1 On Property and Exploitation #

(with Hans-Hermann Hoppe)

1 #

Whenever one says “I own a house,” what one normally means is: I have the right to determine how that particular resource—described in objective, physical terms—is to be employed; I am free to employ it for any purpose whatsoever, provided that in so doing I do not impair the physical integrity of resources owned by others; I am likewise entitled to expect that the physical integrity of my resource, my house, remains unaffected by the actions others perform with the physical resources at their disposal. Property rights, then, are commonly conceived of as extending to specific, physical objects. These objects are economic goods and hence have value, otherwise no one would claim them. Yet it is not to the value attached to a specific resource that property rights extend, but rather exclusively to the physical integrity of such a good. I do not own the value of my house. I own a physically specified house, and I have the right to expect that others will not physically damage it.

2 #

Plausible as this theory of property is,¹ in much of contemporary political economy and philosophy confusion abounds on the issue of whether property rights concern the value of physical things or, instead, it is the physical thing themselves which are of value.² It is thus necessary to clarify why the common notion of property rights as extending exclusively to physical things is indeed correct; and why the notion of property rights in values is flawed.

First, it should be noted that these theories are incompatible with each other. It is easily recognized that every action of a person may alter the value (or price) of another person’s property. If A enters the labor or the marriage market, this may impair B’s value in these markets. And if A changes his relative evaluation of beer and bread, or if A decides to become a brewer or a baker himself, this may change the property values of the—other—brewers and bakers. According to the view that value-impairments constitute rights violations it follows that A’s actions may represent punishable offenses. Yet if A is guilty, then B and the brewers or bakers in turn must be entitled to defend themselves against A’s actions. Their right to defend themselves can only consist in their (or their agent) being permitted to physically attack or restrict A and his property: B must be entitled to physically bar A from entering the labor or marriage market; and the brewers or bakers must be allowed to physically hinder A from spending his own money as he pleases, e.g., from using his own possessions for the operation of a brewery or bakery. Based on this theory, the physical damaging or restricting of another person’s property use obviously cannot be said to constitute a rights violation. Rather, physical attacks and physical restrictions on the use of private property then have to be classified as lawful defenses. On the other hand, suppose that physical attacks and physical property restrictions constitute rights violations. Then B and brewers or bakers are not allowed to defend themselves against A’s actions.

For A’s actions—his entering the labor or marriage market, his changed evaluation of beer and bread, and his opening of a brewery or bakery—neither affects B’s bodily integrity nor the physical integrity of other brewers’ or bakers’ property. If they engage in physical resistance against A’s actions nonetheless, then the right to defense rests with A. In this case, however, it cannot be considered a rights violation that a person’s actions impair the value of another person’s property. No other, third alternative exists.

These two theories of property are not only incompatible, however. The alternative view—that a person may own the value (or price) or scarce physical goods—is also “praxeologically” impossible,³ i.e., it is a theory that we cannot put into effect even if we wanted to; as well, it is as argumentatively indefensible.

For while every person can, in principle, have control over whether or not his actions cause the physical attributes of other persons’ property to change, control over whether or not his actions affect the value of other people’s property rests with other people and their evaluations. Consequently, it would be impossible to ever know in advance if one’s planned actions were permitted or not. One would have to interrogate the entire population to make sure that one’s planned actions would not impair the value of anybody else’s property; as well, one would have to reach a universal agreement on who was permitted to do what, with which goods. Mankind would be long dead before this was ever accomplished. Hence, the theory breaks down as nonoperational.

Moreover, the proposition that a person may own the value of a physical thing involves an internal contradiction. For simply in order to propose this theory it would have to be presupposed that its proponent is allowed to act. He must do so prior (and simultaneously) to making his proposition or seeking agreement for his proposal regarding how to protect property values from value-intrusive actions. He cannot wait, and suspend acting, until an agreement is reached; rather, he must be permitted to employ at least his own physical body (and its standing room) immediately. Otherwise he could not even make his proposal. Yet if one is permitted to assert a proposition—and no one could deny this without falling into a contradiction—then this is only possible because there exist objective (physical) borders of property.

