Public Theology & Christian Living

by Thomas Tacker –

Why are some dwindling whale species endangered while cows are in abundant supply all over creation even though beef is far more commonly consumed than whale? Over the years, my students have provided some pretty imaginative, though incorrect, answers to this frequent test question: Maybe whales have a much longer gestation period or very small litters? Could it be whale steaks are incredibly delicious or naturally low fat and rich in fiber? Or, maybe global warming triggered brain damage in whalers who consequently price their product excessively low…

The actual explanation is that private property rights are well established for cows but not for whales. Ranchers maximize their profits by being good stewards of the herds they own, painstakingly postponing any culling of the herd to the optimal time. But whalers have no incentive to, for instance, pass by a small whale to allow it time to grow and reproduce since it is likely that some other whaler will catch that spared animal. Hunters pursue the wild, nomadic whales all over the oceans while ranchers keep their own cows fenced in on their property. Cows have defined owners while whales belong to no one in particular, just whoever can catch them first.

Private ownership is the key to efficient conservation and good stewardship of any resource. In the case of lumber, for example, we take for granted the efficiency of modern tree farmers who carefully cultivate their crop and postpone any harvest for many years as they manage their forests. Conversely, forests that were commonly owned by “everyone” were really owned by no one, but over-consumed by everyone. Such forests were ultimately turned into barren wastelands through relentless cutting by people behaving quite like locusts but nothing like timber owners. Since trees are a good deal less mobile than whales there were no technical obstacles to establishing private ownership, just incompetent government.

Of course, there are other aspects of private property rights that are even more crucial in human life. It is fair to say that the economic success and subsequent human flourishing enjoyed by countries such as the US has been produced by the largely successful establishment of private property rights, while the economic failure and attendant human misery common in most of the world is a consequence of the common failure to protect private property. The degree to which private property rights are honored is, as we shall see, the economic issue, easily trumping all other relevant factors combined. Where private property rights have thrived there is abundance and modern industrialization; countries without such rights are mired in third world poverty.

The Decline of Private Property Rights
Private property rights are in decline in the US. That is, government does more and more to stifle the freedom of property owners to use their property as they see fit. Although courts have more or less enforced the constitutional requirement that property owners must be compensated when government confiscates private property, the courts tend to ignore the loss in property value caused by government regulation. So, if regulators forbid you, for example, from building on your property because construction may be harmful to a spotted owl nesting nearby, there is no compensation required. The judicial reasoning, using the term loosely, is that the property is still yours; you can walk around on it or camp out in a tent—you just can’t cut down any trees, build anything or make any noise that might upset the owl. Judges claim that such regulation, though it reduces your property’s value over 99%, does not require a dime of compensation since the government didn’t actually take your land! If we needed a reminder that judges are merely glorified lawyers, rather than impartial arbiters of justice, this is surely it. One might argue that protecting spotted owls is worth the extreme cost, particularly if one worships the creation instead of the Creator. But even if this is so, doesn’t justice require that we all bear the burden of protecting our brother owl, through compensation for this taking, rather than dumping the full cost solely on our unfortunate sister property owner?

Taxation is also a sort of partial taking. Though it is generally conceded that a modicum of taxation is necessary in order to fund a government that defends private property from domestic theft and foreign invasion, “US taxation goes far, far beyond that. In the extreme, if the tax collector seizes 100% of your income from every paycheck then you can never buy anything; you have no private property and are essentially a slave. Things aren’t that bad but the average person pays total taxes that are about a third of all their income; the wealthy often pay over 40%, even 50%. If slavery is 100% taxation then doesn’t 50% taxation render you half-slave?

In fact, virtually any government interference with voluntary exchange in a free enterprise system constitutes a partial taking, a degradation of private property rights. Consider, for example, the various restrictions on international trade that hinder the liberty of a US citizen to buy the product deemed best for their family if said product happens to have been produced by people residing in other lands. Of course, many people support such trade barriers, believing (erroneously, as we will see) that this will keep wages higher in the US. This is a common theme in our gradual surrendering of private property rights and, what boils down to the same thing, our surrendering of individual liberty. We often imagine we can gain something for the economic common good by sacrificing individual liberty, but much of the time we end up with a poorer economy and less freedom.

