Mere Opposition to the ‘Initiation of Force,’ Such As From Libertarians, As Necessary But Not Sufficient
As a political theory, libertarianism is a coalition of adherents from all manner of philosophic (or non-philosophic) positions including emotivism, hedonism, Kantian à-priorism , and many others. My own position grounds libertarianism on a natural rights theory embedded in a wider system of Aristotelian-Lockean natural law and a realist ontology and metaphysics. But although those of us taking this position believe that it only provides a satisfactory groundwork and basis for individual liberty, this is an argument within the libertarian camp about the proper basis and grounding of libertarianism rather than about the doctrine itself.The principle against force’s initiation is necessary but it is not sufficient. If you want a consistent defense of free enterprise and the right to the wealth you have produced, you must also identify the source of your rightful ownership of wealth. And you must show that your rightful control over the value that you have created is something much more important than merely a method by which efficient use of resources is incentivized and through which courts engage in dispute resolution. It is also important that you can elaborate on how the justification of your rightful control over your wealth is that you can be objectively identified as the primary creator of this very same quantity of economic value.
When it comes to the matter over why the uninitiated ought to accept the principle that force is wrong, what I have just named are the vital considerations that Murray Rothbard handwaves as inessential to the “doctrine itself.” Accordingly, my conclusion that the non-force principle is necessary but not sufficient is demonstrated by another group of people who claim to oppose the initiation of the use of force. It’s not the group whom many free-enterprisers would expect.
That Laws Are Ultimately Enforced at Gunpoint: These People Agree With Free-Enterprisers About That . . . or Do They?
I often point out that laws — even entirely legitimate ones in a proper constitutional-liberal republican Night Watchman State — are ultimately enforced at gunpoint. Even if the initial penalty for breaking a law is a very small fine, persisting in refusal to comply with the law will bring about an escalation in penalties. If you persist in refraining from discharging the small fine, eventually you will be ruled to be in Criminal Indirect Contempt of Court. And enforcement requires that armed men be dispatched upon you by the State.
Of course, Democrats and Republicans are fond of agitating for new legislation that encroaches upon what peaceful private parties may do with their own belongings and households. Thus, upon being reminded that their favorite legislation initiates violent threats upon peaceful people, these Democrats and Republicans get huffy toward me. At me, they do Rousseau’s Social Contract Song-and-Dance. They recite this big fiction about how, by being born and living among other people, I implicitly consented to a Prime Contract in which I authorize that, for society’s collective benefit, the State may rightfully overrule my peaceful decisions and actual contracts. But in contrast to conventional Democrats and Republicans, there is a group of people — emphatically not fans of large-scale entrepreneurial enterprises — who agree and understand that laws are ultimately enforced at gunpoint.
In contrast to conventional Democrats and Republicans, one woman from this other group denounces governmental institutions, implicitly including the welfare state, for “stealing in the form of taxes...” And just like free-enterprisers such as Frédéric Bastiat and Leonard E. Read, this woman recognizes that “all forms of government rest on violence...” That includes democracies, welfare states, and even proper constitutional-liberal republican Night Watchman States. Similar to that, a man in agreement with this perspective says that when the State takes action upon you who have done nothing to warrant that, it is for you
Anarcho-collectivists acknowledge the correctness of free-enterprisers in pointing out how laws, taxes, and government regulations are ultimately enforced at gunpoint. Yet they do not agree with free-enterprisers about what constitutes the initiation of the use of force by one person against another to snatch the second person’s resources.
Does a Mansion Owner Initiate the Use of Force By Calling the Cops on Burglars?
Consider the case of Charles Martin Hall who, on account of years of doing his own research-and-development, devised a new efficient method for producing aluminum, and became a multimillionaire from that devising. Nouveau-riche, he dabbled in art collection. Suppose that a gang of burglars break into Hall’s mansion to loot him. And suppose Hall calls the police on them. The police arrive and stop the burglars.
Free-enterprisers would say that the burglars were initiating the use of force upon Charles Hall, who was minding his own business. And they would continue that the police apprehending the burglars was the proper exercise of force in retaliation only against the force that was initiated. But the anarcho-collectivists have an entirely different take on this scenario.
