<h2>CHAPTER 38</h2>
<h3>PRIVATE PROPERTY AND INHERITANCE</h3>
<h4>§ I. IMPERSONAL AND PERSONAL SHARES OF INCOME</h4>
<div class="sidenote">Functional vs. personal distribution</div>
<p>1. <i>Under the title "the social aspects of value" are to be considered
the influences exerted upon incomes by various social acts, ideals, and
institutions.</i> The incomes from the wages of free labor and those from
the rent of wealth, as studied in the abstract theory of value, are
alike in their impersonal aspect, their relation to utility. But while
wage flows from a personal source—is an income appearing to reward the
personal effort of the laborer, the income of the wealth-owner is due to
the uses of goods. In the abstract theory of value we do not seek to get
behind this impersonal phase of rent. The income arising from goods goes
to the de facto owner of the goods. We do not ask how the goods first
came into his possession, whether through labor or as a gift, whether
stolen or inherited. Indeed, the economic theory of competitive rent may
be said not to recognize the personal fact of ownership; it is concerned
with the impersonal fact of usufruct. The theory of economic rent, of
time-value and capital, and of wages, as measured by efficiency, is
impersonal, is a study of functional distribution. In the problem of
monopoly<span class="pagenum"><SPAN name="Page_360" id="Page_360">[Pg 360]</SPAN></span> the personal factor is more prominent, but the economic study
of rent cannot well stop there.</p>
<div class="sidenote">Social institutions and personal incomes</div>
<p>An answer, at least in broad outline, must now be given to the question
why some men are permitted to hold wealth as their "own," that is, as
"property," while other men are propertyless. Why do the owners exact
payment for the use of goods, and why are they allowed by their fellows
to do so? Back of these facts is a great system of social institutions
that helps to determine what men will do. Market value is a social fact;
price is determined by the bidding of men under the existing social and
political conditions. These broader social aspects of value remain for
consideration. The influence of lawmaking, of collective action, and of
social institutions on value must be noted. Incidentally, this has been
done in speaking of patents, political monopolies, and related
questions; but mainly the subject has been viewed from the individual
standpoint; now it must be looked at more fully from the social side.</p>
<div class="sidenote">Harmony of the studies of impersonal and of personal
distribution</div>
<p>2. <i>The study of personal distribution should include a further
explanation of the various elements that unite to form the individual's
income.</i> "Distribution" in economics is the reasoned explanation of the
way in which the total product of a society is divided among its
members. It is a logical question and not an ethical one. The economist
first asks, What is the effect of utility on value? and, next, What is
the relation of these goods to the personal incomes of the members of
society? It is not his peculiar part to say whether this is the best
distribution in an ethical sense, yet in pursuing the question of
distribution one comes to the border of certain moral questions.</p>
<p>The impersonal and the personal views of distribution are not, however,
contradictory; they are different aspects of the same question. It
cannot be said that the analysis of economic rent is a purely abstract
piece of work. In fact, the impersonal view of distribution is essential
to an understanding of the personal view of it. The one gives general<span class="pagenum"><SPAN name="Page_361" id="Page_361">[Pg 361]</SPAN></span>
principles, the other the special cases. In the practical economic
issues of the day, the most urgent need is a better popular
understanding of the abstracter theory of value. It is a guiding thread
through otherwise bewildering mazes.</p>
<div class="sidenote">Composition of personal incomes</div>
<p>The actual incomes of individuals are made up of different elements. The
wage-earner and the salaried man are rarely quite without material
wealth. The enterpriser gets some income also in the form of contract
interest, or as rent from machinery. Actual personal incomes are
therefore a sum of various functional or impersonal incomes. The
earnings of every agent may be thought of as always going either to some
individual or to some group. By social convention the receiver of
incomes that are not personal gifts is supposed to have produced them.
This involves the great assumption that the owner of a piece of land has
produced or contributed in some way to society an amount equal to the
rent. This may be true in many cases, but in many cases this view cannot
be accepted without close scrutiny.</p>
<div class="sidenote">Law in relation to wealth</div>
<p>3. <i>Property and wealth are respectively the personal and the
impersonal, the legal and the economic, aspects of productive agents.</i>
Law holds an important place in the discussion of actual economic
questions. This fact was not overlooked by John Stuart Mill, and it has
been far more clearly recognized in the last few years, especially by
the German economists. Political law in the broadest sense, as embodied
in the state, is, in the first place, a set of rules to guide the
conduct and regulate the relations of men in society—a legal code; it
is, in the next place, a governmental machine to determine disputes
between men—a judicial system; and it is, finally, physical power to
bring contestants into court and to secure and protect their rights—a
police force. Whether acting through legislature, courts, or police, in
all its dealings with wealth the law is predominantly personal. The
question the law asks and answers regarding wealth is not <i>What</i>, but
<i>Who?</i> Who is the owner, who should control, receive, enjoy the income?
