Institutional Support.

Property and Freedom, by Richard Pipes, New York: Altred A. Knopf, 384 pages, $30.00

Property rights have become fashionable. All over the world, academic intellectuals, politicians, and career bureaucrats are acknowledging that a respect for private property and the rule of law are the necessary foundations of a prosperous economy and a free nation. Academic economists such as Nobel laureates Ronald Coase and Douglas North have revived an interest in the importance of well-specified property rights for economic growth, inspiring such organizations as the World Bank to devote more attention to this area. After a century during which academics, pundits, and policy makers preferred treating the economy as a well-oiled machine that could be manipulated for progressive social ends without regard to property rights, such devotion to an idea that was at the heart of the Scottish Enlightenment is gratifying.

Journalist Tom Bethell's 1998 book, The Noblest Triumph (see "The Advantages of Ownership," January 1999), was the first attempt to survey these idea for a general audience. Historian David Landes, after decades of focusing on technological and cultural explanations for economic success, gives a prominent place to property in his recent The Wealth and Poverty of Nations (1999). Now comes Richard Pipes' view of property's importance in the history of Western civilization.

Property and Freedom is something of a departure for the author, a distinguished professor at Harvard who is a leading authority on the history of Russia and the Soviet Union. In this ambitious and wide-ranging work, Pipes writes that he seeks to provide the first book in modern times to explain, "based on concrete historical material,...just how property gives rise to freedom and how its absence makes possible arbitrary authority." Setting aside the question of originality, how well has he succeeded?

While sections of the book are both fascinating and instructive, the result is sometimes puzzling and often frustrating. Pipes brings strengths to the discussion, particularly his Russian expertise. But the work fails to build on an existing body of pertinent economic and historical literature, and it is possible that Pipes is unfamiliar with that research. His strengths are seen in the historical over-views, but the analysis is incomplete.

Pipes shows us how important and controversial are many of our most common notions about property, and that their finest expression comes from the revolution in British thinking in the 17th and 18th centuries. He is particularly impressed with the ability of individuals to resist arbitrary taxation by the Crown, stressing the tale of John Hampden, who refused to pay the king's forced loan of 20 shillings--which he could well afford--and who chose to go to trial in 1637-38. This was unusual and remarkable, and Pipes notes that for "a historian of Russia [this was] a mind-boggling event, since in the entire history of that country, extending over seven centuries, not a single instance can be found of a subject defying his sovereign and being given his day in court."

Pipes makes clear how the notion of individual rights has struggled to emerge side by side with the pursuit of liberty, against a backdrop of political leaders and intellectuals continually seeking to replace all individuals rights with a broader structure of communal, social rights. He pays particular attention to the French Revolution because it featured two contending views of emergent liberalism, On the one hand were those who saw the French Revolution as mirroring the American, with its interest in individual freedom and the necessity of creating rights that safeguarded that freedom from the tyranny of the state. On the other were the radical elements who wanted the opportunity to remake society according to their own dictates, and who saw some form of social or communal property as central to any property ordered new society. Pipes makes much of the French philosophes' aversion to quatidian "reality" and their tendency to judge man-kind from the standpoint of idealistic utopias. He notes that when Bosw ell visited Rousseau, the latter remarked, "Sir, I have no liking for the world. I live here in a world of fantasics, and I cannot tolerate the world as it is.... Mankind disgusts me."

Despite Pipes' excellent treatment of the intellectual origins of the French aversion to property and the individualism it connoted, he pays little attention to the question of how well property rights actually functioned in Britain and France. He is content with noting that the Continent was not as consistently supportive of property rights as Britain. Yet by the standars of history, and compared to the Russian example, both Britain and France did well. Indeed, some researchers have argued that, despite the radicalism that so distinguished the French Revolution from the American, the effect in much of the country was the development of a system of rights and regulations that did much to enhance individual property ownership. (See, for instance, J.L. Rosenthal's The Fruits of Revolution: Property Rights, Litigation, and French Agriculture, 1700-1860.)

The most satisfying section of the book is its treatment of property rights in Russian history. As an acknowledged expert, Pipes is in an excellent position to comment on the development of such rights in Russia and the Sovier Union, and his discussion of various rulers' attempts to alternately establish or destroy the institutions of private property is fascinating. It seems that every historical episode in which individual property rights were reasserted was immediately followed by a disastrous return to communal or state property, often at great cost in lives and suffering. The net result for Russia is restricted economic growth and poor development.

To cite one example, Peter the Great is often saluted for having modernized Russia's culture and economy. But Pipes makes clear that Peter's Westernization was primarily cultural and technological. Although receptive to Western ideas in art, literature, music, and science, Peter did little to adopt the legal institutions so crucial to English success. Rather than improving individual property rights, Peter blurred a variety of existing distinctions and endangered the long-run stability of all reforms through arbitrary confiscation. Peasant agriculture was held back of a law requiring that all holdings must be bequeathed in toto to a single heir. Though intended to stop the devolution of large holdings into small parcels through inheritance, the law had the effect of destroying the working land market that had begun to emerge in Russia.

