Secure private property rights are vital to the development of a growing, healthy Australian economy. Property rights allow owners to be free to access, use and benefit from and dispose of their property as they see fit, cultivating a spirit of innovation and entrepreneurship.
In this paper, Wolfgang Kasper outlines a brief history of property rights going back to the Magna Carta in 1215.
Executive Summary
Secure property rights to an asset give owners an open-ended bundle of rights. Owners may exclude others from access, may use the property as they see fit, benefit from their property and dispose of it, as long as they cause others no harm. Owners are autonomous in enjoying their property.
- Without secure property rights and economic freedom, the record-breaking ‘run into prosperity’ of the Australian colonies during the 19th century could not have occurred. Since then numerous restrictions and regulations have diminished the value of private property and economic freedom. In the past decade, neosocialist environmental regulations have propelled this trend. In the process, the burden of proof has often been shifted from people who object to free property uses to the property owners: guilty until they prove themselves innocent.
– Nowadays, private property is rarely endangered by outright expropriation (classical socialism). Instead, we observe a creeping erosion of individual property rights through costly regulations, which take private property rights away without compensation (neo-socialism). Individual rights of land owners, for example, to harvest water or timber, are being confiscated without compensation. Gradually, independent owners are turned into mere managers of centrally decreed schemes. Frequently, governments interfere even without proof that particular property uses are causing harm. Such ‘regulatory expropriation’ is supported by those who still believe that ‘property is theft’––the irrefutable failures of socialism notwithstanding.
Property rights are widely respected in communities where owners have to compete, in other words have to risk some of what they own to explore new, useful knowledge. This competitive discipline is uncomfortable for property owners. However, political interference to ease the competitive pressures also allows the authorities to diminish private property rights and gives rise to public scepticism about the merits of the property-rights system.
Property rights are human rights. Their cultivation underpins individual freedom, promotes economic growth and job creation, and reduces poverty. Citizens of property tend to see advantage in cooperating peacefully and hence in social harmony.
In the face of the progressing erosion of private property rights, the system to protect them needs to be overhauled. In particular, interventions with autonomous property rights should only be deemed acceptable if the three following questions can be answered in the affirmative: [a] Will the proposed intervention improve the outcomes for the people? [b] Will the policy produce social benefits that are greater than the costs it inflicts? [c] Will the expropriated owners be compensated on just terms?
– It is likely that the cost of compensation for regulatory takings will be massive. If new regulatory schemes are envisaged, they should be fully costed (including the compliance costs to the subjects of control) and then put to State-level referenda, or at least be discussed in the next election. The alternative to intrusive regulation and progressive central planning is voluntary market rationing. It will often require institutional innovation to define property titles which permit trading.
Foreword to the second edition
Since In Defence of Secure Property Rights was published in August 2003, Australian governments at federal, State and local levels have given little assurance about the security of private property rights and much to intimidate property owners. In particular, environmental restrictions on agricultural land and proliferating urban planning regulations are proliferating. As a consequence, citizens are becoming fearful that they are losing more and more of the time-honoured rights which derive from the institution of private property. Only a decade and a half after the exposure of the utter failure of socialism in the Soviet sphere and when third-world countries turn increasingly to market capitalism, neosocialism appears to be making great strides ahead in the social democracies, including in Australia.
These trends have led to a considerable demand for this publication, as well as for me as a public speaker. I have been invited to speak at numerous public forums between North Queensland and Western Australia and been confronted, time and again, with cases where the value of private land holdings, machinery and houses has been drastically reduced by threatened and real takings of individual property rights. Many feel that governments, when they try to please single-issue lobby groups through regulatory takings without compensation, are acting unjustly.
What has particularly annoyed many fellow Australians is the reversal of the burden of proof from what was the norm in an earlier era. Rightful property owners used to be free to use their assets as they saw fit, unless others objected, claiming harm. Proliferating legislation and regulations have now shifted the onus of proof onto owners. They receive official letters informing them that traditional rights are to be taken away unless they can prove to the authorities that this should not be done in their case. Thus, urban properties may be heritage-listed, unless the owners can prove that their property does not merit this, and rural land owners are informed that they will no longer be able to farm certain tracts of land, unless they submit justified objections to the authorities. Property owners are thus deemed guilty until proven innocent.
Such reversals of proof have profound repercussions on the fundamental value of personal freedom. They take time-honoured human rights away and put free citizens on the defensive. The self-anointed elites, who are now propelling the neosocialist trend, are busily paving a new road to serfdom.
As I have heard numerous public assertions from members of Australia’s environmental, political and administrative elites that regulations do not take away private property rights or that governments have a right to take property, I have revised the original publication. I do not wish to withdraw anything of the original argument, but I want to add some arguments to make it clear that Australian property protection requires a thorough make-over––a kind of judicial ‘Backyard Blitz’ to restore those human and property rights which once made this country such a great economic success.
In Part A of this essay, we shall look to history to learn about the massive material and non-material benefits conferred by secure property rights and the freedom to use them. Part B will deal with the traditional legal protections of private property, and Part C will discuss the neosocialist onslaught––taking one property right after the other for noble causes––and how to oppose it.
A. Secure Property Create Prosperity
In the 50 years from 1820 to 1870, the Australian colonies experienced a population explosion and a 37-fold increase in real production. By 1870, the average Australian had become 50% more productive and richer than the average American. In the following 43 years until world war I, production was lifted another 4.3 times. By Federation, this vast, and often hostile continent was developed by relatively few people into a most affluent, decent, just, peaceful and civilised country with a much-admired legal system and a pace-setting democracy.
How were so few people able to achieve this?
The achievement was no ‘economic miracle’, something that no one could explain. Nor was it the result of rich natural resources. The original inhabitants had, after all, sat on these resources for 50 000 years, but barely survived. Rather, the answer to the question lies with development-supporting institutions: the rule of law, secure private property rights and the freedom to use them. Because British law provided simple and certain rules (institutions), people could have the confidence that effort and risk-taking would, by and large, be rewarded and that the rewards could be kept.
Rightful property owners did not have to prove anything when they wanted to use their property, as long as they did not harm others. Private property was widely respected, so that conflicts and litigation costs were low.
Property rights defined
Property ownership has never been merely the possession of a valuable asset. It has been defined in legal and economic textbooks as ‘that sole … dominion which one man claims over the external things of the world… [It] consists in the free use, enjoyment and disposal … without any control … save only the laws of the land’.[i] Ownership of an asset¾whether land, machinery, valuable knowledge, or one’s body, time and talents¾gives the owner an open-ended bundle of rights. In decent societies, these tend to be respected by others, at least most of the time.
Property rights––like all human rights––are autonomous. This means that the rightful owner does not have to prove anything in order to use, benefit from or dispose of such property rights. No permits are needed to live one’s life. This has always been an essential ingredient in personal freedom.
One can draw diverse benefits from it. Unabridged land ownership, for example, entitles owners to till the land, to mine the minerals, to exercise the rights of way, to hunt, to collect timber, berries, and rain water, and so on.[ii]
Everyone understood that property ownership conveyed rights,
(a) to exclude others from access to, and use of, the property,
(b) to use the manifold property rights in ways owners saw fit; they were able to discover new uses and new rights that looked promising, for example to harvest the rain and irrigate the land to try out new crops; the potential of discovery induced property owners to learn new skills and risk untried ideas. Millions of these discoveries added up to economic growth;
(d) to dispose of some or all of their property rights, for example by renting out the right of way to a neighbour, or the right to fish in the stream to fishermen; and
(e) to benefit from these uses, typically by exchanging some of their property rights with other people (in free markets), e.g. by hiring other people’s machines to expedite the harvest, by paying experts to share their knowledge, or by ceding the right to plant crops on the land, which they owned, to others in exchange for a voluntarily agreed price.
It was widely understood that this normally implied effort and risk. Learning additional skills and acquiring new technology made property uses more rewarding. The rules inspired a spirit of enterprise and optimism. When occasional heart-breaking losses were incurred, people tried again. Often, they learned new skills and risked innovations, trying to discover new uses for their property. On balance, the winners far exceeded the losers, and the millions of discoveries added up to breath-taking economic growth.
Most of the time, people made use of these rights by voluntary contracts with others. These contracts put a specific right at the disposal of others for a payment. Thus, the right to farm a plot of land were ‘rented out’, the right to transit was granted to a neighbour, or the right to extract sand from a pit could be ‘hired out’ to a builder.[iii] Owners did not have to ask for a permit to dispose the entire property or individual rights, for example by sale, gift or inheritance. New rights were being uncovered when owners competed¾for example, for the right to let paying users harvest the timber or the water on the land. Secure property title thus encouraged resourceful owners to realise new ideas in the hope that others would find these innovations useful enough to make them profitable.
Material progress throughout history has thus relied on the confidence that secure property rights bestow on owners.
One important benefit of property rights was (and is) that they can serve as a surety for a loan. The value of these individual property rights¾whether already discovered and exploited or still unused¾gives savers with spare capital and the banks the confidence that the mortgage is secure. Secure property title therefore enables owners to leverage their assets by raising capital for new purposes.
A welcome by-product of secure property rights was an optimistic can-do spirit, which most 19th century visitors to Australia remarked upon at the time. It still lingers in some parts. The only exception to full property rights is taxation. It derives from the need to pay government agencies who protect life, limb and property (agency costs) and, if necessary, enforce such protection. In our tradition, the government’s right to tax private property has long been based on parliamentary assent and on rules, which ensure that taxes are raised evenly on all citizens who meet certain parliament-approved criteria.
Lessons of History: Private Property Promotes Prosperity, Harmony and Security
The experience in the Australian colonies in the 19th century are far from unique. Before and since, historic experience has taught the material and non-material benefits of secure private property rights. When property is secure and enhanced by reforms, most of the population prospers, and overall freedom is improved:[iv]
- Agriculture and animal husbandry began some 10,000 years ago, only where people respected exclusive ownership of herds, plots of land and the crops that grew on them. In various parts of the world, there were bursts of wealth creation and civilisation, which historians call ‘Neolithic revolutions’. Before that, roaming bands of Palaeolithic hunter-gatherers only exploited nature. As long as our forebears were unfamiliar with the notion of secure property in land and other assets, they were only able to feed small numbers and to achieve only extremely slow cultural and economic progress. Their lives were brutish and short¾whatever the neo-romantics in universities and the media would have us believe.
