Send us your blog post, blog address, address of other great sites or suggestions by email.

Thursday, March 7, 2013

Control as Ownership II

It does not require a law school degree to understand that there has been a decided movement away from contractually defined rights and duties and back to having such standards determined by legislative, judicial, or administrative bodies. Doctrines of “unconscionability,” “fairness,” “unequal bargaining power,” and “equity,” have been employed, along with outright prohibitions on certain types of transactions, or the prices to which parties may agree, to greatly diminish the control individuals may exercise over their lives and property. In a contract-based system, such control is decentralized into the hands of individuals who freely enter—or choose not to enter—into agreements with others, with each party assessing their own interests and risks. But decentralist tendencies are incompatible with politically-directed systems that thrive on forced uniformity and standardization. Today, there is scarcely a realm of human activity over which the state does not demand the powers of micromanagement.
A review of the case law confirms that our legal system has failed to embrace any clear or consistent principles when it comes to the property question. If a court wishes to deny the state’s power to intrude upon privately owned land, it will speak of such verities as, “every man’s home is his castle.” If, on the other hand, this same court desires to uphold some state regulation, it will remind us that, “property rights are not absolute.” Of course, at the same time that the state denies the inviolability of private property interests, it insists upon the inviolability of its own! If you doubt this, try entering a military base, national park, or government office building, and see how the state—like a feudal lord of the manor—insists upon an absolute respect for its property holdings in defending them from trespassers and poachers (i.e., you and me). When the state erects walls or fences around such facilities, it is—like a landowner— asserting a claim of ownership to all these boundaries contain. Likewise, when it builds walls or fences around an entire nation, the state makes an ownership claim to all within such borders.
All property rights are absolute: some person or persons must exercise ultimate control over things to be owned. The only question relates to the identity of such parties, an inquiry that was as relevant on the early American frontier as it was in the Soviet Union. If we were to identify all of the persons entitled to exercise some degree of control over a given parcel or item of property, and if the interests of all those persons could be purchased by one person, that buyer would, by definition, be entitled to do anything regarding that property, including destroying it, because there would be no other party entitled to exercise control over it. This is the reason that title searches to real property are done, and that title insurance is purchased to assure the state of the title that is revealed: to identify any other persons whose interests must be obtained if the new owner wants an unlimited power over a piece of land.
The ways in which political systems usurp control over property have been rather subtle, and their implications still manage to escape even most lawyers. Because most of us do not understand that property ownership is a reflection of decision-making authority over things that can be owned, we fail to see the contradictions inherent in the judicial system’s separation of “control” and “ownership.” Like the denizens of George Orwell’s Animal Farm, we take uneasy comfort in the legalistic corruption of language played at the expense of our ignorance (e.g., “all animals are equal, but some are more equal than others”), and content ourselves that ownership—including that of our own lives—is little more than a state-conferred, defined, controlled, and limited “title.” Having become thoroughly politicized, we fail to ask the fundamental question: upon what basis does the state presume to restrict our claims of ownership to within boundaries it has decreed, and without our consent?
Every property is, by definition, subject to the absolute and unrestricted control of someone. This is what is implicit in a “claim of ownership.” Of course, this absolute authority need not be in just one person. An owner might convey his or her ownership interest to a husband and wife, or business partners who, as new owners, would then exercise joint control over some item of property. But the point is that some person— or persons—must have the final word regarding what is to be done with any given property interest. This is why the ultimate test of ownership comes down to the question: who can decide, without having to get the permission of another, to destroy this property? If a man has great quantities of food left over after a sumptuous banquet, and he chooses to destroy such remains while starving children look on hoping he will give the food to them, will his liberty to destroy the food be respected? This is not to suggest that an owner must make such a decision, or that he might not be held in contempt by others for his denial of their request; only that the owner is the one who can rightfully make such a choice. If this man’s decision is forcibly over-ridden by others, then they, and not he, must be regarded as the owner. Ownership resides in the person(s) whose arbitrariness in decision-making will be recognized by others as supreme. This principle is as true for property in a communist regime as it is in a society founded upon private ownership. Regardless of the system, it is the nature of property ownership that there must be someone who will be acknowledged as having such ultimate authority. Having this authority in the hands of private individuals is what troubles the defenders of state power, who continue to preach the catechism that “property rights are not absolute.”
The authority of government officials depends, in part, upon our continuing to believe in the myth that “we” have an ownership interest in what is really state-owned property. They have no illusions about genuine ownership control residing in any of us. The distinction—as well as the inherent contradiction in the idea of “collective ownership”—was clearly expressed in a sign I saw in a park in Niagara Falls, Ontario: “The parks are yours to enjoy, not to destroy.”
