Even before exchange is possible, there must be an understanding of property, a sense in which what will be exchanged belongs to the person who will exchange it. Otherwise, one would simply take things rather than offering an exchange of mutual benefit. For a functional market and a functional society, it is easy to see that understandings of personal, or shared property, had to evolve.

The idea of the private ownership of valuable capital is a great contribution to economic life. It is a natural extension of the idea of belonging — what a person does, creates, or is associated with most directly, belongs to them. This is ownership, or property, by creation. Naturally, in this sense capital inherently belongs to someone. This meaning of ownership is not transferable; whether a painter still has a painting or has given it away, it remains his by the deed of creation. And in the same sense, this writing will always remain mine most directly. Almost certainly, this property-by-creation would have been the first understanding of belonging and ownership, the association of the deed with the one who has accomplished it.

But, in order to exchange the physical property which is created or maintained by people, more is required. There needs to be an understanding of property which can be transferred from one owner to another, used or exchanged again according to the desire of the owner. This sort of property is beneficial and useful so long as it is an understanding resulting from voluntary exchanges, or from the original effort invested in its creation (with goods, for example) or development (in the case of land) before it has been exchanged. An understanding of exchangeable private property, connected to accomplishment and use, is essential for mutual benefit within a market.

However, over history the concurrent development of an understanding of private property with the development of law has not produced a consistently desirable result. The law as the codification of official, governmental opinion asserts a monopoly over the definition of belonging, a monopoly which is ultimately supported by force.

The assigned role of defining and guaranteeing property, coupled with the monopoly on force which can take it away, has ensured a conflict of interest within the government. For example, the U.S. government has come to own almost one-third of U.S. land through eminent domain, environmental decrees, and asset forfeiture, much of it without compensation. This is the eventual result of mastery over private property, characterized as early as 1795 by the attitude of the U.S. Supreme Court: "the despotic power, as it has been aptly called by some writers, of taking private property, when state necessity requires it, exists in every government... government could not subsist without it."

An extreme example of this conflict of interest occurred in the western United States in the 19th century, after the Civil War. During this time a coalition of government-subsidized railroads, and politicians, many of whom were bribed or had financial interests in the railroads, willfully displaced, starved out, and murdered Native American settlers of western lands so that the railroads might expand through the country. Vast tracts of land were provided to these corporations through official land grants, in contradiction to the established ownership of the same land by native Americans, who were not considered official citizens with legal property rights. The army was employed to support the planned, legal theft of this land through organized genocide, which General Sherman would approvingly label as "the final solution to the Indian problem" in 1867. Clearly the land belonged to the Indians, and clearly they were people — but they were not full people officially, and therefore had no official rights to land, or any property. Neither property nor profit were to blame for what followed from the exploitation of law and governmental force, and the system which made it so easy.

In the past, when the most significant private property was physical, the protection of property under law served people well for the most part. Property such as land is relatively easy to record officially. The intervention of law to protect it generally benefits people, provided of course that recognized property has not been obtained involuntarily, through influence with government as the guarantor and arbitrator of property, as in the example of the railroads. But even when property law works without corruption, there also comes an unyielding artificial definition of property. If the law recognizes property, it is owned. If not, law as the recognized social confirmation of property in the eyes of others, discounts ownership. At best, law only follows the custom of property as it is already recognized, as with the American Homestead Act of 1862, which granted legal title to 'squatters' who had already been farming land for at least five years. Where it fails to recognize this easily enough, squatters remain squatters rather than owners, and businesses remain black-market, unable to acquire the legitimacy necessary to succeed in a society with law. The failure of official property to follow custom is an enormous barrier to prosperity in developing countries.

And law is a labyrinthine accumulation of tradition, legislation, and precedent dating far back into history. It is rarely relieved of any bulk or complexity; it is regularly enlarged. Property law today retains remnants of conceptions of property from long ago. Like any protected bureaucracy, legal administration is not efficient or responsive at reflecting present day. Even aside from the problem of making mistakes (which is always more common in a bloated bureaucracy), this sometimes means that legal property is far removed from an understanding of property as it is currently created, developed, maintained, used, and exchanged.

The problems with legal definition and enforcement of property are largely inseparable from the realities of law as a province of government. Government evolved in large part in order to defend and administer territorial divisions, and was designed over millennia according to the job. A mentality was thereby developed and acquired which still exists today. Among other things, this mentality values the maintenance of an enduring, regimented order, and recognizes static relationships where none exist. The bureaucratic, ruling tradition still defends what exists with a clannish singularity of purpose, distrusting change just as ancient rulers distrusted strangers in their fiefs. Governments assume the exclusive right to force and even deceive in order to defend their turf. This mentality was not developed for commercial application, and sits at odds with what is necessary for exchange. Production and trade require and seek openness.

Turf boundaries and borders, whether physical or mental, get in the way when valuable property means more than land. Government really outlived its usefulness as an arbiter of ownership as soon as wealth began to mean something more than agricultural production. Land can be effectively recorded as fixed property even when the origin of its ownership comes from tradition and use. But other kinds of capital and property are more difficult, especially when they are not objects. Property has now outgrown law.

