a corporate shill by the left, a puppet of the Kochtopus, an apologist for capitalist exploitation and frankenfood. None of the attacks from the left have matched the sheer vitriol of those from the supposed opposite side. These days, though I hold the same libertarian perspective I always have, I’m being denounced as a witting dupe of the rootless commercial class, a shill for the global banksters and usurers, a cuckservative (look it up), and probably a secret Jew myself.

Welcome to Twitter in 2016.

The world truly does seem to be dividing between authoritarians of the right and left, and the rest of us. At some point in last year, hundreds of bitter people left their 4chan caves and became Twitter mavens. It became the choice venue for the far right, which has developed its own internal signaling systems such as putting the signs ((( ))) around ostensibly “known Jews.” They use swastikas as avatars. They post Nazi-era caricatures of Jews. And the rhetoric is a revival of interwar hate that most people believe was vanquished from the earth with the defeat of the Nazis 70 years ago.

Not all the accounts are so blatant. Some prefer the dog-whistle approach in their own posting and merely retweet the more hard-core material. After a while, you can become very talented at spotting the members of this internet junta, and have it confirmed with only one or two degrees of separation from the more overt deniers and/or celebrators of the actual Holocaust (strange how deniers and celebrators hang out together).

Just as left socialism never seems to go away, no matter how many economic disasters it brings about, so it is with national socialism with a rightest tinge. In fact, it seems to be growing, both in Europe and the US, posing a serious challenge to those of us who consider ourselves classical liberals: hard opposition to the left and to the right. As I’ve written elsewhere, the world truly does seem to be dividing between authoritarians of the right and left, opposed consistently by a small but growing group of genuine liberals all over the world.

Terms of Use

Now, to be sure, Jonathan Weisman was exactly right to wonder why Twitter puts up with this stuff. As he points out, banning such accounts is not censorship; this is a private venue that can set its own rules, same as a restaurant or movie theater. And Twitter does indeed have rules against “hateful conduct” that threatens people based on religion and ethnicity, as well as a policy on harassment that prohibits targeting people and inciting others to do the same. There’s no question that these accounts are in violation.

Why doesn’t Twitter act? Well, it sometimes does. After the Weisman articles, Twitter banned some 30 or so accounts. What happened to them? It’s pretty easy: they can easily come back again with another user name. In this sense, Twitter is, by design, much easier to game than Google or Facebook, both of which have much stricter policies. Sockpuppeting is a way of life here.

How does a digital venue decide how strict to be on these matters? It is all about the value of the platform for users. Sometimes tighter is better and other times it is not. In the case of Twitter, a main contribution it makes to global culture is its openness to all. You can find and see and hear just about anything. You can curate your feed. You can include or exclude. Sure, that takes a bit of work, but it is more than worth it.

For Facebook and LinkedIn, matters are very different. Permitting hate, harassment, sex solicitation, porn, and so on, is a problem for the kind of culture they want to create for members. And so it is more carefully policed. Again, this is not censorship anymore than a restaurant that demands shoes is violating human rights. You have the human right to be a Nazi all you want on your own property, but you don’t have the right to do so on property that belongs to others.

What To Do?

As it turns out, the nasty junta of hate-spewing freaks is not an army after all.When this started happening to me, I was initially disoriented and, I admit, a bit shaken. But then it struck me that Twitter surely has permitted a way to deal with this. Sure enough, there is a little gear that allows you to select a pretty little option: block. With the block, that account can no longer contact you or post among your notifications. Quite simply, you stop hearing from them.

I spent about a month doing this to trolls. Oddly, it is very satisfying. Someone tags you in a hate-filled post. With one click, you can blast them out of your curated universe. Once I got the hang of it, it became a game. Instead of getting mad, you just get even. Well, not really. But it sort of feels like it.

You know what? It works. After blocking about 100 accounts over the course of the fall, the problem almost entirely vanished. As it turns out, the nasty junta of hate-spewing freaks is not an army after all. In the end, we might in fact be talking about a few hundred accounts. Maybe it is more. And maybe after this article, they will all be back.

It might not be possible to make them all go away, but there is a way to reduce the influx and almost eliminate the stress. That’s not to minimize the alarming rise of fascism in politics here and abroad, but only to say that we are wise to distinguish between reality and digital illusion.

Blocking Is Betting than Beatings

And this is a much better option than leaning hard on Twitter to do more enforcement of its own terms of use. As much as these people disgust me, I would actually prefer to live in a world in which even deranged Nazis have access to widely available communication channels. I won’t invoke the right of free speech here because that’s not what this is about.

I will, however, say a good word for openness to all – and I mean all – points of view, access to media by all the world’s people (this is a wonderful miracle), and, above all else, the right of individuals to exclude through blocking. This is the way the opinion market should work. This is how we curate our own intellectual lives.

What we absolutely do not need – which Europe has tried to do – are government controls on what types of opinions one is allowed to hold and what books one is allowed to read. If you want violent extremism to grow, this is a great path towards guaranteeing that it will. Shutting people up by force is not the solution. The block button is far more effective than any censor.

Jeffrey Tucker is Director of Digital Development at FEE, CLO of the startup Liberty.me, and editor at Laissez Faire Books. Author of five books, he speaks at FEE summer seminars and other events. His latest book is Bit by Bit: How P2P Is Freeing the World.  Follow on Twitter and Like on Facebook. 

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

 

No, Mr. Trump, Victims of Eminent Domain Do Not “Get a Fortune” – Article by George C. Leef

No, Mr. Trump, Victims of Eminent Domain Do Not “Get a Fortune” – Article by George C. Leef

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The New Renaissance HatGeorge C. Leef
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Trump’s huge mistake about eminent domain

During the debate among Republican presidential candidates last month, Jeb Bush hammered Donald Trump on his abuse of eminent domain. But Trump apparently sees nothing wrong in having government officials force people to sell their property.

Trump replied,

Eminent domain is an absolute necessity for a country, for our country. Without it, you wouldn’t have roads, you wouldn’t have hospitals, you wouldn’t have anything. You would have schools, you wouldn’t have bridges.

