I sit here typing, and on my body I have some nice wool pants with a hounds-tooth pattern, a charcoal gray sports jacket, and in my pockets various possessions, including my ever present Iphone, that I would prefer to keep. If someone challenged me on whether I “owned” these things, I would be hard pressed to prove it. I did not keep the receipts. Luckily, that is unlikely to happen.
I also own other things that I want to keep that don’t fit into my pockets or on my body. The biggest is a condominium in Brooklyn, which, through novel legal arrangements, actually traces its roots down into the ground so that I legally own the apartment free and clear (minus the huge bank loan), as opposed to a co-op apartment in the Big Apple, where one owns a share of the entire building. If someone challenged me as to whether I actually owned my apartment, I could produce a deed (I think) and that would show I owned it.
How? Because that deed is registered with the City of New York, which maintains a special registry for such things. These deeds are open to all to see. Curiously, if a property deed is private, there is no proof of ownership. Private property is by definition a public thing.
I go into all this because I come to the Ninth and most final and most important reason in my ongoing series Nine Reasons The Free Market is a False Concept. Property. It is not a simple subject.
I think there is a tendency, before some looking into the subject, to view property as a relatively simple thing, that can be created with an on/off switch. Let There Be Property. You own something or you don’t. But actually there are many different ways to own something, and this is particularly true with land.
In the end, property is whatever the state says it is, and with land, different states, i.e. types of government, have created many different methods of what the Lincoln Institute of Land Policy and others called “land tenure.” Owning inanimate objects, like a corporation, throws you into another set of choices.
In my book The Surprising Design of Market Economies, I go into the development of property over history. Owning land in particular has been like a slowly simmering soup that has taken centuries to mature and evolve. There have been ways of tying people to land, but what we think of as a modern method of ownership is relatively new.
One thing that had to develop was standard systems of measurement. Owning something from this tree to that lake gets kind of vague, and it becomes hard to sell something that vague, particularly in what we view as a market. To have a market in land, you need very precise systems of measurement, and you needed them to universal, or at least standard within one country. This took a lot of time. Part of the adaption by Europe of the metric system in the late 18th century was an effort to create more tradable property. The United States Congress, in its first few decades, went through a lot of effort to create common systems of measurement, which involved an obsessive appointee figuring out what exactly a yard was, and who then distributed exact, precision made versions of this to the various states so copies can be made. The great book, Measuring America by the late Andro Linklater is a text I quote frequently.
The point in all this is that there can be no markets, no capitalism as we think of, without property. And to have property, you need a state. So we should end the long conceptual divide between government and capitalism, which I wrote about here in Bloomberg View, and accept that governments make markets. And then start the public conversation about how to make them better.