. Hi everyone, and welcome to Property And Liability, An Introduction To Law And Economics. This is our first lecture, so we'll start right at the beginning with the question of property. Property's the unifying concept of our course. It's the single idea that ties together both the analysis of economists and the analysis of lawyers. So it makes sense to start at the beginning and ask exactly what property is, but it turns out that this is a harder question than it appears at first glance. Actually, there are two views as to what property is, one older view and one newer view. The older view held sway in the centuries before 1800, and it's derived from the ancient English Common Law, and we'll come to associate views from this period, like this one, with the name of John Locke. It was replaced gradually after 1800, by a newer view which starts in England as well, and which we'll associate with the name of Jeremy Bentham. So, let's talk a little bit about both of these views. In the old view, property is understood as being objects. So for example, here's my watch. It's an object. What we find is in fact, that much of our ordinary language, the words we use to talk about property, the words we use to talk about ownership reflect the old view. Which as I've said has not really been current for a couple of hundred years now. To associate property with objects means that the principal relationship that property conveys, or property connotes, is a relationship between people and objects. So, in ordinary language I talk about this as my watch, not your watch. And so it's my property. The object itself is my property. The principal nature of the relationship between people and objects in the older view is summarized by the word ownership. And ownership itself consists of three canonical, or standard, or ancient traditional ways of thinking about what ownership means, three categories of things that one can do with objects. One aspect of ownership in the old view is the notion of possession. The watch belongs to me. It's my watch. And implied in this possession is exclusion. It doesn't belong to you. And you can't have the watch or use it without my permission. That suggests the second right of ownership, which is to use the watch in my own interests and for my own purposes. And the final aspect of ownership is my right to dispose of the object as I wish. I can sell it. I can keep it. I can destroy it and so on. So in the old view, property is an object. The relationship of property is the relationship of ownership between people and objects, and ownership includes possession, use and disposition. In contrast stands the newer view, the one that's come to dominate since 1800. In this view, property as such is separated from the objects to which it attaches, and property is a relation between people and other people over how objects are going to be used. So whereas in the older view property and objects were seen as the same thing, under the newer view, people have rights, called property rights, that attach to particular uses of various objects. And so, when we say, this is my watch. We might be saying under the new view, here are the things that I can do with my watch. And what that means is that if I have the right to do those things, I have a property right to use the watch in each of those ways. So for example, I could use the watch to tell time. I could use the watch as a paperweight to hold down papers on my desk. If I was so inclined, I could throw the watch on the ground and stamp it under my foot. I have all of those property rights. But in fact, I don't have all the property rights that might attach to this watch, because there are uses of the watch which I'm not allowed to undertake. So for example, although I can destroy the watch, I can't throw it at you, and I can't use it to hit you on the head, and I can't use it as an instrument to commit a crime. Because I can't do those things, I have no right to do them. And the person or institution that tells me that I can't do those things authoritatively, instead has the property right to do those things. So, in the new view, there's a different property right for every specific use. Here, we'll ask a second question. And that is where does property come from? And here too, we'll see that there are two strongly differing theories of the origins of property. We'll associate one of these theories with the great English philosopher John Locke and the other with the equally great English philosopher Jeremy Bentham. In this case, the dispute between Locke and Bentham has never really been resolved. And as we'll see, it comes up frequently in the material that we'll be talking about. We'll see that the dispute between Locke and Bentham touches on the most fundamental questions of law and political philosophy, questions upon which people continue to differ down to the present day. So, lets briefly talk about Locke's and Bentham's differing views on the origins of property. Let's start with Locke. Locke believed that property comes from God. He said so in his great book, The Second Treatise of Government, which was published in 1690 as part of a war effort, interestingly enough. Locke was writing as a partisan in the great English Civil War of 1688. And his purpose in writing The Second Treatise was to persuade ordinary Englishmen to assure their allegiance to the monarch, James the Second, and participate in a revolution to overthrow James the Second and replace him by the two-headed monarch, William and Mary. A problem for Locke, and