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The Origins, Nature, and Content of the Right to Property: Five Economic Solitudes - February 15th, 2012
Dr. Brady Deaton: Welcome to FARE Talk, where we set out to provide enduring discussions on contemporary topics relevant to our economy with particular emphasis on food, agriculture, and the environment. My name is Brady Deaton, Jr., of the Department of Food, Agriculture, and Resource Economics at The University of Guelph. I'll be your host. Today, Dr. Glen Fox and I will be discussing his long-standing interest and research on property rights. Glen is an agricultural economist at the University of Guelph. He was recently honored as a fellow of the Canadian Agriculture Economic Society and his fellow address, recently published in the Canadian Journal of Agriculture Economics. This address will be linked to this podcast. Glen, welcome to FARE Talk.
Dr. Glenn Fox: Thanks Brady.
Brady: In your paper, you point out the many long-standing controversies in agriculture and natural resource policies are really debates about the nature of property rights. That's the issue that I want to tackle in today's podcast, but before I do, I wonder if there's some kind of story or anecdote that you can give that kind of sets the stage for our listeners.
Glenn: I started working on this topic about 20 years ago, actually, Brady, with one of my master's students named Mike Ivy. And Mike and I were interested in a topic which had become sort of visible or had emerged in importance in the late 1980s, in the early 1990s on the question of when or under what circumstances does a regulation become so costly or so burdensome to a landowner to become the equivalent of a taking, to become tantamount to expropriation.
And so we started to read legal literature, economic literature, read some case law, and we very quickly were confronted with a paradox. And the paradox was that most of the literature, whether or it was being written by economists or by lawyers or by political scientists or ethicists, dealt with a small number of cases typically that had gone to the U.S. Supreme Court.
They used apparently the same words and concepts, but when they got to the punchline, this critical question, does regulation constitute a taking, the answers were all over the map. And we had a great deal of difficulty figuring out why when there's only so many cases and they appear to all be using the same words, that the interpretations or the conclusions could be so divergent.
And after staring at this for a while, we realized that there was something else behind the scenes. And the something else behind the scenes was that each of the authors was invoking a different theory of property rights. And initially we identified three different theories of property rights. Subsequently, we've refined that and now have a list of five theories of property rights that I think exist in work that economists do, but also that legal theorists do.
And the five are: classical liberalism, pragmatism, utilitarianism, legal positivism, and then modern libertarianism.
Brady: Now in the regulatory [inaudible 00:03:10] situations in the United States there's this reference to the Constitution. So, the Fifth Amendment of the Constitution. In the Canadian context, is there something like the Fifth Amendment there?
Glenn: That's a good point. The reason that this word "takings" came up, the reason it's in this literature is because of the one clause referred to as the "takings" clause in the Fifth Amendment to the U.S. Constitution. There is no equivalent to a "takings" clause in Canadian constitutional law. There is another paradox and this is still something that puzzles me today and I don't have a good answer to this is that while there is a "takings" clause in the U.S., there is not a "takings" clause in Canadian constitutional law. The practice has generally been in Canada, when regulations have been found to be excessively burdensome that property owners were compensated whereas the practice in the United States under "takings" clause has been generally that property owners have not been compensated when they've subject to certain types of regulations. So that's a bit of a mystery to me, but -
Brady: I mean I think one of the [00:04:18] in our area, one of the things you hear referenced a lot is this Crow rate subsidy. And that's an example of where farmers or landowners were ultimately compensated for the fact that their guarantee of basically lower shipping rates was taken away by an act. Is that something that comes up in your understanding of this topic and kind of contrasting the U.S. situation with Canada?
Glenn: I think that's a related development, but it's really somewhat different from the regulatory takings. In the case of the Crow rate, which were these grain transportation subsidies off the prairies, those subsidies meant that the price of grain at the farm gate in the prairie provinces was higher than it otherwise would be because essentially those farmers were price takers so whatever price they got was the world market less the transportation cost.
If the transportation was subsidized then their price went up. So grain farmers had a higher price. Livestock producers in the prairies were at a disadvantage because their feed costs were higher.
So when the decision was made to phase out these Crow rate subsidies, there was compensation ultimately that was paid to farmers because of this sort of entitlement that had emerged, particularly to grain farmers. They had that built into their cost structure and really, I think for sort of reasons of political expediency, the government said, "We need to get away from this policy and we recognize that there are people whose livelihood has been helped by this policy and who will be hurt when we take it away. But we're going to take it away so we'll compensate them for that.
