8 Questions Libertarian Title Theory Should Aim to Answer

My interest in the legal debate surrounding the legitimacy of fractional reserve banking has lead me to a deeper interest in title theory in general. As a young, hopeful philosopher, I hope that I am one day able to contribute meaningfully to these discussions. While I have inclinations about the correct answer to all of these questions, each question has at least some parts which I consider, so far, not completely answered. All of these questions, I believe, have important implications in the real world and libertarians must be prepared to answer them.

1. What is Its Ultimate Justification?

Libertarian title theory has had a slew of justifications in the past one hundred years from Rand to Nozick to Mises to Rothbard to Hoppe to van Dun and many others (including more fringe thinkers such as Stefan Molyneux).  Anyone who is familiar with these different justifications realizes that their reason for believing that men ought to respect one another’s property are not the same. For Rand, it is a respect for one’s own life which dictates that we not infringe upon the property of others. For Mises, it is universally preferred to respect property since we all benefit from it, economically. For Rothbard, a respect for property allows us to realize human flourishing and avoid being defective persons. For Hoppe, it is a respect for the norms of argumentation which leads us to recognize peaceful relationships and conflict avoidance as ultimate human ends, which can be achieved by a respect for private property rights.

The reason that the differences are so important is because when we discuss any applied problem of title theory (for example, fractional reserve banking) we want to be sure what the goal of our theory is. If the goal of our goal is to promote human flourishing, as the Rothbardian may answer, then any question of who has title, when they gain or lose title, whether or not they can relinquish title, are only answerable in terms of how much that rule promotes human flourishing. The Hoppean, who sees property as a means to perpetual peace among men and conflict avoidance, must always answer these same questions by asking if their theory of title will, in fact, avoid conflict.

There are already some interesting discrepancies between two theorists who have incredibly similar justifications for title theory (argumentation ethics) Hans-Hermann Hoppe and Frank van Dun (which I will discuss below). Hoppe maintains that we have a right to the physical integrity of our property and nothing else. Van Dun, on the other hand, believes that we have the right to the use of our property and defines the Non-Aggression Principle as a “praxeological” idea, rather than a physical one.

2. What is Included in the Bundle of Rights One Receives from Homesteading?

Most libertarians conform to some idea of the homesteading principle. Homesteading involves some act (described originally by John Locke as “mixing one’s labour”) performed with a previously unowned resource which gives the actor ownership of that resource. The question is, what does one get when one homesteads? What can they do with the resource which is now their property?

The answer to this, I believe, is more or less answered by libertarian theorists. As Hoppe explains in his Economics and Ethics of Private Property;

This ownership of “originally appropriated” places and goods by a person implies his right to use and transform these places and goods in any way he sees fit, provided only that he does not thereby uninvitedly change the physical integrity of places and goods originally appropriated by another person.

This seems good enough for almost all interpretations of libertarian title theory. But there are particular instances in which current philosophers have dispute about this claim. Consider, for example, the above mentioned differences between Hoppe’s physical theory vs. van Dun’s praxeological theory. When applied to the case of land encirclement, (when one property owner has his land surrounded entirely by another person’s land) we are offered two different explanations of the rights provided to each property owner. Under the physical theory, if the encircled land owner wants to return to his property, the encircling land owner would have no obligation whatever to allow passage. However, under the praxeological theory, which gives you the right to the use of your property, the encircling land owner must create a way for the encircled land owner to access his property.

We must question from the outset; what rights to we get when we homestead? The answer can have implications on difficult applied examples of title theory.

3. How Does One Abandon Property?

In a 2015 article, “Expiration of Private Property Rights: A Note“, Walter Block states: “No reasonable person would force people to keep their erstwhile property against their will, and no libertarian would object to the ownership of them by the next man who comes along and homesteads them,”. However, I’m not sure that the problem is so simple. What of the following scenario:

Jones owns a wheat farm next to an Orchard owned by Brown. Due to negligent tree growing practices, a tree from Brown’s farm falls onto the wheat on Jones’ farm, costing Jones $1,000 in damages.

Putting aside the problem of criminal liability, it should be clear to any libertarian that Brown owes Jones restitution of $1,000. However, suppose in his defense Brown claims, “I had abandoned that property. The tree that fell was not mine, but instead an unowned resource. This was an act of God that cannot be attributed to me since I do not own that tree. I therefore cannot be held liable for these damages.” This appears to be a problem to the libertarian. We know that Brown’s negligent acts were, in fact, the reason for the damage. His mixing of his labour with the land caused the damage to Jones’ property. It would seem intuitive to the libertarian that Jones is owed restitution from Brown.

