“If a man owns a little property, that property is him.…it is part of him….in some ways he’s bigger because he owns it.”
—John Steinbeck, The Grapes of Wrath
Property rights are the most fundamental institution in any economy and society. They determine who makes decisions about valuable resources and who captures the economic gains from those decisions; they mold the distribution of income, wealth, and political influence; they set time horizons and investment incentives; and they define who will take part in markets. These attributes are well recognized among economists for spurring economic growth.
But economists have missed another equally important characteristic of private property rights that has long been emphasized in philosophical, legal, and historical literatures and is captured in the quote from John Steinbeck above. Individual owners are more confident, self-reliant, and entrepreneurial than non-property owners. Where access to property is widespread, politics are more stable. Owners have a stake in the existing political regime. Moreover, people acquire property through the market and do not mobilize for forced redistribution using the power of the state through revolution and revolt. They expect property rights to be secure and view government regulation with suspicion. The use and trading of property assets is seen as a positive sum game. With broad property ownership and market participation, the state is less important than the market, and the economy in turn is less centralized, more atomistic, market-based, and supportive of entrepreneurship. This description characterizes the United States from its colonial beginnings through the 19th century and generally on to today.
In contrast, in countries where property ownership is highly skewed and access to ownership open only to elites, non-owners view things differently. Acquisition of property, wealth, and political power can only occur through capture and then enlistment of the state, as occurred in the extreme in 1789 France or 1917 Russia, or is reflected in recurrent political upheaval and redistributions characteristic of Latin America with its many disaffected populations, military revolts, and coups that have occurred since colonial times. This political uncertainty and lack of overall optimism and entrepreneurship has contributed to slower long-term economic growth than a region so rich in natural resources might have otherwise enjoyed. Why has the southern half of the hemisphere had such a different long-term experience than the northern half? Why has there been more ongoing economic growth and political stability in the North than in the South? Differences in the ownership of land is the key. Continue reading →
Supreme Court Deals Unanimous, Welcome Blow to Administrative State in Frog Case
Unanimity is elusive in today’s America but the Supreme Court achieved it last week. Although the dusky gopher frog is endangered, so are property rights and accountable governance. Both would have been further jeopardized if the frog’s partisans in the U.S. Fish and Wildlife Service (FWS) had gotten away with designating 1,544 privately owned Louisiana acres as a “critical habitat” for the three-inch amphibian, which currently lives only in Mississippi and could not live in the Louisiana acres as they are now. The eight justices (the case was argued before Brett Kavanaugh joined the court) rejected both the government’s justification for its designation, and the government’s argument that its action should have received judicial deference, not judicial review.
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