Poor Richard’s Trilogy - EthicalMarkets.com

Much has been written about the “enclosure of the commons.”

“Enclosure (inclosure) is the process which was used to end some traditional rights, such as mowing meadows for hay, or grazing livestock on land which is owned by another person, or a group of people. In England and Wales the term is also used for the process that ended the ancient system of arable farming in open fields. Under enclosure, such land is fenced (enclosed) and deeded or entitled to one or more owners. By the 20th century, unenclosed commons had become largely restricted to rough pasture in mountainous areas and in relatively small parts of the lowlands.

“Marxist and neo-Marxist historians argue that rich landowners used their control of state processes to appropriate public land for their private benefit. This created a landless working class that provided the labour required in the new industries developing in the north of England. For example: “In agriculture the years between 1760 and 1820 are the years of wholesale enclosure in which, in village after village, common rights are lost”.[1] “Enclosure (when all the sophistications are allowed for) was a plain enough case of class robbery. (Wikipedia)

Enclosure has become a general metaphor for the upwards migration of wealth from the general population to the privileged few, i.e. the increasing concentration of wealth in the economy. While enclosure worked for a while to the benefit of a middle class, increasing enclosure of more and more of the commons by those at the very top of the “food chain” threatens to return the modern middle class to the status of medieval serfdom.

This leads some to question the social utility of the current legal framework of private property.

However, I find a great deal of wisdom about the balance of public and private interests in the age-old common law. Unfortunately, modern statutory law has departed ever farther from common law principles of equity and has grown in the direction of monarchical “divine right” and/or “manifest destiny” -ish rationales in modern disguise. As we invent “new” forms of property and revise old ones, as I think we must, I hope we will give due consideration to common law traditions which in general are very egalitarian. Unfortunately, few people born in the past 100 years have any idea what “common law” is unless they have been through law school; and even then they most likely view it as a quaint curiosity. In the Robin Hood story, Robin was upholding common-law rights to the commons against the corrupt and degenerate monarchy.

The Homestead Act–enclosure for the people

A form of enclosure of open, public land that worked to the benefit of the common man is seen in the US Homestead Acts.

“The Homestead Act is one of several United States federal laws that gave an applicant freehold title to up to 160 acres (1/4 section, 65 hectares) of undeveloped federal land. The law required three steps: file an application, improve the land, and file for deed of title. Anyone who had never taken up arms against the U.S. government, including freed slaves, could file an application and evidence of improvements to a federal land office. The occupant also had to be 21 or older and had to live on the land for five years.

“The original Homestead Act was signed into law by President Abraham Lincoln on May 20, 1862. Because much of the prime low-lying alluvial land along rivers had been homesteaded by the turn of the twentieth century, a major update called the Enlarged Homestead Act was passed in 1909. It targeted land suitable for dryland farming, increasing the number of acres to 320. In 1916, the Stock-Raising Homestead Act targeted settlers seeking 640 acres (260 ha) of public land for ranching purposes.

“Eventually 1.6 million homesteads were granted and 270,000,000 acres (420,000 sq mi) of federal land were privatized between 1862 and 1934, a total of 10% of all lands in the United States. Homesteading was discontinued in 1976, except in Alaska, where it continued until 1986. (Wikipedia)

Ownership vesting by productive use and improvement

While enclosure is a bad word in progressive economics, The Homestead Act reflected two ancient principles of common lawthat may be important for us to understand and preserve in defense of the commons: adverse possession and the doctrine of laches.

A person invoking the doctrine of laches is asserting that “an opposing party has “slept on its rights,” and that, as a result of this delay, that other party is no longer entitled to its original claim. Put another way, failure to assert one’s rights in a timely manner can result in a claim’s being barred by laches.” (Wikipedia)

The doctrine of laches is a sort of a generic, common law “statute of limitations”. Adverse possession involves the doctrine of laches in disputes over claims to property.

