9076660069

7/31/2019 9076660069

1/122

7/31/2019 9076660069

2/122

COMMON-LAW

CONSERVATISM

7/31/2019 9076660069

3/122

7/31/2019 9076660069

4/122

COMMON-LAW

CONSERVATISM

RUBEN ALVARADO

n A Exercise In Paradigm-Shifting

e n a r c h h n o l o g o v

7/31/2019 9076660069

5/122

Copyright 2007 Ruben Alvaradoisbn-13: 978-90-76660-06-6

www.wordbridge.net

7/31/2019 9076660069

6/122

Table of Contents

Foreword ..................................................................... vii

Introduction ..................................................................1

1. Overview ...................................................................9

2. Common-Law Politics ...........................................23

3. Common-Law Economics ...................................39

4. Common-Law Religion .........................................65

5. Conclusion ..............................................................91

Appendix I ..................................................................95

Appendix II .................................................................99

Bibliography ..............................................................103

Index ..........................................................................107

7/31/2019 9076660069

7/122

7/31/2019 9076660069

8/122

Foreword

This book, as the subtitle states, constitutes anexercise in paradigm-shifting. It is a book for think-ing conservatives who are willing to dig down andexamine the fundamental presuppositions upon

which they base their cultural and political philoso-phy. As such, it is not a leisurely read, nor is it meantto be. It is to be hoped that the reader will perseverein reading the book in its entirety. There may betimes when a position is laid out which contradictsthe readers own previous understanding. In fact, I

would be surprised if that were not to happen. My request is that the reader continue to read theentirety of the book, for it is in its entirety that thebook stands or falls: in this case, the whole is greaterthan the sum of the parts, and every part has a roleto play in explaining the whole. The goal remains thesame for us all: ordered liberty, liberty under law.

Aalten, July 6th, 2007R.C.A.

7/31/2019 9076660069

9/122

7/31/2019 9076660069

10/122

1Kirk, The Conservative Mind , p. 5.2Kirk, The Conservative Mind , p. iii.

Introduction

Fifty-four years ago a young man by the nameof Russell Kirk published a book that shook the lit-erary, academic, and political world, not so much forits radical ideas as for its lack of them, and beyondthat, for its reassertion of a claim to intellectualstanding for a set of ideas known precisely for theirrejection of the radical and revolutionary. For a long time conservatism that set of ideas of which he

wrote had been in abeyance, if not politically atleast intellectually. When such is the case, the out-

ward eventually comes to conform to the inward;indeed, such had gradually yet inevitably come to bethe case here, conservatism being all but eliminatedfrom the institutions of public life. In the midst of that decline Kirk himself labeled it a 150-year-long rout1 the young author recaptured the vision of amoral order rooted in tradition, in usage, in historicaldevelopment, and beyond that with a basis somehow not in the things of Earth but in those of Heaven.Such ideas, as startling as they were antique,2

caught the liberal intelligentsia by surprise. The dan-gerous thing about this particular book was its rela-tive lucidity: conceivably some readers might under-stand it; and at that prospect, there shivered the peo-ple whom Gordon Chalmers, in those years, called

Russell KirksThe Conservative Mind

7/31/2019 9076660069

11/122

2 common-law conservatism

3Kirk, The Conservative Mind , p. iii.4Kirk, The Conservative Mind , p. iii.

the disintegrated liberals.3 Its message reignited a political movement.

Conservatism since then has grown from a edgling,loose association of somewhat like-minded citizensto a powerful presence on the political and mediascene. But Kirks original vision did not gain a simi-lar foothold. To be sure, conservatism nowadays, atleast for the vast majority of those who claim thetitle, rests on notions of individual liberty, self-reli-

ance, limited government, and belief in God. Kirk,however, went further: in the footsteps of EdmundBurke, whom he (rightly) considered to be thefounder of the modern conservative movement,Kirk championed the notion of a social order for

which custom, convention, constitution, and pre-scription are the sources. 4 And this was no throw-away phrase for him. Echoes of a prescriptive con-stitution run throughout the book, which put theemphasis on a Burkean critique of the natural-rightsphilosophy; this latter, said Kirk echoing Burke, lay at the heart of the radical, revolutionary movementsbeginning with the French Revolution.

Such is not the vision of many a contemporary conservative. Rather, for him (or her) what seems topredominate is a common allegiance to the countrysfounding documents, namely the Declaration of In-dependence and the US Constitution. In particular,the Declarations insistence (We hold these truthsto be self-evident) that all men are created equal,that they are endowed by their Creator with certain

Kirksconservatism atodds withmodernconservatism

The Declaration

of Independenceas theconservativeMagna Carta

7/31/2019 9076660069

12/122

Introduction 3

unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness is endearing to them;

moreover, it is where conservatives hang their hats when it comes to key issues such as rights to life,liberty, and property. For it is in order to securethese rights that Governments are institutedamong Men, deriving their just powers from the con-sent of the governed, That whenever any Form of Government becomes destructive of these ends, it is

the Right of the People to alter or to abolish it, andto institute new Government, laying its foundationon such principles and organizing its powers in suchform, as to them shall seem most likely to eff ect theirSafety and Happiness. The Declaration, then, is the

American Magna Carta, the creed of limited govern-ment and self-reliance, the bastion to which all con-servatives resort in times of political conict and cul-ture war. And it is situated squarely within thenatural-rights tradition.

The US Constitution contains no such wingedlanguage; in fact, it contains no philosophical lan-guage at all. Its preamble, while majestic in its way,still contains no statement of principle beyond thatof an implied popular sovereignty. Some have seenin this a contradiction with the Declaration, for theone speaks of rst principles, the other knows noth-ing of them. Although they are sometimes referredto as components of Americas organic law, evenso only the Constitution has undisputed binding legalforce. Nevertheless, the moral weight of the Declara-tion is indisputable, and it is its echoes that made Lin-colns Gettysburg Address into the second most fa-

The Declarationof Independenceprovides

Americas moralcompass

7/31/2019 9076660069

13/122


5Kirk, The Conservative Mind , p. 27.

mous American political statement: Four score andseven years ago our fathers brought forth on this

continent a new nation, conceived in Liberty, anddedicated to the proposition that all men are createdequal.

Where did that leave Kirks conservativemind? In a decided quandary: for he spends a gooddeal of time explaining the American Revolution notin terms of the natural rights which so prominently

accompanied its emergence but in terms of the pre-scriptive rights of Englishmen, to which the colo-nists were entitled but of which they were being de-prived. For: Burke disavowed a great part of theprinciples of Locke, the official philosopher of Whig-gism. The theories of Locke were inherited by suchdiverse legatees as Rousseau in Geneva, Price in theOld Jewry, Fox in St. Stephens, Bentham in his li-brary, and Jeff erson at Monticello; but from among the general ideas of that philosopher, conservatismafter Burke retained almost nothing but Lockes con-tention that government originates out of the neces-sity for protecting property. 5 And: By and large,the American Revolution was not an innovating up-heaval, but a conservative restoration of colonial pre-rogatives. Accustomed from their beginnings to self-government, the colonials felt that by inheritancethey possessed the rights of Englishmen and by pre-scription certain rights peculiar to themselves. Whena designing king and distant parliament presumed toextend over America powers of taxation and admin-

Kirks view of the AmericanRevolution

7/31/2019 9076660069

14/122

Introduction 5


istration never before exercised, the colonies rose to vindicate their prescriptive freedom.6 This is to

anticipate the argument of chapter 2, and so cannotbe explored more deeply; suffice it to say that Kirksconservatism here, at the foundations, con icts pro-foundly with the vast majority comprising the move-ment which he helped initiate.

In this, the conservatives dedication to liberty,ordered liberty, liberty under law, remains unques-tioned. What is to be questioned is precisely the ra-tionale. Is the 18th century notion of natural rights asenshrined in these statements truly the only soundbasis for securing the liberty conservatives covet? Isit truly the appropriate means to secure the Bless-ings of Liberty to ourselves and our Posterity, as thepreamble of the Constitution puts it?

This book will argue that it is not, and in fact itconstitutes something of a betrayal of the conser-

vative mind so eloquently brought back to life by Kirk. In fact, it will argue that the notion of naturalrights not only has opened the door to a rampantliberalism, but has closed the door to the only truly sound basis for liberty, and beyond that, has blockedeven the capacity to grasp the issue involved: thatliberty in fact is of an historical, and therefore of anexclusive, character.

Which leads to the qualier common-lawthat I have added to the term conservatism.Common-law conservatism would understand thatliberty is not a pre-existing condition to be preserved

Natural rights asufficient basisto secure liberty?

