Chapter 57: Public Utilities
Update: 4/13/20
So the men got up and went. Joshua commanded those who went to write the description of the land, saying, “Go up and down in the land and write a description of it and return to me. I will cast lots for you here before the Lord at Shiloh.” The men left and walked up and down in the land and wrote a description of it in a scroll by its cities in seven sections, listing the cities in each section. Then they returned to Joshua in the camp at Shiloh. Then Joshua cast lots for them at Shiloh before the Lord. It was there that Joshua assigned the land to the people of Israel, and to each was given his portion of the land (Joshua 18:8–10).
After seven years of fighting for control over the promised land of Canaan, Israel had attained military victory. At that time, Joshua called the tribes together. He began the allocation of the spoils of war. The spoils of war included all of the rural land, the cities, and the road system that connected the cities.
Joshua was the nation’s supreme military leader. He was therefore also the supreme judge of the nation. He was the commander-in-chief. The victory of Israel meant that everything that had been constructed by the Canaanites became the property of the state of Israel. As the civil leader of the state of Israel, Joshua appointed men to survey the property that belonged to the state. He had the lawful authority to do this as the leader of the state. The allocation of the property was by lot within the tribal system. The land, cities, and roads were transferred to the tribal governments and to the families whose men had participated in the military conquest of the land.
God was the owner of the land. He had transferred ownership to Abraham. The covenantal heirs of Abraham had now taken possession of the land by means of organized violence. This violence was mandated by God. God had told them that this violence was to be total. Moses said to the conquest generation: “In the cities of these peoples that the Lord your God is giving you as an inheritance, you must save alive nothing that breathes. Instead, you must completely destroy them: the Hittite, and the Amorite, the Canaanite, the Perizzite, the Hivite, and the Jebusite, as the Lord your God has commanded you. Do this so that they do not teach you to act in any of their abominable ways, as they have done with their gods. If you do, you will sin against the Lord your God” (Deuteronomy 20:16–18). God made it clear that this was to be annihilation. [North, Deuteronomy, ch. 48:B] Israelite citizens were not to offer to purchase the land of the Canaanites. This had to be conquest by war. Military conquest for territory was not again required of the Israelites, but this time it was required. All of the Canaanites’ wealth that survived the war was to become the inheritance of the people of Israel. This had been God’s promise to Abraham from the beginning. “I will give to you, and to your descendants after you, the land where you have been living, all the land of Canaan, for an everlasting possession, and I will be their God” (Genesis 17:8).
The land was then transferred to tribes, then to clans, then to specific families (Numbers 26:52–56). [North, Numbers, ch. 14] It was not distributed on the basis of the free market’s principle of allocation: high bid wins. The legal basis of inheritance was participation in the war of conquest. Moses specifically said this to the tribes that wanted to inherit the land across the Jordan River. They could not inherit if they did not participate in the war alongside the other tribes. “So Moses replied to them, ‘If you do what you say, if you arm yourselves to go before the Lord to war, then every one of your armed men must cross over the Jordan before the Lord, until he has driven out his enemies from before him and the land is subdued before him. Then afterward you may return. You will be guiltless toward the Lord and toward Israel. This land will be your possession before the Lord. But if you do not do so, look, you will have sinned against the Lord. Be sure that your sin will find you out. Build cities for your families and pens for your sheep; then do what you have said’” (Numbers 32:20–24).
God expelled Adam and Eve from the garden. He placed a flaming sword at the entrance so that they could not eat from the tree of life (Genesis 3:23). [North, Genesis, ch. 13] He used violence against them. First, he killed them definitively. Second, He was gracious to provide animal skins for them, but then He threw them out into the cold, cruel world. Third, he excluded them by means of force. This established the principle: in the world after the fall, property rights are to be enforced by the threat of violence. Violence is legal in the defense of property. Property is grounded in violence. It was grounded in voluntary exchange before the fall, but not after. When discussing property rights, all roads lead back to violence. Any theory of property that grounds the rights of post-fall ownership on anything else except violence is not biblical. God told Adam that he would die if he transgressed the boundary of the forbidden tree (Genesis 2:17). [North, Genesis, ch. 9]
The free market’s principle of establishing legal title is to trace title back to the original owner. But there is a technical problem with this technique: the original owner was the state. At some point, the state, through its military, conquered the previous owners. This means that legal title is always grounded in state violence. It is not grounded in voluntary exchange.
