by Joe Kernen
“Dad?”
“Yes, Blake?”
“What happened to all the trees?”
Fewer than half the trees that shaded us on our walk were visible. Their predecessors—owned by no one—had been cut down for firewood long ago. Only when Stewart Hartshorn’s community was established did the owners of the property recognize the ornamental value of trees. Which is when they started nurturing them—another object lesson in the social value of property rights.
(An even better one is the seventeen acres that Hartshorn’s daughter, Cora, bequeathed to Short Hills as an “Arboretum, Wildflower and bird sanctuary,” which is not only precisely the sort of public asset that is the direct consequence of putting private property to work but also Blake’s favorite place in all of Short Hills.)
“Dad?”
“Yes, Blake?”
“How did Mr. Hartshorn get the money to buy the land in the first place?”
As it turns out, the source of Hartshorn’s original stake offers an even more interesting insight into the nature of property than his career as a developer, though in this case, the property was pretty abstract. Hartshorn, you see, was an inventor.
Given the thousands of years in which people have been describing, disputing, and discovering value in property, it’s something of a surprise to realize that we’ve recognized that ideas are a valuable sort of property themselves—maybe the most valuable of all—for only a few centuries. England’s first patent law was drafted in 1628, but two hundred years later, when the first steam engines were driving the first locomotives across the English countryside, only about four thousand patents had been granted. That was enough, however, to ignite the Industrial Revolution, which would take the worldwide average GDP when Stewart Hartshorn was born in 1845—about $1,000 a year, still a considerable increase from the $700 to $800 at which it had been frozen for centuries—and more than double it by the time he died in 1935.14
Hartshorn’s invention wasn’t exactly the steam engine. When he was not yet twenty, he invented a mechanical window shade—or in the type of language beloved of patent lawyers, “the application of a pawl and ratchet or notched hub, arranged in such a manner that the shade may be stopped and retained at any desired height or point within the scope of its movement by a single manipulation of the shade, the usual cord for operating or turning the shade-roller being dispensed with entirely, as well as counterpoises, which had in some instances been employed, in connection with spring rollers, for holding the shade at the desired point.”
The Hartshorn roller shade was successful enough that its design long survived the patent protection it was given in 1864; it was essentially the same design still in use when I was young enough to be scared out of my wits every time the roller pulled the window shade up with a sound like a gunshot. Hartshorn’s creation made him far wealthier than his career as a real estate developer. His experience was a small, though profitable, example of the “discovery” of a right to intellectual property, one that was unknown to Galileo or Leonardo or a thousand generations of anonymous innovators. All of them, you see, lived in a time when the only way to make a living as an inventor was to either find a rich patron or keep your invention secret, neither of which was an especially good incentive to treat inventions as property able to be bought and sold.
Once inventions began to be treated as property, the same thing happened to them that happened to every other sort of property: When people can buy and sell ideas, they start producing more of them. A lot more. Hartshorn’s roller-shade patent was the 44,624th issued by the U.S. Patent and Trademark Office in the seventy-three years from its inception in 1789, almost immediately after the Constitution (which granted the national government a right to issue patents and copyrights) was ratified.
This is one of the most counterintuitive things about property specifically and free markets generally. Every other competing economic system assumes that things of value are finite: that when you consume something, you leave behind less than when you started. But as mankind has found more and more ways to recognize property rights in goods, the opposite has happened. Once someone can own them, we get more trees, more crops—and more (and more valuable) ideas.
Easy to see, when you think about it. Hard to explain, however, to a ten-year-old.
“Blake, you know we use oil and coal and natural gas for energy, right?”
“Electric cars don’t.”
“Even electric cars need to get energy from power plants, and they burn coal and oil and gas.”
“Okay.”
“Do you know where we get the fuel from?”
“The ground?”
“Pretty much. Most of it has been in the ground for hundreds of millions of years, and it takes million of years to produce more.”
“I know that.”
“So . . . when someone drills a hole in the surface of the earth and takes oil or coal out of it, is there more or less left behind?”
“Less, of course.”
“So what would you say if I told you that we’ve been drilling for oil for a hundred years, and there’s a lot more oil now than there was a hundred years ago?”
Blake said nothing, though her expression told me she knew she was being tricked but didn’t know how. She has a lot of company. Most people don’t understand how proven oil reserves have grown over time, even as humanity has burned more and more oil. We have been compelled for decades to listen to constant alarms about impending shortages of oil (and gas and cadmium and rare earth and lithium . . .). It’s only common sense, after all: The planet isn’t producing any more oil, or anything else, so it stands to reason that if we started with x tons of palladium, for example, in the earth’s crust, and we use five thousand ounces a year (mostly for the catalytic converters in cars), there must be five thousand fewer ounces left behind. After a while, we’ll run out.
