Private Property – No Trespassing

In case you haven’t noticed, gasoline prices are up. The call has gone out across the fruited plain for somebody, preferably in government, to do something, preferably to the oil companies. The Republicans have a plan; the Democrats have a plan; and both plans keep changing to float with the prevailing political winds in Washington. The $100-rebate-check trial balloon having been blown down with gales of laughter, the latest plan is simply to do what government does best: browbeat the evil petroleum corporations and go after "price gouging," defined as "prices high enough to cost various politicians votes in November." The effect of all of these plans will, of course, be to fail to bring real prices down but possibly either to cause shortages, if prices are held below market levels, or to harm the oil companies, thus hurting their employees and shareholders, or both. The ultimate goals are (a) to get incumbents reelected in the fall and (b) to increase their power.

The only thing the federal government can do to remedy the situation is, as usual, to get out of the way, both in the U.S. and abroad. At home, cut taxes and regulations, eliminate subsidies for ethanol and other alleged alternative fuels, and sell off government lands such as the Arctic National Wildlife Refuge to private businesses who can then drill for oil on their own land to their hearts’ content instead of having to get self-serving politicians’ approval for their every move. Abroad, stop meddling in the Middle East (and everywhere else, for that matter) and bring the troops home. There’s no denying that the instability in that region, caused in no small part by U.S. foreign policy toward both Iraq and Iran, is contributing to the high price of crude oil. Pulling out U.S. troops, who have no business being there in the first place, and taking a less belligerent stance toward Iran would go a long way toward returning some sense of stability to the region and thus reducing the cost of crude. These are, however, the last things the feds will do since such actions do not win them the votes of various special interest groups or increase their power over the economy.

Lest you think the state governments are any better, consider that they aren’t exactly rushing to reduce their own taxes and regulations, either. Here in western Pennsylvania, state police, ever the fine, selfless public servants that they are, managed to shut down a price war between two gas stations that had brought the price down to $2.36 a gallon, ostensibly because of "a minor accident involving cars stopped along" the road on which the two stations are located. More likely, they didn’t like the fact that the free market was proving the state’s complete irrelevance and impotence. While the politicians jawboned and postured, these two station owners actually accomplished the seemingly impossible, reducing gas prices to the level they had been just a couple months ago, causing one customer to remark that they were "pretty much giving it away."

Thousands of words have been employed from commentators all across the ideological spectrum, arguing over what constitutes price gouging, if the oil companies are guilty of it, what factors are involved in causing prices to be so high, whether those factors are sufficient to justify the high prices at the pump, and what (if anything) should be done if the oil companies cannot satisfy the politicians that they are charging prices the politicians consider fair. Much of this is useful discussion, insofar as the root causes of the high prices are revealed to be, to a large degree, various government interventions.

The problem is that such discussion tends to center on "proving" that this or that factor is either sufficient or insufficient justification for high prices, the underlying assumption being that some individuals aside from the buyer and seller are equipped to determine just what the "correct" price of gasoline should be. It is as if there is just some giant pool of gas out there whose optimal price should be able to be ascertained outside of the processes of the market, with the oil companies left merely to serve as conduits for the fuel, offering it up at the predetermined "right" price.

Lost in all of this is the simple fact that oil, once it has been extracted from the ground, is private property. Someone risked the capital, time, and labor necessary to extract the oil from the earth, and that someone now holds title to the fruits of his labor. Once a person or company owns a particular good, he is entitled to offer it up at any price he so desires. This does not imply that anyone is forced to buy it from him at this or any price, but it does imply that no one has the right to change the asking price except the owner of the product. If anyone is able to force a change in the price contrary to the wishes of the seller, then the product is no longer private property. It cannot be private property and at the same time be subject to the whims of someone who does not own it.

Let’s say, for example, that you own a house that you bought 20 years ago for $50,000. Your real estate agent could perform all kinds of calculations based on the rate of inflation, changes in the housing market in your neighborhood, interest rates, and so on, and tell you that he thinks you ought to ask for $100,000 if you wish to sell it today. If he is not a co-owner of the house with you, his opinion is just that – an opinion. You are perfectly free to offer your house for sale at an asking price of $100,000, $200,000, or even a mere $3.29. Potential buyers are then free to decide whether or not they wish to pay the price you are asking and, if not, to bargain with you until you arrive at a mutually agreeable price. No one, seeing that you have slapped a price tag of $200,000 on a house that is, from as objective a standpoint as possible, worth $100,000, has the right to force you to sell it for the price that "everyone knows" is the "correct" price. It’s your private property, and you are free to offer it for sale at whatever price you wish, or even to take it off the market in hopes of selling it for your desired price at a later time.

So it goes with oil. Once it’s out of the ground, it’s private property. The owner can offer it for sale at whatever price he chooses, and the buyer can then decide whether to buy it at the asking price, bargain for a lower price, or bide his time in hopes of a lower price in the future.

The objection, of course, is that oil is a necessity in today’s world, and therefore some consideration of the common good must override the oil companies’ right to set their own prices. If oil is a necessity, however, how much more so are food, clothing, and shelter, and yet who would deny a farmer the right to offer his crops for sale at the price he so chooses? (Actually, the government would, but perversely the government’s actions tend to force the price higher, by setting quotas for how much of each crop can be grown, forcing the destruction of "surplus" crops, paying farmers not to grow crops, or even blatantly setting minimum prices for farm products – and woe to the farmer who chooses to sell below the government’s established price! The fact that politicians, on the one hand, claim to be doing whatever they can to bring down gas prices because gas is such a necessity but, on the other hand, deliberately manufacture high prices for food, which is even more essential, ought to put to rest once and for all the notion that government is made up of high-minded public servants doing everything in the interest of the average citizen.)

Furthermore, the oil companies, so seemingly small in number, have, in the public’s eyes, a monopoly on the market, and thus they cannot be permitted to set their own prices, for they would surely jack up the price of gas so high as to squeeze every last penny out of us. (Never mind that the price of gas goes down frequently and that the companies don’t just charge us $100 a gallon simply because they can, and never mind that John D. Rockefeller managed continually to reduce the price of oil and its products during the entire time that Standard Oil did indeed have a virtual lock on the market. Monopolies are bad just because they sound bad.) So what if there were a monopoly? That single owner of all the world’s oil would still have the right to ask whatever price he chooses because what he owns is private property, and no one else has the right to force him to change his asking price.

Similarly, if someone bought up all the world’s houses, the fact that everyone needs a house would not imply that therefore everyone has the right to set the price at which the owner of the houses offers any one of them for sale. If he bought them fairly and squarely, he has the sole authority to determine the asking price – and every other individual has the sole authority to decide whether or not to purchase any particular house at the asking price, to bargain for a lower price, or to wait for another purchasing opportunity.

As frequently happens when considering public policy matters, it all comes down to the existence and inviolability of private property. As long as property rights are respected, differences can be resolved in a peaceful and orderly manner. In the case of high gas prices, that might mean cutting back on driving, buying a more fuel-efficient car, trimming one’s budget of nonessential spending, or taking alternate modes of transportation. The alternative is to call on government to solve the problem, and that necessarily entails the violation of property rights and the fomenting of much rancor between buyers and sellers, rancor that can then only be mollified by additional government intervention and thus additional violations of property rights, engendering more enmity and perpetuating the vicious cycle.

There are only two choices: private property and peaceful resolution of differences, or violation of private property and continual conflict. Indeed, as the title of a recent Brad Edmonds column so aptly put it, earthly salvation can be found in private property alone.

May 5, 2006

Michael Tennant [send him mail] is a software developer in Pittsburgh, Pennsylvania.

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