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Contra Robert Shiller on Cryptocurrencies – Article by Adam Alonzi

Contra Robert Shiller on Cryptocurrencies – Article by Adam Alonzi

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Adam Alonzi

While warnings of caution can be condoned without much guilt, my concern is critiques like Dr. Shiller’s (which he has since considerably softened) will cause some value-oriented investors to completely exclude cryptocurrencies and related assets from their portfolios. I will not wax poetically about the myriad of forms money has assumed across the ages, because it is already well-covered by more than one rarely read treatise. It should be said, though it may not need to be, that a community’s preferred medium of exchange is not arbitrary. The immovable wheels of Micronesia met the needs of their makers just as digital stores of value like Bitcoin will serve the sprawling financial archipelagos of tomorrow. This role will be facilitated by the ability of blockchains not just to store transactions, but to enforce the governing charter agreed upon by their participants.

Tokens are abstractions, a convenient means of allotting ownership. Bradley Rivetz, a venture capitalist, puts it like this: “everything that can be tokenized will be tokenized the Empire State Building will someday be tokenized, I’ll buy 1% of the Empire State Building, I’ll get every day credited to my wallet 1% of the rents minus expenses, I can borrow against my Empire State Building holding and if I want to sell the Empire State Building I hit a button and I instantly have the money.” Bitcoin and its unmodified copycats do not derive their value from anything tangible. However, this is not the case for all crypto projects. Supporters tout its deflationary design (which isn’t much of an advantage when there is no value to deflate), its modest transaction fees, the fact it is not treated as a currency by most tax codes (this is changing and liable to continue changing), and the relative anonymity it offers.

The fact that Bitcoin is still considered an asset in most jurisdictions is a strength. This means that since Bitcoin is de facto intermediary on most exchanges (most pairs are expressed in terms of BTC or a major fiat, many solely in BTC), one can buy and sell other tokens freely without worrying about capital gains taxes, which turn what should be wholly pleasurable into something akin to an ice cream sundae followed by a root canal. This applies to sales and corporate income taxes as well. A company like Walmart, despite its gross income, relies on a slender profit margin to appease its shareholders. While I’m not asking you to weep for the Waltons, I am asking you to think about the incentives for a company to begin experimenting with its own tax-free tokens as a means of improving customer spending power and building brand loyalty.

How many coins will be needed and, for that matter, how many niches they will be summoned to fill, remains unknown.  In his lecture on real estate Dr. Shiller mentions the Peruvian economist Hernando De Soto’s observation about the lack of accounting for most of the land in the world.  Needless to say, for these areas to advance economically, or any way for that matter, it is important to establish who owns what. Drafting deeds, transferring ownership of properties or other goods, and managing the laws of districts where local authorities are unreliable or otherwise impotent are services that are best provided by an inviolable ledger. In the absence of a central body, this responsibility will be assumed by blockchain. Projects like BitNation are bringing the idea of decentralized governance to the masses; efforts like Octaneum are beginning to integrate blockchain technology with multi-trillion dollar commodities markets.

As more than one author has contended, information is arguably the most precious resource of the twenty first century. It it is hardly scarce, but analysis is as vital to making sound decisions. Augur and Gnosis provide decentralized prediction markets. The latter, Kristin Houser describes it, is a platform used “to create a prediction market for any event, such as the Super Bowl or an art auction.” Philip Tetlock’s book on superforecasting covers the key advantages of crowdsourcing economic and geopolitical forecasting, namely accuracy and cost-effectiveness. Blockchains will not only generate data, but also assist in making sense of it.  While it is just a historical aside, it is good to remember that money, as Tymoigne and Wray (2006) note, was originally devised as a means of recording debt. Hazel sticks with notches preceded the first coins by hundreds of years. Money began as a unit of accounting, not a store of value.

MelonPort and Iconomi both allow anyone to start their own investment funds. Given that it is “just” software is the beauty of it: these programs can continue to be improved upon  indefinitely. If the old team loses its vim, the project can easily be forked. Where is crypto right now and why does it matter? There is a tendency for academics (and ordinary people) to think of things in the real world as static objects existing in some kind of Platonic heaven. This is a monumental mistake when dealing with an adaptive system, or in this case, a series of immature, interlocking, and rapidly evolving ecosystems. We have seen the first bloom – some pruning too – and as clever people find new uses for the underlying technology, particularly in the area of IoT and other emerging fields, we will see another bloom. The crypto bubble has come and gone, but the tsunami, replete with mature products with explicit functions, is just starting to take shape.