- From the late Middle Ages, warring European princes began to protect the economic (and religious) freedom of merchants and others. They did not act out of noble sentiments, but to attract investors and industries which would generate revenues to finance their rivalries. As a consequence, modern growth began. The European¾and later North American and Australian¾economies were carried forward by confident and competing entrepreneurs in agriculture and industry.[v] By contrast, technically more advanced Asian states¾China, India, Persia, Egypt and Ottoman Turkey¾were ruled by self-serving power elites who confiscated property arbitrarily. Their economies and civilisations stagnated. Only in the second half of the 20th century did most states begin, more or less, to secure and protect private property rights from thieves and thugs. The rest is history. The growth process has now swept up most countries on earth¾except Africa, where life and property are notoriously insecure, and much of the former Soviet Union, where private property was long considered to be theft and property is still poorly protected from private and political mafias.
- In post-war West Germany, per-capita incomes rose quickly once people enjoyed secure property rights and most markets were set free. The war-ravaged country was rebuilt within a decade and people regained confidence, freedom and hope. Ignorant journalists called this a ‘miracle’. By the time the Berlin wall came down, 50 years later, East Germans, who had started from the same low base in 1948, generated average per-capita incomes of a miserable 40% of what their western compatriots produced, because most forms of private property had been outlawed in the East.
- In China’s Sichuan province (of some 100 million inhabitants), food riots in the late 1970s forced the Communist Party to break up the commune system of collective ownership. The centralised management of agriculture, which had been much admired by Western intellectuals, was abandoned. Within two years of farm privatisation, agricultural productivity rose by 50%.[vi] The quality and variety of food supplies improved ‘miraculously’. The privatisation experiment was later extended to all of China, giving some 600 million peasants at least a semblance of private property rights and the incentive to develop their own resources. Since then, China’s agricultural output has risen more than four-fold.
- After the communist victory in Vietnam in 1975, bad weather was regularly blamed for crop failures. Yet, re-privatisation in the late 1990s improved the weather in mysterious ways, and Vietnam again became a major rice exporter.
- Rains in the mid-1990s triggered North Korea’s famine. It has not yet been overcome despite copious foreign food aid. Yet, the same rains caused only a minor setback in food production in South Korea, because private farmers quickly repaired the flood damage to their fields.
One could continue the list. The conclusion is always the same: Where property titles are effectively protected from public and private kleptocrats and people are free to use property through market contracts with others, this produces prosperity, optimism and freedom.
This fundamental point is also documented by systematic long-term historic and cross-country comparisons. 85% of the huge differences between the richest and the poorest countries on earth can be attributed directly to differences in political and economic freedom.[vii] No economically and politically free country is poor; none of the unfree countries is affluent.
Non-material benefits
Although the focus here is on the material consequences of well-protected property rights, it should be added that secure private property is inextricably linked to justice, social peace and freedom in general. Property owners, who interact voluntarily to make the best of what they own, acquire habits of cooperation and compromise. It is widely recognised that this breeds a ‘commercial ethic’ and social harmony.[viii] People who work together in markets to combine their assets quickly discover that discrimination on grounds of race, religion or social origin is costly. Wherever the rules are clear, they discover what has been distilled in the saying that ‘good fences make good neighbours’. By contrast, coercion, sly redistribution, discrimination and division are all too often the hallmarks of the political game. This makes for social conflict. Much private and little public choice therefore fosters social harmony.
Secure property rights and the freedom to use them are also an essential precondition for freedom in general. Paupers cannot defend themselves against aggressive neighbours or a rapacious state. The defence of private property in the courts costs much money. This is why classical philosophers of freedom have always stressed that ‘citizens of property’ are essential for a free society.[ix] And freedom, in turn, is of fundamental value to any society, because¾as the philosopher Immanuel Kant observed¾‘freedom is the quality that brings out the best in all of us’.
By most international and historic comparisons, Australian property rights are still reasonably well protected. However, over recent years, Australia’s freedom standards have been slipping, as regulators and judges busily multiply the encumbrances imposed on property titles.[x] Many keep claiming ‘market failure’ and clamour for putting government interests above the interests of private citizens in complete ignorance of the hurt this will cause to our prosperity and freedom. We no longer live in one of the few Western countries that have sole access to modern technology, but we compete globally. Emerging economies are improving the quality of governance and property protection. Reactions to differences in economic freedom now occur faster and on a larger scale, so that self-inflicted competitive handicaps¾for example, rampant environmental controls without compensation¾are punished quickly and resoundingly by world markets. A recent study by the Department of Foreign Affairs and Trade showed the great benefits of globalisation, but also stressed the need for strong and secure institutions, which allow people to succeed in global markets.[xi] Other parts of government are not heeding that message.
One has to fear that this lucky country will not escape the fundamental wisdom that is expressed in the following Arab proverb:
‘Give a man a rock in secure possession, and he will create a garden.
Give him a garden on an insecure lease, and he will leave behind a desert.’
The turning of the anti-capitalist tide
Matters have changed greatly since then. Property rights are now being taken away by the visible, regulatory hand of the government. What the government grabs is unpredictable most of the time, because it responds to political vagaries and diverse, single-issue pressure groups. The principles that made this country great, rich and optimistic are now gradually being subverted by more and more encumbrances and controls, and a culture of complaint, dependency and social pessimism is spreading. Regulations have proliferated since Federation, and the size of government has grown since the 19th century from 6-10% of the national product to some 40%. With this, the compliance costs––in other words, the paperwork for government––have grown immeasurably, and regulations are often so complicated that no one can obey them all. Law-abiding citizens resent a state that forces them to be less than honest at times. During the 1980s and early 1990s, economic reforms reversed the downward slide in economic freedom in Australia, with the predictable result of a more robust economy and greater social optimism. More recently, the reforms have stalled and we are losing ground, while many competing jurisdictions move ahead, often still from lesser bases of economic freedom than Australia[xii].
History suggests that there are real dangers to economic growth, individual freedom and social harmony if the regulatory proliferation is not stopped. This insight has gained ground again in the past two decades.
For most of the 20th century, the pendulum had indeed been swinging away from the pure capitalism of the 19th century. During the Roosevelt year in particular, politicians stacked the courts with judges prone to diminishing property rights protection. This trend in the United States was imitated from the 1930s to the 1970s throughout the common law system. However, in recent decades, from the Reagan-Thatcher revolution onwards, the pendulum has started to swing back and is having an impact on the ground, often with considerable delay[xiii]. In Australia, too, the collectivist high-water mark of the Mason High Court seems to have passed.
B. The Protection of Private Property
The Legacy of Magna Carta
Full and secure property title, as defined above, has not always been the norm. Indeed, it is still not the norm in many places. In most third-world countries, property titles are poorly protected, so that people often cannot use their own property (land, shanty-town shacks, or street stalls) as collateral for loans that would empower them to climb up the income ladder.[xiv] Many in the third world are locked into poverty traps by rampant private and public thievery and widespread government failure to secure titles.
The Western tradition of property rights began with the Greeks and Romans, who created secure and transparent property titles. They enforced property law, at least until some Roman Emperors began arbitrary expropriations.[xv] Then Roman civilisation declined. During the Feudal era, successful military thugs, who styled themselves as lords and princes, granted land titles to loyal followers, but often on limiting conditions and with insecure tenure. Those who fell out of favour with the overlord lost their property again. Little wonder that land was not developed and the economy stagnated during what came to be called the ‘Dark Ages’. In China, high, favoured officials were given provinces with the mandate to treat them as ‘fish and fowl’, in other words take what they could. The peasants and workers therefore had little incentive to improve their property and much incentive to conceal what they owned. Similar conditions prevailed in the Middle East and India. Insecure property title was the twin of economic stagnation.
A revolutionary change occurred in Medieval Europe.[xvi] Opportunistic rulers of small, warring kingdoms discovered that they could collect more revenue, and hence enhance their capacity to wage war by offering secure property rights, free markets and religious freedom to attract merchants and manufacturers. In England, the story began with Magna Carta in 1215, when a weak King was forced to acknowledge that the individual is ‘protected in the free enjoyment of his life, his liberty, and his property’ (as the eminent jurist William Blackstone put it). Rulers could no longer confiscate property at random, as they had during the Dark Ages. The rule that owners ‘shall not be dispossessed from freehold ground’ therefore has long standing.[xvii] Centuries of legal development strengthened and refined the protection of property, leading eventually to a free citizenry, limited government, the rule of law and democracy.[xviii] ‘England’s unique lead in industrialization was [based on] English law’.[xix] Australians inherited the essential protections developed because Magna Carta and flow-on laws form an integral part of the Australian constitution, the overarching ground rules on which our institutional system, our prosperity, indeed our entire civilisation, rest.
Procedural Justice: Proof of Harm, Rules of Evidence, and Standards of Scientific Inquiry
Economic liberty¾the term is often used as a synonym for a fully-fledged property rights regime¾is of course not licensed: All uses of property are limited by the harm they inflict on others. Where this is the case, owners are obliged to desist from exercising their property rights, or have to pay afflicted parties compensation. This problem is much analysed by economists and lawyers. Civilised societies have found numerous, non-violent solutions to handle such conflicts. Most of the time, compensation offers the best solution, but sometimes it is not possible because we do not have enough knowledge to tie cause and effect together, or because the costs of transacting bilateral compensation are excessive.[xx] Where external costs cannot be compensated, but are major, we may have to resort to direct government intervention.
