Common Property in Land: Is It Right? Will It Work?
Equity (vs.?) Efficiency
The title to this section alludes to the two major criteria by which economists judge economic policies. Efficiency is simply the optimal use of available resources — the choice, among alternative uses, that results in the greatest overall satisfaction of desires.* But, some people’s desires might be getting satisfied a whole lot more/better than others’. Equity is seen as the balancing criterion: are some people feasting while others are starving?
The values of equity and efficiency are usually thought to be at odds. (1) Most economists see things that promote efficiency, such as private property, limited government and incentive-oriented policies, as necessarily entailing a tradeoff with achieving the highest levels of equity. (For more on this, see “How Do We Divide the Fruits of Labor?”) Henry George emphatically refused to accept this fundamental tradeoff. George contends that “justice is the highest and truest expediency.” He claims to have articulated a policy solution that reconciles equity with efficiency — or, in other words, achieves full employment without sacrificing prosperity.
“We must make land common property,” Henry George declared. That loaded statement has often been taken out of context. It frequently led to George being lumped in with “the socialists” (who, for their part, strongly disagreed with George; Karl Marx referred to him as “utterly backward”). (2) What did Henry George mean by “common property in land”?
Modern society is quite accustomed to thinking of land as a buyable, sellable commodity. Conventional economic analysis, for the most part, insists on seeing it that way, denying any qualitative difference between “land” and “capital.” However, as we have seen in this course, when land and capital are considered as factors of production, there are clear and important qualitative differences between them. Capital is produced by human labor and more of it can be supplied, if it is in greater demand. Capital improvements to land are economically separate from land itself, which is fixed in supply. Each individual land site is unique. Land therefore trades at a monopoly price: the highest that the buyer is willing to pay. (3)
This essential difference in the nature of land and capital means that “owning” land is not as straightforward a thing as people commonly take it to be. Remember that in economics, land is not merely the earth’s surface but all natural opportunities. Because of this, specific boundaries are needed in order to make “land ownership” meaningful in practice. The Common Law tradition carries the ad coleum (4) doctrine, which gives the landowner rights to a cone starting at the center of the earth and extending into outer space. This proved impractical in modern times, when more and more profitable uses were found for the minerals, water or space below ground, or the air space above it. Consequently, when we talk about the buying or selling of “land,” we really mean the trading of a “bundle of rights” which attaches to a particular location. These rights could include surface rights, subsurface mineral rights, aquifer use rights, air rights, etc.
The Moral Basis of Ownership
Henry George believed in a self-evident moral basis of ownership based on a person’s right to oneself. (5) This principle implies that land cannot be private property, because it was not, and cannot be, produced by human labor. Furthermore, because human beings cannot produce the things they need to survive unless they have access to land, the basic human right to life entails the right to equal access to the gifts of nature. Being required to pay a private land “owner” for access to land is equivalent to having to pay for one’s right to live.
However, if one cannot produce wealth without access to land, isn’t private ownership of land necessary in order to guarantee our fundamental right to own what we produce? John Locke famously justified private ownership of land by saying that when people live and work on land, they mix their labor with it in such a way as to make it justifiably their property. He held out the proviso, however, that this principle only holds as long as “as much and as good” land is freely available for others.
Henry George noted that land, as such, has no market value. At the open frontier, “as much and as good” land is freely available. When land acquires a market value, it is not due to anything the landowner has done — but rather because of the market demand for that land, created by the surrounding community. This, George saw, is the way to resolve the apparent contradiction. Secure land tenure is needed, to ensure people’s right to keep what they produce. But the land’s market value rightfully belongs not to the individual owner, but to the entire community.
Ambiguity over the status of land as property was also written into the US Constitution, and remains there to this day. The Fifth Amendment holds that “private property [shall not] be taken for public use without just compensation.” Land was most definitely considered as property; in fact “landed property” was the primary sense in which the term was used.
Over the years, legal controversy ensued over exactly what it meant for land to “be taken for public use.” The meaning was clear if the land was physically taken, as in the process of eminent domain. However, it is possible for only the land’s value to be taken — for example by the nearby placement of an airport runway, or by a regulation that restricts what can be built on it. In a 1992 case, (6) the US Supreme Court held that a regulation that removed a land parcel’s economically viable use constitutes a “taking” and compensation must be paid to the landowner. Subsequent cases have stopped short of allowing “regulatory takings” of less than the full market value of the land — but cases continue to be brought in Federal courts, and a number of states have adopted laws that allow compensation for regulatory takings.
