Born to be Bad: Government as a Commons

by Michael S. Rozeff
by Michael S. Rozeff

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Political government clearly produces ill results as compared with free markets based upon private property rights, which truth may be found out both by observation and theory. But this which rises to the status of a proven theorem for some of us, and was certainly known to the Founding Fathers of the United States, is neither recognized, accepted, nor appreciated by many others of us, and especially our society’s leadership figures in many fields of thought, who, to our dismay and detriment, strongly inculcate the opposite conclusion. It is needful then that we explain precisely why political government is born to be bad and why we should make every effort to restrain its province rather than expand it, which downward path we are on.

Government’s defects occur because, by its very construction as an institution, it runs into severe organizational problems. The building plan is, so to speak, defective. It produces a house with constant problems, a house that eats money and impoverishes its dwellers. This article homes in on one facet of that defective plan which I believe is probably not well-understood or fully appreciated even among anti-state advocates: Government communizes property and that communization produces commons problems.

Property may be held in common with or without well-defined property rights. People may jointly own a country club and golf course with well-defined rights, or, quite the opposite, they may have access to a public space that is actually owned by no one; and there are many other property gradations distinguished by the ownership structure and rights of the owners (one may own his own country club, for example).

When there are not well-defined property rights to common resources, problems known as commons problems arise. Government communizes property, that is, it destroys private property by transforming it into common property. It does this by absorbing resources from its citizens and placing them into a common pool which it then spends or distributes. The absorption of private resources changes them from resources under private care, that is, private property, into resources under common ownership, that is public property. The theme of this article is that commons problems inherent in government arise as consequences of the government’s communization of private property.

Three commons problems

The fact that communal property lacking in property rights has various problems is far better known than the idea emphasized here that government necessarily communizes property and, in doing so, causes the commons problems. It is well that we should catalog and understand these problems, for they will be manifested in government.

The first two problems are (a) the production of antagonisms, conflicts, and disharmony, and (b) lesser care or neglect. Tibor Machan quotes Aristotle and Thucydides, who noticed these problems. Aristotle writes in Politics:

"That all persons call the same thing mine in the sense in which each does so may be a fine thing, but it is impracticable; or if the words are taken in the other sense, such a unity in no way conduces to harmony. And there is another objection to the proposal. For that which is common to the greatest number has the least care bestowed upon it. Every one thinks chiefly of his own, hardly at all of the common interest; and only when he is himself concerned as an individual. For besides other considerations, everybody is more inclined to neglect the duty which he expects another to fulfill; as in families many attendants are often less useful than a few."

When resources are pooled, there is no obvious or obviously just way to distribute them, unless the pooling has been pre-arranged by individuals who have defined ownership and sharing rules that define private property rights, as they do in corporations and other jointly-held concerns. But government creates pools of resources by force and without well-defined ownership and sharing rules. The pooling and the subsequent distribution is by a complex mixture of force and voting. The end result of this complex process is that no one owns the common resources.

In a commons situation lacking in property rights, which we henceforth take to be the object of our discussion, the principle of Karl Marx "From each, according to his ability; to each, according to his need," which appeals to communists, fails both as a principle of justice and as a matter of practicality. Aristotle dismisses common ownership as "impracticable," and says it "in no way conduces to harmony." Indeed, people will fight over a common pool of resources because they will be unable to agree on each other’s abilities or needs. They will be unable to distinguish effort from ability. A man who works very hard to produce or a man who produces in an effective and efficient way because of his efforts may be considered by others as having a "natural ability." From him, they will wish to take much; but this will be both unjust and counterproductive since it will undermine his incentive to produce, the latter being a third commons problem. And who is in a position to judge what the needs of others are? Human beings have an incentive when there is a common pool of resources to exaggerate their own needs and deflate the needs of others. Wants and demands are easily inflated into needs. Aristotle rather understated the case for disharmony. The Congressional spectacle is ever a battle for divvying up the spoils in the public treasury.

Confirming Aristotle’s observation that people do not lavish the care on public property that they display toward their own, Thucydides writes in The History of the Peloponnesian War:

"[T]hey devote a very small fraction of the time to the consideration of any public object, most of it to the prosecution of their own objects. Meanwhile, each fancies that no harm will come to his neglect, that it is the business of somebody else to look after this or that for him; and so, by the same notion being entertained by all separately, the common cause imperceptibly decays."

