Property Rights Systems and the Rule of Law, page 5 To be sure, there is far more regulation of economic activity -and, hence, neces- sarily of the use of property-in these nations than was common fifty or seventy-five or a hundred years earlier. And the increase in regulation reasonably can be thought to reduce the value of property from what it otherwise might be. Even though many forms of government activity - support for infrastructure, transportation, availability of police pro- tection, support for a well-functioning legal system, provision of a stable currency, and so on-can raise the value of property, still other activity must be recognized as interfering with property owners interests in order to promote other ends. Some estimates put the cost of economically burdensome regulation at staggering levels for even the least ag- gressively regulated advanced economies Nonetheless, the legal imposition on property owners in these economies has been slight enough that, together with the productivity of resources and the distribution of hu- man resources and capital, the value of property in these societies has reached lofty lev els. The total value of real property(obviously only one form of property)in the United States, for example, is estimated to be between $15 trillion and $20 trillion. Stock mar- ket values, which overlap somewhat with real property but also largely represent other business property, intellectual property, and other intangible value, may amount to more than $11 trillion( taking the value of shares listed on the major U.S. exchanges). 7 Beyond factors such as natural endowments and the choices made in crafting sub- stantive legal provisions, the value of property in advanced economies is testament to the societies commitment to the rule of law. practical commitment to rule of law values is part of the economic success story, part of the value of property and of property rights
Property Rights Systems and the Rule of Law, page 5 ________________________________________________________________________ To be sure, there is far more regulation of economic activity – and, hence, necessarily of the use of property – in these nations than was common fifty or seventy-five or a hundred years earlier. And the increase in regulation reasonably can be thought to reduce the value of property from what it otherwise might be.14 Even though many forms of government activity – support for infrastructure, transportation, availability of police protection, support for a well-functioning legal system, provision of a stable currency, and so on – can raise the value of property, still other activity must be recognized as interfering with property owners’ interests in order to promote other ends. Some estimates put the cost of economically burdensome regulation at staggering levels for even the least aggressively regulated advanced economies.15 Nonetheless, the legal imposition on property owners in these economies has been slight enough that, together with the productivity of resources and the distribution of human resources and capital, the value of property in these societies has reached lofty levels. The total value of real property (obviously only one form of property) in the United States, for example, is estimated to be between $15 trillion and $20 trillion.16 Stock market values, which overlap somewhat with real property but also largely represent other business property, intellectual property, and other intangible value, may amount to more than $11 trillion (taking the value of shares listed on the major U.S. exchanges).17 Beyond factors such as natural endowments and the choices made in crafting substantive legal provisions, the value of property in advanced economies is testament to the societies’ commitment to the rule of law. Practical commitment to rule of law values is part of the economic success story, part of the value of property and of property rights. It
Property Rights Systems and the Rule of Law, page 6 is part of what sets Western democracies(a term that is not strictly limited to Western nations or to governments that are fully democratic) apart from many other nations The core concept of the rule of law includes an understanding that society should be ordered around a set of laws that apply similarly to all on the basis of principles de- ducible from the rules and not dependent of the identity of the rulers. It includes the ex- ectation that rules of law that seem on their face to apply to all will in fact be read simi- larly and applied similarly to all-that what seems to be a universal rule will find similar application to the rich and the poor, to high and low born, to those from different relig- ions and tribes and locales, different political parties, different skin colors, different fami- The base proposition for the rule of law is that, in the formulation given by John Adams and David Hume, it intends" a government of laws, not of men. For the laws to govern, for them to play the decisive role rather than for the particular individuals in power to do so, the laws-along with the individuals who apply the law and the institu- tions that mediate application of the laws -must provide reasonable certainty about the meaning of the rules that govern our conduct. And the reasonable certainty about the rules must be rooted in understanding of the rules as written rather than detailed knowl- edge of which individuals will ultimately be applying the rules to us. 9 Friedrich Hayek framed the point in especially strong terms, saying that the rule of law means that government in all its actions is bound by rules fixed and announced beforehand-rules which make it possible to see with fair certainty how the authority will use its coercive powers in given circumstances and to plan ones individual affairs on the basis of this knowledge 20 One can argue the contours of the Hayekian requisites for
