Property Rights and the Paradox of Power

In the past we have discussed “property rights” in terms of its importance in the creation of capital. In a defining book about the subject, “The Mystery of Capital” by Hernando de Soto, his thesis was that countries would be perpetually poor if they do not have three things:  1)   respect for private property;  2)  clear title for property that is fungible; 3)   institutional protection of property. It must be clear to all comers that I have clear title, I have to be able to divide my property, deed it and mortgage it;  further I cannot be looking over my shoulder at others or the government to take it away. And without these three elements capital will never flourish.

 

Clearly the importance of property rights goes far beyond my quiet right to enjoy property.

 

But there are other reasons, unrelated to economics, for which property rights are fundamental. One of our founders, James Madison, referred to it as the “paradox of power.”  It goes something like this:  We all recognize the need for government and then the need to cede some power to the government so it can accomplish its functions. But we all know what happens with power, so the moment we give power to government we have to put sideboards on it. We have to try and control government otherwise it runs amuck; not only the government but the individuals in power.

 

Our system of government provides for different branches of government, actual separation of powers, checks and balances, and a Bill of Rights thrown in there for good measure ? all controls on the exercise of power. But also, we have not only written property rights, we also have institutionalized property rights. We don’t have property as something that comes from the power of government, i.e. grants that can be given and taken away. It does not flow from whimsy or from those in power at a particular moment. Property rights are truly a firewall against abuse of power.

 

Some would argue we really have no secure rights without this institutionalized respect for private property – that all rights really flow from the protection of property.