Levendis, Block, and Morrel mow their own lawns but they write: "I would never mow or fertilize the neighborhood park, however, even though it is only a block from my house. The reason is that I own my lawn, not the park. If I were to mow it, I’d suffer all the costs of physical exertion, and only get a fraction of the benefit which would be split fairly evenly among all the residents of the neighborhood." The park is a commons. The reason why the neighbors do not care for the park is that their private marginal costs far exceed their private marginal benefits. They can solve this problem in any number of ways. One or a few persons can own the park outright and run it as a private enterprise. The neighbors can own the park jointly and define access and other rights. The neighbors can form a club that manages the park and solicits business from neighbors and non-neighbors. The government, managed by a voting system, can take charge, defining both access and care. Whatever is done, the more ill-defined that the private property rights are or the more that the resource becomes a commons, the worse will be the care of it and the greater will be the disharmony over its use.

Richard J. Maybury tells the story of the Plymouth Colony’s experiment in communism here. It had involved creating a commons: "‘all profits & benefits that are got by trade, working, fishing, or any other means’ were to be placed in the common stock of the colony, and that, ‘all such persons as are of this colony, are to have their meat, drink, apparel, and all provisions out of the common stock.’"

The results were that "the colonists went hungry for years, because they refused to work in the fields. They preferred instead to steal food. He [Bradford] says the colony was riddled with ‘corruption,’ and with ‘confusion and discontent.’ The crops were small because ‘much was stolen both by night and day, before it became scarce eatable.’"

William Bradford, in The History of Plymouth Colony confirms the negatives of a communism even of a small group of "godly and sober men," writing

"All this while no supply was heard of, neither knew they when they might expect any. So they began to think how they might raise as much corn as they could, and obtain a better crop than they had done, that they might not still thus languish in misery. At length, after much debate of things, the Governor (with the advice of the chiefest amongst them) gave way that they should set corn every man for his own particular, and in that regard trust to themselves; in all other thing to go on in the general way as before. And so assigned to every family a parcel of land, according to the proportion of their number, for that end, only for present use (but made no division for inheritance) and ranged all boys and youth under some family. This had very good success, for it made all hands very industrious, so as much more corn was planted than otherwise would have been by any means the Governor or any other could use, and saved him a great deal of trouble, and gave far better content. The women now went willingly into the field, and took their little ones with them to set corn; which before would allege weakness and inability; whom to have compelled would have been thought great tyranny and oppression."

"The experience that was had in this common course and condition, tried sundry years and that amongst godly and sober men, may well evince the vanity of that conceit of Plato's and other ancients applauded by some of later times; and that the taking away of property and bringing in community into a commonwealth would make them happy and flourishing; as if they were wiser than God. For this community (so far as it was) was found to breed much confusion and discontent and retard much employment that would have been to their benefit and comfort. For the young men, that were most able and fit for labor and service, did repine that they should spend their time and strength to work for other men's wives and children without any recompense. The strong, or man of parts, had no more in division of victuals and clothes than he that was weak and not able to do a quarter the other could; this was thought injustice. The aged and graver men to be ranked and equalized in labors and victuals, clothes etc., with the meaner and younger sort, thought it some indignity and disrespect unto them. And for men's wives to be commanded to do service for other men, as dressing their meat, washing their clothes, etc., they deemed it a kind of slavery, neither could many husbands well brook it...Let none object this is men's corruption, and nothing to the course itself. I answer, seeing all men have this corruption in them, God in His wisdom saw another course fitter for them."

Bradford recognizes at the very end of this passage that the blame for the results is not "men’s corruption" for all men are corrupt, but "the course itself," meaning the organizational arrangement they had at first selected, which was a commons.

A fourth commons problem

So far, we have recognized three commons problems: conflicts over use, lack of care, and the disincentive to produce when one’s production goes into a common pool. The lack of care problem goes deeper than so far suggested. In 1940, Ludwig von Mises recognized that resources held in common led to the depletion of exhaustible resources. In 1968, Garrett Hardin affirmed this in an article that made famous the phrase "tragedy of the commons."

In Human Action, Mises writes:

"If land is not owned by anybody, although legal formalism may call it public property, it is utilized without any regard to the disadvantages resulting. Those who are in a position to appropriate to themselves the returns – lumber and game of the forests, fish of the water areas, and mineral deposits of the subsoil – do not bother about the later effects of their mode of exploitation. For them the erosion of the soil, the depletion of the exhaustible resources and other impairments of the future utilization are external costs not entering into their calculation of input and output. They cut down the trees without any regard for fresh shoots or reforestation. In hunting and fishing they do not shrink from methods preventing the repopulation of the hunting and fishing grounds."

The first thing to notice is that Mises distinguishes the vehicle or resource that delivers the returns from the returns themselves. Subsoils deliver mineral deposits. Forests as a habitat deliver game. The seas as a habitat deliver fish. Likewise, the human body delivers labor and labor income. Minerals, game, fish, and labor income are the returns (the resource flows) arising from the resources, which are the subsoils, forests, seas, and bodies. The resources are the capital stock. The returns are the returns on that capital.