In the long run Warren Buffett, Shiller, and the rest will likely be right about Bitcoin itself, which has far fewer features than more recent arrivals. Its persisting relevance comes from brand recognition and the fact that most of the crypto infrastructure was built with it in mind. As the first comer it will remain the reserve currency of the crypto world.  It is nowhere near reaching any sort of hard cap. The total amount invested in crypto is still minuscule compared to older markets. Newcomers, unaware or wary of even well-established projects like Ethereum and Litecoin, will at first invest in what they recognize. Given that the barriers to entry (access to an Internet connection and a halfway-decent computer or phone) are set to continue diminishing, including in countries in which the fiat currency is unstable, demand should only be expected to climb.

Adam Alonzi is a writer, biotechnologist, documentary maker, futurist, inventor, programmer, and author of the novels A Plank in Reason and Praying for Death: A Zombie Apocalypse. He is an analyst for the Millennium Project, the Head Media Director for BioViva Sciences, and Editor-in-Chief of Radical Science News. Listen to his podcasts here. Read his blog here.

Benjamin Franklin: Pioneer of Insurance in North America – Video Presentation by G. Stolyarov II

Benjamin Franklin: Pioneer of Insurance in North America – Video Presentation by G. Stolyarov II

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The New Renaissance HatG. Stolyarov II
November 6, 2015
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Mr. Stolyarov discusses Benjamin Franklin’s multifaceted contributions to combating the threat of fire, including the founding of the first fire insurance company in North America – The Philadelphia Contributorship for the Insuring of Houses from Loss by Fire.

This presentation was originally prepared for and delivered at the October 26, 2015, educational meeting of the Sierra Nevada Chapter of the CPCU Society. This video and enhanced slideshow are a slightly expanded version of that presentation.

The slides can be downloaded in PowerPoint format  and PDF format.

Portrait of Benjamin Franklin by David Martin (1767)
Portrait of Benjamin Franklin by David Martin (1767)
Arguments Against Eminent Domain and Its Use for the Benefit of Private Parties (2005) – Article by G. Stolyarov II

Arguments Against Eminent Domain and Its Use for the Benefit of Private Parties (2005) – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
July 26, 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.  The essay earned over 8,300 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.  
***
~ G. Stolyarov II, July 26, 2014

*

The power of eminent domain has had a lengthy history, first originating in the Middle Ages and becoming enshrined in British common law. It is included in the U.S. Constitution as a means of government appropriating private property if this appropriation serves a “public use.” However, under the 5th Amendment, the government is obligated to provide “just compensation” for any property thus taken, which is usually interpreted to mean that the government must pay the market value of the property to the owner from whom it is taken.

Recently, however, governments at all levels have begun to stretch these powers to encompass one private party’s land being taken for the benefit of another, especially if the other is a larger business that has the potential of bringing in greater tax revenues. This is a measure of questionable constitutionality, and even far more questionable morality. It is desirable to abolish such seizures of private land for the purposes of redistribution to other private entities, and to at least limit eminent domain powers to seizures that will only be directed toward benefiting government projects and infrastructure. That is, the power of eminent domain might still be invoked to build a public road or school, but not a shopping mall or apartment building. The arguments in favor of this restriction are overwhelming, even though it does not go as far as complete eminent domain opponents such as myself would like.

First, for somebody who values property rights, private property is an absolute, not to be contingent on “the public interest.” If the individual sees the benefits of keeping his property as outweighing those of selling it, he can either refuse to sell it or ask for more compensation. Anybody but the owner should be allowed to take the property only with the owner’s consent.

Often, current governments do not even give market value to “compensate” for seizures, but, even if they did, there are subjective values that owners associate with their property which are hard to quantify and which only the owners themselves can enumerate accurately. As the story of certain homeowners in the 2005 Supreme Court case of Kelo v. New London shows, some of them have built their dream homes out of places that were run-down when they first purchased them. And, after they had invested their lifetime’s work into those houses, the houses were condemned by the government. Surely, a coercive demand that they accept “market value” is not sufficient to compensate such a deeply personal investment.

