1. presentation copyright 1999 by Barry Brownstein Property Rights and The Distribution of Income

2. Distribution Of Income l ‘No one actually distributes incomes’ –‘peoples incomes are the results of many interacting decisions l ‘The product of supply and demand for productive services’ l Individuals can choose to acquire additional capabilities to boost their incomes

3. Property Rights and The Income Distribution l The market economy is a ‘vast network’ of voluntary exchanges of property titles –voluntary transactions insure win-win trades l Suppose you are prohibited from using your own labor? –Licensing, minimum wage laws l Prohibitions against land use –rent controls, zoning

4. John Locke and Natural Rights n people have rights before the existence of government (natural rights) n the purpose of government is to protect their rights n people are justified in dissolving governments that do not protect their rights.

5. ‘Positivism’ as an Alternative To Natural Rights l Law established by governmental authority l All rights are man-made l can be granted or taken away by man l ‘rights’ can advance ‘common good’ at the expense of individuals

6. Natural Rights vs. Positive Law l Finite and defined- right not to be coerced, if you do not violate someone else’s rights l win-win (not scarce, one person’s use of self-ownership doesn’t conflict with someone else’s use) l conduct considered l Ill-defined- whatever advances ‘the common-good’ (i.e. ‘right to a good job’, ‘right to health care’,) l win-lose- there is no “right to a particular state of affairs unless it is the duty of someone to secure it.” l outcome considered

7. Time Line n John Locke (1632-1704) – Two Treatises on Civil Government n Thomas Jefferson (1743-1826) – 3rd President-author of Declaration of Independence n James Madison (1751-1836) – 4th President-"master builder" of the Constitution n US. Constitution- 1787 – amended with the Bill of Rights 1791

8. Thomas Jefferson- Declaration Of Independence “We hold these truths to be self evident: that all men are created equal; that they are endowed by their Creator with inherent and 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…”

9. The revolutionary basis (of this country) is recognition of the fact that human rights are natural rights, born in every human being with his life, and inseparable from his life; not rights and freedoms that can be granted by any power on earth.- Rose Wilder Lane

10. James Madison on Government "All power is originally vested in, and consequently derived from, the people.” “The powers delegated by the proposed Constitution to the Federal Government, are few and defined.”

11. Property in One's Own Person n Three Possibilities – absolute right to own one's body – certain person or persons own other people – every one has an equal share in everyone else

12. Natural Rights In the Constitution (Amendment 1) Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press;....

13. Ownership of Physical Property n Three Possibilities – transformer or creator has the property right, (homesteading principle) including the right to pass on property to one's heirs – another man or group of men have the right to appropriate the property by coercion – everyone has equal quotal share in all property ("property is theft")

14. Property Rights in the Constitution (Amendment 5)...Nor shall private property be taken for public use without just compensation.

15. “Bread-Store Chain Tells Franchisees: Do Your Own Thing” l Great Harvest Bread Company- 151 stores l “Anything not expressly prohibited by the language of this agreement is allowed” l Simple rules allow for faster adaptation, innovation and collaboration l In contrast with ‘Roman Law’ organizations which prohibit everything that they don’t permit

16. Demand Creates Income l “nobody's will can determine the relative incomes of the different people, or prevent that they be partially dependent on accident.” l the values that are placed on your services do not necessarily correspond to your merit or need, but corresponds to the value the purchaser of the service has

17. Demand and Income l “Incomes earned in the market by different persons will normally not correspond to the relative values of their services to any one person...the performance of a Beethoven sonata...or a play by Shakespeare have no 'value to society' but a value only to those who know and appreciate them.” l The problems with ‘comparable worth’

18. The Problems With Redistribution l Who has the knowledge to get to the target? l “... to assure the same material position to people government would clearly have to treat them very differently to compensate for those disadvantages and deficiencies it could not directly alter.” l The problems with continually changing the rules of the game –destroys the foundation for social cooperation –people then fight over the rules instead of producing

19. What About Discrimination? l The greater the restrictions in the output market, the greater the level of discrimination –example- AT&T (pre-deregulation) l The greater the competition, the lower the level of discrimination –example- technology companies

20. Are Markets Darwinian? l In many non free-markets, the most cunning and intimidating thrive l Markets are a mixture of cooperation and competition l Reputation and trust are essential elements in markets

21. Are Markets Darwinian? l In free-markets property rights are respected for all –contracts are respected and enforced –people are free to exchange l The most productive do the best –but all thrive due to capital accumulation –but many volunteer and are charitable –technology helps the ill, less fit and disabled