To the anarcho-collectivists, once you have performed manual labor, you have sufficiently earned a share of resources — economic value — that is equal to that of everyone else’s. For anarcho-collectivists — even if they give some lip service to the value of inventors and engineers — it is the case that by owning and controlling a share of economic value in society that dwarfs that of most men, Charles Hall has absconded with a quantity that is not rightfully his. By claiming control over a share of economic value far greater than what other men have, conclude the anarcho-collectivists, it is Charles Hall who has initiated the use of force against everyone else. In the anarcho-collectivists’ estimate, Charles Hall is hoarding an unfair share by means of physical force. Charles Hall’s option to call the police to guard this stash for him is, to the anarcho-collectivists, proof that it is Charles Hall holding the power to call upon armed men to uphold and enforce his wrongdoing.
And, continue the anarcho-collectivists, the burglars have the moral high ground. By trying to burgle Charles Hall, they say, the burglars are merely trying to retrieve and reclaim some of the wealth that is rightfully theirs. On that interpretation, it is the burglars who are using rightful retaliatory force against the party that initiated it.
At root, the area of disagreement is the ethics over Charles Hall expecting the police to guard what Charles Hall insists is his own rightful private property. There are laws against burglarizing someone’s mansion. And, as understood both by free-enterprisers and anarcho-collectivists, laws are ultimately enforced at gunpoint. When the police stop the burglars, it is an example of the government using force.
That is why it is necessary but not sufficient for you as a free-enterpriser to say, “I am opposed to the initiation of the use of force.” “Red” Emma Goldman and Karl Marx’s contemporary and frienemy, Pierre Proudhon, claim to hold that same position. Nor is it even adequate to say that you oppose it when one man tries to take from others what is not rightfully his. Emma Goldman and Pierre Proudhon would say that they hold this position as well, and it is exactly why they believe the burglars are in the right, not Charles Martin Hall. And anarcho-collectivists would interpret the story the same way if the rich man in question was not Charles Hall but instead Henry Bessemer, the nineteenth-century British man who got rich from his own improved method of steelmaking.
Some English-language translations of Pierre Proudhon superficially resemble, at first glance, statements from Objectivists. Proudhon explicitly rejects rationalizations for government regulations from Democrats and Republicans that rely upon invocations to their precious Rousseauian interpretation of some supreme Social Contract. And in a move that is more seemingly impressive, Proudhon praises what he calls economic “producers” — producer is the word in the English translations of Proudhon. But to Pierre Proudhon, the only economic producers are manual laborers, not CEOs or inventor-engineers.
That Laws Are Ultimately Enforced at Gunpoint: These People Agree With Free-Enterprisers About That . . . or Do They?
I often point out that laws — even entirely legitimate ones in a proper constitutional-liberal republican Night Watchman State — are ultimately enforced at gunpoint. Even if the initial penalty for breaking a law is a very small fine, persisting in refusal to comply with the law will bring about an escalation in penalties. If you persist in refraining from discharging the small fine, eventually you will be ruled to be in Criminal Indirect Contempt of Court. And enforcement requires that armed men be dispatched upon you by the State.
Of course, Democrats and Republicans are fond of agitating for new legislation that encroaches upon what peaceful private parties may do with their own belongings and households. Thus, upon being reminded that their favorite legislation initiates violent threats upon peaceful people, these Democrats and Republicans get huffy toward me. At me, they do Rousseau’s Social Contract Song-and-Dance. They recite this big fiction about how, by being born and living among other people, I implicitly consented to a Prime Contract in which I authorize that, for society’s collective benefit, the State may rightfully overrule my peaceful decisions and actual contracts. But in contrast to conventional Democrats and Republicans, there is a group of people — emphatically not fans of large-scale entrepreneurial enterprises — who agree and understand that laws are ultimately enforced at gunpoint.
