Readers of The Freeman will be familiar with this experience: How would libertarianism handle drunk driving? (That’s under “D.”) What do libertarians think about organ sales? (Under “O.”) What do you mean by “unintended consequences”? (Look under “U.”) The entries are not at all superficial, though; they are well thought out and carefully reasoned discussions of the topics. Just as important, they are well written: Since Miron’s intention here is to communicate the good sense of these ideas, it really makes a difference that he can write clear and effective prose. And he goes beyond surface-level questions (such as minimum wage) to tackle more complicated issues like Pareto efficiency, fiat money, and abortion. Miron also includes entries on how libertarianism differs from conservatism and (modern American) liberalism, and how consequentialist approaches differ from rights-based approaches.

Another asset of this book is the way Miron uses some of the basic concepts of economics in ways that are not only accessible to the non-economist but also show how the “economic way of thinking” applies to a variety of problems that the average reader might not think of as economic. For example, in the entry on protection of endangered species, Miron appeals to the concept of incentives. Although this solution is counterintuitive, assigning private property rights in endangered species or their habitats will create better incentives for good stewardship. There are many examples in Africa of the success of this approach, so Miron is able to supplement the theoretical explanation of why this works with empirical evidence. He contrasts this effectively with statist approaches by showing how these end up being counterproductive. Worse than being ineffective, these policies can create incentives for behavior that is the opposite of what is intended. It’s important that Miron can show this. Since a book like this has its chief value in outreach, it needs to provide answers to these sorts of questions from people who might not be predisposed to classical liberalism or the economic way of thinking. When he does appeal to precise notions like externalities or moral hazard, the reader is directed to entries on those.

Another feature I found compelling is the way Miron acknowledges the reality of moral disagreement where relevant, while nevertheless directing the reader to think in terms of policies that might make a positive change. For example, consider capital punishment. This isn’t strictly speaking a definitional issue for libertarianism: It’s possible to be a libertarian and think either that murderers deserve death or that no one has the right to take a life. But Miron encourages the reader to think about the issue differently. He frames the usual death penalty debate as “a distraction” and suggests that the reader approach the problem from the other side: “Society wastes substantial energy arguing about the death penalty rather than focusing on policies that would actually reduce crime, such as ending drug prohibition, legalizing prostitution, and improving educational outcomes.” We could argue about what is the best way to punish murderers, but perhaps it would be more productive to create conditions in which there would be fewer murders. The quoted sentence refers the reader to the relevant entries in which Miron shows what the causal links are.

Oddly, there are no entries for “rights” or “liberty.” This seeming lacuna is explained when one reads the entry “consequential versus philosophical libertarianism,” in which Miron contrasts the approach he favors, which he refers to as “consequentialist,” with the “philosophical,” or rights-based, approach. He argues that the latter approach is poorly supported and in any case less useful when trying to get others to see the benefits that libertarianism offers to a society. There is something to be said for the latter point, but the former point is belied by dozens of books by philosophers who explore the possible meanings of rights and liberty. Miron then says that the rights-based approach is consequentialist in that rights theorists claim that respecting rights has the best consequences. While a correct way to characterize John Stuart Mill, this doesn’t really encompass the point of rights for John Locke or for neo-Lockeans and neo-Aristotelians.

But to dwell on this intra-libertarian dispute would be to diminish the overall quality of the book. Libertarianism from A to Z is accessible and readable, and makes its points clearly and concisely. Libertarians will want to have it partly as a reference work. You may already have come to accept libertarian principles but not remember how fiat money works. But it is also an excellent choice to recommend (or give) to friends or relatives who do not agree with this approach but are open-minded enough to want to inquire. Miron has thus done us a great service.

In my conception regime uncertainty pertains above all to a pervasive uncertainty about the property-rights regime—about what private owners can reliably expect the government to do in its actions that affect private owners’ ability to control the use of their property, to reap the income it yields, and to transfer it to others on mutually acceptable terms. Will the government simply take over private property? Will it leave titles in private hands but strip the owners of real control and profitable use of their properties? In any event the security of private property rights rests not only on the letter of the law but also on the character of the government officials who enforce—or threaten—presumptive rights.

Between 1935 and 1940 this matter attained prime importance. So many businessmen and investors lost confidence in their ability to forecast the future property-rights regime that few were willing to venture their money in long-term investments. They constantly sought clarification of the government’s designs, as President Franklin D. Roosevelt raged against “economic royalists” and blamed a “strike of capital” for the economy’s ongoing troubles, including the depression of 1937–38, which undermined the general public’s confidence in the New Deal.

Treasury Secretary Henry Morgenthau tried repeatedly to persuade Roosevelt to make a public statement to reassure investors, but the President steadfastly rejected this entreaty. Morgenthau ultimately became so frustrated that in a 1937 cabinet meeting, he blurted out to his boss: “What business wants to know is: Are we headed toward Socialism or are we going to continue on a capitalist basis?” Strange to say, Jim Farley and even Henry Wallace backed Morgenthau’s insistence that the President spell out what kind of economic system the administration sought to foster.

In his plea Morgenthau encapsulated the wide-ranging uncertainty that Lammont du Pont expressed in the same year, when he said: “Uncertainty rules the tax situation, the labor situation, the monetary situation, and practically every legal condition under which industry must operate. Are taxes to go higher, lower or stay where they are? We don’t know. Is labor to be union or non-union? . . . Are we to have inflation or deflation, more government spending or less? . . . Are new restrictions to be placed on capital, new limits on profits? . . . It is impossible to even guess at the answers.”

I doubt the regime uncertainty that a growing number of commentators and analysts have perceived since 2008 is as great as that of the latter 1930s. However, the government’s frantic actions in the past few years have surely shaken investors’ confidence about future property rights in the United States. The takeovers of Fannie Mae, Freddie Mac, AIG, GM, and Chrysler; the massive interventions in financial markets; the huge bailouts of banks and other financial institutions, mixed with letting Lehman Brothers go down while salvaging Bear Stearns—all these actions and many others suggest that a rational investor might well attach a huge risk premium to any money he ventures even for the intermediate term, not to mention the long term.

