This section is from the "Elementary Principles of Economics" book, by Richard T. Ely and George Ray Wicker. Also available from Amazon: Elementary Principles Of Economics: Together With A Short Sketch Of Economic History
In every civilized State to-day there are certain conditions under which men perform their economic activities, but which are so fundamental in their nature that we do not often stop to consider them. So deep lying are they and so long established that we easily fall into the error of thinking of them as necessary to the very existence of society under all conceivable circumstances. Yet careful consideration will convince the student that this is far from the case. Let us, then, consider in detail some of the more important of these fundamentals.
The right of private property, for instance, is so fundamental in our modern civilization that we hardly think of it as a creation of society, maintained only by constant vigilance on the part of the State, and subject even now to slow and gradual modification. Still less, perhaps, has it ever occurred to most of us as a right that is open to question. The reason for this attitude of mind is that people are ruled in great measure by custom rather than by the light of history and of reason. When any customary right has spread very widely and become deeply rooted in society, men fall into the error of calling it a " natural right." By this term they usually mean that the right is "established by nature," and hence not to be called in question. But in reality there are no such rights. All true rights are rationalrights which can show good reason for their claims, and can justify their existence on the ground that they promote human welfare.
Yet it must be noted that the very fact of the long-continued existence of any social institution furnishes strong presumptive evidence that the institution has ministered to social welfare. Therefore those who appeal to the law or to public opinion to overthrow or to abate the force of the institution have to bear the burden either of showing that social conditions have so changed as to destroy the beneficent operation of the institution, or of offering very strong evidence that some other institution would better subserve the end.
Beginning of the Right of Private Property. On looking into the history of private property, we find in the first place that it has not always existed among men. The savage at first owned nothing. Doubtless, even in very early times, when the primitive man had caught or killed an animal, he considered it more or less his, though even in such cases it was the common property of his family or tribe rather than the exclusive property of the individual. From insignificant beginnings, the right or feeling of ownership has grown, including more and more things and dividing the ownership more and more, until at last nearly everything is owned and nearly every one owns something. Not until a rather advanced stage of civilization had been reached did land become property, and even to-day the last forms of tribal ownership of land have not everywhere given place to individual property.
Strengthening of the Right. In the second place, it is only in comparatively recent times that private ownership has been either so exclusive or so extensive as it is at present. It is not many centuries since a Scottish clan held the right to the territory it occupied so absolutely that no chieftain, however powerful, could abridge the right. To-day, there are beautiful tracts of country in Scotland which have been almost stripped of their agricultural population because the owners, descendants of the old chieftains, have preferred that game rather than men should get a living on their estates. Slowly, however, a reaction has set in, and most nations are now beginning to extend their public claim to game and fish, and are refus--ing to allow so absolute a right of private property.
Limitations to the Right. In the third place, we find that even to-day private property has certain sharp limitations which indicate whence it springs and from what source it draws its being. The State, representing the people, even now says to the individual citizen, " Thus far shalt thou go, and no farther." By its action it shows that it is the grantor of private rights, and that it may withdraw them whenever such a course will be to its advantage. Let us consider some of these limitations.
1. Taxation. The first of these limitations exists in the taxation of private property, which from one point of view may be regarded as simply the taking by the State for its own uses of a part of what it has left to the private ownership of its citizens. Taxation, as understood to-day, is a comparatively recent activity of the State. During the Middle Ages the right of the State to take private property for its support was stoutly opposed, and there was a strong tendency to regard all taxation as extortion. To-day the right of taxation is almost universally conceded. Taxation is the most extreme limitation imposed upon the right of private property by the State in its own behalf.
2. Eminent Domain and Requisition. A second limitation exists in the right of the State to appropriate to itself specific pieces of property with direct compensation to the private owner. This right is exercised especially in time of war, as when the nation for its military needs takes cattle for the subsistence of its troops or wagons for their transportation. Such an assumption of proprietorship is known as requisition. But in times of peace the government often takes for its own purposes, with due compensation, land or other property, under the exercise of what is known as the right of eminent domain, words which in more common language simply mean ultimate ownership.
3. Fines, Forfeits, and Escheats. Fines, imposed and collected by government under the exercise of its police power, form a third clear limitation upon the absoluteness of private property. This limitation and others closely connected with it, such as forfeits and escheats, call for no explanation here.
Limitations directly in Behalf of Individuals. The three limitations just described are such as the State sets up directly in its own behalf. But there are still others, enforced by the State not directly for itself but for individual citizens. (1) The first is the exercise of the right of eminent domain in behalf of individuals or corporations. If a regularly chartered railway company is unable to make terms directly with the owner of land over which it proposes to lay its tracks, it can secure possession by appealing to the government, which compels transfer of the property for compensation. It should be noticed, however, that in all such cases it is presumed that a public purpose is to be subserved by the company.
Moreover, there is a vast system of limitations upon the use, or rather the abuse, of private property, which are designed to prevent the individual from injuring himself or others. We need not enter into an extended description of these limitations. Generally speaking, (2) no man may use private property to maintain a public nuisance. Nothing is more fallacious than the idea that the right of ownership allows a person to do as he pleases with his property. It is true that rights of private property have sometimes been so defined as to permit many abuses to go unpunished, but it has been the tendency of the State so to limit the rights as to exclude abuses. Whenever any given right has proved generally unfavorable to the welfare of society, government has modified or abolished that right, or, failing to do so, has endangered its own stability.
Closely connected with the general subject of property is the legal arrangement whereby exclusive privileges are awarded in return for services to society. Such privileges really become a special form of private property, and have particular importance in determining the distribution of wealth, although they are not without importance also in the production of wealth, on account of the stimulus which the hope of such privileges may give to invention and improvement.
Under this head come trade-marks, copyrights, and patents. The laws regulating trade-marks give property in the design which characterizes some particular product. In the case of copyrights and patents, authors and inventors are granted exclusive rights in their productions for a limited period.
Most modern States proceed on the assumption that the public interest will be furthered by granting these exclusive privileges, and on the whole, the policy has probably been justified by its results. Yet experience has shown that neither patents nor copyrights should be given without limitations. Patents should not be given on light and trivial grounds, nor for unlimited or over-long periods. Moreover, owners of patents should be made by law either to use them or to allow them to lapse, and to grant to others the right to use them on payment of a reasonable royalty. Similarly, copyrights are carefully guarded in the interests of the public. The law in a general way aims to give the reward of services to the author, and avoids allowing a reward for services which others have performed.
Another fundamental institution in our present industrial society
is contract. Some sort of contract lies at the basis of all associated
action. That this condition of associated activity should be
maintained by the State can hardly be doubted, yet even the right to
contract has its limitations resting upon human well-being. To-day
(1) who may and who may not contract,
(2) for what purposes valid contracts may be made, and
(3) under what forms and conditions they must be made to be valid.
Experience justifies this regulation. Children, for example, cannot as a rule make contracts that will bind themselves, because they are not presumed by the law to have the requisite knowledge and judgment. Again, agreements which are clearly opposed to public policy, such as an agreement entered into for the commission of a crime, are invalid and would not be enforced by the courts.