In contrast to conventional Democrats and Republicans, one woman from this other group denounces governmental institutions, implicitly including the welfare state, for “stealing in the form of taxes...” And just like free-enterprisers such as Frédéric Bastiat and Leonard E. Read, this woman recognizes that “all forms of government rest on violence...” That includes democracies, welfare states, and even proper constitutional-liberal republican Night Watchman States. Similar to that, a man in agreement with this perspective says that when the State takes action upon you who have done nothing to warrant that, it is for you
to be...inspected, spied on, directed, legislated at, regulated, docketed, indoctrinated, preached at, controlled,...censored, ordered about... [It] is to be at... every transaction, ... registered, enrolled, taxed, stamped,...licensed, authorized, admonished, forbidden, reformed, corrected, punished. It is, under the pretext of public utility, and in the name of the general interest, to be...ransomed, exploited, monopolized, extorted, squeezed, mystified, robbed; then, [upon] resistance,...repressed, fined, despised, harassed, tracked, abused, clubbed, disarmed, ... imprisoned, judged, condemned, shot, deported, sacrificed...The woman I quoted earlier was “Red” Emma Goldman, the anarcho-collectivist mistress to Alexander Berkman. In the late nineteenth century, Berkman tried to assassinate the chairman of Carnegie Steel, and almost succeeded at that. The man I quoted after her was Pierre Proudhon, a contemporary and “frienemy” to Karl Marx. And similar to them was Upton Sinclair. In words he attributed inaccurately to George Washington, Sinclair admitted, “Government is not reason, it is not eloquence — it is force.”
Anarcho-collectivists acknowledge the correctness of free-enterprisers in pointing out how laws, taxes, and government regulations are ultimately enforced at gunpoint. Yet they do not agree with free-enterprisers about what constitutes the initiation of the use of force by one person against another to snatch the second person’s resources.
Does a Mansion Owner Initiate the Use of Force By Calling the Cops on Burglars?
Consider the case of Charles Martin Hall who, on account of years of doing his own research-and-development, devised a new efficient method for producing aluminum, and became a multimillionaire from that devising. Nouveau-riche, he dabbled in art collection. Suppose that a gang of burglars break into Hall’s mansion to loot him. And suppose Hall calls the police on them. The police arrive and stop the burglars.
Free-enterprisers would say that the burglars were initiating the use of force upon Charles Hall, who was minding his own business. And they would continue that the police apprehending the burglars was the proper exercise of force in retaliation only against the force that was initiated. But the anarcho-collectivists have an entirely different take on this scenario.
To the anarcho-collectivists, once you have performed manual labor, you have sufficiently earned a share of resources — economic value — that is equal to that of everyone else’s. For anarcho-collectivists — even if they give some lip service to the value of inventors and engineers — it is the case that by owning and controlling a share of economic value in society that dwarfs that of most men, Charles Hall has absconded with a quantity that is not rightfully his. By claiming control over a share of economic value far greater than what other men have, conclude the anarcho-collectivists, it is Charles Hall who has initiated the use of force against everyone else. In the anarcho-collectivists’ estimate, Charles Hall is hoarding an unfair share by means of physical force. Charles Hall’s option to call the police to guard this stash for him is, to the anarcho-collectivists, proof that it is Charles Hall holding the power to call upon armed men to uphold and enforce his wrongdoing.
And, continue the anarcho-collectivists, the burglars have the moral high ground. By trying to burgle Charles Hall, they say, the burglars are merely trying to retrieve and reclaim some of the wealth that is rightfully theirs. On that interpretation, it is the burglars who are using rightful retaliatory force against the party that initiated it.
At root, the area of disagreement is the ethics over Charles Hall expecting the police to guard what Charles Hall insists is his own rightful private property. There are laws against burglarizing someone’s mansion. And, as understood both by free-enterprisers and anarcho-collectivists, laws are ultimately enforced at gunpoint. When the police stop the burglars, it is an example of the government using force.
For free-enterprisers who wince at rent control and minimum-wage legislation, police stopping the burglarizing of a mansion is one of the few types of legitimate use of force by the State. Even a constitutional-liberal republican Night Watchman State favored by free-enterprisers like Frédéric Bastiat and Auberon Herbert would have punished burglars for hurting Charles Hall. But for anarcho-collectivists such as “Red” Emma Goldman, the protection of rich people’s private ownership rights is the central evil of the State. For Emma Goldman, police foiling the burglary of a mansion is actually the main case studying proving that the institution of government is the violent enforcer of evil. For anarcho-collectivists, the ability of a multimillionaire like Charles Hall to call the cops to protect his private property from burglars is no better than an intensifying of Hall’s initiation of the use of force against the burglars.