Moreover, the upsurge of the federal government’s size, scope, and power since the middle of 2008 has scarcely calmed investors’ minds. New taxes and higher rates of old taxes; potentially large burdens of compliance with new financial and energy regulations; unpredictable new mandatory health care expenses; new, intrinsically arbitrary government oversight of so-called systemic risks associated with any type of business—all these unsettling prospects and others of substantial significance must give pause to anyone considering a long-term investment, because any one of them has the potential to turn a seemingly profitable investment into a big loss.

The Current Picture

In testing my hypothesis about regime uncertainty, I have marshaled three distinct types of evidence: historical documentation of government actions and public reactions; findings of public-opinion surveys, especially surveys of businessmen; and financial-market data.

My most striking financial evidence for the New Deal episode pertains to the yield curve for corporate bonds—that is, to the spreads between the effective yields on high-grade corporate bonds of various maturities. I found that this yield curve suddenly became much steeper between the first quarter of 1934 and the first quarter of 1935 (when the New Deal lurched from its first, or business-tolerant, phase to its second, or business-hostile, phase) and remained very steep until it flattened between the first quarter of 1941 and the first quarter of 1942 (when the New Deal handed the reins to the military and the big businessmen who, along with the President, ran the war-command economy). I interpreted these extreme spreads from 1935 to 1941 as risk premiums on longer-term investments caused by regime uncertainty.

Does the corporate-bond yield curve show the same kind of shift during the past few years that it displayed in the face of the regime uncertainty that prevailed from 1935 to 1941? To find out I examined a number of series of corporate-bond yields by term to maturity.

I found that in 2008, before the onset of the financial panic in September, the corporate-bond yield curve was quite flat—that is, the yields increased only slightly with term to maturity. When the panic hit, yields became extremely volatile, especially for the bonds with two years to maturity (the shortest term in the data), and remained volatile for almost a year. After mid-2009 the volatility diminished. Once the dust had settled, the yield curve for corporate bonds had become substantially steeper.

Thus just as the steeper yield curve of the latter 1930s corresponds precisely with the so-called Second New Deal, when Roosevelt and his leading advisers went on the warpath against investors as a class, the steeper yield curve since mid-2009 corresponds with the bigger government left in the wake of the financial-market volatility and frenetic government action between September 2008 and the middle of 2009 and with the subsequent rash of extraordinary government measures.

Given the current regime uncertainty, investors will probably continue to remain for the most part on the sideline, protecting their wealth in cash hoards and low-risk, low-return, short-term investments and consuming wealth that might otherwise have been invested. Slow economic recovery, at best, will be the result.

Franklin Roosevelt recognized that the war only provided a short-term fix for the economy—and a very costly one at that. What would happen after the war—when 12 million troops came home and the strong demand for guns, bullets, tanks, and ships ceased?

Roosevelt envisioned a New Deal revival. He had created the National Resources Planning Board (NRPB) in 1939 and urged it during the war to plan for peacetime. The NRPB leaders believed that government planning was necessary to promote economic development. They consciously (and sometimes unconsciously) followed ideas popularized in 1936 by John Maynard Keynes in his bestselling book, The General Theory of Employment, Interest and Money.

Capitalism was inherently unstable, Keynes argued, and would rarely provide full employment. Therefore government intervention was needed, especially in recessions, to spend massive amounts of money on public works, which would create new jobs, expand demand, and rebuild consumer confidence. Yes, government would need to run large deficits, but economic stability was society’s reward. If government planners could manage aggregate demand through public works, the boom-bust business cycle could be flattened and economic development could be managed in the national interest. No more Great Depressions. Man could indeed be master of his economic future.

Before and during the war Keynes’s ideas swept through the United States and first transformed the universities, then the political culture of the day. With statistics in hand and a near reverence for government, the Keynesians were the new generation of planners. They wanted to remake society. Not entrepreneurs, but economists were needed to gather data, plan government programs, and regulate economic development. Paul Samuelson, for example, a 21-year-old economics student, was cautious at first, but then euphoric after Keynes’s book was published. “Bliss was it in that dawn to be alive, but to be young was very heaven,” Samuelson wrote. Other economists soon accepted Keynes, and by the 1940s his ideas dominated the economics profession. In 1948, Samuelson would defend Keynes by writing the best-selling economics textbook of all time.

Planning for Peace

Those on the NRPB were among the excited disciples of Keynes and economic planning. The war itself seemed to be evidence that government jobs had pulled the U.S. economy out of the Depression. Now the economists and planners needed to take the nation’s helm to plan for peace.

According to Charles Merriam, vice president of the NRPB, “[I]t should be the declared policy of the United States government, supplementing the work of private agencies as a final guarantor if all else failed, to underwrite full employment for employables. . . .” That idea launched what Merriam and the NRPB dubbed “A New Bill of Rights.” FDR would call it his Economic Bill of Rights. Included was a right to a job “with fair pay and working conditions,” “equal access to education for all, equal access to health and nutrition for all, and wholesome housing conditions for all.”

New Bill of Rights

FDR viewed this Economic Bill of Rights as his tool for guaranteeing employment for veterans (and others) after World War II. But it was more than a mere jobs ploy; it had the potential to transform American society. The first Bill of Rights, which became part of the Constitution, emphasized free speech, freedom of the press, and freedom of religion and assembly. They were freedoms from government interference. The right to speak freely imposes no obligation on anyone else to provide the means of communication. Moreover, others can listen or leave as they see fit.

But a right to a job, a house, or medical care imposes an obligation on others to pay for those things. The NRPB implied that the taxpayers as a group had a duty to provide the revenue to pay for the medical care, the houses, the education, and the jobs that millions of Americans would be demanding if the new bill of rights became law. In practical terms this meant that, say, a polio victim’s right to a wheelchair properly diminished all taxpayers’ rights to keep the income they had earned. In other words, the rights announced in the Economic Bill of Rights contradicted the property rights promised to Americans in their Declaration of Independence and in the Constitution.

FDR promoted his Economic Bill of Rights in his State of the Union message in 1944, but he died before the war ended. Shortly before his death, Senator James Murray (D-Mont.) introduced a full-employment bill into the Senate for discussion. The bill committed the government in a general way to provide jobs if unemployment became too high. Many leading Democrats and economists supported Murray’s bill. “In this session of Congress,” The New Republic reported, “one of the first bills to be introduced will no doubt be the full employment bill of 1945, designed to carry out item number one in the Economic Bill of Rights.” The Nation joined The New Republic in endorsing the full-employment bill. “Mr. Roosevelt’s program,” it concluded, “is squarely based on the best economic authority available. It is entirely consistent with the economic doctrines of the distinguished British economist Lord Keynes.”

