Knowledge And Decisions

The use of draftees by the army may similarly be rational from the standpoint of the army and irrational from the standpoint of the economy or society. There are no objectively quantifiable “needs” for manpower by the military, any more than by any other organization. At some set of prices, the number of soldiers, civilian employees, and equipment needed to achieve a given military effect will be one thing, and at a very different set of prices for each, the quantitative “needs” for each can be quite different. Even in an all-out war, most soldiers do not fight, but perform a variety of auxiliary services, many of which can be performed by civilian employees, since most of these services take place far from the scenes of battle. From the standpoint of the army as an economic decision making unit, it is rational to draft a chemist to sweep floors as long as his cost as a draftee is lower than the cost of hiring a civilian floor sweeper. From the standpoint of the economy as a whole, it is of course a waste of human resources. Again, the use of force is significant not simply because force is unpleasant, but because it distorts the effective knowledge of options.

The appropriation of physical objects or of human beings is more blatant than the appropriation of intangibles like property rights, but the principles and effects are similar. Neither “property” nor the value of property is a physical thing. Property is a set of defined options, some of which (mineral rights, for example) can be sold separately from others. It is that set of options which has economic value — which is why zoning law changes, for example, can drastically raise or lower the market value of the same physical land or buildings. It is the options, and not the physical things, which are the “property” — economically as well as legally. There are property rights in such intangibles as copyrighted music, trademarked names, stock options, and commodity futures. A contract is a property right in someone else’s future behavior, and can be bought and sold in the market, as in the case of contracts with professional athletes or consumer credit contracts. But because the public tends to think of property as tangible, physical things, this opens the way politically for government confiscation of property by forcibly taking away options while leaving the physical objects untouched. This reduction of options can reduce the value of the property to zero or even below zero, as in the case of those rent controlled apartment buildings in New York, which are abandoned by landlords because they can neither sell them nor give them away, because the combination of building codes and rent controls makes their value negative. Had the government confiscated the building itself, the loss would have been less. The landlord in effect gives the building to the government by abandoning it. Indeed, he pays to get rid of it, because abandonment has additional costs in the form of legal liability if the landlord is ever located and convicted of abandoning the building, which is illegal.

Property rights which are not attached to any physical object are even more vulnerable politically. Contracts concerning future behavior have been virtually rewritten by legislation and/or court interpretation. These have included both prior restraints on the terms of contracts — interest rate ceilings, minimum wage laws, rent control, etc. — and subsequent nullification of existing contracts, as in laws against so-called “mandatory retirement.” Few, if any, contracts require anybody to retire, and about 40 percent of all persons above the so-called retirement age continued to work, even before this legislation was passed. The so-called “retirement” age was simply the age at which the employer’s obligation to employ individuals ended. The only thing “mandatory” was that contractual obligation — and it has been unilaterally extended by the government. Categorical, speculative articulation by third parties regarding the productive ability of the elderly as a group has superseded incremental judgments of each situation by the person actually employing each worker in question.