In a civilised society with secure private property rights, such interference with individual economic freedom is circumscribed by strict legal rules (Graph 1). They incorporate the wisdom of centuries of conflict resolution and judicial endeavour. The first rule is that property owners do not have to prove anything until proven guilty of having harmed others. This means that the burden of proof rests on harmed parties, and in practice often on the regulator who wants to limit private property. They have to convince a court satisfactorily, that a specific property owner is responsible for an observed harmful consequence. Mere suspicion or unproven allegations of harm do not suffice. In practice, this often means that some harm has to be tolerated before regulators can intervene. It is the price of economic freedom that has to be paid in a free society with secure private property rights.
Western law has developed numerous other time-tested conventions which are part of the rule of law.[xxi] For example, the accused are held to be innocent till proven guilty, prosecutors have to disclose facts that are in favour of the accused, and witnesses must be open to cross examination. Courts are often faced with complex issues of evidence and may have to rely on expert witnesses, but these witnesses are expected to adhere to standards of honesty and scientific proof that earn them recognition in their own peer group.
Procedural justice, and the rule of law in general, are valuable cultural possessions of a society; they protect all individual human rights, not only the right to own and enjoy property. As we shall see, these time-tested principles need be upheld for the sake of social peace, justice and prosperity.
Insights from Public-Choice Economics: Three Tests for Policy
There is of course more to the traditional legal protection of property rights than just outlined. Spreading interventions with the traditional property rights regime have led many contemporary observers to conclude that a more thorough reform of private property is overdue. Inspired by the, at best mixed, experiences of democracies over the last 50 years, public-choice economists have developed a number of criteria for deciding when collective action (or public choice) can, and should, replace competing, decentralised private choices.[xxii] The public-choice approach suggests caution, even scepticism, about government interference with private property and free markets. The empirical evidence shows how often government action detracts from prosperity, security and social harmony because it has unintended, harmful side effects.
Public-choice economics, which has been crucial in inspiring the successful microeconomic reforms of recent decades in many parts of the world, suggests at least three policy tests before a government can be advised to take private property rights away by interfering in markets (Graph 1):
INSERT GRAPH 1
Will ‘administrative failure’ merely replace ‘market failure’?
Unfortunately, fallible humans with limited resources can not solve all problems that humans face. One must not fall for the ‘control illusion’, namely that every problem is solvable. Markets¾the voluntary interaction of competing property owners¾do sometimes fail. However, experience has shown that governments often fail, too. Those who demand intervention must demonstrate with reasonable plausibility that intervention will not produce overwhelming negative side effects, but improve on the outcomes of the interplay of markets.
It has to be added that the career prospects of eager administrators, electoral gain for politicians and revenge on supposedly undeserving property owners are decidedly no justification for government intervention, however often these are the true motives for regulations.
Will the carefully assessed benefits to the community exceed the costs to individual property owners and to the administration?
When policy is conducted rationally and democratically, it seems uncontroversial to demand that everyone’s costs and benefits are taken into account, valued and compared in transparent, just ways. In a humane society, no policy should be adopted that causes more harm than good to the people in present and future generations. In a democracy, transparent analyses of the costs and benefits of interventions inform the voters, who will often make their own judgements about basic valuations at the next election. In this way, cost-benefit analyses serve the function of making policies more transparent¾a kind of polygraph test for those who advocate and make complicated policy choices.
In this context, one must never lose sight of the fact that the citizens are the principals and the elected politicians and the bureaucrats only the agents. We, the citizens, and our diverse aspirations, must remain the measure of what is counted as a cost and a benefit.
Policy activists, who pursue single issues, resent that everybody’s interests are taken into account. When a former Danish Greenpeace activist and social scientist, Bjørn Lomborg pointed to the costs of the Kyoto Protocol,[xxiii] he was crucified by the politically correct and many committed natural scientists. However, should one, without prior rational debate, deprive the poor in third-world countries of life opportunities and inflict costs on affluent nations that are the equivalent of tens of thousands of heart-lung machines? If society is to remain just and harmonious, the costs to, and rights of, regulation-aggrieved individuals cannot be disregarded.
When a systematic cost-benefit analysis is undertaken before intervention, one must also count the transaction costs of administering the policy. Proponents of interventions need to explain by what means and methods the property rights of individual citizens are to be modified or taken away. To frame, to supervise and enforce the regulations causes considerable costs to the taxpayer. Admittedly, these are incomes to regulators, but they must be counted as costs to taxpayers and citizens.
Will private owners be fully compensated for their losses?
Justice demands that property owners who lose rights while others benefit, are compensated at full market value. When an intervention produces a benefit for the community, but a cost to those who are being regulated and lose property rights, it seems only fair that the community compensates the losses of the few who are asked to give up property rights. This is why the Commonwealth Constitution stipulates compensation ‘on just terms’. Compensation is not required when the exercise of property rights harms the long-standing rights of others. However, where new community demands are to be satisfied and existing, protected rights are diminished, compensation has to be paid. The eminent American jurist Richard Epstein has made this point poignantly.[xxiv]
He has also made the point that the principle of ‘no expropriation without compensation’ is the only effective antidote against excessive regulation and an essential guarantee of security for citizens. If parliaments and administrations have to compensate individuals for all the regulatory takings which they inflict, the current, excessive regulatory activity will be contained. They will have to formulate priorities with a view to their limited budgets[xxv]. Officials will then have to be more careful in yielding to noisy, egotistic single-issue groups by relying on regulation that deprive some minority of their rights.
The Obligations of Ownership
Despite its obvious advantages, the system of sacrosanct private property is not popular. This is so mainly for two reasons: [a] controlling other people’s private property boosts controllers incomes, careers and power, and [b] private property imposes uncomfortable responsibilities on the owners. Ownership is a mixed blessing in the face of unceasing change and the competition of others, which forces owners to defend the value of their assets by continually engaging in costly and risky competition.
People with property are expected to use their wealth, talents and resources to position themselves in the market, so as to attract good deals from those on the other side of the market.[xxvi] Suppliers compete with other suppliers; buyers with other buyers. Thus, suppliers are forced, time and again, to incur costs for improving their product, advertising and after-sale services. These so-called transaction costs may be high, and the returns still disappointing. People with political connections therefore often seek protection. Politicians, who are always in search of support and funds for their next campaign, are tempted to oblige. Once property owners obtain political patronage for shirking the discomfort of unrestricted competition (economists call this ‘rent seeking’), they spend less time and effort on searching for new products and production methods. This means less economic growth.
When rent seeking multiplies, the property-rights system decays. Entrepreneurs are then increasingly beholden to politicians and everyone is subjected to proliferating regulations and taxes. The citizens may still hold formal property titles, but they are losing more and more of their freedom to use their own assets as they see fit. They increasingly just implement government management plans and fill in the paperwork.[xxvii] In the process, they become dependent, whingeing zombies.
Once asset-owning citizens are reduced to lobbying and cease to compete genuinely, the community at large becomes sceptical of the institution of private property, because there is a moral trade-off: Owners enjoy secure, respected and complete property titles, but in exchange, have to expose their wealth and knowledge¾time and again¾to the risks of competition. This benefits the wealth of the nation. If this ‘capitalist compact’ is broken, the young and poor will listen to the siren calls of socialists and demand controls and expropriation, irrespective of the cautioning lessons of history.
C. Against The Neo-Socialist Onslaught
Socialism has Failed¾Let’s Reinvent it!
The doctrine of the primacy of individual autonomy and private property, as just outlined, is nowadays contentious. Many claim that collective purposes and public choices must have priority[xxviii] and even that private property rights are always conditional on the ruler’s toleration. Accordingly, the authorities should intervene whenever the property-rights system produces outcomes that can be labelled ‘market failures’. High courts in many countries, including Australia, have recognised more and more encumbrances on private property, putting the interest of government above that of individual citizens and oblivious of the harm their rulings inflict on freedom and prosperity. The ‘conditionality school’ nowadays demands increasing limits to private autonomy, so that private property and free markets become uncertain, and there is less trust.
Most societies in East and West have learnt that outright seizures of private property are extremely costly. Old-style socialism¾as practised by Lenin, Mao and Castro, and advocated for essential industries in living memory by the Australian Labor Party¾is dead. Hardly anyone nowadays shouts: “Property is theft!”… at least not outside sociology departments and journalism schools.
Yet, everywhere activist groups are busy re-inventing socialism. Throughout Western capitalist societies, private property is habitually confiscated piecemeal. Parliaments and bureaucrats busy themselves decreeing regulations which extinguish long-existing private property rights. They do so ostensibly for good causes¾to improve safety, public health, environmental conservation, social equity (however defined), the national culture, and much more. Economists and lawyers call this ‘regulatory expropriation’, for there is normally no compensation for the losses that the regulations inflict. Throughout the Western world, the fatal old mistakes of socialism are now being repeated in a new guise. In the interest of clarity, I prefer to call this new political movement ‘neo-socialism’¾expropriation by a thousand regulatory cuts and without proper compensation.
At this point, it has to be recalled that private property is not the mere possession of a physical asset, but an open-ended bundle of diverse rights. Most regulations diminish and destroy some of these rights, so that property is worth less.[xxix] For example, fruit growers may discover that new health regulations make newly bought packing machinery unusable. Owners of fishing rights may be surprised by new regulations which destroy the value of their gear and their families’ livelihood. Land management plans pop out of government inquiries that propose to take long-standing economic liberties away. When New South Wales farmers all of a sudden have to pay metered rates for the rain water, which they collect on their own land in their own dams, their properties are devalued.[xxx] Yet, governments are reluctant to even speak of compensation for regulatory losses.
The language is often a revealing give-away. Thus, farmers who collect rainwater on their properties and at their own expense are publicly reviled as ‘water barons’. This alludes to the old-socialist campaign against ‘robber barons’, industrialists who work, invest and innovate to produce goods and services which others want to buy. Spokesmen for the Conservation Foundation assert that the growing regulation of land uses is unavoidable, for such is the ‘march of history’. Environmentalists invoke ‘iron laws of history’. Last time these terms were widely used was by Lenin and Hitler to bolster their respective socialist causes. Of course, the failure of Lenin’s and Hitler’s grand designs should have taught us that, in history, nothing is predetermined which individuals who fight back cannot overturn.