On September 6, 1945, President Harry Truman gave a major speech in which he supported the Economic Bill of Rights, especially a full-employment bill. Most congressmen, however, rejected both. Rep. Harold Knutson (R-Minn.) said, “Nobody knows what the President’s full employment bill will cost American taxpayers, but the aggregate will be enormous.”

Instead, Knutson and many other congressmen favored cutting tax rates and slashing the size of government as the best measure to restore economic growth. Senator Albert Hawkes (R-N.J.) even argued that “the repeal of the excess-profits tax, in my opinion, may raise more revenue for the United States than would be raised if it were retained.” Hawkes proved to be prophetic. After vigorous debate Congress scrapped the Economic Bill of Rights and cut tax rates instead. American business then expanded, revenues to the Treasury increased to balance the federal budget, and unemployment was only 3.9 percent in 1946 and 1947. The Great Depression was over.

Jones invents (and patents) the wheelbarrow and uses it on his land. He intends to produce this great new device and sell it to a world that eagerly awaits it. Smith lawfully walks by Jones’s property and watches him using the wheelbarrow, realizing this is something no one has ever seen before. If Smith goes home and, using her own materials and labor, makes a wheelbarrow from the mental image stored in her mind, what has she taken from Jones? Smith’s mental image is hers. One could say it is the result of her own mental labor (observing, understanding, remembering). When she acquired it, in no way did she interfere with Jones’s access either to his physical wheelbarrow or his mental image of it. Jones had what he started with. That’s how it is with ideas. (Bear in mind that under current law Smith is guilty of patent infringement even if she never saw Jones’s wheelbarrow. Do not assume that patents are primarily about prohibiting copying.)

Smaller Profits

But, someone will object, if Smith competes with Jones in selling wheelbarrows, Jones’s profits will likely be smaller than if the government were to stop Smith from competing in that market.  (That’s what patents and copyrights boil down to.) True enough. But now the subject has changed. Instead of talking about property rights in the product of one’s labor, we’re talking about property rights in economic value or potential profits. How can one own economic value? It’s in the eyes of beholders. How can one own yet-to-be-made profits?

But, our critic might say, those profits would have been made had Smith not done what she did. We’re back to square one. What did she do? Again, she used her labor and materials to build a wheelbarrow based on a image in her mind. That image was there as a result of nonaggressive action. Had she broken into Jones’s home, Jones would have a cause of action for burglary. But Smith committed no burglary in our story. Had a contract existed between the two parties with respect to the wheelbarrow, perhaps a breach occurred. That’s also not part of this story. The burden of proof would seem to be on anyone who thinks a rights violation took place.

My example may be rejected because Jones obviously took no precaution against people seeing his wheelbarrow. I think that objection fails. If he owns the very idea wheelbarrow (which is the implication of a patent), why should he have to take such a precaution? Lysander Spooner, who pushed the case for IP as far as it can be pushed, wouldn’t have thought so. If Jones leaves the keys in his car, that certainly would not be a valid defense for a car thief.

Slave Labor

In a recent discussion about copyright, my interlocutor suggested that the unauthorized publishing of a book in effect makes a slave of the author because the publisher profits off the author’s labor without consent. But that begs the question by assuming what is in dispute, namely that the publisher took something that belongs to the author. But what? The intangible book is an arrangement of words, however imaginative or novel. It’s hard to see how that can be owned. (We’ve already dealt with the lost-profits argument.) Of course there is nothing to stop fans of the author from launching a campaign to encourage people to buy the authorized edition. (J. R. R. Tolkien launched such a campaign for himself when The Lord of the Rings was issued in an unauthorized paperback.)

(I do not concede, by the way, that absent copyright, authors would suffer great hardship in the free market. Copyright advocates assert without good grounds that duplicating artistic works and complicated inventions is necessarily a low-cost and automatically lucrative endeavor, which is by no means the case. But that subject is for another time.)

The “slave labor” objection in fact proves too much. If Jones creates a new market by offering a novel product, is he exploited if Smith caters to that same market with a similar yet sufficiently different product? (Apple created a market with the iPod, but soon competitors came along that presumably did not violate Apple’s patents.)

Plagiarism

Finally, it is curious that the first thing that occurs to people on first hearing the anti-IP case is plagiarism: “You mean it would be okay for someone to take an author’s work, put his own name on it, and sell it?”

Two issues are conflated here. One can plagiarize without violating a copyright, and one can violate a copyright without plagiarizing. Under copyright law you may use brief verbatim excerpts of another’s written work without permission as long as you use quotation marks and attribute the text to the author. It’s called “fair use.” (Question for copyright fans: Isn’t even fair use a violation of an author’s rights?) If you were to use an excerpt that otherwise would qualify under the fair-use principle but without attribution, you would be guilty of plagiarism but not copyright violation. The same would be true if you quote Shakespeare without attribution. (Shakespeare wrote without benefit of copyright.)

On the other hand,  if you publish Atlas Shrugged with Ayn Rand’s name on it, you would be guilty of copyright violation but not plagiarism.

For the sake of clear thinking, let’s keep these issues separate.

Well, is plagiarism okay? No, it’s not! Obviously it is dishonest and dishonorable to represent someone else’s work as one’s own. But note, according to LegalZoom, “plagiarism is not a criminal or civil offense.” Nor should it be. It’s a breach of good conduct, and there is a plentitude of nonviolent, non-State ways to deal with it, especially in the Internet age.

It was disheartening to read John Stossel’s uncritical endorsement of Hernando de Soto’s diagnosis of the causes of poverty in Third World nations as their lack of street addresses and legal titles to property (“Why Do the Poor Stay Poor?,” March 2011). The error of these claims in De Soto’s The Mystery of Capital (2000) has been pointed out by several authors. . . .