It is not; rather,it is contributing to the loss of liberty

Liberty andcommon law

7/31/2019 9076660069

15/122


7Liberty, Burke knew, had risen through an elaborate anddelicate process, and its perpetuation depended upon retaining those habits of thought and action which guided the savage in hisslow and weary ascent to the state of civil social man. Kirk, The Conservative Mind,p. 21.

by civil government, to which all are entitled simply by virtue of their existence, but rather a birthright, an

inheritance, an heirloom. It is the product of centu-ries of labor within the context of speci cally West-ern civilization.7 Nor was its development any sort of blind process; it was the fruit of the deliberate em-phasis on establishing a civilization upon fundamen-tal principles both theological and judicial. Westerncivilization is Christian civilization, but it is also Ro-

man civilization, which explains why law could beone of the deciding criteria in its denition. The

Western emphasis on law, and specically on thenotion of a common law, is what underlies thedevelopment of its unique heritage of liberty. In theinexorable course of history, this common-law tradi-tion now maintains a precarious existence only in the

Anglo-Saxon countries, and even there (witnessGreat Britains dreary apostasy) it is embattled andendangered.

In fact, this struggle is what conservatives in-stinctively understand to be underlying the politicaland cultural struggles currently under way betweenRight and Left in America. Conservatives understandthat America stands for something diff erent than

what is on display in the rest of the world, especially as that rest of the world manifests itself in interna-tional organizations such as the United Nations; and

Common law and the culture

war

7/31/2019 9076660069

16/122

Introduction 7

8Kirk, The Conservative Mind , p. 5.9Whose Justice? Which Rationality? (Notre Dame, IN:

University of Notre Dame Press, 1988 ), p. 8.

that that something diff erent needs to be protectedand preserved in the face of incessant attacks from a

supposedly progressive global intelligentsia. This struggle is not one in which natural rights

forms a bulwark against some other philosophy, whether it be utilitarianism or some strain or other of post-modernism. Far from being a bulwark, the phi-losophy of natural rights is a weak reed at this junc-ture in history. We need to recover the category of

common law in both its dimensions historicalgrowth and universal force. For only then shall wesee clearly enough to challenge the hegemony of globalist universal jurisdiction. Until then, we willhave to be content with muddling along.

This essay, then, picks up where Kirk left off .It too is a criticism of conservative thought, 8 widely divergent though its scope and method might be.

Alasdair MacIntyre once wrote that Burke theorizedshoddily9 and in this context the same might be saidabout Kirk: for he never quite gets around to de n-ing what he means by prescription other than thatit pertains to something old, something grown,something with historical roots. How is such to berescued from the clutches of a base reaction or, even

worse, a utilitarianism, which justies things not onthe basis of absolute value but in terms of the inter-ests they serve? This points to the question of thetranscendent, which likewise Kirk never really both-

The imperativeof recovering thecommon law

Picking up where Kirk leftoff

7/31/2019 9076660069

17/122



ers with dening other than referring, in good Angli-can fashion perhaps, to vague notions of religiosity.

And the role of economics, which for many conservatives serves as a touchstone for determining onescommitment to liberty Kirk is ambivalent here,defending private property but scolding Burke forseeming to have ignored economic inuences spell-ing death for the eighteenth-century milieu quite sosurely as the Social Contract repudiated the eighteenth-century mind.10 In these areas and perhaps more, Iintend with this book, indeed, to pick up where Kirk left off , to answer questions he left unanswered, clearup ambiguities he left behind; to provide conserva-tism with a defensible intellectual foundation, andmore than that, with a platform from which it mightsuccessfully take the attack to the enemy. And all of this antiquated though it may sound in the spiritof Christian charity.

7/31/2019 9076660069

18/122

11The standards of law and the institutions of the statediffer across different countries and times and, being the work of man, everywhere and of necessity contain bad as well as good.

There is indeed however something higher, something universal,at work in all creations of law and the state, which purposes to beconsummated in all of these, the consummation or lack thereof amounting to the superiority or poverty of the same: that inwardunchanging essence of law and state. Now jurisprudence is thescience of law and state as it exists in a particular time under aparticular people. From this stems the requirement for a higherscience, having as its object this inner unchanging essence of law and state. It may be called the doctrine of law and state . Stahl,

1. Overview A General Theory of the Common Law

I will rst provide an integrated exposition of the unique common-law order, a necessity properly to frame the discussion of politics, economics, andreligion in subsequent chapters.

The common law is a complex phenomenon,having various aspects, each of which conditions anddepends on the other aspects; even so, it is a uni edentity.

It nds expression, rst and foremost, in anoverarching law-order, a sort of natural law provid-ing the principles undergirding all positive law-or-

ders. This common, universal law-order does notexist in a vacuum, or as a sort of Platonic idea tran-scending the legal systems of the nations, but ingreater or lesser degree is interwoven into each of them. In this sense the common law is the samething as what Stahl referred to as the doctrine of law and state.11

Common law isa complexphenomenon

with variousaspects

It is a universallaw finding expression in thelaw of the nation

7/31/2019 9076660069

19/122

10 common-law cons ervatism

Principles of Law , p. 1.12Common law ( lex communis ) has been naturally implanted

by God in all men. It is commonly called the moral law ( lex moralis ). In this common law (jus commune ) is set forth for allmen nothing other than the general theory and practice of love,both for God and for ones neighbor.. Christ set forth twoheadings of this common law. The first heading pertains to theperformance of our duty immediately to God, and the second to

what is owed to our neighbor. Proper law ( lex propria ) is the law that is drawn up and established by the magistrate on the basis of

common law ( lex communis ) and according to the nature, utility,condition, and other special circumstances of his country. Itindicates the peculiar way, means, and manner by which thisnatural equity among men can be upheld, observed, and cultivatedin any given commonwealth. Therefore, proper law (jus proprium )is nothing other than the practice of this common natural law (jus naturale ) as adapted to a particular polity. It indicates how individ-ual citizens of a given commonwealth are able to seek and attainthis natural equity. Whence it is called the servant and handmaidenof common law (jus commune ), and a teacher leading us to theobservance of common law. Johannes Althusius, Politica,.19,20, 22, 30.

13 This is the theme of my book A Common Law: The Law of Nations and Western Civilization.

This common law stands above sovereignty and conditions sovereignty. All sovereign polities are

called to implement it in the positive legal ordersthey shape and maintain.12

The opposite of the common law is the civillaw, which is formed by absolute law-creating sover-eignty, and is the creature of sovereignty. In thecommon-law order, sovereignty is the servant of thelaw and exists to implement the law. In the civil-law

order, sovereignty is the creator of the law; law existsto implement the will of the sovereign, and in fact is the will of the sovereign.13

There are thus two, polar-opposite forms of -

It stands oversovereignty, notunder it

The opposite iscivil law

7/31/2019 9076660069

20/122

Overview 11

sovereignty, corresponding to the two forms of law.Limited sovereignty recognizes a society of pluralistic

authority structures, and mediates the relationshipsbetween them. Its goal is the formation and promo-tion of civil society. Absolute sovereignty recognizesno authority structures it does not itself create andcontrol. It strives to create not a society, but an orga-nization.

The common law so conceived inspired the

law-order developed over the course of centuries by Western Christendom as the corollary of limited sov-ereignty. It was once shared, in greater or lesser de-gree, by all Western polities. Especially since theFrench Revolution, this law-order was superseded onthe European continent by the civil law, the productof absolute sovereignty and its lawmaking eff ort of codication. This has led to the formation of two

Western legal traditions, the common-law and thecivil-law traditions, the common-law tradition carriedon by the Anglo-Saxon countries, the civil-law tradi-tion carried on in the continent, the vehicle being theFrench Revolution.

This development is therefore a product of the18th and 19th centuries. Previously, there was a funda-mental unity among the legal systems of the Anglo-Saxon and continental countries of Western Europe,a unity the sight of which has been lost by reading back into history these later developments. Certainly,there were major diff erences, but those diff erencescannot be used as an excuse to ignore the fundamen-

Common law =

limitedsovereignty

Civil law =

absolutesovereignty

Common law the basis of the

Western legaltradition

Anglo-Saxon law

the loneremaining exemplar of common law

7/31/2019 9076660069

21/122


14 This theme calls for a book-length exposition. In themeantime, regarding the relationship of Roman and English law one may consult BrycesStudies in History and Jurisprudence , LeonisFreedom and the Law,McIlwains English Common Law (cf. alsohis Constitutionalism: Ancient and Modern ), for starters.

15Stahl, Principles of Law,ch. 4: The Popular Character of Law, pp. 79ff.

tal unity.14

As the common law calls for limited sover-

eignty, it calls for multiple sovereignty. The basis of this order of multiple sovereigns is the nation. 15 Na-tions have the calling to establish positive legal or-ders, each incorporating the principles of the com-mon law. In so doing, each nation establishes its ownbranch of the common law, and this national law isthus also its common law.