And what a lot of people don’t know because they were all saying, oh, you’re going to take their property. When somebody — when eminent domain is used on somebody’s property, that person gets a fortune. They at least get fair market value, and if they’re smart, they’ll get two or three times the value of their property.

This last assertion led George Mason law professor Ilya Somin (an expert on eminent domain) to quip at the Volokh Conspiracy, “If eminent domain really were a good way to make a fortune, the Donald Trumps of the world would be lobbying the government to condemn their property. But that rarely, if ever, happens.”

Put aside Trump’s hyperbole about the supposed impossibility of schools, hospitals, and bridges without eminent domain. What I want to focus on is his claim that eminent domain is not objectionable because people who have their property taken make out just fine financially.

That claim is simply indefensible. The truth is that people who lose their property to eminent domain proceedings are almost never made whole.

Legal scholars have for many years been writing about the injustice that usually befalls people who have to settle for what the government deems “just compensation” under the Fifth Amendment. I wouldn’t expect Mr. Trump to know about that because he is too busy making deals. But the kind of deals businessmen usually make involve two parties who can say “no,” unless and until they think the deal will improve their positions.

With eminent domain takings, however, the property owner can’t say “no,” and usually must settle for much less than he or she would have bargained for in a voluntary setting.

Professor Gideon Kanner has written extensively about the problem of inadequate compensation for people who’ve been forced to sell under eminent domain. In his article “[Un]Equal Justice under Law: The Invidiously Disparate Treatment of American Property Owners in Taking Cases,” he writes:

The true standard of compensation is not indemnity, but rather fair market value so artfully defined as to exclude factors that sellers and buyers in voluntary transactions would consider, and that the government need only pay for what it acquires, not for what the owner has lost.

Those losses include business goodwill, relocation expenses, and the emotional damage of having to leave a community where one may have strong ties. In the government’s calculus, people are expected to suffer such losses as part of the price of living in America.

As the Supreme Court stated in the 1949 takings case Kimball Laundry v. U.S., “Loss to the owner of non-transferable values … is properly treated as part of the burden of common citizenship.” That “tough luck, property owner” mindset still prevails.

Knowing that they hold the high cards (and ultimately the guns) when they deal with property owners, government officials take full advantage. As Kanner observes, “Condemning agencies regularly reap unjustified windfalls from the fact that the majority of their offers (including the many low-ball ones) are accepted without litigation or even involvement by a private appraiser or lawyer.”

Therefore, eminent domain causes many property owners to suffer uncompensated losses.

Far from “getting a fortune” or “two or three times” the market value of their property, most owners are left substantially worse off for their unwanted encounter with condemning government agencies. Few if any of them shrug off the losses as their part of the “burden of common citizenship.”

Although the eminent domain issue came up during a debate among presidential candidates, there is hardly anything that the president can do to rectify the problem of under-compensation for property owners. He (or she) cannot issue an executive order mandating that property owners be made whole.

If there is to be a solution, it must come from the judiciary.

Judges, and especially the justices of the Supreme Court, will have to stop ruling that merely because an individual is paid an amount deemed “fair market value,” the Fifth Amendment’s requirement of “just compensation” has been satisfied.

It would also help property owners if the Supreme Court would overturn Kelo v. New London and establish that property can only be taken for actual “public use,” as the Fifth Amendment requires, and not for private use that local politicians think might have some “public benefit.”

Since we are going to have confirmation hearings for a new member of the Court eventually, it would be important to find out precisely what the nominee thinks “just compensation” and “public use” actually mean.

George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

IJ and Small Business Owner Beat IRS on Civil Asset Forfeiture – Article by Adam Bates

IJ and Small Business Owner Beat IRS on Civil Asset Forfeiture – Article by Adam Bates

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The New Renaissance HatAdam Bates
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The court struck a blow for property rights

Last year I referred readers to the abuse of civil asset forfeiture laws by the IRS in its attempt to take more than $107,000 from North Carolina small business owner Lyndon McLellan without charging him with any crime.

The IRS cleaned out Mr. McLellan’s business account because it suspected him of “structuring,” an offense whereby a person avoids legally-mandated financial reporting requirements by keeping their deposits and withdrawals under $10,000.

Because there are many perfectly legitimate reasons a business owner may deposit less than $10,000 at a time (for instance, if their insurance policy only covers $10,000 cash on hand), and because civil asset forfeiture allows the government to seize cash and property without proving any wrongdoing, IRS structuring seizures are prone to abuse.

Tacitly recognizing the abuse allowed by the law, former Attorney General Eric Holder announced changes to the use of civil forfeiture in structuring offenses last year. The policy changes should have spared innocent business owners like Lyndon McLellan, but it seems some federal prosecutors never got the memo.

In fact, the Assistant U.S. Attorney in charge of the case responded to criticism by sending veiled threats to Lyndon McLellan and his lawyers at the Institute for Justice, warning them against publicizing the case lest it “ratchet up feelings” in the IRS offices.

The publicity worked. After significant public and political pressure, the IRS relented and returned the amount they had taken from Mr. McLellan’s bank account. As I noted last year, however, the IRS refused to reimburse Mr. McLellan for the costs of fighting the seizure or to pay interest on the money it had wrongfully seized.

But this week a federal judge ruled that the IRS must do more to make Mr. McLellan whole, and awarded him legal costs totalling more than $20,000.

The court held:

Certainly, the damage inflicted upon an innocent person or business is immense when, although it has done nothing wrong, its money and property are seized. Congress, acknowledging the harsh realities of civil forfeiture practice, sought to lessen the blow to innocent citizens who have had their property stripped from them by the Government. …

This court will not discard lightly the right of a citizen to seek the relief Congress has afforded.

Fortunately, thanks to the efforts of Mr. McLellan and the Institute for Justice, the good guys won this time. Ultimately, however, the only way to ensure that civil forfeiture abuses stop happening is to abolish civil forfeiture. If the government cannot prove beyond a reasonable doubt that a person engaged in criminal activity, it should not be able to punish them as if they’re guilty.