First, people who have property that would qualify for a street address, if such address system existed, . . . are not among the poor. Second, in the same Third World country, there are rich as well as poor people. The lack of a street address thus cannot explain why the poor are poor. Third, in the formal and informal sectors of Third World countries, people acquire loans all the time without the presentation of government certified titles to property. Indeed, de Soto himself describes the vibrancy of economic activity in Brazilian favelas where, for example, “street cottage industries have sprung up . . . manufacturing anything from clothing and footwear to imitation Cartier watches and Vuitton Bags.” Fourth, Stossel buys into de Soto’s mistaken view of lawlessness in most of the Third World: “They need the rule of law. But many places in the developing world barely have law.” But de Soto contradicts himself on that claim, too: “[A]sset owners in the extralegal sector are . . . relatively well organized [and] ‘law-abiding,’ although the laws they abide by are not the government’s.” Furthermore, people “in the undercapitalized sector do have . . . strong, clear, and detailed understandings among themselves of who owns what.” (For more on de Soto’s self-contradictory claims, see “Mystifying the Concept of Capital: Hernando de Soto’s Misdiagnosis of the Hindrance to Economic Development in the Third World,” Independent Review, Summer 2008.) In fact, only in the most chaotic countries or failed states are crimes against private property not punished by law.

De Soto’s claims have fascinated some in the libertarian community who find someone, originally from a Third World country, Peru (but who did not grow up there), arguing that adopting capitalism and the rule of law would eliminate poverty around the world, to be a useful ally. But de Soto has an incorrect understanding of the economic history of the more developed countries, including such recent ones as South Korea and Hong Kong, as well as of the hindrance to economic development in the less-developed countries. He does not recognize that economic development or the growth of wealth preceded the development of legal titles to property in the now-developed countries. Thus he seeks to reverse the order of causality: Institute legal titles to property and economic development will follow! He also does not recognize that savings constitute the “capital” that may be borrowed with or without the presentation of legal titles to property. Titles to property may qualify someone for a loan, but without savings in the community, there would be nothing to lend. Indeed, de Soto believes that knowledge of the source of “capital” for economic development is a “mystery” for people in both the more-developed and less-developed countries. But Adam Smith explains that in the Wealth of Nations (1776), which de Soto fails to recognize.

Stossel would do better to point his readers to Adam Smith’s explanation of the institutions and policies that promote the creation of wealth among nations than to endorse de Soto’s mistaken and frequently self-contradictory views about the hindrance to economic development in the Third World.

Those two sentences helped focus the Progressive worldview. First, the United States needed an income tax to capture large chunks of revenue. Second, someone who had a large fortune, “by the mere fact of its size,” had to be treated differently from other wealth holders. Property rights became variable. One group would be treated one way, other groups would be treated another way. Third, the nation needed a “graduated income tax” to redistribute wealth from the haves to the have-nots. The new tax slogan would be “ability to pay.”

Author Delos Kinsman, writing while Roosevelt was president, said, “Individuals should contribute to the support of the government according to ability.” And “income is the most just measure of that ability.” Enlightened leaders like Teddy Roosevelt would redistribute wealth in the national interest.

Roosevelt’s thinking was a profound change from the views of the Founders. To them, government existed to protect property, not redistribute it. Americans had a right to pursue life, liberty, and property, not an entitlement to it. Thus the Founders never considered raising revenue through an income tax, least of all a graduated one. They wanted consumption taxes—levies on imports or on luxury goods. Why? Because, as Alexander Hamilton said in Federalist 21, “The amount to be contributed by each citizen will in a degree be at his own option, and can be regulated by an attention to his resources.”

Hamilton added, “If duties are too high, they lessen the consumption; the collection is eluded; and the product in the treasury is not so great. . . . This forms a complete barrier against any material oppression of the citizens by taxes of this class, and is itself a natural limitation of the power of imposing them.”

American law also reinforced the use of consumption taxes. “All duties, imposts and excises shall be uniform throughout the United States,” the Constitution reads. What could be more uniform than Congress’s first excise tax of seven cents a gallon on all whiskey produced in the United States?

Not Good Enough

Progressives, however, disliked consumption taxes as the major source for revenue. They were too small, too cumbersome to collect, and sometimes too regressive—wealth never properly redistributed itself through consumption taxes. Taxes on whiskey, tobacco, and imported olives from Spain shifted very little, if any, wealth from rich to poor. In 1913 the House Ways and Means Committee observed that federal revenue rested “solely on consumption. The amount each citizen contributes is governed, not by his ability to pay taxes, but by his consumption of the articles needed.” Swollen fortunes, as Roosevelt might say, went untaxed and became more swollen while some immigrants lived in poverty.

The Sixteenth Amendment was ratified in 1913, giving Congress the “power to lay and collect taxes on incomes from whatever source derived.” It did not rule out “ability to pay” as the basis for the levy. The amendment became law just as Woodrow Wilson was coming into the presidency. As a Progressive, Wilson wanted to start small, establish a precedent, and then increase rates over time. Under the new tax law, exemptions were so high that few Americans earned enough to pay any tax. Rates started at 1 percent and rose slowly to a high of 7 percent on all income over $500,000.

Progressives easily sold this tax plan to the voters. Fewer than one American family in 100 paid anything, but politicians could promise audiences that they might receive benefits from the revenue. And who would dare to suggest that billionaire John D. Rockefeller did not have the ability to pay 7 percent of his huge income to the government?

Ability to Pay

Yet that raises an interesting question. At what tax rate did Rockefeller, or other wealthy men, cease to have the ability to pay? If they could pay 7 percent, could they pay 15? Apparently so, because in 1916 Wilson and Congress raised the top rate to 15 percent. Unlike with a consumption tax, under the income tax politicians judge ability to pay and they choose the rates they think rich people can afford. If politicians choose rates too high they may lose the support of the rich, but they may gain support of those larger groups receiving subsidies from the tax revenue. If wealth really needs to be redistributed, should we trust people to do it with their own money or politicians with other people’s money?

Rockefeller, for example, was the best and cheapest oil refiner in the world. His charitable giving included the Erie Street Baptist Church, a cure for meningitis, and funding for Tuskegee Institute. That was how he redistributed his own wealth. Andrew Carnegie, the steel baron, built libraries, and banker Andrew Mellon built the National Gallery of Art in Washington, D.C. In the political realm, President Franklin Roosevelt supported high taxes and gave subsidies to silver miners, farmers, and the Tennessee Valley Authority to make cheap electric power.

Charitable givers and politicians both pursue their self-interest, but the politician’s self-interest includes winning votes. That means, if possible, channeling subsidies to voting groups to win reelection at the expense of taxpayers in general. Rockefeller’s gifts to Tuskegee did not cost anyone but him any money. FDR’s subsidy to silver miners, by contrast, cost millions of taxpayers small amounts of tax revenue. It helped FDR carry several western states each time he ran for president. His redistribution efforts were essential to his being reelected.

