SUMMER SIX PACK: Property & Prosperity [updated]

Six more cold ones from the beer fridge of the NOT PC archives.

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Sunday, May 22, 2005

Cue Card Libertarianism -- Property

    Murdering Soviet scumbag Leon Trotsky understood property rights better than most of the so-called ‘centre-right.’ He pointed out, as he was raining down famine and destruction on the peasants he’d decided were expendable, that where there is no private ownership individuals can be easily bent to the will of the state under threat of starvation or worse. Only ghosts can survive without property, he recognised; human beings cannot.
   Leon Trotsky thought that was a good thing—that men can’t survive the way animals do.  He understood the crucial importance of property rights.
   Unlike other animals we humans can’t survive as we come into the world; in order to stay alive and to flourish we each need to produce and to keep the fruits of our production. If our minds are our means of survival – as Julian Simon used to say, our Ultimate Resource – then property is the result of applying the creative potential of our minds to reality in order to enhance our lives.
    The need for a legal framework protecting property has been long ignored or taken for granted by economists and legal theorists of all stripes, but its importance is slowly being re-learned by contemporary thinkers.
    Tom Bethell’ s landmark book The Noblest Triumph: Property and Prosperity Through the Ages is itself a triumphant example. It traces successes and disasters of history consequent upon the respective recognition or denial of property through the ages: Ireland’s potato famine, the desertification of the Sahara, and the near-disastrous US colonies at Jamestown and Plymouth can all be traced to lack of respect for property argues Bethell. He identifies four crucial blessings of property

that cannot easily be recognised in a society that lacks the secure, decentralised, private ownership of goods. These are: liberty, justice, peace and prosperity. The argument of [his] book is that private property is a necessary (but not sufficient) condition for these highly desirable social outcomes.

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Sunday, May 14, 2006

'Recognise rights in river' says PC

    Sometimes recycling works. Here's an example in the form of a press release. The Government are about to close a deal to return the Waikato River to Tainui. All the usual suspects are up in arms.  The Whig The Tory however has a good discussion and a link to the 1999 Maori Law Review article discussing an earlier proposal to return the Whanganui River from the perspective of common law property rights. Sample:

    English common law presumed that non-tidal waterways were held by the owners of adjoining land to the centre line, with no general public right of use or access... While the popular view was that rivers are ‘public property’, there is no legal basis for that view, apart from places where the Crown retained ownership of adjoining lands eg., in national parks etc.

      Quite right.  So why is everyone so unhappy that the waterway is being privatised?  As I said in a press release at the time on behalf of the Libz:

‘Give Tribe Full Ownership of River’ says Libertarianz
    Libertarianz supports full ownership of the Whanganui River being transferred to the Atihaunui A Paparangi tribe - not the so-called ‘partnership’ of state and tribe the Waitangi tribunal recommends, but the full and final creation of ownership rights in this river, and in every other river, lake, forest, mountain and waterway in New Zealand.
    “The main issue to me is not to whom property rights in the river are transferred to,” says Libertarianz Environment Deregulation Spokesman Peter Cresswell, “the important thing is that transferrable property rights in the river be created so the river and its surrounds can end up in the hands of those people who valuable it most.”
    Property rights protect the interests of the property owners – as people who have had their land confiscated should understand – and protects the environment in the process. The environment needs to be de-politicised as crucially as does the economy. Creating property rights in rivers – and getting the state out of them - would be a crucial first step.

    The important words were and still are "transferable," and "property rights" -- as long as rights in the river are made both secure and transferrable -- and as long as no other existing property rights are violated -- then those rights will end up in the hands of those who value them the most, as they should be, and out of the hands of Government, where they shouldn't.
Sadly, that doesn't quite appear to be what's proposed here.

LINKS: Government set to return Waikato to Tainui - NZ Herald
Rodney Hide missteps - The Tory

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Wednesday, May 31, 2006

Q: Do you have an inviolable right to do whatever you want on your property?

    I'm going to answer that question in the title above by linking to an earlier piece on neighbourly relations, and I need to answer it because of misunderstandings like this from people who should know better:

    I don't subscribe to the notion that you have an inviolable right to do whatever you want on your property. I'm comfortable with not being able to build a 100 foot high fence as it may block your neighbour's views...