Furthermore, “the public interest” is a collectivist notion, which ignores the fact that only individuals exist and that invoking “the public interest” in fact implies that the government should coercively back some private interests over others.

The policy of eminent domain has, recently, been used with blatantly power-hungry justifications. Business X brings in less tax money than Business Y might, so X must be demolished to give way to Y. Y is also a larger business that might create more jobs, so this justifies putting out of work those individuals who are currently employed by X. The flaw with this reasoning is that it views individuals as fungible, or substitutable for one another. It should not matter how many other individuals benefit from a government policy if it ruins the livelihood and property of even one innocent person. Individual rights are absolute.

Advocates of eminent-domain redistribution of property to private parties will attempt to state that the government can actually bring about “efficiency” through the use of eminent domain power to achieve “urban renewal.” However, economic theory from Adam Smith on has shown that the free market achieves any goal more efficiently than the government. A business that thrives because of government favors through eminent domain is not thriving because it functions better than others in market competition. As a matter of fact, that business might well not be favored by supply and demand, and has therefore not been able to acquire the land it seeks under a mode of free, voluntary market exchange. Therefore, its owners are seeking to gain what they have not earned by expropriating it from those who have earned it.

The kind of eminent domain supported by the Supreme Court in Kelo v. New London is pure legalized theft. It is time to recognize it as such.

 

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

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

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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
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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
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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.

Answers to Some Frequently Asked Questions on Road Privatization (2009) – Article by G. Stolyarov II

Answers to Some Frequently Asked Questions on Road Privatization (2009) – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
Originally Published September 12, 2009
as Part of Issue CCVII of The Rational Argumentator
Republished July 24, 2014
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Note from the Author: This essay was originally published as part of Issue CCVII of The Rational Argumentator on September 12, 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
***

I recently received a series of questions pertaining to my articles, “The Necessity of Road Privatization” and “How to Privatize the Roads.” I make my answers available to the public, as I have heard the same questions frequently posed to advocates of turning roads over to free-market competition.

Issue: Unavailability of Electronic Technology

Question: “You suggested that electronic tolling can be used for private roads, but what if this technology is not available for some countries? If the technology were not in place, would privatization still be desirable?”

Answer: Road privatization is desirable no matter what the technological level of the society adopting it. There are several justifications for this:

1) In a private, competitive road market, the requisite technologies for providing easy, convenient access to roads for customers will develop quickly, as entrepreneurs will be motivated by profit to invest in them. After all, if customers must spend a lot of time waiting at toll booths to get on the road, they will take their business elsewhere.

2) At any level of initial technology, it is possible to have superior organizational and logistical methods that maximize user convenience. For instance, if we assume no electronic technology whatsoever and physical cash collection as the only feasible means of obtaining payment, we can still conceive of entrepreneurs having large numbers of toll booths at each checkpoint to ensure that customers can pay quickly and be on their way. Alternatively, entrepreneurs can always charge road users regular membership fees and issue members identification papers that would be checked anytime the user enters the road. It is not always possible, of course, to predict the specific form an organizational innovation will take. However, tens of competing producers, each working under the hard budget constraint of a private enterprise, are much more likely to come up with innovative, efficient solutions than a monopoly producer with a soft budget constraint.

3) Historically, some of the first major roads in the United States – the turnpikes of the late 18th and early 19th centuries – were privately built and operated, in an era long before today’s advanced technology. The roads functioned quite well for their time, facilitating inter-state commerce and the westward migration of large numbers of settlers. Private roads have existed with much more primitive technology than is available anywhere today, and so there is no reason to suppose that a given technological level is required for them to be viable. Technology certainly improves quality in this area, as in virtually all others, but the laws of economics function in a society of any level of advancement.

Issue: Different Ownership and Different Rules

Question: “If every road is owned by different people and different rules are imposed, would it not be too confusing?”

