Two's Company: The Basics of Property
A great deal of truth can be unveiled via "Crusoe economics" — the analysis of acting man in complete isolation. However, just as it takes two to tango, it also takes two to trade and two to fight; therefore, in the sciences of human action, it takes at least two (a Crusoe and a Friday) for questions of property, exchange, and justice to even arise. The analysis of a tiny two-person society can reveal a surprisingly large number of principles regarding these issues that remain true even in large, complex societies. Let us see what Crusoe and Friday can teach us.
Let us say Crusoe and Friday meet in Cockaigne, the mythical land of abundance dreamed up by poets in the Middle Ages. Let us hear David Hume describe such a condition, in which
nature has bestowed on the human race such profuse ABUNDANCE of all EXTERNAL conveniences, that, without any uncertainty in the event, without any care or industry on our part, every individual finds himself fully provided with whatever his most voracious appetites can want, or luxurious imagination wish or desire.
Hume went on to suppose that in this situation every person's natural beauty is such that he has no desire for adornment, that the weather is so mild that he has no need for clothing, that all around him wild plants bear in abundance the most delectable food and natural springs spill out in profusion the most delicious beverages.
Hume argued that in such a paradise, the human conventions of property and justice would be entirely useless:
For what purpose make a partition of goods, where every one has already more than enough? Why give rise to property, where there cannot possibly be any injury? Why call this object MINE, when upon the seizing of it by another, I need but stretch out my hand to possess myself to what is equally valuable? Justice, in that case, being totally useless, would be an idle ceremonial.
As Hans-Hermann Hoppe concluded from similar reasoning,
To develop the concept of property, it is necessary for goods to be scarce, so that conflicts over the use of these goods can possibly arise. It is the function of property rights to avoid such possible clashes over the use of scarce resources by assigning rights of exclusive ownership. (emphasis added)
What economists mean by the term "scarce" is not just "nonabundandant," but also "rivalrous." What precludes the usefulness of property and justice in Cockaigne is not just the abundance of goods; it is the fact that one's use of one kind of a good does not physically exclude anyone else's use of that same kind of good. As Hoppe explained,
If, let us say, due to some paradisiac superabundance of bananas, my present consumption of bananas does not in any way reduce my own future supply (possible consumption) of bananas, nor the present or the future supply of bananas for any other person, then the assignment of property rights, here with respect to bananas, would be superfluous.
So, in the land of Cockaigne, in which nothing (not even human bodies) is rivalrous, the conventions of property and justice could not possibly be of any use to either Crusoe or Friday.
Now, let us expel Crusoe and Friday from their Eden. First off, let us assume now that Crusoe's and Friday's bodies are rivalrous. Under that assumption, conflicts are now possible. For example, Friday may want Crusoe to give him a haircut, and Crusoe may want to go for a swim instead. Crusoe's body is rivalrous in that it cannot be used for both the haircut and the swim at the same time. Since human bodies are rivalrous, conflicts can easily arise regarding their use. Such conflicts can even escalate to disastrous wars. So, in order to avoid such conflicts, it is generally advantageous for everybody for there to be some set of socially accepted rules (a moral code) regarding the exclusive use of human bodies.
Furthermore, there is the all-important fact that, in almost all cases, as Ludwig von Mises wrote,
Human effort exerted under the principle of the division of labor in social cooperation achieves, other things remaining equal, a greater output per unit of input than the isolated efforts of solitary individuals. Man's reason is capable of recognizing this fact and of adapting his conduct accordingly. Thus social cooperation becomes for almost every man the great means for the attainment of all ends. An eminently human common interest, the preservation and intensification of social bonds, is substituted for pitiless biological competition, the significant mark of animal and plant life.
For example, Friday (who, in Daniel Defoe's novel, came from a tribe of cannibals) would probably prefer to cooperate with Crusoe rather than eat him, if he was aware how productive such cooperation could be. In order to facilitate social cooperation, people generally find it in their interests to develop some kind of moral code of property and justice in order to avoid conflicts that would dissolve the division of labor.
One alternative would be for each individual to exclusively control his or her own body. The obviously decisive advantage of this convention is that the human body is uniquely effective at serving the ends of the mind that inhabits it.
Another alternative would be to have members of one group (a "master" caste) control their own bodies, as well as the bodies of the members of another group (a "slave" caste) and all the products of their slaves' labor. For example, the two might consider Crusoe to be a rightful master because he is an Englishman, and Friday to be a rightful slave because he is a Kalinago Indian.
This would ultimately be detrimental to the interests of both the master and the slave.