“By adverse possession, title to another’s real property can be acquired without compensation, by holding the property in a manner that conflicts with the true owner‘s rights for a specified period. For example, “squatter’s rights” are a specific form of adverse possession.” (Wikipedia)

By stipulating that prospective homesteaders had to occupy the land for 5 years and make improvements to it in order to acquire private title, the Homestead Act was, in a sense, a way of encouraging citizens to assert the ancient tradition of “squatters rights” to the property.

I’m not enough of a historian to trace the origins of squatter’s rights, but I can understand and intuitively favor the principles of justice and equity which they represent. Continuing from Wikipedia/Adverse Possession:

“The principles of homesteading and squatter’s rights embody the most basic concept of property and ownership, which can be summarized by the adage “possession is nine-tenths of the law,” meaning the person who uses the property effectively owns it. Likewise, the adage, “use it or lose it,” applies. The principles of homesteading and squatter’s rights predate formal property laws; to a large degree, modern property law formalizes and expands these simple ideas.

“Squatter’s rights embodies the idea that if one property owner neglects property and fails to use it, and a second person starts to tend and use the property, then after a certain period the first person’s claim to the property is lost and ownership transfers to the second person, who is actually using the property.

“The essential ideas behind the principles of homesteading and squatter’s rights hold generally for any type of item or property of which ownership can be asserted by simple use or possession. In modern law, homesteading and the right of adverse possession refer exclusively to real property. In the realm of personal property, the same impulse is summarized by the adage “finders/keepers” and is formalized by laws and conventions concerning abandoned property.

“Copyrights

“Some legal scholars have proposed to extend the concept of adverse possession to intellectual property law, in particular to reconcile intellectual property and antitrust law[17] or to unify copyright law and property law.[18](Wikipedia)

Instead of simple possession being nine-tenths (originally “nine points”) of the law, a better formulation would be thatproductive use or improvement is nine points of the law. This is actually more consistent with the common-law origins of squatter’s rights. The intuitive impulses behind the common laws of salvage and claiming abandoned property also come from the same sentiments: property should not go to rack and ruin from disuse while someone in need is willing to claim it and use it productively. These common law sentiments and traditions are the true origins of modern property law, notwithstanding the success of special interests at gradually twisting and perverting those sentiments into their own opposites in today’s statutory law.

The Modern, “Absolute” Title

This is what the rich have really been angling for ever since the early days of enclosure. The dominant modern attitude towards private property is no longer firmly grounded in common law tradition, but is gradually sliding towards a relatively modern theory of “natural law” and “natural rights”. This theory defends a form of private property in which the rights of an owner are absolute and supreme–not subject to any test of productive use or improvement nor to any competing interest of society. Those who defend this theory like to imply that it is a conservative, traditional institution. It is anything but. Its only claim to antiquity is bedded in the “divine right of kings,” but the common law of property must be said to have earlier origins and distinctly contrary principles. Common law has always held that ownership of private property is, as Wikipedia says (Fee Simple): “limited by the four basic government powers of taxation, eminent domain, police power, and escheatand could also be limited by certain encumbrances [explicit or implied] or a condition in the deed.”

As early as Aristotle, philosophers argued for the social benefit of private property, but in the interest of preserving the commons, not eliminating it.

“[T]hat which is common to the greatest number has the least care bestowed upon it. Every one thinks chiefly of his own, hardly at all of the common interest; and only when he is himself concerned as an individual.” (Aristotle, Politics)

If Aristotle’s concern was for the common good, his argument can not be used in support of a theory of private property that scoffs at social values such as the “common good”. Nothing in Aristotle’s view of private property could be construed to hold absolute private “title” (an expression related to royalty) above all competing social interests.

The arguments I have seen in support of absolute private property ownership fall into two categories: appeals to natural lawand appeals to utility.

