Economics Volume II: Modern Economic Problems

by Frank A. Fetter

§ 6. #Limitations of private property#. It is well, in discussing private property, to rid the mind at once of the idea that it is an absolute and unchanging thing. Few realize the manifold ways in which property rights are limited. Unmodified private control of property is unknown; the public makes many reservations in its own interest. There is, first, a whole set of limitations to prevent nuisances. An owner in many situations is not free to build a slaughter-house or to start a glue-factory on his land. Property is governed by general public utility, and anything that threatens to become a nuisance or a danger may be excluded. Under the right of "eminent domain," the state or the railroad takes the old homestead from the owner who would live and die there.

Altho pecuniary damages are paid to him, this is a limitation of his property rights. Rights of way on property exist either by contract or by prescription permitting its public use. Most important of all limitations is the right of taxation, by which society takes more or less of private incomes for purposes of which the individual owners may not approve.

The law enforces a multitude of private claims by some persons against others. A variety of rights called easements or servitudes may attach to private property, modifying its exclusive use. Leases for any period are a limitation of the owner's control. Both the holder of the lease and the owner of the property have certain rights before the law. The lender of money secured by mortgage has a legally recognized and enforceable interest in the mortgaged wealth. Property is left in trust for the benefit of persons or of institutions or of the public, and is administered by trustees who are strictly bound to execute the terms of their instructions. Contracts of many sorts are entered into by owners, limiting their control in manifold ways, and the law enforces these contracts. These all form a complex of equitable claims, which together equal in value one undivided property right, which in turn equals the value of the wealth.[4]

§ 7. #Limitations of bequest and inheritance#. The term bequest implies a will, usually a written will in which the person, in anticipation of death, expresses his wishes as to the disposition of his property. It is said sometimes that bequest is a "logical" result of private property, but the law does not treat it as such. The right of bequest, or of gift at death, is limited in various ways in different countries. In countries where hereditary aristocracies exist, primogeniture is in some cases required by law, in others so strongly favored by public opinion that it is practically always followed. Custom limits bequests in England to members of the family, and wills given outside the family are rare, and are almost always broken in the courts. John Stuart Mill contrasted this with the practice in America, frequent even in his day and still more frequent now, of rich men giving for public purposes. In France the right of bequest outside the family is legally limited; only the share of one child can be willed away by the father, and the rest must be equally divided among the children. Settlements and fidei commissa are limited in many countries, because of the recognized social evils resulting from the tying up of estates for generations. Throughout the history of England, Parliament has given attention to the question of mortmain, which chiefly concerned the drifting of great estates into the hands of the church or of corporations, as the result of bequests by the pious. In England, of late (and to a less extent in this country), the policy of permitting unlimited endowments to charitable institutions has been seriously questioned, and by legislation some of the old endowments have been diverted from their original purposes when these have ceased to be of social utility. Inheritance, in contrast with bequest, usually means succession to the property of one who has died intestate, that is, has made no will. The law of inheritance likewise varies greatly with time and place.

§ 8. #Social expediency of private property#. In the light of present political philosophy the explanation and justification of private property must be on grounds of social expediency. This is a broad explanation and it has the fault of a broad explanation, that it needs to be further explained. Under it can be brought the many varying conditions. Even if private property works hardship to individuals in many cases, yet it may be justified if, on the whole, it is best for the progress of society. Laws must be judged by their average working, not by exceptional cases. In general, the system of private property must be judged by this test: Does it further the welfare of the nation better than would any alternative plan for the control of economic wealth? The question is not whether it is faultless, for no human institution is so. Nor must it be assumed that the rule of property needs to be uniform in respect to all kinds of wealth. There are many kinds of property, and the test may be applied separately to the different forms and to the varying degrees of property rights. The varied and often strict limitations of property mentioned above are all determined by some thought, wise or foolish, of social expediency. Different parts of wealth may be treated in different ways: there may be private property in wagons, and public property in roads; private property in houses, and public property in forests; private property in automobiles, and public property in railway carriages. But any rule of property, like any other workable human law, must be applicable to all individuals that meet the conditions.

The very acceptance of the theory of social expediency implies the need of frequent readjustment of the institution of private property. The essential thought in the various attacks on the institution of property is that, because it either causes or makes possible the inequality of incomes, it is not socially expedient. Private property, as it is found to-day, is complicated by many historical accidents. Survivals of ancient injustice and relics of feudal institutions that rest on no vital reason remain in our new country as well as in the older ones. The limits of property in many respects are determined not according to the logic of expediency, but by the social inertia which often governs successive generations.

The question is raised in many minds: If private property is not an absolute right, what shall be its limits? What changes should be made in it? These questions put the greatest economico-political problem of our day, one that contains within it, indeed, many minor problems. A number of these will receive attention in the following pages.

§ 9. #The monetary economy#. So greatly does the use of money facilitate the transfer, buying, and selling of private property and so closely are property and pecuniary trade connected in practice and in the thoughts of men, that every radical proposal to abolish private property has included a plan to do away with money also. But money and private property are not essentially and logically bound up together, for a certain measure of private property always has been found where money was little or not at all used. True, if there were absolutely no private property, there would be little use for money, altho it might still be used as a form of counter by the communistic state. We have already seen[5] how a monetary unit comes into use, and we shall treat more fully of the nature of money in later chapters. We may note here merely that the use of money is an outstanding feature of the present economic system and gives rise to many of the problems of political economy.

§ 10. #The competitive system#. The existing system is likewise characterized by competition[6] in the buying and selling of wealth and of the usances and services of economic agents. By competition we mean here the condition of political freedom on the part of each man to trade his property (goods, uses, or services) as he chooses, and this combined with the disposition on his part to get what he values most highly for himself and his family. Whenever any one else (official or citizen) forbids and prevents a man from getting all he can, in so far competition is limited. Whenever any one is deterred by fear of, or by affection for, some other trader, from getting all he can, in so far competition is limited. Whenever any one conspires with another trader to act together with him to withdraw or to alter his bid, in so far competition is limited. Private property and economic competition do not merely happen to exist side by side, forming more or less favored conditions each for the other; they are essentially connected.[7]

It is not our task at this point to present the advantages and disadvantages of competition, but merely to indicate its important place in the actual economic world. Like private property, competition is not the universal feature of our present system, but it is the most general and characteristic method of valuation, of price fixing, and of trade.