By Jan Narveson
A short summary of geoism and its relation to libertarianism.
“Rent of land, profits of stock, wages of labor” – that’s the classical triumvirate. But the significance of these distinctions is not so easy to fathom. Indeed, when we look really carefully, we will find that it evaporates. There is no good reason to treat them as significantly different.
When A hires B to work for A, A pays B a wage, per hour, or a salary, per week or month. During the time that B works for A, B puts out effort, invests his skill and energy, in projects useful to A. Assuming the normal case of a businessperson interested in maximizing income, it is in A’s interest to have B do this, and B, we assume, won’t do it without pay, since B too is interested in making a living, and, we will further assume, the best living he can manage. A wage-bargaining session of some duration – probably very short – precedes the period when B works for A and A pays B for doing so. At this session, it is clear, each party has an eye on the bottom line.
Precisely the same thing happens when B strikes a bargain for living quarters with landlord C, or purchases some stock, from broker D. In each case, the other party has control over a resource, and B is ready to pay to make use of that resource in some way. In the case of wages, the resource is, in one sense, the job, which will have attractive and unattractive features in itself, as well as the income from it, which is an all-purpose resource. In each case, B also commands a resource desired by the other party. In the work bargain, the resource is himself, or more precisely those personal resources which B can bring to bear on job performance; in the other two, it’s money, again, as so often.
Come to that, we can take the view that all the payments involved are really rents. A hires B rather than C because B has a combination of features such that A is willing to pay for their use. In the negotations with C and D, B respectively rents a place to sleep and carry on other activities for which a room is suitable, or land or whatever it is he’s renting; in case D, B parts with some income for awhile, in hopes of achieving a greater one in return. In all these cases, somebody pays somebody else for the use of something in expectation that that use will either improve his income, or improve his level of satisfactions as a consumer.
Consider now the discoverer or the user of a natural resource. A strikes gold, B coal, C finds a stretch of farmland; or, A discovers in himself a useful talent he didn’t previously realize he had. Some appear to think that just having these things, in one’s possession – a static relation – is what being wealthy consists in. But it is not so. In all of these cases, they constitute wealth only insofar as the possessor is in a position to derive income from their use. Some will want to say that in some of these cases, but not others, the income is “earned” and that this should matter. That is wrong. In every case it is earned; in every case the resource in question is used to inspire income. Possessors of land can rent it, or sell it, to the wrong people, or the right people – at profit, or at loss. Which it is depends on what the purchasers want to do with it and what the seller charges. None of this is fixed in stone.
Georgism rests on a claim that there is something different about land. Or should we say, Natural Resources? There is this idea that money derived from sheer ownership of something that we can’t possibly have produced is unfair or something, while income from work is fair and just and so forth. Those who think this then contemplate the very tall person who is so good at basketball, having “done nothing” to earn this commanding height; or they contemplate the owner of a barren outpost worth nothing to anyone. We can be more general about this. All activity of any sort makes use of what cannot have been made by anyone; and all resources, not made by anyone, are worth nothing at all to anyone at all until someone comes along and puts them to use, which requires an investment in time, energy, and ingenuity.
There have been those who suppose that there is a natural quantity with a natural price: human labor. The idea was that the value of anything else was determined by how much labor went into it. The sorry history of the Labor Theory of Value is one of the instructive side-shows of economic theory. Like everything else, as it turns out, some labor is more valuable than others. Labor is subject to the law of supply and demand.
The same is true of land. Land-rent is a price, pure and simple. You’ll get more, if the bit you own is in high demand, and less if it is in low demand, and which it is depends entirely on what can be done with it and what people want to do with it, and how many of them want it at a given time, and with what resources to offer in exchange for the permission to use it that way. Supposing that there is some kind of basic, invariant contribution made by land, or “resources” for that matter, to human wealth is an illusion, pure and simple.
What could Henry George have been thinking, anyway? “From what springs the sentiment which acknowledges his exclusive right as against all the world? Is it not, primarily, the right of a man to himself, to the use of his own powers, to the enjoyment of the fruits of his own exertions?” This interesting thought leads on to another: “This right of ownership that springs from labor excludes the possibility of any other right of ownership.” Yet one’s own body, which is, as it were, the capital base from which one’s labor proceeds, was obviously not the fruit of one’s own labor, and so we should not, on this reasoning, be able to own ourselves – even though that is the foundation on which George, and Locke, and in a way all of us, want to build the right to own the fruits of our labor. And finally: “When nonproducers can claim as rent a portion of the wealth created by producers, the right of the producers to the fruits of their labor is to that extent denied.” If so, though, it would seem that the right of producers to their own labor, which they did not create, to charge for its use, is based on the same sort of thing. It amounts to a rent, as much as does the rent of land.