I. The appeal to “natural law” and “natural rights“. Libertarians and some conservatives view private property rights as the foundation from which all other natural rights extend. There are several problems with this:

A. Despite the pre-scientific musings of many erudite (if old-fashioned) philosophers about the “state of nature”, in the state of nature there is but one law, the law of the jungle, and but one right: “might makes right” (Vae victis). Any other right can only be the result of imposing positive (artificial) law. The only other laws that exist in nature are the “law” of unintended consequences and the natural laws such as the law of gravity, the laws of thermodynamics, etc.

B. In nature, possession is 100% of the law, not just nine points. The only private property is that which one can take and hold by force. If you can take it from someone else it becomes yours. If they can take it back or induce you to give it back it is theirs again. Natural social behavior might seem to introduce more laws, such as in the “law of the pack” and “pecking order”, but in nature these are simply either:

Proxies for force which must be regularly backed up by force–there is no court of law, or
Genetically encoded, involuntary, instinctive responses to chemical or physical signals as in the case of social insects and bacteria.
C. Without the rule of law, predictably and impartially managed by society, property is nothing but a temporary possession maintained by private force. If the existence and persistence of private property depends upon a public legal infrastructure, then private property as we know it is a public creation. The public, which creates the “privateness” of the property and preserves it by force of law, always has a proprietary interest in any such property–by the principle of natural law! (In any contest between private force and state force, the state wins.)

D. Many of the philosophers who have argued for “natural law” have conflated it with divine law, nature simply being a proxy for the divine creator. This attitude has passed by inheritance to modern-day conservatives and libertarians. Property, once the divine right of kings, is now the divine right and manifest destiny of whoever has the latest legal claim. In this tradition, the owner has an absolute (thus divine) right to his property which supersedes all other claims. The public interest, the interests of future generations, or the survival of the planet be damned. There are two problems with this argument:

This is thinly veiled theology which, in the possible absence or indifference of the necessary deity, amounts to little more than anarchy.
This “absolute” natural right can be magically dissolved by signing a piece of paper, just as any other so-called natural right of man can be signed away or evenautomatically abdicated simply by accepting casual employment. This reveals that the “natural right”, just like the natural man (the supposed “king of his castle”), is actually nothing more in this doctrine than a right of “chattel” (from the word cattle–-in law, any movable property; also used to refer to slaves, wives, and minor children).
II. The appeal to utility

A. Proponents of the absolute right to private property claim that it promotes the common good in the same way that greed supposedly promotes the common good in the “free market”. They rely on an “invisible hand”to make everything work out for the best even if each person acts purely out of greed, ambition, paranoia, malice, delusion, or any other form of vice, depravity, or pathology.

B. To be fair, they assert that an owner will always act in his own best interest and that the utility of absolute private ownership follows from this (with a little invisible helping hand still required). They assert that an owner will rarely fail to act in his own self-interest. However, only if every property owner acted in his fully enlightened self-interest could the appeal to general utility succeed. That test is clearly unmet. Most owners are not only unenlightened they are predictably irrational. The “rational agent” theory has been fully discredited in psychology, sociology, neuroscience, and even in economics (which tends to fall somewhat behind the curve in theories of human behavior).

C. Science has debunked the invisible hand for failing to deal with irrational agents, externalities, andinformation asymmetry.

D. Without an invisible hand, the only interested party left around to represent the common good, the public interest, future generations, and the planet, and “to promote the general welfare” (as per the Preamble to the US Constitution), is (no big surprise to progressives) the public. The public interest is a proprietary interest in a portion of the bundle of rights which make up ownership. The public owns this proprietary interest by virtue (as stated before) of natural law!

E. For the appeal to utility to succeed, owners must put their property to its “highest and best use”. This condition is clearly not satisfied. The proponents of absolute private property rights often argue that it is government interference, (zoning, environmental regulation, nuisance laws, etc.), which prevents private owners from achieving the highest and best use of their property, and that such interference is a “taking” of their property. There is law on both sides of this argument and owners are free to file their claims in the proper court of jurisdiction– the venue which they argue is the only proper source of remedy.