The 'notion' being argued against in that extract is a straw man. It’s a child’s notion of property rights. The reality, however, is quite different.
    But first, an introduction: let me tell you about something called 'freedom.' Freedom in this context means to be free from physical coercion; in other words, having political freedom means that you're free to do whatever you're able and whatever you damn well please as long as you don't initiate force against anyone else. My freedom ends, in other words, where your nose begins. In this respect you might call your neighbour's nose your 'side-constraint,' just as his nose is yours -- which means some of us do get more freedom than others.
    Now, under common law, which is what I would propose to repair to once the RMA is abolished, you have the secure right to peaceful enjoyment of your property. And as both you and your neighbour would enjoy that same right, his right of peaceful enjoyment is your side-constraint. Your freedom ends where your neighbour's peaceful enjoyment begins. The 'side constraints' for land use under common law require you to take account of, among other things, your neighbour's rights to light, to air, to support, and to road access and the like. These are significant side constraints, but they are both objective and reciprocal -- your neighbour is equally constrained to recognise your similar rights.
    So how are neighbourly issues resolved under common law? How for instance might I ensure my view or a neighbour's tree was retained? Voluntarily, as I explained here.

    Voluntary agreements and the use of easements and covenants is the key. If, for example, I want to protect my existing view over your land, then I can negotiate with you to buy an easement over it for that purpose, and that easement would be registered on the title, and legally protected. It might be that my neighbour doesn't want money; it might be that he values very highly the stand of trees on my property. How highly? Highly enough perhaps to ask for a restrictive covenant over those trees to be registered on my title, in his favour. We shake hands. We have agreement.
    We each have want we want, we each have security over what we want, trees and view are both protected, and not a bureaucrat or resource consent was needed to do it--just common sense, the tools of common law, and respect for each other's property rights. Sounds pretty good, doesn't it.

    And no room for the Jackie Wilkinsons of the world -- or, at least, no house room for them.

UPDATE: The ‘Jackie Wilkinson’ link above has been fixed.

LINKS: Ms A. Presley gets community service – NOT PC 
The 'right' to a view - Not PC (Peter Cresswell)
Cue Card Libertarianism - Freedom - Not PC (Peter Cresswell)
Cue Card Libertarianism - Common Law - Not PC (Peter Cresswell)
TAGS: Common_Law Conservation Environment Property_Rights RMA

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Friday, February 20, 2009

Property rights are human rights: let’s protect them say NZ academics!

    I’m astonished.  The last two decades have seen attack after attack on New Zealanders’ property rights.

• the imposition of the Resource Management Act, which gave planners full power over your land;
• the confiscation of crown pastoral leases;
• ‘right to roam’ laws attacking the sanctity of farmers’ land;
• the destruction of Maori land value by Crown pre-emption rights;
• the nationalisation of petroleum;
• the partial nationalisation of Telecom;
• the confiscation of the legal right to claim the foreshore and seabed under common law;
• the destruction of value of pre-1990 forests under the Emissions Trading Scheme;
• unwanted power pylons being imposed on Waikato farmers;
• the attack on the value of shares in Auckland International Airport Ltd.

    And in the last Parliament, when offered the opportunity to place the protection of property rights in NZ’s Bill of Rights Act, MPs peremptorily voted it down –- with John Key’s National Party being prominent in the ‘Noes’ lobby when it finally came to the vote.
    So much for the National Party’s commitment to property rights.
    Despite abundant historical evidence of the many blessings of property rights, and cogent arguments defending these life-sustaining rights, both academics and politicians of all stripes have been on the front foot against property rights for years.
    So how astonishing then to see National Party hack Matthew Hooton promoting the work of two academics from the state-worshipping climes of Victoria University, who argue in advance of next week’s Jobs Summit that “if the new Government moves to protect property rights, there will be more jobs in our economy than otherwise.” 
    Professor Lewis Evans and Professor Neil Quigley of the Institute for the Study of Competition and Regulation at Victoria University of Wellington, along with NERA Economic Consulting, entitled ‘Protection of Private Property Rights and Just Compensation: An Economic Analysis of the Most Fundamental Human Right Not Provided in New Zealand.’