By what legal right did the state gain ownership? Victory on the battlefield. Might made right. This is universally true in matters of the ownership of land. Economists may offer detailed theories of voluntary exchange-based ownership today, but they cannot find evidence of their theories when it comes to the original establishment of ownership. This is why economists avoid the topic of the original ownership of land. They always end up at a war. Original ownership was established in history by state violence. When there is valuable land available, and the land is occupied sparsely or by nomadic tribes, an invading military force will conquer the nearly empty land. The victorious state will then exterminate the original holders, or drive them out of the land, or assimilate them on whatever legal basis the victorious nation allows.
This is not conjectural history. This is the history of every known nation. It can be documented. In most cases, nations then adopt a grand theory of the legitimacy of the original conquest of the land. The new immigrants are said to have been entitled to conquer the land because they had moral superiority. Maybe they did, but this is open to debate. What they had for certain was better military tactics and probably superior weapons. They also had greater population because of immigration. There were more of them. This is not how the textbooks of the nation are usually written, but this is what the documentation always reveals. This at least was true until the final third of the twentieth century. In the United States, textbooks began criticizing Christopher Columbus and the other invaders of the Western hemisphere. The general public pays no attention to these arguments. The textbook writers do not discuss how the existing tribes and peoples in the Western hemisphere attained their ownership of the land. There are no historical records, but there are always legends, and the legends always point to a military leader who was in direct contact with the gods of the now-occupying culture.
In the Western liberal tradition, the most popular theory of original ownership was established by John Locke in 1690. In his Second Treatise on Government, he devoted Chapter V of Book II to a consideration of original ownership. He argued that God gave all of the earth as grant to all mankind. This did not settle the issue of which family owned which piece of property. “Though the earth, and all inferior creatures, be common to all men, yet every man has a property in his own person: this no body has any right to but himself. The labour of his body, and the work of his hands, we may say, are properly his. Whatsoever then he removes out of the state that nature hath provided, and left it in, he hath mixed his labour with, and joined to it something that is his own, and thereby makes it his property. It being by him removed from the common state nature hath placed it in, it hath by this labour something annexed to it, that excludes the common right of other men: for this labour being the unquestionable property of the labourer, no man but he can have a right to what that is once joined to, at least where there is enough, and as good, left in common for others” (II:V:27).
This is a classic example of conjectural history. It begins with a hypothetical state of nature. We know nothing of this hypothetical realm. It is history without documentation or any possibility of obtaining documentation. It is, as I have called such theories, a just-so story. It is history as some logician has concluded it should have been, whether or not it really was. We are supposed to accept it, not on the basis of historical documentation, but simply because it sounds logical. But this story is not remotely logical. How much land does a man’s labor entitle him to? Enough to support his family under prevailing technological practices? Enough to support the biological heirs of his family? Locke did not say. We also do not know how much labor entitles an individual to how much land. We do not know about his efficiency. The more efficient he was, presumably the less land he needed. That penalizes the efficient producer. It subsidizes the inefficient producer.
At the heart of property rights is boundaries. There is no way to identify the physical boundaries of ownership based on Locke’s theory of original ownership. The only way that somebody could defend his property was by violence. He had to insist that his labor entitled him to a particular plot of land. Then he had to defend it physically. There would always be some other would-be farmer or would-be speculator who wanted ownership of this land. He could threaten violence. He did not have to pay any attention to the original person’s claim. The original owner might be able to get the civil government to defend his title, but then we are back to violence. Violence is the basis of ownership. A would-be owner can spin all the wonderful theories he wants about his moral right to the property, but if he cannot defend it through violence, he is not going to retain ownership.
There is no libertarian theory of original ownership that acknowledges violence as the heart of the matter both legally and practically. Amazingly, some defenders of a zero-state world invoke Locke, as if Locke’s theory were coherent. In his book, The Economics and Ethics of Private Property (1993), libertarian anarcho-capitalist economist Hans-Hermann Hoppe adopted Locke’s argument as the basis of private property. “As soon as scarce resources are visibly appropriated—as soon as somebody ‘mixes his labor’ with them, as John Locke phrased it, and there are objective traces of this—then property (the right of exclusive control), can only be acquired by a contractual transfer of property titles from a previous to a later owner, and any attempt to unilaterally limit this exclusive control of previous owners or any unsolicited transformation of the physical characteristics of the scarce means in question is, in strict analogy with aggressions against other people’s bodies, an unjustifiable action.”