That is why it is necessary but not sufficient for you as a free-enterpriser to say, “I am opposed to the initiation of the use of force.” “Red” Emma Goldman and Karl Marx’s contemporary and frienemy, Pierre Proudhon, claim to hold that same position. Nor is it even adequate to say that you oppose it when one man tries to take from others what is not rightfully his. Emma Goldman and Pierre Proudhon would say that they hold this position as well, and it is exactly why they believe the burglars are in the right, not Charles Martin Hall. And anarcho-collectivists would interpret the story the same way if the rich man in question was not Charles Hall but instead Henry Bessemer, the nineteenth-century British man who got rich from his own improved method of steelmaking.
Some English-language translations of Pierre Proudhon superficially resemble, at first glance, statements from Objectivists. Proudhon explicitly rejects rationalizations for government regulations from Democrats and Republicans that rely upon invocations to their precious Rousseauian interpretation of some supreme Social Contract. And in a move that is more seemingly impressive, Proudhon praises what he calls economic “producers” — producer is the word in the English translations of Proudhon. But to Pierre Proudhon, the only economic producers are manual laborers, not CEOs or inventor-engineers.
Nor does Proudhon sympathize with investors. Investors risk their own resources by providing, to the CEO, control over such resources, hoping those resources will be inputted in such a way that they produce a final product that satisfies customers. Investors do that out of hope for a material return. And those investors have to do without those resources in the meantime even if they do get a return. But to Proudhon, only the manual laborers are the “producers” who contribute to the enterprise’s success.
Anarcho-collectivists, as with other opponents of free enterprise, implicitly presume that the quantity of wealth in an economy — the quantity of economic value — is fixed. That would mean that any one person getting more wealth spells less of it for everyone else. As Proudhon says it,
Many libertarians praise the philosopher Immanuel Kant, as can be seen at the Institute for Humane Studies, at the Cato Institute, and at the Mises Institute. Such libertarians honor him for his epistemology opposing inductive reason, and they also say he was an important contributor to free-enterprise advocacy itself. They are correct that Kant popularized the observation that the more two countries liberalize themselves domestically and trade with one another, the more that discourages warfare between them.
Anarcho-collectivists, as with other opponents of free enterprise, implicitly presume that the quantity of wealth in an economy — the quantity of economic value — is fixed. That would mean that any one person getting more wealth spells less of it for everyone else. As Proudhon says it,
The purchaser draws boundaries, fences himself in... Here, then, is a piece of land upon which, henceforth, no one has a right to step, save the proprietor and his friends; which can benefit nobody, save the proprietor and his servants. Let these sales multiply, and soon the people...will have nowhere to rest, no place of shelter, no ground to till. They will die of hunger at the proprietor’s door, on the edge of that property which was their birthright...On that interpretation, if Charles Martin Hall had a net worth of 5 million US dollars, then that deprives everyone else in society of 5 million US dollars’ worth of resources. Who is Charles Martin Hall to have so much when the burglars have so much less? That is the mentality behind the presumption that those who would burglarize Charles Hall or Henry Bessemer are the ones who have the moral high ground. That is how Proudhon concludes, “Property is the [false] right of increase claimed by the proprietor over any thing which he has stamped as his own. . . . The proprietor, producing neither by his own labor nor by his implement, and receiving products in exchange for nothing, is either a parasite or a thief.”
Many libertarians praise the philosopher Immanuel Kant, as can be seen at the Institute for Humane Studies, at the Cato Institute, and at the Mises Institute. Such libertarians honor him for his epistemology opposing inductive reason, and they also say he was an important contributor to free-enterprise advocacy itself. They are correct that Kant popularized the observation that the more two countries liberalize themselves domestically and trade with one another, the more that discourages warfare between them.
Still, many aspects of Kant’s views actually lend support to anti-capitalists such as Proudhon. In this context, Kant implicitly endorses the notions that there is a fixed quantity of wealth and that you can only give or take wealth but never produce a net increase in the total existing quantity of wealth.