Present-day neo-socialists, like their intellectual forefathers, just do not understand: They still think that wealth creation is based on the mere exploitation of the land or the workers. The public have little understanding of the toil, investment, innovation, learning and risk-taking by enterprising people. Hence, activists and media writers get away with ignorant nonsense about ‘unearned income’ and exploitative ‘barons’, and neo-socialist expropriation is widely tolerated¾at least until it comes to a backyard near you.
On the other hand, it is understandable that governments resort increasingly to regulatory takings of private property rights. They have run into barriers of taxpayer resistance and therefore lack the funds to underwrite all those promises to particular lobby groups.[xxxi] Parliamentarians of all political hues therefore rely more and more on regulation to achieve ambitious ends, never mind that these may be unjust to some citizens. Regulations are invariably at the expense of some citizens’ private property rights and someone’s freedom. Moreover, regulations have negative side effects, which politicians blithely brush aside because they only impact further down the track. The consequences are a problem for a later administration. Activist politicians, who typically look no further than the next election, prefer interventionism because it is cheap.
When old-fashioned judges or economists raise questions, whether interventions will work or whether compensation is paid, they are greeted with incomprehension, if not popular wrath. Moreover, when one debates the issues with politicians, bureaucrats, scientists or media gurus, one does not have to dig deep before one encounters lingering beliefs that ‘property is theft’, indeed that ‘rich’ property owners deserve to be disadvantaged. By contrast, one encounters little appreciation of how secure wealth empowers creative people and how competitive risk-taking by confident property owners creates wealth. Widespread economic illiteracy thus gives rise to intellectual and popular tolerance of neo-socialism.
Proof of Harm, not Mere Suspicion or Precaution
As was said above, it is legitimate for politicians to intervene in order to protect the community’s shared interests from harm which private uses of property may cause. Governments may, for example, consider preserving biodiversity by taking away the long-standing property right of farmers to clear vegetation on their property. The problem is that most politicians now want to do this on the cheap, discarding the time-tested rules of the property-rights system, which is one of the most valuable elements of the social capital that underpins our affluence.
The rule of law demands that harm done to others by a particular use of property is proven to the satisfaction of the court. This is often not easy. Green activists, committed opponents of the institution of private property, and politicians therefore advocate a ‘precautionary principle’, asserting that expected harm constitutes sufficient grounds for interference with private autonomy. Subjective fears and alleged future damage can of course never be proven. The ‘precautionary principle’ becomes an omnibus excuse to take property rights away, and the capitalist civilisation would be undermined at its very core.
This is not to reject precaution as a sensible guide to human action. However, the ‘precautionary principle’ is being claimed only for conserving nature, while at the same time inviting the most incautious and short-sighted attacks on prosperity, justice, social peace and freedom.
Precautionary confiscation is normally justified with the argument that damage to the environment is irreversible. But this is hardly ever true, and often the damage occurs only to a tiny portion of a natural asset. It is, for example, grossly misleading to equate damage to some small parts of the Barrier Reef with its entire, irreversible destruction. Nature has great powers of self-repair. In Hiroshima, they have to use weedkillers to conserve the nuclear impact site; and on Fraser Island none of the conservation experts could identify the sites mined for beachsands in the 1970s. Besides, affluent societies can do much to restore and conserve nature.
One has, therefore, to remain critical of widely accepted official attitudes. Although the Productivity Commission rejected the ‘precautionary principle’, one of its recent studies advocated certain controls and government actions ‘notwithstanding remaining scientific uncertainty about the condition of reefs and the time scale for effective remedial action’.[xxxii] Admittedly, the Commission is a body expert in economic analysis and ill equipped to understand and analyse contradictory and complex problems of natural science. Nevertheless, the above statement comes very close to subscribing to the precautionary principle of the Greens. Moreover, one cannot help but note that the study pays insufficient regard to secure private property. Is it asking too much of a Commission, which is entrusted primarily with the pursuit of productivity, that it accords a higher and more explicit status to private property rights which are essential to productivity growth? Instead of justifying what governments decree, one should expect the Commission to be a public advocate of the merits of private property rights and their effects on economic growth.
Confusing and ill-informed public utterances by political leaders and revolutionary court rulings (for example, on native title) are now causing widespread uncertainty and fears of further illegitimate abridgements of private property rights. Political leaders could do much good if only they indicated occasionally that they understand private property and its contribution to a decent society.
The Burden of Proof Rests with the Regulator
Recently, a high-ranking official, with whom I had raised the question of property rights restrictions on Queensland farmers, miners and industrialists, lectured me that ‘failure to determine positive proof of guilt [that environmental damage is caused by producers] is not identical to positive proof of innocence’. As if free citizens had to prove their innocence, when they enjoy lawfully what is theirs! I took the opportunity of lecturing him that producers, who exercise their rights within the law, do not have to prove anything, until proven guilty to the satisfaction of the court, of having caused damage to others.
It is the essence of secure human rights, including property titles, that individuals do not have to justify their free enjoyment. The burden of proof that the enjoyment of a property right should be curbed always rests on those who allege harm. This includes regulators who wish to interfere. This is not a trifling technicality; our free, individualistic Western civilisation depends on such legal institutions. How sad when high government officials know so little about the rule of law!
The media should, incidentally, also be expected to presume property owners innocent until proven guilty. The ‘politically correct’ and the advocacy journalists these days frequently violate this principle, instigating modern versions of McCarthyism and public show trials. People who caution against hasty expropriation and point to human rights are all too readily reviled as scheming to wreck the environment. Any landowner in his right mind values the natural assets he possesses, for this is part of their future livelihood. Those who despoil their land, suffer in the long term; they have to make amends or leave the land. There is no doubt scope for improvement in land management practices in Australia, but no useful purpose is served by Greens and media accusing farmers of ignoring the benefits of a healthy environment.
Reversing the burden of proof
Much of the proliferating legislation and many of the regulations churned out by parliaments and administrations have altered this. The enjoyment of private property rights is being made increasingly dependent on government permits, which are granted by authorities on application. Citizens thus have to seek permission to do what in the past they could do freely. To do that they have to prove to authorities that they deserve permission to use their property (and pay a fee), which inflicts compliance costs on them, exposes them to penalties, some of which even of a criminal nature, and delays their actions. In a fast-moving market economy, the delays may well be the difference between profit and loss. Many property owners may well be prepared to take the risks of changes in the market, but they are often loath to making political and bureaucratic predictions, because the rules are not transparent and regulators appear to be acting arbitrarily.
Big property owners, with political connections and legal departments, tend to be much less affected by the shift in the burden of proof, but the small entrepreneur is easily discouraged. This has not only serious consequences for economic growth, because it is the many small improvements that make for broad-based, sustained economic growth, but also tends to redistribute economic opportunity from small poor to big rich operators.
Standards of Scientific Proof Must Not be Discarded
When harm is to be proven in court or public inquiries, complex scientific issues are at stake. Judges and commissioners have to depend on expert witnesses. While I am not a natural scientist, I am concerned how often insiders tell of expert witnesses being partisan and scientific proof of environmental damage being based on dubious, contentious methodology. For example, the NSW Farmers’ Association recently showed how superficial the documentation under the NSW Threatened Species Act has been in recent years.[xxxiii] In most cases (ca. 70%), only purely taxonomic references were given in property-rights restricting listings under the Act. In about 10 more percent of cases, just one or two references were cited. Gross violations of accepted scientific methods were noted, for example, that mere hearsay and anecdotal evidence formed the basis for conclusions, that correlations confused cause and effect, and that matters were openly biased towards vested interests. The same has been found to apply in the United States, as a study by the (US) Council of State Governments revealed (1999). Another example is the apparently less than truthful handling of long-term data on salinity and other quality criteria of water in the River Murray by the scientific establishment and the lobbies, which want to cut back on the taking of water from the river for productive purposes. A recent study of trends since the late 1930s by Dr. Jennifer Marohasy of the Institute of Public Affairs established that salinity at the intake of the pipeline to Adelaide has not gone up and that many of the other assertions made by the science establishment are an ‘environmental myth’, alas a myth that is going to cost taxpayers and agricutural producers heavily[xxxiv]. Is it asking too much for costly policies to be based on verifiable facts?
Often we are shown horror images of salt pans, turbid water or expanses of dead coral. This is meant to shock. However, one has to ask sceptically whether these salt pans have not existed all along, whether turbidity is not essential nourishment to mangroves and how extensive and irreparable the areas of dead coral are.
Citizens must insist for the sake of a sustainable future of prosperity that the courts and regulators adhere to accepted standards and not take liberties with scientific proof.
Issues of Philosophy
Environmentalism is often underpinned by deeper philosophical questions which must be addressed in critical public debate.
One school of thought about nature conservation considers conservation one of the fundamental goals of sound policy, because it secures a good future for coming generations. From this point of view, nature conservation is part of the human goal of long-term security.[xxxv] Other schools of thought assert or imply that nature has rights independent of human aspirations. ‘Apes have human rights, too’, asserted a recent journal headline. This poses unsolvable logical and philosophical problems.
One can analyse the costs and benefits of actions from the human standpoint and rationally argue about them, but one cannot know the valuations of certain outcomes by animals, since humans cannot communicate with them about these matters.[xxxvi] Any cost-benefit calculus becomes impossible when assessments are made from different and incompatible bases. What is the right policy if it is in the polar bears’ interest to consume seals? How can we logically trade off the interests of bears, seals and humans, other than using our own human reference standards?