Any particular item of property may, as we saw in the examples from mining in chapter four, be subject to various ownership claims. Nevertheless, if our thinking remains clear, and we don’t confuse the boundaries of a parcel of land with the boundaries of each property interest in the land, every such claim can be identified as a separate ownership interest subject to separate control. The following hypothetical may illustrate the point. Suppose that I own a parcel of land containing an old house. Suppose, further, that I desire to set fire to this house and burn it to the ground. Am I entitled to do so? If the answer is “no,” then I am not the owner of the property, but the person or entity whose permission I require is. Let us suppose that a bank has a mortgage on the property to secure payment of a loan obligation. Let us further suppose that I had put a new roof on the house last year, for which I have not paid the contractor, who has since filed a lien on the property. Let us also assume that I have rented this house to a tenant, who still has one year remaining on her lease. Let us also assume that I have a fire insurance policy on the house and, further, a neighbor who does not want me to burn down my house. Finally, let us assume that the city in which this house is located has an ordinance designed to preserve (i.e., to prevent the modification or destruction of) historic buildings, and that my house has been so designated. If I wish to proceed with the destruction of the house, need I secure the approval of any of these parties and, if so, why?
In terms of legally defined property claims, it is likely that each of these parties enjoys a sufficient interest in this property to entitle them to exercise some degree of control over it by securing judicial remedies to thwart my plans. As with the earlier example of an automobile purchased with a loan secured by a chattel mortgage, the bank could claim a property interest in my house, the boundaries of which are defined by the contract it entered into with me. It would be entitled to exercise control over the property insofar as was necessary to protect the security interest I had created in the bank. This would entitle the bank to keep me from destroying the house, but would not permit it to restrict my repainting of the house or whom I might choose to invite onto the property. Since I, as the owner, had created this interest in the bank by contract, its interests would be consistent with both the legal and transactional definitions of ownership.
What about the lien interest of the contractor? Like the bank’s mortgage interest, the lien-holder has a legally protected security interest in the house, limited to the extent of its unpaid bill for the roof. Unlike the bank, however, it is unclear whether the lien interest was created by the terms of my contract with the roofer—which would satisfy the transactional definition of ownership—or imposed upon me by operation of law—which would be an intrusion upon my property interests.
The interests of my tenant are clearly protected under either a legal or transactional analysis. My contract with her has created a property interest in the house (i.e., the right to the “quiet use and possession” of the property) for the term of the lease. She owns a possessory interest in the house, and my act of burning down the house during the lease period would violate her ownership rights.
The interests of the fire insurance company require clarification. Its interest is not so much in the property that it is insuring, as in the contract between the company and myself. Thus, the insurance company doesn’t have an interest in my not burning down the house, but does have an interest in my not destroying the house for the purpose of submitting a fraudulent claim for its loss. Since the insurance company and I have both contracted regarding our respective property interests (i.e., my payment of premiums and the commitment of their assets), the company’s interest in the property would be—depending upon the terms of our agreement—consistent with a transactional approach to property. If I were to submit a fraudulent claim, I would be violating the insurance company’s property interests in this contract.
As to my neighbor’s objections, unless he could show that he had acquired a transactionally-based interest in my not destroying my house (e.g., a restrictive covenant by which I had agreed, with my neighbors, not to burn down my house)—an interest that the courts would enforce—he could assert a legal claim to prevent my burning of the house under either a nuisance or trespass theory. If smoke or flames were to cross my boundary lines onto his, I would be engaged in a trespass, which could be actionable under either a legal or a social definition of property. As my rightful decision making, as an owner, ends at my property boundaries, such a trespass would be a violation of my neighbor’s property interests.
But without an identifiable trespass, which will be discussed more thoroughly in chapter seven, an action premised on nuisance would be a denial of my property interests. If my neighbor’s objection to my proposed action was only grounded in aesthetic considerations, or living next door to a vacant lot, or any other concern for which he and I had no agreement, his nuisance action would amount to his trespassing my interests, by extending his decision making, through judicial action, onto my land.
Finally, as to the interests of the city, a clear conflict exists between the legal and social/transactional definitions of property interests. Since the courts will enforce the ordinance against me, the city can be said to have a legal interest in my property, at least to the extent of being able to prevent my destruction of the house. While the courts would never be so frank as to declare that the city had usurped my property interests—preferring the phrase “regulatory interest under the police powers”—it does amount to a legally protected interest every bit as much as the bank’s mortgage interest. The city’s interest fails to satisfy the transactional definition of property, however, in that its interest was not acquired through any contract with me, in which the city gave up a property interest it had in exchange for what I had given up. As in all governmental action, the city simply imposed the restriction on me and other property owners covered by the ordinance, without negotiating with us regarding our acquiring an interest owned by the city.