Therefore, there is no contradiction betweenthe universal law-order and national sovereignty. Atruly universal law-order in fact requires multiple sov-ereigns, because only then can it retain the criterianecessary to that universality. A universal sovereign,on the other hand, of necessity subordinates all inde-pendent activity to its own will, and cannot abide by

any independent authority; it therefore can neversubmit to an all-encompassing order which it itself does not control and, since it can never subjecteverything to its will, there will always be unresolvedconict, never unanimity. Today this tendency is evi-dent in the quest to establish global jurisdiction forinternational organizations universal jurisdiction.Suchis the fulllment of the civil-law tradition.

But the common law, which stands oversover-eignty, conditions it and restricts it to the

Seat of common-law sovereignty:the nation

Seat of civil-law sovereignty:

worldgovernment

Common law integratesindependentactors

7/31/2019 9076660069

22/122

Overview 13

maintenance of an order of freedom and equality fornon-sovereign, private entities. It is thus universally

integrating.In this law-order, sovereignty serves toimplement the principles of universal law in the par-ticular legal order of the nation.

The expression of the common law in the lifeof the nation is the regime of private law. Private law is the law of liberty and equality. In it, legal personsare equals; with it, there is no respect of persons. It

does not subordinate legal persons to a higher orderor purpose, but allows them to pursue their ownpurposes; it integrates these persons as equals, coor-dinating them over against each other rather thansubordinating the one to the other or treating themas subordinates of a greater whole. It thus strives notfor an order of monolithic organization but one of a

plurality of associations.In a common-law society, there are therefore a

plethora of legal persons associations, and individ-uals through associations pursuing independentgoals, coordinated in terms of the integrating privatelaw. Each of these associations in turn has an inter-nal order governed by the principle of distributive justice , in which distributions are made rather thantransactions, in which the members are apportionedshares and responsibilities, rights and duties, in ac-cordance with the administrative will.

These associations are both private and public,ranging from the family to corporations, clubs, foun-dations, and then also to public communities such astowns, cities, and states. They all are governed by internal laws. Outwardly, they are coordinated andintegrated with other associations in terms of private

Private law is theexpression of common law

within the nation

Internaldimension of associations =distributive justice

Externaldimension of associations =commutativejustice

7/31/2019 9076660069

23/122


law. The common law qua private law integratesthese activities in terms of the principle of commutative

justice .It is of the utmost importance to realize both

the diff erence between distributive and commutativejustice, and the mutuality thereof. The besetting sinof left and right in the modern age has been to sub-ordinate and even subsume the one principle to theother, leading to collectivism on the one hand and

individualism on the other. The concept of justice is fundamental here,

and requires closer attention. The classic denition isrendering to each his due, ensuring that what onehas coming to him, one actually receives. The Ro-man jurist Ulpians celebrated denition is: Iustitiaest constans et perpetua voluntas ius suum cuiquetribuens (Justice is the constant and perpetual willto render to each his due) but this would seem todene the just will rather than justice in itself.

Aristotle went further, rst making the impor-tant point that justice always concerns outward deal-ings with others rather than internal states of mindor mood justice therefore always involves relations.He then took the decisive step of dividing justiceinto the two forms of distributive and commutative .Distributive justice is exercised in the distributionof honor, wealth, and the other divisible assets of thecommunity, which may be allotted among its mem-bers in equal or unequal shares. Commutative jus-tice, on the other hand, supplies a corrective prin-ciple in private transactions.

The important thing to notice here is that

Mutuality of distributive andcommutativejustice

Closerexamination of justice

Ulpian

Aristotle

Transaction versus command

Thing versusperson

7/31/2019 9076660069

24/122

Overview 15

16The Morals of Markets and Related Essays , p. 103.

commutative justice is transactional justice. It is norespecter of persons; it strives to abstract the thing

from the person and focus simply on the justice involved in the transaction at hand. Distributive jus-tice, on the other hand, does not concern transac-tions but commands: it is realized when the com-mand takes the person into account in an appropri-ate manner, looking to the need or merit of the vari-ous actors. Commutative justice concerns the thing;

distributive justice concerns the person. Yet Aristotles distinction does not quite get to

the bottom of the issue. Which is, that what really isbeing distinguished here is two dimensions of associ-ation, one internal, the other external. As H.B. Actonpointed out, 16 distributive justice requires a distribut-ing agency to be set over the persons involved in the

distribution. So the parties are subordinate to a high-er decision-making authority. In commutative justice,the parties are coordinated over against each other inindependence, are equal rather than being subordi-nated in terms of a higher relation. Thus distributivejustice pertains to internal order, order within a partic-ular organization; commutative justice pertains toexternal order, order between organizations.

This understanding corrects the impressiongiven by an exclusive emphasis on the principle of methodological individualism. For there is no iso-lated individual standing over against society, in allhis autonomous glory. There is rather the citizen ,

whose functioning within the associationalism of the

Definitivedistinction:external versusinternal

Citizenship asfunction of pluralisticassociation

7/31/2019 9076660069

25/122


common-law order makes it go. The individuals re-lationships are mediated , precisely through the associa-

tions of which society is composed. The citizen isthe natural individual taking on the guises providedby the various associations of which he forms part.

The key to properly-functioning citizenship is re-sponsible membership in the various associations,some of which are natural and/or obligatory. Onesuch example is the family, into which all are born.

Another is the state, of which all are members (citi-zenship strictly speaking), with rights and responsi-bilities corresponding to that membership. For anassociation to remain healthy, its members must rec-ognize its authority over them, recognize their placein it, and pursue the shared interest of that associa-tion. In the state association, that shared interest is

the common good.Since the sovereign does not impose the law

but receives it, the common law in its guise of exter-nal private law is not imposed but rather issues forth,precisely as a function of the relations of thediff erentiated society. It results from the interactionof the independent loci of authority which are al-lowed to arise when sovereignty is exercised as over-sight rather than command. This common law there-fore grows with society; it expands as society diff erentiates. A primitive society lacks much in the

way of a common law because most relations areinternal to the associations of which it is composed;these associations are monolithic. It is therefore noaccident that primitive societies stand in isolationand have difficulty in maintaining open communica-

Spontaneousgrowth of common-law order

7/31/2019 9076660069

26/122

Overview 17

17Stahl, Private Law,p. 100.

tions with the outside world. They have little conceptof a universal law governing such relations.

Directly, the common law governs the rela-tions between associations, and between individualsto the degree that they act as legal persons outside of the boundaries of any particular association. Within associations it governs relations only indirectly, thatis, to the degree that internal aff airs impinge on thefunctioning of the common-law order. For example,

contracts establishing arrangements contrary to theinstitutions of the universal common law (e.g., polyg-amy, same-sex marriage) are impermissible.

Being a function of commutative justice, theserelations are of the order of transactions. Since asso-ciations pursue independent goals, they do not at-tempt to subordinate other associations, but only toobtain from those other associations resources whichthey might need the better to attain their own goals.

These transactions can take on numerous forms, andcan have numerous objects; they can however besummarized in the term obligation commitmentsto performance.

Although there are two basic forms of obliga-tion, contract and tort (Aristotle characterized theseas voluntary and involuntary, respectively), contractis its example par excellence.17 Contract establishes acommitment to some duty or performance. Con-tracts mainly involve the transfer either of goods orof services. In the case of goods, either a sale orsome form of lease is contemplated; in the case of

Common law only indirectly impinges oninternal law of associations

Common law aslaw of transactions

The core of

transaction:obligation andcontract

7/31/2019 9076660069

27/122


services, a commitment to do something or abstainfrom doing something.

Such obligation calls the concept of privateproperty into existence. Private property only comesabout in connection with these relations betweenlegal persons. The contracts which arrange for atransfer of goods require the concept of property asa presupposition. Property, in turn, presupposes theexistence of entities outside the owning group. The

concept of property has no signi cance within theholding community, only outside of it for every-thing within is held in common or in trust and issubject to the regime of distribution rather than ex-change. Further, property is all the goods and ser-

vices at the disposal of the group, thus not only ma-terial things but also the human capital, the capaci-ties of members capable of being put to pro tableuse and in demand on the part of those outside. Allof these can be leveraged. In the chapter oncommon-law economics this will be explored morethoroughly.

The common law as external private law devel-ops in terms of these inter-group arrangements, re-ciprocally inuencing their development and being inuenced by it. The point of contact of this devel-opment is the judiciary, the adjudicative branch of government. This is one of the main instrumentsthrough which sovereignty aff ects the social order.By rendering decisions in cases of dispute, the judi-ciary establishes and conrms valid forms of rela-tion, and of the components of relation. These juralrelations as they are sometimes known are rights ,

Private property as function of obligation

Common law developsthrough processof adjudication,issuing in rights

7/31/2019 9076660069

28/122

Overview 19

involving both the legal persons (individuals and as-sociations) and the legal objects (goods and services).

