The following is a revised and shortened version of the essay, “Ownership As Identification,” which goes into more detail about how documents of ownership are documents that help identify a person’s choices, which are part of her personality and identity. This is part of a larger discussion about intellectual property, as trademarks and copyrights and patents are not merely documents of ownership, but, as a corollary, documents of identification that identify an economic value with its creator. This is in line with my conclusion that, on a broad scope, all theft is ultimately a form of identity theft.
 |
| Fashion designer and heiress Tory Burch; photo from Kim Pooser at Always in Style; see permissions here. |
- None of the wealth that she controls was created directly by her. She has a TV set she did not create. But, as will be explained below, insofar as she acquired this TV peaceably, it is the product of her own economic productivity.
- No rich person built up her fortune, ex nihilo (from nothing). Yes, it is true that most people have inherited some form of wealth from their forebears. It is also true that many productive rich people, such as fashion designer Tory Burch, were born into wealth. That consideration does not negate the principle either. Most of the essay that follows will be an explanation of how Point 2 does not contradict the principle.
0. How Does Anything Unowned and Unclaimed in the Wilderness Become Rightful Private Property in the First Place?
Imagine you’re a homesteader. You go onto wilderness land that was not claimed by anyone. If you were a hunter-gatherer, you might be satisfied with this land in its default condition. But that hunter-gatherers mostly gained their food from foraging and hunting and otherwise did not change the land as much was a big reason why the infant mortality rate among them was 25 percent. As you want the chances for mortality to be much lower for yourself and the children you intend to bring into the world, you know that this wilderness is not satisfactory for your habitation. For the land to be truly hospitable, you need to change it.
You choose which crops to plant. You irrigate the land so that the crops receive water with greater regularity. Although Karl Marx mischaracterizes this process as if it were manual labor and nothing else, the process actually involves the exercise of a body part other than the arms and shoulders: the brain. You improve the land and make it livable mostly through the plans you devise for it. And, as John Locke points out, the new livability of the land is economic value that was not inherent to the land.
No, the net increase in the land’s economic value was something that your creative choices had put into it. It is for this reason, note John Locke and Adam Smith, that the homestead has rightfully become yours. As Locke and Smith laid the foundation for this interpretation, I call it the Locke-Smith (“Locksmith”) Idea. When other people come and homestead their own plots, it is proper that they respect that your own plot is rightfully yours to control exclusively.
The most direct and substantial reason why you are the one who should have ownership control over the economic value of your homestead is that you are the one who created that economic value. The law’s formal observance of you as the homestead’s owner is no more than secondary to that fact. And the law’s formal recognition of you as the owner is merely the law acknowledging, always implicitly though seldom explicitly, that the party that should have default claim of ownership control over an economic value is the one that made it.
Ownership is the means of identifying an economic value with its creator. This identification is what helps the law ensure that, in controlling and enjoying the economic value she took the initiative in producing, a person experiences the logical consequences of her peaceful chosen actions. That identification helps prevent thieves from wrestling away control of the effect (the economic value) from its cause (the value’s creator). This especially applies to intellectual property rights.
Now we shall address the two considerations from above.
1. If an Economic Value Belongs to Its Creator, How Can I Rightfully Own Units Made Directly By Someone Else?
The Locksmith Idea is not mitigated by the fact that a particular unit’s rightful owner is seldom the same party that produced the unit directly. In most instances where someone resolutely trades away the units she produced directly, she maintains the economic value she had created in the direct production of the units. The economic value she previously had in those units is what she now has stored in whatever good or service she obtained in exchange for the units. Indeed, insofar as this party first produced those units with the intention of trading them away later, she did so for the purpose of maintaining the units’ economic value in the form of good or service she gained in exchange for the units.
When you improve your land, the improvements are what you have produced directly. But when you sell the land for $500,000, you retain the economic value of the improvements. The economic value you produced is now stored in the $500,000. When you exchange the $500,000 for Y, the Y itself was assembled directly by other parties, but the economic value you produced is now in the Y.
Due to natural circumstances, that economic value might depreciate on its own. Machinery can wear down. Food items will rot. The depreciation can also be imposed from government forces, such as in the national government’s treasury and the central bank devaluing the monetary units you saved up. But if the material units you produced directly were traded away for Y, whatever economic value remains with Y is the same economic value created from your production of the original material units.
There is a corollary to this. Note that an extension of the right of the homesteader to the land he improved is his right to sell that land. Thus, the homesteader’s right to the land he improved is applied in the homesteader’s ability to transfer ownership of it to someone else. That does not change the fact that, by default, the first rightful claim of ownership over improved land goes to the homesteader whose planning choices improved it.
That principle applies to manual labor. An extension of the Locke-Smith Principle is the laborer’s right to transfer ownership of his labor. For that reason, it is consistent with the worker’s rights that the worker may forge an agreement with an employer. The worker implicitly agrees that, in exchange for the employer’s remuneration, the employer gains ownership over the product of the worker’s physical labor as that labor is being performed. That does not change the principle that, by default, the first rightful claim of ownership over one’s efforts goes to the person who is performing that effort.
2. The Right to Ownership Over the Economic Value One Has Created Includes the Right to Bestow It to Heirs of One’s Choosing
Many readers balk at this idea, saying that most of the wealth a person has was not created by she herself, but was what she inherited from elder relatives. They say that especially applies in instances of the heiresses of multi-million-dollar fortunes. The consideration that a lot of people start with inheritances, reply my detractors, demonstrates that most of the economic value a person possesses is not what she created herself.