Answer: Standardization of rules often happens to a significant extent in private markets. For instance, railroads standardized many of their practices in the 19th century by mutual agreement of private railroad companies. In any business, it is useful and profitable to enable the customers to rely on some common and well-known elements and practices, and it is quite likely that many rules of the road will be extremely similar. On the other hand, this similarity will not be of the rigid, ossified sort that currently exists on government roads – where the rules are uniform and immutable, irrespective of how well they actually work in facilitating safe and efficient roadway use. Entrepreneurs would be free to experiment with new rules and arrangements, and if consumers do not like a particular arrangement, they would always be free to use a competing road. Entrepreneurs will be aware of this and so will hesitate to adopt measures that would be difficult for users to understand and to follow. Roads that do things differently and continue to attract traffic will likely need to prominently advertise the aspects that make them unique, so that potential users are well aware of the peculiarities in advance and in a concise, easy-to-understand manner. The best road innovations will take hold among other entrepreneurs and will eventually become part of a new set of evolving standards.

Issue: Private Road Monopolies

Question: “Can a road monopoly be allowed to charge exorbitantly if there’s no alternative to a place?”

Answer: It is extremely unlikely that any individual business would be able to purchase all possible access routes to a given place, as this would be extraordinarily expensive. If any alternative route exists, and a non-coercive monopoly currently charges exorbitant prices, this will be a strong signal for competitors to enter the market, buy up land on the alternative route, build their own roads, and charge lower prices than the former monopolist. If there is a single provider of a road to a particular place, even the potential of this kind of competition would keep such a provider charging reasonable prices.

In the odd event that competition does not enter the field, people might simply choose not to go to the place for which the only road requires an exorbitant fee for its use. In this case, many individuals will come to see the benefits of going to the place in question as being outweighed by the costs, and so the place will cease to become popular, and the road provider’s revenue will diminish greatly. At that point, the road provider will either need to lower its prices to attract more business or go out of business entirely.

It is important to recognize that a road monopoly is precisely what exists virtually everywhere in many countries today. This monopoly, unlike to transitory monopolies that may sometimes occur on the free market, is supported by law. The consequences of a coercive monopoly in the provision of any good are easy to foresee and identify: lower quality at a higher price. It is reasonable to believe that taxpayers are already being charged exorbitantly for the use of government roads today.

Click here to read more articles in Issue CCVII of The Rational Argumentator.

The Extraordinary Business of Life – Article by Sanford Ikeda

The Extraordinary Business of Life – Article by Sanford Ikeda

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The New Renaissance Hat
Sanford Ikeda
May 25, 2013
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I heard it again from this year’s commencement speaker: the common mistake of thinking economics is just about business and making money. I know I’m not the only economics teacher who every year has to disabuse his students (and many of his own colleagues from other disciplines) of that same error.

Economics is not business administration or accounting. Economics is a science that studies how people interact when the means at their disposal are scarce in relation to their ends. That includes business, of course, but a whole lot more as well.

Where Does That Notion Come From?

Well, for starters, perhaps from one of the greatest economists in history, Alfred Marshall. He opens his highly influential textbook, first published in 1890, with this statement:

“Political Economy or Economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of wellbeing.” (Emphasis added)

This definition more or less prevailed until 1932, when another British economist, Lionel Robbins, defined economic science as being concerned with an aspect of all human action insofar as it involves making choices, not with a part of individual action. Economics, in other words, is the science of choice. Its starting point is not the “material requisites of wellbeing” but a person’s subjective valuation of her circumstances. Ludwig von Mises got it, which is why he called his magnum opus, simply, Human Action.

Similarly, Libertarianism Isn’t Pro-Business

An equally common mistake is to think that supporters of the free market are “pro-business” and favor so-called crony capitalism. But a consistent free-market supporter is neither pro-business nor anti-business, pro-labor nor anti-labor. A free market to us is what happens when you safeguard private property, free association, and consistent governance and then just leave people alone.

Part of the misunderstanding here might stem from the term “free market” itself. Since people tend to associate markets with buying and selling, jobs, and making (and losing) money, it’s perhaps understandable that they would think that advocates of the free market must be concerned mainly about business-related stuff: profits and losses, efficiency, and creating and marketing new products.