There is at least one solution to this problem that I can think of. We could say, “Anything that was the result of human interference with nature given goods are up for indefinite liability even once the owner has abandoned his property” but this also seems slightly problematic to me. Once Brown homesteads the nature-given orchard, does he then not have a liability to make sure his trees are not falling onto others’ property? I don’t think the answer is immediately clear. Up to the point of Brown homesteading the orchard, Jones would have to accept the risk of trees falling over onto his property. Does it seem right that the instant and already unstable tree becomes homesteaded, that Jones is magically relieved from this risk? Well, I think, yes, it does. Brown, who homesteads the adjacent orchard hopes to reap the rewards from that orchard and must accept the risks that come along with the ownership of that property. This includes trees which were already going to fall onto Jones’ property. So when, then, can Brown abandon the property and cease to be liable for damage from his falling tree?

Do I have a perfect answer to this problem? No. But I hope I have pointed out that abandoning property cannot be dealt with with a simple hand wave of the previous owner deciding to no longer own their property (of course, I do not charge Block with having this position).

4. What is the Thing that Actually Owns Resources?

The so-often referred to, “axiom of self-ownership” offers two important items which require definition. The first; ownership. As I have mentioned above, there is a question of what rights one receives with title to property. The second; self. Self-ownership usually refers to the proprietary relationship between ourselves and our own physical body but we need to ask, “If ‘I’ own myself, what am ‘I’? What is that thing which owns my body?”

This question has not gone unasked. In this 2005 blog post, for example, Dr. Tibor Machan brings up this very problem noting, “there is a conceptual oddity with ‘self-ownership’–the owner is the self and what is owned is also the self. The usual relational situation between the owner and what is owned fails to obtain”

I don’t think there are major complexities in trying to define a legal person for pragmatic purposes. Surely, the separation of persons is empirically obvious to everyone. It is clear that Tom is Tom and Sally is Sally and Tom is not Sally and Sally is not Tom. But, I believe it would be an interesting question to ask about what is the “self” which owns its own body (and eventually other, non-human resources).

I want to offer, what I think may suffice for initial thinking about the problem. A definition of the self should require, for title theorists, at minimum, a component of the will. Having a will is a necessary condition for any purposeful action. Having a will allows us to have rights, discuss and petition for our rights, and infringe on others’ rights. The will is what separates us from leaves blowing in the wind. If I want to exercise my rights over my own body, (for example, to lift my arm above my head) I must first will it. I’m sure there are many objections which I have not thought of, but I want to offer this definition of the self as a prima facie working definition: That which wills.

5. Can Property Owners Retain the “Right to Sell” When they Sell Restricted Title to Property?

Title to property, as I have mentioned above, come with a bundle of rights. Full or unrestricted title is when someone has the complete set of rights associated with the property at the point of homesteading. This doesn’t mean that they themselves had to be the homesteader, only that when they took of the property (via contract) that they now have all of those same rights associated with that property that the original homesteader had.

There are also situations in which a property owner can sell certain rights that come with ownership to someone else without completely giving up title. A homeowner who rents his property to a tenant sells the right to use the property for a given period of time in a certain way. For example, a one-year lease gives the tenant use-rights to the house for one year and limits his use of the house insofar as he cannot cause damage to the walls, the electrical wiring, the plumbing, etc. The tenant has a restricted title.

There are an infinite number of formulations for restricted title. I can allow you to use my lawnmower only on Tuesdays, or I can sell you the right to use a boat but only on lakes, not rivers or I can sell you the right to “all-you-can-eat” shrimp, provided that you do not take any shrimp home. There is one type of right that has, for me, been the most interesting. Is it possible to give nearly unrestricted title to piece of property with the sole condition be that the buyer, themselves, do not have the right to sell that property?

It’s an interesting question because the right to sell your property is one of the most important rights built into the original unrestricted title. In this 2012 blog post Block writes, “full ownership entails the right to sell that which you own. If you can’t sell it, you don’t really fully own it”. And no doubt, this is the case. But it being important doesn’t answer whether or not we can formulate such contracts.

One reason to be particularly interested in this problem of title is the question of covenant communities. Hoppe is (in)famous for having described covenant communities in his book Democracy; The God that Failed as follows:

There would be signs regarding entrance requirements to the town, and, once in town, requirements for entering specific pieces of property (for example, no beggars, bums, or homeless, but also no homosexuals, drug users, Jews, Moslems, Germans, or Zulus), and those who did not meet these entrance requirements would be kicked out as trespassers.