Thus U.S. politicians had incentives to steadily increase the income tax in the 1900s. The top rate went from 7 to 15 percent in Wilson’s first term. World War I took it over 60, then over 70 percent. It didn’t drop below 50 percent until 1924, and was about 25 percent the rest of the decade. The rate rose to 63 percent in 1932 under Herbert Hoover and then 79 percent in 1935. The World War II years pushed it over 80 percent, and in 1945, FDR’s last year in office, the top was 94 percent on all income over $200,000. Wealthy people apparently had a very high ability to pay, and politicians had a very high desire to fight wars and win elections.

I first met de Soto maybe 15 years ago. It was at one of those lunches where people sit around wondering how to end poverty.

I go, but I’m skeptical. There sits de Soto, president of the Institute for Liberty and Democracy in Peru, and he starts pulling pictures out showing slum dwellings built on top of each other. I wondered what they meant.

As de Soto explained, “These pictures show that roughly 4 billion people in the world actually build their homes and own their businesses outside the legal system. . . . Because of the lack of rule of law [and] the definition of who owns what, and because they don’t have addresses, they can’t get credit [for investment loans].”

They don’t have addresses?

“To get an address, somebody’s got to recognize that that’s where you live. That means . . . you’ve got a mailing address. . . . When you make a deal with someone, you can be identified. But until property is defined by law, people can’t . . . specialize and create wealth. The day they get title [is] the day that the businesses in their homes, the sewing machines, the cotton gins, the car repair shop finally gets recognized. They can start expanding.”

That’s the road to prosperity. But first they need to be recognized by someone in local authority who says, “This is yours.” They need the rule of law. But many places in the developing world barely have law. So enterprising people take a risk. They work a deal with the guy on the first floor, and they build their house on the second floor.

“Probably the guy on the first floor, who had the guts to squat and make a deal with somebody from government who decided to look the other way, has got an invisible property right. It’s not very different from when you Americans started going west, [but] Americans at that time were absolutely conscious of what the rule of law was about,” de Soto said.

Americans marked off property, courts recognized that property, and the people got deeds that meant everyone knew their property was theirs. They could then buy and sell and borrow against it as they saw fit.

This idea of a deed protecting property seems simple, but it’s powerful. Commerce between total strangers wouldn’t happen otherwise. It applies to more than just skyscrapers and factories. It applies to stock markets, which only work because of deed-like paperwork that we trust because we have the rule of law.

Is de Soto saying that if the developing world had the rule of law it could become as rich as we are?

“Oh, yes. Of course. But let me tell you, bringing in the rule of law is no easy thing.”

De Soto says we’ve forgotten what made us prosperous. “But [leaders in the developing world] see that they’re pot-poor relative to your wealth.” They are beginning to grasp the importance of private property.

Let’s hope we haven’t forgotten what they are beginning to learn.

Now imagine that some lobbyists have staked out part of Antarctica and brought suit in federal court against tourists who trespassed on “their” land. Fine, you say: After all the lobbyists got there first. Replace “Antarctica” with “ideas” and you have the surreal world of “intellectual property.” Unfortunately, while you and I cannot both mine for gold in the same spot, we can certainly make use of the same idea, and therein lies the heart of this story.

A good spot to start the tale is in 1998, when a panel of judges ruled that software was patentable, thereby starting the intellectual property equivalent of the California gold rush (State Street Bank & Trust v. Signature Financial Group). Every child knows how to answer the door: “Knock knock.” “Who is there?” But what if I taught a computer how to say, “Who is there,” and patented the idea? Absurd, you say. Well, we all understand how to run an auction—but do not try doing it with a computer because the holder of U.S. Patent 7,702,540 (also known as e-Bay) will sue you. And that in a nutshell is what software patents are all about.

The entire concept of being able to patent a commonly used idea because it is implemented on a computer is silly, but this article is too short to review all of the millions of software patents issued since 1998. A famous and not-so-famous example may serve to reinforce the point. Raise your hand if you have not heard about the Amazon “one-click” patent (U.S. Patent 5,960,411). No hands? Okay, if you can patent one click, why not two? Sorry, that you cannot do. Why not? Microsoft beat you to it (U.S. Patent 6,727,830).

Software patents, though, are only a modern incarnation of an ancient evil. How about patenting the peanut butter and jelly sandwich? Too late, already done—in 2005, no less (U.S. Patent 6,874,409). That one did not hold up in court. There are so many silly patents that there are two websites, totallyabsurd.com and patentlysilly.com, to publicize them. Many seem to tell a tale of inventors with little sense—and a government patent office with even less. How about a thong diaper (U.S. Patent D539422)?

Here is one that was approved by the eagle eyes at the U.S. Patent Office (U.S. Patent 6,637,349): “A motorized picnic table having a drive mechanism, wheels connected to and driven by the drive mechanism, a table mounted above the drive mechanism, and at least one seat adjacent the table. In the preferred embodiment, the seats are bench-type seats and flank the drive mechanism.”

That was “invented” by Gregory A. Lafferty, “approved” by patent examiners Robert Olszewski and James S. McClellan, and lawyered by Baker & Daniels.

And what was the patent examiner smoking when he approved this one?

A method of swinging on a swing is disclosed, in which a user positioned on a standard swing suspended by two chains from a substantially horizontal tree branch induces side to side motion by pulling alternately on one chain and then the other (U.S. Patent 6,368,227).

But if you think patenting the obvious is silly, then what about patenting the impossible? Do these inventors sit around and watch Star Trek all day, then rush off to the patent office? U.S. Patent 6,025,810 protects the warp drive: “[This] invention takes a transmission of energy, and instead of sending it through normal time and space, it pokes a small hole into another dimension, thus sending the energy through a place which allows transmission of energy to exceed the speed of light.” It comes complete with elaborate wiring diagrams.

Fun is fun. But there is a serious side to all this nonsense. In The Social Network, Facebook creator Mark Zuckerberg asks, “Why should a guy who makes a really good chair owe money to anyone who ever made a chair?” Yet in practice that is what patents are for. Take the matter of faster-than-light travel. The patent is silly because it is science fiction rather than science. But should a real entrepreneur ever come up with a way of communicating faster than the speed of light, the only thing we can be certain of is that she will then have her pants sued off for patent violation by Mr. David L. Strom—owner of the “idea” of the warp drive.