That we are in danger of losing the human focus was again made clear by the Commonwealth-funded Terrestrial Biodiversity Assessment, selectively leaked in April 2003. The report paints a ‘bleak picture of the country since European settlement’ and ‘warns of continued levels of extinctions’. The ecosystem of the Murrumbateman area of NSW and the Cumberland Plain of NSW are singled out as having suffered the worst biodiversity losses. Are these areas¾namely Canberra and Western Sydney where citizens work and pay taxes to fund such investigations¾to be seen as no more than ‘losses’ to biodiversity? Is the norm a sparsely populated continent? Do improvements for humans no longer count as benefits, but merely as damage to Mother Earth? ‘Deep Green’ segments of the bureaucracy appear to have moved so far from shared community values that they would deny the citizens’ right to arrange nature to human benefit and dismiss human aspirations to further augment such benefits, if pristine nature is affected. One then comes readily to the conclusion that all agriculture harms biodiversity, and that humans are no more than despoilers of nature.
In the interests of a free, humane society, one has to begin with an analysis of both the costs and the benefits of development to human beings. Nature conservation enters the calculus only under the rubric of security of future generations. The alternatives are inhumane. Moreover, they are likely to lead to a backlash against nature conservation, because societies whose wealth has been destroyed by gross violations of property rights are in the end not able and willing to conserve nature.
Scientific Truth and the Vision of the Anointed
Often those who agitate against secure property rights act out of deeply held, quasi-religious convictions, claiming the moral high ground. One cannot help but feel reminded of a bon mot of the German philosopher, Friedrich Nietzsche who said: ‘The enemy of the Truth is not the lie, but those committed to a higher cause.’ Even when committed people defend high ideals, such as Mother Nature, they must accept compromise with all other interests in our pluralist society. They must also accept that all of us have limited knowledge and can be wrong at times. Single issues may excite lobbyists and help their fund-raising, but a healthy, stable society requires responsible policy makers who keep numerous, conflicting values in mind.
Because of this, we are well advised to look for social arrangements which help to uncover the truth and new opportunities, as well as to correct past errors. This criterion is fulfilled by the system of competitive markets and clearly defined property rights. It is rarely met by government action where past errors can be frequently disguised with more public spending, and where central decision often means that errors are concentrated.
All this may sound unduly sceptical about the capacity and motivation of governments. However, my scepticism derives from a life-long involvement with public policy and a grounding in public-choice economics. Everyone acts out of self-interest. Political parties, single-issue lobbies, charities and scientific institutes are motivated by the pursuit of income and influence. Government agencies eager to expand give their ‘client lobbies’ funding, official recognition and other support in exchange for their calls for growing government action. This enables politicians and bureaucrats to claim that they are only responding to public pressure.[xxxvii] What one can observe in environmental policy fits the description and analysis of new-age politics by Stanford University economist Thomas Sowell in his book The Vision of the Anointed.[xxxviii] Self-appointed elites turn marginal issues into existential ‘Causes’, for which they have ‘The Solution’. Inspired by what happens on the other side of the world, the ‘Internationale of the Anointed’ may even push solutions in search of a problem. When it becomes apparent that ‘The Solution’ causes more harm than good, they celebrate the fact that they have influenced policy, but studiously ignore the damage done by violations of private property rights. Instead, they fabricate their next, career-promoting ‘Cause’. Being an Anointed minister, activist or organisation is nowadays quite profitable, since budget allocations are moved by ‘Causes’. In this way, government grows and individual freedom and self-responsibility are eroded.
If private property is to remain protected, proper legal procedure and the three public-choice inspired tests discussed in Part Bcannot be disregarded. It will simply not do to just say: ‘Damage proven or only expected: Regulate! Confiscate!’ (Graph 2). The leap to regulation and confiscation may look simple and expedient, but it jettisons the wisdom of generations of legal endeavour and worldwide historic experience. All that such a streamlined administrative approach will do is to expedite a return to the Dark Ages.
INSERT GRAPH 2
Nature Protection on the Cheap and the Sly
Most policies to protect the environment in Australia are based on a naïve trust in the capacity of government to know and influence matters. The technocratic approach is to rely on planning and directives, trusting against all past experience that unwilling ‘subjects’ comply and ignoring unintended consequences. Thus, the Wentworth Group of scientists has produced a plan to improve land and river management in the Murray-Darling Basin. It relies on all farmers drawing up detailed management plans for their property, which are based on government directives. The plans of all farmers require prior approval and are policed by regional bodies. This is social engineering on a grand and prescriptive scale. No one has yet come up with an estimate of the compliance costs to farmers, let alone the impact on the value of affected rural properties. It is unclear how much governments intend to pay to farmers to compensate them for the extra paperwork and loss of economic freedom, and how much will be swallowed by administration and coordination costs. Compensation to farmers for implementing the Wentworth proposals would certainly cost a multiple of what has been offered so far.[xxxix] Some estimate the cost to affected farmers to be in the order of $20 billion.
If farmers remain unconvinced and resentful, the Wentworth plan will no doubt be as effective as Soviet central plans were. Observers who are impressed by top-down planning schemes typically assume that writing targets down on paper, designing plans and creating bureaucratic structures makes things happen. The reality is different: As soon as responsibility is taken over by planners and farmers are subjected to directives and supervision, self-responsibility, alertness to emerging problems and readiness to remedy matters with one’s own resources tends to suffer.[xl] The consequences for farm productivity in China and North Korea were mentioned. Those technocrats and politicians who now wish to rely on planning mechanisms, supplemented by a little subsidy here or there, should be invited to look at socialist nature management around the Aral Sea or the outcomes of Czechoslovak or Polish environmental planning, before it is too late. What natural scientists rarely appreciate is that planning and coercion have the side effect of inducing people to cease doing things.[xli] Why should North Korean peasants have repaired the embankments in the floods when this was the responsibility of the Commissars? Why should farmers do conservation work in the district once this becomes the responsibility of the Wentworth Commissars?
Without engaging the voluntary, entrepreneurial energies of self-reliant people on the land, environmental protection and farm productivity will be damaged, rather than promoted by the Wentworth mechanism. Anyone even vaguely familiar with past technocratic planning schemes, which overtax the cooperation of affected parties, cannot but agree with the conclusion of one observer: ‘The report is full of good things from the environmental point of view’, he wrote, ‘but its lack of interest in the economic and property rights of farmers is breathtaking’.[xlii]
Natural scientists, who are trained to analyse controlled laboratory experiments with dead matter, rarely understand that communities cannot be so easily controlled and directed. In social evolution, human interaction is quite complex and developments are quite discontinuous, so that the naïve social-engineering approach (models, plans, targets, directives, and so on) fails.
Meanwhile, the Labor-led State governments throughout Australia have progressively tightened controls on clearing remnant native vegetation: Clearing native vegetation has been made gradually more difficult, if not impossible, even where regrowth is involved. Access to and use of privately owned lands of a particular quality – for example wetlands, however defined – is being restricted in many parts of Australia, typically without an offer of just compensation. Urban building regulations, controls over private development and zoning regulations restrict the traditonal rights of owners more and more. In numerous instances, the proliferation of administrative measures has led to misinformed intervention or is sloppily carried out. Equal cases are often not treated equally, and the impression of arbitrary injustice is widespread.
While earlier restrictions on land clearing in some States were imposed without any offer of compensation, some of the latest regulations come with offers of compensation . Thus, the Queensland government has set aside $75 million for that purpose. The latest scheme can now go ahead because the Federal government has offered another $75 million to Queensland for one-off compensation payments to farmers affected by those additional restrictions. This ‘carrot’ of $150 million is accompanied by the ‘stick’ of an immediate prohibition of many types of vegetation clearing to attain unspecified objectives of the Kyoto Protocol (an ill-informed attempt at world government, to which the Australian government has not subscribed, and that with good reason).[xliii] Disputes are to be resolved, not by Land and Environment Courts, but by the minister. This shifts much power to the government and amounts to a gross diminution of Australia’s traditional rule of law.
We now observe administrative confusion and discrimination. There was no provision to compensate for the bans on clearing of freehold land under the 2000 Act, whereas some compensation is now on offer for the additional bans of 2003. This has created a woeful confusion about property law: If the restriction of vegetation-clearing rights is recognised as a taking by government which attracts compensation, this, one would think, creates a precedent for State and/or Commonwealth compensation for all such takings. A further logical muddle arises from the Commonwealth now sharing in the new compensation with the reference to ‘Kyoto responsibilities’. Will the clause in the Australian Constitution to pay ‘compensation on just terms’ not apply to such takings under the recent land-clearing bans, in which the Federal government is now implicated?
The sums offered to date as compensation for the 2003 bans (some $150 million) look ludicrously inadequate, if one takes property rights and just compensation seriously. The regulations will take valuable rights away forever and restrict the future capacity of farmers to innovate. The ban on tree clearing will cost several orders of magnitude more than the figures now mentioned by politicians. It seems that the new controls are being passed surreptitiously and without discussion of the true costs. The political debate has to be about whether the Queensland public wants all existing native vegetation badly enough to consider substantial tax increases, sufficient to compensate all individual landholders for the alleged gain to the community.
An indication of the orders of magnitude that will be required in new taxation can be gleaned from fieldwork by Jack Sinden of the University of New England. He recently interviewed 51 farmers in the Moree Shire of NSW to estimate the decline in land value and farm productivity as a consequence of the NSW Native Vegetation Conservation Act. In this small sample, the potential loss in land values is $198 million (or 21 per cent). Some $20 million are expected to be lost additionally in regular annual incomes.[xliv] The cost of tree conservation in New South Wales will be borne very unevenly. Sinden estimates that farm families are compelled by the Vegetation Act to forgo 15.6 per cent of their potential earnings, whereas urban families will lose only 0.5 per cent of their earnings through additional taxes.[xlv]
To date, the public debate and the legislation in Queensland, New South Wales, Western Australia and elsewhere have proceeded by and large in ignorance of the economic facts and the costs. Relevant legislation should be discussed only after the costs and the benefits of such proposals are estimated (which is now to be done by the Productivity Commission within a year). Environmental protection on the cheap and the sly will only produce a backlash and conflict. These are momentous matters for the population at large. In a decent democracy, the issues should be put to State referenda, testing popular willingness to shoulder the additional tax burdens for protecting the vegetation or to divert some of the funds of the GST- and land-tax rich States to protecting remnant native vegetation.