These coventant communities would offer nearly unrestricted title to property holder with the exception that they could not sell their land to certain types of people. The restriction on who can be sold property could be on any number of things; age, race, gender, number of fingers, colour of eyes, occupation, income, religious orientation, etc. The immediate possibilities appear less than savory to a lot of people. But, I argue, there are a lot of reasons to be happy with the idea of a covenant community. For example, an all-women’s community for women who have experienced abuse and need to be away from men. These women could gain the full benefit of ownership of their property (as opposed to renting or requiring charity from other land owners) while still being able to maintain a safe distance from men. The only rule would be that they could not sell their property to men. Or, consider the supposed problem of gentrification. Suppose that we had an existing culture within some city block that was important to the current tenants. In an attempt to maintain that culture, they decide that only African Americans should occupy their homes and that no one should be forced out of their homes by the rich, willing to outbid them for their homes. Then, these tenants could all contract and agree that all future sales of their apartments and houses can only be to African Americans and that they cannot charge more than, say, $200,000 for an apartment and $300,000 for a house. Through this institution of a covenant community, this culture can be sustained in perpetuity.

6. How Would Title Theory Look if There was No Scarcity in God-Given Resources?

Hoppe, with style and brilliance has always been able to describe the social problem of man. He writes in A Short History of Man;

Men do not live in perfect harmony with each other. Rather, again and again conflicts arise between them. And the source of these conflicts is always the same: the scarcity of goods. I want to do X with a given good G and you want to do simultaneously Y with the very same good. Because it is impossible for you and me to do simultaneously X and Y with G, you and I must clash. If a superabundance of goods existed, i.e., if, for instance, G were available in unlimited supply, our conflict could be avoided. We could both simultaneously do ‘our thing’ with G. But most goods do not exist in superabundance. Ever since mankind left the Garden of Eden, there has been and always will be scarcity all-around us.

As Hoppe points out, the only reason we need title theory at all is because of scarcity. We must decide who has control over which resources when and in what way people can use their property. But what of a scenario in which there was no scarcity at all? I think, that the answer is simple; no such thing as title need ever be established. But there is another question, what of a Garden of Eden situation in which we have abundant God-given resources but are bound by scarcity in our own physical bodies as well as standing room? Do things change significantly from the current situation regarding the use of human bodies?

I think that we can have a similar answer to what we have now; you have the right to use your own body as you please as long as you do not physically invade another person’s body. But there seems to be a slight problem with this. Could I use my body to stop others from accessing other abundant resources? Imagine, for example, there is an infinitely reproducible blueberry in my hand. The blueberry is abundant insofar as “taking” the blueberry from me will result in two blueberries and if you were to “take” another, a third would appear and so on and so on. But if I hold the only “source” of blueberry in my hand, can you infringe upon my body to get it?

This situation depends largely on some assumptions. For example, there is still a scarcity of dimensions in which we can move our physical bodies to access resources. My hand surrounding the blueberry only limits others insofar are they cannot get to the blueberry without physically invading my hand. But suppose I laid out my assumptions (e.g. time still exists, there are only three dimensions, gravity exists, it is a Tuesday, etc.) clearly and fully, title theory should aim to answer these sorts of questions of whether or not I can invade the physical integrity of another’s body.

It may appear that this does not have a lot of practical application. Scarcity does not appear to be going away any time soon (no matter what the Marxists will tell you). There are, however, often questions about title in infinitely reproducible things. The debate surrounding intellectual property rights deals with this subject exactly: Since ideas are infinitely reproducible (my having an idea does not stop you from having that same idea) there is no need for property rights or a theory of title whatever. An interesting part about the intellectual property debate is that philosophers must deal in a reality in which idea-producing things (human bodies) are scarce, whereas the ideas themselves are not. Surely, while we cannot defend a property right in an idea, we must still defend the property rights in bodies. For example, no one could justly torture another person in order to gain their ideas.

I think that there are other theoretical situations in which an abundant resource appears in the real world that title theory needs to address. Imagine a scenario in which Jones and Brown own land on opposite sides of a pond whose water is supplied from an underground spring which refills the lake to the same level after any water is removed (either from evaporation, wind, or Brown or Jones removing it). Let us assume that the underground spring is unowned and the physical earth at the bottom of the pond is half owned by Brown and half owned by Jones. Would it make any sense for either Brown or Jones to claim a property right in the water sitting in the pond right now? To both parties involved, the water is superabundant; it is infinitely reproducible. This might be a real case in which title theory would deny the right of either party from appropriating a physical resource since it appears to be non-scarce.

7. Is the Limited Liability Corporation Legally Legitimate?

This is a popular applied question for libertarians which title theory must address. The problem with the limited liability corporation is (almost obviously) its limited liability status. When seeking restitution from a corporation, a plaintiff can only sue for the assets held by the corporation but not the assets of shareholders. This appears to a be a problem for libertarians since we believe that restitution that is owed should be paid (for example, we are against horrific bankruptcy laws which deny creditors their just due).