Where common law and natural law agree

On one hand is the aristocratic “absolute title” descending from the divine right of kings and on the other hand is the “bundle of rights” established by an unbroken, progressive line of common law, originating in pre-history, and backed up by natural law (the might of the state). It seems natural law is no longer on the side of royalty, nowadays, and common law never was.

In common law tradition the social contract recognizes a whole catalog of individual and severable rights to property. For any given property, the various rights may be divided and held by any number of different people, groups, or agencies. As I said above, the public always retains some of those rights which can be thought of as implied public easements, servitudes, and restrictions.

By vigorously reasserting and defending the residual public interest in all private property, an interest that is firmly based in common law (not to mention natural law), we can roll back some of the private enclosure of the commons.

Graphic: The Bundle of Rights

Disenclosing the Commons with Tax Policy

Tax policy is a way to return underutilized private property to the commons. A highly progressive property tax, income tax, and inheritance tax can all be used to insure that excess accumulations of property, and property that is not being used productively, is returned to the commons. If the tax rates are too low they will not serve this function, but if the rates are high enough at the upper tiers they will force excess accumulations of property and underutilized property back into the commons, partly via the marketplace (by influencing fair market values) and partly via the tax revenues flowing back into the public treasury.

Taxes and easements

One way that property can be returned to the commons without it being converted to tax revenues or sold on the market is through public easements. One example of this is a conservation easement.

Concerned with the loss of farmland (especially small family-held farms) to development pressures, I proposed and lobbied for the the Tennessee Conservation Easement Act of 1981. The timing was right and the TN Department of Conservation provided resources to get the bill written. It passed quickly. The act provided property tax relief on farmland in exchange for a transfer of development rights from the farmer to the state. The conservation easement transferred to the state most of the rights in the farmland that were not needed by the farmer in order to farm the land–mineral rights, subdivision rights, commercial development rights, etc.– not to be exploited by the state but simply to be held in a public trust. As long as the easement remained in force, the property taxes collected by the state would be greatly decreased. A lot of farmers were happy about that and the program was a big success.

Any of the individual property rights that make up the total bundle of rights can be transferred back into the public domain in return for tax relief, without handicapping the private owner from using the property in many productive and constructive ways. If the concept of public easements and restrictions combined with tax relief were used together with a highly progressive property tax and inheritance tax rate, the enclosure of the commons might be dramatically reversed.

Parenthetically, I should acknowledge the oft-heard alarm that conservatives raise about the confiscatory and antisocial effect of taxes. We need to thank our conservative and libertarian brothers and sisters for their vigilance and their concern for the little people. We do need to insure that people who have just enough to live in comfort and dignity (if they have that much) pay no property tax, income tax, or inheritance tax at all.

Conditional property, equity, and information asymmetry

As discussed above, the ownership of private property is never absolute, but always conditional. Even in the case of an “absolute title” to real property, there are implicit social conditions that can be thought of as implied easements, servitudes, and restrictions. The same conditionality also applies to personal property and intellectual property.

One of the main devices that has been used by special interests to enclose the commons (and rip people off in general) isinformation asymmetry. Restricting access to information has many parallels with fencing in, or enclosing, property. Classical free-market economics assumes that all parties to a transaction have full knowledge of all the costs and benefits pertaining to a transaction and can make informed judgments about the impacts of the transaction on their own interests. Common sense and personal experience tells us that is seldom the case. In the real world one party usually has more information about the conditions and consequences of a transaction than the other. Information asymmetry and many other kinds of externalities have actually become the accepted basis for most cases of making “profits.” In all such cases for-profit transactions can and should be distinguished from fair trades.

