Part XI. The Institution of Douglass North

Chapter 29:
And Anyway the Entire Absence of Property is not Relevant to the Place or Period

In his book of 1999, Property and Freedom, the historian of Russia Richard Pipes ventures on an analysis of seventeenth-century English history with a similar pro-market purpose as North’s, whose guidance, alas, he acknowledges, à la Acemoglou.85 Like North and many other historians, Pipes correctly attributes the supremacy of the English Parliament to a long series of accidents in the provisioning of the monarchy. Fiscal crises, such as Charles I’s crisis over “ship money” imposed on non-maritime English cities, certainly did raise up the Mother of Parliaments, for which we praise God. But Pipes, like North, then slips into the claim, which we have seen is foggily seconded by a few economic historians themselves, that the constitutional innovations of the very late seventeenth century were somehow connected with the Industrial Revolution. Indirectly they surely were, by way of the resulting freedom of discussion that made first Holland and then England into lands of innovation. But North and Pipes (and Ekelund and Tollison and Wells and Wills and Acemoglou and others who keep springing up to offer evidence beside the point), by contrast, want to claim that an alleged perfection of property rights in the late seventeenth century improved incentives. Back to Max U and the constraints on his asylum/institution.

The reason Richard Pipes, though, falls into the error of overemphasizing the Glorious Revolution is not a Northian compression of chronology but an irrelevant comparison. Quite understandably, since Russian history is his profession, he has always in mind the dismal Russian case. True, Pipes depends on surprisingly elderly historical opinion for his allegedly widespread examples outside Russia of “patrimony” — that is, in Pipes’ usage, the literal ownership of the nation by the king, contrary for example to the history of China (except for the First Emperor or the early Mongol period or other and rare upheavals) or, for that matter, the history of the ancient Israelites. His references are centered on the 1920s, and likewise throughout his book for all manner of non-Russian facts.86 (He justifies his dependence on histories quite early in the professionalization of history with the surprising doctrine that historical knowledge does not advance.)87

But at least on Russia he can be taken without too many grains of salt. He argues persuasively that the development of private property was short-circuited in Russia by the Mongol invasion of 1237, which subordinated the princelings of Muscovy in the two centuries afterwards to the Golden Horde, called “Tartars.” When it first took direct control, the Horde governed from its camps on the lower Volga by absolute terror, as is the habit of conquering nomads, and brooked no countervailing powers or property rights. A Timur the Lame making pyramids of 70,000 skulls in Isfahan — who by the way damagingly sideswiped the Golden Horde in 1395 on the way to his own conquests — typifies nomad warfare, reintroduced in another key by the Germans and Japanese and the Russians themselves in the 1940s.

Pipes argues that the grand princes of Muscovy and their heirs after 1547, the tsars of all the Russias, learned “patrimony” from the Mongols. Without the Mongols the old commercial tradition of Novgorod would have triumphed, he says, as similarly bourgeois habits did elsewhere in Europe. But unhappily the bourgeois habits lost out, and instead in 1478 a warlike and property-despising Muscovy annexed Novgorod, and a century later Ivan the Terrible methodically dispersed its bourgeoisie. As the leading historian of early modern Russia, the late Richard Hellie, put it, “by 1650 Moscow [that is, the Tsar personally] had nearly complete control over two of the major economic factors, land and labor, and had substantial control over the third, capital, as well.”88 In early modern times the Russian state enserfed the peasants just when serfdom was eroding in Western Europe. The Law Code of 1649 repealed a statute of limitations on recovering runaway serfs (compare the year-and-day custom in the West — city air makes one free). The Code “legally stratified the rest of society,” Hellie noted, “thus giving the government control over nearly all of Russia’s labor.”89

“The rest of society” included its top. A mercantilist Peter the Great, and even an enlightened and physiocratic Catherine the Great, says Pipes, treated everyone in Russia from lowest to highest as in effect serfs. It was, as one aristocrat put it, “despotism tempered by assassination” (of Peter III, Paul I, Alexander II, Nicholas II). So long as the tsar survived the dagger or the pistol, everyone’s property was at his disposal. Acemoglou’s erroneous belief, acquired from North, that in Western Europe “economic institutions also ensured that the monarchs controlled a large fraction of the economic resources in society,” is correct for Russia — but nowhere else in Europe. Once William the Conqueror divided up the land of England among his followers, they owned it, though “of” the king. The aristocrat paid knight service, as the serf paid six capons, but knight and peasant owned the land, and bought and sold it with enthusiasm. Even the arrogant Prussian dukes-margraves-kings were limited by property and customary law. But a great Russian lord, however arrogant and French-speaking, was still merely of the “service” class.