More specifically, the proclamation goes that the $300 million that Paris Hilton inherited cannot be the result of her own creative choices. No, goes the proclamation, she is known for being a flaky socialite who made no wise investment other than having been born to the most convenient set of parents. As environmentalist and eugenicist Garrett Hardin says it in the journal Science, “An idiot can inherit millions, and a trust fund can keep his estate intact. We must admit that our legal system of private property plus inheritance is unjust...”
I have refuted that argument in this other post.
I cannot deny that most of us alive today, rich and poor alike, work with economic value that was already created by our forebears. But, as I have written in months past, that reality does not nullify the principle. The fact is that insofar as you are free, the economic value you own and control is still the result of your own productive choices. And that fact does not hinge upon your fortune having been built up from nothing, ex nihilo.
As I have noted in this other blog post, to say that Paris Hilton inheriting $300 million is a reward to her for doing nothing, or for merely having been born, is to overlook something crucial. The member of the Hilton family most germane to this discussion is Paris’s great grandfather, Conrad Hilton, founder of Hilton Hotels. The hundreds of millions of dollars he accumulated were the sum total of what his hotel guests willingly paid him in exchange for his lodging services. And these guests chosen to pay him these prices because they valued the lodging services more than the monetary sums they gave up.
One of the great motivators of earning lots of money is spending it on oneself in one’s own lifetime, but another is being able to bequeath it to descendants. Paris Hilton’s inheritance is not an instance of some malevolent deity, named Capitalist Inequality, rewarding her for having been born to convenient parents. Nay, her inheritance is the reward to Conrad Hilton from his guests for the services he provided them.
Many people reply indignantly that even if they can sympathize with Conrad Hilton wanting to ensure a comfortable life for his great-grandchildren, it still offends them that flaky heirs and heiresses can frolic in an affluence that the heirs and heiresses themselves take for granted. The reality is that insofar as there is economic freedom, heirs and heiresses hold onto their wealth to the extent that they still exercise responsibility and even productiveness in managing their heritage. Through unwise choices, an heir or heiress truly unworthy of such a fortune will happen to lose it.
At age five, Woolworth department store heiress Barbara Hutton inherited $70 million — $1.372 billion in 2018 U.S. dollars. Not only did she not appreciate her fortune; she did not even appreciate fortune-makers, writing hate poems about how capitalism is venal and corrupting. She did not manage her fortune with much self-care. When she died, she had no more than $3,500 left. Her story is unusual only in its severity — accounts of shrinkage of the fortunes of multimillionaire heirs are less extreme but nonetheless common. When “Commodore” Cornelius Vanderbilt died in 1877, he left behind an estate of $100 million. When his descendants held an official reunion at Vanderbilt University in 1973, not one of them possessed a net worth even as high as $1 million.
Paris Hilton inheriting $300 million does not negate my point that, insofar as people deal peacefully with one another, in the long run a person’s wealth is the stored version of the economic value which that person created. Paris inheriting $300 million is, in principle, about Conrad Hilton having created the 300-million-dollar value and rightfully deciding what to do with it. How much of that wealth Paris will continue to retain in her old age will depend upon her own wisdom in managing and re-investment of this economic value.
Conclusion: Your Net Worth Should Never Be Considered All of Your Identity, But It Is Part of Your Identity, Conveying Information About Your Choices
Thus, indeed, insofar as anyone acquired it through choices made in freedom and peace, the amount of wealth that someone owns, inherited or otherwise, is the quantity of economic value that he or she created through her choices. And these choices are an important portion of one’s identity. Concordantly, identifying someone’s ownership over wealth that is the result of such choices is a method of identifying important aspects of the owner herself.
And among the choices that make up our identity are those pertaining to finance and economics. I hold no doubt that many people recoil at such a thought. It is a common refrain, “I hate people being materialistic and trying to wrap up their identity in what they own. If the bank forecloses me and I lose my stuff, it doesn’t erase my personality; I don’t stop being who I was before the foreclosure.”
I readily acknowledge that you are not the belongings that are external to you. You have an identity separate from such objects. Were you to lose a significant portion of your fortune from some unforeseen traumatic event, that loss of money, by itself, would not stop you from being you. Still, the steps you chose to take to acquire anything with which you were not already born do display facets of your personality and are thus part of your identity.
As an institution that is supposed to be helpful in safeguarding you against theft, a document of rightful ownership is a document of identification. It is an identification in several important respects. The deed to your homestead, for instance, is such a document for identification. Consistent with what I have been saying, the deed identifies you with the property you control because it identifies the economic value with its creator.
This is something that cannot be stressed enough. Your identity consists of your creative choices. Your creative choices produce economic value. When the economic value you produce is respected as your private property, that ownership identifies the economic value with its creator. That is, respectively, to identify the effect with its cause. Rightful ownership is thus a form of identification. For someone to steal the economic value you produced is for that person to steal the logical effects of your choices, choices that are part of your identity. On a broad level, all theft is a sort of identity theft.
For more elaboration on this argument, please see my much longer essay over here, which is about how intellectual property rights play a crucial role in everything I have said above.
On Monday, July 6, 2020, I added the link on the bottom to my long essay about intellectual property rights being about a vital legal method for documenting and protecting one’s financial identity.