St. Gregory likewise propounded, “When we furnish the destitute with any necessity we render them what is theirs, not bestow on them what is ours; we pay the debt of justice rather than perform the works of mercy.”
Basil of Caesarea similarly proclaimed, “The bread in your hoard belongs to the hungry; the cloak in your wardrobe belongs to the naked; the shoes you let rot belong to the barefoot; the money in your vaults belongs to the destitute.”
And St. Ambrose concurred, “You are not making a gift of your possessions to the poor person. You are handing over to him what is his.”
In giving to a person in need of charity, the giver “makes restitution” for an injustice... ...in giving to an unfortunate man we do not give him a gratuity but only help to return to his that of which the general injustice of our [social] system [such as of private property] has deprived him. For if none of us drew to himself a greater share of the world’s wealth than his neighbor, there would be no rich or poor. Even charity therefore is an act of duty imposed upon us by the rights of others and the debt we owe to them.And this sounds like a repetition of Christianity’s early Church Fathers, as noted by Stephen Hicks. Pope Francis loved to quote John Chrysostom saying, “Not to share one’s goods with the poor is to rob them... It is not our goods that we possess, but theirs.”
St. Gregory likewise propounded, “When we furnish the destitute with any necessity we render them what is theirs, not bestow on them what is ours; we pay the debt of justice rather than perform the works of mercy.”
Basil of Caesarea similarly proclaimed, “The bread in your hoard belongs to the hungry; the cloak in your wardrobe belongs to the naked; the shoes you let rot belong to the barefoot; the money in your vaults belongs to the destitute.”
And St. Ambrose concurred, “You are not making a gift of your possessions to the poor person. You are handing over to him what is his.”
Yes, it is the tradition of the early Church Fathers, Immanuel Kant, and the anarcho-collectivists to presume that the quantity of wealth that can be enjoyed by the human population to be static. On that assumption, someone getting more wealth translates to less for everyone else. But those premises are false. And we can see that only through a proper rational approach to philosophy, as elucidated by Ayn Rand and Objectivism while citing economic insights from Enlightenment-era philosophes Jean-Baptiste Say and John Locke and from twentieth-century business management professor Julian Simon.
Therefore, let us look at how one gets rich by means other than manual labor.
Multimillionaire Inventor Charles Martin Hall Did Not Steal His Wealth — His Volitional Mind Produced It
First, the usefulness of natural resources — their economic value — is not directly proportional to the quantity of units of this resource. Rather, through technological improvements, a single unit of a natural resource can be made more useful than it had been in years past. And that usefulness — that economic value — is the true definition of wealth. If these improvements have been made over the past five years, than a particular quantity of natural resource can produce more wealth for us today than that same quantity could have five years ago.
The use of electricity in production involves using up natural resources, using up coal and oil and natural gas and biomass. And aluminum is a very useful metal, being strong yet lightweight in comparison to others. But for most of human history, it was difficult to isolate the aluminum from the ore encasing it. That meant you could not get purified aluminum to use it for the best purposes. It was only in 1825 when the scientist Hans Christian Oersted separated a few micrograms of aluminum from ore.
Aluminum was so difficult to separate from ore that, by 1850, aluminum cost more per ounce than gold did. When Louis Napoleon had guests over, he treated them differently according to rank. Somewhat-high-ranking guests got to eat with forks and knives made from gold. But the highest-ranking guests ate with forks and knives made from aluminum.
But after arduous periods of research-and-development, Charles Martin Hall devised a method of using electricity to separate aluminum from the ore encasing it. Whereas it previously took over 74 kilowatts to produce a single kilogram of aluminum — kilowatts that expended natural resources such as coal — by 1886 that same kilogram of aluminum could be produced after the exertion of 40 kilowatts. By 1890, Charles Hall got that down to 15 kilowatts. This means that in 1890, a kilogram of coal that you invested in the aluminum market would avail to people over four times as much aluminum as that same quantity of coal would have in 1825. In the aluminum market between 1825 and 1890, Charles Hall quadrupled the usefulness and economic value of a kilogram of coal. Aluminum’s real price declined by a factor of 200.