    The paper compares New Zealand’s record on property rights with the rest of the OECD; finds our record to be among the worst in the developed world; details the economic harm being done to all New Zealanders as a result; and proposes a legislative solution involving an amendment to the Bill of Rights Act to ensure a canary in the mine exists to alert the public if and when future parliaments seek to confiscate property rights without compensation.  [The full paper can be found at  http://www.iscr.org.nz/n493.html and it was also previewed on page six of today’s National Business Review.]

    There is much to be disappointed with in an argument made on practical grounds alone, without any statement of the moral grounds on which property rights must be protected –- and much to object to in the notion that property rights equates only to ‘compensation for takings’ instead of outright protection against theft of what you own –- but in these times seeing support for property rights from any local quarter is welcoming.
    And they’re right, you know. If the new Government would move to protect property rights, then there will be more jobs in our economy than otherwise. 
    An understanding of the vital role of property rights and lawfulness in creating wealth should be basic knowledge for every thinking person, shouldn’t it?  Even a politician.
    Tibor Machans' authoritative piece on the Right to Private Property would be a good place for honest thinking persons to start their education: "The institution of the right to private property," says Tibor, "is perhaps the single most important condition for a society in which freedom, including free trade, is to flourish."

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Monday, October 15, 2007

Wealth, and why we don't have it

    Wealth. What is it? Where does it come from? Why are some people in some places wealthier than others? And why does New Zealand have to borrow so damn much in pursuit of it?
    These are the sorts of questions people have been asking for centuries, and at least since Adam Smith it's been something for which we have some pretty good answers.
    We've all heard the commitments to get New Zealand back into the top half of the OECD, and many of us have seen those graphs that Rod Deane pulled out recently showing NZ's rise and decline in those rankings over the last century-and-a-half -- and we've realised that getting back into the top half of the OECD isn't as easy as politicians' promises would have you believe.
    According to my dictionary, wealth is defined as "affluence, plenty and prosperity, a profusion, great plenty (of); prosperity." Clearly, wealth has something to do with productivity, with resources, with capital, and with what Julian Simon called the ultimate resource: the creative human mind applied to productivity. But how to explain and quantify the relationship?
    Two years ago, the World Bank began examining questions such as these, and unusually for such an organisation, they came up with something worth studying. They found something that hadn't been accounted for in all their previous studies on the subject. Ronald Bailey explains:

    Two years ago the World Bank's environmental economics department set out to assess the relative contributions of various kinds of capital to economic development. Its study, "Where is the Wealth of Nations?: Measuring Capital for the 21st Century," began by defining natural capital as the sum of nonrenewable resources (including oil, natural gas, coal and mineral resources), cropland, pasture land, forested areas and protected areas. Produced, or built, capital is what many of us think of when we think of capital: the sum of machinery, equipment, and structures (including infrastructure) and urban land.
    But once the value of all these are added up, the economists found something big was still missing: the vast majority of world's wealth! If one simply adds up the current value of a country's natural resources and produced, or built, capital, there's no way that can account for that country's level of income.

      What's missing in those traditional measures is what links the human mind with productivity: the rule of law—specifically, the legal protection of property. In a sentence, the creative human mind is more productive the more that property rights are legally protected.
    The explanation for that is simple. You see, when the protection of law is weak, then the mind is only able to plan short range. When property rights are weak, for example, people tend to build their furniture before they build their roofs -- and you can see the evidence of this in shanty towns all over the globe. When time horizons are short, this is rational behaviour. But shanty towns aren't the natural human environment, are they. Take a shanty town dweller out of the shanty and set him down in a place where the rule of law is better recognised, and immediately his time horizons become longer, his prospects much brighter, and his house and his wallet much richer.
Extent time horizons by setting in place the rule of law, and immediately you bring the distinctive attribute of the creative human mind -- the ability to think and to plan long range -- to bear on the question of productivity. That's the real link between wealth and law, and it's something politicians actually can do something about.
    You see, this is what the World Bank's researchers realised in their study. What's more important in determining wealth than natural resources or real capital is what they eventually termed this "intangible capital" -- that is, "the wealth product that comes from securing people's rights through the rule of law," so called "intangible factors" such as "the trust among people in a society, an efficient judicial system, clear property rights and effective government."