The Immorality and Fallacy of Free Trade Barriers

Before we consider the economic fallacy inherent in international trade barriers, though, let us ponder the morality of this attempt to beggar-our-neighbors. The main premise of “Buy American” regulations is that allowing private citizens to trade with whomever they choose would end up enriching people in poorer countries but would reduce average income in the US. So, if we have two coats and see a foreign neighbor with no coat then we should forsake our own liberty to make sure it stays that way! I don’t think that jibes very well with Christ’s instructions on coat allocation.

Fortunately, the reality of all voluntary trade, international or otherwise, is that it only takes place because each side sees a benefit. International trade increases average wealth in the US as well as that of our trading partners. To understand the impact of free trade, and many other economic issues, it is useful to remember that the purpose of an economy is to, as far as possible, generate abundance for human consumption. The bottom line of the economy is consumption; jobs are a means to that end. Thus, the purpose of cancer research is to produce better treatments of cancer, not to generate jobs in the cancer research industry. If we discover a true “magic bullet” cure for cancer then all those jobs become instantly obsolete and are lost. This would be a great thing, a tremendous blessing for society though it may entail some hardship for the former cancer researchers who must find new jobs. From the consumer viewpoint, all those researchers are now freed up to produce something else. Total wealth and consumption is up because we now have more output from cancer research than before, (a true cure) plus whatever new output the former researchers now generate in new jobs.

This is how an economy advances: new technology increases productivity, wiping out some jobs, and freeing people up to produce something else. Centuries ago we employed almost everyone in low tech farming because we needed that much farm labor to feed ourselves. After numerous breakthroughs we now need hardly any labor to produce food in high tech farms. Thus, millions of farm jobs were wiped out. This freed up people to eventually make cars, airplanes, and televisions—we would never have those great products if we were all still busy working the farms. This is the theme of economic progress; jobs are constantly being destroyed by improved productivity which in turn makes new job creation possible. The number of potential new jobs is basically infinite, which is why, despite continuous job obsolescence the total number of jobs rises with the growing work force.

If foreign-based firms can make, say, clothing of equal quality but cheaper than US producers, then US clothing jobs are lost, and the labor is now free to produce something else. Remember the key purpose is to make clothing as cheaply, as abundant as possible. When consumers gain, the economy improves. Even though some workers lose, at least temporarily, the loss to workers is less than the gain to consumers. Plus, since we get cheaper clothes, we now have more to spend on computers, education, air travel, health care, and everything else, which helps facilitate new job opportunities. With society getting clothing cheaper and being able to buy more of other products, total consumption and wealth rise. In effect, we just achieved a breakthrough in clothing production technology; we make other things more efficiently than clothes then trade for the clothing. Historically, most Americans who lose jobs find a new job that pays as well or better within several weeks. However, some of the unemployed sometimes encounter much more severe problems and we may want to assist them in some form. Since our total wealth is up this is easy to afford. It is possible, though often not advisable, to fully compensate each person who lost a job so that not a single person suffers any loss as a result of free trade or breakthroughs in technology. With a bigger total pie we can make sure no one’s slice gets smaller, if we wish.

How much bigger, exactly, would our pie be if politicians stopped using trade barriers to impoverish our nation and prop up inefficient, obsolete jobs? The Heritage Foundation, a leading economic think tank, estimates that annual income would increase about $5,000 per household! Talk about real economic stimulus! Each family can enjoy an average raise of $5000 per year if we allow ourselves the freedom to trade our property with foreign citizens as we see fit. (Note that this does not require any negotiation with foreign governments; we simply abolish harmful US trade barriers.) Again, with the average family’s real income up $5000 we can well afford to help those families who lost jobs to more efficient foreign production.

International trade barriers are just one example of how restrictions on property rights tend to backfire. When people freely choose to cooperate in productive activity everyone participating tends to benefit, otherwise they would not cooperate. However, when government coercion is used to organize society there is no automatic occurrence of net benefits. Usually, the point of coercion is to force someone into activity that harms them; we often assume this harm is less than the gains to society but this assumption is often wrong.