“The equal right of all men to the use of land”, says George, “is as clear as their equal right to breathe the air – it is a right proclaimed by the fact of their existence…. There is on earth no power which can rightfully make a grant of exclusive ownership in land.” Indeed? No doubt George would also insist that slavery is wrong, on the ground that the right to command another man’s labor does not exist, or something of the sort. But powers on earth did, for some time, create a legal right in some to the bodies and labors of others. As always with proclamations of this sort, we can’t take it at face value. The question is whether the “powers” who do in fact create exclusive ownership of bits of land are to be classified with the ones who created ownership of slaves – or are they instead to be classified with those who created exclusive ownership of Model T Fords, refrigerators, and luxury hotels?
The point is that you cannot, on the sort of premises wielded by Georgists, find any rationale for classifying them with the former rather than the latter. Whenever we own any material object, we own something, some of which is not created by man. Whenever we do anything, we make use of something not created by ourselves. Whenever we are able to command a higher price for our work than someone of lesser talent, smaller stature, etc., we profit from something not the product of our own labor. If not being such a product justifies taxation, then taxing everything and anything is justified. Forget it!
But those who look in such directions for the right basis of the institution of private property are looking in the wrong place. They are, in fact, making a fundamental mistake.
The fundamental mistake consists in supposing that ownership is a relation between a person and a thing. It is understandable that people should make such a mistake: after all, here I am with my computer; the computer is mine, it belongs to me, there are just the two of us. Aren’t there?
Answer: no indeed. The most important actors on the scene are not in fact on the scene at all. Namely, they are the people (a) from whom I bought it, and (b) the people who refrain from stealing it, or perhaps (c) stand ready to try to apprehend people who do steal it. Ownership is not a relation between a given person and a person thing. It is, rather, a relation, an understanding, between that person and everybody else, an understanding to the effect that this person’s use of this thing is to be undisturbed, so long as its uses are confined to ones permitted by the law, if we are talking about legal property, or to ones permitted by the basic rules, if we are talking about property in moral terms.
Ownership is, in other words, a set of rights. To own something is to have the right to its use and disposition, which means that others are required to refrain from using the thing without the owner’s permission. What we sell when we sell things is that right, and what buyers buy when they buy them is that right. Or, as we may want to say, “those rights”, since it is quite possible to separate the right to do some things with a given item from the right to do something else with it, and buy or sell the one more or less independently of the other.
Given that ownership is a set of rights, how do we decide what those rights shall be, and to whom they shall go? For this we need, of course, an underlying moral philosophy – some idea what the basis is for general rules of conduct among people. And while that seems a monster project, there is in fact a core of agreement among serious students of the subject. The agreement centers on something quite unsurprising, when you think of it: the problem of violence. The first rule of morals, everywhere, is that we are to refrain from getting what we want by assault and battery, threats of death, and so on. Murder, theft, fraud, and harms inflicted by one person on another, are what are ruled out. This is hardly surprising. All of us are subject to assault by others, and all of us stand to suffer from the effects of such assaults. Given our broadly similar ability to resort to these methods of getting on with others – that is, getting on at their expense – a plausible proposal is that we will jointly agree to desist from those, and confine ourselves to relations that are agreeable to both or all parties concerned.
The institution of private property is nothing more nor less than the application of this general proscription on violence to the special case of using items in the world around us. Actually, if we consider the matter clearly, we would have to agree with Locke that we have a “property in [ourselves]”, and that the laws against murder and battery are the laws concerning self-ownership. Some people dislike to talk that way, but it is hard to see that there is anything more than rhetoric in this disdain. When I do something, I use myself; my entitlement to do the thing is my entitlement to use myself in that way, and just because that’s the way I want to use this body and mind. The same – precisely the same – holds for using anything else in the world. My ownership of any of those other things consists in the prohibition against others intervening to use them contrary to my desires on the matter.
Now why should we think that people can come into the ownership of things like land, which is, of course, not created by us and which also, of course, is not a part of our bodies?
There is an easy answer: because land and other things in nature are there, and we have an interest in using those things in assorted ways.
Being there means that if others want it, they have to push you off. Having an interest in continuing to use it means that you have an interest in their not pushing you off. If you didn’t care, of course, then they wouldn’t need to push you – in that case, you’ll just move over and let them get on with it. But in many (most) cases, you are there for some reason: to use it in some way or other, answering to purposes that you have. And given that you do, what others do to compel you to move over or do something else is an exercise of force against you. Which is to say that, if you accept a general right of liberty, it is a violation of your liberty of action.