Property Rights Systems and the Rule of Law, page 6 ________________________________________________________________________ is part of what sets Western democracies (a term that is not strictly limited to Western nations or to governments that are fully democratic) apart from many other nations. The core concept of the rule of law includes an understanding that society should be ordered around a set of laws that apply similarly to all on the basis of principles deducible from the rules and not dependent of the identity of the rulers. It includes the expectation that rules of law that seem on their face to apply to all will in fact be read similarly and applied similarly to all – that what seems to be a universal rule will find similar application to the rich and the poor, to high and low born, to those from different religions and tribes and locales, different political parties, different skin colors, different families. The base proposition for the rule of law is that, in the formulation given by John Adams and David Hume, it intends “a government of laws, not of men.”18 For the laws to govern, for them to play the decisive role rather than for the particular individuals in power to do so, the laws – along with the individuals who apply the law and the institutions that mediate application of the laws – must provide reasonable certainty about the meaning of the rules that govern our conduct. And the reasonable certainty about the rules must be rooted in understanding of the rules as written rather than detailed knowledge of which individuals will ultimately be applying the rules to us.19 Friedrich Hayek framed the point in especially strong terms, saying that the rule of law “means that government in all its actions is bound by rules fixed and announced beforehand – rules which make it possible to see with fair certainty how the authority will use its coercive powers in given circumstances and to plan one’s individual affairs on the basis of this knowledge.”20 One can argue the contours of the Hayekian requisites for
Property Rights Systems and the Rule of Law, page 7 rule of law, the degree to which rules must be fixed or the command that all govern- ment actions be bound in advance by rules. But Hayek's essential point is correct-that the rule of law directs government to provide fair notice of what rules it will apply, that the rules must allow individuals to plan their affairs with a reasonable understanding of the rules that set the bounds to lawful behavior The classical rule-of-law conception propounded by Hayek and others contains four elemental components. These are rule fidelity(law appliers'engagement in apply ing law), principled predictability(foreseeability of rules'application and meaning), rule validity(the derivation of rules from valid legal authority ) and external authority(accep tance of someone other than the rule applier as the source of the rule to be applied) None of these four elements is completely obvious, and each of these elements can be problematic in some settings Meeting these elements- coming within the classical definition of the rule of law assures that law is not the whim of an individual, that law is not administered in ways that dramatically empower government officials at the expense of private citizens, that the law's strictures are not unduly difficult to anticipate. These elements of the rule of law cohere with a system of legal governance, of law-boundedness, that allows substan- tial scope to individual judgment(and, thus, to varied individual values) in charting the course of ordinary affairs. Because these elements of the rule of law produce the sort of predictability Hayek sought, they allow individuals to adapt to legal rules in ways most likely to improve social welfare(at least as assessed by a measure of summed individual values)or, put in less positive terms, in ways most likely to minimize social cost. Fur- ther, because the rule of law thus defined militates against the sort of whimsical, biased
Property Rights Systems and the Rule of Law, page 7 ________________________________________________________________________ the rule of law, the degree to which rules must be fixed or the command that all government actions be bound in advance by rules. But Hayek’s essential point is correct – that the rule of law directs government to provide fair notice of what rules it will apply, that the rules must allow individuals to plan their affairs with a reasonable understanding of the rules that set the bounds to lawful behavior. The classical rule-of-law conception propounded by Hayek and others contains four elemental components.21 These are rule fidelity (law appliers’ engagement in applying law), principled predictability (foreseeability of rules’ application and meaning), rule validity (the derivation of rules from valid legal authority), and external authority (acceptance of someone other than the rule applier as the source of the rule to be applied). None of these four elements is completely obvious, and each of these elements can be problematic in some settings. Meeting these elements – coming within the classical definition of the rule of law – assures that law is not the whim of an individual, that law is not administered in ways that dramatically empower government officials at the expense of private citizens, that the law’s strictures are not unduly difficult to anticipate. These elements of the rule of law cohere with a system of legal governance, of law-boundedness, that allows substantial scope to individual judgment (and, thus, to varied individual values) in charting the course of ordinary affairs.22 Because these elements of the rule of law produce the sort of predictability Hayek sought, they allow individuals to adapt to legal rules in ways most likely to improve social welfare (at least as assessed by a measure of summed individual values) or, put in less positive terms, in ways most likely to minimize social cost. Further, because the rule of law thus defined militates against the sort of whimsical, biased
Property Rights Systems and the Rule of Law, page 8 and dictatorial impulses that often correlate with welfare-reduc cing rules, the rule of law can be associated with some substantive welfare-enhancing qualities These rule-of-law elements do not, however, assure that laws are wise or just The mind of man has been little able to devise precepts that provide coercive power to any group, under any structure, and assure that it will be used exclusively in ways that are wise and just. The focus of the rule of law is not to provide such assurance -neither through procedural requisites nor through definitional assertion- but merely to assure law-bounded qualities that tend in the direction of better and more just legal systems Adherence to the rule of law slows down changes in the system, increases the foresee ability of change, makes change less the product of one individuals will than of the more regularized and intricate interweaving of different wills and priorities. The rule of law is a commitment to limitations that guarantee greater stability rather than any specified end- point for law and for government. This process commitment is not the entirety of what one might desire of a legal system- the substance of the rules surely matters as well -but it is an important goal and one that needs attention even in the best, most law-abiding systems, systems that will tend to promote human liberty, security, and economic oppor- Property Rights Systems and Arbitrary rule people around the world instinctively recognize the differences among nations commit- ment to the rule of law. Western democracies generally rank high on this commitment and are characterized by a set of governance structures that limit individual, official power. But differences across nations, though intuitively evident, are less readily cap- tured by description of what does and does not comport with the rule of law than might