The Pipes history of Russia fits smoothly with that of “the Steppe and the Sown” (as the title of a famous book in 1928 expressed it).90 Historians such as Peter Perdue (2005), William McNeill (1964), Owen Lattimore (1942), back to the Muslim historian Ibn-Khald?n (1377) — with the example of Timur literally before him — have emphasized the role played again and again by conquerors from the steppe.91 Perdue notes “that like good bank robbers, nomadic state builders went where the wealth was. As China centralized under a new dynasty [sometimes itself descended from the Steppe], a nomadic state often rose along with it.”92 The stolid agriculturalists of Mesopotamia or Rome or the Ganges Plain or China or the Indus Valley were repeatedly subject to waves of barbarians on horses (or from dry areas, camels) riding out of central Asia, with a nautical variation on the theme around the edges, such as the barbarous Sea People in the Eastern Mediterranean in the late second millennium B.C.E. or the barbarous Vikings in Europe in the late first millennium of our era.

Richard Hellie argued that Russia became in response a “garrison state,” a modern version of Sparta, partly because the remnants of the Golden Horde “raided Russian ceaselessly in a search for slaves. . . . Had Moscow not taken effective countermeasures, all its population would have been sold through the Crimea into the slave markets of the Middle East and the Mediterranean.”93 In 1942 Owen Lattimore wrote, again, that “the Manchu conquest of China in the seventeenth century was the last rush of the tide [he spoke in watery metaphors of a 'reservoir' of 'border nomads' sophisticated in the ways of both steppe and sown] whose ebb and flow along the Great Wall Frontier had been so important in working the mechanism of Chinese history.”94 Until the time of the disintegration of the Golden Horde and the decline of Mughal power in India and finally the conquest of the Mongols and other central Asian threats by the Qing Chinese — that is, until the coming of massed and disciplined gunpowder infantry — the wild horsemen ruled from time to time, and sometimes for quite a long time (Ibn-Khald?n reckoned their time as forty years). If they did not become conquered in economic ideas by the city-dwelling proto-bourgeoisie they had conquered, which was what usually happened, they brought the propertyless rule of the Steppe along with them. That is Pipes’ grim claim for Russia. The Russian tsar (called today “the president,” or sometimes the “prime minister”), he argues, owned everybody, all the way up to princes of the blood and arrogant oil millionaires. “Muscovy has tried to leave its despotism,” wrote Montesquieu. “It cannot.”95 Property there was no independence, as in the lands of the Sown it came gradually to be by immemorial custom.

The case of India’s Mughal emperors, ruling from 1526 until the British Raj, is instructive. They were descendents of Timur, and never lost the conviction, it is said, that having conquered northern and then all of India they owned it outright, lock, stock, and barrel. Mughal India was glorious in many ways. Yet innovation, except to serve the tastes of the Emperor and his present selection of favorites, had a thin market. South Asia, though in 1526 in many parts much more sophisticated economically than the Western infidels, remained poor while Europe began to innovate. The conventional view of the Mughals is that every citizen from highest to lowest was subject to having all his wealth taken in a trice — in order, say, to construct the Taj Mahal to commemorate the Emperor’s favorite wife. True, recent work has suggested that “earlier estimates of one-third to one-half or more [of national income flowing to the state are questionable]. . . thereby raising the issue of whether the Indo-Muslim state was, in fact, the crushing Leviathan that it has been made out to be. . . . There was . . . the growth of property rights in land.”96 And after all, Bengali textiles were the wonder of the eighteenth-century world.

* * * *

But all this interesting historical assertion, whether true or false or merely Memorable, is irrelevant to explaining a change in Europe 1600-1800, or 1300-1900. The sad Russian and Mughal cases teach us that private property is essential for human flourishing beyond the patriarch’s tent. They usefully warn against a socialism that analogizes to a whole nation an idealized family (and in practice often an abusive family) — such as Papa Joe Stalin, the pipe-smoking father of the nation. But in places like Holland and Britain and France in 1600 the private property of people was solid, and sold, and neither the father nor the mother of the nation could seize it without due process of law.

