Gustav Cassel: In Defense of Private Property Rights

Article excerpt

In their book on property rights, Terry Anderson and Fred McChesney (2003: 13) make the following statement:

   The idea that property rights might themselves be a distinct
   and explicit area of economic inquiry is relatively recent. In
   classical economics, well-defined and secure property rights
   were typically assumed to exist, not analyzed or explained. (1)

That statement may have some element of troth, but it is not difficult to find economists from "the old days," a century or so back, who emphasized the importance of secure property rights.

In Sweden, Gustav Cassel, probably the most famous political economist in the world in the years immediately after World War I, was the most outspoken economist in this respect. He vigorously defended the importance of private property rights for economic growth and progress, In this article, I review his arguments and his evolution from a radical liberal to a conservative liberal (in the European sense of the word).

Before World War I: A Different Vein

Gustav Cassel was not always a vigorous proponent of private property rights. At the turn of the 20th century, he argued that local authorities should have the right to appropriate the incremental value of land, at least in urban areas where rising site values could be assumed almost without exception to be the result of local authority action (for example, the laying-out of streets, bridges, and parks). Cassel (1900: 485) held that it was necessary to "keep a much keener eye on the superior rights of the community at large" and cited authorities such as John Stuart Mill, Gustav Schmoller, Adolph Wagner, and Karl Bucher. In his view, one cannot give "an unlimited scope to private property rights to land" (p. 486). He went on to argue that

some lawyers are obsessed by the idea that private landed property grants its owner an absolute and exclusive right to rule over a piece of our planet all the way down to the centre of the Earth, and see no difference between this right and the right to a piece of money, but this idea should not and must not be allowed to dominate our national way of thinking generally.... The right to dispose of some of society's land can to a lesser extent than any other right be granted free of all those limitations which are determined by society's interests and a view to sound social development [Cassel 1900: 486].

In his programmatic book entitled Social Policy (1902: 110), Cassel stated: "The city has a right to the incremental value, which is a fruit of the costs it has laid down. One can put property rights on any philosophical footing, yet one will still not arrive at any other result."

In 1906, a land reform association was formed in Stockholm and Cassel became its first chairman. During the early years of the association's activities, he expended a great deal of energy pleading for an incremental land-value tax. In the first issue of the association's series of pamphlets, Cassel (1906: 5-6) wrote that far too much mischief had been made by the phrase "sanctity of property," which the influence of "the dogmatism of the liberal political economy" had extended beyond all reasonable bounds. "Property rights to speculation are placed on an equal footing with property rights to tilled land and a home of one's own."

Cassel's call for a tax on incremental values was a consequence of his overarching principle that taxation must be imposed wherever it does not hinder growth, an argument he explained in a newspaper article: "Fiscal policy must ... understand how to place tax burdens so as to form the least possible impediment to a productive society. Thus taxes should not be imposed primarily on the results of productive work but on unearned incomes" (Cassel 1908).

Cassel's campaign set the political machinery moving. In 1907, several motions were proposed in the First Chamber of the Swedish Parliament for taxation of land values or incremental land values. …