Only we don’t. Back in 1980, the economist Julian Simon made a famous bet with the biologist and scarcitymonger Paul Ehrlich: He allowed Ehrlich, who had predicted worldwide famines and resource shortages for years, to pick any basket of commodities and hold them for ten years. If the prices increased because of those Ehrlich-promised shortages, he would pay the difference; if they decreased, Ehrlich would do the same. When the price of every one of Ehrlich’s picks—copper, tungsten, chromium, nickel, and tin—fell (tin, which traded for nearly $9 per pound in 1980, was only $3.88 in 1990)—he lost, though he’s still predicting imminent worldwide resource shortages, despite a record of doomsaying that is so far untarnished by success.
The reason why Ehrlich lost—why “shortages” are always (at worst) temporary—is central to understanding free markets: So long as people have incentives to find a commodity, in the form of a price that is greater than the cost of finding it, they’ll do so. In economic terms, there are no shortages; there is simply a lag while price catches up to demand, and once it does, inventive people go get it.
So long as they are permitted to assert a property right over what they find. Sometimes they can’t. Sometimes it’s impractical to divvy up something of value so that people can assert a property right to it, either because the value of the commodity is less than the cost of policing it—that’s why European and the northeastern U.S. forests were clear-cut15—or because technology hasn’t caught up with the potential for “propertizing” something.
Which is what happened to television.
When I tell Blake about growing up with only seven television channels to choose from, she gets the same look she had when I tried to prove to her that the earth seems to have, in economic terms, more oil now than when John D. Rockefeller started up Standard Oil of New Jersey. The remote control that operates the Kernen multimedia center not only has two dozen buttons operating previously unknown functions with mysterious acronyms like “CC,” “DVR,” “REC,” and “PIP” but also is capable of accessing more than fifteen hundred channels (and will probably, by the time you read this, have even more.)
; The introduction of a technology that could slice the electromagnetic spectrum into fine enough bands that a thousand different programs could be produced and sent into people’s homes hasn’t always been greeted with applause, particularly by America’s elites. However, it’s a stretch to argue that the quality of programming back in the “vast wasteland” days of the 1960s was better; I mean, I loved The Beverly Hillbillies, but then I was also ten years old. Does anyone really believe that Playhouse 90 was better than The Wire? More instructively, the way in which the government involved itself in broadcasting when the airwaves were—sort of—regarded as a public asset was profoundly different. Back then, the only way to make sure that the electromagnetic frequency used to send The Beverly Hillbillies into your home did so without interference from another frequency was by the most heavy-handed government regulation. In return for a giveaway of a hugely valuable band on the spectrum—a giveaway that was, as such giveaways always are, determined by political clout rather than economic efficiency—the networks were obliged, for example, to submit to censorship of a sort that the modern cable system laughs at.
The lesson seems obvious, and not just to those of us who cash paychecks produced by cable-TV revenue: The more programming channels are treated as private property, rather than the gift of the government, the better: for diversity, for quality, and certainly for quantity. Ted Koppel may complain—okay, he does complain—that TV news has deteriorated to the point that people no longer watch to get the facts but to reinforce their prejudices, but our local cable provider now offers more than five times as many hours of news every day than it did when Nightline went on the air—and if some of that news has a strong point of view, at least someone admits it, which sounds to me a lot better than pretending to be objective.16
You can’t really debate whether private property has increased human welfare everywhere it has been recognized; it’s obvious to anyone with eyes to see. There is, however, another debate, which is whether property rights are justified only because of their impact on prosperity.
That would seem to be enough, and maybe it is. But for the last three centuries, some really smart people have been arguing about whether property is good for reasons having nothing to do with more GDP. The English physician and philosopher John Locke, for example, thought that property rights were natural, not just efficient. His thinking went something like this:1. God created the world.
2. Anything created by God was, by definition, not legitimately owned by anyone.
3. But we want and need ownership.
4. So property exists whenever the work of man is mixed with the work of God.
This was, by any measure, revolutionary: Labor, not just prior possession, was what made ownership legitimate. Land was common property, but the improvements in land that made it valuable—from plowed fields to fortified castles—were private property, the natural right of whoever improved it. Discoveries of natural phenomena were res nullius; but anything that made them useful was property.
Locke’s argument wasn’t accepted by everyone, even people who accepted the importance of work in justifying ownership. Contemporaries of Locke (such as David Hume) and later thinkers (such as Karl Marx) agreed that labor added value but not that it granted a natural right to property. Even so, Locke’s theory seems to be the one that makes the most sense of Blake’s list: Clothes are property because they are made (and subsequently sold). People are not because they are the work of God.
But wild animals?
“Do you mean all wild animals, Blake? Birds?”
“Of course.”
“What about fish?”
“Yup.”
“What about the one you caught?”
“I threw him back.”
“But you could have eaten him if you wanted.”
“Ewww.”