Charles Hall making aluminum so widely available, and therefore cheap, had many benefits. To produce the engine of their airplane, the Wright brothers needed a metal that was both lightweight and cost-effective. The metal that suited their purposes was aluminum. Had Charles Hall not made his breakthrough when he did, it likewise would have been much more difficult for the Wright brothers to put together the airplane when they did.
Henry Bessemer made a comparable advancement. Steel production goes back at least as far as the Roman Empire. But, as with aluminum in 1825, it was always difficult to produce steel in large quantities. In the year 1850, mills had to burn 7 tons of coal to generate the amount of heat necessary to produce a single ton of steel. But, as Charles Hall did years after him, Henry Bessemer expended investors’ valuable resources in a risky duration of research-and-development. Through such R-and-D, Bessemer learned that if you quickly blasted jets of cold air on it as it was newly minted, it removed impurities and resulted in purer, stronger steel. On account of the Bessemer converter and Process, by 1862 it took 2.5 tons of coal to produce a stronger ton of steel. This means that, on account of Bessemer, in 1862 a ton of coal could produce over twice as much steel as it could have in 1850. Between 1850 and 1862 in the steel market, Bessemer more-than-doubled the usefulness and economic value of a single ton of coal.
That it took smaller quantities of coal to produce larger quantities of aluminum and steel also made larger quantities of coal available for other endeavors still.
Historians know that Charles Martin Hall became a multimillionaire, but they do not have a firm estimate of how many millions he had. But let us consider what it would mean if he had gained 5 million US dollars. If Charles Martin Hall received 5 million US dollars, it is because, from one end of the supply chain to the other, customers valued the newly-plentiful-on-the-market aluminum more than they valued the quantity of money that they exchanged for it. And the amount of money coming in from customers totaled at $5 million. Had the economic value that Charles Martin Hall not been worth as much to his customers, these customers would not have made those transactions. Thus, Charles Martin Hall gained $5 million only insofar as his customers valued, in total, his innovation at least as much as $5 million.
The benefits that Charles Martin Hall and Henry Bessemer provided was not the result of them snatching from everyone else a share of a fixed quantity of resources such as coal. Instead, each quantity of coal could produce more economic value for people than that quantity could have before Charles Hall and Henry Bessemer came along. If you had a quantity of coal and wanted it applied to steelmaking, your ton of coal was over twice as valuable as it would have been had Bessemer not taken action. Likewise, if you had only a kilogram of coal and wanted it applied to making aluminum available to consumers, your kilogram of coal became over four times as useful and valuable as it would have been had Charles Hall not intervened.
Any time you produce wealth through your labor, that economic value is stored in the direct product of that labor. And maybe you exchange the product of labor for something else. Should you exchange your labor for money or other items, it is the case that you did not directly produce units of that money or those other items. Nevertheless, you retain the economic value that you produced originally. That economic value is now stored in the money or other items for which you exchanged the more-direct products of your labor.
The same principle applies to efficiency-boosting inventions. An inventor such as Charles Martin Hall or Henry Bessemer may sell his patent. As another alternative, he may keep his patent and rightfully use the more well-known method of recouping the costs of the units of resources he expended. After all, those resources were expended in the research-and-development and experimentation needed to arrive at the functional design and delineation that was needed for the invention to perform as intended. Such costs of the units of resources is recouped through licensing — properly selling access to the invention’s functional design. And when money and other items are exchanged for this access, the economic value of the invention is then stored in the money and other items exchanged to the inventor for it. Accordingly, the quantity of wealth that Charles Martin Hall or Henry Bessemer possesses in his mansion is no greater than the net increase in economic value that he brought into being.
Far from snatching an unfair share of a fixed quantity of economic value in society, the wealth enjoyed by Henry Bessemer and Charles Martin Hall was commensurate — no greater — than the net increase in economic value they had availed to the world in total through their finding and applying new methods to produce greater economic value from the existing quantity of resources. Whatever the exact figure, Charles Martin Hall rightfully owned the millions he did because that was the quantity of wealth that he created.