The most telling example of this is the current debate over intellectual property. Law still approaches ownership of ideas in the very same way it approaches the ownership of physical possessions. Rules and certain exceptions are made for the ownership of intellectual creations through patents and copyrights and trademarks, they become precedent, and they are doggedly enforced. But knowledge and ideas are mental capital, they are not physical capital. They can be copied and exchanged freely by word of mouth or through modern technology. People are making use of this ability even as the law forbids it, and is powerless to stop it. Infringing on a trademark or copying music electronically may be illegal, but it is not theft. What people have discovered in practice is that they can profit from the exchange of the intellectual capital they already have in their mind, or recorded on media. Intellectual property still has its owners by creation, and it has its owners who possess it and use it. It just does not exist neatly as the sort of fixed property that government is used to defining.

One criticism of unenforced intellectual property is that those who invest in the development of a profitable concept will not be ensured a reward commensurate with their investment. It is imagined that the writer of a novel who makes a deal with one publisher will immediately find copies of that novel on the market, published without compensation for the author. It is imagined that an inventor without the protection of a patent will find his invention copied by large companies and his development efforts wasted. It is imagined that companies will find their competitors instantly copying their products. This is a distortion. Not only is it possible for agreements over the ownership of concepts to be made voluntarily, respectability might depend on it within an industry. Even now with enforced intellectual property, this is more powerful than legal enforcement. What would authors think of a publisher who did not respect authorship? In a free marketplace, what would people within industries think of companies who showed no recognition for inventors? We should note that the major modern examples of companies copying the work of others directly are corporate coalitions between government and business which can depend on official support to maintain their position, the large corporations of China and Japan for example. These are not subject to the full tests of marketplace reputation.

An evolution to intellectual property by voluntary recognition only will make for a more competitive marketplace. But there is nothing little undesirable about this, and there is much which is desirable. Rising through intellectual advantages may take great ability, but so much the better. In such a market, the most driven and able people will be competing hotly to perform better for customers at every stage, from concept development, to production, to delivery. This will reward greater adaptability and talent, greater organizational skills, greater daring. It will open the market to smaller competitors challenging established companies. It will help to develop business and exchange to reward those who take action and pursue innovation rather than those who just maintain a position. This is what capitalism should be.

The creators of many kinds of intellectual property are already discovering that they can profit in this fluid property environment along with customers, they just need to find new methods and new models which are different from the standards based on static, fixed property. Enforcing direct sales on every single use of an idea is unrealistic. Publishers discovered this when copiers were introduced. Today voluntary contributions by institutions with copiers, such as universities, replace any lost profit. The model of contributions for future work is one example of another model. Another is counting on the desire of people to voluntarily support what they value, counting on the infrequency of unmitigated thievery, an approach which has already worked with software, music, and other media.

Since a Promethean society does not have territorial government, those who live in it must replace the official, legal guarantee of property, with the arbitration of property disputes. They must find and adopt standards for the recognition of property, and independent agencies without the conflicts of interest that officials often have. But it is not necessary to have a detailed, specific, centralized plan for the notation and guarantee of every kind of property, before the foundation of a Promethean society. That would be law-code thinking again, suitable for centralized planning but not for an organic, free society. There may not be one best way of accounting for property by an independent agency. What is necessary is just the organization of some initial standards, which can be replaced or change over time under the combined scrutiny of the independent choices of a market.

Some standards would have to be used by a third-party arbitrator to determine ownership, in cases of dispute. Usually this would be possession, but not in the case of possession of property which has been stolen, obviously. Evidence could be submitted for each side, just as it is in court today. Ownership is already well understood by expectation, in most circumstances. The choices required in a market will find solutions to the specific questions, such as access to resources, and when intellectual ownership might have to be respected. Practice will find what works in practice, and independent, private arbitration will respond far more readily than law.

Legal standards need not be what works, or what makes any sense — but if a law exists, it is defended for the sake of inertial hegemony (assuming an absence of the corruption which is actually quite common). As opposed to legal standards for property, market forces do tend to find solutions which work. Fixed property in the context of media does not work. Property based on use does. However, fixed property in the context of land is a defensible standard. There also may be adoptions of use-based and fixed standards for the same types of property which are more or less applicable within different contexts. Only a decentralized market will find these and respond.

If private arbitration of property seems implausible, it is worth considering that commercial law did not evolve from a ruling tradition, quite the opposite. It was adopted into public law from private arbitration which was invented independently out of desire and need. In Europe, feudal law was intimate with rank, and incapable of the 'radical' assumption of individual equitability in the arbitration of disputes, an assumption which was becoming necessary for commerce. Merchants established their own courts of arbitration based on expectation and the accumulation of precedent, the custom of merchants, beginning in 12th century Italy. This "law merchant" system was the first administration of disputes in Europe which was capable of fairly deciding commercial issues, and was the first one which might have been able to recognize claimants to property (including land) on an equitable basis. Considering that this came from private ingenuity rather than territorial government, does it really require much imagination to conceive of independent arbitration of the ownership of property, as well as contract dispute over the exchange of property?

<< Promethean Capitalism contents
< previous, Part Three: Exchange and Markets
> next, Part Five: Environments and Resources