To Roy Davidson:

I take it that you and Mason are referring to this passage from your comment:  

"Historically, land-grabbing and the bestowal of land titles is coextensive with the growth of state power. Favoritism, corruption, and fraud are the invariable concomitants of property in land. But "ground rent seeking" which represents the actual or anticipated (speculative) yield from ownership of land works counter to the operation of free markets. The landowner can, and often does, get rich in his sleep. He is rewarded for the unproductive effort of holding, which may be for decades. The seller of goods, merchandise, commodities (i.e wealth) must find customers fairly promptly or end up with losses and sometimes bankruptcy. For details of process see the the link-POLITICAL ECONOMY PRIMER-below.

Despite the paeans to "free enterprise" and "free trade", the state system of land tenure and the state imposed money monopoly inexorably leads to increased statism. The state and the free market are irreconcilable."


Most of your commentary seemed particularly provocative. But it did not spark a lot of interest from those on the list that I might have expected to be provoked. So let me, at this late stage, take issue with the following part of your longer commentary.


I will analyze three sets of issues.

1. The first two sentences. You appear to refer to a society that is 
making a transition between anarchy and a private property rights 
system. If so, you are implicitly assuming that land has become worth 
grabbing, whereas in the past it was not. That property rights in a 
resource tend to emerge as the resource become more valuable in exchange 
is a point made by Demsetz in 1967 I believe. Since private property 
rights cannot exist in a complex society without a state, one would 
expect a state to emerge as well; or perhaps that an existing state 
would extend its power to the territory where land-grabbing was 
occurring. And, since favoritism and corruption are characteristics of 
government, we would expect these as well. However, favoritism is also a 
characteristic of private decision-making. Corruption, of course, is 
not. We define it in terms of government. Fraud, on the other hand, is 
presumably a characteristic of market exchange and need not be a 
characteristic of government agents. However, fraud could not exist in 
market exchange unless people expected overall to gain from exchange in 
spite of occasionally being defrauded. From this point of view, the 
prospect of fraud is a cost of trying to satisfy one's wants through 
exchange rather than through self-sufficiency. Liberalism, of course, 
does not deny the existence of favoritism, corruption in government, and 
market fraud. So these points are not really a correction or critique of 
Liggio on Howe and Morgan or a critique of liberalism. So what is the point?

2. The next three sentences. "Ground rent seeking," by which I assume 
you means trying to profit from acquiring land -- either to use it, sell 
it, or save it for one's family --  is hardly "counter" to free markets. 
It is an example of free markets. Lots of people get rich because they 
are lucky. In the stock market, at racetracks, and so on. So what? That 
some people get rich by buying land because they are lucky provides no 
justification for making a generalization that all increases in the 
value of land are due to luck and that all acquisitions of land are 
unproductive. On the contrary, if that generalization were true, land, 
or living space, prices could never come into existence in the first 
place. Ground rent seeking could not exist. A person gets rich in his 
sleep because others are doing things that enhance the value not only of 
their own land but also of the sleeper's land. If those others could not 
gain by enhancing the value of their land through their productive 
effort, the sleeper's land would not rise in value. (I note that you may 
be using a special definition of "ground rent seeking." If so, what 
justifies the use of this definition in a critique of liberalism?)

3. The second paragraph. Is it really true that the state has grown 
relative to the rest of the economy under free enterprise and free 
trade? Or are you referring to absolute growth? In any case, is the 
growth of the state inevitable? Can't people in democracies learn from 
their mistakes by observing the growth of other countries that have not 
made them? Is this not why the central banks of all, or practically all, 
of the major democratic economies are now practicing inflation 
targeting? (By they way, I had some difficulty with the concept of a 
"state-imposed system of land tenure." I take that such a system would 
not be part of a free enterprise system, which would allow the free 
exchange of land.)

With respect,

Pat Gunning