for the revolutionists during this period, was that James, supported by the Anglican Church, claimed to rule through what we now call the divine right of kings. James argued that God himself had reached down to Earth, touched James on the shoulder, and made James God's ruler of the territory of England in God's name. And the Church supported him in this view. So when Locke wrote, hoping to inspire people to join a revolution against James the Second, he was trying to solve a problem for the potential revolutionaries. Everybody knows that it's tough to fight a revolution. And that if you lose the revolution, you're in big trouble. But Locke's revolutionaries faced a second problem. And that was the Church's support of James's view that his right to rule came from God himself. If James was right, then Locke's revolutionaries not only faced the physical dangers of being unsuccessful revolutionaries, but might have faced eternal damnation for blasphemy for having acted against God's will. So it was important for Locke to keep God in the theory of property. And as we'll see, he did that quite elegantly. It's difficult to support Locke's story, as we'll see, after the theory of Charles Darwin that in fact we are not descended immediately from God. But that we're descended as it were from animals that preceded us. But well before Darwin, Locke's theory was challenged by the great English philosopher, Jeremy Bentham, who said, in 1791, that Locke's theory that property came from God was generally nonsense upon stilts. Bentham made an obvious observation which is that no property can be enforced, no claim to use objects or control the use of objects as against other people, can be enforced without proper consent of the State. And so for Bentham, property was simply those claims to the use of objects that the state was willing to throw its enforcement power behind. In this sense, property originates with the State, in the State's decision as to what property rights to honor and what property rights to ignore. So let's expand a little bit on these two differing views of property, and once again, let's start with Locke. Locke argues that people once lived in what he called the state of nature. This was a state of real people living on the Earth, but living in a situation before any government existed. This, of course, is the part of Locke's story that runs afoul of Darwin's theory. Darwin makes it very hard to believe that there really was a time when human beings lived without duly constituted authority. But Locke knew nothing of Darwin, and of course his purpose was not social science as much as it was political philosophy and indeed persuading people politically to act in a dangerous way. And so, Locke argued, we do exist and we have existed historically, we don't exist now, but we have existed historically in a state of nature in which God reaches down from heaven and touches not James the Second or the monarch, but every individual human being and gives these individuals three distinct rights. The first of these rights is the right to what we call personal liberty, or what Locke thought of as property in one's own body. This means, literally, that we own our corpus. That is, our own bodies. And at the very least, it means that we can't be sold to another person as a slave might be sold and owned by another person. Indeed, Locke's great disciple, Jefferson called the right to personal liberty an inalienable right, by which he meant it was a right that could not be sold even if the individual wanted to sell the right. One concomitant of the right to personal liberty, conceived as the right to own one's own body, is that one's brain is in one's own body, and one's thoughts and one's speech emanate from one's brain. And thus, if we own our own bodies we own our own brains and the product of those brains, speech and thought and those too Locke said are our's, we have a right to them. A second right that Locke thought God gave every individual in the state of nature was a right to personal property. The personal property came to individuals, according to Locke, in a particular way. There were, Locke said, in the state of nature abundant resources for all. And they weren't owned by anyone. How could one make personal property out of the abundance of nature? Locke's answer was that property came, personal property came, when one mixed one's own labor with those abundant resources of nature so as to produce something useful or valuable for human beings. God makes trees, but human beings produce apple orchards by mixing their labor with the processes of nature and with the materials that nature provides. And that combination of labor and materials produces apples which can be enjoyed and which can be sold. Finally, Locke recognized that the first two rights didn't have much meaning, if there were individuals who were inclined to violate others' rights to personal liberty or to personal property, and that those people must be stopped from violating those rights. And so Locke argued, God gives every individual a third right, which is the right to punish those individuals who violate the first two rights that everybody holds. And so everybody has a right to their own body and liberty. Everybody has a right under certain circumstances to the personal property that they create with their own labor. And everybody has a right to punish and enforce the two property rights the, the two first property rights. Every individual has a right to enforce them by punishing those who violate them. Locke's