The Austrian Guide to World Peace

“If you don’t know the guy on the other side of the world, love him anyway because he’s just like you. He has the same dreams, the same hopes and fears. It’s one world, pal. We’re all neighbors.”

— Frank Sinatra

Addison WigginWhen I first met Jeff Deist, he was chief of staff for Ron Paul in the U.S. House of Representatives. I’ll tell you more about our run-ins tomorrow…

Today, Jeff runs an organization that Ron Paul helped finance — the MIses Institute. It was named after Ludwig von Mises, a major proponent of the Austrian school of economic thinking. 

Most economists focus squarely on numbers — using math to describe how money moves through the financial system. They believe that explaining and solving recessions and depressions is just a matter of finding the right mathematical model. 

The Austrians, on the other hand, deride using formulas to explain economic forces. They believe every transaction is governed by innate human rights and common sense. Imbalances only occur when something interferes with those natural conditions, like the heavy hand of government. 

In fact, Austrian economic thought can be applied to all sorts of problems — even geopolitical quagmires that have vexed diplomats for decades. Jeff recently shared a timely example on The Mises Institute blog, which we’ve excerpted below. Enjoy. — Addison

A Libertarian Approach to Disputed Land Titles

“Romanticists condemn the economic theories concerning land for their utilitarian narrow-mindedness.”

— Ludwig von Mises

Jeff DeistThe recent spate of bombing violence in Israel’s West Bank, East Jerusalem and Gaza demonstrates the enduring attachment both Israelis and Palestinians have to physical land in the country. Both sides make claims — legal, moral and political — to land within Israel, from the southernmost tip of Gaza to the northernmost tip of the Golan Heights.

This ongoing and often violent dispute is based on interrelated historical and religious events reaching back thousands of years, even before the origins of the biblical Holy Land. And while ancient disputes are inherently more difficult to resolve, 20th century events also weigh heavily on the current conflict. The Balfour Declaration in 1917, the official establishment of Israel by U.N. resolution in 1948, decisive domestic land wars in 1967 and 1973 and even recent peace accords all failed to settle the issue or at least bring an end to violence.

Fights over land are the norm in human affairs, and the impetus for most wars across time. This is unsurprising, because for most of human history land and wealth were virtually synonymous. Today the ultimate landowner, Queen Elizabeth of England, at least symbolically controls 6 billion acres of British territories far beyond the Crown Estate. In theory, the wealthiest elites today, people like Jeff Bezos, derive most of their net worth from equity ownership in public or private companies. And unlike the blue-chip companies of 50 years ago, today’s big tech firms operate mostly in the digital sphere — owning lots of servers, intellectual property and lines of code, but little in the way of factories, offices or fields. Yet several tech titans, including Bezos and Bill Gates, are found among the old-money crowd in The Land Report’s list of top American landowners. The richest people in the world tend to hedge their bets, and one way they do so is selling stock to buy land rather than the other way around. This should tell us something.

So long as land remains valuable, we should expect people to fight over it. And not only in Israel. Similar disputes over historical claims are simmering in the West, including claims by American Indian tribes against the U.S. federal government for land restoration and black Americans seeking land as partial reparations for slavery. Yet we view these claims almost entirely in political terms, as matters to be settled by legislatures representing “the people” and using public appropriations. Why should this be so? Why does modern positivist “land law” focus primarily on zoning issues and land use rather than defining ownership? Black’s Law Dictionary appears to provide more guidance than the Supreme Court or international pseudo-tribunals. Why do we lack a method or road map for resolving land disputes in the modern context when land has been such a fixture in common law? One would think the basic rules of property titles would have been settled centuries ago.

So how do we address thorny land disputes in Gaza and elsewhere? Fortunately, both the late Murray N. Rothbard and his mentor, Ludwig von Mises, wrote at some length on the question of property titles, though from two different perspectives. In particular, we can look to chapters nine and 10 of Rothbard’s The Ethics of Liberty and the chapter on “Ownership” in Mises’s Socialism for their fullest treatments of law and justice as they relate particularly to real property.

Rothbard’s approach is normative, based strictly on natural law justice principles rather than economic efficiency. Mises, by contrast, is a strong critic of natural law. His “rule utilitarianism” views markets as a form of social cooperation, and seeks rules of conduct which encourages such cooperation for land disputes. But both men recognize the role that earlier aggression, whether force or fraud, played in creating property titles held today. Invasion, war, seizure, theft, trickery and general violence are at least as prevalent in human history as heroic homesteading.

Mises, in Socialism, does not sugarcoat this reality:

All ownership derives from occupation and violence. When we consider the natural components of goods, apart from the labour components they contain, and when we follow the legal title back, we must necessarily arrive at a point where this title originated in the appropriation of goods accessible to all. Before that we may encounter a forcible expropriation from a predecessor whose ownership we can in its turn trace to earlier appropriation or robbery. That all rights derive from violence, all ownership from appropriation or robbery, we may freely admit to those who oppose ownership on considerations of natural law. But this offers not the slightest proof that the abolition of ownership is necessary, advisable or morally justified.

Rothbard, in The Ethics of Liberty, rejects the notion of accepting current settled land titles under color of state authority. Defending things as they are, he says, causes the utilitarian to smuggle in an implicit ethic:

This, in fact, is the way utilitarian free-market economists invariably treat the question of property rights. Note, however, that the utilitarian has managed to smuggle into his discussion an unexamined ethic: that all goods “now” (the time and place at which the discussion occurs) considered private property must be accepted and defended as such. In practice, this means that all private property titles designated by any existing government (which has everywhere seized the monopoly of defining titles to property) must be accepted as such. This is an ethic that is blind to all considerations of justice, and, pushed to its logical conclusion, must also defend every criminal in the property that he has managed to expropriate.

(Libertarians) must take their stand on a theory of just versus unjust property; they cannot remain utilitarians. They would then say to the king: “We are sorry, but we only recognize private property claims that are just that emanate from an individual’s fundamental natural right to own himself and the property which he has either transformed by his energy or which has been voluntarily given or bequeathed to him by such transformers. We do not, in short, recognize anyone’s right to any given piece of property purely on his or anyone else’s arbitrary say-so that it is his own. There can be no natural moral right derivable from a man’s arbitrary claim that any property is his. Therefore, we claim the right to expropriate the ‘private’ property of you and your relations, and to return that property to the individual owners against whom you aggressed by imposing your illegitimate claim.”

So how, then, does a Rothbardian apply natural law theory to determine just land titles? We start with self-ownership, the idea that humans have an absolute right to own and control their bodies. From that right, we derive the right to find and transform unowned resources into owned property. Finally, owning property means having a right to alienate such property, by exchange or gift. So humans justly acquire property by mixing their labor with unowned resources, or by contract and gift.

All other methods of ownership, variants of theft or fraud, do not create just property titles.

Regards,

Jeff Deist
Special to the Financial Reserve

P.S. Check out Jeff’s full article at the Mises Institute website here.

Addison Wiggin

Addison Wiggin

Addison Wiggin is founder and executive publisher of Agora Financial LLC, an independent economic forecasting and financial research firm. He and Bill Bonner began writing the firm’s flagship Daily Reckoning in the midst of the tech boom and bust. It was one of the first widely distributed email newsletters on the Internet. The publication’s critical eye on finance and economics continues today. He’s also creator and editorial director of Agora Financial’s daily missive The 5 Min. Forecast.

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