Every person can recognize these borders as such on his own, without having to agree first with anyone else with respect to one’s subjective system of values and evaluations. Prior to even beginning the intellectual endeavor of proposing property theories, then, as its very own praxeological foundation, there must be an acting (e.g., speaking) man, defined in terms of physical or human resources. Value of utility considerations, agreements or contracts—all things that contemporary political philosophers and economists typically regard as fundamental to their various theories of justice or property—already presuppose the existence of physically independent decision-making units. Also presupposed is a description of these units in terms of a person’s property relations to definite physical resources—otherwise there would be no one to value or agree on anything, and nothing on which to agree or about which to make contracts. Anyone proposing anything other than a theory of property-in-physically-defined-resources would contradict the content of his proposition merely by making it. He could not even open his mouth if his theory were correct; and the fact that he does open it disproves his claim.⁴

3 #

The notion of property-in-values is praxeologically impossible (nonoperational) if formulated as a theory of justice, i.e., as a system of rules that applies universally to each and every person alike. It becomes operational if—and only if—it is employed instead as a theory of exploitation. It is at least logically coherent as a system of rules that privileges one person or group of persons at the expense of another, underprivileged person or group. No one could act, if everyone owned the value attached to what he regarded as his.

Acting is possible, however, if B owns the value of the resources presently at his disposal and is entitled to determine what others, A, may or may not do with resources they control so as to not impair his, B’s, property values. This would perforce include A’s compensatory delivery to B of resources presently possessed by A. On the other hand, A is then entitled to own neither the value nor the physical integrity of his possessions and has no claim against B except that B allows him to do anything as long as it is to B’s advantage. Although praxeologically possible, such a system of rules does not even qualify as a potential human ethic, because it fails to meet the universalizability criterion. By adopting this system, two distinct classes of persons are created—superhumans or exploiters such as B, and subhumans or the exploited such as A—to whom different “law” applies. Accordingly, it fails from the outset as a universal, human ethic. It is not—not even in principle—universally acceptable and thus cannot qualify as law. In order to be considered lawful, a rule must apply universally, for everyone equally. The idea of property-in-values, then, is not only praxeologically impossible—if universalized—but also inhumane—if not universalized.

4 #

From this conclusion far-reaching consequences follow: (1) discrimination, (2) defamation and libel suits, (3) comparable worth, parity, and affirmative action policies, and (4) the notorious “ex-lover seeks compensation for no longer being loved” suits would then have to be regarded as scandalous if at times amusing perversions of law and justice. Likewise, institutions such as (5) licensing laws, (6) zoning regulations, (7) antitrust laws, (8) insider trading laws, etc., represent legal outgrowths of the property-in-value theory.

Ultimately, they all involve restricting A’s control over specified resources by correspondingly expanding B’s control over them. This holds true even though A had not physically damaged, and was not in the process of physically damaging, any of B’s possessions in doing whatever A wants to do with the means presently at this own disposal. B’s claim against A is based not on physical losses caused by A, but rests solely on B’s assumption that A’s actions, unless restricted, impose a value-loss on him. In this theory B owns the value of his property, and hence is entitled to reassure his value-integrity by imposing physical restrictions on A’s actions. One party seeks material compensation from another for the crime of nonmaterial value damages suffered from having one’s expectations regarding another’s actions disappointed. Disappointed hopes, of which life offers an unlimited supply, are used by one person as a justification for trying to physically enrich himself at the expense of another.

Let us now illustrate the exploitative character of each of these legal practices in some more detail.

Discrimination #

Strictly speaking discrimination is the refusal to deal with, trade with, live next to, buy from, sell to, engage in any commercial or noncommercial activity whatsoever, with another person. In discriminating against B, A undoubtedly reduces B’s economic well-being, compared to what it would have been had A not so discriminated.⁵ The value of B’s physical property, as well as his “human capital”⁶ falls below the level otherwise attainable. Nevertheless, since B can only own his person plus his physical property, he can have no just claim against A for shunning him.

