Creation, Consent, and Government Power over Property Rights

Daniel Klein’s essay effectively criticizes a longstanding argument in favor of government control of the economy and society: the idea that the state is entitled to broad power to redistribute property rights because it “created” them to begin with. As Matthias Matthijs describes it in his response essay, the argument holds that “there is nothing ‘natural’ either about laissez-faire capitalism or private property rights; they were both enforced by the state in the first place.”

In my response, I will add some points to Klein’s critique of this claim. I also consider a closely related justification for government power over the property rights that Klein also mentions: the assertion that wide-ranging state control is justified because the people have “consented” to it, either by voting in elections or merely by choosing to live in the area controlled by the state. Both arguments are seriously flawed. However, consequentialist justifications for activist government are not so easily dismissed.

I. Government did not “Create” Property Rights

Scholars such as Robert Ellickson, Harold Demsetz, Elinor Ostrom, and Hernando de Soto have documented how private property rights often emerge even in the absence of government enforcement.[1] The claim that such rights are necessarily “created” by the state is simply empirically false. The institution of private property long predates the existence of the modern state, or indeed states of any kind.[2]

Obviously, states do often enforce property rights, and that state enforcement is sometimes more efficient than private sector alternatives would be. But the mere fact that government enforces property rights does not give it the right to redistribute them in any way it sees fit.

The circumstance that the state enforces a right does not prove either that the right could not exist at all without the state or that its moral legitimacy flows solely from the state’s recognition. If it did, the same argument would apply to other rights protected by the state. For example, most governments enact laws forbidding murder, rape, violations of freedom of speech, and slavery. Without these laws, our lives and liberties would be more at risk. In that sense, government has “created” our rights to life, speech, sexual autonomy, and free labor in exactly the same way as it “created” property rights. In the terminology of Stephen Holmes and Cass Sunstein, these rights are all “creation[s] of state action,” because “laws [enable us] to acquire and hold” them.[3] Yet no one argues that the state therefore has the right to kill, censor, rape, and enslave its citizens at will.[4] With property, as with life, liberty, and speech, the fact that the government helps protect a right does not mean that it “created” it or that it may dispose of it as it pleases.

II. Property, State Power, and Consent

Klein’s essay also briefly discusses the claim that government may reallocate property rights as it sees fit because we have consented to its authority to do so merely by living within the territory over which it claims sovereignty. Even if the government did not create property rights, perhaps citizens are bound to submit their property to its dictates because they implicitly consented to it.

This argument has a venerable history, dating back at least to Plato’s Crito.[5] But it is ultimately unsound. The key flaw is that the argument assumes the validity of the very point that it is meant to prove: that government has the right to enact laws of a particular type in the first place. If mere physical or political control of a given territory gives the state the power to regulate property within that area as it wishes, then of course residents are required to follow those laws. But the existence of such a right is in no way demonstrated merely because individuals have chosen to live in the area.

Consider the case of an organized crime boss who has established a “territory” and has the physical power to punish area residents who disobey his decrees. Do residents have a moral obligation to pay him protection money or turn over property to him whenever he demands it? Obviously not, since the boss never had a moral right to issue such commands in the first place. The fact that people choose to live in the territory he claims does not establish that they have consented to obey him in any morally significant sense. What is true for organized crime bosses is also true for governments: the mere fact that a government establishes control over a territory and at least some residents do not choose to leave does not prove that they are required to obey the government’s dictates with respect to their property rights.[6]

Perhaps the consent argument for state control of property rights becomes stronger if the government in question is democratic. Even if mere residency is not enough to prove consent, perhaps participation in democratic elections is. This narrower version of consent theory is more appealing than one that would give carte blanche to authoritarian rulers as well as democratic ones. But it still suffers from the same flaws as its more sweeping cousin.[7] It too assumes the validity of the point it is intended to prove. The fact that a majority of residents have voted for a government that enacts a particular restriction on property rights does not prove that either the majority or its representatives were morally entitled to dispose of those rights in the first place.

This is particularly true if at least some of the residents never agreed to be ruled by the winners of the election, and never had a chance to vote on the logically prior question of whether they accept the underlying structure of the electoral system. Consenting to take part in an already established electoral process does not mean that the voter consented to allow the winners of the election to control his or her property rights. Once a political system is established, one can rationally choose to vote for the “lesser evil” among the available candidates even if one would prefer that the relevant government not exist at all or have much more limited powers. Any “consent” entailed by choosing to vote is further undercut if the winners of the election exercise authority over nonvoting residents as well as those who chose to participate.

Consider the following modification to my crime boss example. Imagine that the Corleone and Barzini Mafia families of Godfather fame each claimed to control a “territory” somewhere in New York City, but agreed among themselves that the right to reallocate property rights in the area would accrue to whichever of the two crime families won a majority of the residents’ votes in a referendum.[8] Let’s say they allow a new referendum to take place every four years. Maybe they even permit other Mafia families to compete in their elections so long as they follow the electoral rules initially established by the Barzinis and Corleones. Few would contend that the Barzini–Corleone cartel is justified merely because their willingness to hold occasional elections proves that the residents have consented to let them tax and regulate property at will.

As with the broad version of the consent argument, the “democratic” version also applies far beyond the area of property rights. If the mere opportunity to vote in elections implies that residents have consented to government control over their property, why not also over their lives, sexual autonomy, speech, right to be free of slavery, and so forth?

Democracy is a useful tool for imposing accountability on government. The democratic Mafia cartel I envision is likely to be less oppressive than the more authoritarian system described earlier. But democracy does not by itself justify untrammeled government control of either property rights or any other rights enjoyed by the people.