Tracing title back to original owners always leads to a military conquest. There may not be a written traceable title all the way back, but in principle this is how today’s title is grounded judicially. This is not a just-so story. This is how nations have allocated state-owned land. They sold the land or gave it away to specific individuals or groups. States have the right to do this because they own the land. They gained title fair and square: through violence. Tracing such title transfers are possible in nations that are recent in origin. They can be traced back at least three centuries in most of the United States. With respect to land acquired by military action after the ratification of the Constitution in 1788, surveys and titles are a matter of public record. The United States government sold land to settlers. It transferred land to territories, and when territories became states, states took over the records. The United States government did not consult with Indian tribes regarding the transfer of most of this land. The Indians could not defend title on the battlefield, so they lost the land to the United States government. Throughout history, this is the story of land ownership. It was surely the story of Israel in the days of Joshua.
When it comes to land, the state is the original owner. It established ownership through military conquest. National governments have transferred title to specific plots of land on numerous legal bases. Even after the transfer, civil governments have always retained a veto over the ways in which the land can be used.
Roads are primarily judicial. They are only secondarily economic. There must always be a way for agents of the civil government to access the residences and business facilities owned by individuals and corporations. Roads enable civil government to enforce the law at a low cost. Every society has roads, and every society’s roads are controlled by civil governments. Roads are inherent in the nature of civil government. There may be toll roads that are privately owned, but they have been authorized by civil governments, and they are subjected to taxes by civil governments. The idea of autonomous roads is not biblical. It is also not historical. The state always retains a veto power over the uses to which roads will be put. It does not matter who bids the highest price.
We can see this in the use of roads in Mosaic Israel. We begin with the cities of refuge.
Then the Lord said to Joshua, “Speak to the people of Israel, saying, ‘Appoint the cities of refuge of which I spoke to you by the hand of Moses. Do this so that one who unintentionally kills a person can go there. These cities will be a place of refuge from anyone who seeks to avenge the blood of a person who was killed. He will run to one of those cities and will stand at the entrance of the city gate, and explain his case to the elders of that city. Then they will take him into the city and give him a place for him to live among them. If one of them comes to try to avenge the blood of the person who was killed, then the people of the city must not hand the one who killed him over to the authorities. They must not do this because he killed his neighbor unintentionally, and he had no hatred toward him in the past. He must stay in that city until he has stood before the assembly for judgment, until the death of the one who was serving as high priest in those days. Then the one who had accidentally killed the person may return to his own town and his own home, to the town from which he fled’” (Joshua 20:1–6).
The Mosaic law required roads that would enable people to get to one of the six cities of refuge. There were three additional cities in the land beyond the Jordan (Deuteronomy 4:41). These cities were judicial, which meant that everyone had access to them.
In order for a township or city to gain access to a city of refuge, it would have to create a road or use an existing Canaanite-built road. There also had to be some way to get to the central city where the temple was built. That would create the need for other roads. Mosaic Israel was covered with roads. These were judicial roads. By judicial, I mean both the civil covenant and the ecclesiastical covenant.
In order for a tribe to get access to the cities of refuge and also to Jerusalem, they would have had to cooperate with other tribes. They would have had to have roads to connect to whatever roads were available to the other tribes. There would have been an entire network of roads across Israel. All of these roads would have been funded either by direct taxation or by some sort of state-enforced system of required work on the roads. The roads had to be kept cleared. This was a judicial matter.
This means that Israel had a system of eminent domain. Eminent domain allows municipalities and other regional governments to confiscate private land. In order to avoid theft, the confiscating agency has to pay a market price to the owner of the land. But the owner of the land does not have the right to stop the state from expanding its ownership of land. This is because the state is the original owner. It delegates ownership to individuals, but only on its terms.
What about bridges? The state should be allowed to construct bridges in order to enable people residing in distant areas to gain access to the court. There is no doubt that politicians could bend the meaning of the law in order to build roads and bridges for economic reasons. But the only biblical reason is this one: an individual has the right to gain access to justice.
The reason why eminent domain is required is this. The economic value of the plots of land needed in the final stages of construction of a road would get increasingly valuable. This is a result of the doctrine of sunk costs. All of the money invested in building the road is a sunk cost. It is of little economic value if the road is not completed. This would mean that the marginal value of each of the plots of land in the final stretch of the road would rise in value equal to the total economic value expected from the road. Each property owner on the map leading to the judicial city would be able to demand an ever-higher price. This would make the price of building a road astronomical. The solution is eminent domain. The state pays every property owner whatever the market price of the land was prior to the announcement of the road.