In a purely functional sense, because the person who has ultimate control over an item of property is the effective owner, and because all forms of government regulation create a division between ownership and control, politics always generates personal and social conflict (i.e., the purported owner is restrained in the exercise of his or her control by a state agency). I desire to use my property in a particular way (e.g., to burn down my house), but the city ordinance prohibits this. Control of this property is now divided between the incompatible preferences of myself and the city, thus creating a conflict in ownership.
Anyone who has ever given two children joint ownership of a toy, or observed the division of jointly-owned property during a divorce, can attest to the dissonant nature of two owners each desirous of controlling the same item in inconsistent ways. Such conflicts can easily be resolved by the owners contracting with one another (e.g., child A gets to make decisions on oddnumbered days, child B makes decisions on even-numbered days). At first glance, it might be supposed that the city’s ordinance qualifies as such a contractual compromise. However, since a contract requires the giving up of some property interest (e.g., one’s money, land, personal services) in exchange for the other party doing the same thing, and since, as we have seen, the city is giving up no property interest of its own in exchange for my obligation not to burn down my house, such regulations fail this test. Like the playground bully who promises to not beat you up in exchange for your lunch money, the government restriction is nothing more than an act of plunder.
In a society that has replaced concerns for individual liberty with notions of due process of law, the idea that arbitrariness is not only a permissible but an essential element of property ownership will be troubling and ring of absoluteness. Such a response reflects an ignorance of the realities of power and authority. It is the nature of every kind of human action that some person, or group of persons, will ultimately make a decision concerning a specific course of action, based upon their preferences, from which no appeal will be taken. If you and a group of friends are trying to decide whether to have dinner in an Italian or a Szechuan restaurant, you will debate the alternatives and, at some point, make a discretionary choice. No matter how much a decision-maker tries to be reasonable, or consistent with prior decisions, or tries to accommodate the views of all interested persons, his or her decision will always come down to a choice that is not subject to review by anyone. If there is some other party who can override this decision, then that person is the ultimate decision-maker. There is nothing remarkable in this: it is only a reflection of the nature of all decision making that someone must ultimately say “yes” or “no”, to make a quantum jump from one state of mind to another.
When such authority is exercised over property, the person who can make that final decision is the de facto owner, regardless of where “title” may reside. This is what is meant by “arbitrariness” herein. It refers to the locus of the decision-making authority, not to the quality of the decision itself. For example, a developer wishes to cut down an aged tree on his land in order to make way for a residential development. Another person who objects to this act chains herself to the tree in an effort to get the courts to intervene to save the tree. In this situation, the tree’s future will be determined by somebody. Whether the developer or the court prevails tells us who the de facto owner of the tree is. This is what the concept of property entails, and there is no way of avoiding the issue, regardless of the nature of the political system involved.
The intertwined nature of control and ownership also helps to explain why economies grounded in private ownership have been far more productive than socialistic systems. Because an owner is able to reap the benefits of his or her decision making over property, an incentive exists for creative, productive activity. No matter how well-intended I may be, my motivation for productiveness will be greater if I am the owner of what I am able to generate than if I am only a manager of another’s property interests, a truth continually made evident in the collective factories and farms of communist systems. As we saw earlier in Joseph Schumpeter’s contrast between owner-controlled and manager-controlled business firms, an owner tends to have a longer-term perspective in decision making than do most managers, whose outlooks become more akin to those of employees. I first encountered this phenomenon in law practice, where clients who owned their own businesses tended to be more determined to resist government regulatory practices than did the managers of firms I represented. The former seemed to have a sense that a bad decision might prove harmful to the business they envisioned their children and grandchildren owning one day. Managers, on the other hand, seemed more concerned with how their decisions would affect their careers within the next few months or years.
One also witnesses the motivational benefits arising from control in the workplace. It has long been evident in the study of managerial styles that unstructured and less formalized systems can be far more creative and productive than systems based on the pyramidal, authoritarian model. The traditional organizational structure of top-down management, with its emphasis on centralized decision making, close supervision, and rigid externalized discipline grounded in fear and threats, has proven less rewarding to both the firm and its workers than a more decentralized approach.2 Conventional managerial thinking has been built on the same assumptions we find in political systems, namely, that one has “an inherent dislike of work” and “will avoid it if he can.” Because of this, it is presumed, “people must be coerced, controlled, directed, [and] threatened with punishment” to get them to work on behalf of organizational purposes. More recent management thinking, however, rejects such premises in favor of a diffused authority—sometimes referred to as “participatory management”—which has been shown to increase both productivity and job satisfaction among employees who enjoy increased decisional control over their work environments.3 Consistent with Schumpeter’s insights, it is no coincidence that such decentralist arrangements are often analogized to workers having a “property” interest in how their work is to be performed.

Boundaries of Order: Private Property as a Social System

No comments:

Post a Comment