If people appropriate the resources, that is, if people come to own the land, forests, seas, and human bodies as private property with well-defined property rights, there are no significant commons problems. (Outer space is another such resource.) People have a strong tendency to care for themselves and their property and to manage it with an eye to maximizing its value; and since a property’s value directly depends on the future stream of returns that the resource delivers, people do not routinely extract the returns in such a way as to undermine the value of the resource. When people do not appropriate the resource, then there is a commons and we start to get the commons problems.

There is a fourth commons problems that Mises identifies here that involves neglect but is so serious that it should be distinguished from the mere neglect noted by Aristotle and others. The problem is that people will take the returns now without regard to the future. They will attempt to shoot all the buffalo, kill all the elephants for the ivory, and kill all the whales for their oil. The reason is that if they do not do this, someone else will. Their marginal cost from abstaining from grabbing is high – they lose the return to someone else. Their marginal benefit is nil. So everyone grabs. If the resource is exhaustible, they exhaust it, whereas a private owner would maintain a herd and renew it because the value in future sales exceeds the costs of maintenance. In general, the owner of a mineral deposit will not mine and sell the entire deposit immediately and the owner of a forest will not immediately cut all the trees down. The deposits may be worth more later than the interest cost of waiting. The growth in the trees may bring in more revenue later than the interest cost of waiting.

Mises correctly notes that these calculations of "input and output" are neglected when there is a commons. People deplete the commons. They destroy the value of the resource. This shows up as despoliation of the environment. It is something like a scorched earth policy. Everything that can be taken now is taken, and nothing useful is left behind. The fourth commons problem is the destruction of the commons, and this is the tragedy of the commons of which Hardin wrote.

Hidden commons problems

When herds of animals are killed off, such as buffalo, elephants, and whales, the reason is that they are not privately owned but instead are a common resource. Many people rush to take what they can, creating the tragedy of the loss of the animals. But the tragedy is remediable. The tragedy, being entirely manmade, can be eliminated by defining private property rights. The solution in parts of Africa has been to privatize game and game preserves.

Wherever private property rights are not defined or ill-defined, commons problems may surface. Whales have been part of the common seas. With no private property rights in the ocean, commercial exploitation of the whales led to a low whale population. In 1946, various states signed an international agreement with quotas on commercial whaling. This step was a movement in the direction of private property rights with each state carving out a claim on the whole herd. There are enforcement issues, and a number of important countries have not signed.

There are many other commons problems that are more subtle and disguised. In 2000, David N. Laband explains, the Supreme Court overturned a long-held common-law tradition. Up until the Court’s decision, plaintiffs had to demonstrate actual injury. The Court changed the criterion to possible injury. The number of trivial asbestos lawsuits rose sharply. This pushed at least 20 companies into bankruptcy and drew compensation away from those who had truly been injured by asbestos.

Laband called this a "tragedy of the judicial commons." The tragedy of the commons, as we have seen, refers to a situation in which valuable resources (the commons) are not privately owned but are open to use by any one of many users who do not coordinate their use of the resources through any means, such as agreement, custom, rules of use, etc. They all jump in to harvest the resource’s returns, which depletes the resource.

In the asbestos case, there was a pool of payouts available to asbestos plaintiffs. The pool was limited and exhaustible. Before the Court’s decision, the truly injured had claims on this pool. It was analogous to having private property rights on the payout pool. After the Court decision, their claims were diluted by the new entrants. What was a private pool (in some sense owned by the truly injured) became a public pool open to those with dubious claims. The new claimants "overfished" the public pool and depleted it.

David W. Rasmussen and Bruce L. Benson saw (in The Economic Anatomy of a Drug War) that costless access to the government’s legal system by lawyers, judges, and prosecutors results in its exploitation and overuse by them. The legal system is a public resource, which means it is basically unowned. The costs of the system, including trials and prisons, are paid for by society. The system is exploited by the legal operatives. They view the prisons as a commons resource. By being tough on crime, the prosecutors, the legislators, and the judges all make themselves look good to voters. They proceed to fill the prisons to gain the benefits for themselves. They ignore the costs to society and to the many prisoners that should not be imprisoned. The injustice of this is especially intolerable because it involves the justice system itself.

