Neo-classical liberalism, ‘market freedom’, and the right to private property

ABSTRACT

Neo-classical liberals aim to offer a more consistent, coherent, and morally ambitious form of liberalism than the traditional classical and social liberal alternatives by providing grounds for a strong commitment to both individual economic liberty and social justice. The key neo-classical liberal claim is that the stringent protection of negative economic liberty does not conflict with, but is rather an essential component of, a commitment to political and social justice. My focus in this article is not on this key neo-classical claim itself, but rather on the conceptually prior question of the meaning and institutional implications of the negative conception of individual economic liberty. In addressing this question I trace some lines of argument which derive from the classical political economy of the late eighteenth and early nineteenth centuries. Drawing in particular on ideas and arguments developed by the American economist and social critic Henry George, I argue that a fully coherent and defensible conception of negative economic liberty is compatible with a commitment to a strongly conditional form of private landownership, but is incompatible with a commitment to absolute private property in land.

KEYWORDS:

• Capitalism
• economic liberty
• private property
• land
• neo-classical liberalism
• market freedom

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. Apart from themselves, Brennan and Tomasi also identify David Schmidtz, Gerald Gaus, Charles Griswold, Jacob Levy, Matt Zwolinski, and Will Wilkinson as neo-classical liberals (Brennan & Tomasi, 2012, p. 115).

2. As Schmidtz and Brennan acknowledge, the idea of positive liberty as the power to do as one chooses or to act autonomously is different in several respects from the conception of positive liberty discussed by Berlin. The differences between the two conceptions are not relevant to the present discussion.

3. Thus, my position is not that poverty itself necessarily constitutes a lack of negative liberty. For plausible statements of this position see Gourevitch (2015), and Cohen (2011). The position I will be adopting (pace Cohen (1991)) is that the legal enforcement of formal rights of private ownership does not amount to a restriction of the negative liberty of those who own little or no property: if I am forcibly prevented by officers of the law from pitching my tent in your back garden without your permission, I do not thereby suffer a constraint on my negative liberty; conversely, if you are not forcibly prevented from pitching your tent in my back garden against my permission, I do thereby suffer a constraint on my negative liberty.

4. For a rejection of the idea that considerations of moral desert can have any relevance to the case for the market mechanism see Hayek (1982), Vol. 2, pp. 64–65. It is important to note that one could make the case for the principle of distribution according to productive contribution while at the same time rejecting the idea that anyone ‘deserves’ to be rewarded in accordance with their productive contributions.

5. The broad affirmation within liberal societies of some such precept presumably at least partly explains the prevalence of what Liam Murphy and Thomas Nagel have referred to as ‘everyday libertarianism’, the false but widespread feeling that people are absolutely morally entitled to their net pre-tax incomes. See Murphy and Nagel (2002), p. 36.

6. A detailed discussion of the reasons why market freedom requires the protection of the right to make and receive bequests is beyond the scope of this article. The key claim to be defended would presumably be that the right to make and receive gifts and bequests is a key aspect or incident of the more general right to dispose of one’s property in the pursuit of one’s individual aims and purposes.

7. Since Ricardo’s time the theory of rent has of course been radically transformed, generalized to apply to any factor of production, whether land, labour, or capital (see Samuelson & Nordhaus, 1948/1989, pp. 666–669; and Josh Ryan-Collins et al., 2017, pp. 39–51). However, these developments in rent theory are not relevant to the arguments presented in this and the following section, which relate only to the concept of rent as it applies in respect of land. I shall henceforth use the term ‘rent’ to refer specifically to land rent.

8. The radical implications of Ricardo’s theory of rent were also recognized by many of the mid to late nineteenth and early twentieth century economists who contributed to the development of the tradition of neo-classical economics, including Henrich Gossen, Friedrich Von Wieser, Leon Walras, Philip Wicksteed, and Alfred Marshall, all of whom expressed some kind of support for the nationalization of land. See Blaug (2000); and Foldvary (2008).