    All this intangible capital ... boosts the productivity of labor and results in higher total wealth. In fact, the World Bank finds, "Human capital and the value of institutions (as measured by rule of law) constitute the largest share of wealth in virtually all countries."
    Once one takes into account all of the world's natural resources and produced capital, 80% of the wealth of rich countries and 60% of the wealth of poor countries is of this intangible type. The bottom line: "Rich countries are largely rich because of the skills of their populations and the quality of the institutions supporting economic activity."

      This "intangible capital" can be quantified, and what we find when that exercise is done is that "the natural wealth in rich countries like the U.S. is a tiny proportion of their overall wealth—typically 1 percent to 3 percent—yet they derive more value from what they have."

    Cropland, pastures and forests are more valuable in rich countries because they can be combined with other capital like machinery and strong property rights to produce more value. Machinery, buildings, roads and so forth account for 17% of the rich countries' total wealth.
    Overall, the average per capita wealth in the rich Organization for Economic Cooperation Development (OECD) countries is $440,000, consisting of $10,000 in natural capital, $76,000 in produced capital, and a whopping $354,000 in intangible capital. (Switzerland has the highest per capita wealth, at $648,000. The U.S. is fourth at $513,000.)
    By comparison, the World Bank study finds that total wealth for the low income countries averages $7,216 per person. That consists of $2,075 in natural capital, $1,150 in produced capital and $3,991 in intangible capital. The countries with the lowest per capita wealth are Ethiopia ($1,965), Nigeria ($2,748), and Burundi ($2,859).

      So what does this mean for New Zealand, and any hope we have of getting rich, and getting back into the top half of the OECD?
Well, here's the bad news. In the rankings of "intangible capital," New Zealand comes a pitiful twenty-first with just $243,000 of "intangible capital" per head, behind Spain and Singapore at nineteenth and twentieth, and just ahead of Greece, Portugal, South Korea and Argentina.
   That's a measure of how poor we are in the rule of law.
    And just look at our performance as compared to Australia, often known as "the lucky country" because of its resource riches. But Australia's resource wealth only amounts to $25,000 per Australian, compared to our own resource wealth of $43,000 per head; the difference between the lucky country and us is that they're "luckier" in terms of the rule of law: in the "intangible capital" represented by that measure, Australians are half again as wealthy as we are, with $371,000 per head compared to our own $243,000 per head.
    So the message is clear, and when you boil it all down it's not complicated. If wealth is your goal, and if ambitions to be in the top half of the OECD are genuine, then concentrate on the rule of law, and on the "intangible capital" of an efficient judicial system, of clear property rights and of effective government.
    Simple.

• Ronald Bailey's article is here: The Secrets of Intangible Wealth - Reason magazine.
• The World Bank study is here: Where is the Wealth of Nations: Measuring Human Capital for the 21st Century [200-page pdf]

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Wednesday, January 17, 2007

Market forces destroying the Amazon?

    "The market forces of globalization are invading the Amazon, hastening the
demise of the forest and thwarting its most committed stewards."
    So begins the latest National Geographic cover story, documenting the Amazon's demise in pictures and stories -- "during the past 40 years, close to 20 percent of the Amazon rain forest has been cut down, more than in all the previous 450 years since European colonization began" -- and sheeting home the blame to the ubiquitous enemy named in that opening line: "market forces and globalization."
    The destruction of the Amazon has been a common theme for journalists and professional busybodies more than a decade. Today's highest profile busybody Al Gore wrote in his 1989 vice-Presidential manifesto Earth in the Balance that the devastation of Brazil's forest was "one of the great tragedies of all history." Gore, too, blamed the desire of "large landowners to earn short-term profits," ignoring "long-term ecological tragedy."
    But there's a problem with this analysis. As Tom Bethell writes in his book The Noblest Triumph: Property and Prosperity Through the Ages,

    Although he visited Brazil and is a professional politician, Gore showed little interest in the political origins of the Brazilian debacle. [Neither does the National Geographic.] ... It's real cause, however, was not greedy landowners, but unwise laws governing land ownership.