One day, Blake pulled a smallmouth bass out of our local pond that was definitely big enough to make for good eating . . . if, in fact, she liked to eat fish, which she does not. This saved me from having to teach her how to clean and gut a fish, at least for now, but seemed to be a teachable moment nonetheless.
“So it’s okay to hunt, Blake?”
“Well . . . I wouldn’t like to, but I guess. If it was someone’s work.”
“And if that someone shoots a deer?”
“They’d get to keep it.”
“So it wasn’t property when it was alive, but it turned into property after it was dead?”
“Uh-huh.”
“Why?”
“Well, it was their work. Just like planting flowers. Or raising cattle.”
One of the virtues of educating a child in the labor theory of value (or letting her do it herself) is that it is a constant reminder of the value of hard work; Blake knows that anything done half assed—one of her favorite phrases, even if it embarrasses her to repeat it—is only half valuable. But it also teaches that the legitimate owner of anything valuable—of any property—is the individual who created that value by adding his or her work to the work of nature. There’s nothing wrong with governments protecting the “rights” of the natural world, but they have no natural right to the value created by work, and when they assert one—when politicians debate how much of the national wealth to return to its creators—they are, as Blake reminded me, nothing but bullies.
“Dad?”
“Yes, Blake?”
“If work is what makes something property, then is work a kind of property?”
“Yeah. I think so.”
“So my homework is my property?”
“Well . . . yes. So long as you accept that your mother and I have the right to inspect it.”
“So if it’s called homework, how come I don’t get paid?”
CHAPTER 4
October 2009: Who Made My Shoelaces?
October 2009: Our son, Scott, learns to tie his shoes, and a whole lot more . . .
Among all the purchases made by the Kernen family over the course of a year, this one had to be one of the most mundane: a pair of shoelaces for Blake’s brother, Scott. Actually, two pairs. Three bucks at any drugstore, supermarket, or even shoe store in America. Or, in fact, around the entire world. Billions of them are made and sold every year, from the most primitive outdoor market to the newest upscale mall, and by innumerable Internet retailers.
They’ve been around quite a while, as well. A couple of years ago, archaeologists found a leather shoe in present-day Armenia that was made more than five thousand years ago, and not only does it look no more beat up than Scott’s sneakers after a day playing in the mud, but it was held together with, you guessed it, laces. Shoes using eyelets and cross-lacing have been around since at least the twelfth century. Shoelaces are what you might call a mature technology.
And no one knows how to make them. Or more accurately, “not a single person on the face of the earth knows how to make” them.
That “not a single person” line is taken from an essay written by a man named Leonard Read in 1958. Titled “I, Pencil: My Family Tree as Told to Leonard E. Read,” it is a short but illuminating explanation of the miraculous way in which technology, raw materials, transportation, and science are brought together by literally millions of people to manufacture a simple “lead” (really graphite) pencil, and how, even though every one of those millions knows a little bit about the processes involved, no one knows the whole story. More to the point—this is an essay about free markets, after all, one regularly cited by Milton Friedman—it is about how those millions of people, and their transactions, somehow manage to organize themselves to produce that pencil, without, as Read puts it, any “master mind . . . dictating or forcibly directing” them.
And I thought that there wasn’t any better way to show Blake and Scott the incredible power of an undirected free market than with a pair of shoelaces.
The particular shoelaces used for the exercise weren’t anything special: two thirty-six-inch lengths of cotton and polyester, capped with acetate tips and p
ackaged on a couple of inches of cardboard. But their journey to Scott’s shoes took us on a trip around the world and through a whole lot of centuries.
Cotton first:
“Scott?”
“Yeah?”
“Do you know what this is?”
“Uh, a string?”
“If it were still in a sneaker, you’d know, wouldn’t you?”
“It’s a shoelace!”
“You bet it is. And it’s partly made out of cotton. You know what cotton is?
“Like cotton balls?”
“Just like.”
Actually, cotton balls are the product that most closely resembles the most valuable part of the plant before it gets processed. As with any other form of life, all parts of the cotton plant are pretty useful, but the one that matters to the shoelace manufacturer (in fact, to anyone who wants to turn cotton into money) is the seedpod, which is roughly the size and shape of the cotton balls we keep in the bathroom and is responsible for contributing several hundred billion dollars to the world’s economy every year. The pods—the bolls—are where the plant grows something that looks like hair: fibers a couple of inches long. Since those hairs have to be spun into yarn, the plants that had the longest ones—“long-staple” cotton—were the most popular ones for thousands of years until a onetime tutor from Massachusetts named Eli Whitney invented his first cotton gin in 1794.
Whitney’s invention—hooks attached to a rotating cylinder next to a wire screen—wasn’t something anyone told him to create. His moment of revelation—he watched a cat try to pull a bird through a wire fence, leaving a bunch of feathers behind—came because he realized that the short-staple cotton of Georgia and South Carolina would be worth a lot more money if someone could separate it from its seeds.