Econ 640 Feb. 19 class on rights and property rights Prof. Howard Baetjer

Themes we have considered Spontaneous order  Often superior to what can be accomplished by design Dispersion of knowledge Value of decentralizing power Wariness of unlimited government

 Language  Taxis: Esperanto anyone?  Invented in 1887 by L. L. Zamenhof  Science and technology  Markets and economies  Internet  Customs, culture, entertainment  Law  Ecosystems  Taxis: The Biosphere project Examples of spontaneous order

 " To the layman untrained in economics, the market economy presents a bewildering face. It consists of numerous individuals each intent on his own goals, giving no concern to the overall social implications of his pursuits. No central coordinating agency controls or even monitors the innumerable independent production and exchange decisions made by these countless individuals. It is no wonder that the market economy seems to be nothing but a jungle of clashing, discordant individual activities.“- Israel Kirzner Why Are Markets Feared?

Finish up from last time

Why are property rights important? Ownership is necessary in a material world Avoids “the tragedy of the commons” The market economy is a ‘vast network’ of voluntary exchanges of property titles  voluntary transactions insure win-win trades Property rights facilitate the spontaneous order. They put control where the knowledge is.

Rothbard’s theory of justice in property rights What are the main elements? Why is governmental definition of property rights problematic? Why does communism in theory mean rule by a smaller group in practice?

The relationship between rights and government – classical liberalism Built on the ideas of Sophocles, Cicero and many others. People have rights before the existence of government (natural rights). The purpose of government is to protect their rights. People are justified in dissolving governments that do not protect their rights.

Thomas Jefferson in the Declaration of Independence certain “We hold these truths to be self- evident: that all men are created equal; that they are endowed by their Creator with certain inalienable rights; that among these are life, liberty and the pursuit of happiness; that to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed…”

The relationship between rights and government – positivism Law established by governmental authority All rights are man-made Can be granted or taken away by man ‘Rights’ can advance ‘common good’ at the expense of individuals

The U.S. Constitution: The enumerated powers doctrine All power is originally vested in, and consequently derived from, the people.”- Madison “The powers delegated by the proposed Constitution to the Federal Government, are few and defined.”- James Madison The real source of the power of the U.S. Constitution is the transcendent notion that man has “inherent and inalienable” rights.

The U.S. Constitution: The enumerated powers doctrine “By enumerating particular exceptions to the grant of power [to the government], it would disparage those rights which were not placed in the enumeration…; - Madison “…because the powers are enumerated, and it follows, that all that are not granted by the constitution are retained [by the states or the people” – Madison

The solution – the ninth amendment “The enumeration in the Constitution of certain rights shall not be construed to deny or disparage others retained by the people.”

‘Freedom’ in Firms “(Freedom is) that condition in which the agents in a social system are unrestrained in their ability to act except by rules or principles that apply to the organization of a system as a whole—including those responsible for the rules.”- Michael McMaster The “rule of law”  Known rules  Equally applicable to all

Lissack and Roos on Simple Rules in Organizations “Organizations are not the legal code expounded by the corporate office and memorialized in 20-page memos… Instead they are the day-to-day actions of the members of the network-employers customers, suppliers, partners...” “In an organization, you don’t have to “incentivize” anybody. You have to create the conditions under which they can thrive.” “Underspecified guiding principles like “work hard” are useless. Overspecification, like “if…then…” makes guiding principles equally useless.”

Nordstrom’s Simple Rule For Employees WELCOME TO NORDSTROM We're glad to have you with our Company. Our number one goal is to provide outstanding customer service. Set both your personal and professional goals high. We have great confidence in your ability to achieve them. Nordstrom Rules: Rule# 1: Use your good judgment in all situations. There will be no additional rules. Please feel free to ask your department manager, store manager or division general manager any question at any time.

Southwest Airlines Few rules. A core rule is “follow the golden rule.” One pilot applicant was rude to a Southwest gate agent and his interview cancelled. Distributes “They” with a red slash buttons to employees. Everyone on a Southwest flight crew, even captains, pitch in to get planes turned around quickly. Surrender self-importance.

What are the implications of Rothbard’s view for: Inequalities of wealth or income? Inheritance? Prohibition of recreational chemicals? Wages and hours laws? Immigration? Zoning, “smart growth,” and other land use policies?