Natural Order

Praxeology, property rights, and contracts

On the main Mises.org site, Dmitry Chernikov blogs about how praxeology effectively presupposes property rights of free, acting people. I agree with his basic stance on the origin of property (which I argued for here, although I don't agree that his plan for appropriation is desirable), and I think there is more to be learned from this line of reasoning.

Dimitry mentions the problem of knowing what one person is thinking inside their mind. Property rights are a means to an end of exclusive control over one's environment, so some purposeful action can occur. Without exclusive control (at the least, over one's own body) no purposeful action by that person is possible. So how do we make sure other people don't claim exclusive control over the things we need? We have to come to some common agreement with them. In formal terms, these are contracts.

Of course, most contracts are explicit. Neighbors don't need formal contracts to keep them from stealing from each other's houses, after all. Nevertheless, there is a common understanding between neighbors that stealing is violation of their property rights. This agreement, from the point of view of praxeology, is no less real than a formal law ratified by all owners of houses which declares theft illegal.

Without exclusive control over property, people cannot cooperate. Contracts, therefore, are necissary for cooperative action to take place. The very act of cooperating with someone presupposes some common agreement, no matter how ill-defined. Even two neighbors who refuse to speak to each other have an agreement, as the act of not interacting is as much cooperation as anything else.

With this view, I say that the state neither created contracts, nor property. The state can enforce contracts, (third-party enforcement of contracts often requires formal, written agreements), but it did not invent them. It could not have, because they originate with cooperative action itself.

So who should be the one to enforce a contract? The state can try, but it is aware of the many implicit agreements between acting people? Of course, no one is completely, but some people are certainly better to serve as judges than others. Radically different cultures are certainly not well poised to judge the outcomes of each other's contracts. I propose that the arbiter of any agreement should be one chosen by those entering the agreement. Only they know who would serve them best, or if they desire arbitration at all. The state cannot supply them with effective arbitration for the same reason it cannot effectively supply them with shoes: It lacks both the dispersed, Hayekian knowledge scattered throughout society, and the Misean price signals to rationally allocate its arbitration services.

Can Austrian economics ever become mainstream?

Austrian econ is not for everyone. Those who study economics in order to fine-tune economies through public policy will not likely agree with it. Of those who do, their only recourse is to admit their goals as being unachievable, which would mean that they no longer care to implement policy. How many politicians would run for office in order to give up power? This is something which runs contrary to the motivations for running for office itself.

The success of a school of economics seems to come from its use in politics and its use in academia. But to what extent does one effect the other? Does academia primarily effect politics, or is it the other way around? Did Hayek "loose" to Keynes because of intellectual reasons, or political ones? We all know that government cannot make rational decisions in a great number of areas. Is it capable of choosing good economic theories at all, and if not, what does that say about economics as a science?

It seems to me that all sciences benefited greatly when they were separated from politics. Galileos were no longer be persecuted for their ideas. Freedom of speech erected a wall of separation between thought and government which greatly increased the quality of intellectual thought. Is such a thing even possible with economics? According to this study, there are far more economists employed in academia than any other field, but also considerably more in government than private business.

At least praxeology offers an alternative way for people to examine the worthiness of economic theories if interpreting history proves too subjective. But all of that matters little if economic thought, due to its close kinship with politics, is more the result of political action than scientific truth.

Property rights and fishing

Over at Cafe Hayek, Don Boudreaux blogs about fishing and property rights. This got me thinking: What is necessary for rational allocation of fishing rights? Clearly, treating the ocean's fish as totally unownable is problematic, as that sort of thing would naturally lead to overfishing.

At first it seems like a difficult problem. Fish, after all, do swim. They don't stay in one place, and baring certain fishing industries which farm, they cannot be pinned in like cows in a pasture. Trading the right to pull up a certain number of fish sounds nice, but this could be problematic, because the enforcers of those rights would be the government. Allowing government to regulate fishing would not only be problematic because the government is a poor decision-making body, but it would also allow competing industries and fisheries to gain advantages through the political process. It would, in other words, be an invitation for government failure, and we could only hope that this failure would be less disastrous than keeping the oceans unownable.

I've got another proposal: What if we gave governments something simple and easy to enforce, which could not be hijacked by rent-seekers? What if we just said commercial fishing rights are geographic in nature, and allowed fishing firms to defend their sections of the ocean, and nothing else? People might say "Well, that doesn't solve anything, because the fish swim about and don't pay any attention to geographic borders". And they'd be correct on the latter point, but consider the following:

Each firm could, if they wished, over-fish their own territories in order to acquire more fish before their competitors. However, this behavior would be irrational. Once the lake becomes property, it can be traded and leased. As property, it is no longer rational for each firm to participate in the tragedy of the commons and over-fish. Instead, the firms can extract more rent from their pieces of the lake by leasing fishing rights out to each other (or organizations of their choosing) not simply on a geographical basis, but also based on fish species and temporal factors. Firms which could make the best use of the fishing rights would naturally pay more for those rights, and the best way to make good use of any resource is to conserve it when necessary. A natural order would emerge, where it is likely that the rights to each migratory pattern of a certain fish species would probably be owned by a single firm, preventing overfishing.

As a simple example, consider a lake with only two fishermen, each of which is very distrusting of the other. Prior to any enforceable rights, it is in the self-interest of each fisherman to over-fish the lake in a perpetual tragedy of the commons. However, if enforceable contracts are created, and half of the lake is given to each fisherman, something different happens. The fishermen are now able to come to an agreement they trust (due to another party enforcing their contracts), and can both agree to limit fishing in order to maximize both their profits. Government involvement over the individual fish themselves isn't necessary.

In short, I believe that self-interested, rational actors will produce a natural order which is most beneficial to them. All they need to do is to be able to defend their property. But I suppose this is what Hayek would have said?