It would be detrimental to the interests of the slave, because every action that a person undertakes with his own body for his own purposes maximizes his ex ante utility. And, conversely, every time a person is forced to act otherwise than he would have with his own body, it necessarily diminishes his ex ante utility. It is always possible that a person may make a mistake in undertaking an action, and therefore not maximize his ex post utility. Furthermore, it is conceivable that Friday may manipulate Crusoe's body in a way that, ex post, Crusoe considers to be more advantageous than what he would have done voluntarily. For example, Crusoe may, unawares, be walking into quicksand, and Friday may violently yank him back away from it. But such instances are highly exceptional. In moral and legal codes, it is the consequences that systemically occur as a rule, not as an exception, that count. And as F.A. Hayek wrote,
Though we leave people to decide for themselves because they are, as a rule, in the best position to know the circumstances surrounding their action, we are also concerned that conditions should permit them to use their knowledge to the best effect. If we allow men freedom because we presume them to be reasonable beings, we also must make it worth their while to act as reasonable beings by letting them bear the consequences of their decisions. This does not mean that a man will always be assumed to be the best judge of his interests; it means merely that we can never be sure who knows them better than he.
A master-slave arrangement would, in general, be detrimental to the interests of the master too, because, as Mises wrote,
Free labor is incomparably more productive than slave labor. The slave has no interest in exerting himself fully. He works only as much and as zealously as is necessary to escape the punishment attaching to failure to perform the minimum. The free worker, on the other hand, knows that the more his labor accomplishes, the more he will be paid. He exerts himself to the full in order to raise his income.
The above is true with regard to all degrees of slavery, including feudal serfdom. And the extent of the general inexpediency will be in direct relation to the completeness of the slavery. Therefore, it is in the interests of virtually everybody that the principle of exclusive ownership of one's own body should prevail.
So much for human bodies. How about other goods? To prevent conflicts over coconuts between Crusoe and Friday, and to thereby facilitate social cooperation, external goods must be partitioned somehow as well. David Hume thought the optimal rules for the partitioning of goods were obvious. "Who sees not," he wrote,
that whatever is produced or improved by a man's art or industry ought, forever, to be secured to him, in order to give encouragement to such USEFUL habits and accomplishments?
Implicit in this proposition is the Lockean precept that whoever first improves ("homesteads," or as Locke said "mixes his labor" with) a natural resource is to be considered the proper owner of the resource. The more secure Crusoe and Friday are in the use and enjoyment of the resources they individually improve, the greater will be the number of improved resources.
That it may be alienated by consent, in order to beget that commerce and intercourse, which is so BENEFICIAL to human society? And that all contracts … ought carefully to be fulfilled, in order to secure mutual trust and confidence, by which the general INTEREST of mankind is so much promoted?
Exchanges (Hume's "commerce and intercourse") are beneficial to mankind, because every exchange is ex ante advantageous to both parties. As Murray N. Rothbard wrote,
The essence of the exchange is that both people make it because they expect that it will benefit them; otherwise they would not have agreed to the exchange. A necessary condition for an exchange to take place is that the two goods have reverse valuations on the respective value scales of the two parties to the exchange.
Therefore, the more free commerce there is between Crusoe and Friday, the more satisfied they both will tend to be.
And remember that all this has only to do with rivalrous goods. Just as there is no utility in assigning property rights in Cockaigne, there is no utility in assigning property rights for nonrivalrous goods, like air (in most situations) or ideas.
And so we have what might be called the property-rights order of liberalism: permanent self-ownership and the perpetual (even distant) ownership of rivalrous goods that one has homesteaded or contracted for, as well as all rivalrous products of those goods. Hoppe explained masterfully how this set of rules is the most expedient out of all alternatives:
Any deviation from this set of rules implies, by definition, a redistribution of property titles (and hence of income) away from user-producers and contractors of goods and onto non-user-producers and noncontractors. As a consequence, any such deviation implies that there will be relatively less original appropriation of resources whose scarcity is realized, there will be less production of new goods, less maintenance of existing goods, and less mutually beneficial contracting and trading. This naturally implies a lower standard of living in terms of exchangeable goods and services. Further, the provision that only the first user (not a later one) of a good acquires ownership assures that productive efforts will be as high as possible at all times.
For virtually everybody, liberalism is, out of all alternative property codes, the best code for the facilitation of individual ends through the universal means of social cooperation. For the reasons above, this is clearly true for a two-person society; it is also true of larger societies. The way the advantages of liberalism (and the disadvantages of deviations from liberalism) play out in an extensive market society is of course more complicated. However, the underlying logic is basically the same. Throughout all the twists and turns of economic analysis, we see again and again the same principle holding true: to the extent that, by virtue of private property (as outlined above), control is tied to efficacy, and benefit is tied to contribution, the interests of virtually any given individual are advanced.
 It could be assumed that Crusoe and Friday are somehow physically incapable of manipulating each other's bodies.
 F.A. Hayek, The Constitution of Liberty, p. 76.