The common law as a universe of burgeoning rights thus develops in the service of a spontaneousorder. It facilitates relations between groups by bringing to bear the legal institutions which can me-diate those relations. These institutions include prop-erty, contract, tort or delict, due process of law, legalpersonality. They are not imposed, but rather grow

out of custom as sanctioned by the courts. However,they are implicit in the logic of the common law.Such relations will always be conducted through suchlegal institutions, wherever such relations arise.

In this process, the courts are determined by precedent and thus follow a given trajectory,although such determination is not rigid; they are

guided forward by the inner logic of the commonlaw as entailed in its capacity as a universal, integrat-ing legal order showing itself no respecter of per-sons. Here the common law reveals itself as generalequity. Therefore, courts operating in terms of cus-tom and equity as so dened act, in the issuing of decisions, as determinators of value, of the norms by

which society is ruled. They do so not by prescribing a law but by providing an interpretation which thengives to law and custom its boundaries and indicatesits path forward into the future. Decisions and prece-dents are the framework through which the commonlaw takes shape in a particular society.

The values of society are therefore fundamen-tally inuenced by the decisions issued by the courts.

The legal system takes shape upon this basis, andlegislation, if it is to maintain the legal order of the

Common law brings universalinstitutions tobear onindividualsituations

Common law,equity, valuation

Valuation as

social function

spontaneous notimposed

7/31/2019 9076660069

29/122


18Stahl, Principles of Law,p. 39.

common law, must respect this legal system andbuild upon it. In the civil-law approach, legislation

becomes omnipotent and takes it upon itself to re-place this customary order. In so doing it interruptsthe continuity of a society with its past and intro-duces an articiality and an uprootedness which hasa thoroughly pernicious eff ect on societal mores.

This is the process by which, in a common-law order, valuation takes place which is valid across thesociety. Valuation occurs through a process in whichan appeal is made to sovereign (or the sovereignsrepresentative) to adjudicate on a point of uncertainty. It is this decision which is decisive be-cause it then becomes binding on society at large; itbecomes law. And the law, as Stahl has noted, is theprimary, most immediate ethical measure for the ac-tions of men; 18 as such, it has a ripple eff ectthroughout society, in uencing its very moral ber,for better or for worse.

We can therefore establish as the fundamentalprinciple of the common-law order the following formula: the sovereign con rmation,under the leading of justice and in line with precedent , of (external) social value,in response to request, at the margin . This process imple-ments and generates the integrating universal valuestructure upon which civilization rests, which is thecommon law. The common law therefore bringsdown the higher law, which is Gods will for humansociety, into the life of the nation by means of theinstrumentality of sovereignty, which through a pro-

Social valuationoccurs at themargin

Comprehensiveformula of thecommon law

7/31/2019 9076660069

30/122

Overview 21

cess of spontaneous ordering overseen by the stategenerates the pluralist, diff erentiated, associationalist

order characterized by liberty under law, and upheldby individuals dedicated to the citizen ideal.

7/31/2019 9076660069

31/122

7/31/2019 9076660069

32/122

2. Common-Law Politics

As noted in the introduction above, contem-porary American conservatism is ruled by the idea of natural rights as incorporated in the Declaration of Independence. In contemporary debate, reference ismade to the natural right of life, the natural right of liberty, the natural right to pursue happiness, which,as the Declaration of Independence states, is the rea-son for which governments were instituted, and thereason why government should not make any lawsinfringing on such rights.

I should like to refer to this manner of think-ing as State of Nature Conservatism. For its rootslie in the social contract, state of nature approach toderiving the origin of government, as originally de-

veloped in the 17th century by Hugo Grotius and, with some modications, John Locke.

It is important to realize the background to thedevelopment of this school of thought. As far as

Grotius is concerned, that backdrop was the wars of religion rstly, the 80 Years War between Spainand the Netherlands, then the 30 Years War in Ger-many. Grotius was concerned to discover the basisfor the authority of government, for sovereignty,apart from divine right. The wars of religion, he wasconvinced, had made this venerable basis untenable,

for divine right required acknowledgment of a partic-ular religion, and thus precluded adherents of variousfaiths from living together in peace.

Governmentsinstituted tosecure rights

This is state of natureconservatism

Quest forneutral basis of government,beyond religion

7/31/2019 9076660069

33/122


Grotius felt he had discovered a more securebasis on the purely human plane of contract. Law, he

stated, was the expression of strict justice, and thusthe stuff of contract and property. And here, contractis even prior to property, for property itself, the divi-sion of the goods of the earth, was the result of hu-man agreement. And governments were formed inlike manner, by a primordial agreement through

which sovereignty was formed by the delegation and

in fact alienation of the right of the sword whicheach individual has from nature.

Locke adapted Grotius basic approach butchanged it in signicant ways. Firstly, he made prop-erty to be dependent not upon an hypothetical agree-ment but simply upon a natural right derived fromeach individuals own labor. That which an individ-ual appropriated or created by his own labor was by the law of nature his own (see page 42 below). Thus,property cannot be undone by agreement. Further-more, governments were formed by the delegationof the power of the sword, but this delegation didnot entail alienation. Every man retained the right of resistance, retained the right to bear arms, and in factthe governments power of the sword is simply de-rivative of this primordial right.

This line of reasoning would seem to providethe citizen with a solid rationale for insisting on lim-ited government and on the necessity for govern-ment to consult with its citizens and ensure that thelaws it passes and enforces correspond with the willof the citizenry. Furthermore, that these laws serveto protect these basic natural rights which in fact, at

Grotius: contractprecedesproperty,

sovereignty

Locke: property precedescontract,sovereignty

Seemingly adequatejustification forlimitedgovernment

7/31/2019 9076660069

34/122

Common-Law Politics 25

least in the Lockean approach as continued by theDeclaration of Independence, stand even beyond the

reach of the will of the people, are inalienable andsacrosanct, by virtue of being established by God,

whose will is prior to the will of any man, individualor collective.

There is a y in the ointment, however, at leastfor those who do not believe in human autonomy but in the primacy of Gods will and law, not only

for ones private aff airs but also for human life insociety. And it is this: the philosophy of naturalrights makes human nature into the source of law,

with Gods will only coming into the picture as being the source of that human nature. The keystone of the religious conception of natural rights is then thebiblical doctrine of mans being created in the imageof God. This image of God entails a range of obliga-tions on the part of government.

The key at this point is interpretation. Whatcomprises the range of obligations the government ischarged to uphold? The doctrine opens a Pandorasbox of conicting opinion and chaos precisely wheresettled legal foundations are required. If naturalrights are the source of law, then laws ultimately aresubject to the philosophical opinion of the court. Itis precisely at this point that Stahl directed his majorcriticism of this school of thought. The applicationof natural law in the courtroom is impermissiblelegally, is contrary to justice. Every man has the rightnot to be subjected to any other norm than those

which are established as the objective order of thecommon life, which are sanctioned by the ruling

Makes humannature into basisof law

This is no stablebasis for law

7/31/2019 9076660069

35/122


19Stahl, Principles of Law,p. 37.20Stahl, Principles of Law,p. 38.21Stahl, Principles of Law,pp. 99-101.

authorities, as the norms of positive law. 19 Natural-rights doctrine gives the judge a blank check regard-

ing his interpretation of the law, allowing him tostrike down any law he believes contradicts naturalrights. The rule of natural law is therefore in truthonly the establishment of the arbitrariness of every opinion regarding the common public order, it is theestablishment of the war of all against all.20

The attempt to integrate the concept of human

nature into the philosophy of law is praiseworthy,but it must be done properly. The history of the de-

velopment of the philosophy of natural rights dem-onstrates this. Jurists and theologians early on real-ized the importance of anthropology to legal philos-ophy, and developed the idea of subjective right,

which explores the role of the human subject in the

formation of law. Stahls summary formulation of the concept is worth quoting precisely for its con-ciseness:21

Accordingly, law in the subjective sense is theethical power which a man has over against othersin the sphere allotted to him by the legal order,by virtue of that order. Its essence is not merely the negative of allowance or the intransitive of freedom, but the positive and transitive of ethicalpower against others.

Law in the subjective sense, e.g., the right of mendue him in all his life positions, constructs, in

Human natureshould be takeninto account, butproperly

Concept of subjective right

7/31/2019 9076660069

36/122


that it is his own power inhering in him, a truecenter about which the entire external world(things, actions of others, etc.) is related as con-trolled object, and in accordance with which thecontent of legal norms is often determined. It istherefore a secondary principle of the legal order along-side the primary and absolute principle: the purpose ( JX8@H ) of life relations . As secondary princi-ple, however, it is always based upon this latter.Its own content and range is originally and essen-tially derived from, and the coherence of all therights of all men lies in, this objective higherprinciple.

