When Private Property Dies…

tl;dr: Is private property at the root of society’s problems today? How might taxes evolve to be less of a drain on people?

I read a fascinating article by Alastair Parvin called “A New Land Contract”.

It puts forth the idea that a root cause of growing economic inequality globally lies in the concept of completely private ownership of land.

Initially, my reaction was “oh, this is just another socialist screed against capitalism,” but it turned out I was wrong.

It’s a thoughtful history of how property as a private notion came to be.

Historical Origins of Modern Private Property

As a history major, I appreciated the background he provided.

Weirdly enough, the land system that we have today has its origins in a problem specific to medieval kings, which is ‘how do I fund military campaigns and defence, without paying to keep a standing army?’

And it was William the Conqueror who perfected the answer. It was a piece of paper. And on that piece of paper was basically an agreement between the Crown and a noble, saying ‘if you provide men for military campaigns when I ask, in exchange I will grant you a monopoly over your own private fiefdom, where you can levy as high taxes as people can bear to pay’.

So effectively — rent is the original tax, paid via lords to the King.

In fact the word ‘feudal’ derives from the latin word feudalis — for ‘fee’. In other words, rent. So the whole system of government by which the Normans ruled over the Anglo Saxons was based on rent.

https://medium.com/@AlastairParvin/a-new-land-contract-684c3ba1f1b3

He goes on to explain:

And over time that piece of paper became a tradable asset, as well as an inheritable one: so you can literally buy the right to extract taxes from people.

And it’s amazing to me that we don’t find that more weird than we do — it’s right there hidden in plain sight in the language we use: landlord.

https://medium.com/@AlastairParvin/a-new-land-contract-684c3ba1f1b3

That hit me kind of hard.

Like you, I’ve said the word “landlord” hundreds of times, but never really thought about it.

However, in this era of growing awareness about the institutionalization of certain structures and behaviors, the idea that a piece of land (or anything) has a “lord” feels at odds with the current milieu of growing awareness of injustice.

The System of Lords

Maybe it was just serendipity, I don’t know, but at the time I read this article, I was also in the middle of a mini-binge watch of a show on Netflix called “The Last Kingdom.”

It’s about England in the 9th century as the Saxons/Britons do battle with the Norse/Danes. A lot of blood, guts, and gore, to be sure, but also a powerful hint as to what life was like for many people who lived under this system.

Leaving aside the obvious lack of modern amenities and technology, the total subservience of the peasants and tenants who inhabited the land of the “lord” and the near complete rights of that lord over the people, well…IF America has its roots in the 1619/slavery “original sin,” then Alastair’s argument about private property with a similar kind of “original sin” starts to hold water.

Taxes and Property Rights

And, as if in an ever-growing series of ripples, the article and the TV show were consumed within the context of trying to complete my taxes in preparation for the new July 15th deadline.

This may be a side rant, so sorry if it is but I think it fits in here, somehow.

I hate taxes, but not because I don’t think I should pay them.

I hate them for a few reasons.

• For anything other than one job and one paycheck, it becomes cumbersome and time-consuming.
• The size of the tax preparation market is $11 billion, which is based on the fact that taxes aren’t easy enough to do yourself
• the tax prep lobby spends money to keep things difficult, preventing Americans from saving $4.4 billion per year in fees.
• In Estonia, you can pay your taxes in 7 seconds.

All of this is a huge economic drain on the economy (except for accountants) and a disincentive to initiate new activities because of the costs of tax tracking associated with it.

Turns out I’m not alone in this feeling…though I’m apparently also not woke enough.

Ok, it’s great that I have the problem of being frustrated with my taxes, but what does that have to do with property rights and what’s to be done about it?

Opportunities for Innovation

It’s easy to complain, but far less easy to do anything about it.

Plus, the entrenched interests and raw inertia (we’ve been saying ‘landlord’ for a millenium now) are not inconsequential.

Still, at a moment in time like this, as we see that 20th century capitalism is falling apart at the seams, it’s not a bad idea to think about ways to keep the best part (rewarding entrepreneurs who take risks to provide value to the market) while also re-thinking how to ensure that the value created by said entrepreneur is also distributed to others who played a role in growing the business.

For example, Mark Zuckerberg deserves the lion’s share of the reward for inventing Facebook. However, every person who joined the network contributed something. The early adopters did more than the later ones, but everyone deserves a small bit.

In crypto, this is literally how a Token-bonding curve works. The price of the token goes up as more people join the network. Later entry costs more than earlier.

What crypto-economic systems provide us is a technology to support a more equitable form of capitalism and social justice (see: Bitcoin and the Opportunity to Create Effective Policing).

In Redefining Law, I wrote about the concept of the Harberger Tax and communal property rights as defined in Glen Weyl’s book “Radical Markets.”

On this blog before, we’ve touched on the concepts of Radical Markets promoted by Glen Weyl (book) and (podcast interview).

The reading was pretty heavy and dense, but the key idea was that market mechanisms can and should be deployed much more to generate optimal outcomes.

In the future that Weyl envisions (or desires maybe), property rights as we know them today are vastly different. For example, you would have to pay for the rights to the land under your house in an annual auction instead of owning it in perpetuity.

This type of market was simply not feasible before. The friction and transaction costs and time were too great.

Today, they are.

https://blog.neverstopmarketing.com/redefining-law/

The environmentalists and religiously observant among us may not agree on too many things, but they might all agree on the fact that the earth doesn’t belong to anyone.

Further, we can all recognize that the earth is a resource which, when put in the hands of private individual, can have value put on top of it (a house, a building, a stadium).

At the same time, the value of that house, building, stadium is not 100% solely attributable to the work of the private individual. The streets, electricity, etc. also enable the financial success. So, it’s not a crazy idea to suggest that the land is a communal property to which an individual has rights for a certain period of time.

Those rights come from the payment of a renewable lease which is, like the Alaska permanent fund, paid out to all of the members of that area. This concept is also at the heart of Elinor Olstrom’s Noble prize winning work.

So, What’s to be done?

Honestly, I don’t have an answer. This post went in an unexpected direction (it happens in a workshop), but I’ll try and wrap it up like this.

It feels like things are coming to a head (maybe I’m being overly dramatic) as it relates to things like finance (i.e. Cantillon effect), capitalism, social justice, and government (i.e. ‘defund the police’).

While I’m not super-optimistic that most of our elected leaders will have the knowledge or will to try and re-think the foundational systems of taxation and private property, the good news is that the options are there.

I wouldn’t be surprised if we start to see micro-states get created (go Liberland!) or areas like Catalonia secede from other areas and use that opportunity to innovate at the core of property and taxes.

When history has run its course on one system, the sooner we can jump to the next one, the sooner we can adjust to a new equilibrium…and hopefully tranquility and equality.

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