There exists a categorical distinction between physical invasion and the refusal to deal with, or discrimination.⁷ A’s actions are that of a boycott, and do not constitute physical intrusion. But many commentators, unfortunately, fail to make this vital distinction. All too often it is thought, for example, that rape and discrimination against women are on a continuum. Or that lynching blacks is different only in degree to ignoring them. But a moment’s reflection will show that these activities are night and day compared to each other. The physical assault of B on A (as “retaliation” against A’s prior discriminatory action) always involves losses in value terms. But it also robs A temporarily or permanently of the very means to recover such losses. In contrast, while discrimination may likewise be unpleasant, in leaving B’s physical possessions unimpaired, it strictly limits B’s value losses. For example, if no one will hire ugly women to be secretaries, the wages they command will tend to decline. But at lower compensation levels, these females—their physical integrity and hence their job skills being unimpaired—will become more of a bargain in the labor market. This, presumably, will counter the negative effect of the initial discrimination. They will not be consigned to unemployment, the first result, but will rather find jobs, albeit at lower wages than absent discrimination. However, once on the payroll, they will be able to demonstrate their “true” productivity (perhaps even in excess of that of their more beauteous competitors) and can in this way recoup at least in part their initial salary losses. In sharp contrast, had physical invasion been directed against them (or, as a retaliatory action, against their more beautiful competitors), none of these ameliorative reactions could have come into play.⁸

Defamation and libel #

Most commentators have argued that one has a legitimate ownership right to one’s reputation. But this is not so. For the simple reason that one’s reputation consists of the thoughts of other people.⁹ That is, A’s reputation consists solely of the thoughts of B, C, D, and B’s reputation of those of A, C, D,… etc. But since no one can own the thoughts of other people, one cannot, paradoxically, own one’s own reputation.

While there can be no universal right to one’s reputation, and libel and defamation do not constitute exploitation per se, the right of a person to engage in libelous or defamatory action is not unrestricted. For while everyone has an unrestricted right concerning his thoughts, the right of free speech is not absolute. For example, no one has the right to tell another person “unless you hand over to me your wallet, I’ll shoot you.” This sort of speech would be strictly forbidden in a private property society. It is a threat to engage in initiatory violence. As well, no one, including any of my detractors, has a right to come to my living room to give me a speech or tell me what he thinks about me and when I tell him to leave object on the ground of his right to freedom of speech. A trespasser has no free speech rights whatsoever—on my property. Free speech rights, so-called, are really but an instance of private property rights. I can say anything I want on my property and so can anyone else, including any libelous person, on his own property.

Comparative worth and parity policies #

Most advocates of Equal Pay for Equal Work (EPFEW) or of Equal Pay for Work of Equal Value (EPFWOEV) legislation maintain that these enactments are necessary in order to combat employer discrimination between males and females. Even were this the case, there would be nothing that should be legally untoward in such a situation, for women own only their labor power, not the price placed upon it by others. Did they but have a right to the former, as we have seen, it would be impossible for anyone at all to engage in human action, lest they advertently or inadvertently impact on the value of any women’s effort.

But it is not at all the case that women earn less than men due to employer discrimination. On the contrary, this state of affairs is due to the asymmetrical effects of marriage: it enhances male wages and reduces that of females. Due to unequal responsibilities in the average family for child care, shopping, cleaning, laundering, cooking, and a whole host of other such activities, the average wife earns only some 40 percent of her husband’s salary. In contrast, there is no pay gap at all between females and males who have never been touched by the institution of marriage; the salaries of the never married are virtually identical. The much noted and reviled by feminists income ratio of 60 percent–75 percent is actually an amalgam of the experiences of these two very different groups of people.¹⁰

Contrary to the views of feminists, private property and markets are the institution, par excellence, which assures not only EPFEW, but EPFWOEV as well. Suppose, for example, that a man and a woman had equal productivity of $20/hour and that the man were paid this amount of compensation.¹¹ Suppose further that the women were paid only $12, 60 percent of the male wage, exemplifying the supposedly discriminatory “pay gap.” This would set up the same irresistable profit opportunities as in the case of the male paid less than his productivity level. Any “male chauvinist” employer who hired the man at $20, rather than the equally productive woman at $12 would place himself at a serious competitive disadvantage. He would be a prime candidate for bankruptcy.