Does that sound crazy? Consider the true story of Jerome Lemelson, who in 1954 and 1956 filed patents (or so he later claimed) on optical scanning. Optical scanning was no more practical in 1956 than the warp drive is today—and needless to say, Lemelson’s “invention” did not include a working device. Still, when optical scanning became widespread in 1998, Lemelson demanded and received millions of dollars in royalties from the companies that produced optical scanners. It is true in the end the courts invalidated his patents. But he did not give back the money.

The Rest of the Story

Patents are not the end of the story. They seem so serious: They’re essential, it’s said, to innovation, growth, economic welfare. Patents involve weighty and important things. By contrast, trademarks and copyright seem lightweight. What does a song really matter to our economic well-being? The logo of a company? If the International House of Pancakes wants to sue the International House of Prayer for a trademark violation, well it’s silly, but so what? If a woman trademarks her name and threatens to sue anyone who uses it in written communication, well the world is filled with silly people. If one restaurant sues another over grazing goats on the roof, it’s an amusing article in the Wall Street Journal. Or suppose a company calls itself “Rosetta Stone,” trademarks the name, then sues Google for selling it as a keyword for searches. At least a big company like Google can afford the lawyers to defend itself. And if the media industry’s anti-piracy lawyers are suing one another for copying cease-and-desist letters, that’s not only silly but ironic, right? It’s true that these silly lawsuits clog up the courts, but that’s the price we have to pay for . . . well I am not sure why we have to pay it, but you get the point.

Some copyright stuff is sleazy. For example, Stephens Media encourages people to share its news articles with their friends, then sues them for copyright violation when they try to do it. It’s true the company intimidates a lot of people into paying up—but “no harm no foul”: Nobody has actually gone bankrupt on its account yet.

The truth is that trademarks—unlike patents and copyright—have a legitimate purpose. Why should someone be allowed to do business pretending to be me? That’s how trademark law is written. Yet no law has been written that lawyers cannot distort. A company, Peabody Energy, recently tried to take down a website making fun of its clean-energy claims because—you’ve got it—the site used its trademarked name.

The Electronic Frontier Foundation has an entire catalog of these kinds of offenses. Are they just silly? Or are they sinister? Suppressing free discussion of the demerits of a person (who trademarked her name) or a company (that trademarked its name) certainly is not the purpose of trademark law. Or how about this: When the book Alice’s Adventures in Wonderland—a book not under copyright and in the public domain—was reformatted for the Adobe e-book reader, readers were told that any effort to copy, print, lend, or give the book away—or indeed to read the book out loud—would be a violation of international copyright law. Leaving aside that these restrictions are as meaningless as they are legally unenforceable, and that this falls into the silly rather than sinister category, the idea that a copyright holder might want to prevent something from being read aloud should give pause.

After you pause, take a deep breath: There is worse to come. There are copyright holders who want to prevent things from being read at all. The Diebold Corporation sued a group of students. Their offense? They made public internal company emails documenting that Diebold voting machines do not work especially well, and in particular are vulnerable to the casting of fraudulent votes. Pretty serious stuff. Why did Diebold sue these students? It sued them for copyright violation. It claimed the internal emails were copyrighted and that the students had reproduced them without permission. In this instance the courts behaved sanely: Judge Jeremy Fogel wrote in his decision that “no reasonable copyright holder could have believed that portions of the e-mail archive discussing possible technical problems with Diebold’s voting machines were protected by copyright.” But while threatening and carrying out meritless lawsuits is not as bad as winning them, it imposes a real tax on free speech. And more to the point, the history of intellectual property is the history of absurd requests being repeatedly rebuffed by the courts (think “software patents before 1998”) until a panel of judges finally caves in.

Let us be realistic: People sue each other for all sorts of silly reasons having nothing to do with intellectual property—and often win in court. People who spill coffee on their laps sue the maker of the coffee; burglars who fall through the roofs of properties they are robbing sue the owners for unsafe roof conditions, and so forth.

Abusive by Nature

So why condemn intellectual property law over, say, tort law more broadly? Why focus on IP and not on the broader problem of excess litigation? The answer is that intellectual property is abusive by its very nature. Despite what the propagandists say, intellectual property is not about protecting land from trespassers. It is about controlling what belongs to other people. It is about the right of Disney Corporation to tell me what to do with things I have on my computer—even things I have created myself.

Is it a coincidence that the main accomplishment of the patent system is to encourage rent-seeking behavior? Well, consider that originally the only purpose of the patent system was to encourage rent-seeking behavior. There was no fiction that it was a reward for invention: The king simply granted favored rent-seeking courtiers monopolies over the production of salt, the land in Virginia, or whatever the favorite with the largest bribe happened to desire.

Is it a coincidence that the main use of copyright is to suppress free speech? Well consider that originally the entire purpose of copyright was to suppress free speech. When the printing press became widespread, a monarchy deathly afraid of popular dissent granted printing companies “copyright” monopolies over the printing of (government-authorized) books, along with the right (and obligation) to burn any books the monarchy disapproved of.

Where is this all headed? Intellectual property is not merely a threat to freedom of trade and speech. It is also a threat to freedom of thought. Sound far-fetched? A ridiculous straw man? A wild exaggeration?

Is it? How about this famous copyright lawsuit that the plaintiff won? It concerned two songs: One consisted of four repetitions of a short musical phrase A followed by four repetitions of B. The other and subsequent song also consisted of four repetitions of A followed by three repetitions of B. And indeed, the tune was sufficiently “obvious” that the judge concluded that George Harrison did not knowingly copy the song “You’re So Fine” when he wrote “My Sweet Lord.” He nevertheless ruled for the plaintiff: “His subconscious knew it already had worked in a song his conscious did not remember. . . . That is, under the law, infringement of copyright, and is no less so even though subconsciously accomplished.”

Subconscious copyright violation! Just wait until we all have video cameras implanted in our retinas! Then you will have to pay a fee to Walt Disney Corporation or some other big company each time you look down the street. Or perhaps you will have to pay me: I’m thinking of patenting the idea.