To recap a bit, private property rights are violated not just if government seizes property without due compensation but also through regulations that reduce the value of property. Taxation is confiscation of private property, though at least minimal taxes to establish and protect private property are probably necessary. Finally, virtually any restriction on voluntary trade impedes our ability to acquire and dispose of property as we see fit. A key example of this is our extremely destructive international trade barriers. So, private property rights can be thought of as a question of degree, a continuum. If I live in a communist state where private property is forbidden then I have zero private property rights. If I lived in a country where government was pretty much limited to protecting private property rights through national defense, police and criminal courts— maybe something like the US a century ago— then I had complete private property rights. Call it a score of 100. People in the US of today are in an environment, perhaps, somewhere like halfway between zero and complete private property rights; call it a score around 50. We are able to own private property but government severely, and increasingly, limits our freedom to use that property as we choose.

Of course, the US is blessed with a government that is for less domineering than most in the world. Several studies have examined the degree to which private property rights are protected in countries around the world and how closely this correlates with income and other measures of well-being. For example, James Gwartney and Robert Lawson find that, in 2009, the countries ranked in the top 25% for private property rights (they use the appealing term “economic freedom”) had an average income of $32,443, while countries in the bottom 25% earned an average of just $3,802. Those with the most private property rights earned more than 8 times as much as those with the least! More broadly across the world, the weaker the protection of private property, the lower the average income. Or, to restate, the more politicians are turned loose to “help” people through higher taxes, regulation and other government programs, the worse off people are. Gwartney and Lawson also find that people with more economic freedom enjoy longer life spans, protect the environment better, and do much more to help the poor.

This last point is worth some emphasis. Politicians almost universally claim that if we surrender our property rights to them, then they will take better care of the poor. Many people assume that, whatever its weaknesses, socialism does look out for the poor better. Not true. Here is the reality from Gwartney and Lawson: in those countries in the top quarter of private property rights, the average poor person (defined as being in the poorest 10% of people in that country) received an income of $9,105. In countries in the bottom quarter of economic freedom, countries with hardly any private property rights, the average poor person received a meager $896. The poor in the least socialist countries have income more than 10 times higher than the poor in the most socialist countries. Even more telling, poor people in the relatively free countries have much higher income than “middle class” in the least free countries. Under relative freedom, the typical poor person receives over $9,000 while the overall average income is below $4,000 in countries where politicians completely dominate the economy.

Private Property and Human Flourishing

Why are private property rights so crucial for human flourishing? Incentives are a big part of the story. Most people are willing to work very hard to earn income to help their families; few people are willing to work very hard only to have politicians confiscate the fruits of their labor. Moreover, we are most productive when we take the time to build better tools and improve our skills before we begin production. It’s far more efficient to build a modern auto plant rather than to just start building cars by hand. A doctor serves his patients better by first completing medical school and other training rather than just giving it his best shot right after high school. But such preparations require years of sacrifice before the payoff of high productivity is realized. Moreover, in a fallen world there is often strong temptation to focus on more short run benefits; we need the certainty that strong property rights will protect our future rewards from political predation. Political control of an economy, in addition to other problems, creates tremendous uncertainty that undermines commitment to long range plans. With government domination of health care looming, for instance, will it be worth the sacrifice of completing medical school?

Beyond incentives, there is the problem that no human mind is even close to being capable of planning an economy. There is no one who is simultaneously an expert on early child education, every aspect of health care, all energy production, and the world financial system—just to name a few key concerns. In fact, most members of the uS Congress have no expertise in any of these areas, most are lawyers whose expertise is helping you sue someone if you happen to spill coffee on yourself, or helping you avoid accountability if you have committed some crime. Of course, the average voter has probably even less expertise then members of congress. So, for example, we have a bunch of politicians who mostly have no particular expertise on energy voting on which currently inefficient alternative energy will receive massive subsidies extracted from hard working taxpayers. As the politicians choose the lucky lottery winners they do so with an eye toward satisfying voters who, with a few exceptions, know even less about energy. Thank God the legal voting age is not even younger or we might end up funding research in cars powered by cute little hamsters on treadmills. Is it surprising that we get more efficient energy investments when they are made by private firms guided by individuals who have made it their lives’ work to study energy markets and who have much or all of their personal fortunes at stake in the energy projects they fund?