Property Rights Systems and the Rule of Law, page 8 ________________________________________________________________________ and dictatorial impulses that often correlate with welfare-reducing rules, the rule of law can be associated with some substantive welfare-enhancing qualities.23 These rule-of-law elements do not, however, assure that laws are wise or just. The mind of man has been little able to devise precepts that provide coercive power to any group, under any structure, and assure that it will be used exclusively in ways that are wise and just. The focus of the rule of law is not to provide such assurance – neither through procedural requisites nor through definitional assertion – but merely to assure law-bounded qualities that tend in the direction of better and more just legal systems.24 Adherence to the rule of law slows down changes in the system, increases the foreseeability of change, makes change less the product of one individual’s will than of the more regularized and intricate interweaving of different wills and priorities. The rule of law is a commitment to limitations that guarantee greater stability rather than any specified endpoint for law and for government. This process commitment is not the entirety of what one might desire of a legal system – the substance of the rules surely matters as well – but it is an important goal and one that needs attention even in the best, most law-abiding systems, systems that will tend to promote human liberty, security, and economic opportunity. Property Rights Systems and Arbitrary Rule People around the world instinctively recognize the differences among nations’ commitment to the rule of law. Western democracies generally rank high on this commitment and are characterized by a set of governance structures that limit individual, official power. But differences across nations, though intuitively evident, are less readily captured by description of what does and does not comport with the rule of law than might
Property Rights Systems and the Rule of Law, page 9 initially be thought. Both the variance and the difficulty of bold pronouncements abou the qualities of a legal system that demonstrate adherence to or departure from the rule of law can be seen in comparing the situations in Zimbabwe and the United States-one system that appears strongly in derogation of, and one that appears to operate strongly in accord with the rule of law Property Rights in Land in Zimbabwe In 1965, the white minority government of lan Smith declared the British colony of Rhodesia (now Zimbabwe) independent of Britain. The Smith government repre- sented white citizens(who were a very small minority of the population, perhaps two or three percent)and sought to maintain white supremacist policies. Policies long in effect in rhodesia had limited the right of black African citizens to own land, except in certain designated reserves, and land ownership consequently was heavily skewed toward whites. The breakaway from Britain in 1965 sparked an armed struggle between the Smith government and two black nationalist movements, known generally in the West by the acronyms ZANU(Zimbabwe African National Union) and ZAPU (Zimbabwe Afri- can Patriotic Union). The inequality in land holdings was both a symbolic and pragmatic factor in the civil war The war ended in 1979 with the victory of the nationalist groups and an agree- ment(the Lancaster House Agreement) negotiated among the warring groups and the government of the United Kingdom, the former colonial power. The UK, which had not recognized the Smith governments claim to independence and had imposed sanctions gainst the regime, formally recognized Zimbabwe as an independent Commonwealth nation in 1980. ZANU and Robert Mugabe won elections to form the new government
Property Rights Systems and the Rule of Law, page 9 ________________________________________________________________________ initially be thought. Both the variance and the difficulty of bold pronouncements about the qualities of a legal system that demonstrate adherence to or departure from the rule of law can be seen in comparing the situations in Zimbabwe and the United States – one system that appears strongly in derogation of, and one that appears to operate strongly in accord with, the rule of law. Property Rights in Land in Zimbabwe In 1965, the white minority government of Ian Smith declared the British colony of Rhodesia (now Zimbabwe) independent of Britain. The Smith government represented white citizens (who were a very small minority of the population, perhaps two or three percent) and sought to maintain white supremacist policies. Policies long in effect in Rhodesia had limited the right of black African citizens to own land, except in certain designated reserves, and land ownership consequently was heavily skewed toward whites. The breakaway from Britain in 1965 sparked an armed struggle between the Smith government and two black nationalist movements, known generally in the West by the acronyms ZANU (Zimbabwe African National Union) and ZAPU (Zimbabwe African Patriotic Union). The inequality in land holdings was both a symbolic and pragmatic factor in the civil war. The war ended in 1979 with the victory of the nationalist groups and an agreement (the Lancaster House Agreement) negotiated among the warring groups and the government of the United Kingdom, the former colonial power. The UK, which had not recognized the Smith government’s claim to independence and had imposed sanctions against the regime, formally recognized Zimbabwe as an independent Commonwealth nation in 1980. ZANU and Robert Mugabe won elections to form the new government