As long as Congress and state legislatures allow this practice to continue, more innocent Americans will end up fighting for their livelihoods like Lyndon McLellan had to.

Cross-posted from Cato.org.

Adam Bates is a policy analyst with Cato’s Project on Criminal Justice. His research interests include Constitutional law, the War on Drugs, the War on Terror, police militarization, and overcriminalization.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

Eminent Domain for Private Gain Is Terrible and Cruel — Even When It “Works” – Article by George C. Leef

Eminent Domain for Private Gain Is Terrible and Cruel — Even When It “Works” – Article by George C. Leef

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The New Renaissance HatGeorge C. Leef
August 18, 2015

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Despite a “success” story, eminent domain for economic development is a bad policy

Ilya Somin’s excellent new book The Grasping Hand on the infamous case of Kelo v. New London recently drew a negative response from a professor who defends the use of eminent domain for “economic development.”

In his letter to the editor of the Wall Street Journal, Wayne State University professor John Mogk took issue with Somin’s book and with Ed Glaeser’s favorable WSJ review. Mogk claims that they did not adequately weigh what he regards as a successful use of eminent domain to promote economic growth in Poletown, Detroit.

The New London redevelopment project that cost Suzette Kelo her little pink house was, Mogk admits, a fiasco. But, he says, we shouldn’t paint all eminent domain cases with that brush. He wants to buttress the case that the public welfare can be enhanced by using eminent domain to obtain land for projects that are supposed to stimulate the economy and create jobs.

Mogk believes that the apparent success of Poletown saves the day for eminent domain enthusiasts.

Here are three reasons for believing that he is mistaken.

First, as a policy matter, we either give the green light to property seizures for any “public purpose” conceived by politicians, or we prohibit them and limit eminent domain just to seizures for a clear public use. (That’s the language in the Constitution.)

We cannot have a rule that says, “Eminent domain may be used for economic development plans, but only when it actually produces net benefits.”

No one can know ahead of time whether a plan will “work” (which is to say, produce at least some of the promised gains) or utterly fail. In Kelo, the City of New London’s grand redevelopment plan fell through completely. Where neat, modest houses once stood, you now see only rubble and weeds. Nobody knew that would be the outcome when the plan was conceived.

Consider this analogy: The law forbids warrantless searches by the police, but suppose that, in some illegal searches, important evidence of criminal activity is found. Should we conclude that the Fourth Amendment’s warrant requirement can be discarded because there are some instances where we get good results from warrantless searches?

I don’t think that conclusion follows. And neither should we allow property seizures whenever authorities want to, just because those seizures sometimes have “good results.”

Second, Professor Mogk’s Poletown example isn’t as telling as he thinks. Perhaps it is true, as he writes, that most of the inhabitants were content with their buyouts. What I don’t think anyone can deny, however, is that for some of the residents, especially elderly people, the forced relocation was extremely disruptive and painful.

Outsiders like Mogk and the bigwigs at General Motors (who wanted the land for a new Cadillac plant) may have thought that Poletown was “declining,” but to the people who called it home, living there was their best option.

The right to quietly enjoy their property was taken away from them so that others might be more prosperous — GM stockholders and UAW workers, in particular.

We have to oppose the collectivistic philosophy that says it is permissible to use coercion against some individuals as long as those in power think they might thereby create a net utilitarian gain for more politically powerful (and usually much richer) interests.

Third, all that these economic development eminent domain takings can ever do is to redistribute where economic activity takes place. It cannot create any overall gain.

Let us suppose that the GM management was correct in forecasting an increase in demand for luxury cars. (It appears that they overestimated that demand, at least for their own vehicles, since the plant never employed nearly as many workers as they had said it would.) Free market competition to satisfy that demand would have led to increased output without Detroit confiscating land for a new GM plant.

If it hadn’t been able to resort to coercion to get the land, GM would probably have found other ways of increasing Cadillac production, but even if it couldn’t have done so, other auto-makers would have built more luxury cars. Auto jobs would have been created somewhere, and car buyers would have benefited without property owners losing.

Instead of proving that eminent domain can be a good economic development tool, the Poletown example is just another illustration of Bastiat’s broken window fallacy. Demolishing Poletown to build a new auto factory brought about visible benefits for some people, but only at the expense of benefits for others that would have otherwise occurred.

No, not every eminent domain seizure for economic development purposes is as pointless and utterly destructive as Kelo, but we still ought to stick with this rule: Government should protect property rights, not violate them. The government should do those few order-keeping functions appropriate to it and leave the allocation of resources and planning of production to people who risk their own money and cannot take what isn’t theirs.

George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

The Human Rational Faculty and the Necessity of Property Rights (2005) – Article by G. Stolyarov II

The Human Rational Faculty and the Necessity of Property Rights (2005) – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
July 20, 2014
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Note from the Author: This essay was originally written in 2005 and published on Associated Content (subsequently, Yahoo! Voices) in 2007.  I seek to preserve it as a valuable resource for readers, subsequent to the imminent closure of Yahoo! Voices. Therefore, this essay is being published directly on The Rational Argumentator for the first time.  
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~ G. Stolyarov II, July 20, 2014
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Each individual is, by his fundamental and inextricable identity, a rational being, with a means of accurately identifying and analyzing reality with his mind. The individual’s rational faculty is his sole gateway to knowledge, and the sole means by which he can direct the application of his knowledge to the external world.
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Nobody else’s activity of any sort can substitute for the individual’s own thinking, just as nobody else’s activity can substitute for an individual’s own digestion. Each individual is also fundamentally a volitional being, and can choose to default on the responsibility of thinking for himself, thereby also choosing to bear the consequences.

However, whatever he chooses, it remains irrefutably true that he still possesses the capacity to be rational. From this capacity it is implied that he ought to be allowed to be rational, i.e., that he has a natural right to use his reason and benefit from the applications thereof.