The US founding fathers well understood the importance of private property. Reportedly, Jefferson perhaps came very close to writing “Life, Liberty and Property” rather than “Life, Liberty and the Pursuit of Happiness.” In any event, private property is fundamental to human happiness and is essential to all human rights. We’ve already established that private property rights are virtually synonymous with economic success. But all other freedoms become tenuous if the freedom to own property is weakened. Consider, for example, religious freedom. Increasingly, churches are being banned from certain neighborhoods based on zoning issues raised by hostile neighbors. Granted, this is hardly as severe as being thrown to lions, but it’s easy to see how broad the ramifications are once government has too much authority to limit the activities people engage in on their own property. Private property provides us a haven from unwelcome meddling by politicians. If politicians have unbridled power to tell us where our churches can be established, they can use that power to influence how we worship. A church, for instance, whose teaching on traditional marriage is politically incorrect may find itself facing expensive and disruptive zoning charges and thereby be tempted to water down its doctrine.

Of course, there is much more to freedom of religion than what goes on in church. Christianity has little meaning if we do not live out our Christian principles in everyday activities. But, once government has usurped the right of, say, landlords to choose their own tenants, we soon end up with the government forcing Christians to rent to unmarried couples, as happens in California. Once the state usurps an employer’s right to structure the compensation of his own employees, we end up with the employer being required to provide the same benefits to homosexual couples as he provides to married employees. Private property is the key bulwark against the advance of totalitarian control, over religion and everything else.

Consider the recent mortgage crisis. Most of the problematic high risk loans were directly motivated by government—either compelled by regulators promoting the Congressional goal of “affordable housing” or induced by government directed purchases of high risk loans. (Often the originating bank would immediately sell subprime loans to Fannie Mae or other government enterprises, which explains why these banks were not much concerned about default risk.) However, banking executives rarely mention this fact as they face grilling in Congressional testimony or by the press. Technically, these executives have free speech rights but in practice they do not because of government’s far reaching regulatory control over their businesses. Just as a slave cannot afford to antagonize his master, bankers cannot anger their regulators. Business regulation is often very complex and varies substantially by industry but in one key respect they are as easy to understand as speed limits and other driving regulations. Just as any hyper-strict enforcement of traffic rules would result in virtually every driver being ticked for speeding, “rolling stops” or some other infraction, regulators can always come up with some way of tormenting businesses. If nothing else, regulators can always take lots and lots of time to study routine business proposals to expand branches or market new products.

This is why you will seldom hear medical drug companies mention that they could keep prices lower and save more lives if the FDA would not take years and years to approve new medicines, frequently long after approval in other countries. Nor will you often hear oil executives explain that they could produce oil much more safely and cheaply if regulators had not declared so much land and shallow waters off limits, forcing drilling to operate in very deep waters. Similarly, businesses often make campaign contributions to politicians they despise. When you face powerful political thugs who can severely damage, even destroy, your business, it is very tempting to just pay them some protection money and keep your mouth shut. Likewise, many, probably most, falsely accused businesses find it easier to pay a fine than endure the legal costs of proving their innocence. We have let the politicians build up their Leviathan state and grind down the protection of private property to the point that most business people dare not oppose the petty tyrants who rule them.

Without truly private property, largely free of government control, there is no real freedom of any kind. The freedom to speak or worship as you wish dwindles away as government takes control of your income, your ability to provide for your family. The list of inalienable rights, “life, liberty, and the pursuit of happiness,” has a nice ring to it. But without “life, liberty and property” there can be no true opportunity to pursue happiness.

Thomas Tacker (Ph.D., North Carolina) is professor of economics, finance, and information systems at Embry Riddle University. He has authored numerous scholarly articles in the area of economics.

Notes
¹See www.freetheworld.com.

John Locke on Liberty and Private Property

John Locke was an 18th-century British philosopher whose writings inspired America’s founding fathers. The famous line of the Declaration of Independence, “Life, liberty, and the pursuit of happiness,” is adapted from his writings.

“All mankind… being all equal and independent, no one ought to harm another in his life, health, liberty or possessions.”

“Every man has a property in his own person. This nobody has a right to, but himself.”

“All wealth is the product of labor.”
“Government has no other end, but the preservation of property.”

“The end of law is not to abolish or restrain, but to preserve and enlarge freedom. For in all the states of created beings capable of law, where there is no law, there is no freedom.”

Questions for Tacker’s “Life, Liberty, and Poverty”
1. According to Tacker, what is the key to efficient conservation and good stewardship of resources? How does he illustrate his point?
2. What evidence is there that private property rights are in decline in the U.S.?

3. Why does Tacker think that barriers to free trade are immoral and fallacious? Do you agree?

4. What is the connection between private property and human flourishing?

(First published in Areopagus Journal Vol. 10 No. 4 – Christian Economics)