Economic wealth<span class="pagenum"><SPAN name="Page_362" id="Page_362">[Pg 362]</SPAN></span> consists of scarce things, of valuable agents, and
because they are scarce, men quarrel over them. Because of the
impersonal economic fact that a field and a machine produce scarce
goods, arises the legal question as to which man is entitled to enjoy
them.</p>
<div class="sidenote">Property and wealth</div>
<p>In the case of material things, property value and capital value must be
exactly equal. Property rights cover the ownership of a material thing.
Material property consists of things viewed with reference to ownership;
capital consists of the same things viewed with reference to their
economic services. There are other property rights besides those in
material things, various immaterial rights controlling the action of the
individual and thus giving a sort of ownership of the individual's
actions. Such are patents which forbid other men making a particular
kind of machine; copyrights which forbid other men printing certain
writings; legal contracts that limit the action of men in various ways,
and thus appear to abridge their liberty.</p>
<h4>§ II. THE ORIGIN OF PRIVATE PROPERTY</h4>
<div class="sidenote">Property and income</div>
<p>1. <i>Property is ownership, the legal control over the sources of
economic income.</i> The Latin word property means ownership, and hence
that which pertains to the individual, that which is a man's own. The
control of property is greater or less. The law makes between property
rights and equity rights certain subtle distinctions which have their
reason in the history, if not in the logic, of the law, but which are
not essential to economic discussion. What we are interested in are the
equitable claims of men to wealth rather than the technical property
rights. With that thought let us consider the value of the control of
wealth. If a farm worth ten thousand dollars is mortgaged for five
thousand dollars, its economic worth is ten thousand dollars after as
before the mortgage, but the equitable claim is divided into two shares
of five thousand dollars each. The value of the property<span class="pagenum"><SPAN name="Page_363" id="Page_363">[Pg 363]</SPAN></span> right cannot,
in a reasonable view, be greater than the value of the economic wealth
it covers. There is much confusion in the law of taxation on this point.
The law treats the farm as property and the debt upon it, whether
secured by a mortgage or not, as another body of property. Needless to
say, this leads to absurd conclusions in reasoning, and to gross
injustice.</p>
<div class="sidenote">Forms and modes of ownership</div>
<p>There are different forms of ownership: first, private, as that of
individuals, families, partnerships, or corporations; second, public or
state, as the ownership of the state house, the highway, the Adirondack
forest-reserve or the Erie Canal. These are equally effective as against
the claims of outsiders, but the rights of those inside the circle of
ownership differ. For example, the rights of one shareholder against
another, or the rights of one member of a family as against another, are
not the same as the rights against outsiders. Private property is the
characteristic feature of our present industrial society, but it exists
side by side with state property and with many intermediate grades
between private and common property. Private property, while attacked on
some sides, is usually accepted without question; but in this age of
inquiry its origin should be examined, its limits and the reasons for
them should be noted, and its purpose, faults, and effects should be set
clearly before the judgment.</p>
<div class="sidenote">Various theories of property: Occupation</div>
<p>2. <i>The older theories of the origin of private property are those of
occupation, conquest, labor, natural rights, and law.</i> The theory of
occupation is that property is based upon the priority of claim of one
who finds wealth without an owner and appropriates it. This, to be sure,
is a statement of what happens in the settlement of new countries, but
it is not an explanation of the property rights that are arising every
moment, nor does it give a logical reason for the continuance of ancient
property rights.</p>
<div class="sidenote">Conquest</div>
<p>The same can be said of the conquest theory, the theory that property is
based on force. It applies to the invasion of<span class="pagenum"><SPAN name="Page_364" id="Page_364">[Pg 364]</SPAN></span> the Roman provinces by
the barbarian tribes who divided the country and enslaved the
population. But it rarely applies to present-day happenings and at its
best it cannot, to modern minds, "justify" present property rights.</p>
<div class="sidenote">Labor</div>
<p>The labor theory, meeting some queries where others fail, is that
ownership is based on production, on the right of a man to that to which
his brain and his muscle have imparted value. It is evident that this
test leaves without explanation or justification a great number of
things that do exist and have existed as property.</p>
<div class="sidenote">Natural rights</div>
<p>The natural-rights theory is that property is necessary for the
realization of the dignity of human nature. This, if true, would be not
so much an explanation as a condemnation of private property as it has
existed in most cases, as millions of men are in every land all but
lacking in property, and inequality of possession is everywhere marked.
