THE TWO TYPES OF SOCIETIES we have looked at so far were both extreme systems. Natural law societies are ‘0% ownability societies.’ They are built on the premise that humans are residents of this world, like the other animal residents, with no more rights than any other animal. Natural law societies don’t accept any structures that built on the idea that humans are owners of the world, in any way, shape, or form.
Sovereignty-based societies started with the premise that the world was made specifically for certain groups of people and their descendents. It belongs to them provided they are able to hold dominion over that part of the planet. All rights to each part of the world belong entirely to the first group to claim it and go through rituals and ceremonies that confirm the people of that group understand that they own. The other extreme societies start with the principle of ‘sovereign ownability’ or 100% ownability of the Earth by human entities.
Zero percent and one hundred percent are extremes.
If it is possible to start with the premise that humans have hundred percent ownability and build societies around this premise, and possible to start with the premise that humans have zero percent ownability and build societies around it, it must also be possible for a group of people in the right position to start with the premise that certain rights are ownable and belong to humans and certain other rights are not ownable and can never belong to humans, and build societies around this premise.
For example, a group of people in the right position might decide that humans are residents of this world and not its natural owners, but that we have superior abilities compared to those of other animals and we have the right to use these abilities to help us put together a sane and healthy relationship with the planet we are on. We may do a scientific analysis of the different rights that we may be able to allow people to buy and own and conclude that we are harmed if we (the members of the human race) accept ownability of certain rights. For an extreme example, it should be clear that the human race may be harmed if its members either grant or accept that groups of people have the right to use parts of the world as places to gather materials for nuclear bombs, process these materials, and then build nuclear bombs or other devices that have the potential to destroy the world. A group of people in a position to form any kind of society they want may decide that they will not grant or accept ownability of this particular right and will work together to prevent anyone from ever buying or otherwise gaining the right to do these things.
In other words, if all members of the human race were in a position to make collective decisions—as is our group in Pastland—they may decide that the human race will stand unified in at least one area: certain rights will not be ownable and we will work together to prevent any subgroup of the human race from ever owning them.
The group may also decide that the human race benefits if it allows people to buy and own certain other rights to the world. For example, if we set aside some land as ‘places to build homes’ and then allow people to buy the right to build homes on the lots and live in them, provided they follow certain strict rules designed to protect the land and the human race as a whole, people will have the right to construct high-quality housing and have the ability to personally benefit from this. (They benefit both by having the right to live in the homes they build and the right to sell the rights that we have let them own later.) The human race is better off if it has high-quality housing, so, when we allow ownability of this right, we are creating an incentive system that encourages private individuals to do things that make life better for the human race as a whole.
If we decide that we want to accept ownability of some rights to the world, but that certain other rights will never be ownable by any group under any circumstances, we will be creating a society that is not an extreme system.
Extreme choices are rarely optimal for anything: if you only live in places with extreme temperatures, say moving to Death Valley in the summer (where temperatures average 45C/110F) and then to Oymyakon, Russia in the winter (where temperatures average –40C/–40F) you are probably not going to be very comfortable and you will probably have a lot of problems related to the temperature. If you only know one way to drive, and that is to either hold the gas pedal all the way down or leave it all the way up, you are probably not going to find it very easy to get around and will probably have a lot of accidents. If you only communicate by screaming or whispering, with nothing in between, you probably aren’t going to be able to get your point across most of the time.
Extremes are normally not good. Usually, when you want to accomplish something productive, you are better off to use moderation, to find something in between the extremes.
Why might early humans have built societies around these extremes and ignored all intermediate options?
Most likely, they did this because they were ignorant. They didn’t know how to build societies that were not extreme; perhaps, their way of thinking about important things in the world prevented them from even looking for moderate systems.
Humans have incredible intellectual abilities; we can use these abilities if we want to use them, but we don’t have to use them, and many people would prefer not to make the effort. Feelings and emotions come easy; people can decide how they feel and make guesses about how the world works based on these feelings. Both of the types of societies that have existed in the past appear to have been based on things people have come to believe, based on an analysis of feelings, emotions, and other analyses that had nothing to do with the higher logical centers of their minds.
How did the extreme societies come to exist? Most likely, this happened: some people, in the remote past, guessed that some force or being had created the world and some force or being had created humans. They saw the wonders of nature and the world and were amazed.
Aren’t we all?
They thought there had to be some reason for us having come to exist on such an incredible world.
What is this reason?
They guessed that there was something about the situation we find ourselves in that implies we are supposed to be interacting with the world a certain way.
How are we supposed to be acting?
What do you think?
What do you feel is the right way to interact with the world? Are we supposed to be taking care of it and keeping it healthy? Or, perhaps, the world was made as a gift for us and, perhaps, we are supposed to be taking advantage of the things it produces to advance ourselves (‘subduing’ the land, as the Bible says) and fighting each other to control it (‘gaining dominion’ and ‘holding dominion’ over it, to use the words of the Bible)?
People guessing about such things would probably keep their guesses pretty simple. Either we are supposed to be taking care of the world or we are supposed to be subduing and dominating it. The extremes are simple choices. If you are guessing about things that you believe come from the wishes of some invisible sprit being that lives in the sky, you are most likely going to keep it simple: the being either wants us to own and treat the land as a possession, or wants us to not own and treat the land as a the property of our host. We would not expect people guessing about such things to come up with a complicated algorithm that claims certain specific rights are supposed to be ownable (say the right to set aside building lots where people can build private homes where they and their families can live) while certain other rights (say the right to build a uranium mine and enrichment facility on a part of the world to make nuclear bombs) are not supposed to be owned. They probably wouldn’t guess that we are supposed to be allowing a certain percentage of the bounty of the world to be buyable and ownable, with the rest being unownable and being administered by the human race as a whole.
