Property

We either have property rights or we do not.  There is no such thing as determining on a case by case basis whether or not we should have property rights.  Property rights give an individual control over how a certain thing is to be used.  This right can only have meaning in a democratic political system if there is some disagreement between that individual and the general public, and the will of the general public is disregarded.

The supreme court justice Oliver Wendell Homes Jr. stated in his famous dissent in Lochner vs. New York that a "constitution is not intended to embody a particular economic theory."  Does this mean that he believed that no constitution was ever intended to embody any ideas about economics?  It is beyond the scope of this post to discuss whether his dissent was a proper interpretation of our constitution.  However, I would argue that the contention that elected officials should have the discretion to determine whether a property right ought to be respected or not is an idea about economics.


Not all decisions are left to popular discretion.  The same judge applied a very different principle to free speech.  There is much more understanding on the part of the general public on the importance of protecting unpopular speech.  In contrast there is very little support for the protection of unpopular use of capital goods.  And yet without this protection in what sense can we say that capital goods can be bought, sold and owned as capitalism requires?


Mr. Holmes saw constitutions as experiments.  That experiment was in the results of free speech, it was not interpreted as an invitation for elected officials to experiment with restrictions on speech in order to determine whether or not they would benefit the public.  Likewise with property and capital goods in particular a program of experimentation is different from a secure property right.  The constitution can implement one or the other, but not both.


We will want to put some thought into whether a program of experimentation or secure property rights are likely to produce better results.  In other words, contra Holmes, our constitution should embody an economic theory, and we should take care to make sure it is a good one.


In the area of free speech and freedom of the press we recognize that we cannot rely on the fact that restrictions are harmful and hence likely to become unpopular to provide sufficient protection for this right.  We recognize that in addition to this we need explicit protection of this right in our constitution.


At the heart of this issue, I believe, is a theory of how societies work.  The Austrian school of economics takes the view that individuals make decisions in order to better realize their values in light of beliefs that they hold about the future.  It seems to me that you can except this or reject it.  If you take the point of view that we are to apply the experimental methods of the physical sciences to the social sciences then you are implicitly rejecting this idea.


The physical sciences depend on ideas about causation.  Events are effected by things that occurred before those events.  If things that were to happen in the future could have some influence on events, then this would render the methods of the physical sciences useless.


Strictly speaking, reasonable assumptions about decision making processes don't violate this principle.  It is not events that happen in the future that have an influence on individual decisions.  It is their beliefs about the future.  However, in order to apply the usual scientific methods to the social sciences, it will be necessary to come up with methods of making very good distinctions between the two.  Since every individual will have an incentive to improve their ideas about the future, it is very difficult for social scientists to consistently come up with better ideas than everyone else on this subject.  In particular, it will be difficult for them to come up with better ideas in areas where the ideas of some small minority who have very good ideas on some subject will have a particularly disproportionate influence on the future.


Now let us suppose that the author of a book knew that there were no laws that could prosecute him for what he wrote.  Would this be sufficient to protect his freedom?  I submit that it would not.  He would also need the assurance that such laws would be unlikely to be enacted in the future.  Without such laws, no publisher could be confident that once they had gone to the trouble of printing several copies of the book, that the government would not pass some law that made the distribution of the work illegal.  Hence it is not only current law that determines freedom, but the kind of laws that people have reason to believe will be enacted in the future.


Now, we turn to property rights and economic freedom.  Individuals either have the ability to own and control capital good or they do not.  The mere absence of any law that unduly interferes with this ability is less than a secure right to freedom in that respect.  In order to enjoy ownership rights to capital goods, the owners must have the assurance that no laws preventing them from putting those goods to unpopular uses will be enacted in the future.


This is why we need to embody an economic theory into our constitution.  In order for us to enjoy the full benefits of capitalism, those who have the potential to invest in capital goods must have the assurances about future legislation that only a constitution can provide.