But even this wonderful chapter suffers from analytical deficiencies that might have been addressed had Pipes paid a bit more attention to the theoretical literature on the creation of property rights. He makes a few limited references to economic historians but writes as if he is unaware of the literature on the importance of "credible commitment" in the establishment of property rights. This body of work makes the not-so-obvious point that reforms often do not succeed because 1) they are not properly implemented or 2) they are not believed.

The latter point is particularly salient in the case of Russia and the Soviet Union. It is not enough to liberalize or modernize here and now; you have to convince people that investment will pay off in the long run. Promises are not sufficient; only the creation of sustainable institutions that restrict the state's power to make arbitary confiscations or to default on early commitments will do. Indeed, a case can be made that many of Russia's current difficulties stem from a lack of the well-established legal rights that undergird a market system.

Privatization and liberalization do not do much to modernize a nation that is often on the brink of anarchy and that has inherited institutions from a regime in which all notions of individual liberty were systematically destroyed. Some attention to the results from the "credible commitment" research would have given more focus and rigor to Pipes' otherwise admirable historical treatment. Although Pipes wishes to leave out technical and theoretical debates, some points just cannot be made without a thorough reading of the literature.

Nor does Pipes always follow through on his insights. He claims, for example, that the abundance of land in Russia hampered the rise of institutions to govern individual property relations. He notes that "the surfeit of land in Russia prior to the nineteenth century had two important effects. In the first place, it led to the underdevelopment of all those institutions which in regions where land was in short supply produced civil societies... secondly, the seemingly inexhaustible profusion of land...impressed on the Russian peasant the conviction that the soil, like water and air, was res nullis which God had created for everyone's benefit and which, therefore, could not be owned."

This is an important idea that has emerged in other contexts, most notably in the work of Ester Boserup in anthropology (whom Pipes does not cite) and Douglass North in economics (who is cited in other parts of the book), both of whom have linked land abundance or scarcity to the evolution of social institutions regulating property. Yet having made this claim, Pipes seems to change the thrust of the argument by noting that rudimentary institutions of private property were starting to evolve before being eliminated in the 13th century, in the aftermath of the Mongol invasion.

Here Pipes emphasizes historical contingency as the culprit in Russia's poor development, even suggesting a counter-factual that property rights would have developed had the Mongols not invaded. Which was it? Historical forces deriving from the abundance of land, or the bad luck to have been invaded and overrun by the Mongols? Long-run pressures, or short-run accident? Not only does Pipes offer no answer, he doesn't even acknowledge the problem.

Perhaps this project would have been more rigorous and thorough had it been confined to a theme like Property and Freedom: Comparing Russia With the West, itself a monumental task. Of course, such a book probably would have appealed to a readership small enough to fit inside a small theater, so Pipes shouldn't be faulted for expanding his horizons.

Pipes' final chapter, which addresses the 20th century, is especially representative of the book's promises and frustrations. Pipes wants to show how conflicts about property rights are all of a piece, but in the conclusion his reach clearly exceeds his grasp. Big issues, including the rise of socialism and fascism as well as the growing welfare state, are given parallel treatment (in separate sections) with small American policy debates about busing or affirmative action. The discussion is much too limited, even superficial, and the links between cause and effect are not well established.

Such shortcomings are evident from the chapter's opening sentence: "Of all the ages in history, the twentieth century has been the least favorable in the institution of private property, and this for both economic and political reasons." Surely Pipes did not mean that. He probably wished to argue that from an intellectual standpoint, the number of challenges to modern property rights that have emerged is unprecedented. (This tendency to confuse intellectual elites' attitudes toward property with the actual functioning of social institutions also marks Pipes' discussion of the French Revolution.)

Yet it is the very success of property rights in fact that has made the variety of governmental intrusions, whether small or large, seem so indefensible. Similarly, the state may have been smaller (in terms of tax revenue) before the 20th century, but this did not make it less intrusive or arbitrary. Furthermore, the rise of modern technology, though it has promoted collectivization in some circumstances, has done much to safeguard rights by enabling us to avoid regulation. But the role of technology in restricting state authority does not play any serious role in this last chapter. Indeed, it is missing throughout the book.

Surely one of the reasons why European governments have tended to liberalize some aspects of international finance more rapidly than other areas is that the ease with which large capital moves around the world makes it more likely that an overly restricted system will suffer much with few benefits. Hence our freedom from arbitrary confiscations beyond a certain point is safeguarded by a technology that makes seizure of physical property not nearly so important as transfers of financial, commercial, and intellectual capital. Market competition and new technology have often been the undoing of the most hidebound collectivist. Again, the historian's tendency to emphasize conscious design and statesmen's intent rather than actual performance restricts Pipes' ability to investigate the de facto evolution of world property rights.

Despite the book's shortcomings, it is a stimulating and educational tour. Promoting the virtues of private property and freedom is always necessary--even in these days when the idea of the market economy seemingly stands triumphant. As events surrounding the World Trade Organization's Seattle meeting demonstrated, the forces of reaction are ever ready to denounce our era and wait for a crisis to try to return us to the collectivist dreams of yesteryear. Pipes reminds us that socialism is one of the oldest of human fantasies, and perhaps the most destructive. And this treatise seeks to show how nations have struggled mightily to break free of such illusions. For that we should applaud and encourage the author.

John Nye ([e-mail]), an associate professor of economics and history at Washington University in St. Louis, is a founding member of the International Society for the New Institutional Economics.