EPFEW and EPFWOEV, then, equate wages between equally productive males and females. The reason women earn only some 60 percent of what males do is because, on average (due, perhaps largely, to marriage asymmetries) they are only 60 percent as productive. So EPFEW and EPFWOEV have already been attained on the market. There is no discriminatory wage gap.

But this is not at all what the advocates of pay “equity” demand. Their view, predicated on the notion that people have a right not merely to their own persons and property but to the value thereof is, in effect, that males and females should receive the same compensation, despite differences in productivity. Imagine that their wish were granted. That is, suppose that the law requires a male with productivity of $20, and a female with productivity of $12, both to be paid the former amount. Now, incentives will all be turned around. Instead of having a financial interest in hiring the woman, the firm now will be led “as if by an invisible hand” to avoid her at all costs. The result will be greatly enhanced unemployment rates for women, a result which obtains whenever the legal system artificially prices factors of production out of the market.

Affirmative love #

Most people can see through lawsuits seeking damage for alienation of affection. These are properly regarded as a scandal and a disgrace. People cannot own the love of others. The very notion is contradictory; true affection must be given voluntarily, while ownership implies the right to take it from another person, whether or not he is willing to bestow it. So these suits, too, are an instance of the confusion over physical ownership vs. property in values. An ex-lover seeking financial compensation from her no longer amorous suitor is really asserting that she has the right to control his feelings. If this were true his ownership right over his person would be null and void, since he could not even choose the object of his desires.

Licensing laws #

This legislation is an attempt to restrict the actions of others so that the value of one’s own property can be enhanced or stabilized. If entry into the industry of potential competitors can be precluded, one’s wealth increases. Naturally, this motivation is disguised, hidden behind a plethora of “public interest” billingsgate. Accordingly, taxi license holders wax eloquent about the reduced traffic congestion afforded by this system, and members of the American Medical Association take pride in the enhanced quality of medical services thus engendered. But this is empty rhetoric. Taxi cab medallions sell for many thousands of dollars, attesting to the value of government-imposed monopoly, not to the ease of traffic flows. And the salary levels achieved by doctors has little to do with the nation’s health; if anything, the very opposite is true.¹² For example, consider the Viennese doctors—the best in the world at that time—who came to the U.S. to escape the ravages of National-Socialism in the 1930s. It was no coincidence that the AMA did everything in its power to hinder the process whereby they could practice their profession. They insisted on loyalty oaths, but this had nothing to do with patient care. They compelled familiarity with the English language—as if there were no German-speaking sick people, nor translators. They demanded residence periods, as if these were anything but a blatant attempt to forestall unwanted competition.¹³

But licensing laws do not even go far enough if the values of taxis, medical equipment, skills, are to be maintained and enhanced. Strictly speaking, there should also be requirements on the demand side as well. That is, the temporarily unemployed cabbies should be able to commandeer the man on the street, force him into the taxi, and drive him, if need be right back to the point of embarcation, so as to maintain revenues. And if ever revenues decline, doctors ought to be allowed to inflict diseases on innocent people—so that they can charge them for cures. After all, according to the property in values theory, people who do not get sick, and/or refuse to ride around in taxis, are really stealing from doctors and cabbies, respectively.

Zoning #

Who has not yielded to the temptation—at least in thought—of wishing to maintain if not upgrade the value of his real estate holdings? One way to do this is through entrepreneurial action (including insurance). A person purchases a home in a large-scale condominium development, for instance, where all owners are precluded from any activity (painting a house with polka dots, ripping it down and putting in a cement factory) which might conceivably lower property values. Alternatively, a restrictive covenant can be signed with neighbors to the same end.

But this costs money, time and effort. There are “transaction” costs involved. Frequently it is much easier to rely on the political process. If a law is passed requiring a minimum one acre lot size for single family dwellings, hordes of “undesirables” can be kept out. For the only chance of the poor successfully bidding against wealthy people is in the form of multiple dwelling units. They can “gang up” on the rich by more intensive land settlement. But if this is precluded by zoning laws, that option is not available to them. Better yet, inaugurate the no-growth philosophy, ostensibly for environmental ends; this obstructs any new building, for whatever purpose, the better to maintain property values. Why rely on an “imperfect” market when legislative enactments can attain such ends?¹⁴