The regulatory takings issue is really something quite different and maybe an example of wetland policy, might be an example. So you think of a farmer who's got a wetland or a marsh on his or her property. Then there's some policy measure that designates that as some sort of protected area under a wetlands protection policy. Once that designation is imposed, then that restricts what the farmer could do. Up until that point, maybe the farmer could drain the wetland and turn it into a mock gardening agricultural operation. Well, now that option's off the table and the farm is arguably worth less than it would have been, because the option to do that has been removed. And so the farmer might say, "My farm was worth a million dollars before and now it's worth half a million dollars. I need to be compensated for the imposition of that regulation to protect the wetland on my farm.
Brady: So just to make sure I've got it straight. In Canada, if the government compulsory takes the land, actually takes it, then there's the tradition of compensation. But if the question or the line that you've been kind of working on is when you change the economic value or the market value of something through regulation, then at what point does that constitute something that should be compensated for? And of course that's the big debate in the U.S. literature examining Supreme Court decisions. And it's still [inaudible 00:07:35] your observation of things that are going on in Canada.
Let's take a couple of cases that you think - That you cover a number of actually applied situation in the Canadian context to examine the origin of property rights and how that helps illuminate the controversy around different natural resource issues.
Let's take a couple of those and maybe just illuminate this idea of the origins of property rights being very helpful in illuminating aspects of that controversy.
Glenn: Well, one of the examples that I understand you've done a previous podcast on this subject already, but- One of the long-standing controversies in Canadian agricultural policy has to do with the Wheat Board. And under the framework developed by federal legislation for the prairie provinces, producers of certain types of grain had to sell that grain to the Wheat Board. It was called a [inaudible 00:08:30] selling agency. It was the monopoly buyer that was then tasked with the job of marketing that grain, particularly to export markets. There are numerous sides to that debate, but I think two of the sides that I think illustrate these different property rights are on the one hand, some farmers and some agricultural economists and some people at the Wheat Board argue essentially a utilitarian theory of property rights.
And the utilitarian theory of property rights says that an arrangement, a policy, an institution is a good policy or a good institution if it maximizes the sum of utilities in some net sense, it maximizes the net benefits for everybody that's affected by the action.
So the utilitarian pro-Wheat Board argument would be that farmers on net gain, even though they've had this restriction on their ability to sell grain to any customer that they choose because of the operations of the Wheat Board. Because of counter[inaudible 00:09:41] market powers or economies of size or scale or whatever. And so there's a net gain even though some individual farmers might be disadvantaged. And so that would be the utilitarian perspective.
Brady: You know, in the previous podcasts we discussed this a bit and we look at our own profession, agriculture economics and its debate about whether or not the Wheat Board was able to increase net returns to farmers. And so that would be an example of our literature, would you characterize as being kind of utilitarian in origin?
Glenn: Yes, and when I'm saying that there are these different theories of property rights, it's not to say that there aren't what I'll call "intermural contests" within each theory of property rights as to whether or not a particular policy or a particular action is a good one or not. And certainly in the agricultural economics literature there have been some researchers have said, "No, there is not a net gain in utility," and others have said, "Yes, there is a net gain in utility." But what's common to all of them is the utility scale and this idea of adding up the benefits accruing to the winners and subtracting away the harms imposed on the losers and coming up with some sort of net calculus from that.
An alternative perspective, and I think that some of the farmers in Western Canada who protested and some ultimately went to jail over the Wheat Board's monopsony on grain purchases took more either a classical liberal or a libertarian point of view. And their argument went something like this. "We own our own labor. We own the land. We own the equipment. We bought the seed. And it was the combination of all those things that we own that went into the production of the grain. And now we own the grain. And one of the prerogatives of ownership is we should get to choose to whom we sell the grain."
And having an institution like the Wheat Board, utility calculations notwithstanding, is a violation of a property right that a modern libertarian or a classical liberal would say, "Because I produced it with my inputs, with my resources, with my labor, then I should have the prerogative to sell it to whomever I choose. And therefore the institution is a violation of those property rights."