Indeed, I’ve met quite a few who claim to favor “free-market capitalism” merely because they believe in making as much money as possible in their lifetimes. It’s not surprising that many of these folks do tend to be pro-business and supporters of crony capitalism. I want to ask them not to be on my side.

Connotations aside, the free market encompasses far more than the stuff of business or a money-making scheme. Yes, it does include the essentials of private property, free association, and stable governance. But a dynamic market process that generates widespread material prosperity and promotes the pursuit of happiness would not be possible if it were based solely on the relentless pursuit of one’s narrow self-interest. Markets would not have gotten as far as they have today (with per-capita GDP up more than fiftyfold since 1700) if people didn’t also follow norms of honesty and fair play, trust and reciprocity. Such norms are without question partly the result of self-interest; few would trade with us if we weren’t honest and fair. But, as Adam Smith taught us, these norms also arise in large measure from a sense of sympathy, of fellow-feeling and fairness, that comes from our ability to see others as we see ourselves, and vice versa. This is why in most contexts I usually prefer the term “free society” to “free market.”

Bourgeois Virtue

But I think one good reason the association between business on the one hand and economics and classical liberalism on the other has been so persistent is that business and the free society arose together. That is, the liberal idea—that certain fundamental individual rights exist prior to and apart from the State—sparked one of the most momentous social changes in history: the commercial revolution and the emergence of the modern urban middle class. 

The triumph of liberty, of personal freedom, unleashed the creative potential of people, who found expression in art, religion, literature, but most of all—or at least most visibly—in the Marshallian “ordinary business of life.” The changes that have taken place in the past 500 years—scientific revolutions, religious reformations, political upheavals, artistic rebirths—were driven by the same human propensities as the commercial revolution and fueled by the wealth it produced. Indeed, the social and political changes of the past century—for women, workers, and minorities—would not have been possible without the entrepreneurial pressures of competition and innovation that forced radical changes in conventional thinking and socially conservative attitudes.

Tradition’s Worst Enemy

In short, business is the most dynamic social institution known to mankind. The critical and competitive attitudes that enable business to flourish erode custom and break old ties even as they foster new ones. The products of business tend to offend people whose sensibilities were refined by generations of tradition. The free market is tradition’s worst enemy.

Business has become part of the default mode of modern society. We take it for granted. We don’t realize what a radical, subversive force it is, to the point where it sounds strange to say so. But try to imagine a world without businesses and commerce. A world like the Dark Ages of, say ninth century Western Europe: static, grindingly poor, strictly hierarchical, socially intolerant, and, apart from the occasional battle or beheading, boring like you wouldn’t believe.

So, while it’s still a mistake to think economics and classical liberalism are somehow about studying and promoting business, maybe at a deeper level it’s not such a bad one to make after all. Business is subversive.

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

The Vital Importance of Property in Land: Part 2 – An Analysis of the Georgist Land-Value Tax – Article by G. Stolyarov II

The Vital Importance of Property in Land: Part 2 – An Analysis of the Georgist Land-Value Tax – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
October 16, 2012
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In this second installment of my short series on land and property rights (see my first installment here), I begin to respond to “We Can Have It All: The Beauty of Value Capture” by Edward Miller. In particular, I focus on the idea of the single tax on the value of land, as originated by Henry George. Mr. Miller, a contemporary representative of the Georgist position, states that “We can eliminate taxes and debt, poverty and special privilege. Contrary to the dour pronouncements from the curators of the dismal science, we can have it all.” Mr. Miller advocates doing this by advocating the elimination of “no-strings-attached sovereignty” over land and replacing it with what he calls “Value Capture” and which many others would call a land-value tax. Mr. Miller states that this “is a tax only in the sense that Pigovian ‘Taxes’ are. It is not a tax on production, and thus there is nothing objectionable about it from the perspective of classical liberalism. Indeed, I’d argue that without it, classical liberalism is a cruel joke. Value capture is simply a reconceptualization of who owns the value of the access rights over the Earth.” In this installment, I will focus on the Pigovian/Georgist land-value tax idea in particular. In subsequent installments, I will address what I consider to be a more desirable approach to land in a free-market, classically liberal manner that seeks to facilitate economic growth and the continual improvement of living standards.