III. Consequentialist Defenses of Government Power

Like Daniel Klein, I believe that creation and consent-based arguments for government control over property rights are seriously flawed. But I am not convinced that such arguments are either the most important or most commonly used justifications for the modern activist state. As the widespread negative reaction to the Supreme Court’s decision upholding the taking of property for “economic development” in Kelo v. City of New London shows,[9] most Americans reject the claim that government has an inherent right to dispose of private property as it wishes.[10] Even 77% of self-described liberals disapproved of the decision, which was also opposed by a variety of liberal activists, including Ralph Nader and the NAACP.[11]

Most modern liberals and social democrats instead resort to consequentialist arguments to justify the powers they wish to allocate to the state. For example, President Obama usually defends his health care plan on the grounds that it is necessary to increase access to health care and reduce its costs. More generally, the political left advocates severe restrictions on property rights and economic liberties because these are supposedly needed to promote beneficial consequences such as public welfare, happiness, and equality. For their part, many social conservatives often argue that such restrictions are needed to enforce good “moral values,” thereby justifying such policies as bans on prostitution and gay marriage, and the War on Drugs. Even if sweeping government authority over property rights cannot be justified on a priori grounds, perhaps it must be accepted because the consequences of rejecting it are too dire to risk.

In my view, these kinds of consequentialist arguments for activist government have serious weaknesses. Both liberals and conservatives overstate the benefits of big government, while underrating its dangers. Nonetheless, this kind of consequentialism is the most important opposing view that libertarians and other property rights advocates must engage with.


[1] See, e.g., Robert Ellickson, Order Without Law: How Neighbors Settle Disputes, (Cambridge: Harvard University Press, 1991); Elinor Ostrom, Governing the Commons (New York: Cambridge University Press, 1990), Hernando de Soto, The Other Path: The Invisible Revolution in the Third World, (New York: HarperCollins, 1989); Harold Demsetz, “Toward a Theory of Property Rights,” American Economic Review 57 (1967), 347–59.
[2] See Richard Pipes, Property and Freedom, (New York: Vintage Books, 1999), pp. 64–94.
[3] Stephen Holmes and Cass R. Sunstein, The Cost of Rights: Why Liberty Depends on Taxes, (New York: Norton, 1999), 210, 217.
[4] Sunstein has, however, used these types of arguments to justify wide-ranging government restrictions on freedom of speech. See Cass R. Sunstein, Democracy and the Problem of Free Speech, (New York: Free Press, 1995).
[5] In Crito, Socrates argues that he is required to obey Athens’ laws because he chose not to leave the city. See Plato, Crito, in The Collected Dialogues of Plato, (Edith Hamilton and Huntington Cairns, eds. 1969), 27.
[6] For a more detailed critique of the consent argument along the same lines, see A. John Simmons, Moral Principles and Political Obligations, (Princeton: Princeton University Press, 1979), 95–101.
[7] I have criticized this and related consent arguments in more detail in Ilya Somin, “Revitalizing Consent,” Harvard Journal of Law and Public Policy 23 (2000), 765–72.
[8] Mario Puzo, The Godfather, (New York: Fawcett Crest, 1969).
[9] 545 U.S. 469 (2005).
[10] Some 80% of the public opposed the decision, which was also denounced by a wide range of politicians and activists. Ilya Somin, “The Limits of Backlash: Assessing the Political Response to Kelo,” Minnesota Law Review 93 (2009), 2108–2111.
[11] Id. at 2111.

Also from this issue

Lead Essay

  • In his lead essay, Daniel B. Klein introduces us to the idea of overlordship – the premise, implicit in modern social democracy, that the state is the ultimate owner of all property rights in society. Under this theory, the state provisionally delegates any rights that individuals may have, and it is free to revoke them as well. The social contract, to which we have all allegedly subscribed, gives warrant for these acts, or so we are told.

    Though his formulation may seem quite harsh – “overlordship” is a term we more often associate with feudalism – Klein traces its development in the late nineteenth century, citing authors who were quite explicit about their intentions. He also cites recent figures, up to and including President Barack Obama, who subscribe to substantially the same views. Klein calls for a return to individualist modes of ownership, as championed by David Hume and Adam Smith, both of whom were also skeptical of the social contract in general, owing in part to the dangerous consequences implicit in that mode of thinking.

Response Essays

  • Matthias Matthijs charges that libertarian thinking caused the biggest economic disaster since the Great Depression, and that our current political climate is nonetheless still dominated by an ideology highly congruent to Daniel Klein’s. Reasonable people, however, now doubt even market capitalism itself. Libertarians and social democrats disagree on three fundamentals: the empirical evaluation of government efficacy, the positive/negative liberty distinction, and the absolutism of private property rights. On each disagreement, Matthijs argues, the social democrats have the upper hand. In particular, property rights would not exist without the state to regulate them, and these rights are in no sense “natural.” A natural right, Matthijs argues, would never have any need of defense by the state.

  • David Friedman suggests a threefold classification of rights. In his scheme, normative rights are moral claims whose violation results in a moral judgment: I may think, with reason, that you are a bad person. A legal right is one that has been duly written into the law. Finally, a positive right is one for which violators face meaningful consequences, such that they will be substantially deterred. These definitions differ somewhat from those found in traditional legal theory, but Friedman defends the analytical power of his schema. In practice the three types overlap, but we may still analyze rights according to their normative, legal, and positive dimensions. Friedman offers historical and contemporary examples of the three types of rights and speculates on their origins using game theory.

  • Ilya Somin examines three arguments for government control over property rights: the claims that property rights are created by the government, that residence and/or citizenship imply consent, and that government control can produce superior outcomes to private control, regardless of theoretical justification. He dismisses the former two and concedes that the latter, consequentialist argument for government control is the strongest of the three. Still, he argues that this approach has serious weaknesses, in that people across the political spectrum tend to overestimate the good that governments can do.