9. As George put it, ‘if we concede to priority of possession the undisturbed use of land, confiscating rent for the benefit of the community, we reconcile the fixity of tenure which is necessary for improvement with a full and complete recognition of the equal rights of all to the use of land’ (Ibid, pp. 303).

10. The distinction between full private ownership and quasi-private ownership is similar in certain respects to ideas expressed in Pullen (2001) and Andelson (2001). The idea of quasi-private ownership is also similar in some respects to the idea of ‘shared ownership’ embodied in the ‘common ownership self-assessment tax’ recently proposed by Posner and Weyl (2018, pp. 55–62).

11. On the incidents of ownership see Honore (1961).

12. For a more detailed discussion see Kerr, 2017). For an objection to the idea that land rent is socially created see Gochenour and Caplan (2013); for a reply to this objection see Foldvary (2014).

13. I set aside the question of how (de)centralized the public collection of land rent may or may not be.

14. On the issue of compensation for landowners see George, 1879/2017), pp. 317–323. Some such concern is presumably what motivated James Mill and J. S. Mill to call for the taxation of future increases of rent, rather than of the full value of estates (see the references on page 12 above).

15. See (among many others) Smith, (1776/1904), Bk. 5, Ch. 2; Ricardo, (1817/1821), Ch. 10; Foldvary (2008); Hodgkinson (2008); Mirlees et al. (2011), pp. 368–405; Ryan-Collins et al. (2017); Samuelson and Nordhaus, (1948/1989), pp. 666–669; and Stiglitz (2015).

16. Posner and Weyl (2018, p. 43) have argued that the public collection of LVT would in fact distort and suppress economic activity by removing incentives for landowners to invest in their land. But since investing in land normally takes the form of investment in capital that is situated on the land, and since the earnings of capital would be unaffected by the public collection of LVT, incentives to invest in capital (and therefore in the land on which capital is situated) would be no weaker than if LVT were privately collected. Indeed, incentives to invest in capital (and therefore land) would be strengthened by the requirement that those excluded from the land be compensated through the public collection of LVT, since publicly collected LVT must be paid by quasi-private landowners regardless of the extent to which they invest in their land. It is also worth bearing in mind that publicly collected LVT would replace existing taxation bearing on the returns to capital goods.

17. Mirlees et al. (2011); Ryan-Collins et al. (2017); Samuelson and Nordhaus, (1948/1989)

18. More recently, Brian Kogelmann and Benjamin Ogden have argued (again in the context of a discussion of the Lockean Proviso) that unrestricted original appropriation generates higher welfare for the least well-off than a left-libertarian egalitarian form of original appropriation, since the former results in greater investment in land, and therefore higher productivity, than the latter (Kogelmann & Ogden, 2018). In my view the claims made by Kogelmann and Ogden do not undermine the argument developed in this section of the article partly because of the absence of taxation in the models on which their claims are based, and partly because the authors’ assumption that unrestricted original appropriation leads to greater investment in land seems highly questionable, given the opportunity that unrestricted original appropriation gives landowners to increase their returns by holding land out of production.

19. I am grateful to a reviewer for this journal for pushing me to say more about the differentiation between land and capital.

20. Hodgkinson (2008), pp. 174–178.

21. These costs include the costs of search and discovery that must take place before extraction itself can begin. For an examination of the issues raised by the existence of such costs, see Gochenour and Caplan (2013). See also Foldvary (2014).

Additional information

Funding

This work was supported by the Robert Schalkenbach Foundation under grant number 782-C.

Notes on contributors

Gavin Kerr

Gavin Kerr is an independent researcher based in Bonn, Germany. His research interests lie at the intersection of the fields of politics, philosophy, and economics, with a particular focus on the relationship between the classical and social liberal traditions, and the ideas of market democracy and the property-owning democracy. His current research focuses on the importance of land in economic theory and practice, and on the relevance of land economics to the issue of environmental sustainability.