Thoughts on Perpetual Property Rights

The concept of property rights is engrained in the libertarian community and is perhaps one of the single biggest selling points for crypto-currency. We live in a world where governments routinely take what they want, when they want. New laws are passed, new taxes, new regulations, and new restrictions on our freedoms. We never agreed to this state of affairs; we were born into it.

In my search for free market (non-violent) solutions for securing life, liberty, property, and justice for all I have been forced to question everything. Even the very definition of property. Where does property come from? How is it allocated? When can it be transferred?

Property is an idea, “this belongs to me”; however, ideas being what they are, are not universally shared. The definition and assignment of property becomes a point of conflict when two people make contradictory claims. They both cannot be right at the same time.

Two people arrive on an island at the same time, they both claim it as their own. Who owns the island? How is it divided? Can it be objectively determined who is “right” and who is “wrong”? In this state there are only two outcomes, “compromise and peace” or “no compromise and war”. The outcome will be peace when both parties are better of with peace and war if either party is better off under war.

The origin of property rights on this island is a peace treaty whereby both parties came into agreement, “this is mine” and “that is yours”. So long as both parties remain in agreement peace will prevail. As soon as either party finds “war” a better alternative all property rights are gone and a new peace treaty must be negotiated.

We can conclude from this that property rights are not absolute nor permanent part of nature. They are always subject to negotiation and can only be maintained so long as neither party becomes too desperate nor too strong. By nature, a starving man does not care about a rich man’s claimed right to his over-abundance of food. Likewise, a powerful man sees no reason to negotiate with a weak man beyond his own compassion.

Collectively the masses, when properly coordinated, are much stronger than the rich few. The rich can maintain their privileged status only as long as they can maintain the consent of the masses. The masses will generally give their consent so long as they get what they need and the rules are perceived to be fair. From a different perspective, the masses will suffer under perceived injustice as long as the cost of war is higher than the benefits they hope to achieve. As injustice continues the “cost of war” (what they have to lose) falls relative to the benefits. Eventually, when people have nothing left to lose they social unrest resets property rights.

What does this mean for a blockchain community attempting to establish a constitution? It means that we must be careful how we define rights and expectations. If we define very rigid rights then the lack of flexibility may lead to conflict. On the other hand, if we don’t define a predictable playing field then people will not feel safe. The goal of any community governance system is to manage property rights in a way where we achieve the following:

1. No one becomes too powerful (able to bend the rules)
2. The rules are stable and predictable
3. We carefully communicate rules to prevent conflicting expectations

Part of managing expectations is getting explicit consent to the process and potential outcomes. The more defined the process and the more predictably it is implemented the more secure everyone is. Any process must be balanced so that it cannot be systematically manipulated to empower an unaccountable few.

Any member of a community that enters said community with the expectation that their rights are defined by something other than what they have agreed to with the community will be frustrated. It would be like someone renting a house and then believing that the house was theirs. When they get evicted at the end of their lease they will be upset and may claim “but it is my house!”. When you enter a community you must have an accurate understanding of your rights and expectations or there will be future conflict.

So the question becomes how should a community manage property rights? Are they temporary grants or are the permanent? As individuals we want to own what is “ours” and we want everyone else to mind their own business. We can agree to a peace treaty where property is absolute and passed down through the ages. This is a stable set of rules that is very predictable assuming all property is initially allocated without dispute.

That said, we must also have a system for correcting unauthorized transfer via theft or default on contract. The system must be robust against subjective and ambiguous situations. For this reason we agree in advance that disputes may be resolved by a defined process and that the outcome of this process may be the reallocation of property. Everyone is secure so long as the process has proper checks and balances to prevent the process from being corrupted.

This leaves us with one remaining edge case: abandoned property. This is property whose owner cannot be found. In this situation anyone with a dispute against said property might win by default. Is it possible for someone to have a dispute with the owner of “abandoned” property? Is it reasonable for everyone else to continue to respect this “property” even though there is no one actively claiming it? Abandoned property is like a neighboring county rich in resources whose population has suddenly died. Does the rest of the world “respect the property claims” of this missing population? On what basis is there to maintain “peace” with a dead man? It certainly wouldn’t be much of a war to claim that property.

From this we can conclude that the only reason not to reclaim the abandoned property is the possibility that the owner might turn up in the future, discover his property rights had been confiscated, and declare war. The probability of this missing owner showing up falls dramatically with time.

So a community has three options:

1. Allow resources to go to waste
2. Risk war when rightful owner returns
3. Define property rights as contingent upon active renewal

The first option unnecessarily denies the rest of society the benefit of those resources. The second option leaves everyone uncertain and risks war, and the last option places a minimal cost on the owner to maintain property.

In reality, all three options place a cost on maintaining the property, the first two options place the cost of maintaining private property on the community whereas the last option places it on the owner.

It seems to me that the cost of maintaining private property should be placed on the owner of said property. The cost of a owner to maintain his property is low and fixed. It only requires maintaining the ability to “say something”. The opportunity cost to the community is potentially unbounded.

If property rights are a peace treaty, a wise negotiator would want to retain flexibility without risking war. An unwise negotiator would think in absolutes and risk war the first time reality doesn’t fit his mental model.

What do you think?