Nobody should be permitted to intervene with another individual’s use of reason, nor to substitute his reasoning for another’s and force another to agree with or accept the consequences of his reasoning unless the other explicitly consents.

When two individuals come to an agreement, each has used his own reasoning to embrace it. When, however, such a clear, unambiguous agreement is not present, the individual who presumes to place his thoughts in the stead of another’s is committing the initiation of force, which is the opposite of reason.

Since all natural rights are derived from the human capacity to reason, all violations of natural rights are derived from the initiation of force by some individuals against others.

The only manner in which reason can have any concrete, material expression is by means of property, i.e., those material entities which belong to an individual as a consequence of his use of reason. Even the very capacity to reason itself is dependent on property, as the individual mind is a material entity, and, were it not for the concrete biological mechanisms of the brain, there would not be abstract thought.

Thus, to be able to reason, the individual must have a property in his physical mind. In order for his physical mind to function, an individual must also have property in his physical body, since, not only is the mind part of the body but, without the proper functioning of the remainder of the body, the mind would not be able to survive. In summation, the right to the use of one’s reason implies the right to property in oneself and, as a corollary, the right to use one’s reason to determine what shall happen to one’s mind and body.

History of the 1848-1853 California Gold Rush (2003) – Essay by G. Stolyarov II

History of the 1848-1853 California Gold Rush (2003) – Essay by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
July 20, 2014
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Note from the Author: This essay was originally written in 2003 and published in six parts on Associated Content (subsequently, Yahoo! Voices) in 2007.  The essay earned over 43,500 page views on Associated Content/Yahoo! Voices, and I seek to preserve it as a valuable resource for readers, subsequent to the imminent closure of Yahoo! Voices. Therefore, this essay is being published directly on The Rational Argumentator for the first time.  ***
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~ G. Stolyarov II, July 20, 2014
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Background History of the California Gold Rush

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The real story of the California Gold Rush has to be traced back to the Mexican War, which was fought from 1846 to 1848. The war started out as a dispute over Texas. However, under the Treaty of Guadalupe Hidalgo, America ended up not only with Texas, but also Nevada, Utah, Arizona and California.

During this time period, the country was expanding and its transportation improving. Once gold was discovered in California, waves of fortune-seekers, also known as 49ers (because they came during 1849), came from all over the world to California, thus drastically impacting both the economy and social life of California, which in turn impacted the rest of the nation. Even though few of the 49ers actually made a fortune from mining gold, many found other ways to earn a living, especially once the gold became scarce and xenophobia emerged. Nonetheless the incredible number and diversity of people who came to California seeking an easy fortune influenced Californian and American life.

John Sutter, on whose lands the gold discovery had occurred, moved to California from Switzerland in 1830 and obtained a property charter from the Mexican government. During this time, he established a fort at New Helvetia, at the junction of the American and Sacramento rivers. He strove to build an agricultural empire, but the gold discovery was the beginning of the downfall of his dream. Along with James Marshall, Sutter located gold at his mill in 1848.

It may seem odd that James Marshall and John Sutter were quite displeased upon testing the gold and confirming its identity. But Sutter was barely interested in profits to be made from the discovery; his original plan was to establish an agricultural powerhouse, and he stuck to it. He was afraid, however, that if news of the discovery leaked, his workers would abandon him and try to make a profit of their own from the gold fields. He also feared the competition over land and resources that would ensue if a massive rush of immigrants came to California to seek gold. Thus, he and Marshall agreed to keep the discovery secret until the mill’s completion, so that Sutter would retain the manpower necessary for the job.

Stories circulated the countryside within weeks. However, they were all too often dismissed as wild rumors, until they caught the ears of a new and ambitious Mormon immigrant, Samuel Brannan. Brannan immediately sensed immense riches in store from the potential gold boom, and keenly bought most of the picks, pans, and shovels in California at extremely low prices. Then, after he established a colossal stockpile, he ran through the streets of San Francisco, holding up gold, and shouting “Gold, gold in the American River!” He provided enough empirical evidence to be believed and trigger a massive inflow of immigrants as the news spread east. In just the next nine weeks, by selling mining equipment at prices far higher than his costs, he made $36,000.

Gold Seekers’ Journey Westward During the 1849 California Gold Rush

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The journey westward during the 1849 California Gold Rush was an arduous ordeal for many. As news of the 1848 discovery at Sutter’s Mill spread, people all over the United States were allured by the prospect of gold, but the pathways from the population centers of the East Coast to California were few and arduous. Two essential choices for forty-niners, the first wave of Gold Rush immigration in 1849 were an overland journey across the 2000 mile stretch of yet unsettled land in between, or a sea route around Cape Horn in South America.

The sea route, preferred by gold seekers from the Eastern states, would often take about six months. It was not a pleasant journey, either. Seasickness and spoilage of food and water were omnipresent.

Some time later, a third route was thought up, though not any less perilous than the other two. Migrants sailed as far south as Panama, disembarked, then made 3-day trip by mule and canoe across land to the Pacific side, where they boarded another ship. Tropical diseases in that part of the world were devastating. Malaria and cholera claimed many lives. Lieutenant Ulysses S. Grant, when journeying to California in 1852, wrote that a third of his regiment was killed or incapacitated by these afflictions. To add to the problems, ships to ferry the immigrants up to San Francisco were rare, and the travelers would often end up being stranded in Panama for months.

Over land, a favorite route of immigrants from the Central states was the Oregon-California Trail, a well-worn path carved out several years earlier by fur trappers. This overland road much shorter than the sea route, but not faster. Its travelers would go for six months by covered wagon through desolate landscapes with scarce supplies of water. The Native Americans along the way, whom many xenophobic settlers initially feared, actually turned out to be helpful, providing supplies, information, and guides. The occasional entrepreneur in the area would also capitalize on the scarcity of water by selling it at prices as high as $100 per drink. Supply and demand worked even in the desert.