This theory expresses, however, one of the worthy ideals of modern
democracy. Although, in common with the various other "natural rights"
theories, it must to-day be deemed too absolute and too individualistic,
it contains a far-reaching truth, of which due account must be taken in
our social philosophy.</p>
<div class="sidenote">Law</div>
<p>The legal theory is that property exists because the law says it shall.
This expresses a truth, but is no more than a truism. The law determines
the limits of property, but what determines the limits of the law? What
practical or social justification is there for passing and continuing
such law? The legal theory does not explain anything finally. Each of
these theories has its defects, but each points to some fact important
and significant, at certain times and places, in the explanation of this
widespread institution.</p>
<div class="sidenote">Property in early societies</div>
<p>3. <i>The institution of private property has evolved under diverse
conditions; the question of its origin is not the same as that of its
present justification.</i> In early societies individual property rights
were not very clearly marked. Every tribe asserted against other tribes,
and tried to uphold, by<span class="pagenum"><SPAN name="Page_365" id="Page_365">[Pg 365]</SPAN></span> war, its claims upon its customary
hunting-grounds; but the claims of the individual hunter and fisher
within the tribe did not often come into conflict. Private property at
the outset was in personal possessions, ornaments, weapons, utensils,
which were very meager in that primitive society where it was the custom
"to go calling with a club instead of a card-case." Only later came
individual property in land. A few years ago it was generally believed
that the organization of the old German tribes was politically an almost
perfect democracy, and economically a communism wherein all had equal
claims on the land. To-day this opinion is very seriously questioned. It
seems probable that the so-called communism was really an oligarchy of
the favored, and that the masses lived in subjection, cut off from all
but a meager share in the public property.</p>
<div class="sidenote">Origin vs. present justification of property</div>
<p>However that may have been, strong forces within historic times have put
an end to the common ownership and tillage of land as it existed among
the serfs of Europe. The common tillage of land was shown by experience
to be wasteful. Not only did competition tend to bring the economic
agents into more efficient hands, but the movement was furthered by many
acts of injustice and violence on the part of those in power. Inquiries
into the origin and development of this social institution are
interesting and helpful in forming an estimate of its present
significance, but the problems of the past are not those of to-day.
Whether or not the ancient beginning of property in Europe was in
violence and evil has but a remote bearing on the question as to the
present working of it. Social conditions and needs have not changed more
than have the forms and limits of property itself. Each generation has
its own problems to solve, and each must test existing institutions by
their present results, ignoring for the most part the evils of the past.</p>
<div class="sidenote">Social expediency the ground of private property</div>
<div class="sidenote">Shifting limits of the law of property</div>
<p>4. <i>Private property may now be justified mainly on the grounds of
social expediency.</i> This is a broad explanation under which can be
brought the many varying conditions;<span class="pagenum"><SPAN name="Page_366" id="Page_366">[Pg 366]</SPAN></span> but it has the fault of a broad
explanation, that it needs be further explained. Conceding that private
property works hardship to the individual in many cases, it must be
justified on the ground that, on the whole, it furthers the progress of
society. Private property is looked upon by some as merely reflecting or
expressing the economic inequalities of men; the man poor in ability is
the man poor in property. It is looked upon by others as exaggerating,
indeed at times reversing, the economic abilities of men. In general, it
must be judged by this test: Does it further the welfare of society
better than would any alternative plan for the control of economic
wealth? The question is not whether it is faultless, for no human
institution is so. Nor must it be assumed that property is a fixed and
uniform mode of control; there are many kinds of property. Different
parts of wealth may be treated in different ways: there may be private
property in wagons, and public property in roads; private property in
houses, and public property in forests; private property in automobiles,
and, in some countries, public property in railway-carriages. But any
rule of property, like any other workable human law, must be applicable
to all individuals that meet the conditions. Hence any human institution
must be judged by its average working, not by exceptional cases.</p>
<p>The very acceptance of the theory of social expediency implies the need
of a readjustment of the institution of private property; for private
property, as it is found to-day, is complicated by many historical
accidents. Survivals of ancient injustice and relics of feudal
institutions that rest on no vital reason remain in our new country as
well as in the older ones. The limits of property in many respects are
determined, not according to the logic of expediency, but by the social
inertia which often governs succeeding generations.</p>
<p><span class="pagenum"><SPAN name="Page_367" id="Page_367">[Pg 367]</SPAN></span></p>
<h4>§ III. LIMITATIONS OF THE RIGHT OF PRIVATE PROPERTY</h4>
<div class="sidenote">Public interests limiting property rights</div>
<p>1. <i>Unmodified private control of property is unknown: the public makes
many reservations in its own interest.</i> Few realize the manifold ways in
which property rights are limited. There is, first, a whole set of
limitations to prevent nuisances. An owner in many situations is not
free to build a slaughter-house or to start a glue-factory on his land.