And unfortunately, those two perspectives kind of pass each other like two ships in the night. We talk past one another, failing to recognize that they're fundamentally different ethical theories, the fundamentally different property rights theories that are involved in the controversy and we end up with these skirmishes about your utility calculations versus my utility calculations versus my rights and somehow we're not really understanding what's at the core of the disagreement.
Brady: That's interesting because in some cases there could be a convergence. In other words, you could do a utility calculation and at the same time, it could be consistent with the libertarian. But also there could be divergence and in this case, there was a divergence between those two. And I think you're right that we often don't spend time looking at the nature of that controversy in the articles that we write.
Glenn: Certainly the five different theories that I've enumerated earlier can reach the same conclusions under some circumstances. But I think it's important to be clear on the process through which we're reaching our conclusions, because I think a lot of the times when we disagree, it's not clear why we're disagreeing. Obviously, there're easy cases. If all the theories point in the same direction, then there's usually not much of a controversy. There's not much of a fight.
Brady: But that's interesting because that's almost like there's this [inaudible 00:13:20] ethical superior situation and if you can get all of the ethical theories kind of coming together, then you can argue at least- That's an interesting point.
Glenn: But you have to be lucky. That's kind of like winning the lottery, right? It's a wonderful outcome if you can get it, but in a lot of practical cases, we don't have them line up like that and the different theories will give us quite different answers.
Brady: Now that's the utilitarian position versus the libertarian position. Are there other parts of the theories that fit into this example? Or maybe it makes sense to go on to another example if you want to illuminate the other-
Glenn: Well, another example that's gotten a fair amount of attention in Ontario and in some other jurisdictions is the question of raw milk consumption. And most milk goes through a pasteurization process, but there are some people for a variety of reasons that would like to have- To be able to consume raw milk.
Brady: So pasteurization, we're just basically heating up the milk to kill certain bad things, bad bacteria.
Glenn: And sort of the long-standing public health argument, which essentially is the utilitarian argument says that there's a net gain in utility, there's a net benefit even though it does impose some costs. There's a net benefit to pasteurization and everybody should drink pasteurized milk. And there's also a legal positivist argument that says that currently, in the province of Ontario and in many jurisdictions, it is illegal for a farmer to sell raw milk commercially to a customer. So there's a legal positivist argument that says that's what the law is and so that should be what is followed.
But there's a case very similarly in Ontario where a farmer-
Let me back up a little bit. Because one of the important aspects from a legal positivist point of view is that there is an exception to the rule and the exception is that a farmer can drink raw milk from his or her own cows. And that's a long-standing exception, but you can't sell it to somebody else.
There was farmer in Ontario and he introduced what was called a "cow share" program. So that people who were not part of his family could buy shares in a cow and then they were cow owners and he argued that they would then be eligible to drink raw milk from the cows that they owned as a cow share in this cow share arrangement. And there was a court case about that. And that court case is going to be appealed, apparently, to higher levels.
The farmers and I think the cow share owners who've generally been unsuccessful in making this case that they're trying to make tend to come at it more from what I would call a classical liberal or modern libertarian point of view, which goes back to this ownership. "I own my own body, I own my own cows. I can go into a contractual arrangement with somebody else to share cows. And if I choose to consume milk from my cows that's unpasteurized then that's my business and it's not anybody else's business."
The utilitarian public cow argument tends to hinge on this estimation or calculation of net benefits. So there will be costs to non-pasteurization of maybe diseases and those diseases would have to be treated and so by pasteurization we eliminate that and save those costs.
Brady: One of the things that comes out of your paper is this discussion of legal positivism, which has always been-
We've talked about this before. I'm always interested in this issue where ... I think to a legal positive they might define property as the word given to a protected set of interests. So I'm just thinking of phrases from someone like Warren Samuels who might say, "Property is protected not because it's property, but it's property because it's protected." And in our discussions, you've always had a somewhat different, I think, perspective than that. And I wonder if we can just talk about that a little bit.
Glenn: Well, I think that's a very good recapitulation of legal positivist theory of property rights and that is that legal positivism and I think pragmatism and utilitarianism characterize rights in general as political. And that is, people have rights because the legislature granted them those rights. In contrast with classical liberalism or modern libertarianism which tend to view rights as pre-political.
That is, you have rights because you're human not because a legislature or a king or some other political organization declared that you had those rights. But certainly legal positivists say that your rights are whatever, in the Ontario context, whatever the legislature says they are.
