The Definition of "Property"

This article was published in the Spring 1998 issue of Formulations by the Free Nation Foundation The Definition of "Property" and "Property Rights" in a Free Nation by Gordon Neal Diem, D.A. (to table of contents of FNF archives)

Outline
introduction
Proposal to Establish Two Categories of Property
Four Categories of Goods
Property Claims Are Based on the Nature of the Goods
The Unique Problem of Extraction Industries
Property in a Free Nation
Notes

What is "property" and how does property come into existence? One of the few political philosophers to describe the origin of "property" and "property rights" is Ludwig von Mises. In Omnipotent Government, von Mises says:

"(P)rivate property...can be traced back to a point where somebody either appropriated ownerless goods or land or violently expropriated a predecessor whose title had been based on appropriation. To law and legality no other origin can be ascribed. It would be contradictory or nonsensical to assume a ‘legitimate’ beginning. The factual state of affairs became a legitimate one by its acknowledgment by other people. Lawfulness consists in the general acceptance of the rule that no further arbitrary appropriations or violent expropriations shall be tolerated. For the sake of peace, security, and progress, it is agreed that in the future every change of property shall be the outcome of voluntary exchange by the parties directly concerned.

This, of course, involves the recognition of the appropriations and expropriations effected in the past. It means a declaration that the present state of distribution, although arbitrarily established, must be respected as a legal one. There is no alternative. To attempt to establish a fair order through the expropriation of all owners and an entirely new distribution would have resulted in endless wars.

Within the framework of a market society the fact that legal formalism can trace back every title either to arbitrary appropriation or to violent expropriation has lost its significance. Ownership in the market society is no longer linked up with the remote origin of private property. Those events in a far-distant past, hidden in the darkness of primitive mankind's history, are no longer of any concern for present life."¹

Von Mises is writing in the absence of any knowledge that future generations may attempt to establish a new nation from a state of nature—or from a state of relative nothingness in the middle of the ocean—and may, in fact, need to originate a definition of property and a definition of property rights for this new nation. But, his brief discussion of the origins of property does suggest a course of action to be taken by a new nation.

Von Mises implies that land and raw materials exist in nature, pre-date claims of individual ownership and are originally "free goods." Natural, social, and physical laws also exist in a state of nature and are "free goods" which pre-date human discovery and claims to individual ownership. It is the claim of individual ownership that appropriates these free goods from nature and transforms these free goods into "private property." The "right to private property," or "ownership," is a claim by a person or persons to exclusive utilization, consumption, or transfer of some category of goods. "Utilization" is the use of a good without erosion in the quantity or quality of the good. "Consumption" is the use of a good with a subsequent erosion in the quantity or quality of the good. "Transfer" is simply the reassignment of ownership from one individual to another.

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Proposal to Establish Two Categories of Property: "Social Property" and "Private Property"

In the new Free Nation, pre-existing free goods should remain free goods, free of appropriation by individuals as private property, and should become "social property." Social property is owned collectively, not individually. As social property, these free goods remain available for all citizens of the free nation to utilize, but not necessarily consume. Utilization rights should be unencumbered, but consumption should be regulated by some group consensus concerning equitable and fair use.

Maintaining free goods as social property provides two benefits. First, free societies rapidly become unfree as power politics and the use of force are initiated to insure the "fair and equitable" distribution of land, raw materials, and intellectual goods. The question of fair and equitable distribution becomes moot when all pre-existing free goods are owned in common by all citizens and are available for utilization (although not consumption) by all citizens. Individuals consuming free goods (reducing the quality or quantity of the goods) should compensate all other citizens, both living and yet unborn, for that consumption. Thus consumption by one becomes consumption by all, and fairness and equity is maintained.

Consumption of all social property is held to the standard of "usufruct," the legal right to use another's property and enjoy the advantages of it without injuring or destroying it. In their use of social property, Free Nation citizens should constantly remind themselves of the words of Nineteenth Century conservationist George Perkins Marsh.

"Man has too long forgotten the earth was given to him for usufruct alone, not for consumption, still less for profligate waste."² The second benefit of social property is increased production. Society's efforts to create personal property, constructions upon the land, and mixed goods (see definitions below) are often stymied by private property claims to the pre-existing free goods necessary in the production efforts. Of special concern are private "deeds" to land and "copyrights" on pre-existing social and physical natural laws. The production of private property is maximized in the free nation by insuring all free goods are available to all potential producers. (There is a question of rival claims to the free goods which is beyond the scope of this paper, although standards such as "first in use" are available to resolve claims issues.)

In addition to free goods, which remain social property, there are abundant other categories of goods which are available to become private property. "Goods" fall into four general categories.