I am not a supporter of a land-value tax (however it may be termed) or of Pigovian taxation in general. The idea of a Pigovian tax (however called) seems to me rather contrived, in that it assumes a perfect knowledge on the part of the taxing authority of not just which activities create negative externalities, but also the precise extent to which a particular instance of such activities creates those externalities – and, correspondingly, the precise extent of taxation needed to take the “social cost” of these activities into account. The economic distortions of taxation, relative to a tax-free free-market situation, cannot be avoided in practice, no matter what form the tax takes – though, admittedly, it can be said that some types of taxes produce greater distortions or different kinds of distortions than others. Furthermore, the idea of a Pigovian tax is unworkable in practice, because political incentives and the influence of special-interest pressure groups would surely distort the incidence of the tax to benefit those with lobbying clout. In other words, even if the exact “social cost” of every activity could be calculated, the influence of lobbyists on elected officials would result in the incidence of the tax departing from a proper reflection of that “social cost.”

The elimination of all other possible taxes would be a definite advantage of the Georgist system, though – in practice – attempts to introduce a new type of tax have seldom supplanted existing taxes but have merely resulted in yet another kind of tax alongside all others. In fact, in the United States today, we might consider the current system of property taxation to be a partially Georgist system – but the property taxes are paid alongside income, sales, excise, gift, estate, fuel, and numerous other taxes – not to mention a myriad of fees to fund specific government services.

However, let us assume that it is politically feasible to enact a single land-value tax that supplants all other taxes. Perhaps an added advantage of this simplified approach would be the reduction in the overall cost of administering tax determination and collection – which the most benevolent conceivable government would entirely pass on to the people in the form of a lower tax rate. Even in this ideal situation, why might a land-value tax still be less favorable than other possible taxes?

Consider that certain kinds of taxes can be avoided by a property-owning individual entirely. He only needs to pay an income tax if he earns taxable income. He only needs to pay a sales tax if he purchases taxable goods. He can avoid gift taxes by not giving gifts (beyond the tax-exempt amounts). If he has enough money saved up to live on, grows/produces all of his own goods, and keeps his property largely to himself, he can avoid all such taxes in theory (even though, in practice, he would admittedly be part of a small minority of the population). The similarity among these taxes (no matter their other flaws, of which there are many) is that they do not reduce current wealth kept for personal use. Property taxes are different in that they are able to actually diminish a person’s stock of wealth without that person undertaking any positive action. As long as a person owns a house, or a commercial building, or even a stretch of land for recreational use, he cannot avoid the diminution of his wealth through taxation solely due to the passage of time. An income tax only reduces one’s potential earning opportunities. A sales tax only reduces one’s potential purchasing power if one chooses to make purchases. A property tax, however, reduces one’s existing stock of wealth, no matter what one chooses to do. Thus, with all other things (including the total tax collected) being equal, a property tax is more adverse to an individual because it compels him to engage in positive actions in order to maintain his present wealth, rather than merely discouraging the individual from undertaking certain additional activities that might be taxed to a greater extent than he might prefer.

A Georgist land-value tax is different from the current American property tax in that it taxes the land only and not the manmade improvements on that land. In this respect, the land-value tax is superior. It would probably encourage significant vertical building by landowners/occupants in order to increase the amount of improvements per unit of land. However, it would also probably result in large stretches of land being unoccupied and unused, because there would be a sub-optimal level of interest in developing that land, as the owners/occupants would be responsible for paying tax. This may make the unfortunate phenomenon of urban congestion common even in less populated areas.

Furthermore, one can conceive of a supremely sub-optimal outcome of the single land-value tax, which would be the result of a perverse incentive indeed. This is the scenario where most individuals decide that it is not worth the trouble to own land (or partially own it or “rent” it from the community – however this might be described legally). Instead, large landholding corporations would emerge and purchase most or all of the land. Their owners (probably a lot of dispersed shareholders beholden to an entrenched management and thereby subject to numerous principal-agent problems) would be willing to absorb the costs of the land-value tax in exchange for collecting rents from everyone else who lives and works on that land. Many ordinary people might think that they are getting a good deal by avoiding all legal incidence of taxation – but in reality, the amount of rent they would pay to the landholding corporations would be higher to reflect the taxes those corporations have to pay. In other words, the cost of the land-value tax would be at least partially passed on to the renters/majority of people in the community by the landholding corporations. Economically, this is identical to the scenario that the Georgist proposal seeks to avoid – the situation where (whether or not this is indeed the case) it is alleged that most of people are beholden to a minority of landowners or lienholders by means of payment of rent or repayment of expensive mortgages.