Pipes himself points out that for all the talk of the divine right of kings in Western Europe in the seventeenth century, no monarch west of Russia believed he literally owned his subjects. Thomas More in 1516 had one of his characters in Utopia complain that bad counselors tell the king “that all property is in him, not excepting the very persons of his subjects: and that no man has any other property, but that which the King out of his goodness thinks fit to leave him; . . . that . . . it were his advantage that his people should have neither riches nor liberty; since . . . necessity and poverty blunt them, make them patient, beat them down, and break that height of spirit.” But, he declares, “I should rise up and assert, that such councils were both unbecoming a king, and mischievous to him: and that not only his honor but his safety consisted more in his people’s wealth, than in his own; if I should show that they choose a king for their own sake.”97 He might have added that English kings were anyway subject to law, and the bad counsel was therefore an irrelevant wish for a patrimony not in the English cards. In 1649 Charles defended himself against the Rump Parliament in the trial for his life in 1649 by declaring, quite truly, that “pretend what you will [oh Parliamentarians], I stand more for their [i.e. the people's] liberties. If power without law may alter the fundamental laws of the kingdom [for example, by executing an anointed king], I do not know what subject he is in England that can be sure of his life, or anything he calls his own.”98 At his hour of execution he said again that English law protected property against anyone, King or Commons: “liberty and freedom consists in having of government those laws by which their life and their goods may be most their own.” Certainly in England, and even in “absolutist” France, private property was itself absolute against the king.

It is therefore misleading of Pipes to declare in the style of North, and contrary to his own evidence just assembled, that “thus, in the course of the seventeenth century, it became widely accepted in Western Europe that there exists a Law of Nature . . . [and that] one facet of the Law of Nature is the inviolability of property.”99 It is true that more people said it in the seventeenth and especially in the eighteenth century, for which we are glad. Saying matters. But Pipes himself shows that the idea and especially the practice was already many centuries old, in English law, in the writings of Aquinas, and, as he notes in the paragraph preceding his Northian and behavioral declaration, in those of Seneca of Rome. Pipes had just argued that even Jean Bodin, the influential French theorist of absolutism and of the divine right of kings, declared in 1576 that private property was a law of nature, secure against the grandest sovereign, citing Seneca to the same effect.100 Bodin posits no serf or service class owned by a Timur or an Ivan the Terrible. A Frenchman of the late sixteenth century was no item in the baggage of a propertyless nomad of the Steppe.

In some ways modern economies — with their gigantic governments spending half of national income, and regulating still wider fields of economic activity — create less, not more, security of property than a feudal economy with diffuse centers of power, or than an early modern state such as Stuart England with a less-than-impressive ability to tax. The fact is an historical irony on which Pipes and North and Harold Demsetz and I would doubtless agree. An American state armed with the doctrine of eminent domain and the power to tax incomes at combined rates of 35 percent, not to speak of unusual definitions of torture and the ability to tap telephones, and having a passionate desire to limit people’s consumption of recreational drugs, looks at least in the matter of state power more, not less, like the Muscovy of old than did, say, France in 1576. The economist Milton Friedman was fond of saying, “Just be glad you don’t get the government you pay for.”

To quote again the far-sighted Macaulay in 1830, against Robert Southey’s proto-socialism: Southey would suggest that “the calamities arising from the collection of wealth in the hands of a few capitalists are to be remedied by collecting it in the hands of one great capitalist, who has no conceivable motive to use it better than other capitalists, the all-devouring state.”101 But in Western Europe in 1200 or 1700 a right to property that protected in Lockean fashion against an all-devouring state was nothing new. Roman law had protected property very well, and the Roman state took little more than English Stuart’s shares of national income for its purposes, 5 percent.102 The Mughal state, by contrast, erected on a principle of patrimony that would look reasonable to a tyrannical socialist state nowadays, is asserted (we have seen that the assertion might be wrong) to have taken 50 percent.

Ownership anyway is not a modern idea and not an exclusively bourgeois idea, though the town-dwellers have worked most vigorously to extend the meaning of “property.” Feelings of private property are hard-wired into humans, or so anyone who has raised a two-year old would attest. Little Daniel needs to be taught to play nice and to share in a sweetly socialist way — his instincts are brutally selfish, the worst of capitalism, very much more interested in Mine than in Thine. The economist Herbert Gintis speaks of a “private property equilibrium,” noting that “preinstitutional ‘natural’ private property has been observed in many species, in the form of the recognition of territorial possession.”103 Indeed, a classic 1976 paper in evolutionary biology by John Maynard Smith and Geoffrey A. Parker spoke of an evolutionary stable strategy as “bourgeois”(following the marxoid assumption widespread among the clerisy of the day that so far as humans are concerned private property is a new and novel stage of history) if existing property among animals was used to settle disputes. A speckled wood butterfly, Pararge aegeria, intruding in a wood on a patch of sunlight on ground already the property of another speckled wood butterfly would be inclined by evolution to yield. Gintis makes the Smith-Parker argument more precise and brings to bear other evidence that animals and two-year old humans in fact have incentives to take a “bourgeois” attitude towards property, whether or not Leviathan enforces property rights.104 And repeatedly it has been observed that when property comes to matter — that is, when the beaver or the acre of land or the right to take water from the Colorado River becomes valuable enough that its misallocation would cause substantial social loss — even a communalist or tyrannical government will often start enforcing its privateness.105 It does so unless, indeed, it is under the influence of some anti-bourgeois rhetoric, such as the fierce personal loyalty of the Steppe horseman to his chief, or the collectivist, Romantic, post-Christian, and pseudo-familial dreams of nineteenth-century Europeans, bearing fruit in twentieth-century authoritarianism of der Führer or the General Secretary.