Conclusion
Henry Bessemer and Charles Hall grew rich only to the extent that they had enriched other people who had applied their innovations. And this enrichment came in the form of improved methodology that enriches people far beyond the mere number of units in natural resources available. That net increase in economic value that Hall and Bessemer each produced — a quantity of value that was and remains gigantic in size — redounded upon each of them in their respective personal fortunes. Private property rights enabled Bessemer and Hall to pursue such endeavors, and private property rights enabled Bessemer and Hall to enjoy the just deserts of those efforts.
Multimillionaire Inventor Charles Martin Hall Did Not Steal His Wealth — His Volitional Mind Produced It
First, the usefulness of natural resources — their economic value — is not directly proportional to the quantity of units of this resource. Rather, through technological improvements, a single unit of a natural resource can be made more useful than it had been in years past. And that usefulness — that economic value — is the true definition of wealth. If these improvements have been made over the past five years, than a particular quantity of natural resource can produce more wealth for us today than that same quantity could have five years ago.
The use of electricity in production involves using up natural resources, using up coal and oil and natural gas and biomass. And aluminum is a very useful metal, being strong yet lightweight in comparison to others. But for most of human history, it was difficult to isolate the aluminum from the ore encasing it. That meant you could not get purified aluminum to use it for the best purposes. It was only in 1825 when the scientist Hans Christian Oersted separated a few micrograms of aluminum from ore.
Aluminum was so difficult to separate from ore that, by 1850, aluminum cost more per ounce than gold did. When Louis Napoleon had guests over, he treated them differently according to rank. Somewhat-high-ranking guests got to eat with forks and knives made from gold. But the highest-ranking guests ate with forks and knives made from aluminum.
But after arduous periods of research-and-development, Charles Martin Hall devised a method of using electricity to separate aluminum from the ore encasing it. Whereas it previously took over 74 kilowatts to produce a single kilogram of aluminum — kilowatts that expended natural resources such as coal — by 1886 that same kilogram of aluminum could be produced after the exertion of 40 kilowatts. By 1890, Charles Hall got that down to 15 kilowatts. This means that in 1890, a kilogram of coal that you invested in the aluminum market would avail to people over four times as much aluminum as that same quantity of coal would have in 1825. In the aluminum market between 1825 and 1890, Charles Hall quadrupled the usefulness and economic value of a kilogram of coal. Aluminum’s real price declined by a factor of 200.
Charles Hall making aluminum so widely available, and therefore cheap, had many benefits. To produce the engine of their airplane, the Wright brothers needed a metal that was both lightweight and cost-effective. The metal that suited their purposes was aluminum. Had Charles Hall not made his breakthrough when he did, it likewise would have been much more difficult for the Wright brothers to put together the airplane when they did.
Henry Bessemer made a comparable advancement. Steel production goes back at least as far as the Roman Empire. But, as with aluminum in 1825, it was always difficult to produce steel in large quantities. In the year 1850, mills had to burn 7 tons of coal to generate the amount of heat necessary to produce a single ton of steel. But, as Charles Hall did years after him, Henry Bessemer expended investors’ valuable resources in a risky duration of research-and-development. Through such R-and-D, Bessemer learned that if you quickly blasted jets of cold air on it as it was newly minted, it removed impurities and resulted in purer, stronger steel. On account of the Bessemer converter and Process, by 1862 it took 2.5 tons of coal to produce a stronger ton of steel. This means that, on account of Bessemer, in 1862 a ton of coal could produce over twice as much steel as it could have in 1850. Between 1850 and 1862 in the steel market, Bessemer more-than-doubled the usefulness and economic value of a single ton of coal.
That it took smaller quantities of coal to produce larger quantities of aluminum and steel also made larger quantities of coal available for other endeavors still.
Historians know that Charles Martin Hall became a multimillionaire, but they do not have a firm estimate of how many millions he had. But let us consider what it would mean if he had gained 5 million US dollars. If Charles Martin Hall received 5 million US dollars, it is because, from one end of the supply chain to the other, customers valued the newly-plentiful-on-the-market aluminum more than they valued the quantity of money that they exchanged for it. And the amount of money coming in from customers totaled at $5 million. Had the economic value that Charles Martin Hall not been worth as much to his customers, these customers would not have made those transactions. Thus, Charles Martin Hall gained $5 million only insofar as his customers valued, in total, his innovation at least as much as $5 million.