There is therefore a law-conditioning principleinherent in human nature, rooted in mans being cre-ated in the image of God, stemming from his capac-ity to reason and choose, his capacity for ethical ac-

tivity. It calls for a sphere of activity to be establishedon his behalf within the legal order and protected by that legal order. The specic content of that sphereis more closely determined by the legal order in ac-cordance with the institutions of law (marriage, fam-ily, property, etc.).

Therefore, that a sphere of in uence is call-ed for regarding each individual human being is whatis put forward in the doctrine of subjective right; butthe specic content of that sphere is the province of positive law, to be determined in terms of the vari-ous factors of the human condition.

Now then, the Christian confesses a peculiarunderstanding of the human condition, one which isanthropological although cosmological as well: thehuman condition as fallen, corrupted, sinful. Thisfactor is of decisive importance to the development

Subjective rightestablishes theprinciple of personality inlaw

Specific content

is determined by positive law not nature

Christianunderstanding of human nature

7/31/2019 9076660069

37/122


of a legal order.Roman jurists, following in the footsteps of

Stoic philosophers, postulated an original goldenage in which all men were equal, all men were free,in which there was no war, no subjection, and noprivate property, no meum et tuum , mine and thine.

This was the age of the natural law. But there thencame the age of the jus gentium (law of nations),

which brought all of these things into being. This is

how Justinians Institutes (Book I, Title II, . 2 ) statesthe matter:

The Law of Nations is common to the entirehuman race, for all nations have established forthemselves certain regulations exacted by customand human necessity. For wars have arisen, andcaptivity and slavery, which are contrary to natu-ral law, have followed as a result, as, according tonatural law, all men were originally born free; andfrom this law nearly all contracts, such as pur-chase, sale, hire, partnership, deposit, loan, andinnumerable others have been derived.

The Romans therefore understood that a break

had occurred at some point in primordial history, abreak in which an age of innocence was followed by the age of division, subjection, property, slavery the various institutions of civilization as then under-stood. And it would seem from the above quotationthat they attributed that break precisely to these insti-tutions, anticipating Rousseaus argument.

The Christians knew better. The corruption inthe world was cause by mans fall into sin, by pri-mordial disobedience to God. The consequences

Golden Age inRoman law

Institutions of civil society

corruptedoriginalinnocence

Christian view:mans fall intosin is the root of corruption insociety

7/31/2019 9076660069

38/122


were clear, at least to Augustine, the patron saint of Western civilization, and Western theology in his

train. The fall into sin was what had given rise to thesubjection of man to man, both as punishment forsin and as a restraint on sins eff ects. Therefore the prior concept was not liberty, but authority: the recognitionthereof, and the proper exercise thereof. Hence me-dieval society knew little of abstract liberty, but rath-er of liberties: gradual, and graduated, release from

the baseline condition of subjection, resulting in thetypical hierarchical order progressing from serf toking.

The right of the fully free was, in the middleages, at bottom essentially the same as the rightof the partly free, whereas in antiquity freemanand slave stood in sharpest contrast to eachother, the one a person, the other a thing. In themiddle ages both were persons, and the rights of both had a similar legal structure. Each possesseda concrete bundle of rights, with corresponding duties. Diff erences were largely quantitative. Theunfree lived under the most widely varying laws,but even the lowest had some rights and werenot at their lords arbitrary disposal. Thoughbound to the soil, the villein had a claim to hisland and could not be separated from it; fre-quently he had the right only to be judged by hisfellow-villeins; and he could only be called uponto do a xed amount of labour in the elds. Sim-ilarly, those who were unfree but not bound tothe soil were only liable for limited dues inmoney and labour. It is characteristic of medievalfreedom that it is frequently mentioned inrelation to men who were in law either unfree oronly partly free; it is common to nd the rights

7/31/2019 9076660069

39/122


22 Tellenbach, Church, State, and Christian Society,p. 19.

of ministeriales , censuales , or cerocensuales describedas libertates.22

In such soil sprouted the constitution of lib-erty. Feudalism provided the grounding in authority that incipient Western nations needed to progress inliberty. Only in this manner could mans basic cor-ruption and sinfulness be kept in check, allowing thedevelopment of subjective right, the ever-expanding

sphere of inuence which each individualpossesses as a potentiality to be actualized. The actualization of this potentiality into the

concrete shape of legal personality, legal capacity,citizenship, was the work of sovereignty. Kingship,in which sovereignty found expression, is what en-abled feudal society to move forward into a proper

property-based, common-law social order. This isobvious in a country like England, where the kingsauthority for the most part was above dispute, and

where his writ ran right across the isle. Matters werediff erent in the Holy Roman Empire, where the em-peror was relatively powerless to impose his writ atall. But this conrms rather than obviates the thesis

proposed here. With the burgeoning associationalismof Italy and the other member regions of the Holy Roman Empire, the towns, the centers of thatassociationalism, came to the emperor for legitimiza-tion, and it was his approval, his grant of rights, im-munities, privileges, and charters, which created thepublic-legal framework of authority which could sup-

port a complexifying, diff erentiating social order.

Feudalism asrudimentary form of liberty

Sovereignty the vehicle forrealizing liberty

7/31/2019 9076660069

40/122


Roman law facilitated this transformation. Itlled in the gaps inevitably left where a property-

based society with its emphasis on individualismemerges in the midst of a feudal society with its col-lectivism. Essentially, the collectives were shrinking

while the individuals were multiplying, resulting inthe formation of new forms of association to accom-modate the otherwise free-oating individuals. Themanors themselves were being transformed from asystem of servile to one of freehold, or at least copy-hold, tenure, their monolithic introversion being bro-ken up and replaced through an openness to an inte-grating, interdependency-shaping world. Roman law helped shape the institutions of private law regarding external relations between these associations; indige-nous law maintained and developed the shape of theassociations internally (see further, page 85 below).

The legal order itself, developing through theinterplay of courts, sovereigns, and jurists with theirburgeoning commentaries, became something unique in the unity it displayed in the midst of diver-sity. This Ius Commune was formed out of the variousmaterials of the Western legal tradition, dominatedby the utriumque ius , the one-and-the-other Romanand canon law, the degree students of law obtainedat the culmination of their studies, but also including indigenous customary law, feudal law, manorial law,municipal law, territorial law, admiralty law, and theLaw Merchant.

This law has been greatly misunderstood. Itsrole has been seen chiey as a subsidiary form of positive law, and therefore its importance has been

Roman law supplied thematerial for

generating private law

Formation of the Westernlegal tradition

Common law asgeneral equity of

Western legalsystems

7/31/2019 9076660069

41/122


23 This is the point Manlio Bellomo makes in his importantbook The Common Legal Past of Europe,1000- 1800.

de-emphasized, in tandem with the tendency to de-emphasize the importance of the Holy Roman Em-

pire simply because the lack of direct political poweron the part of the Emperor, along with the obviousdatum that most of the countries in Europe wereindependent. But this is to misconstrue its role,

which was never to provide a direct, positive legalorder, but to provide an atmosphere, a way of think-ing, a form of general equity akin to Stahls doc-

trine of law to be used to assist in the formation of positive law.23

This common law entered the life of the na-tions comprising Western civilization, pressing for-

ward to inspire positive legal orders incorporating the universal integrating principles of law, whereinprivate law strings the beads of an expanding

associationalism, allowing for the growth of diversi-ed society of communities, for unity in diversity.

The twin poles of this growth were custom and pre-scription, custom regarding law and prescription re-garding rights. The objective order of law developedprimarily through custom, thus spontaneously via thecourts; the subjective order of rights developedthrough the mechanism of prescription, whereby theliberties accrued through the passage of time arepassed on from generation to generation, in similarfashion to property itself, for having once been at-tained, such liberties could not be removed again

without cause, even if the original title deed were

Custom andprescription

7/31/2019 9076660069

42/122


24Corinne C. Weston, England: Ancient Constitution andCommon Law, in The Cambridge History of Political Thought: 1450- 1700,p. 377.

25Englands Present Interest Considered, in The Political Writings of William Penn,p. 26.

26the Corner-Stones of Humane Structure, the Basis of Reasonable Societies, without which all would run into Heaps andConfusion; to wit, Honest [sic rca ] vivere, Alterum nonlaedere, jus suum cuique tribuere, that is, To live honestly, not tohurt another, and to give every one their Right, (ExcellentPrinciples, and common to all Nations). Englands PresentInterest Considered, in The Political Writings of William Penn,p. 26.

no longer available for that is the signicance of prescription, to provide security of property in the

absence of title, thus rather as a result of continuouspossession.

