Property Wrongs

Can property exist without the state?


The Myth of Ownership: Taxes and Justice, by Thomas Nagel and Liam Murphy, New York: Oxford University Press, 238 pages, $25

Three hundred and fifty years ago, at the height of the English civil war, Thomas Hobbes called for an absolute monarchy, arguing that there would be nothing but bloodshed without it. Property, security, family life -- basically, civilization as we know it -- were impossible without the commonwealth under the sovereign, he argued; therefore, we are bound to obey the king's every command. The alternative, he famously declared, was far worse: "a perpetual war of every man against his neighbor," in which existence is "nasty, brutish, and short."

Even after centuries of prosperity, largely the result of a very different approach to government, Hobbes remains a starting point of social analysis for many modern-day academics. In The Myth of Ownership: Taxes and Justice, two well-known philosophers on the law faculty at New York University offer a political vision made only a little bit kinder and gentler than the terrifying despotism Hobbes advocated by their assurances that they are defending modern democratic regimes.

As their book's self-consciously controversial title implies, Thomas Nagel and Liam Murphy argue against "the idea that people's pretax income and wealth are theirs in any morally meaningful sense." Like Hobbes, they oppose the notion that anyone can do anything without the state. But they go beyond Stephen Holmes and Cass Sunstein's relatively straightforward observation (in their influential 1999 book The Costs of Rights: Why Liberty Depends on Taxes) that all private rights incur public costs. Nagel and Murphy attempt to show that private property rights not only lack protection without government but are actually nonexistent until the state and its tax system create them.

Their premise is that the world we live in today, with its affluence and security, would be impossible without the services afforded by government -- the protection of private property, for example. Taxes, they claim, are an indispensable, indivisible part of that framework. It is not surprising, then, who the authors' main sparring partner turns out to be. "A consistent application of sophisticated libertarian political theory leads to deeply implausible results that hardly anyone actually accepts," they assure their readers, but "in its naïve, everyday version libertarianism is taken for granted in much tax policy analysis."

Against this libertarian bogeyman, they claim that pretax incomes -- before or after market transactions have taken place -- have no basis in justice, because they are not founded on any defensible notion of merit or reality. To Nagel and Murphy, "there is no such thing" as a "pre-government distribution of bundles of resources," because it is the government's law and tax system -- not the spontaneous and cooperative exchanges of individuals or some kind of "natural right" -- that decides who gets what. Without the government, they say, we would be in Hobbes' state of nature all over again. Everyone would be equally strong but equally afraid, and presumably too busy planning pre-emptive security strikes against their neighbors to think about mutually beneficial market exchanges.

Having dismissed the idea that public policy can realistically be guided by the assumption that individuals "own" property and that the government must then justify the taxes that reduce such holdings, Nagel and Murphy reformulate the issue in terms of overall social welfare. Unlike Hobbes, they argue that government activity, and the property rights it creates, do have limits: Both are restricted by the extent to which they contribute to particular socially just outcomes.

The authors then spend much of the book arguing for what they think those "socially just outcomes" ought to be: a predictable mix of personal entitlements to basic income, education, and health care, combined with market regulation aimed at "limiting the damage to the inevitable losers in market competition without undermining the productive power of the system." But the specifics are there mainly to illustrate their larger point: that tax policies are the conduit through which people receive what they are really entitled to.

Nagel and Murphy do get one thing right: All theories of property and taxes, including libertarian and utilitarian ones, rely on assumptions about justice. (The debate among libertarians over tort reform, for example, reveals several distinct moral foundations for a particular view about personal entitlement, and the extent to which it is reasonable for the government to sanction specific legal settlements.) The authors deserve credit for seeing the complex moral questions that underlie tax and property law. There's a problem, though. Even if you accept their welfare-state vision of justice, Nagel and Murphy's argument about property and ownership falters on other grounds.

The authors try to slide out of many difficulties by omitting a serious discussion of the origins of the state. But there are good reasons why people tell stories about how government emerged (or could have emerged). If you don't assume some minimal antecedent demand for government services, such as common defense against property violations and other crimes, there's no way to avoid characterizing the state as simply a protection racket. Nagel and Murphy, however, categorically rule out a natural right to property or anything else before the state exists -- and thus render the idea of "consensual rule" an absurdity.

In fact, their argument leaves it entirely unclear how, if no property rights exist before the government steps in, the state has the resources even to initiate its own tax-extracting and property-creating activities. The state, as a real entity, cannot originate from nothing. But according to the authors' argument, in the absence of a functional tax framework not even the state can be properly entitled to the startup capital to create itself.

Of course, there's a difference between saying that no property exists before the state creates a system of entitlements and saying that no legitimate property claims can exist before a perfectly just state establishes them in law. But Nagel and Murphy prove neither assertion, even as they insist (in different places) that they prove both.

Their argument also invites questions about what, in their view, people can be said to "earn." If people can own nothing, it can be assumed that they can earn nothing beyond whatever a just state says they are entitled to; the authors remind us over and over that property rights are "to a large extent the product of tax policies that have to be evaluated by standards of social justice." But a "large" extent implies that those rights are not entirely the result of tax policies -- which raises the question, of what else are they the result? And what are we to make of an act of creation, once we sift out all influences due to economic conditions, parental guidance, and any other advantages that, for the authors, constitute the mechanism of injustice? Nagel and Murphy make no gesture toward incorporating returns to creative or entrepreneurial effort into their theory of justice -- or, for that matter, their theory of reality.

Worst of all, the authors call their own consistency into question, by specifying that they are starting from the point of view of members of an existing democratic society. Why take democracy -- which, as they admit, sometimes generates morally unacceptable outcomes -- as a given, without allowing the market the same slack? The authors offer a weak defense that in political life, unlike in business, people usually give some weight to moral arguments, but this is an empirical claim that could be easily refuted by a look at the wide variety of market products -- from "fair trade" coffee to mutual fund portfolios deliberately comprised of "socially responsible" companies -- that cater to consumers' moral

Here Nagel and Murphy begin to show their true colors. They are defending their subjective distaste of the market without a real look at what it does, or at the alternatives to a state-based scheme of social justice. After all, the government is at least as "conventional" as property rights, and Nagel and Murphy are either blind or dishonest for failing to recognize the state's symbiotic (if not parasitic) relationship with the market. They hope to reshape America in the mold of a European social democracy but fail to mention Europe's double-digit unemployment rates. They hope inequality will be eliminated but do not explain why, prima facie, inequality is wrong. They want responsible, public-minded citizens but refuse to give civil society a chance.

More important than criticizing their argument, however, is realizing that its framework is shared by other thinkers who exert a powerful influence on social policy. Many people calling themselves liberals now believe that the expansion of state power is the driving force of civilization, something to be encouraged, not feared or too sharply limited. Stephen Holmes even goes so far as to claim that statist liberalism, not libertarianism, does more to advance the classical liberal project of eradicating power imbalances wherever they occur, adding with relish that this especially includes the place dearest to libertarian hearts, the sphere of "private" market transactions.

Murphy and Nagel are right that tax law is saturated with issues of justice, and they are right to insist that any fiscal policy must be backed by a coherent and defensible system of justice. Property is a moral issue, and libertarians should see welfare state theories for what they are: challenges not necessarily to market competition, which provides important and empirically verifiable benefits that Murphy and Nagel acknowledge, but to the value we may justifiably assign to those benefits.

In other words, those who sympathize with the authors' libertarian sparring-partner must construct an argument for liberty on moral grounds, or risk academic -- and political -- irrelevance. It is no longer enough simply to demand a right to be left alone, when rival theories of justice are calling the origin and status of that very right into question.