Equity (in law) is an ancient common law principle that fairness supersedes the letter of the law. Equity (in economics) is similarly a principle of fairness, in this case fairness in the distribution of economic costs and benefits. Equity (in finance) is also a term used to refer to an ownership interest, as in home equity, especially in cases where ownership interests are shared or distributed between several parties. Fairness is also implicit in this use of the term equity.

Information asymmetry can be thought of as a way to enclose and/or externalize various parties’ legitimate equity, both in the sense of equity as fairness and the sense of equity as one’s proper share of some economic interest in, or ownership of, a thing. A good example is the personal information that we share with service providers on the internet. Equity is each party’s fair share of ownership, and information asymmetry and other forms of covert enclosure and externalization should be understood as factors that create an inequitable distribution of costs and benefits. If Google and FaceBook are going to make money on the information they collect from me, where is my fair share? I’m not anti-business, just anti-ripoff. Fraud, unfair advantage, covert enclosure, and disinformation are violations of common law principles of equity. So where are the Equity Police?

Generalization

The concepts of property and ownership can have a great deal of social utility. I don’t want anyone coming into my house and just walking off with whatever they please. The problem with current definitions of property is that they are insufficiently conditional and explicit. They don’t explicitly and transparently incorporate the principles of equity, the various interests of all parties, and the public interest in portions of the bundle of rights. Enclosure and ownership don’t have to be bad words if the rules and conditions of enclosure and ownership–and the various present and future interests of all parties–are well-balanced, open, explicit, and transparent (some of those terms may be redundant, but I feel the emphasis can’t be over-emphasized).

Poor Richard

A Republic of Letters (New York Times Sunday Book Review) A review of COMMON AS AIR: Revolution, Art, and Ownership by Lewis Hyde. Discussing enclosure of the intellectual commons.

Progress update: the Future of Money project

The very interesting interview series on the future of open money, undertaken by Venessa Miemis and friends at the Emergence Collective, is progressing apace,

here are the “update” videos:

Future of Money Videoblog: Episode 1 from KS12 on Vimeo.

Future of Money Videoblog: Episode 2 from KS12 on Vimeo.

Future of Money Videoblog: Episode 3 from KS12 on Vimeo.

Video:

The Future of Money video

What are young adults thinking about money and value? How can we create new systems of wealth generation and abundance? What does the future hold for banks and other financial institutions in the wake of massive peer to peer exchange?

“The Future of Money” begins a conversation on these topics and invites your participation (twitter hashtag #futureofmoney)

This video was created as part of Venessa Miemis’ presentation at the SIBOS Conference in Amsterdam, 25 October 2010. The interviews were conducted with participants in America, England, Sweden, Mexico, Germany and Thailand via video Skype calls from Berlin, Germany.

Written by Gabriel Shalom, Venessa Miemis and Jay Cousins

Directed and Edited by Gabriel Shalom

Produced by KS12 with Venessa Miemis

Title Design by Patrizia Kommerell

Featuring (in order of appearance):
Edward Harran, Attention Philanthropist
Caroline Woolard, Our Goods
Alan Rosenblith, Director, The Money Fix
Hans Schoenburg, Founder, GiftFlow
Ashni Mohnot, Founder, Enzi
Linus Olsson, Founder, Flattr
Jerry Michalski, Founder, Relationship Economy Expedition
Georg Zoche, Founder, Transnational Republic
Fernanda Ibarra, Advocate, Metacurrency Project
Jessica Harris, One Blue Dot Share Networks
Michel Bauwens, Founder, P2P Foundation
Douglas Rushkoff, Author, Program or be Programmed

Photos from the series Macro Economics by Kevin Dooley

Music:
YACHT “Summer Song Instrumental”
James Collin “Upstairs”
Dreddy Anthem “Acoustic Jammin’”
Patrick Lee “Quittin Time”

Executive Producers:
Chris Skinner, Chairman of the Financial Services Club
SWIFT Innotribe Team
Bernd Nürnberger
Anthemis Group