There are usually two areas in which we are concerned about corporations owing others. The first is when a contract has been created between the corporation and someone else. If the corporation owes $10,000 to someone but only has $9,000 in assets, the limited liability status bars the creditor from going after their full $10,000 but limits them to only collect the $9,000. This particular problem, however, has been more or less dealt with as far as I am aware. As Rothbard brilliantly points out in his book Power and Market;

On the purely free market, such men would simply announce to their creditors that their liability is limited to the capital specifically invested in the corporation, and that beyond this their personal funds are not liable for debts, as they would be under a partnership arrangement. It then rests with the sellers and lenders to this corporation to decide whether or not they will transact business with it. If they do, then they proceed at their own risk.

This solution works for breach of contract. But what of the second problem, that of tort? Can shareholders limit the extent to which they are liable for torts against third parties by entering into a limited liability corporation? At first, it appears that this is a problem for the legitimacy of the limited liability corporation. However, some libertarian legal theorists such as Stephan Kinsella have pointed out that, in general, torts should be held against management or employees who actually commit the tort instead of shareholders.

This view offers a plausible answer in many cases. As long as the shareholder did not intend for the actions of their agents, then it would seem that agents should be held responsible instead of the shareholders. Imagine a pizza delivery person who goes well over the speed limit on a delivery causes a car accident resulting in significant damages. As long as the shareholder did not want the delivery person (their agent) to go over the speed limit, it seems clear that the delivery person should be liable for damages.

I think that this view may miss the special relationship of fiduciary duty between shareholders and their agents; management and employees. In general, the role of management in a for-profit company is to maximize shareholder value. This is their fiduciary duty as agents of shareholders. Now suppose the following project is available to a manager: Jones Corporation can begin a construction project which would earn a positive cash flow of $1,000,000 if successful. However, there is a 5% chance that the construction project will collapse and cause $10,000 in damages to the surrounding community. Using the expected outcome method we can see that this project has an expected revenue of $949,500 (0.95•$1,000,000+0.05•(-$10,000)). Given no other projects to consider, a manager would see that this project is worthy of directing company resources towards. If the project is successful, the shareholders gain. But, if there are damages, this theory would hold that the manager that decided to go ahead with the project has to foot the bill. This appears, to me, to be intuitively backwards.

One could retort that as long as the project had the approval of the shareholders (as opposed to the decision of the delivery person to break the speed limit), then the shareholders must be held liable for the damages. But this is precisely the problem with agency. The reason shareholders employ agents is to avoid making every decision themselves. Again, I don’t offer any perfect solution, but I want to point out that the difficulties within this debate are not yet perfectly decided by libertarian legal theorists.

8. Is Fractional Reserve Banking Legally Legitimate?

This is the hot topic today and for the last half decade. I don’t think that I will go into to much detail of the debate but I will quickly outline one aspect of the legal debate surrounding fractional reserve banking between libertarians.

When a depositor puts money into his account at the bank, he believes that he retains title to that money. Then, once that money is deposited, the bank is able to promise title to that same piece of property to a borrower. This creates a legal problem of double-title to the same piece of physical property. Those who support fractional reserve banking point out that this problem can be solved by simply creating contracts in which the depositor gives up title to his money when he deposits it.

There are many other facets to the debate which I will not get into here. However, the reason that this debate is so important and one which must be eventually settled by libertarian legal theorists is that many of the legal theorists who oppose fractional reserve banking, also consider it to produce economically inefficient outcomes. There are really two debates withing libertarian circles surrounding fractional reserve banking. First, the debate here; is fractional reserve banking legally legitimate? Second, does fractional reserve banking set in motion what is known as Austrian Business Cycle? Without going to great lengths describing the Austrian Business Cycle Theory, the claim is that artificially reduced interest rates cause entrepreneurs to invest in inappropriately timed projects because they are tricked into believing that consumers a lower time-preference than they really do, resulting in what everyone knows as the business cycle.

The reason that this matter for libertarians is that believing that i) fractional reserve banking is legally legitimate and ii) fractional reserve banking sets in motion the Austrian Business Cycle forces us to recognize that capitalism has lost its status of economic perfection. To say this is the equivalent of saying that fractional reserve banking is a capitalist act but an act that causes economic inefficiencies. Surely someone can hold both these positions but it certainly does damage to our ideological creed which puts capitalism on a pedestal of social organization which can boast justice, beauty, and efficiency.

Why We Should Care

As libertarians, we believe in the truth, beauty, and justice of liberty. We believe that private property is the institution which allows society to flourish. If we believe these things to be true, then we must be able to describe it to those around us. When we are asked about what liberty looks like in the real world, we can always defer to title theory, but only insofar as it is developed. I hope that one day I can contribute to the illumination of what is truly a beautiful theory.

One thought on “8 Questions Libertarian Title Theory Should Aim to Answer

  1. Pingback: Promulgation of Libertarian Law | Andrew D. Allison

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