As an example of the scientific missteps in this literature, consider the famous “tragedy of the commons” on which in 1968 Garrett Hardin wrote (in aid, it should be remembered, of an authoritarian proposition usual in his time — and persisting still among radical environmentalists — that freedom to have a family is intolerable and that population policy should be, as he put it, “mutual coercion mutually agreed upon”).106 True, as Hardin asserted, if villages in Europe allowed the common fields to be overstocked, there would be a loss of efficency, because the sheep and cattle would tread down the grass, and eat up the early shoots renewing it. But the villagers in question, not surprisingly, understood the point as well as modern academics do, maybe even better, and to prevent the loss they introduced limitations (“stinting”). The loss from not stinting the commons would be gigantic at small numbers of grazers if, as Hardin assumes, each grazer acts as a Cournot oligopolist, that is, if he idiotically ignores the response of others when he puts an extra cow on the commons.107 Hardin admits that “in an approximate way, the logic of the commons has been understood for a long time, perhaps since the discovery of agriculture or the invention of private property in real estate.” Perhaps. And perhaps it was understood even among hunter-gatherers irritated by the overharvesting of deer by a competing tribe. Hardin’s sole empirical argument for the relevance of his posited régime of non-property-even-when-it-matters is that still “at this late date, cattlemen leasing national land on the Western ranges demonstrate no more than an ambivalent understanding, in constantly pressuring federal authorities to increase the head count to the point where overgrazing produces erosion and weed-dominance.” Of course they do: they are farming the government, not merely the pastures, and the public lands are therefore nowadays overgrazed. But in olden days, such as the days of open-field agriculture, the land was private or was regulated when it mattered. And in any case, as the political scientist Elinor Ostrom has shown repeatedly, people cooperate, too: they do not always defect from the common good, as assumed by Hardin.108 It is one of the main findings of experimental economics that people cooperate much more than the prudence-only model Hardin was using would imply. Anyone who troubles to examine local regulations or legal cases in the not-so-wild West, or in English villages in the fourteenth century, will find stinting enforced.109 Hardin, though an impressive scholar in some other ways, appears not to have looked into the evidence.

Likewise, if you look into the national and local regulations and legal cases in thirteenth century England you will find private property enforced — and never mind the alternative of “preinstitutional ‘natural’ private property” enforced by shame and ostracism that Gintis talks about. North, though an impressive scholar in some other ways, appears not to have looked into the evidence. The legal historian Harold Berman, whom North might have consulted, and on whom Pipes wisely depends, has no doubts on the matter: “Modern English, German, French, Italian, Swedish, Dutch, Polish, and other national European legal systems were initially formed in the twelfth and thirteenth centuries under the influence . . . of the new canon law. . . [and] of the discovery . . . [of] Justinian’s Roman law and of the parallel . . . development of systems of [law] . . . not covered by canon law,” such as the law merchant. The medieval foundations survived. “For example,” Berman goes on to say, “the elaborate rules of contract law and of credit transactions . . . survived successive economic changes and were an essential foundation of the laissez-faire capitalist economy that emerged in the nineteenth century.”110


One thought on “Part XI. The Institution of Douglass North

  1. don’t mistake a free and frank ehgaxnce of ideas and information with anger It is possible to disagree vehemently without malice intended. For example, consider our to-do from a week or two back where we ended was what’s the difference between reporters, journalists, and presenters?! Then this week you tee off on Glen Milne ’nuff said. At least he’s a lot more subtle than say, Greg Sheridan. But where do you draw the line and why do they all get to hide behind journalistic privilege’?@Deirdra says: it’s hardly just British shows that get ignored by Boxcutters Josh has said on numerous epidodes he’s not as interested in reviewing comedies as compared to drama, for example.(though anyone who’s read the *ahem* official GAT list could confirm that). Likewise sci fi get short shrift vs cop-shows, interview shows get reviewed not-at-all, and sitcoms get an automatic 3-star penalty. Australian shows get an automatic four-star bonus.Meh it’s their podcast, and they can do as they like with it. If we weren’t prepared to put up with their eccentricities, we wouldn’t listen. nd likewise, if we could deal with criticism, we wouldn’t actively post on the board

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