This body of rights and liberties developedhistorically, and came to be viewed as an inheritance.

This can be seen clearly in England, in particular inthe 17th century struggles between constitutionalismand absolutism. Christopher Brooke, a leading mem-ber of the House of Commons in the early 17th cen-tury, put it this way: We hold our privileges by pre-scription and prescription is inheritance.24

William Penn ( 1644-1718 ) placed great stock inthis ancient constitution. The rights of Englishmen

were a great good: Above all Kingdoms underHeaven, it is Englands Felicity to have her Constitu-tion so impartially Just and Free, as there cannot wellbe any Thing more remote from Arbitrariness, andZealous of preserving the Laws, by which its Rightsare maintained.25 Basic to this constitution are fun-damental laws, of which the rst part is the generalprinciples of the common law of nations, 26 the sec-

Rights andliberties asinheritance

English ancientconstitution

7/31/2019 9076660069

43/122


27Englands Present Interest Considered, in The Political Writings of William Penn,pp. 26-27.

ond the rights of Englishmen:

But those Rights and Priviledges, which I call English,and which are the proper Birth-Right of Englishmen,and may be reduced to these Three.I. An Ownership, and Undisturbed Possession: That what they have, is Rightly theirs, and no Bodys else.II. A Voting of every Law that is made, whereby that Ownership or Propriety may be maintained.III. An In uence upon, and a Real Share in that Judica-

tory Power that must apply every such Law, which is the Ancient Necessary and Laudable Use of Juries: If not found among the Britains, to be sure Practised by the Saxons, and continued through the Normans to this very Day.

That these have been the Ancient and Un-doubted Rights of Englishmen,as Three greatRoots, under whose Spacious Branches the Eng-

lish People have been wont to shelter themselvesagainst the Storms of Arbitrary Government, Ishall endeavour to prove.27

The historical accuracy of Penns treatment is a mat-ter for debate, but that is a secondary matter com-pared to the fact that such an ancient constitutionhad in fact developed historically, and was in fact

what he claimed it was. English rights and liberties were precisely those which established the citizen inhis liberty and property, which enabled him to func-tion in the common-law social order, the order of private law. The constitution, the public legal order,existed to maintain and support this private legal or-

7/31/2019 9076660069

44/122


28Perry, Sources of Our Liberties,p. 318

der. This ancient constitution was brought over by

the Englishmen who founded the New World colo-nies of Virginia, Massachusetts Bay, and those whichfollowed. Americans were Englishmen, endowed

with the rights thereto accruing, and the Englishcommon law was the law of the land on both sidesof the Atlantic. This understanding was reected inthe rst of the American revolutionary documents,the Resolutions of the Stamp Act Congress of 1765, whichdeclared That his majestys subjects in these colo-nies, owe the same allegiance to the crown of GreatBritain, that is owing from his subjects born withinthe realm, and all due subordination to that augustbody, the parliament of Great Britain, and, concur-rently, That his majestys liege subjects in these col-onies are entitled to all the inherent rights and privi-leges of his natural born subjects within the kingdomof Great Britain.

Only 11 years later, however, the matter wasentirely diff erent. For in the Declaration of Inde-pendence, the actions of that monarch were de-clared to be in violation of the inalienable rights of man; they had as their object the establishment of anabsolute tyranny over the states. No mention wasmade of the rights of Englishmen. 28 The leavenof natural rights had permeated the American colo-nies, just as it had permeated all of Western civiliza-tion. Historical rights had given way to natural rights.On the continent, legal philosophy was being con-

English libertiescarried to

America

Declaration of Independenceabandons idea of inheritance

7/31/2019 9076660069

45/122


29Haines, The Revival of Natural Law Concepts , ch. II, sec. 2.

ducted entirely in this key.England, too, had undergone that in uence,

but its common law had not been subjected to thecodication eff orts the legal systems of the continenthad been. The inherent con ict between historic andnatural-rights doctrines had slumbered there be-neath the surface. It took the outbreak of the FrenchRevolution and Edmund Burkes celebrated re-sponse (published as Re ections on the Revolution in France)to burst the bubble of harmony. From thispoint on, the con ict between historic and naturalrights was out in the open for all to see.

In the Declaration of Independence, naturalrights likewise provided the legitimation of the novus ordo seclorum known as the United States of America,but in an entirely diff erent manner than with theFrench Revolution. The American revolutionaries

were not interested in overthrowing the received or-der; they were interested, rather, in maintaining theirreceived institutions, customs, and laws in the face of an overweening British monarchy and parliament.But undeniably there was more to the American rev-olutionary movement than prescriptive rights. Thenatural-rights-based theory originating in Grotiushad here borne signicant fruit: Many of the Revo-lutionary patriots believed with Thomas Dickinsonthat liberties do not result from charters; chartersrather are in the nature of declarations of pre-exist-ing rights.29 Yet, although both the American and

the French Revolution partook of the elixir of in-

Burke salvagesEnglish libertiesfrom a similarfate

American versusFrench naturalrights

7/31/2019 9076660069

46/122


30Rushdoony, This Independent Republic,p. 21.31 A Common Law.

alienable natural rights, the underlying constitutions which they established are of a fundamentally diff er-

ent sort. Post-revolutionary France had put paid toits feudal past; America, on the other hand, had car-ried out a conservative counter-revolution. 30

And so matters stand, at bottom, to this day. The American Revolution and its ideological prog-eny established a common-law regime upon the basisof natural rights. That inherently unstable mix has

led to the interminable con icts between judiciary and legislature, indeed judiciary and the Constitutionitself. On the continent, the Revolution led to theessential overthrow of historic institutions and theimpoverishment of law through the establishment of

Jacobin institutions of representation and bureau-cracy and incessant eff orts at the codi cation of law.It has led to the situation today in which two tradi-tions stand against each other, each claiming to rep-resent Western civilization, indeed world order: thecommon-law tradition, headed by the United States,and the civil-law tradition, headed by the EuropeanUnion. Having detailed this opposition in a previousbook,31 I refer the reader to that work for more in-formation in this regard.

The conict between these two traditions hastaken place mainly at the level of economics, whichconveniently is the topic of the next chapter.

Natural-rightsapproach leadsto judicialactivism

Codification

7/31/2019 9076660069

47/122

7/31/2019 9076660069

48/122

32Is it entirely coincidental that The Wealth of Nations waspublished in the same year, 1776, as the Declaration of Independ-ence?

3. Common-Law Economics

In the last chapter, we characterized contem-porary conservatism as State of Nature Conserva-tism. That holds true for politics; it also holds truefor economics. Contemporary conservatism is fun-damentally awed here in the same way that it is inpolitical theory. For there exists an economic coun-terpart to natural-rights theory, and it is saddled withthe same core problem-set. It seeks a reality behindthe purported facade of convention of civil society,private law, and sovereignty in the same way thatnatural-rights doctrine seeks to dissociate civil au-thority from life, liberty, and property.

The propensity of which I speak wasdenitively enshrined by Adam Smith in his epoch-making work, An Inquiry into the Nature and Causes of the Wealth of Nations.32 Smith sought to establish anew paradigm at the heart of the budding science of economics, in order to counter the in uence of mer-

cantile thought which to that point had dominatedpublic opinion and government policy.Smiths target was the ostensible mercantilist

equation of wealth and money. As he understood it,mercantilism pursued national wealth by accumulat-ing money in the form of bullion; this was behind

State of natureeconomics

Adam Smith thefounder

Smith ostensibly was attacking mercantilism

7/31/2019 9076660069

49/122


the age-old restrictions on the exportation of goldand silver, and led to the pursuit of a favorable bal-

ance of trade, in which exports exceed imports, thuskeeping gold and silver in-country.

Smith disputed this equation of wealth andmoney. In his view, the wealth of nations consistednot in money but in actual productive capacity, theability to produce goods and services. His goal wasto establish the primacy of free trade as a principle of

international relations, but in order to do so he deliv-ered a hostage to fortune. For, like the natural-rightstheorists who sought to refound rights and libertieson a basis beyond convention, Smith sought torefound free trade on the state of nature. As we shallsee, this would provide Karl Marx, and collectivistsafter him, with the basis for their own critique of

capitalism. With this theoretical basis, Smith posited false

dichotomies which at best confuse the issue. Firstly,in order to combat the alleged mercantilist positionto favor the producer over the consumer, he assertedthe primacy of consumption over production.

Consumption is the sole end and purpose of allproduction; and the interest of the producerought to be attended to only so far as it may benecessary for promoting that of the consumer.