One significant downside of this scenario, relative to the status quo, is that the possibility of “free and clear” ownership of property would be more definitively off-limits to everybody – even in theory. Another even greater concern is that the landholding corporations would essentially behave like supercharged homeowners’ associations – with even more power to micromanage people’s lives and impose arbitrary restraints on the use of personal property and the improvement of land. They would be able to conduct this abuse with impunity, because there would be fewer of them in any given geographical area, compared to today’s homeowners’ associations. This would give the landholding corporations the oligopoly (and sometimes monopoly) power that enables many similar entities to disregard consumer preferences and extract large amounts of unearned money.

The reality is that the market always seeks to correct for economic distortions that are the result of confiscatory or redistributive policies. The correction is always imperfect, because real wealth is in fact appropriated through taxation. However, changing the tax structure cannot, by itself, solve the whole distortion – without addressing how much wealth is kept by private citizens and what they are legally able to do with that wealth. There may, however, be a valid argument for changing a tax structure if this inherently results in a lower total proportion of tax collected, relative to the wealth that exists among the general population. This, of course, depends on the real rates of tax selected for each alternative under consideration. For instance, I would wholeheartedly support (as an unambiguous directional improvement relative to the status quo) a single land-value tax whose entire collections would be a mere 0.5% of the Gross Domestic Product. Irrespective of any concerns about the incentive effects of the tax, those would be dwarfed by the sheer amount of wealth that individuals would be able to keep compared to today’s tax regime. In this situation, though, I would still strongly prefer that the legal concept of full ownership of land be retained and that the land-value tax be administered similarly to today’s property taxes – as opposed to treating the occupant of the land as a “tenant” who owes a “rent” to “the community.”

There may also be a valid argument for changing a tax structure if doing so results in more wealth-generating behavior and increased productivity. However, I cannot find a system that allows for the diminution of current wealth through taxation to be more encouraging of productivity than a system that merely takes a share of future active production or consumption. If one cannot be guaranteed the peaceful and total enjoyment of the wealth one has already earned, then earning more seems less attractive from a psychological (in addition to a purely economic) perspective. Productivity is simply not as enjoyable if one views it as a chore to be done in order to remain in one’s present situation and prevent a decline – rather than an ambitious endeavor of self-improvement and possible enrichment.

Next, I will address how land might properly be approached from a libertarian/classical liberal standpoint, with beneficial practical consequences to most and the avoidance of effects that might stifle economic growth or decrease individual opportunities.

The Vital Importance of Property in Land: Part 1 – Arguments for Land as Property – Article by G. Stolyarov II

The Vital Importance of Property in Land: Part 1 – Arguments for Land as Property – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
October 14, 2012
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In this small series on land and private property, I hope to counter the claims of Henry George and his contemporary followers, who generally support a libertarian view with respect to all property except land – which they do not consider to be legitimate property. I, on the contrary, see the ability to own property in land (based on a true Lockean understanding of “mixing one’s labor” with rightfully owned land, or legitimately acquiring it from those who did) as indispensable to the existence of other property rights – as well as, more generally, to the expression of human individuality and the improvement of the human condition.

Why is property in land essential for the exercise of all other property rights? In this first installment, I provide six arguments.

Argument 1: Use of Personal Property: If there is no property in land, one cannot be guaranteed the ability to set one’s personal property in any location for its use and enjoyment. This means, ultimately, the use and enjoyment of one’s personal property is always at the discretion – and with the permission – of whichever governing authority or collective decision-making would supplant the right of private property in land. This is not liberty; the best that it can be is a kind of benign neglect from the persons or committees who have the power to dispose of the land and what is on it.