Protecting the Environment: By Central Plan or Market Incentives?
The alternative to central planning¾backed by moral suasion, coercion and taxation¾is the introduction of clearly defined property rights for scarce assets. Then, a market price can emerge that rations demand and at the same time mobilises additional supply.[xlvi] In the past, when resources¾such as stands of native vegetation or clean water¾became scarce, institutional creativity and markets have helped to overcome emerging scarcities. For example, when parking space in the CBD became scarce, pay parking was made possible. This not only rationed non-essential street parking but also promoted the provision of additional parking spaces.
Australians have a long tradition of institutional creativity. For example, the Australian inventions of Torrens title and strata title have solved land-tenure problems most successfully. Likewise, it is possible to define water entitlements that then allow trading, rationing of demand and mobilisation of more supply[xlvii]. Effective markets depend on reliable and well-enforced property rights. They depend on simple laws and courts which cultivate simple, abstract and general rules and abstain from engineering specific outcomes.[xlviii] The great advantage of rationing by market price over planning is that it is depoliticised. It works with voluntary compliance, rather than coercion, hence much more cheaply.[xlix]
Unfortunately, neo-socialists and planners rarely accept this fundamental insight.
Courts as a Line of Defence for Private Property
The presumption is widespread that Australia’s legal system can no longer be relied upon to give owners the traditional security and confidence of property ownership. In some respects, this seems justified since the High Court dismissed the confidence-inspiring legal construct of rules on land title in settled colonies (defined traditionally as terra nullius) when recognising aboriginal land title, and since judges increasingly engage in engineering specific outcomes which they consider ‘socially just’. This is why some farm groups now lobby for new legislation, instead of testing centuries-old property law in the courts.
Nevertheless, some judges regularly affirm the common law and private property title when citizens appeal to the courts. This is of course costly. For example, Justice Horton Williams of the South Australian Supreme Court ruled on 14 February 2003 that the South Australian State government had no right to take away, at short notice and without proper compensation, the rights of 28 Murray River fishermen to use gill nets. The Rann government’s ban on gill nets to catch native fish would have deprived 28 citizens of an important property right, the court found. The remaining rights would hardly have allowed these families to earn a livelihood. In other words, the government’s attempt was expropriation with minimal compensation, just 1.5 times a fisherman’s annual income. The court found that the SA minority Labor government had intervened out of political opportunism, on the basis of a political compact to obtain an independent’s support in parliament. No scientific reasons to justify the restrictions were given. ‘Apart from this compact (and the groundswell of opinion…), there is no other evidence which might provide a basis … for [this] exercise of regulatory power’. The judge ruled that the fishermen were entitled to the ‘quiet enjoyment’ of their property until it was seized with reasonable notice and the right to demand just compensation. Unfortunately, that decision was reversed on appeal on 6 June, but a further appeal to the High Court is in contemplation.
Another interesting case was a recent decision of the NSW Land and Environment Court against Hunters Hill Council to pay $2.515 million in compensation for a tiny foreshore block, after council zoning had made all development of the property impossible. Council was obliged to compensate at full market value, as the Valuer General had established. The prospect that council would have to raise local rates was not deemed a relevant argument to reduce the amount of compensation.[l]
These and similar cases show that the spirit of Magna Carta is still being upheld in Australian court rooms. Authorities who want to achieve policy objectives on the cheap by making neo-socialist leaps run the risk of costly reprimand. Such cases should also serve to caution eager interventionists that their actions inflict costs on taxpayers. The electorate will, sooner or later, pass judgement on the costs and the benefits of such regulations. It is likely that the voters will look at the compensation costs, think of tax burdens and then rein in the proliferation of frivolous interventions.
Fighting ‘Iron Laws of History’
The protection of private property rights goes far beyond deciding the future of one industry or another. It will define what kind of society ours is to be¾a community of self-responsible, free, entrepreneurial citizens, who innovate and solve problems, or regulation-damaged zombies dependent on the government’s subsidy drip.
Since so much is at stake, the debate about property rights protection and environmental conservation in Australia has to become more explicit. It has to be better informed and economically literate, which means it has to be informed by estimated costs and benefits. To date, the public exchanges about these matters appear to be a ‘dialogue of the deaf’. On one side, there are the farmers, foresters, fishers and miners, who are becoming increasingly vocal about violations of their private property rights. They are joined by some old-fashioned jurists, economists, and free-market think tanks, who stress the historic importance of property rights and therefore insist on proper compensation for legitimate regulations. On the other side are single-issue activists, political and bureaucratic controllers, natural scientists ignorant of history and economics, most of the media and many church leaders¾in short the outspoken, collectivist part of public opinion. The two sides face each other in complete incomprehension. This is dangerous, as it paves the way to stagnation and conflict.
The argument for the strong legal protection of property and other individual rights is based on the lessons of history, social theory and the hope that our children will be able to prosper. This is not to dismiss environmental protection as a worthwhile objective of policy, but it has to be achieved with respect for property and other human rights. Often, the best solution will be through market processes, which engage the voluntary cooperation of property owners. If, by contrast, the implicit assumption is that property is theft and that all can be planned in government offices, policy risks not only long-term prosperity and social cohesion, but also environmental quality.
Liberty is rarely granted to citizens. It has forever to be claimed and re-claimed by the citizens. In the eternal tug of war between collective and particular interests and ordinary citizens, there is never more than a cease-fire. As of the beginning of the 21st century, it seems, State governments, the High Court and noisy, subsidised single-issue lobby groups have ended the cease-fire. Only the thin and fickle defence of the common law and the resolute action of citizens, who are prepared to defend their liberty separate our civilisation from lapsing back into an era of declining personal and economic freedom. A spokesperson for the Conservation Foundation recently told a Queensland audience that it was an ‘iron law of history’ that private property owners would have to accept more and more stringent regulations in the interest of environmental conservation. As I listened, it occurred to me that I had heard an ‘iron law of history’ invoked in my youth, when Marxist students asserted that the progressive spread of communism was an inevitability. After the people throughout eastern Europe and the USSR rejecting that system because of its disastrous destruction of individual effort and prosperity and after Gorbachev’s failure to reform, invoking an ‘iron law of history’ sounded hollow. It takes individuals, who stand up for their freedom, to unmask ‘iron laws of history’ as mere ideological bluff. When enough people stand up, some political entrepreneur or organisation will make the reassertion of traditional property rights part of the programme and we will again get reform. It is to be hoped that this happens before prosperity is prejudiced so that many get hurt.This matter is far too important to be left to self-seeking politicians and control-hungry bureaucrats. Keeping private property secure from political opportunism is worth the political and¾if necessary¾courtroom fight.
[i] William Blackstone in his 18th century Commentaries of the Laws of England, cited after W. Samuels, 1994, 180).
[ii] W. Kasper & M.E. Streit, Institutional Economics––Social Order and Public Policy (Cheltenham, UK and Northampton, MA, USA: E. Elgar, 1998), 173-211. See also: N. Berggreen, N. Karlson and J. Nergelius, Why Constitutions Matter (New Brunswick, N.J.: Transaction Publishers, 2002).
[iii] As above, 221-255.
[iv] M. Friedman & R. Friedman, Free to Chose (Harmondsworth: Pelican, 1986); N. Rosenberg & L.E. Birdzell, Why the West Grew Rich (New York: Basic Books, 1986); J.D. Gwartney, ‘Private Property, Freedom and the West’, in J. L. Doti and D.R. Lee (eds.), The Market Economy––A Reader (Los Angeles: Roxbury Publications, 1991), 62-76; J. Bovard, Lost Rights (New York, NY, Martin’s Press, 1994); W. Kasper, Property Rights and Competition¾An Essay on the Constitution of Capitalism (Sydney: The Centre for Independent Studies, 1998), chapters 4 and 5; W. Kasper (2001-02), ‘Economic Freedom Watch’, Policy, vol. 17:4 (Summer), 37-43; Bethel, The Noblest Triumph; J.D. Gwartney & R. Lawson, Economic Freedom of the World, 2002 Annual Report (Vancouver, BC: Fraser Institute, 2002).
[v] E. L. Jones, The European Miracle; Rosenberg & Birdzell, Why the West Grew Rich; Kasper-Streit, Institutional Economics.
[vi] W. Kasper, ‘The Sichuan Experiment’, Australian Journal of Chinese Affairs No. 7 (1981).
[vii] The relationship between the security of property rights and the freedom of their use is not always tight in the short term. Like a slowly corroding railway bridge, eroding property rights may not be immediately noticed. Then, a cataclysmic accident occurs. This is why econometricians, who are used to correlating quarterly or annual data, tend to relegate open-ended institutional evolution to ‘dummy variables’. The dynamic interaction of economic changes and periodic political adjustment to economic pressures (as described in Kasper & Streit, Institutional Economics, 387-404) cannot be easily modelled, because it is fraught with discontinuities and deals with discoveries of yet-unknown solutions. See R. Roll & J. Talbot, ‘Why Many Developing Countries Just Aren’t’, Working Paper (Los Angeles: Anderson School, University of California, 2001) [www.anderson.ucla.edu].
[viii] J. Jacobs (1992), Systems of Survival (New York: Random House, 1992).
[ix] Friedman & Friedman, Free to Choose. See also J. Powell, The Triumph of Liberty (New York: Free Press, 2000).
[x] W. Kasper, Economic Freedom Watch Reports No 1-6 (Sydney: The Centre for Independent Studies, 2001-02).
[xi] Department of Foreign Affairs and Trade (Australia), Globalisation: Keeping the Gains (Canberra: DFAT, 2003).
[xii] As of 2002, the latest year for which international data are available at the time of writing, Australia ranked in the top dozen of countries as to overall economic freedom, though marked behind the US benchmark. However, overall economic freedom keeps improving, including in many potential competitor economies of Australia. Better institutions reduce the transaction costs of doing business in backward economies and create scope for local labour, governments and land owners to earn higher incomes in the global economy. –– J. Gwartney–R. Lawson, Economic Freedom of the World, 2004 Annual Report (Vancouver, The Fraser Institute, 2004). Also: www.fraserinstitute.ca, and www.freetheworld.com.