Murray Rothbard tried to get around this obvious problem by using an analogy that did not directly deal with eminent domain. In Man, Economy, and State (1962), he used the analogy of eggs in a recipe. “For example, it is erroneous to argue as follows: Eggs are the good in question. It is possible that a man needs four eggs to bake a cake. In that case, the second egg may be used for a less urgent use than the first egg, and the third egg for a less urgent use than the second. However, since the fourth egg allows a cake to be produced that would not otherwise be available, the marginal utility of the fourth egg is greater than that of the third egg.” This is analytically correct. This is the central issue in eminent domain. But he never mentioned eminent domain. He got around this problem by defining it away. “This argument neglects the fact that a ‘good’ is not the physical material, but any material whatever of which the units will constitute an equally serviceable supply. Since the fourth egg is not equally serviceable and interchangeable with the first egg, the two eggs are not units of the same supply, and therefore the law of marginal utility does not apply to this case at all. To treat eggs in this case as homogeneous units of one good, it would be necessary to consider each set of four eggs as a unit” (Chap. 1, Appendix A). With eminent domain by the state, the plots of land are purchased as a unit. But if these were market transactions, purchased one at a time, the price of the final plots would become prohibitively expensive. The road could not be built. He did not discuss eminent domain in this book, a glaring omission. He did mention it briefly in Power and Market (1970), the original publisher’s suppressed section of Man, Economy, and State. But he did not discuss the central analytical issue: the rising marginal value of the plots of land remaining to be purchased along the proposed roadway. I think it is significant that Mises did not mention eminent domain in Human Action.
George Reisman, Mises’ former pupil, did discuss eminent domain in his massive treatise, Capitalism (1990). He did not mention the problem of the rising marginal value of the final plots. More significantly, he accepted the legitimacy of eminent domain for pipelines and roads. The government “should restrict the role of eminent domain to its traditional sphere in the United States, which is precisely such projects as road construction, in which a vast stretch of property is required for an indivisible use” (10:8). This was a practical consideration. He did not discuss the moral and economic theory of ownership lying behind this conclusion.
There is a potential for minor corruption with eminent domain. Someone who knew where the road was going to be built could go out and buy up property along the route. Then the value of his property would rise, and he would profit when the state paid him a free market price for his land. If he sold this information to somebody, he could profit. He would not have to buy the property himself. The point is this: the price paid would have to be based on the market value of the land prior to the development of the project. Only the state could force the sale. If there were no eminent domain, the building of judicial roads would be economically impossible or close to it.
Eminent domain that is used for non-state ventures, where the government buys non-judicially related land and then sells it to real estate developers, is clearly a violation of property rights. This should be prohibited by law.
If access to roads is free of charge, then taxes fund the roads. In the case of toll roads, individuals who use the roads fund the roads. But the purchase of the land that is used by the toll roads was always enabled by the civil government. The civil government may tax the profits of the toll roads. In some cases, it may sell for a cash payment the right of a private company to collect tolls.
As the cost of digital monitoring gets lower, it is likely that more roads will be converted to toll roads. Only those people who use the roads will be charged. The ability of the owners of the roads to assess the charges and collect them will get cheaper over time, which means that there will be greater use of these tools of toll collection.
One way for a local community to be paid by users of roads is to sell the right to install water and sewer pipe lines. Another way would be for cities to sell the right to install telephone cables. It is not necessary that the city pay for building these utilities. The city will always retain control over the quality of the services and the prices charged. These are public utilities. Public utilities need access to homes and businesses. But, at the same time, homes and businesses need access to public utilities.
For any city to develop, there must be a way to bring in water and to remove sewage. The city of Rome today still uses sewage-removal tunnels that were built five centuries before the birth of Christ. Sewers had been constructed at least two centuries earlier. Without aqueducts and sewers, Rome would never have become a city of a million people in the days of Christ.
Railroads are the economic equivalent of roads. They began to spread after 1830. Governments could build them, but profit-seeking companies were the main builders. They can only build where the government had set aside land for the tracks. After 1844, telegraph wires usually were built alongside of railroad tracks. The telegraph became a major public utility.
With the development of electrical power in the late nineteenth century, the generation and distribution of electricity became another public utility that was basic for the expansion of the city and the rise in per capita income. Then came telephones.
No city larger than a township has ever developed without public roads and the public utilities associated with roads. The division of labor has always centered in cities, and cities have always used public utilities as a way to expand their populations.