Property is governed by general public utility, and anything that
threatens to become a nuisance or a danger is excluded. When, under the
right of eminent domain, the state or the railroad takes the old
homestead from its owner who would live and die there, the payment of
money damages to him does not make this the less a limitation of his
property rights. Rights of way on property exist either through contract
or by prescription permitting its public use. Most important of all
limitations is the right of taxation, by which society takes more or
less of private incomes for purposes of which the individual owners may
in no way approve.</p>
<div class="sidenote">Private claims limiting property rights</div>
<p>2. <i>The law enforces a multitude of private claims against private
owners.</i> A variety of rights called easements or servitudes may attach
to private property, modifying its exclusive use. Leases for any period
are a virtual limitation of the control and division of the ownership.
Both the holder of the lease and the owner of the property have certain
rights before the law. The lender of money secured by mortgage has a
legally recognized and enforceable interest in the mortgaged wealth.
Property is left in trust for the benefit of persons or of institutions
or of the public, and is administered by trustees who are strictly bound
to the execution of the terms of their instructions. Contracts of many
sorts are entered into by owners, limiting their control in manifold
ways, and the law enforces these contracts. These all form a complex of
equitable claims, which together equal in value one undivided property
right, which in turn equals<span class="pagenum"><SPAN name="Page_368" id="Page_368">[Pg 368]</SPAN></span> the value of the wealth. These claims
mutually limit each other (whether they be called equitable claims, or
liens, or property rights), and wealth is not multiplied by multiplying
the claims, as the lawmakers unfortunately sometimes assume to be the
case.</p>
<div class="sidenote">Limitation of bequest</div>
<p>3. <i>The right of bequest, or of gift at death, is limited in various
ways in different countries.</i> The term bequest implies a will, usually a
written will in which the person, foreseeing death, has expressed his
wishes as to the disposition of his property. It is said sometimes that
bequest is a "logical" result of private property, but the law does not
treat it as such. In countries where hereditary aristocracies exist,
primogeniture is in some cases required by law, in others so strongly
favored by public opinion that it is practically always followed. Custom
limits bequests in England to members of the family, and wills giving
outside the family are rare, and are almost always broken in the courts.
John Stuart Mill contrasts this with the frequent practice by rich men
in America of giving for public purposes. In France the right of bequest
outside the family is legally limited; only the share of one child can
be willed away by the father, and the rest must be equally divided among
the children. Settlements and <i>fidei commissa</i> are limited in many
countries, because of the recognized social evils resulting from the
tying up of estates for generations. Throughout the history of England,
Parliament has given attention to the question of mortmain, which
chiefly concerned the drifting of great estates into the hands of the
church or of corporations, as a result of bequests by the pious. Only
recently in England, and to a less extent in this country, has been
seriously discussed the policy of permitting unlimited endowments to
charitable institutions, and new legislation has diverted from their
original purposes some of the old endowments. These varied and often
strict limitations of the right of private property are all determined
by some thought, wise or foolish, of social expediency.</p>
<p><span class="pagenum"><SPAN name="Page_369" id="Page_369">[Pg 369]</SPAN></span></p>
<div class="sidenote">Limitation of right of inheritance</div>
<p>4. <i>The law of inheritance varies greatly with time and place.</i>
Inheritance, in contrast with bequest, usually means succession to the
property of one who has died intestate, that is, has made no will. The
old idea of family unity survives in great measure in modern laws of
inheritance. The nearest living relatives, no matter how distant they
may be, inherit property when there is no will. When a miser dies in
solitude and neglect, the world must be searched over to find a remote
cousin to take the hoarded wealth. Inheritance is limited largely at
present by the power of taxation. The view is growing that the claims of
the society in which wealth has been acquired are stronger than those of
relatives distant alike in space, in blood, and in affectionate
interest. This view is reflected in many recent inheritance-tax laws
which take from the shares of distant relatives a goodly portion for
public purposes.</p>
<p>The question is raised in many minds, If private property is not an
absolute right, what shall be its limits? What changes should be made in
it? The essential thought in the various attacks on the institution of
private property is that, because it occasions inequality in incomes, it
is not socially expedient. The conviction is growing that, in some
general way, incomes should correspond to, and reflect, social service.
It is well to consider more closely what the terms social expediency and
social service imply.</p>
<hr class="chap" />
<p><span class="pagenum"><SPAN name="Page_370" id="Page_370">[Pg 370]</SPAN></span></p>
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