The maxim is so perfectly self-evident that it would be absurd to attempt to prove it. But inthe mercantile system the interest of the con-sumer is almost constantly sacriced to that of

the producer; and it seems to consider produc-tion, and not consumption, as the ultimate end

Smiths actualgoal: introducethe state of nature intoeconomic theory

False dichotomy # 1: primacy of consumptionover production

7/31/2019 9076660069

50/122

Common-Law Economics 41

33Smith, An Inquiry into the Nature and Causes of the Wealth of Nations,Book IV, ch. 8, para. 49.

and object of all industry and commerce.33

But the whole notion of favoring one of theseover the other is chimerical. For consumption andproduction are two sides of the same relation, andthey each depend equally on the other: one cannotconsume without rst producing (or someone pro-ducing for him). Jean-Baptiste Say expressed the ideasuccinctly in what is known as Says Law: supply cre-

ates its own demand. Which is to say, supply, or pro-duction, and demand, or consumption, are two sidesof one and the same equation.

This truncation has beset economics eversince. It has led to the focus on distribution, and theefficiency thereof through the market process, whilerelegating production to the status of production

function, as a sort of black box, taken for granted.Smiths emphasis on the division of labor being lim-ited by the extent of the market is an expression of this xation. The size of the market certainly is animportant aspect, but only one aspect, in determining the division of labor.

One false dichotomy leads to another, to wit,

Smiths denition of wealth in which he opposesmoney to goods. Here again, Smith is attacking analleged mercantilist falsehood, the equation of wealthand money, to which he opposes productive laborresulting in goods as the true content of a nations

wealth.

Chimericaldichotomy; SaysLaw

Emphasis onconsumptionhas beseteconomics eversince

False dichotomy # 2: is wealthmoney or is itgoods?

7/31/2019 9076660069

51/122


34Smith, An Inquiry into the Nature and Causes of the Wealth of Nations,Book I, ch. 5, para. 2. Emphasis added.

The real price of every thing, what every thing really costs to the man who wants to acquire it, isthe toil and trouble of acquiring it. What every thing is really worth to the man who has acquiredit, and who wants to dispose of it or exchange itfor something else, is the toil and trouble whichit can save to himself, and which it can imposeupon other people. What is bought with money or with goods is purchased by labour, as much as

what we acquire by the toil of our own body. That money or those goods indeed save us thistoil. They contain the value of a certain quantity of labour which we exchange for what is sup-posed at the time to contain the value of an equalquantity. Labour was the rst price, the original purchase-money that was paid for all things.It was not by gold or by silver, but by labour, that all the

wealth of the world was originally purchased; andits value, to those who possess it, and who wantto exchange it for some new productions, is pre-cisely equal to the quantity of labour which it canenable them to purchase or command. 34

Money is merely representative of the underly-ing reality, which in Smiths view is the labor ex-pended in the production process. Labor is the

source of the value we attribute to marketable goods,and wealth is the sum total of such goods.

Smith here followed John Locke, who attrib-uted, as we have seen, the origin of property to la-bor. Locke did so because in his view labor was ulti-mately the source of economic value.

Money as veilover underlying material reality

Roots of classicaleconomics inLocke

7/31/2019 9076660069

52/122


35Locke, Two Treatises of Government,Of Civil Govern-ment, vol. II, chap. v, . 39-40.

[S]upposing the world given, as it was, to thechildren of men in common, we see how labourcould make men distinct titles to several parcelsof it, for their private uses; wherein there couldbe no doubt of right, no room for quarrel.

Nor is it so strange, as perhaps before consider-ation it may appear, that the property of labourshould be able to over-balance the community of land: for it is labour indeed that put the diff er-ence of value on every thing.35

Here again, Smith is simply adapting the Lockeanstate of nature understanding of civil society to eco-nomics. Money is something added to the economicprocess in order to facilitate it, but it is by no meansessential to it: barter could just as well take place,albeit certainly with attendant inconvenience.

Excepting Say, the labor theory of value wasshared by all the classical economists including KarlMarx, who in fact derived his critique of capitalismprecisely by assuming it. Essentially, since labor isthe source of all value, capitalists in their accumula-tion of pro t were appropriating surplus value whichby right accrued to the laborers. Marxism wouldeliminate this inequity by eliminating the capitalist, socreating the workers paradise.

In response, a new school of economicthought arose, the so-called neoclassical school,

which while sharing Smiths conviction of the impor-tance of free trade to the wealth of nations parted

Labor theory of value andMarxism

Response of neoclassicalschool

7/31/2019 9076660069

53/122


36Menger, Principles of Economics,ch. 3, . 2b, p. 107. Thetranslation is mine, from the original German text; theDingwall/Hoselitz translation (James Dingwall and Bert F.Hoselitz, trans., Principles of Economics,New York: The Free Press,1950; online edition, The Mises Institute, 2004 ) is simply tooimprecise to be of use here.

ways with him with regard to the doctrine of eco-nomic value.

The neoclassicists substituted the principle of marginal utility for that of labor as the basis of eco-nomic value. That is, they exchanged the objectiveapproach, in which value is considered to inhere inlabor, for the subjective approach, in which the ap-praisal of economic actors is made the source of

value. The meaning goods have for us, which we

call value, is merely transferred. Originally, only need-satisfactions have a meaning for us, in that themaintenance of our life and our welfare depends onthem; as a logical consequence, however, we transferthis meaning to those goods the disposition over

which we are conscious of being dependent upon forthe satisfaction of these needs. 36 Value is rooted in

the satisfaction a good yields, not in the labor usedto produce that good.

But that is as far as they got. Neoclassicists tooshared Smiths conviction regarding the primacy of consumption and efficient distribution via the marketas the subject matter of economics. For them as well,money was a superuous albeit useful addendum;true economic science involved getting behind theveil of money to the real substrate of concretegoods.

This agenda became explicit in the work of

Subjectivetheory of value

Neoclassicaleconomicsshares Smithsfocus on goods

Bhm-Bawerksdecision for stateof natureeconomics

7/31/2019 9076660069

54/122


37The Elements of Economics,v. I, p. 151. Macleod was a greatbeliever in highlighting via boldface print.

Eugen von Bhm-Bawerk, one of the founders of the neoclassic Austrian school of economics.

Bhm-Bawerk is interesting in that he penetrated tothe very core of the issue, only decisively to turnaside from the appropriate course so as to persist inthe error of state of nature economics.

The motivation behind Bhms investigation was righteous indignation. Economists had beensmuggling a new category into the ranks of economic

goods, namely rights and relations (German: Rech-te und Verhltnisse), in response to the veritable as-set explosion of multiplying forms of credit andgoodwill, forms which appeared exponentially tohave increased the total wealth.

The chief instigator of this revolution in eco-nomics was the Scot Henry Dunning Macleod.

Drawing upon his experience in the real world of banking and nance, Macleod had come to the con-clusion that it was not material goods at all that con-stituted the subject matter of economics, but therights to those goods. As Jurisprudence is the Sci-ence which treats exclusively about Rights, and notabout Things, so Economics is the Science whichtreats exclusively about the Exchanges of Rights ,and not the Exchanges of Things .37 The Westernsystem of private law had led to the multiplication of forms of rights, each exchangeable, each with mone-tary value in its own right; and for Macleod it wasabsurd that economists continued to ignore the exis-tence thereof.

Rights andrelations aseconomicgoods?

Macleodsubstitutes rightsfor goods

7/31/2019 9076660069

55/122


38 Elements of Political Economy,pp. 325-326.

Now the question at issue is no tri ing one. Theproperty aoat in this country in bills of ex-

change, bank notes, and bank credits alone, isupwards of 600,000,000, and the question is, Whether this is a real and independent value, oronly a myth? All Political Economists, from thedays of Turgot, maintain that it is nothing, amere nonentity, that it is of no more value thanthe paper it is written on. We, on the contrary,maintain in opposition to the entire body of writ-ers in France and England, from Turgot to Mr.

John S. Mill, that it is a real value, that is a sepa-rate and independent value over and above, andperfectly distinct from money or commodities,and we have the most perfect conviction that weare right.38

Macleod was aware that the criticism of his

view centered on the charge of double-counting, of asserting the existence of an economic good on theone hand and a separate right to that same good, anIOU of one form or another, as being itself likewisean economic good. Bhm-Bawerk expressed the ob-jection this way: One may summarize the condi-tions upon which Macleods doctrine is based in the

following two statements: 1 ) When A lends a dollarto B, B possesses in this dollar a corporeal good val-ued at one dollar. 2 ) In the right of obligation to thereturn of the dollar lent, A possesses an immaterialgood with a present value likewise approaching adollar, and which is not identical to the material dol-

Bhm-Bawerkscriticism of

Macleod

7/31/2019 9076660069

56/122


39Rechte und Verhltnisse,p. 11. Again, the translation ismine; the Huncke translation (Whether Legal Rights andRelationships are Economic Goods) is imprecise.