Because travelers reached California successfully did not imply that their journey was over. Gold was further inland near Placerville, far from the port of San Francisco where the ships docked. Some travelers were also repulsed upon reaching San Francisco by the sight of numerous bars, gambling places, and saloons, all sites of licentious life that had been taboo in the East. Additionally, many immigrants explored the Sacramento River and its delta for new gold sites to mine.

Key Figures in the California Gold Rush: John Sutter, Richard Barnes Mason, William T. Sherman, and Ulysses S. Grant

***

The 1849 California Gold Rush was a magnet for ambitious personalities: individuals who would later rise to extraordinary heights in American politics, military, and economic life. The Gold Rush ruined the great landowner John Sutter but served as a testing ground for Richard Barnes Mason, Ulysses S. Grant, and William T. Sherman.

John Sutter was, as he had predicted, economically destroyed by the inpouring of gold seekers into California. His ambitions for an expansive enterprise were ruined by the desertion of his laborers and by squatters overrunning his lands after the discovery of gold. Sutter never extensively attempted to benefit from the Gold Rush, except for one half-hearted expedition which he abandoned almost upon arriving at the gold fields. His losses were never officially compensated.

Another key person in Gold Rush history was Colonel, later General, Richard Barnes Mason, who served as the fifth military governor of California from 1847 to 1849. Governors were changed with extreme rapidity during that time period, but Mason served on his post the longest. He was an astute observer who toured the gold fields with his assistant, Lieutenant William Tecumseh Sherman, and reported to Washington first-hand observations of the social and economic conditions in the state. His writings are an excellent primary source for understanding the Gold Rush phenomenon.

Sherman, the Sherman who would become an infamous Civil War general, wrote down his observations in his memoirs. Quite unexpectedly, he became a banker for Lucas, Turner & Co. in September of 1853, and oversaw construction of “Sherman’s Bank,” a building so durable and finely engineered that it still stands in California today.

The California Gold Rush seemed to be a magnet for future great generals. Ulysses Grant, upon arriving in California, also wrote detailed notes for his memoirs. His own experiences however, were not to be as glorious as his later life. Grant struck a deal with his troops to start a potato growing business, which failed miserably.

Grant’s financial failure happened because hundreds of other entrepreneurs got the same idea at the same time. So many potatoes were grown that season that everybody had enough for themselves, and no one wanted to buy any. So Grant and his troops ended up eating a lot of what they grew and letting the rest rot away. As for Grant himself, put simply, he had a drinking problem, which would notoriously feature in his later life. In 1853, he was discharged from his regiment and sent home, though he conveniently omits this fact from his accounts.

Economic and Cultural Leaders During the 1849 California Gold Rush

***

A number of America’s future economic and cultural leaders began their rise to prominence during the 1849 California Gold Rush. Among them were such individuals as Mark Twain, Sam Brannan, Levi Strauss, Phillip Armour, John Studebaker, Henry Wells, and William Fargo.

The Gold Rush was the proving ground for Samuel Clemens, the future Mark Twain. He came to California as an absolute unknown and took a job at the San Francisco Call, one of the two newspapers in the city at the time. He distinguished himself before the world in a rather unorthodox manner, writing a story about a local frog-jumping contest.

As for Sam Brannan, the great businessman who first spread news of gold’s discovery in California, he became the richest man in California without once mining the gold himself. He outmaneuvered the market many times through his publicity skills and adept purchases, eventually owning much of downtown San Francisco and even printing his own currency. Brannan was also disgusted with some of the racist, nativist miners’ oppression of foreigners and new arrivals in the state. He often broke up ethnic clashes and defended the rights of immigrants against the typically racist-slanted legislature. Why did Brannan care about the plight of working immigrants? The simplest answer is that foreigners were a large portion of his customer base, and the more miners were in the business, the more Brannan would profit. The market, and its most skilled representatives, are blind to irrational prejudices of race and nationality.

Levi Strauss, the future inventor of blue jeans, was known during the Gold Rush as a dry goods salesman and tent maker. In 1853, he made what he called “canvas pants” out of tent fabric especially for miners. These gained widespread popularity and earned Strauss a fortune.

Another great businessman who got started during the Gold Rush was Phillip Armour, who came to Placerville, California and opened a meat market there. Later, he moved back to Indiana with his profits and founded the gargantuan Armour Meat Packing Company.

Moreover, John Studebaker, a wagon manufacturer, established a firm in California to provide transportation to Oregon pioneers. It would expand to become a major car producer during the first half of the twentieth century.

Finally, Henry Wells and William Fargo offered a stable, honest banking, transportation, and mail delivery system to miners, something that the uncertainty-faced miners desperately needed. Their venture would also soon expand to a nationwide level.

California’s Colossal Economic Growth During the 1849 Gold Rush

***

The economy of California grew at a phenomenal rate during the days of the 1849 Gold Rush. Much of this growth was made possible by the laissez-faire economic policies of Governor Richard Barnes Mason.

Prices rose dramatically as more people found gold and gold became widely circulated on the market. Seeing that customers would afford it, merchants raised their fees on all sorts of commodities, from real estate to food to transportation. A miner in California may have made about six to ten times as much as his eastern counterpart, but he also had to pay about that many times more for his upkeep.

The following concrete illustration of this trend is useful: a plot of San Francisco real estate that cost $16 in 1847, sold for $45,000 just 18 months later. Imagine investing in real estate during that time period.

The city of San Francisco grew from an isolated village to a thriving city in the five or so years of the Gold Rush. Its population rose from 1000 in 1848 to 35000 in 1850. This contributed dramatically to California’s admission to the Union as a state in 1850. 30 new houses and 2 new murders came about every day. Theaters and newspapers were built and prospered, and eventually only London would have more newspapers than San Francisco. Wages rose with the general standard of living, and great economic expansion and demand for jobs made employment readily available.

The California agricultural boom was another significant economic result of the Gold Rush. Many of the forty-niners and later immigrants contributed to the growing demand for food. Initially, this was satisfied by imports from merchants as far away as Chile or as nearby as Oregon. However, gradually the capacity was developed to grow the food in California itself. Machines were imported into the country to equip an efficient farming industry, and eventually wheat was exported from California to other parts of the U.S.