Argument 2: Complete Ownership: If there is no property in land, then there is never an ability – even in theory – to enjoy the use of land “free and clear” – without paying some sort of rent or “usage fee” to someone. Ignoring property taxes (whose absence is wholly conceivable and would be tremendously beneficial – even if other types of taxes are kept in place), it is possible today for people to pay off any mortgages and liens on their property and to enjoy it outright, without fear of losing the property if they do not pay a continuous stream of money to a third party.  The greatest value of private property comes about precisely when the ownership of that property is absolute – not contingent upon future services or payments rendered to other people.

Argument 3: Opportunity to Choose Leisure or Work: If there is no property in land, and one must continuously and inescapably pay a stream of money to a third party in order to avoid losing the property, then this means that one must continuously earn a sizable income to support that stream of payments. The ability to lead a life of leisure (after having made adequate provision for one’s other needs) is forever closed off to most people (unless they are beneficiaries of trust funds or a fortuitous investment strategy). Whatever the relative merits of work versus leisure might be in any particular situation, a libertarian would hold that the choice to pursue either (or any combination of each) should be up to the individual. Restrictive institutions should not permanently foreclose individuals (in multiple senses of that word) from pursuing one of these alternatives or the other. My own ambition, for instance, is to pay off the mortgage on my house while I am still relatively young. I would continue to engage in paid employment (and hopefully earn decent money) for many decades thereafter, but a lot of the economic pressure would be removed by getting rid of the largest recurring expense, and the same amount of earnings could achieve a much higher standard of living in other respects.

 Argument 4: Incentives for Improvement: If there is no property in land, then there is little incentive (other than sheer benevolence) for the occupant to improve the land by the addition of permanent fixtures, for someone else (or “the community at large”) would capture the values of the improvements, while the occupant would spend his personal resources on the improvements. This is the classic case of a “positive externality” not being realized – or, alternatively, a “tragedy of the commons” situation arising from the community laying claim to a resource that becomes over-exploited and insufficiently maintained. If one wishes for private residential lots to begin to resemble the public roads of a large city in appearance, then doing away with land ownership is an excellent means to that dubious goal.

Argument 5: Individuality: Only through the exercise of the right of private property can a person truly actualize his individual aspirations and distinctive esthetic. True private property enables an individual to act within his own realm as he pleases, as long as he does not infringe on the identical prerogatives of all others with their property. Only private property in land can give an individual the unfettered ability to paint a house with the colors and patterns of one’s choice, to determine the surrounding landscaping, to select the appliances and amenities therein, and to decorate it (which is a right that should not be undervalued, lest we lose it in the age of draconian busybody “homeowners’ associations”). An individual who owns land can truly turn the land and the improvements on it into reflections of himself, rather than just another barren, drab, or cookie-cutter plot (though any of those are within his prerogative as well, if he wishes to be unimaginative). True innovators are always in the minority and always unconventional. If they do not have a sphere where they can act unfettered, then many of their creations may never come to be.

Argument 6: Owned Land versus Land in the State of Nature: While I do not support arbitrary claims of ownership to undeveloped land, I do hold to the Lockean view that a person comes to own land by mixing his labor with it as the first occupant – and only to the extent that he does so. Locke himself argued that a person’s legitimate claim to land extends only to whatever land this person (or others acting on his behalf, through the voluntary exchange or offering of their services) was able to transform with his labor and put to use. Any other (undeveloped) land remains in the state of nature, free for others to claim. This is why Locke opposed arbitrary claims of the King of England to all of the prime forests of that country as the King’s “hunting grounds”. Likewise, one might question whether a Lockean view of property rights would allow national governments today to lay claim to vast undeveloped territories and to preclude development thereon (or sell “development rights” or “resource rights” to those territories). A fully libertarian system of property law would recognize the right of the first occupant and user of a property to be its owner, but only with respect to the land which is truly inextricably involved with such occupancy or use – i.e., land that has been improved and transformed. This is a consistent and universalizable standard for legitimate ownership, and it is a standard that follows directly from the desire to use and transform objects in nature for the improvement of human well-being. Such improvement and transformation are precisely what differentiates owned land from land in the state of nature. Owned land is much more usable and often dedicated to specific purposes, whereas land in the state of nature remains to be adapted to human needs. In practice, the two would look quite different and would enable natural demarcations of private land holdings.