Alchian, Armen A., "Some Economics of Property Rights," Il Politico, Vol. 30 (1965), pp. 816-29.
The idea that property needs a "right" to excuse it is confused and harmful.
Economists who own their home or have other assets will regard them as their "property". When speaking in their professional capacity, however, they change their vocabulary and will invoke "property rights". Do these terms mean the same thing?—and does it matter which term is used? This essay argues that "property" and "property rights" mean different things and muddling them up presents an albeit insidious, but quite serious threat to the kind of social order where economic efficiency and individual freedom have the best chance to survive.
"A Bundle of Rights"?
Ironically, the author who has done the most to impose the term "property rights" on scholarly usage was Armen Alchian, an economist of irreproachable credentials both as a fine theorist and a defender of the free society. In a seminal essay1 that has become a foundation stone of "property rights economics", he explained that when you owned, say, a piece of land, what you had was the right to leave it fallow, to plough it, to grow wheat on it for your own use or for sale, to walk across it, to fly over it, to build a house on it, to grant an easement on it, to lease it to another party, to bequeath or to sell it. Property was such a "bundle of rights". It is tempting to hold that if you removed one stick from the bundle, it remained a bundle, if you removed two, it still remained a bundle; How many sticks can one remove without the remainder ceasing to represent property, and are some sticks more essential than others?
This concept of property opens the door to a kind of gradualist argument. If "society" or the government purportedly acting on its behalf removes from the bundle a stick here and a stick there, if it forbids the owner to build on his land, or subjects the growing of some crop to an acreage quota, imposes an easement or a public pre-emption privilege, the "bundle" that is left is still property of a sort. How many rights may the government remove from it for the bundle still to pass for property and the government to pass for its protector?
Freedoms and Rights Differ Fundamentally
The "bundle of rights" concept gives rise to a dangerously weak theory of property. To find the root cause of the weakness, one must go "back to basics" and firmly grasp the difference between a freedom and a right.2
A freedom is a relation between one person and a set of acts. The person is presumed to be free to perform any act in the set that does not breach the rules against torts (offences against person and property) and (a less stringent requirement) the rules of civility. A substantial obstruction of freedom (e.g., gagging or threatening to hit a person to stop him from speaking freely) is a tort or an incivility. As such, it is wrong. To say that a person has a "right to a freedom" is tantamount to saying that he has a right not to be wronged—a redundant and silly proposition. It also implies that he would not have this freedom if he had not somehow obtained a right to it—an implication that is at the source of much false theorizing. You do not need a right to move if your moves stay within the rules—this indeed is what it means to have rules.
In contrast to a freedom, a right is a relation between two persons, the right-holder and the obligor, and an act the obligor must perform at the rightholder's bidding. A right may be created by contract in which the obligor, in exchange for a consideration, surrenders his freedom to perform (or forbear from performing) some set of acts as he pleases, and agrees to perform (or forbear from performing) it as required by the rightholder. Here, both parties enter voluntarily into the right/obligation relation. However, a right may also be created by some authority, such as the government acting on behalf of "society", conferring it upon rightholders and imposing the corresponding obligation on obligors of its own choosing. The conferring of welfare rights on some and the imposition of the corresponding taxes on others is a mundane example. The granting of civil rights to some minority and the imposition of the appropriate conduct on the rest is a perhaps less mundane one. The notion of "property rights" as used in current economic theory, conjures up the fiction that property is conferred by "society" upon the proprietors and the corresponding obligation to respect it is imposed by "society" on everybody. (It is worth noting that respect for property is part of the rules against torts. Violating property is a wrong that must simply not be done; and this interdiction is enforced by various private or public ways and means of enforcement ranging from reciprocity and retaliation to law courts and a police force. A separate obligation to respect or protect property, a corollary of the supposed "right to private property", is double-counting. Like any other double-counting, it obscures the view of what is owned and what is owed.)
Property Rights, True and False
There are, in fact, genuine property rights in the sense of two-person relations involving a right and a matching obligation. Leases, loan agreements, a shareholder's equity in net corporate assets, options and other equity and credit derivatives, insurance policies and, in a broader sense, all outstanding contracts with the exception of contracts of employment, are property rights proper.
When you lease your house, we know where the tenant's right(s) come from. They arise from the surrender, for a given period, of your freedom to use your own house and your assumption of an obligation to let the tenant use it subject to certain conditions and in exchange for value received or to be received.
But where does your putative "right" to own the house come from? The standard answer is that it comes from your purchase agreement with the previous owner, or a bequest or gift he made to you. The previous owner's right to do this, in turn, came from an agreement with, or bequest or gift from, the owner previous to that owner, and so on. Such a regress, however, can only shift the problem ever further backward and does not resolve it.
The literature offers us two solutions, the Lockean and the socialist. In the Lockean solution, the chain of legitimate transfers of ownership goes on backwards until it ends with the original owner who took possession. He had a "right" to do so if two notorious provisos were satisfied: he must have "mixed his labour" with what he appropriated, and he must have "left enough and as good" for those who came after him. These pious provisos have come in for much and deserved criticism on grounds of their contestable logic, and in this essay I will simply leave the reader to judge the Lockean solution for himself.
The socialist solution is to intimate that property is privately held only by the grace of society that could choose to change its distribution, or take it into public ownership, if it did not create a right to it and if it did not confer this right upon individual proprietors. The latter hold their property subject to any conditions by which society circumscribes the right to it. It may withdraw the right altogether if it deems it in the public interest to do so. Constitutional obstacles to this can always be got round, for society is not going to stop itself from doing what it wishes to do. In any event, if the right to property is in society's gift, it can always take back the right it has conferred and with that extinguish its own obligation to protect it.
The Presumption of Good Title
The contradictions and outlandish fictions of both the Lockean and the socialist solution disappear in thin air the instant we cease to maintain the arbitrary supposition that one needs a right to own valuable resources. This supposition originates in an atavistic belief that everything should belong to everybody or shared equally, and any departure from this norm requires a justification, an excuse of some kind.
Not everyone believes this, and those who do believe it only in certain contexts. It is not a universal human trait, but only one of various extravagant ones. In no way does it place it beyond dispute that owning property is morally reprehensible and unjust unless it can be shown that a right to it exists.
Ownership is a fact of life whose origins are veiled by the mists of pre-history. By the elementary rules of debate, the burden of proof lies with those who claim that a right is needed to justify it. This claim must be made good either as regards the institution of ownership in general or, failing that, the ownership of a particular asset by a particular owner. As to the former, making it good is impossible, for a metaphysical proposition cannot be verified. As to the latter, the claimant must show that the owner has not got good title to the asset.
It is blatant nonsense to try and switch the burden of proof to the owner, and ask him to prove that his title is good; for he can never prove the negative assertion that there is no flaw hidden in it somewhere out of sight. It is he who wants us to believe that there is one, who must spot the hidden flaw.
Putting it concisely, challenges to property require to be verified by the challenger, for they cannot be falsified by the defender. It is this asymmetry that generates the presumption in favour of title ("possession is three parts of the law"). Property being analytically a freedom, it is no surprise to find the same logic yielding the presumption of title that yields the vaster and more inclusive presumption of freedom.
*Anthony de Jasay is an Anglo-Hungarian economist living in France. He is the author, a.o., of The State (Oxford, 1985), Social Contract, Free Ride (Oxford 1989) and Against Politics (London,1997). His latest book, Justice and Its Surroundings, was published by Liberty Fund in the summer of 2002.
The State is also available online on this website.
For more articles by Anthony de Jasay, see the Archive.