City planners (who owe employment to the existence of zoning laws) argue that this system keeps “incompatible” land uses separated from one another. But private property rights can achieve the same ends, without the use of force and compulsion.¹⁵ The reason filling stations do not locate in cul-de-sacs is that there is too little traffic to support them there. Likewise, cement factories are prohibited by marketplace considerations from setting up shop in downtown areas. High real estate prices relegate them to the periphery. When land use bureaucrats err, they do so on a colossal, city-wide scale. They lose millions for the citizenry but not a penny of their own personal funds. The benefits of marketplace zoning, as is illustrated most drastically by the failure of the Soviet economic system, is that private investors, who risk their own money, tend to be more careful with it. The drawbacks of central planning apply to cities as well as to countries.

Anti-trust #

Anti-trust laws serve many purposes. From the point of view of the expert in law and economics, for instance, they function as a full employment bill, calling forth millions of hours of highly paid expert testimony. From the perspective of the neo-classical economist it furnishes an opportunity to demonstrate manual dexterity with average and marginal cost and revenue curves, “dead weight losses” and “resource misallocations,” the better to dazzle naïve students. For the political ideologue, the theory of monopoly, upon which anti-trust laws are based, provides the “scientific legitimation” for the permanency of so-called “market failures”; it is a stick which can be used to beat up on the private property (capitalist) system.

For our purposes, anti-trust laws illustrate yet another instance of defining property in terms of values, not physical criteria. If company A sells a better product, or the same one at a lower price, how does it “hurt” its competitors? Only in value terms, not physical ones.

As in the case of witchcraft, or heresy during the period of the Inquisition, there is no defense against the charge of monopoly. Promotion of consumer welfare is no defense; indeed, it is part of the indictment. Selling at a price lower than competitors is prima facie evidence of cutthroat competition; selling at a higher price indicates monopolistic profiteering; selling at the same price as everyone else is evidence of collusion. Since there is no fourth alternative, any firm is theoretically guilty as charged, no matter what its behavior. Similarly with quantity sold. Too much is pre-emptive, too little is monopolistic withholding, and the same as others is collusive dividing up of the market. Heads the anti-trust division and the Federal Trade Commission win; tails, the business concern loses.¹⁶

Insider trading #

The last instance of the property-in-value theory we shall discuss are laws prohibiting “insider trading.” The complaint on the part of the advocates of such laws is that the knowledge possessed by someone, when acted upon in a commercial matter, is a violation of the rights of others. Previously we had asserted that “no one could act, if everyone owned the value attached to what he regarded as his.” With insider trading we see a paradigm case of this.¹⁷

The legally established contention here is that a knowledgeable state of mind can convert what would otherwise be a legitimate purchase of stock into an illegitimate one, provided that the information relied upon is not homogeneously spread throughout the population. Since it never is, virtually any commercial activity with regard to stocks and bonds can be deemed unlawful.

The situation is indeed worse than that. A rigorous pursuit of the “logic” of insider trading prohibitions could potentially be used to preclude any market transaction.

Did a woman buy an umbrella because she heard a newscast that it would rain tomorrow? Unless everyone tuned in to the same weather program, and listened as attentively as did she, this would give her an unfair advantage over other people. And what of the person who attended, horrors!, a course on the care and feeding of stocks and bonds? Such studies would surely give the student an “inside track” vis-à-vis those who had not attended the lectures. If the crime of excessive information¹⁸ can be applied to umbrellas and stocks and bonds, it can be applied to anything: to real estate, to amenities, to human capital, to factors of production. Moreover, this doctrine calls into question the acquisition of any knowledge (unless, of course, it is evenly spread throughout the entire world community). Those particularly at risk include doctors, lawyers, economists, college professors, and Nobel Prize winners.   

Reprinted with kind permission of Springer Science and Business Media from International Journal of Value-Based Management 15, no. 3 (2002): 225–36. Hans-Hermann Hoppe, an Austrian school economist and libertarian/anarcho-capitalist philosopher, is Professor of Economics at University of Nevada, Las Vegas, Distinguished Fellow with the Ludwig von Mises Institute, Founder and President of The Property and Freedom Society, and Editor-at-Large of the Journal of Libertarian Studies.