This phenomenal economic growth was made possible by Governor Richard Barnes Mason’s laissez-faire approach to the economy. Mason recalled of his administration: “I resolved not to interfere, but permit all to work freely, unless broils and crimes should call for interference.”

During the military period, when California’s future within the United States was still uncertain, as it was not yet a state, and governments changed with great frequency, no political factions could emerge to attempt to regulate and restrict the economy. The courts were based on the Anglo-Saxon model, which stressed property rights and the rights of the accused, though occasional acts of “vigilante justice” did occur. The government was highly limited and mainly acted as a second line of defense against crime. People fended for themselves mostly, and did surprisingly well. Unlike the cities, in the mining camps, crime rates were extremely low, lower than even in the relatively peaceful Eastern cities, mainly because almost every miner owned a gun. The principle of “more guns, less crime” was clearly demonstrated there.

Immigration to California During the 1849 Gold Rush

***

The Gold Rush resulted in massive foreign immigration to California from virtually every area of Europe, Asia, and the Pacific. At first, immigrants were accepted by almost everyone, as land, gold, and other resources were plentiful. As those resources became less abundant, however, a minority of white racists played on miners’ fears of foreign competition and came to dominate the legislature, setting up barriers to foreign immigrants. While some immigrants left, many others persisted, and set the stage for the vast cultural diversity seen in California today.

During the 1849 Gold Rush, California’s government was tolerant toward all immigrants under the laissez-faire military administration of Richard Barnes Mason. But as soon as the civilian legislature came along in 1850, a minority of racist white miners, who feared competition with foreign immigrants, influenced the government to abandon laissez-faire and institute the Foreign Miners Tax.

This $20 monthly fee from every foreign miner was intended to “protect” American miners from foreign competition. It was a disaster and was repealed a year later, as many foreign miners quit their careers and crowded the cities, jobless and penniless. Some did not give up and spread into other fields of business, having thus defended their individual rights against the bigoted government.

Mexicans had comprised much of California’s population before the Mexican War. The war unseated them from a dominant social position and many came to the mines, seeking to regain lost wealth and status. Tensions between Mexican miners and racist/nativist interests escalated into the 1850s. An example would be the attempt by racist miners, supported by politicians from the East, to drive Mexicans out of the Calaveras and Tuolumne counties where the Mexican miners had claimed land.

The Chinese migrants to California would shape the state extensively. Once again, the Chinese encountered animosity from racist miners and the legislature. Nevertheless, their industry and persistence enabled them to find jobs as cooks, cigar makers, restaurateurs, vegetable farmers, fortune tellers, and merchants, found temples, gambling halls, theaters, and laundries, and become key contributors to the agricultural boom. Many of them planted crops or built levees.

Women and African Americans also found a new home and opportunities in Gold Rush California. In both conventional and unconventional economic roles, they defied constricting Eastern stereotypes and met with great financial success. As for African-Americans, though many came as slaves, they bought freedom with gold and those already free used gold to free families, fight discrimination and start newspapers, schools, and churches. Upon its admission to the Union, so many were free and economically active that slavery was prohibited in the state.

Sources Used

Chevez, Ken. Part Three: State’s Latinos Lost in the Rush. 1/18/98. Sacramento Bee. October 2003 <http://www.calgoldrush.com/part3/03mexicans.html>

Discovery Of Gold By John A. Sutter. 2003. Virtual Museum Of The City Of San Fransisco. October 2003 <http://www.sfmuseum.org/hist2/gold.html>

Discovery Of Gold Report Of Colonell Mason. 2003. Virtual Museum Of The City Of San Fransisco. October 2003 < http://www.sfmuseum.net/hist6/masonrpt.html>

Gen. William Tecumseh Sherman. 2003. Virtual Museum Of The City Of San Fransisco. October 2003 <http://www.sfmuseum.net/bio/sherman.html>

Gold Fever Discovery. 1998. Oakland Museum of California. October 2003
<http://www.museumca.org/goldrush/fever05.html>

Gold Fever Entertainment. 1998. Oakland Museum of California. October 2003
<http://www.museumca.org/goldrush/fever18.html>

Gold Rush And Anti-Chinese Race Hatred. 2003. Virtual Museum Of The City Of San Fransisco. October 2003 <http://www.sfmuseum.net/hist6/chinhate.html>

Gold Rush: Gold Country. 2003. Idaho State University.
October 2003 <http://www.isu.edu/~trinmich/goldcountry.html>

Hoge, Patrick. Part Three: Justice Wasn’t Pretty- But It Was Quick. 1/18/98. Sacramento Bee. October 2003 <http://www.calgoldrush.com/part3/03justice.html>

Lieutenant Ulysses S. Grant And The Gold Rush. 2003. Virtual Museum Of The City Of San Fransisco. October 2003 < http://www.sfmuseum.net/hist6/shermgold.html>

Magagnini, Steven. Part Three: Chinese Transformed
Gold Mountain. 1/18/98. Sacramento Bee. October 2003
<http://www.calgoldrush.com/part3/03asians.html>

Magagnini, Steven. Part Three: Fortune Smiled on Many Black Miners. 1/18/98. Sacramento Bee. October 2003 <http://www.calgoldrush.com/part3/03blacks.html>

Magagnini, Steven. Part Three: Indian’s Misfortune Was Stamped In Gold. 1/18/98. Sacramento Bee. October 2003 <http://www.calgoldrush.com/part3/03native.html>

Perkins, Kathryn Doré. Part Three: ‘Real Women’ Who Defied Stereotype. 1/18/98. Sacramento Bee. October 2003 <http://www.calgoldrush.com/part3/03women.html>

The Gold Rush: Collision Of Cultures. 2003. PBS. October 2003 <http://www.pbs.org/goldrush/collision.html>

The Gold Rush: Journey. 2003. PBS. October 2003 <http://www.pbs.org/goldrush/journey.html>

William T. Sherman And The Gold Rush. 2003. Virtual Museum Of The City Of San Fransisco. October 2003 <http://www.sfmuseum.net/hist6/shermgold.html>

America: Gone West. Cooke, Alistair. BBC/Time-Life Television, 1973.

