Let me make four quick points before you read on. First, the book will invite you to think differently about our economy than you probably have before. So be willing to take off your old economic glasses and put on a new pair.
Second, I’ve written the book for informed general readers, not experts. For that reason, I often skimp on details in order to keep the main argument clear. If you want more depth on a particular topic, the endnotes and bibliography can lead you to it.
Third, although the ideas expressed in this book can apply to all modern economies, they are a product of my experience in the United States, and are perhaps more applicable in Anglophone countries than elsewhere.
And finally, though I began writing this book long before the Covid pandemic, the ideas expressed here are even more pertinent now than ever.
Peter Barnes
Point Reyes Station, California
1 What is Universal Property?
Capitalism as we know it has two egregious flaws: it relentlessly widens inequality and destroys nature. Its “invisible hand,” which is supposed to transform individual self-seeking into widely shared well-being, too often doesn’t, and governments can’t keep up with the consequences. For billions of people around the world, the challenge of our era is to repair or replace capitalism before its cumulative harms become irreparable.
Among those who would repair capitalism, policy ideas abound. Typically, they involve more government regulations, taxes, and spending. Few, if any, would fundamentally alter the dynamics of markets themselves. Among those who would replace capitalism, many would nationalize a good deal of private property and expand government’s role in regulating the rest.
This book explores the terrain midway between repairing and replacing capitalism. It envisions a hybrid market economy in which private property and businesses are complemented by universal property and fiduciary trusts, whose beneficiaries are future generations and all living persons equally.
Economists wrangle over monetary, fiscal, and regulatory policies but pay little attention to property rights. Their models all assume that property rights remain just as they are forever. But this needn’t and shouldn’t be the case. My premise is that capitalism’s most grievous flaws are, at root, problems of property rights and must be addressed at that level.
Property rights in modern economies are grants by governments of permission to use, lease, sell, or bequeath specific assets – and just as importantly, to exclude others from doing those things. The assets involved can be tangible, like land and machinery, or intangible, like shares of stock or songs.
Taken as a whole, property rights are akin to gravity: they curve economic space-time. Their tugs and repulsions are everywhere, and nothing can avoid them. And, just as water flows inexorably toward the ocean, so money, goods and power flow inexorably toward property rights. Governments can no more staunch these flows than King Canute could halt the tides.
That said, the most oft-forgotten fact about property rights is that they do not exist in nature; they are constructs of human minds and societies. The assets to which they apply may exist in nature, but the rights of humans to do things with them, or prevent others from doing them, do not. Their design and allocation are entirely up to us.
In this book, I take our existing fabric of property rights as both a given and merely the latest iteration in an evolutionary process that has been and will continue to be altered by living humans. Future iterations of the fabric will therefore be a product not only of the past, but also of our imagination and political will in the future. And, while eliminating existing property rights is difficult, adding new ones is less so.
Before we talk about universal property, we need to look at co-inherited wealth, for that is what universal property is based on.
A full inventory of co-inherited wealth would fill pages. Consider, for starters, air, water, topsoil, sunlight, fire, photosynthesis, seeds, electricity, minerals, fuels, cultivable plants, domesticable animals, law, sports, religion, calendars, recipes, mathematics, jazz, libraries, and the internet. Without these gifts and many more, our lives would be incalculably poorer.
Universal property does not involve all of those wonderful things. Rather, it focuses on a subset: the large, complex natural and social systems that support market economies, yet are excluded from representation in them. This subset includes natural ecosystems like the Earth’s atmosphere and watersheds, and collective human constructs such as our legal, monetary and communications systems. All these systems are enormously valuable, in some cases priceless. Not only do our daily lives depend on them; they add prodigious value to markets, enabling corporations and private fortunes to grow to gargantuan sizes. Yet the systems were not built by anyone living today; they are all gifts we inherit together. So it is fair to ask, who are their rightful beneficial owners?
There are, essentially, three possibilities: no one, government, or all of us together equally. This book is about what happens if we choose the third option and create property rights to make it real.
Let’s start with an obvious question: how much is this subset of co-inherited wealth worth? While it is impossible to put a precise number on this, estimates have been made. In 2000, the late Nobel economist Herbert Simon stated, “If we are very generous with ourselves, we might claim that we ‘earned’ as much as one fifth of [our present wealth]. The rest [eighty percent] is patrimony associated with being a member of an enormously productive social system, which has accumulated a vast store of physical capital and an even larger store of intellectual capital.”1
Simon arrived at his estimate by comparing incomes in highly developed economies with those in earlier stages of development. The huge differences are due not to the rates of economic activity today – indeed, young economies often grow faster than mature ones – but to the much larger differences in institutions and know-how accumulated over decades. A few years later, World Bank economists William Easterly and Ross Levine confirmed Simon’s math. They conducted a detailed study of rich and poor countries and asked what made them different. They found that it wasn’t natural resources or the latest technologies. Rather, it was their social assets: the rule of law, property rights, a well-organized banking system, economic transparency, and a lack of corruption. All these collective assets played a far greater role than anything else.2
The preceding analysis doesn’t include ecosystems gifted to us by nature, but Robert Costanza and a worldwide team of scientists and economists took a crack at that in 1997. They found that natural ecosystems generate a global flow of benefits – including fresh water supply, soil formation, nutrient cycling, waste treatment, pollination, raw materials and climate regulation – worth between $25 trillion and $87 trillion a year.3 That compares with a gross world product of about $80 trillion.
These calculations suggest that we are greatly confused about where our wealth today comes from. We think it comes from the fevered efforts of today’s businesses and workers, but in fact they merely add icing to a cake that was baked long ago.
The calculations also suggest that we should devote far more attention to co-inherited wealth than we currently do. Nowadays, economics textbooks don’t even mention such wealth, much less its magnitude. Nor do Wall Street analysts or financial reporters. This is a grievous oversight that greatly impedes our understanding of our economy. It is like trying to comprehend the universe without taking dark matter into account, or analyzing a business while ignoring over eighty percent of its assets.
Figure 1 Where Today’s Wealth Comes From
Paying more attention to co-inherited