Fifteen years after the Global Financial Crisis: Recessions and Business Cycles in the History of Economic Thought

Social Dimensions of Property Rights: From Smith to Maine and Duguit

Witztum Amos, London School of Economics

Duguit (1911) raised some questions regarding the social dimensions of property rights but his focus was almost entirely on their use instead of their origin and costs. This why it had such little impact on modern economics where property rights are analysed from a purely utilitarian perspective. Their evolution and subsequent social costs are ignored. In this paper I argue that the emphasis on the effects of property rights on incentives ignores a much more significant counter effect that comes as a result of the consequences of their presence and their effect on distributions and the incentives of the property-less members of society. By contrast, both Adam Smith and Henry Maine (a legal historian who was also a great influence on Hayek), examine property rights in a clear historical--and anthropological—manner and are therefore acutely aware of the social significance of the emergence of property rights. Both of them describe a process in which the acquisition of property rights lead to the power to exclude and to the lapse of the correlative duties towards those who are left without property. The main difference between them is that Maine sees in this an evolutionary inevitability which emanates from the necessary demise of social cohesion due to changes in mode of subsistence (technology). Smith, however, sees this as a failure of the political system to translate into law that which at all time would be deemed as a moral necessity: the care for those who are property less. What in his view allowed such a breach of morality to be sustained is the working of the invisible hand. In terms of Maine’s argument, Smith is simply saying that the correlative duties lapsed because there was no apparent problem for the property less individuals to acquire their subsistence by other means and as independent agents who sign contracts with the owners of property. However Smith does recognise that there are conditions under which, this mechanism fails. In such a case, his analysis corresponds to Maine’s analysis in reaching the conclusion that there are clear social costs associated with the emergence of property rights and these have efficiency implications. This leads to the conclusion that property rights mean social duties. This is a deep insight which has failed modern economics.

Area: Eshet Conference

Keywords: property rights, Adam Smith, ethics, law

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