There is no libertarian economic theory of urban development that rests solely on the principle of private ownership in the distribution principle of high bid wins. This is second only to a theory of national defense as a gaping hole in libertarian theory. There should be competing libertarian monographs on this topic. There has yet to be a single monograph on this topic.
The Bible begins with the story of Adam in the garden. It ends with a description of the New Heaven and the New Earth. There is a common link between the two places of residence: the tree of life. “Out of the ground the Lord God made every tree to grow that is pleasant to the sight and good for food. This included the tree of life that was in the midst of the garden, and the tree of the knowledge of good and evil” (Genesis 2:9). [North, Genesis, ch. 3:C] “Then the angel showed me the river of the water of life, clear as crystal. It was flowing from the throne of God and of the Lamb through the middle of the city's street. On each side of the river was the tree of life, bearing twelve kinds of fruits, and it bears its fruit every month. The leaves of the tree are for the healing of the nations” (Revelation 22:1–2).
The Bible presents human history as the development of cities. There is the city of God, and there are the various cities of man. This was the great theme of Augustine in The City of God in the aftermath of the sacking of Rome by the Visigoths in A.D. 410. There is a linear development from the garden to the city. Adam and Eve were removed from the garden in order to keep them away from the tree of life (Genesis 3:22). Throughout the early chapters of the Old Testament we read of the creation of cities. The movement of people in rural areas to cities has been the movement of all of history. This accelerated after the advent of compound economic growth sometime around 1800. It accelerated again two centuries later in China and India. The rate of urbanization has never been higher. But without public utilities and roads, there would not be urbanization.
There is no libertarian theory of urbanization. The market’s principle of high monetary bid wins is inapplicable in some areas of urban development. This includes roads. This is because roads are judicial. But what about public utilities such as water delivery, sewage disposal and telephone lines? These are not judicial. There is a connection between judicial roads and economic services that parallel roads. The civil government cannot allow constant digging up of roadway to allow multiple providers of economic services. The disruption of the roadways would be constant. So, in order to provide stability, governments regulate prices of monopolistic service providers. The state or the local government grants a right of way to these companies as a way to fund the maintenance of the roads. That is what the fees should be used for, biblically speaking. Public utilities make possible a growing city, and this brings more people under the authority of local government. This is an aspect of the move from garden to city. Plots of land along the roadways have lawns, flowers, and other marks of a garden.
Historically, a nation with a developed transportation system is capable of defending itself against invasion. This includes extensive roads, but these days, it also includes railroads.
Certain crucial services are not available without the intervention of the state. National defense is one of them. The police power is another. This also includes roads. All three of these institutional arrangements are an extension of the principle of civil government. It is not possible to design a system of final sanctions that is allocated by the free-market principle of high bid wins. The Bible actually prohibits this in the case of courts. The principle of high bid wins is the basis of bribery, which is prohibited.
Economists rarely discuss the theoretical foundations of public utilities. These foundations rest heavily on a theory of roads. The roads are judicial, not primarily economic. They have economic value, but only because they initially are based on the rule of law. The roads are extensions of civil government in the same way that courts are extensions of civil government. Roads are necessary for people to gain access to the courts. They are also necessary for the executive to enforce the judgments of the courts. Roads are two-way, not simply in the sense of geographical direction, but in the sense of judicial administration.
Roads enable the civil government to extend its jurisdiction into the lives of citizens. Roads reduce the cost of gaining access to the courts, and they reduce the cost of enforcing the decisions of the courts. An economic rule takes over: as the price falls, more is demanded. In order to extend the principle of justice across the nation or any geographical region, it is imperative that civil governments create a roadway system. Joshua and the Israelites simply took over the road system that had been built by the civil governments of the Canaanites. Then they established a new system of law. That was what the conquest was all about.
Public utilities are byproducts of the state’s system of roads. They provide the services necessary for immigrants from farms to take up residence in cities. As I have said already, the biblical historical model is the transition from the garden to the city. This is how the dominion covenant is extended in history.
There is no libertarian theory of roads because roads are not governed by the principle of high bid wins. The distribution of land associated with the building of a road cannot come about through the operation of the market process. That is because of the increasing market value of the land that remains to be purchased in order to extend the road. The state can buy the required land from all of the participants at a flat rate. This is not possible for a profit-seeking enterprise.
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The complete manuscript is here: https://www.garynorth.com/public/department196.cfm