Government as a commons

Let us go deeper than this analysis to see what it means. If Rasmussen and Benson are correct that prisons are filled to get votes, then for prisons to be a commons problem, the ultimate demand for filling the prisons must arise from the voting public who vote for officials tough on crime. The public must also view the prisons as a commons. Its members must not connect their votes for a tough judge or prosecutor to the costs they bear in paying for prisons. This is indeed the case, for it is impossible that voters can make this connection. Many government officials vote on many programs over time, and many voters contribute to the outcomes. One’s vote is mixed in with the votes of many others. Under these circumstances, no voter can possibly connect his or her vote on a given official to his taxes much less to a specific use of those taxes.

And if some voters do happen to care strongly about being tough on crime and vote accordingly, they will swing the election toward tough officials. These will then shift the costs of the system onto nonvoters and those voters who were indifferent to the issue.

We see that the commons problem of the legal system arises because a common resource is created that no one owns, because the system of voting and government disconnects the voter from owning and controlling the resource flows extracted from him by taxes.

But then let us go further. We need not limit the analysis to prisons and the legal system. Consider another instance: the programs of the welfare state such as Social Security, Medicare, and Medicaid. The Congress decides on the taxes paid in and who pays them. It also decides on benefit levels, which it changes over time. What anyone receives also depends on variable personal factors such as health and length of life. The government takes the money from taxpayers. It then has a common pool of financial resources that it spends. Individuals do not have private property rights in this pool of resources. They are held in common and spent by the Congress. Various interest groups then attempt to increase benefits for themselves.

But why stop here? The commons problem created by the existence of public government is evidently far broader than even this application suggests. The basic resource of all of us in a nation, taken together, is our capital, both physical and human (including our bodies.) This capital throws off income flows as returns, such as labor income. As long as this capital is privately held (we own ourselves) and there are private property rights, the income flows are returns to their private owners. There is no commons problem.

The moment that we create a government that taxes and takes income, we partially destroy private property and create a public common resource. Given the complexity of voting, no individual or group can connect their votes or taxes to the overall pool of harvested income. This is impossible to do. Our capital is like the seas, and the income from it is like the whales in the ocean. A government collects many of the whales into a common pool. Who then fishes in this pool for the whales? In a democracy, almost everyone does. We rush to exploit the pool before the next fellow does.

Various groups fish (lobby) for money for themselves, but not directly. The government is the collector and distributor. It intermediates the exploitation of the common resource. It collects all the whales, divvies them up, and distributes them, which it does so as to maintain its own power while simultaneously siphoning off what it can for itself. Its incentive is to maximize the value of the pool to itself, that value not necessarily being solely monetary.

Hans Hermann-Hoppe, in Democracy The God That Failed, argues that the government’s value-maximization process differs as between privately and publicly owned government. Both are monopolies and both exploit the capital under their control. He suggests that the privately owned government, like a monarchy, exploits less than the publicly owned government, like democracy. This occurs because the monarch is a private owner of the cash flows that it extracts from the pool. It has private property rights in government and, like a forest owner, evaluates the resource’s cash flows over a long time horizon. It looks to maintaining its position and the resource over long periods of time, including that of the monarch’s heirs. In contrast, democracies tend to have caretaker governments that occupy office for limited periods and have shorter horizons. Their incentive, unless moderated by entrenched legislators and long-lived parties, is to exploit the resource pool more quickly regardless of long-run consequences. The argument is that monarchy, while imperfect, alleviates the commons problem of public government.

Conclusions

Government exploits the nation’s capital, owned by us, which, via taxation, loses its private ownership character and becomes publicly owned. Government harvests a large portion of our returns on capital, creating a commons. The exploiters of this commons, who are we the people formed into lobbying groups and the members of government, attempt to take as much as we can from the commons. The members of government have the main control over the commons. What happens?

We get all four commons problems plus several serious new ones. We get neglect, conflict, lower production incentives, and resource depletion. Our capital is communized by the government, not owned by anybody. The government harvests the returns assiduously by continual taxation. It uses the returns with far less care and regard than we as private owners would. The government squanders the capital. The taxes undermine the incentives to work, so we get less effort and production. We fight over who gets what.

But the commons problems of government are even worse than this. We waste resources trying to avoid taxes going into the commons. We become dependent on the system. We lose the ethics of justice and shift to a regime of take what you can get. Members of the government and the Exploiting Cliques use their share of the pool to finance their favorite projects. These include expensive wars with enormous long-term costs that the members of government do not bear.

There are ways out. They include moving to jurisdictions with smaller government and taking economic activity underground. Creating limited government and living with no government at all are the two main larger-scale social options.

Government is itself communization with all its attendant ills. Government, by its very being, size, and uses of power, creates very large commons problems. Government is born to be bad.

October 1, 2007

Michael S. Rozeff [send him mail] is a retired Professor of Finance living in East Amherst, New York.

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