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Four Categories of Goods

The first category of goods is real estate, including land, raw materials in the land, and human constructions on the land. Land and raw materials are finite, are the creation of God, pre-date human claims to ownership, have a past history as free goods, and are the possession of all mankind. These goods are both utilized and consumed. Once consumed, they are gone forever and are lost to future generations who have a legitimate claim to the goods by virtue of their humanity. Individual claims to ownership of land and raw materials are not appropriate and should be preempted by social claims to ownership. Human constructions on the land are clearly the creation of man and have no history as free goods, therefore, individual claims to ownership of human constructions—homes, factories, highways—are appropriate. Human constructions are private property, but land and raw materials are social property.

The second category of goods is personal property, including tangible goods utilized or consumed to fulfill human needs and wants. These goods do not exist in nature, do not pre-date human claims to ownership, have no past history as free goods, and are the creation of man, not of God. This category of goods is both utilized and consumed, but, unlike land and raw materials, personal property can be replaced. Personal property is private property.

The third category of goods are intellectual goods, including non-tangible goods and ideas utilized to fulfill human needs and wants. Intellectual goods include talents, skills, inventions, discoveries, ideas, art, literature, and knowledge. Intellectual goods are utilized, but never consumed. To the extent intellectual goods are claimed from nature (e.g. discovery of a natural law), intellectual goods should be social property. To the extent intellectual goods are a unique attribute of an individual (e.g. musical talent), intellectual property should be private property.

The fourth and final category of goods is capital goods, including tangible goods utilized or consumed to produce personal property or place human constructions on the land. Capital goods do not exist in nature, do not pre-date human claims to ownership, have no past history as free goods, and are the creation of man, not of God. These goods are utilized, consumed, and replaced. These goods are, therefore, private property.

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Property Claims Are Based on the Nature of the Goods

Within these four general categories of goods, goods are sub-divided into "man-created goods," "pre-existing goods," and "mixed goods." Man-created goods are molded by the hand or mind of man. Pre-existing goods exist in nature, pre-date human claims, and have a past history as free goods. Man-created goods are appropriately private property. Pre-existing goods are appropriately social property.

Mixed goods are the result of the combination of pre-existing free goods with the exertion of the human hand and mind. Mixed goods pose the greatest challenge to claims of ownership. Mixed goods are social property in proportion to the amount of free goods used in creating the mixed goods; conversely, they are private property in proportion to the amount of human exertion and creativity involved in the creation of the goods. The human exertion and creativity is the basis for the private property claim. Disagreements concerning the proportion of goods in the mix is resolved by popular consensus, reinforced by a civil court jury system. Disagreements concerning the proportion of free goods in the mix are potentially very important because the proportion of free goods determines the extent to which the mixed goods are available for free utilization by all citizens, and, conversely, the extent to which individuals can claim private property rights, thus limiting the utilization to only those citizens who, for example, pay a fee or offer goods in barter

Mixed goods include "discoveries" and "inventions." Discoveries are the human recognition of the value and usefulness of land, raw materials and intellectual goods that exist as free goods. Individual ownership claims to these goods are minimal. Most discoveries should be considered social property and should be available to all individuals to use. Inventions are largely human creations in which considerable human exertion and creativity is applied to some small amount of pre-existing goods (e.g. raw materials). Most inventions should be considered private property and individual claims to exclusive utilization, consumption, and transfer of the property should be enforced.

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The Unique Problem of Extraction Industries

Critics of the above proposal may question how extraction industries can exist in a system in which raw materials are recognized as social goods. First, potential producers of personal goods, capital goods or constructions on the land engage in extraction activities to support their production activities. Extraction activities do not exist independent of goods-production activities. Second, extractors pay the citizenry for the right to extract (the payment mechanism to be worked out later), so all citizens benefit from extraction activities and encourage those activities deemed beneficial. Third, the extractor owns that portion of the raw materials to which he continues to exert his labor, but abandoned or unharvested materials remain social property available for claim or gleaning by other producers. Thus there is no waste of natural resources in the system. Fourth, knowledge of mining and other extraction methods is derived from natural laws, thus this knowledge cannot be denied to any potential extractor by copyright, although capital tools used in the extraction process can be patented.

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Property in a Free Nation

Many of the social, political, and economic problems facing contemporary nations are resolved in the Free Nation by disallowing any appropriation of pre-existing free goods from the state of nature; these goods remain the social property of all citizens. Private property rights emerge as individuals exert themselves to create constructions on the land, personal property, capital goods and mixed goods. Private property is property created by man, not God or nature. Conflict concerning the proportion of free goods in any mixed goods are resolved by consensus or by the civil court.

The above arrangement should maximize the availability of free goods in production, should secure the rights of private property to those who produce such property, should insure the full and equitable distribution of access to goods and the opportunity to produce to all citizens, and should insure prosperity for the Free Nation. D

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Notes:

1 Ludwig von Mises. Omnipotent Government: The rise of the total state and total war. Arlington House, 1969. pp. 136–137.

2 George Perkins Marsh. Man and Nature. Charles Scribners Sons, 1864, p. 138 quoted in Jeffrey Brown, ed. Sustaining the Future. Global Learning, 1995.

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