story went on however, that it's difficult for individuals to enforce their third right. Notice that the state of nature is not a state of uncivil society. It's not a state of anarchy and it's not a state of chaos. As Locke concedes it, as long as everybody was reasonable, they would understand the benefits of the three rights that God gave to people, and they would respect those rights of their own volition, because they'd recognize that forbearance would protect their own rights in situations that might arise in the future. But of course, in the real world, there are people who won't respect those rights. Locke didn't call them evil. He called them unreasoning because of their inability to accept the argument that he was making about natural rights. And these people, these unreasoning few, said Locke, would not find it difficult to violate the property rights of people who are weaker than they were. And therefore, the property rights of weak people were always in jeopardy at the hands of stronger people. But even the property rights of strong people were at the mercy of coalitions of weaker ones. Many weak people can get together to steal the property of the strong person. And of course, if people have the right to punish those who have victimized them, they may overdo it a bit and punish out of proportion to the harm that's been done to them. All of these, Locke said, were problems created by the difficulty of enforcing the third right in the state of nature. So Locke imagined that in the state of nature, people would recognize these dangers and therefore decide to force all. The way they did it was to create Locke's famous social contract. We could imagine these individuals sitting around a large campfire, each coming to the campfire with a basket containing their three rights. Think of them as eggs in their basket; the right to personal liberty, the right to personal property, and the right to punish transgressors. After deciding that nobody's third right is worthwhile if they are hold up themselves because they can't enforce their rights against stronger individuals, Locke argues that reasonable people will all take their third right, the right to punish transgressors from their basket, and put it in the center of the circle. Then they would agree to designate some people amongst their number as agents of the government. That is, people who would then wear badges to distinguish them from everybody else, and those badges would signify that everybody had agreed to surrender their third right, their right to punish so that only those people designated as the government, only those people wearing the badges, could inflict violence upon other people by punishing them for transgressing the first and second rights of individuals. So, for Locke, government were simply those people who were assigned by the citizens, if you will, the contractors of the social contract, to collect everybody's third right, and to use those third rights in the way that people themselves would use them if they could, which was to punish transgressors, and to do so in an appropriately proportional way. Finally, it's worth noting that in Locke's theory, individuals don't surrender all three of their eggs to the government. They keep the first two eggs and don't surrender them to the government at all. That is, they retain their right to liberty and their right to property, which is not, in Locke's view, given to them by the State. It's given to them by God, and individuals hold onto that right even in the face of the actions of the State. Locke's theory of God given natural rights and a social contract that creates a government beholden to the citizens that create it, has important implications for the relationship between property and the State. And thus, important implications for the relationships of individuals to the State. So I've tried to summarize these as three major implications. The first of these is, as we've seen, that property precedes the existence of government and the State, that is, property is given to individuals by God. It's not given to them by the State. Individuals hold these property rights against the government. And as we've suggested, the government has no warrant to take these rights away from them without the consent of the individuals, no matter how compelling the public purpose might be that the government takes the property for. The State, that is, has no interest or purpose, other than protecting individual liberty, and personal property. The State is a purposeless abstraction, created solely as an instrument of individuals to protect their individual liberty and property. It has no needs. It has no interests. It has no purposes of its own. And Locke would not recognized terms like national interest or public welfare or social good as appropriate justifications for governmental actions that violated either of the first two rights of individuals. This suggests that no person may be made the unwilling instrument of another's welfare. People's property and liberty cannot be taken away from them without their consent for the benefit of any other person or punitively for the benefit of everybody as a whole. Again, there is no national interest, or social interest, or public good that transcends the personal property and liberty of individuals, and individuals may not see their liberty or property used by the government for the benefit of other people. One final implication of Locke's theory, of course, it that it justifies revolution. This was the point of his writing it, and