French Cartoon. 2003. Oakland Museum of California. October 2003 <http://www.museumca.org/goldrush/curriculum/4g/42103011.html>

That Cold-Hearted Discipline – Article by David J. Hebert

That Cold-Hearted Discipline – Article by David J. Hebert

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The New Renaissance Hat
David J. Hebert
November 6, 2013
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But of all the duties of beneficence, those which gratitude recommends to us approach nearest to what is called a perfect and complete obligation. What friendship, what generosity, what charity, would prompt us to do with universal approbation, is still more free, and can still less be extorted by force than the duties of gratitude. —Adam Smith, The Theory of Moral Sentiments

A recent article by Wharton Professor Adam Grant has been popping up here and there, most recently in Psychology Today. Grant suggests that studying economics breeds greed, and he cites several studies to support his claim. The studies conclude economics professors give less money to charity than other professions, economics students are more likely to deceive others for personal gain, and people who study economics have less of a concern for fairness and tend to think that “greed” is okay.

To his credit, Grant does consider the alternative: that maybe economics actually attracts greedy people or that greedy people tend to thrive by studying economics. He dismisses these possibilities by noting that “there is evidence for selection . . . but this doesn’t rule out the possibility that studying economics pushes people further toward the selfish extreme.” He goes on to chide practitioners of the discipline for teaching self-interest in the classroom.

Finally, he concludes with four points that are meant to provide evidence of the social harm in studying economics, which can be summarized in two overarching points:

1) Economics justifies greedy behavior, and

2) Studying economics makes people less altruistic.

I want briefly to discuss these two points here.

Economics Justifies Greedy Behavior?

Studying economics, and specifically the role of incentives, teaches us that relying on altruism is a brave assumption that has but limited applicability. For example, among people we know, we can rely on a certain degree of altruism or benevolence. I know, for example, that my family and friends will be there for me not because I pay them to do so, but because they care about me. Similarly, they know I will be there for them. However, I don’t know the same thing about random people I encounter on the street.

And yet in order to enjoy the immense wealth that the division of labor affords us, society demands that we have interactions both with people we know well and people we do not know at all. These two distinct spheres of activity require two distinct forms of cooperation, which one might get from reading Adam Smith’s twin pillars of economics: The Theory of Moral Sentiments and The Wealth of Nations.

More tidily, perhaps, F. A. Hayek describes this situation in The Fatal Conceit by noting the difference between the macroeconomy and the microeconomy. Macro, in this context, refers to society as a whole, while micro refers to just the people to whom we are close. Hayek says that if we were to apply the same rules of the family unit to the macro, as would be the case if we were to allocate resources altruistically, we would destroy the macro. This is because there would be a complete lack of economic calculation, resources would be misallocated, and plans would fail to be coordinated (see these articles for more on economic calculation).

Hayek also notes that the reverse is true: If we were to apply the rules of the market to the family, we would destroy it as well. We don’t need prices and incomes at the dinner table to allocate the food. Even the most ardent defender of markets would agree that having prices and such as the means of allocating food at the dinner table would be wrong, just like paying your friends to help you move across town would be strange. (Beer and pizza don’t count.)

Instead, students of economics recognize not that greed is good, as the saying goes, but that greed can be transformed into the service of others given the proper institutional setting. That institutional setting, which has been thoroughly discussed elsewhere, is one that celebrates the role of property rights, prices, and profits (and losses) and recognizes their role in creating the incentives to properly husband resources, generates the information about the relative scarcities of various goods and transmits this information to consumers and producers in a quick and efficient manner, all of which provides a feedback mechanism to drive continued innovation.

Economics Makes People Less Altruistic?

Grant cites a 2005 article by Neil Gandal et. al. as concluding that “students who planned to study economics rated helpfulness, honesty, loyalty, and responsibility as just as important as students who were studying communications, political science, and sociology,” but that by the third year, economics students rated these values “significantly less important than first-year economics students.”

While the Gandal study does include such conclusions, it also includes much more. For example, economics students attribute less importance to fairness. Evidencing this, Gandal points out that, when questioned about the allocation of radio frequencies to different mobile-phone service providers, students who study economics are more likely to advocate selling the rights to the highest bidder while students of other disciplines are more likely to advocate for allocating the rights to “anybody who meets some minimal eligibility criteria.”

Students of economics do not advocate for property rights because we are greedy; we advocate for property rights because we understand and take seriously potential incentive problems in politics. The notion of minimal eligibility requirements may sound nice, for example, but problems may lie in who gets to draw that line, by what process that line gets drawn, and the incentives faced by the line-drawers. As Madison points out in Federalist 51, “If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.”

Economics students know men are no angels. And as Nobel laureate James Buchanan points out, government officials are human beings, too, with their own hopes, dreams, and aspirations—and yes, forms of avarice. Supporting the allocation of resources to the highest bidder sidesteps the issues raised by these potential incentive problems. This means that the choice of how to allocate resources fundamentally comes down to a choice of institutions.

We can have a central authority establish guidelines by which anyone who wants can use the radio frequencies, or we can let the market decide. The former leads to a standard tragedy of the commons problem, whereby the radio frequency gets overused. In the case of cell phones, this means that the frequency would be crowded with multiple conversations simultaneously; imagine trying to shout to your friend across a crowded bar. The latter leads to the frequencies being allocated to the person who is best able to utilize them to serve the general population. So AT&T, for example, gets exclusive rights to a certain bandwidth and then tries to figure out how to best serve its customers. In this case, the customer gets to enjoy a clear phone call without the distraction of several other conversations in their ear simultaneously.

In any case, these are not examples of quelling altruism, but of keeping it in its place.

Less Greed, More Cooperation

Viewed in this light, economics does not so much teach greed but rather the beauty of cooperation. How else could we explain how a woolen coat gets made, how Paris gets fed, or how a pencil gets made? And if allocating, say, radio frequencies based on highest valued use makes people learn to discard fairness, well, how exactly is that a bad thing?