Georgists may note the irony of these proceedings. In modern societies the greatest part of land’s market value results from the infrastructure investments made by the surrounding communities. And, land use regulations are often changed in ways that increase land values — such as when farm land at the edge of a city is rezoned to permit residential subdivision — but there is little call for communities to claim compensation from landowners for such “regulatory givings.”
Henry George argued that this labor theory of property was a moral absolute, arising from natural laws. Others have argued that other theories of property are equally justifiable. Some libertarians, for example, hold that human freedom is the fundamental value, which is undermined by any limitation on private property — that anything (including land) that can be conceived of as privately ownable must be so. Disputes over scarce resources or natural monopolies can then be negotiated between free individuals. At the other end of the spectrum, Marxists envision a historical evolution toward a society in which all of the means of production, and even all products, are owned in common.
Nevertheless, George’s concept of the moral basis of ownership has strong pragmatic appeal. The notion that one has the right to keep what one produces “feels right” to most people — although they may see the principle as harking back to some halcyon past when things “made sense.” Workers today are accustomed to selling their labor time for a given wage rate, and contributing to the making of a thing that “the company” owns. (They do this because such employment offers them the best return they can get for their labor, under their existing set of alternatives.) The disconnection between our work and what it produces is seen as a regrettable byproduct of modern life. Many people admire those who “get out of the rat race” and produce something directly — such as by gardening, building a home or starting a small business.
Law and Property
Modern society has inherited deep ambiguities in its legal definitions of property. The common law tradition, mentioned above, held a definition of “land” that proved unworkable in modern societies; it had to be replaced by the “bundle of rights” concept. These rights, however, are not absolute; they must be specified in laws. The framers of the United States Constitution, for example, held that life and liberty were inalienable human rights — yet in a political compromise to create a new nation out of thirteen separate states, the Constitution explicitly recognized slavery as legal. Because the Constitution was conceived as the “supreme law of the land,” it had to be amended to make private property in human beings illegal.
Common vs. Government Property?
Some hold that a distinction should be drawn between Common property — that which all have an equal right to use and enjoy, and Government property — that which belongs to the state and is subject to governmental control. However, the government’s claim of sovereign control over land is based on its role of securing the equal rights of all people. The government’s role is to administer the common property of the people, who may decide, through the political process, to hold certain areas off the market for public use — or even, as in the case of a military base, not allow the general public to set foot there.
As part of its role in securing its citizens’ rights, government exercises vital functions of administering land tenure, land title, and to some extent, land use. These are important social functions, and their efficient provision tends to increase land values. (Land for comparable uses tends to have a lower value under governments that fail to provide secure tenure or efficient record-keeping.) In a modern economy, government administration and regulation of land tenure is a vital part of the market system.
NOTES
1. One popular conception of this is the notion of “Pareto Efficiency,” after the Italian economist Vilfredo Pareto, a contemporary of Henry George. A Pareto-efficient state is one in which no one can be made better off without making someone else worse off. (Go back)
2. From an 1881 letter from Karl Marx to Friedrich Sorge, a prominent figure in the U.S. working-class movement.. (Go back)
3. It is sometimes noted that the other factors, labor and capital, can be fixed in supply and trade at a monopoly price. Examples include unique works of art, and the performances of famous actors or musicians. Such monopoly values are sometimes termed “quasi-rents.” From the point of view of the entire society, however, such monopoly values are still quite different from land rents, because land is needed for all production and for life itself. The high prices paid for Julia Roberts’s acting, or for a drawing by Picasso, do not stop others from acting or drawing — in fact, they might inspire them to do so. (Go back)
4. From the Latin phrase Cuius est solum, eius est usque ad coelum et ad inferos — [for] whoever owns [the] soil, [it] is theirs all the way [up] to Heaven and [down] to Hell. (See “ad coleum” on Wikipedia) (Go back)
5. Progress and Poverty, Book V, Chp. 1. Please see “The Rightful Basis of Property“. (Go back)
6. See Lucas v. South Carolina Coastal Council (Go back)