And if you can point to chapter and verse in current statutes and laws in Ontario that say you have a particular right, then a legal positivist says you have that right. And if you can't point to that chapter and verse then a legal positivist would say that you don't have that right. Sometimes legal positivists use the term "presumptive right." Which is, you think you have a right, but in fact there's no legislative authorization that declares that you have that right, therefore it's presumptive. You don't really have it, because the legislature hasn't granted it to you.
Brady: And how does that contrast with the Lockean or the natural law position that you talk a little bit about in your paper?
Glenn: The classical liberal and the modern libertarian views tend to be based on natural law, which views rights as pre-political, which is you have rights because you're human. And that would exist even if you were the only human being on the planet and there was no organization called a government or a state or a legislature or what have you. And so those are rights that we acquire by virtue of being human. Because we exist, we have these rights. John Locke was one of the leading proponents of that particular view of the origin of human rights. And then he devoted quite a bit of attention to an explanation of how these rights become rights to property, which is a claim of authority over something in the external world, external to my body. So if I say I have a property right in this pencil, that's something in the external world, I'm claim authority over this pencil, by virtue of Lockean rights claim.
Brady: So when we look at-
You've given two examples we could talk about agriculture zoning or things like green belts. All of these things tend to influence the debate by discussions about whose right is it to decide how property should be used.
Do you see, coming from your own research and your own experience and your paper, do you see a research agenda or an extension role for academics or even maybe for government people in using the kind of work you've done or plan to do to illuminate the issue further? What should a graduate student listening to this podcast think about as a research area? Or what should a government official listening to this perhaps think about, "Okay, well, I'm looking at this issue in Ontario. How might I use this information?
Glenn: I don't know that it's a research issue or research agenda or an outreach agenda, but I think it would be good if we could have a higher level of awareness of, first the existence of these different theories of property rights and an ability to recognize them in the wild. I teach these in some of the courses that I offer, particularly my undergraduate courses here at Guelph. And by the end of the semester, I tell students that my essay on five theory of property rights is kind of like Peterson's Field Guide to the Birds.
When you go out into the woods, if you were to study Peterson's Field Guide to the Birds, you should be able to recognize the different species of birds when you see them in the forest. And what I hope my students would be able to do is to be able to recognize these different theories of property rights when they encounter them in policy discussions, in research documents, in speeches, and in even in things like movies. Because there's a lot of popular culture that makes reference to some of these things.
So that's sort of an awareness thing.
I think the research agenda is to start to focus on what I'll call the comparative analysis or the comparative evaluation of the five theories. If we don't even know we have five different theories and we're having these apparent policy debates over things that look like facts and they're not really about facts, they're about the five theories. Then we need to at least be aware that there are these different theories.
But once we get to awareness, then what? Because if we're having this debate among theories, then we have to be able to evaluate. We have to be able to compare.
So one of the things I talk about at the end of my paper is, I kind of start to sketch what I call a comparative evaluation of the five theories of property rights. And I think that that's an important research agenda item for, not just applied economists, I think, legal scholars, political scholars, even ethicists. We need to take more seriously the evaluation, even to think about what the criteria are. How are we going to measure the performance? What's the evaluation scale going to be to measure these five theories and to decide-
Is there one theory that always dominates? Or does one theory work well in one set of circumstances and not work so well in another set of circumstances? Then we need to figure out what's the distinction between the sets of circumstances that influenced the applicability of one theory versus another.
So I'd say that's where I see the research agenda going on this topic. And a few years ago, Per Pinstrup Anderson, who was giving the presidential address at the American Agricultural Economics Association really challenged our discipline, which tends to be a very utilitarian-oriented discipline in terms of its implicit theory of property rights. And he said, "We need to be aware, and we need to understand non-utilitarian theories." And so I see my essay as really responding to that challenge that he made and kind of fleshing out in more detail what the non-utilitarian alternatives are. And then we need to figure out as ag economists or as natural resource economists, what are the implications of these different theories for the types of policy analyses that we typically do in our work.
Brady: Well put. We will have links up to Glen's paper and additional links and references to issues discussed in this podcast.
Glen, thank you so much for speaking to us today.
Glenn: Well, you're very welcome.
Brady: Thanks for joining us at FARE Talk. We hope you will continue to check our website for updates and the latest podcasts.
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