Those who do not believe there is such a right are another matter, to be sure. The limited point made here is that we are supposing we have already settled that question, and the question is only how property rights in external objects, including those not “made” by us, are to be justified. The answer is that they are justified on the basis of the general liberty principle, which forbids forcings, for any purpose other than to prevent further forcings.
My simply being in place p at time t does not “force” anyone to do anything, unless I got there by force, which we are, of course, supposing I have not. My arriving at place p, if pis hitherto unoccupied, likewise uses no force against anyone.
Now, the point of this little essay is that that is basically all there is to it, and there doesn’t need to be anything else. The idea that we all have an equal right to the land is amazingly arbitrary, and contrary to all human experience while it’s at it. It’s arbitrary in that it has no basis. The fact that we don’t make the land is irrelevant, as already seen: we don’t make the natural part of anything we have or own, no matter whether we have “made” it or not. But the point is, it doesn’t matter. For things are just things: they do not come with labels saying that they “belong” to some people or that some people, somehow, have a “claim” on them, nor in turn that everybody has a claim on them, equal or otherwise.
Let us now generalize the point further.
Here the most fundamental relevant principle is the one discovered by Bastiat: economic value lies in service; an economic exchange is an exchange of services, each valued more highly by its beneficiary than the alternative situation in which the service is not performed. We are accustomed to talking about “goods and services”, of course. But the distinction, while perfectly all right in its place, does not reflect anything fundamental – rather, it obscures what is fundamental. When A buys some object, x, from B, what he gets from B is the right to use x. That is what it is to “have” x, in normative terms. People use things, of course, with or without rights. But when they “own” things, as distinct from simply “possessing” them, what they have is a protection for their use: those who would dispossess them are, by virtue of their ownership, declared to be in the wrong, and the forces of the law, in the case of legal property rights, stand ready to assist in preventing, apprehending, or punishing persons who engage in such dispossessive activities. When a sale is made, that is what happens: the person wanting to use the object now does so in good conscience (assuming, as in the normal case, that prior ownership is clear and that the uses involved are all non-harmful to further persons).
In short, transferring objects is transferring rights to use of objects. In some cases, the right is transferred for a definite period, and the payment is essentially a rent; in the case where the right is transferred for an indefinite period, to be terminated only with the acquiescence of the owner, we say that he owns rather than rents. But in both cases, a right to use, or to determine who does use the thing and on what terms, is what is fundamentally exchanged.
In the other direction, where payment is made in money, what the recipient gets, of course, is the right to spend the money as he pleases, which may be as gift, or in exchange, or as investment. But the immediate point is simply that A who provides B with a sum of money has done B a service, and it is only because A has done so that B is willing, in turn, to perform the service B performs for A. This all is obvious on reflection, and the supposition that what is involved in property acquisition from other persons is something quite else is due either to illusion, misunderstanding, or fetishism.
If what I provide you with is the use of a piece of land, you assess the value of what you have got in the transaction in terms of what you can do with the land in question: live on it, farm it, hang onto it in hopes that its value will increase as the surrounding population builds up, or perhaps build on it, as a parking lot or a business or whatever. If you were thinking of buying rights to a lode of minerals, or a pair of shoes, etc., you would be engaging in the same sort of deliberation: how much utility to me is available from my ownership, or rent, or temporary use, etc., of this item, as an alternative to anything else I could have instead? Land has no special priority here, any more than would diamonds, or uranium, or anything else. The right to command the services of Julia Roberts is far more valuable than the right to command the entire block of properties on which my house stands – in the right hands – and the capabilities of Michael Schumacher command a far higher price than quite a huge range of material objects in today’s world.
It is irrational to think that land occupies a place that is fundamental in the way that Henry George supposed, and irrational to suppose that things in the material world, just as such, come emblazoned with ownership labels on them. Things are things. As Bastiat puts it, they have utility, but no (economic) value, as such. Value happens when we start exchanging, and when we do, what we exchange are services, some of which bear on me use of material things, others of which do not (except unless we count people as “material things” in the relevant sense.) The value of land or any other exchangeable material item is due to the utility it affords to those who use it, in one way or another, and the same is true of any other exchangeable item, whether it be an exercise in pianistic ability or a thick steak or an acre of real estate. Whether you should part with a sum of money, or something else, for it, it’s the service done by your trading partner, and by you to him, that is the essence of the transaction.
July 16, 2001