[xiii] R. Pilon, ‘The Purpose and Limits of Government’, The Insider, no. 317, (June 2004), 3-5. Also see: R. Pilon on www.cato.org.
[xiv] H. de Soto, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (New York: Basic Books, 2001).
[xv] T. Bethel, The Noblest Triumph: Property and Prosperity Through the Ages (New York: St. Martin’s Press, 1998), 61-74.
[xvi] E. L. Jones, The European Miracle, 2nd ed. (Cambridge: Cambridge University Press, 1981/1987); Kasper-Streit, Institutional Economics, 383-381.
[xvii] Bethel, The Noblest Triumph, 75-91. Also: D.R. Henderson, ‘Your Right to Property’ and ‘The Environment: Own and Save It’, in D.R. Henderson, The Joy of Freedom (London-New York: Financial Times-Prentice Hall Books), 61-74 and 321-344.
[xviii] J. Jacobs, Systems of Survival (New York: Random House, 1992).
[xix] R.M. Hartwell, The Industrial Revolution and Economic Growth (London: Methuen and Co., 1971), pp.245-250.
[xx] Compensation for community benefits need not always involve government. I have boyhood memories of an ornithological society collecting moneys to pay Bavarian farmers compensation for the inconvenience of late hay-making, that is, until the sky larks, who are ground breeders, had hatched their eggs.
[xxi] G. de Q. Walker, The Rule of Law: Foundation of Constitutional Democracy (Melbourne: Melbourne University Press, 1998).
[xxii] Public-choice economists assume that political agents, like all others, act out of partial ignorance and base self-interest, rather than with perfect knowledge and out of noble selflessness. If you appoint some selfish knave to high office, he is not simply converted into a knight in shining armour. It therefore always helps our understanding of politics to follow the money trail and the affected interests. See J. Buchanan & G. Tulloch, The Calculus of Consent: Logical Foundations of Constitutional Democracy (Ann Arbor, MI: University of Michigan Press, 1962); J. Buchanan (forthcoming), ‘Public Choice Theory’, Policy Vol 19:2 (Winter 2003); Kasper & Streit, Institutional Economics, Ch.10.
[xxiii] B. Lomborg, The Skeptical Environmentalist¾Measuring the Real State of the World (Cambridge, UK: Cambridge University Press, 2001).
[xxiv] R. Epstein, Takings: Private Property and the Power of Eminent Domain (Cambridge, MA: Harvard University Press, 1985); R. Epstein, Principles for a Free Society (Sydney: The Centre for Independent Studies, 1999); R. Epstein, Towards a Regulatory Constitution (Wellington: NZ Business Roundtable, 2000).
[xxv] J. Bovard, Lost Rights (New York: St. Martin’s Press, 1994); R.J. Pierce, ‘Redefining Our Regulatory Goals’, (US) National Wetlands Newsletter, (Nov./Dec.) 1991.
[xxvi] Kasper & Streit, Institutional Economics, Ch. 7.
[xxvii] S. Kates, ‘Private Property without Rights’, Policy Vol 17:4 (Summer 2001-02), 32-36.
[xxviii] W.J. Samuels, ‘Property’, in G. Hodgson, W.J. Samuels, M.R. Tool (eds.), The Elgar Companion of Institutional and Evolutionary Economics, vol. 2 (Cheltenham, UK: E. Elgar, 1994), 180-184.
[xxix] R. Epstein, Towards a Regulatory Constitution.
[xxx] There are of course difficult issues at stake, for example in sharing water between upstream and downstream users. These can be solved by a better definition of water rights, which allows rational allocation through market exchanges. Those users who can make the most valuable use of that scarce commodity, water, must be allowed to bid for it. And those who find water too dear, must be able to economise on it or mobilise additional supplies. Adding a tax wedge by charging water rates is not a sensible way of resolving these complex issues.
[xxxi] R. Epstein, Towards a Regulatory Constitution.
[xxxii] Productivity Commission, Industries in the Great Barrier Reef and Measures to Address Declining Water Quality (Canberra: Productivity Commission, 2003). In a recent report, the Productivity Commission went a considerable way to acknowledge that regulations to conserve nature have a major input on productivity and growth: Productivity Commission, Impacts of Nastive Vegetation and Biodiversity Regulations, Melbourne, Productivity Commission, 2004. However, the report hides the fundamental issues behind a surfeit of technical detail and obscurantist econometrics. It coyly hides the estimates of economic harm to property owners (and likely compensation costs) in Appendix K.
[xxxiii] NSW Farmers’ Association, ‘Dubious (Lack of) Data’, The Primary Report (January 2003), 1-2.
[xxxiv] J. Marohasy, Myth and the Murray, Measuring the Real State of the River Environment, IPA Backgrounder, vol. 15/5, (Dec.) 2003; J. Marohasy, ‘Environmental Fundamentalism’, Policy, vol. 20:3, (Spring) 2004, 41-45..
[xxxv] Kasper & Streit, Institutional Economics, 86-89.
[xxxvi] In practice, the protagonists of rights for Nature claim those rights for themselves. Independent rights for Nature are then only a ploy to escape critical, democratic debate and to quarantine conservation policies from the usual contest among multiple policy objectives.
[xxxvii] J. Rabkin, Euro-Globalism? How Environmental Accords Promote EU Priorities into “Global Governance”¾and Global Hazards (Brussels: Centre for the New Europe, 1999).
[xxxviii] T. Sowell, The Vision of the Anointed¾Self-Congratulation as a Basis for Social Policy (New York: Basic Books, 1995); D. Henderson, Anti-Liberalism 2000: The Rise of New Millennium Collectivism (London: Institute of Economic Affairs, 2000).
[xxxix] The NSW government has committed $120 million in taxpayers’ funds over the next four years, and there is the prospect of more millions of Commonwealth taxes for the venture. See M. Duffy, ‘Carr Goes Green, Farmers See Red’, Daily Telegraph, 24 May 2003.
[xl] Kasper & Streit, Institutional Economics, 142-155; 416-422.
[xli] Rosenberg & Birdzell, Why the West Grew Rich.
[xlii] Duffy, ‘Carr Goes Green’.
[xliii] D. Dutton & W. Kasper, ‘Green Protectionism’, Policy, vol 18:4 (Summer 2002-03); 23-25.
[xliv] J. A. Sinden, ‘Economist Estimates Cost of Vegetation Act to Farmers’, University of New England Press Release No 016/02, 12 February 2002 [accessed on UNE website on 12 June 2003]; J.A. Sinden, ‘Decision Rules, Government Rules, and the Costs of Vegetation Protection in New South Wales’, Journal of Forest Economics 9 (2003), 1-4. Also see: Productivity Commission, Impacts of Native Vegetation and Biodiversity Regulations, 541-566.
[xlv] Some estimate the losses in farm incomes (and hence property values) on the basis of the per-hectare level of grass production for cattle: Probably, some ten times more grass grows on cleared land than under trees. It is therefore estimated that a cattle-carrying hectare will produce some $31/hectare p.a. less after the bans, and that some 81 million hectares may be affected by the various bans (A. McKay, ‘Information/Fact Sheet’, Property Rights Australia, e-mailed, private communication).
[xlvi] T.L. Anderson & D.R. Leal, Free Market Environmentalism, revised ed. (New York, NY: Palgrave, 2001); T.L. Anderson & F. S. McChesney (eds.), Property Rights, Cooperation, Conflict and Law (Princeton, NJ: Princeton University Press, 2003); T.L. Anderson–L. Huggins, Property Rights: A Practical Guide to Freedom and Prosperity (Stanford, CA, Hoover Institution Press, forthcoming 2004); also F.L. Smith, “Markets and Environmnent: A Critical Reappraisal”, Contemporary Economic Policy, vol. XIII (Jan.) 1995, 62-73.
[xlvii] One problem with water is that it is not a static stock of an asset like land, but a flow that can be stored only at considerable cost. Markets handle such allocational problems all the time, for example in the efficient allocation and exploration of oil and gas.
[xlviii] B. Leoni, Freedom and the Law (Princeton, NJ: Van Nostrand, 1961).
[xlix] Kasper & Streit, Institutional Economics, 142-155, 287-293.
[l] Daily Telegraph, 23 March 2003.
[1] William Blackstone in his 18th century Commentaries of the Laws of England, cited after W. Samuels, 1994, 180).
[1] W. Kasper & M.E. Streit, Institutional Economics––Social Order and Public Policy (Cheltenham, UK and Northampton, MA, USA: E. Elgar, 1998), 173-211. See also: N. Berggreen, N. Karlson and J. Nergelius, Why Constitutions Matter (New Brunswick, N.J.: Transaction Publishers, 2002).
[1] As above, 221-255.
[1] M. Friedman & R. Friedman, Free to Chose (Harmondsworth: Pelican, 1986); N. Rosenberg & L.E. Birdzell, Why the West Grew Rich (New York: Basic Books, 1986); J.D. Gwartney, ‘Private Property, Freedom and the West’, in J. L. Doti and D.R. Lee (eds.), The Market Economy––A Reader (Los Angeles: Roxbury Publications, 1991), 62-76; J. Bovard, Lost Rights (New York, NY, Martin’s Press, 1994); W. Kasper, Property Rights and Competition¾An Essay on the Constitution of Capitalism (Sydney: The Centre for Independent Studies, 1998), chapters 4 and 5; W. Kasper (2001-02), ‘Economic Freedom Watch’, Policy, vol. 17:4 (Summer), 37-43; Bethel, The Noblest Triumph; J.D. Gwartney & R. Lawson, Economic Freedom of the World, 2002 Annual Report (Vancouver, BC: Fraser Institute, 2002).