David Hebert is a Ph.D. student in economics at George Mason University. His research interests include public finance and property rights.

This article was originally published by The Foundation for Economic Education.

***

Editor’s Note by Gennady Stolyarov II: Mr. Hebert’s article is excellent in focusing on the true significance of economics and the need for private property rights. In one important respect, though, my position differs from his when it comes to the allocation of radio frequency to highest bidders such as AT&T and other entities exercising similar coercively granted monopoly and quasi-monopoly powers.

My position, arising out of similar libertarian principles, is that the allocation of radio frequencies to AT&T (and similar local/regional telecommunications monopolies) through the political process would not result in an economically optimal allocation, even if AT&T were the highest bidder. The reason for this is that AT&T’s very bidding ability arises out of (1) its decades-long history as the telephone monopoly in the United States and (2) the protections from competition that it enjoys in certain jurisdictions as a local or regional monopoly provider of certain services wrongly considered “natural monopolies” – such as high-speed cable services. In a pure free-market system, there would likely need to be some sort of allocation process for radio frequencies, so long as the use of radio frequencies by some parties has the physical ability to interfere with the use of the same frequencies by other parties. However, the outcome of such a free-market allocation process would differ considerably from the outcome of a bidding process in today’s status quo, conditioned by decades of deleterious path-dependency arising out of the privileges granted to AT&T and similar local/regional monopolists. Probably, an auction of radio spectrum on a purely free market would result in many smaller firms buying up many smaller ranges of spectrum and competing with one another more vigorously to provide superior customer service than do a handful of large, politically privileged telecommunications companies (AT&T, Comcast, Verizon, et al.) today. In this path-dependent, partially unfree environment it may be, in some cases, that allocations to lower bidders would result in better uses of resources and improved consumer outcomes, as long as institutional political privilege (e.g., enforced monopolies or historical insulation from competition) of the higher bidders can be incorporated into the bidding process in the form of some reasonable handicap used in considering their bids.

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

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

“Occupy” Protesters Have Rights, Too – Article by G. Stolyarov II

“Occupy” Protesters Have Rights, Too – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
November 4, 2012
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I am generally skeptical of the “Occupy” movement and have expressed my ambivalence and criticisms here, here, and here in the past. However, for all of my disagreements and reservations, I will defend the rights of fellow human beings when they are infringed. And, without question, “Occupy” protesters have rights, too – rights that have been shamelessly violated in the brutal crackdowns on “Occupy” protests which occurred last year.

In response to my passing mention of the pepper-spraying incident at University of California Davis in November 2011 (for which the University has now offered to generously compensate the victims), Dr. Charles Steele wrote, “Mr. Stolyarov responds that he’s concerned about ‘Occupy’ protesters being pepper-sprayed at UC Davis.  I’m uncertain what this event has to do with the Romney v. Obama choice, but he and I have very different definitions of ‘peaceful.’  My definition of peaceful does not include forcibly blocking public thoroughfares and occupying public spaces so that others cannot exercise their legitimate rights to use them.  It’s shameful that taxpayer money is now going to these ‘victims.’”

First, the facts of the situation do not bear out the allegation that anyone’s ability to use the UC Davis facilities was substantially impeded. The protesters blocked a sidewalk; that is all. Surely, anyone who wished to get from one facility to another could have walked around.

Second, the protesters were students who were paying customers of the university. Even though the right to use public property is a somewhat nebulous area (since it is funded through the payments of large numbers of people with competing preferences), it is clearly the case that a paying user of property – especially one who pays the immensely generous sums that often constitute tuition these days – should have a considerable degree of prerogative, as long as the property is not damaged and remains usable to others. This whole incident is a glaring demonstration of the power asymmetry between universities and their students. What other institution (especially a privately owned and funded institution) would treat its customers in this way? Would any private country club be able to get away with pepper-spraying its donors who happened to be sitting on the sidewalk approaching a golf course (without being in the way of the game)?

It is clear that the protest was not intended to obstruct the everyday goings-on at the university. Rather, like the many special events that regularly occur at every university, it was intended to attract attention to an issue important to students – in this case, the protesters’ grievances, justified or not. There is no evidence that the protesters befouled the grass and sidewalk they occupied, or that they prevented other students and faculty from passing through on unrelated business.

Third, even if the protesters violated a formal rule of the university (which is itself unclear), proportionality was not followed in the response. To physically damage a person for breaking a prohibition whose violation physically hurt no one is clearly not a proportionate punishment. Nor was the attempt to evict the protesters through any kind of force justified with respect to this kind of petty violation (if it was one). Even if it could justifiably be said that the protesters were clearly, unambiguously in the wrong in occupying the sidewalk, they should not have been interfered with forcibly during their occupation. An appropriate remedy would have been to inform them of the nature of their violation and to present them with a subsequent punishment that did not involve bodily harm. Preferably, the punishment should have been related to any alleged harms. Examples could include sidewalk-cleaning duty, or fines that reflect the estimated “economic cost” of the obstruction (if there indeed was one).

But, even more importantly, I fail to see how a clear criterion can be established to delineate which “occupations” of the sidewalk would constitute violations of other people’s rights. With regard to genuine public thoroughfares (e.g., roads and railroads), the delineation can be clearly made with regard to whether the flow of vehicle traffic is obstructed. But, on a mere sidewalk, how long would one need to dally in order to be considered a violator? Would sitting for a mere minute suffice? What about standing for a minute? What about standing for five seconds? What about walking really slowly so that others have to walk around? What about walking really slowly because one has a disability? What about walking at a moderate pace when the culture of the university encourages most people to be ultra-rushed and adopt a rapid pace at all times? What if a person occupies the sidewalk for a much longer time period, but no one else is around to use it? Ultimately, no such arbitrary delineation can be made – and if none can be made, then we must err on the side of permissiveness. The ability for people to peacefully express themselves is too precious for anything less to be done in the attempt to preserve it.