presentation copyright 1999by Barry Brownstein

Property Rights andThe Distribution of

Income

Distribution Of IncomeDistribution Of Income

‘No one actually distributes incomes’

– ‘peoples incomes are the results of many interacting decisions

‘The product of supply and demand for productive services’

Individuals can choose to acquire additional capabilities to boost their incomes

Property Rights and The Property Rights and The Income DistributionIncome Distribution

The market economy is a ‘vast network’ of voluntary exchanges of property titles

– voluntary transactions insure win-win trades Suppose you are prohibited from using your

own labor?

– Licensing, minimum wage laws Prohibitions against land use

– rent controls, zoning

John Locke and Natural Rights people have rights before the existence of government (natural rights)

the purpose of government is to protect their rights

people are justified in dissolving governments that do not protect their rights .

‘‘Positivism’ as an Positivism’ as an Alternative To Natural Alternative To Natural

RightsRights Law established by governmental authority All rights are man-made can be granted or taken away by man ‘rights’ can advance ‘common good’ at the

expense of individuals

Natural Rights vs. Positive Natural Rights vs. Positive LawLaw

Finite and defined- right not to be coerced, if you do not violate someone else’s rights

win-win (not scarce, one person’s use of self-ownership doesn’t conflict with someone else’s use)

conduct considered

Ill-defined- whatever advances ‘the common-good’ (i.e. ‘right to a good job’, ‘right to health care’,)

win-lose- there is no “right to a particular state of affairs unless it is the duty of someone to secure it.”

outcome considered

Time LineTime Line John Locke (1632-1704)

–Two Treatises on Civil Government Thomas Jefferson (1743-1826)

–3rd President-author of Declaration of Independence James Madison (1751-1836)

–4th President-"master builder" of the Constitution US. Constitution- 1787

–amended with the Bill of Rights 1791

Thomas Jefferson- Declaration Of Independence

“We hold these truths to be self evident: that all men are created equal; that they are endowed by their Creator with inherent and inalienable rights; that among these are life, liberty and the pursuit of happiness; that to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed…”

The revolutionary basis (of this country) is recognition of the fact

that human rights are natural rights, born in every human being with his life, and inseparable from

his life; not rights and freedoms that can be granted by any power

on earth.- Rose Wilder Lane

James Madison on Government

"All power is originally vested in, and consequently derived from, the people.”

“The powers delegated by the proposed Constitution to the Federal Government, are few and defined.”

Property in One's Own Person Three Possibilities

–absolute right to own one's body–certain person or persons own other people–every one has an equal share in everyone else

Natural Rights In the Constitution(Amendment 1)

Congress shall make no law respecting anestablishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press;....

Ownership of Physical Property Three Possibilities

–transformer or creator has the property right, (homesteading principle) including the right to pass on property to one's heirs

–another man or group of men have the right to appropriate the property by coercion

–everyone has equal quotal share in all property ("property is theft")

Property Rights in the Constitution(Amendment 5)

...Nor shall private property be taken for public use without just compensation.

““Bread-Store Chain Tells Bread-Store Chain Tells Franchisees: Do Your Own Franchisees: Do Your Own

Thing”Thing” Great Harvest Bread Company- 151 stores “Anything not expressly prohibited by the

language of this agreement is allowed” Simple rules allow for faster adaptation,

innovation and collaboration In contrast with ‘Roman Law’

organizations which prohibit everything that they don’t permit

Demand Creates IncomeDemand Creates Income

“nobody's will can determine the relative incomes of the different people, or prevent that they be partially dependent on accident.”

the values that are placed on your services do not necessarily correspond to your merit or need, but corresponds to the value the purchaser of the service has

Demand and Income Demand and Income

“Incomes earned in the market by different persons will normally not correspond to the relative values of their services to any one person...the performance of a Beethoven sonata...or a play by Shakespeare have no 'value to society' but a value only to those who know and appreciate them.”

The problems with ‘comparable worth’

The Problems With The Problems With RedistributionRedistribution

Who has the knowledge to get to the target? “... to assure the same material position to people

government would clearly have to treat them very differently to compensate for those disadvantages and deficiencies it could not directly alter.”

The problems with continually changing the rules of the game

– destroys the foundation for social cooperation

– people then fight over the rules instead of producing

What About What About Discrimination?Discrimination?

The greater the restrictions in the output market, the greater the level of discrimination

– example- AT&T (pre-deregulation) The greater the competition, the lower the

level of discrimination

– example- technology companies

Are Markets Darwinian?Are Markets Darwinian?

In many non free-markets, the most cunning and intimidating thrive

Markets are a mixture of cooperation and competition

Reputation and trust are essential elements in markets

Are Markets Darwinian?Are Markets Darwinian?

In free-markets property rights are respected for all– contracts are respected and enforced– people are free to exchange

The most productive do the best– but all thrive due to capital accumulation – but many volunteer and are charitable – technology helps the ill, less fit and disabled