Something similar may be happening in the United States, not with foreign conquest but with our domestic freedoms. Two freedoms are at risk: The freedom to practice our religion and the freedom to use our property in any way that’s peaceful. This is not new, but what’s different are the people who are putting them at risk. Some Americans have attacked these freedoms because other Americans want to build, on property they have legally acquired, a center that includes Muslim prayer space. The Park51 center—prayer space, athletic facility, culinary school, auditorium, and art studio—would be two blocks from “Ground Zero,” where murderers flew hijacked airplanes into the World Trade Center on that awful September 11, 2001. If the most extreme protesters succeed, they will have limited the religious freedom of Muslims and the right to use property peacefully.

Therein lie two ironies. The first, the kind highlighted by Sumner, is that if these opponents limit Muslims’ rights, they will make the United States a little more like some of the Muslim countries they abhor. A defining characteristic of many Muslim countries is their governments’ intolerance of religious freedom. The 2010 annual report of the U.S. government’s Commission on International Religious Freedom asserts that Burma, China, North Korea, Eritrea, Iran, Iraq, Nigeria, Pakistan, Saudi Arabia, Sudan, Turkmenistan, Uzbekistan, and Vietnam are “countries of particular concern.” Governments of these countries, says the report, “have engaged in or tolerated systematic and egregious violations of the universal right to freedom of religion or belief.” Of these 13, seven—Iran, Iraq, Pakistan, Saudi Arabia, Sudan, Turkmenistan, and Uzbekistan—are countries with majority Muslim populations. The commission also put 12 countries on the “Watch List.” These are places where religious freedom is low, but not as low as the other 13. The 12 are Afghanistan, Belarus, Cuba, Egypt, India, Indonesia, Laos, Russia, Somalia, Tajikistan, Turkey, and Venezuela. Of those, six—Afghanistan, Egypt, Indonesia, Somalia, Tajikistan, and Turkey—have majority Muslim populations.

The second irony is that many of the people most involved in attacking the religious freedom and property rights of Muslims had previously fiercely defended—or at least posed as fierce defenders of—religious freedom and property rights. Radio and TV talk-show host Sean Hannity, for example, has passionately defended religious freedom for Christians. Could this all along have been special-interest pleading on his part because he’s a Christian? Possibly.

Or consider Republican politician Newt Gingrich, who last April mounted a ringing defense of religious freedom. In a Washington Post op-ed Gingrich and Jim Garlow argued that students at the University of California’s Hastings College of Law have the right to set up their own Christian club, with belief in Christianity as one of the requirements of membership. Gingrich and Garlow wrote: “[P]eople of faith are being deliberately marginalized and excluded not for any real misdemeanors but for having the temerity to suggest that there’s an authority higher than school administrators, a truth more compelling than the latest government-dictated cultural doctrine.”

Notice the term “people of faith” rather than “Christians.” A careful reader would conclude that Gingrich strongly believes in religious freedom for everyone. With his rejection of “government-dictated cultural doctrines,” Gingrich sounds like someone who would defend all people of faith.

Neither Property Rights Nor Religious Freedom

Yet just three months later, on July 21, Gingrich wrote: “There should be no mosque near Ground Zero in New York so long as there are no churches or synagogues in Saudi Arabia. The time for double standards that allow Islamists to behave aggressively toward us while they demand our weakness and submission is over.”

Although Gingrich was clever enough to say, “There should be no mosque,” rather than, “The government should not allow a mosque to be built,” his meaning seems clear. By invoking the Saudi government’s intolerance, he seems to be saying that governments in the United States should follow the Saudi model, in this case at least, and not allow the Islamic center to be built. My interpretation is buttressed by how he ends his article:

No mosque.

No self deception.

No surrender.

The time to take a stand is now—at this site on this issue.

On September 10 Gingrich said that President Obama should “tell” Imam Rauf, the Muslim leader who wants to build the Manhattan facility, “don’t do it.”

To add to the irony, who has given a property-rights defense of Muslims’ freedom to build mosques on their own property? None other than President Barack Obama. Obama recently stated: “As a citizen, and as President, I believe that Muslims have the same right

to practice their religion as everyone else in this country. And that includes the right to build a place of worship and a community center on private property in Lower Manhattan, in accordance with local laws and ordinances.”

I would have preferred that Obama drop his qualifier—local laws and ordinances—given that zoning laws and other such ordinances are, as legal scholar Richard Epstein has pointed out, a huge assault on property rights. Still, at least Obama defended these rights.

So here’s where we are. A man who would be president, Newt Gingrich, from a party that in recent years has claimed to defend religious freedom and property rights, the Republican Party, gives up all claim to be a defender of these rights and seems to want to imitate a society whose government is highly intolerant of religious freedom. If Gingrich has his way the Saudis will have won—without firing a shot or even lifting a finger.

Of course, those who oppose the facility do have other options in a free society, including boycotting and picketing. But they do not include using force to prevent it from being built.

The only credible way to defend freedom, the way most likely to lead to its preservation, is to defend everyone’s freedom, not just the freedom of those with whom we agree.

I’ve been astounded, for instance, about the heated debate over the Ground Zero mosque. It’s not at Ground Zero and the proposed Muslim community center isn’t really a mosque. But never mind those side points. My question: Who owns the property? Apparently the center is a private project and a lawful use of the property, per the government’s standards. End of story. But critics—many of whom claim to be champions of property rights, religious freedom, and the free market—remain opposed to it because they do not like the idea of a group of individual Muslims building something near a site where some other Muslims committed an atrocity.

The beauty of property rights is that they grant individuals the ability to determine their own future regardless of whether other people like them or not. If I own a property and propose a project that conforms to some easily recognizable preexisting rules, then I have the right to build on it whether or not my neighbors prefer that something else be built on the site—or whether or not they like me, the facility, or my religion.

Likewise, if I own a home or a business, I have a right to decide who gets to visit me on that property. It’s a simple concept. Surprisingly, California’s courts—which seem to have specialized in eroding property rights—cut through the nonsense last July and ruled in a way that would make any parent of a kindergartner proud, even though the same court contradicted itself in a different ruling the next month. Still, it’s progress.

California’s Third District Court of Appeals “struck down a union-backed California law Monday that allows labor picketing on a store’s parking lots and private sidewalks, saying it unconstitutionally requires property owners to host speakers with whom they disagree,” reported the San Francisco Chronicle.