this was the point of Thomas Jefferson's references to it, implicit references to it, in the Declaration of Independence. Locke argues that when the government itself violates the first two property rights to liberty and personal property of individuals, then the government becomes the, the agent, the robber, if you will, that government itself was created to protect the people against. Lock's view was that when government broke the social contract by attacking one of the first two rights of individuals without their consent, that they had, just as in an ordinary contract, rescinded the contract itself. So that when one person fails to perform a contract, the other party to the contract is released from their obligation under it. In the multi-sided social contract, a similar argument holds. If the government acts so as to violate the social contract, then the citizens have a right to rescind the social contract, and take that third egg back from their government, and reconstitute a different government in which they have more confidence than the old one. So Locke's theory is decidedly a theory of revolution, and it's one that sets the individual distinct, apart from the state. Against the ideas of John Locke stand those of Jeremy Bentham, who lived somewhat later than Locke. Bentham, in 1791, in the midst of the French Revolution, wrote that Locke's theory of natural rights and social contract was nonsense on stilts. He didn't see God giving natural rights to anyone. And perhaps he thought, as moderns might, that the word of God can't be appealed from and may make it difficult for rational political discourse to be undertaken. Bentham's theory of property and the State had no room for God. Indeed, generally speaking, there was no room for any kind natural or God given rights. And people's property rights were only those rights that the State elects to enforce. If you think you have a property right to an object and somebody steals it, your property right is not worth a great deal to you unless the State agrees with you that, that person has stolen your object and sends the police and the courts to catch that person and punish them for what they've done. If you believe your object has been stolen, but the State's law says that the person who took it had a right to take it away from you, then the State will not in fact sick its police force or its courts upon the person that you think took the property from you. And in that case, it's hard to say that you have a property right at all. From this unobjectionable observation, Bentham argued that it is the State that creates property rights. And moreover, the State doesn't create property rights arbitrarily or randomly, or to meet the whim of a particular ruler or legislator. For Bentham, the State has a particular purpose in mind in assigning property rights. And that, of course, is Bentham's famous formula of the greatest happiness for the greatest number. Bentham was the originator of the philosophy of utilitarianism, and the way that we now typically express his philosophy is that all social policy, all law, all policy, ought to be made so as to maximize the sum of individual utilities. Like Locke's theory, Bentham's theory has important implications for the relationship between property and the State, and through it, on the relationship between individuals and the State. And as in the case of Locke, I've tried to summarize Bentham's implications in three major points. The first of these, as we've seen, is that there is no property until the State creates it. This means that individuals have no right to property, as against the State. And the State ultimately is the final arbiter and chooser of exactly what property rights are and exactly who's going to hold property rights, at least initially, before people are allowed to trade those rights in the, in commercial life. And, since the State is assigning property rights, it ought to have a purpose when it assigns property rights. And for Bentham, that purpose was the utilitarian purpose. To produce the greatest possible happiness amongst the people, to maximize the sum of individual utlilities. This public purpose for Bentham was superior to the private interests of any individual, including that individual's interest in personal liberty and in personal property. For Bentham, the State was the instrument of public welfare. It was the instrument by which social utility was to be maximized. And the State, therefore, may take the liberty and property of any individual in pursuit of its proper purposes. Again, the interests of the State are superior to the interests of the individual. And the State, through its definition of property rights, can transfer in commonwealth from one portion of a population to another in further[UNKNOWN] of it's objective of maximizing social utility. So, for Bentham, if a dollar is held by a rich person and the argument is made that if the dollar is taken from the rich person, that person will be deprived of only a small amount of utility, and that dollar is then given to a much poorer person, for whom it can be argued that, that same dollar will produce much greater utility, then the transfer of the dollar will produce a net increase in social utility by increasing the recipient's utility more than the donor's utility has been decreased by the transfer. Since this is a socially increasing, a utility increasing move for Bentham, the State has the obligation to take the property, the dollar, from the wealthier individual and transfer it to the poorer one.