40Rechte und Verhltnisse,p. 11.41Rechte und Verhltnisse,p. 10.

lar.39 If this is true, says Bhm, then indeed, creditcreates new, previously non-existent goods, and the

goods-doubling power of credit would truly be a mi-raculous fact, albeit still a fact.40 But this cannot be;for it is to count the economic good and the right, of

which the economic good is an object, as two sepa-rate goods. Today there can be no doubt that thechief principle [der Hauptsatz] of this doctrine is er-roneous [ein Irrsatz]: the double-counting made here

with the credited object and the right directed to thisobject, or made with obligation and debt, is all tooobvious.41

Back in 1858, in his Elements of Political Economy ,Macleod had already retorted to criticism similar tothat made by Bhm in 1881:

Now, who can deny that the present value of adebt, payable at some future period, is a separateand independent value? It is a marketable com-modity, it may be bought and sold like a poundof sugar, and the money that is paid for it doesnot represent it any more than the money repre-sents any commodity that is exchanged for it.Now, what is a Bill of Exchange? It is nothing

but a debt payable three months after date, say;and that debt has a present and separate value,quite independent of the money that will ulti-mately pay it. Now, when we affirm that credit iscapital, we mean nothing more than this, that

Macleodresponds tocharge of doublecounting

7/31/2019 9076660069

57/122


42 Elements of Political Economy,p. 325.43 Elements of Economics,pp. 138-140.

operations take place where one or both sides of the transaction are debts. That sales of goods andservices occur, where a promise to pay formsone side of the transaction. A proposition, wepresume, which no one in his senses will deny.

We make no assertion involving the stupid blun-der that the same thing can be in two places atonce.42

Apparently, Bhm (and others) had been misreading

Macleod, asserting that he counted both the eco-nomic good and the right attached to that good astwo separate economic goods. This is not what he

was doing; rather, he was consistently making theattempt at replacing goods with rights as thematerial of exchange and thus of economics.

But Macleods language sometimes added to

the confusion. For example, in the Elements of Eco- nomics 43 he writes On the Three Species of Wealth or of Economic Quantities. These comprise, rstly,Material or Corporeal Things such as lands,houses, money, corn, timber, cattle, and herds of allsorts, jewelry, minerals, and innumerable things of this nature which can be bought and sold, and whose

Value is measured in money. Then comes Imma-terial Wealth , including personal services (A per-son may sell his Labour or Services in many capaci-ties for money, such as a ploughman, an artisan, acarpenter, or as a physician, an advocate, an engi-neer, an actor, or a soldier: and when he receives adenite sum of money for such Labour or Service its

Imprecision of Macleods

language

7/31/2019 9076660069

58/122


Value is measured in money , as precisely as if it were amaterial chattel thus, Adam Smiths labor, Says

immaterial products of labor and services, Seniorsknowledge. Thirdly, Incorporeal Wealth , consist-ing in vast masses of Property which exist only inthe form of abstract Rights, quite separate and sev-ered from any material substances, which can all bebought and sold, and whose Value can be measured in money , exactly like that of any material chattel.

Therefore there are three distinct Orders of Quan-tities which can be bought and sold, or exchanged:and therefore which satisfy the denition of

Wealth.Here Macleod lines up things, services, and

rights as three diff erent forms of wealth, instead of being clear that all three categories are forms of rights. The confusion becomes complete when heenumerates the forms of exchange that may takeplace:

1. The exchange of a Material thing for a Materialthing. Such as so much corn, cattle, or land forso much gold.

2. The exchange of a Material thing for Labouror a Service. As when gold or silver money isgiven as wages, fees, or salary for services done.3. The exchange of a Material thing for aRightas when gold money is given in exchangefor the funds, or a Copyright, or Bill of Ex-change.4. The exchange of Labour for Labouras when

persons agree to exchange one kind of Labourfor another kind of Labour.5. The exchange of Labour for a Rightas when

wages or salaries are paid in bank notes.

Lack of consistency interminology

7/31/2019 9076660069

59/122


44

Elements of Economics,p. 141.45 Elements of Economics,pp. 151-152.46cf. Bhm-Bawerk, Whether Legal Rights and Relation-

ships are Economic Goods, pp. 37f .

6. The exchange of one Right for anotherRightas when a Banker buys a Bill of ex-change, which is a Right, by giving in exchangefor it a Credit in his books, which is anotherRight.44

This is inexcusable. For in the same book, only ten pages further down, Macleod states, as quotedabove (p. 45 ), that it is rights, not things, which areexchanged, and which can be divided into three cate-gories corresponding exactly with the aforemen-tioned list: Corporeal or Material Property orRights , then Immaterial Property [or rights rca ], lastly Incorporeal Property [or rights rca ].45

The confusion of putting rights and objects of rights on a line is what led Bhm-Bawerk to launchhis criticism. It was not Macleod who fell into hiserror, though, but others who while professing to seethe error of Macleods ways nevertheless persisted intheir own.46 For his part, Bhm resolutely stuck withthe Smithian doctrine of goods, broadly understoodas the products of labor material things and per-sonal services as the substance of exchange, reject-ing Macleods rights-based approach absolutely.

For this reason Bhm failed in his attempt todevelop a satisfactory theory of interest, to which hedevoted two massive volumes. He simply could notcome up with an original rationale for, as Aristotle

Only rights areexchanged

Bhm rejectsrights in favor of goods

Bhm-Bawerksfailure

7/31/2019 9076660069

60/122


47 This is the subject of De Sotos important book, The Mystery of Capital.

put it, money begetting money, and was forced tomake interest a derivative concept, with prot-gener-

ating capital goods for him, the true underlying reality somehow being the source of it.

Since then, neoclassical economics as a wholehas failed to come up with a satisfactory theory ex-plaining either money or interest. This is due to itsprincipled decision to view goods as the proper sub-ject matter of economics, while consigning money,

indeed the entire sphere of incorporeal property,to a derivative category, nonessential to theory.

Keynes was aware of the problem, and in hisown way set out to x it: by turning it on its head.Instead of goods being original and money deriva-tive, he made money to be original and goods to bederivative. Money, which could be created ex nihiloby the government (truly a godlike entity in this re-gard) could of itself generate productive capacity.Keynes thus advanced a proposition reversing SaysLaw: to wit, demand creates its own supply.

The reality which Macleod perceived was thatthe universe of rights transforms and multiplies

wealth.47 The material substrate of wealth is not thesame thing as wealth, and without the panoply of rights through which the material substrate is medi-ated in an economy, that material substrate is leftunproductive, at a subsistence level, at least for themass of men. This is why tribal and feudal societiesanciently, and socialist societies in modern times,could never get farther than a minimal level of pro-

Neoclassicaleconomicsfailure

Keynessolution: money before goods

Macleodunderstood thatrights create

wealth

7/31/2019 9076660069

61/122


48

Heinsohn is a sociologist, Steiger and Stadermann areeconomists. Their work ought to earn them the Nobel Prize ineconomics someday. Beyond the works listed in the bibliography,the following should be consulted: first and foremost, the seminal

work: Heinsohn and Steiger, Eigentum, Zins und Geld: Ungelste Rtsel der Wirtschaftswissenschaft [Property, Interest, and Money:Unsolved Mysteries of Economic Science], fourth, revised edition.Marburg: Metropolis Verlag, 2006. Furthermore, Stadermann andSteiger, Allgemeine Theorie der Wirtschaft: Band 2 , Nominalkonomik[General Theory of Economics: Vol. 2, Nominal Economics],

Tbingen: Mohr-Siebeck, 2006; Stadermann, Das Geld der konom- en: Ein Versuch ber die Behandlung des Geldes in der Geldtheorie [TheEconomists Money: An Essay Regarding the Treatment of Money in Monetary Theory], Tbingen: Mohr Siebeck, 2002.

ductivity. The reality of the situation has only recently

been laid bare, in the work of Gunnar Heinsohn,Otto Steiger, and Hans-Joachim Stadermann. 48 Their

work demonstrates the truly unique character of theproperty regime. They show that property is not justthere: it is a quality attaching to things only within the legal context , the context of private law.

Heinsohn and Steiger for the rst time harness

the distinction between possession and property for thebenet of economic theory. This legal distinction isunavailable to economists who either are unaware of or who refuse to recognize the fundamental impor-tance of the legal sphere to economics. Possessionconcerns the actual goods and services, the level of use, while property concerns the invisible layer of titles and obligations enabled by the human will, ca-pable of obligating itself to future performances the basis for the entire regime.

Obligation serves a dual purpose, that of meeting

The property-based economicsof Heinsohn,Steiger, andStadermann

Distinctionbetweenpossession andproperty

7/31/2019 9076660069

62/122


49Stahl, Private Law,p. 95. Emphasis added.

needs for which things are not appropriate (services, works) but bey

Documents

9076660069