In this case the Sacramento local of the United Food and Commercial Workers Union began picketing a Foods Co. supermarket, owned by the Ralphs Grocery chain. Union protesters stood only a few feet from the door, handed out flyers to customers, and occasionally marched in front of the door.

When the company tried to evict the protesters the union invoked the 1975 Moscone Act. As the court of appeals explained in its decision, “The Moscone Act declares that conduct relating to a ‘labor dispute,’ such as peaceful picketing, ‘shall be legal,’ . . . .” The state’s labor code, the court stated, requires that before a court grants an injunction in a labor dispute, it must find that “unlawful acts have been threatened and will be committed unless restrained” and “That substantial and irreparable injury to complainant’s property will follow” and “That as to each item of relief granted greater injury will be inflicted upon complainant by the denial of relief than will be inflicted upon defendants by the granting of relief” and “That complainant has no adequate remedy at law” and “That the public officers charged with the duty to protect complainant’s property are unable or unwilling to furnish adequate protection.”

Free Speech vs. Organized Labor

This is an absurdly hard-to-meet standard. Under the state law, then, protesters can swarm a property unless the owner can prove the protesters will destroy the property and meet all the other impossible-to-prove caveats stated above. In the name of protecting unions in labor disputes, the state code obliterated what one would normally consider the most basic tenet of property rights: the right to keep intruders off of one’s property.

In its 3-0 ruling in Ralphs Grocery Company v. United Food and Commercial Workers Union Local 8, the court ruled: “This case presents the question of whether the state, based on the content of the speech, can force the owner or possessor of real property that is not a public forum to give an uninvited group access to the private property to engage in speech. We conclude that such legislation violates the First and Fourteenth Amendments of the United States Constitution and, therefore, is invalid.”

And more simple clarity from the court: “Forcing a speaker to host or accommodate another speaker’s message violates the host’s free speech rights.”

This is not an inconsequential point. I recall during the four-month grocery union strike in southern California in 2004 the degree to which union protesters disrupted business, harassed customers, yelled at store employees, and did so right by the entrance to these privately owned buildings. In some cases the employees blocked store entrances. (Ironically, the leader of that strike is now speaker of the California Assembly, which offers some insight into the type of legislation that moves forward in California these days.) As I wrote in The Freeman in September 2004, the strike “disrupted most people’s lives. Store hours at almost all major grocery stores were curtailed; food selection was limited; and shoppers who continued to frequent Ralphs, Vons, or Albertsons stores were forced to cross picket lines manned by increasingly surly workers.” Unions gained a leg up in their bargaining because they could wantonly violate private property rights.

In a series of legal decisions over the years, California courts had come up with some convoluted distinctions regarding free speech on private property that is accessible to the public. Before the July ruling the basic standard was that in malls and multistore facilities serving as a de facto town square, individuals have more speech rights than at single-store facilities that are not intended as meeting places. But even at these free-standing stores, labor speech is protected by the above-referenced Moscone Act and other sections of the state labor code.

Public Private Property

In this particular case the unions showed up about five days a week and picketed the store for about eight hours. The company provided the union with a memo detailing its rules for speech on store property, and union members generally ignored those rules. The store called the Sacramento police, but the police refused to do anything other than give the union picketers the same copy of the rules they already had been ignoring.

The unions argued that the store was actually a public forum because another part of the shopping center had sitting areas. Those sitting areas, in the union’s view, made the store equivalent to a multistore facility that served as a town hall for public debate. The trial court ruled in the union’s favor, noting that the grocery company did not meet the five standards detailed in the Moscone Act.

It also agreed that the store is something of a public forum given that other groups had solicited money and signatures in front of the store. This is like saying one’s front lawn is the equivalent of a public park because the homeowners had allowed neighbors to congregate there. The beauty of property rights is that the owner can decide whom to allow on his property, at what times, and under what conditions—a point thoroughly lost on the trial court but overturned by the appeals court. As the appeals court explained, “A private owner may selectively permit speech or prohibit speech in a private forum without affecting the private nature of the forum.”

The appeals court also rebuked previous courts for decisions that “were based on the now-discredited notion that the First Amendment of the United States Constitution may prohibit private property owners from restricting expressive activities on their properties.” The court found the Moscone act unconstitutional: “The Act affords preferential treatment to speech concerning labor disputes over speech about other issues. It declares that labor protests on private property are legal, even though a similar protest concerning a different issue would constitute trespassing.” It similarly voided the relevant section of the state labor code (section 1138.1).

Attorney General Jerry Brown, recently elected governor again, filed an amicus brief in the Ralphs case that in 21 pages made no reference to private property and no distinction between the speech rights one has in the public square and the rights one has in a private space. His brief noted that “the state has no obligation to assist a property owner in restricting the expression of others.” All this time I thought the main purpose of the government was to ensure the life, liberty, and property of residents are protected from trespass.

Fortunately, the court grasped the latter point. Yes, the court acknowledged, a private property owner can limit access to his property, even to unions that are there to disrupt and harm the business. Yes, there are different free-speech standards—not depending on union membership, but based on where the speech is taking place (private versus public property).

Mixed Messages

Ironically, in August the same court came to a rather different conclusion in a free-speech case involving the Westfield Galleria, a large indoor shopping mall in the Sacramento suburb of Roseville, when it ruled against a set of severe speech restrictions adopted by the mall’s management. This is one of the more bizarre such speech issues since the Galleria had adopted a set of rules that prohibit people in the mall’s common areas from “approaching patrons with whom he or she was not previously acquainted for the purpose of communicating with them on a topic unrelated to the business interests” of the mall or shops within the mall, according to a Sacramento Bee report.

The rules are silly and offensive. Hearing about them would make me avoid the Galleria—although I already do so because I hate mall shopping. Nevertheless, despite the complications and circumstances, the same principle should be at work here as in the union-picketing case. Property owners get to set the rules on their own property, even bad ones, just as I get to determine the guests at my own house, even if I decide to invite a group of ne’er-do-wells and deadbeats.

Instead, the court ruled that the Galleria’s rules “are unconstitutional on their face.” Still, I can’t help but be thrilled by its decision in the Ralphs case and its recognition that unions do not have a set of free-speech rights elevated above everyone else. Overall, it’s a step forward for property rights in California, given that disruptive union picketing is common and few malls arrest customers who chat about the weather.