      Those familiar with the subsidies and destruction wrought in rural New Zealand by Muldoon's Marginal Lands Board would recognise the debacle in the Amazon, but on a very much larger scale. You might say that (just as with the land clearances promoted under Muldoon's programme) the forest clearances were not so much a sign of market forces and globalization, but instead of government forces and nationalistic sentiment.
    Here's the story that's not told by either Gore or the National Geographic. Notes Jorge Cappato, writing for the UN Environment Programme,

Towards 1970, the Brazilian president Medici decided to build a Transamazonian highway of 5,000 kilometers to offer "a land without men to men without lands". However, neither the land was fertile nor was it empty: there were natives, riverside people, seringueiros, and people who lived from and took care of the forest.

      The project, run by Brazil's military government, was funded by the World Bank over opposition from its own ecological officer. Said Adrian Cowell in his Decade of Destruction documenting the disaster,

   The momentum of the Bank's financial machine, the need to lend money to Brazil as its debt developed, had overidden the practical warnings of its specialists.

      As Tom Bethell notes in his book, the construction of the Federal road

opened up access to the Amazon region, and a competition for the (state-owned) land ensued. Squatters received the right to 100 hectares if they could show effective use of the land for a year. The problem was that only cutting down the trees counted as effective use...

      And here's where the "unwise laws governing land ownership" come in. None of those people displaced by the military government's project -- in Capatto's words, the "natives, riverside people, seringueiros, and people who lived from and took care of the forest" -- none of them had their pre-existing property rights protected, or their rights to the use of the forest protected. Instead, the military government claimed ownership of all land 100 kilometres either side of their highway (as Bethell notes, such a claim made in the US would see "most of the US mainland nationalised") and then parcelled it out to friends, fellow-travellers and squatters who could clear trees fast enough to claim 'their' 100 acres. Bethell again:

    Only the traditional "sustainable use" of harvesting rubber and nuts did not count. For those who had already arrived and staked their claims, the best way to guard against competition from newcomers was to cut down trees as quickly as possible... In effect, if not in law, "the land-claiming process itself has required deforestation," the economist Gary Libecap wrote.

Even the World Bank's own advisers belatedly acknowledged the problem they themselves had helped cause:

    Governments responsible for the Amazon region, for example, have exacerbated the negative environmental externalities. Public subsidies and tax incentives to large cattle producers and loggers were responsible for more than 50 percent of the deforestation in the Amazon region in the 1970s and the 1980s (Binswanger 1991). Moreover, public investments in infrastructure into the frontier areas have magnified the externalities associated with the lack of well-defined property rights in such areas.

    So there you have it. Not for the first time, the story is not quite like the National Geographic tells it.
    And now ask yourself: who's the real villain here then? Market forces and globalization? Greedy landowners? Or, as Bethell and others argue, Big Government, nationalistic sentiment, a lack of real property rights and "unwise laws governing land ownership."
    And why doesn't National Geographic tell this side of the story at all?

LINKS: Last of the Amazon - National Geographic magazine
The Noblest Triumph: Property and Prosperity Through the Ages - Tom Bethell, Amazon.Com
Who was Chico Mendes? - Jorge Cappato, Global 500 Forum, UN Environment Programme
The Decade of Destruction - Adrian Cowell, Bullfrog Films [film review]
Land Reform Policies, the Sources of Violent Conflict and Implications for Deforestation in the Brazilian Amazon - Gary Libecap, Social Science Research Network [Abstract]
The Quality of Growth - World Bank, 2000

RELATED: Politics-World, Property Rights, Environment, History-Modern

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Thanks for reading. And now, ‘Something to Live For.’ An historical recording: Ella with Duke Ellington's Orchestra (led here by Mercer Elllington), performing a Billy Strayhorn song.