[1] E. L. Jones, The European Miracle; Rosenberg & Birdzell, Why the West Grew Rich; Kasper-Streit, Institutional Economics.
[1] W. Kasper, ‘The Sichuan Experiment’, Australian Journal of Chinese Affairs No. 7 (1981).
[1] The relationship between the security of property rights and the freedom of their use is not always tight in the short term. Like a slowly corroding railway bridge, eroding property rights may not be immediately noticed. Then, a cataclysmic accident occurs. This is why econometricians, who are used to correlating quarterly or annual data, tend to relegate open-ended institutional evolution to ‘dummy variables’. The dynamic interaction of economic changes and periodic political adjustment to economic pressures (as described in Kasper & Streit, Institutional Economics, 387-404) cannot be easily modelled, because it is fraught with discontinuities and deals with discoveries of yet-unknown solutions. See R. Roll & J. Talbot, ‘Why Many Developing Countries Just Aren’t’, Working Paper (Los Angeles: Anderson School, University of California, 2001) [www.anderson.ucla.edu].
[1] J. Jacobs (1992), Systems of Survival (New York: Random House, 1992).
[1] Friedman & Friedman, Free to Choose. See also J. Powell, The Triumph of Liberty (New York: Free Press, 2000).
[1] W. Kasper, Economic Freedom Watch Reports No 1-6 (Sydney: The Centre for Independent Studies, 2001-02).
[1] Department of Foreign Affairs and Trade (Australia), Globalisation: Keeping the Gains (Canberra: DFAT, 2003).
[1] As of 2002, the latest year for which international data are available at the time of writing, Australia ranked in the top dozen of countries as to overall economic freedom, though marked behind the US benchmark. However, overall economic freedom keeps improving, including in many potential competitor economies of Australia. Better institutions reduce the transaction costs of doing business in backward economies and create scope for local labour, governments and land owners to earn higher incomes in the global economy. –– J. Gwartney–R. Lawson, Economic Freedom of the World, 2004 Annual Report (Vancouver, The Fraser Institute, 2004). Also: www.fraserinstitute.ca, and www.freetheworld.com.
[1] R. Pilon, ‘The Purpose and Limits of Government’, The Insider, no. 317, (June 2004), 3-5. Also see: R. Pilon on www.cato.org.
[1] H. de Soto, The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (New York: Basic Books, 2001).
[1] T. Bethel, The Noblest Triumph: Property and Prosperity Through the Ages (New York: St. Martin’s Press, 1998), 61-74.
[1] E. L. Jones, The European Miracle, 2nd ed. (Cambridge: Cambridge University Press, 1981/1987); Kasper-Streit, Institutional Economics, 383-381.
[1] Bethel, The Noblest Triumph, 75-91. Also: D.R. Henderson, ‘Your Right to Property’ and ‘The Environment: Own and Save It’, in D.R. Henderson, The Joy of Freedom (London-New York: Financial Times-Prentice Hall Books), 61-74 and 321-344.
[1] J. Jacobs, Systems of Survival (New York: Random House, 1992).
[1] R.M. Hartwell, The Industrial Revolution and Economic Growth (London: Methuen and Co., 1971), pp.245-250.
[1] Compensation for community benefits need not always involve government. I have boyhood memories of an ornithological society collecting moneys to pay Bavarian farmers compensation for the inconvenience of late hay-making, that is, until the sky larks, who are ground breeders, had hatched their eggs.
[1] G. de Q. Walker, The Rule of Law: Foundation of Constitutional Democracy (Melbourne: Melbourne University Press, 1998).
[1] Public-choice economists assume that political agents, like all others, act out of partial ignorance and base self-interest, rather than with perfect knowledge and out of noble selflessness. If you appoint some selfish knave to high office, he is not simply converted into a knight in shining armour. It therefore always helps our understanding of politics to follow the money trail and the affected interests. See J. Buchanan & G. Tulloch, The Calculus of Consent: Logical Foundations of Constitutional Democracy (Ann Arbor, MI: University of Michigan Press, 1962); J. Buchanan (forthcoming), ‘Public Choice Theory’, Policy Vol 19:2 (Winter 2003); Kasper & Streit, Institutional Economics, Ch.10.
[1] B. Lomborg, The Skeptical Environmentalist¾Measuring the Real State of the World (Cambridge, UK: Cambridge University Press, 2001).
[1] R. Epstein, Takings: Private Property and the Power of Eminent Domain (Cambridge, MA: Harvard University Press, 1985); R. Epstein, Principles for a Free Society (Sydney: The Centre for Independent Studies, 1999); R. Epstein, Towards a Regulatory Constitution (Wellington: NZ Business Roundtable, 2000).
[1] J. Bovard, Lost Rights (New York: St. Martin’s Press, 1994); R.J. Pierce, ‘Redefining Our Regulatory Goals’, (US) National Wetlands Newsletter, (Nov./Dec.) 1991.
[1] Kasper & Streit, Institutional Economics, Ch. 7.
[1] S. Kates, ‘Private Property without Rights’, Policy Vol 17:4 (Summer 2001-02), 32-36.
[1] W.J. Samuels, ‘Property’, in G. Hodgson, W.J. Samuels, M.R. Tool (eds.), The Elgar Companion of Institutional and Evolutionary Economics, vol. 2 (Cheltenham, UK: E. Elgar, 1994), 180-184.
[1] R. Epstein, Towards a Regulatory Constitution.
[1] There are of course difficult issues at stake, for example in sharing water between upstream and downstream users. These can be solved by a better definition of water rights, which allows rational allocation through market exchanges. Those users who can make the most valuable use of that scarce commodity, water, must be allowed to bid for it. And those who find water too dear, must be able to economise on it or mobilise additional supplies. Adding a tax wedge by charging water rates is not a sensible way of resolving these complex issues.
[1] R. Epstein, Towards a Regulatory Constitution.
[1] Productivity Commission, Industries in the Great Barrier Reef and Measures to Address Declining Water Quality (Canberra: Productivity Commission, 2003). In a recent report, the Productivity Commission went a considerable way to acknowledge that regulations to conserve nature have a major input on productivity and growth: Productivity Commission, Impacts of Nastive Vegetation and Biodiversity Regulations, Melbourne, Productivity Commission, 2004. However, the report hides the fundamental issues behind a surfeit of technical detail and obscurantist econometrics. It coyly hides the estimates of economic harm to property owners (and likely compensation costs) in Appendix K.
[1] NSW Farmers’ Association, ‘Dubious (Lack of) Data’, The Primary Report (January 2003), 1-2.
[1] J. Marohasy, Myth and the Murray, Measuring the Real State of the River Environment, IPA Backgrounder, vol. 15/5, (Dec.) 2003; J. Marohasy, ‘Environmental Fundamentalism’, Policy, vol. 20:3, (Spring) 2004, 41-45..
[1] Kasper & Streit, Institutional Economics, 86-89.
[1] In practice, the protagonists of rights for Nature claim those rights for themselves. Independent rights for Nature are then only a ploy to escape critical, democratic debate and to quarantine conservation policies from the usual contest among multiple policy objectives.
[1] J. Rabkin, Euro-Globalism? How Environmental Accords Promote EU Priorities into “Global Governance”¾and Global Hazards (Brussels: Centre for the New Europe, 1999).
[1] T. Sowell, The Vision of the Anointed¾Self-Congratulation as a Basis for Social Policy (New York: Basic Books, 1995); D. Henderson, Anti-Liberalism 2000: The Rise of New Millennium Collectivism (London: Institute of Economic Affairs, 2000).
[1] The NSW government has committed $120 million in taxpayers’ funds over the next four years, and there is the prospect of more millions of Commonwealth taxes for the venture. See M. Duffy, ‘Carr Goes Green, Farmers See Red’, Daily Telegraph, 24 May 2003.
[1] Kasper & Streit, Institutional Economics, 142-155; 416-422.
[1] Rosenberg & Birdzell, Why the West Grew Rich.
[1] Duffy, ‘Carr Goes Green’.
[1] D. Dutton & W. Kasper, ‘Green Protectionism’, Policy, vol 18:4 (Summer 2002-03); 23-25.
[1] J. A. Sinden, ‘Economist Estimates Cost of Vegetation Act to Farmers’, University of New England Press Release No 016/02, 12 February 2002 [accessed on UNE website on 12 June 2003]; J.A. Sinden, ‘Decision Rules, Government Rules, and the Costs of Vegetation Protection in New South Wales’, Journal of Forest Economics 9 (2003), 1-4. Also see: Productivity Commission, Impacts of Native Vegetation and Biodiversity Regulations, 541-566.
[1] Some estimate the losses in farm incomes (and hence property values) on the basis of the per-hectare level of grass production for cattle: Probably, some ten times more grass grows on cleared land than under trees. It is therefore estimated that a cattle-carrying hectare will produce some $31/hectare p.a. less after the bans, and that some 81 million hectares may be affected by the various bans (A. McKay, ‘Information/Fact Sheet’, Property Rights Australia, e-mailed, private communication).
[1] T.L. Anderson & D.R. Leal, Free Market Environmentalism, revised ed. (New York, NY: Palgrave, 2001); T.L. Anderson & F. S. McChesney (eds.), Property Rights, Cooperation, Conflict and Law (Princeton, NJ: Princeton University Press, 2003); T.L. Anderson–L. Huggins, Property Rights: A Practical Guide to Freedom and Prosperity (Stanford, CA, Hoover Institution Press, forthcoming 2004); also F.L. Smith, “Markets and Environmnent: A Critical Reappraisal”, Contemporary Economic Policy, vol. XIII (Jan.) 1995, 62-73.
[1] One problem with water is that it is not a static stock of an asset like land, but a flow that can be stored only at considerable cost. Markets handle such allocational problems all the time, for example in the efficient allocation and exploration of oil and gas.
[1] B. Leoni, Freedom and the Law (Princeton, NJ: Van Nostrand, 1961).
[1] Kasper & Streit, Institutional Economics, 142-155, 287-293.
[1] Daily Telegraph, 23 March 2003.