The benefits that Charles Martin Hall and Henry Bessemer provided was not the result of them snatching from everyone else a share of a fixed quantity of resources such as coal. Instead, each quantity of coal could produce more economic value for people than that quantity could have before Charles Hall and Henry Bessemer came along. If you had a quantity of coal and wanted it applied to steelmaking, your ton of coal was over twice as valuable as it would have been had Bessemer not taken action. Likewise, if you had only a kilogram of coal and wanted it applied to making aluminum available to consumers, your kilogram of coal became over four times as useful and valuable as it would have been had Charles Hall not intervened.
Any time you produce wealth through your labor, that economic value is stored in the direct product of that labor. And maybe you exchange the product of labor for something else. Should you exchange your labor for money or other items, it is the case that you did not directly produce units of that money or those other items. Nevertheless, you retain the economic value that you produced originally. That economic value is now stored in the money or other items for which you exchanged the more-direct products of your labor.
The same principle applies to efficiency-boosting inventions. An inventor such as Charles Martin Hall or Henry Bessemer may sell his patent. As another alternative, he may keep his patent and rightfully use the more well-known method of recouping the costs of the units of resources he expended. After all, those resources were expended in the research-and-development and experimentation needed to arrive at the functional design and delineation that was needed for the invention to perform as intended. Such costs of the units of resources is recouped through licensing — properly selling access to the invention’s functional design. And when money and other items are exchanged for this access, the economic value of the invention is then stored in the money and other items exchanged to the inventor for it. Accordingly, the quantity of wealth that Charles Martin Hall or Henry Bessemer possesses in his mansion is no greater than the net increase in economic value that he brought into being.
Far from snatching an unfair share of a fixed quantity of economic value in society, the wealth enjoyed by Henry Bessemer and Charles Martin Hall was commensurate — no greater — than the net increase in economic value they had availed to the world in total through their finding and applying new methods to produce greater economic value from the existing quantity of resources. Whatever the exact figure, Charles Martin Hall rightfully owned the millions he did because that was the quantity of wealth that he created.
Conclusion
Henry Bessemer and Charles Hall grew rich only to the extent that they had enriched other people who had applied their innovations. And this enrichment came in the form of improved methodology that enriches people far beyond the mere number of units in natural resources available. That net increase in economic value that Hall and Bessemer each produced — a quantity of value that was and remains gigantic in size — redounded upon each of them in their respective personal fortunes. Private property rights enabled Bessemer and Hall to pursue such endeavors, and private property rights enabled Bessemer and Hall to enjoy the just deserts of those efforts.
Far from private property rights being just a mere method for dispute resolution in court, private property rights — especially the intellectual sort — are a documentation of financial identity. They help to identify particular creative efforts by a particular creative party, and thereby assist customers in identifying and recompensing the specific creative party that provided them the specific value.
It is good to educate people about the principle that it is wrong to initiate the use of force. But what is equally needed is more than what Murray Rothbard and many other libertarians cared to provide in the 1970s. Absent of the further clarification, people will not gain any more insight into the need for free enterprise than did Pierre Proudhon and “Red” Emma Goldman.
It is good to educate people about the principle that it is wrong to initiate the use of force. But what is equally needed is more than what Murray Rothbard and many other libertarians cared to provide in the 1970s. Absent of the further clarification, people will not gain any more insight into the need for free enterprise than did Pierre Proudhon and “Red” Emma Goldman.
If you think a productive inventor is right to call the police on people who burglarize his home, then you need to understand what important consideration was missing when libertarians in the 1970s assumed it was adequate simply to unite behind the declaration that they opposed any initiation of the use of force by governments and private citizens. The corollary imperative is to understand that the biggest driver in creating wealth — the wealth that becomes the property at risk of being stolen — is human rationality and its application by inventor-entrepreneurs such as Charles Martin Hall and Henry Bessemer. Absent of this philosophical understanding that intellectual effort — intellectual property — is the basis for rightful ownership over anything tangible, any libertarian proclamation of the wrongness in initiating force against private property rights will be worse than incomplete.