People guessing about the intentions of an invisible sprit being are likely to keep their guesses pretty simple. Either we are supposed to own, totally and completely, or we are not supposed to own at all. Hundred percent ownability or zero percent ownability; these are the guesses that people could easily work out without any need to use logic and reason. People making such guesses with no way to directly contact the invisible spirit being they believe is in charge won’t be able to determine the intentions of the invisible being with objective scientific analysis. They can only decide what they think feels right to them.
Feelings can give us the two extreme options. But they can’t give us anything in between. If we want something that is not extreme, we need to use logic, reason, and scientific analysis.
Although all humans are very smart compared to our closest animal relatives, not all humans seem to have the same abilities when it comes to the use of logic and reason. Some people are highly intellectual and use logic to solve nearly every problem they face.
Others rely on intuition, on copying and repeating the behaviors of their parents and others who have worked through the problem intellectually and solved it. Their instinct tells them to copy those who have had success and they follow this success.
We are capable of incredible intellectual feats. But not everyone feels comfortable with this kind of analysis all of the time. In fact, thinking through complex projects is mental work and can be very hard work. It can take a lot of mental effort to work through complex projects logically.
In some cases, the practical realities of our existence force us to go to this effort. Warfare provides a perfect example: our adversaries in war have jet fighters, rockets, bombs, and nuclear weapons. We can’t hope to defend ourselves against these adversaries by using feelings and emotions to build countermeasures. We have to use science.
Over the centuries, people have found that any emotion at all can interfere in the scientific calculations and lead to wrong answers. For example, prior to Galileo’s findings in 1607, people designing cannons thought that heavy objects must fall faster than light ones; it just felt wrong that a cannonball that weighs 200 pounds (a solid iron ball) will take the same trajectory as one that weighs only 50 pounds (a hollow ball filled with gunpowder that will explode when it hits the ground). Because people felt the light ball would fall at a different rate, they couldn’t figure out the right amount of powder and right angle to set the cannon to hit their target.
In his book, ‘Two New Sciences,’ Galileo proposed that all objects fall at the same speed, after accounting for air resistance. The book explains experiments that anyone who doubts the premise can perform to verify its truth. Galileo was arrested and put on trial, shortly after writing this book, for ‘teaching false sciences.’ The things he said didn’t feel right. (Galileo was convicted and spent the rest of his life in jail for the crime.) But military scientists realized that Galileo’s formulas explained the trajectory of cannonballs perfectly and began to use them. Over the years, people found out that physics just didn’t work the way our feelings tell us it is supposed to work. Military researchers were taught to never trust their feelings; they had to follow the science exactly and leave all emotion out of their calculations, or they would not be able to design and build weapons capable of protecting their country.
The realities of warfare have forced us to totally banish emotions and beliefs from analysis these areas. Try this: look up journal articles about the correct use of prayer to help work out the ballistics of rockets; you won’t find any.
But when thinking about societal design, we seem to believe it is somehow immoral to use our logic and reason. We use logic to help us build weapons. But we don’t use logic to help us understand the forces that push us to believe that the people born on the opposite sides of certain imaginary lines are worthy of nothing better than being blown to pieces by these weapons.
Our group in Pastland is in a position to think about the world differently than people did before the event that sent us into the distant past. We have a moratorium on accepting the principles that led to the conflicts of the past. We can think of the interests of our group as the interests of the human race. We can do an analysis of the different structures that we can incorporate into our societies, figure out which will help us, and which will harm us.
We have stared with a natural law society. This is a 0% ownability society. Zero percent of the rights that are potentially ownable to the world are actually ownable. We can all see that the natural law society has forces pushing against progress, growth, and the development of facilities that will allow us to replace the technological tools that we brought back with us from the future and build new and even better technological tools in the future. If we keep natural law societies, we will not have these things, we will revert to primitivism, and all knowledge of the better ways of doing things will be lost.
We will realize that the societies that we left behind in the distant future had forces that led to improvements and progress. We may come up with theories about the reasons for the difference.
Some may look back at the distant future societies and realize that people who improved in those societies often got very, very rich from this. They owned rights to improve and they owned rights to keep the wealth they got by improving. It might be possible to split out these particular rights—the rights that encouraged people to improve—from the other rights that they got and make these particular rights ownable.
We can work out the forces that lead to improvements. Then we, the members of the human race, can discuss our priorities. If a majority of the members of the human race want improvements, we can incorporate these structures into our society.
We don’t have to worry about what is ‘supposed to’ happen to do this kind of analysis. We don’t have to search the heavens for invisible beings that may have created us and then determine the intentions of these beings. We can simply determine the relationship between the structures that can be a part of human societies and the incentives. After we understand these things, we can figure out what incentives we want our societies to have and then put the required structures into place.
We have seen that 0% ownability societies have advantages and disadvantages, and 100% ownability societies have advantages and disadvantages. If it is possible to build societies around the premise of ownability of no rights, and possible to build societies on the premise of ownability of all rights, it must also be possible to build societies around the idea of ownability of some rights or partial rights to the world. I want to give a quick example to show you how such a thing might work:
Let’s consider partial ownability of the bounty or free cash flow the land produces. If we sold 100% of the rights to the Pastland Farm, the buyer would be buying the right to get $2.4 million a year in free cash flow and all increases in production that she is responsible for creating. Imagine that we decide we are going to sell the right to some free cash flow but not all of it, and all increases in bounty that take place during the time that rights to the property are private.
For example, say that we decide that we want only $400,000 of the free cash flow to be buyable and ownable; the rights to the first $2 million will not be sold. We can do this by creating something called a ‘leasehold’ and selling the leasehold, but not the property itself. The leasehold is simply a document. This document grants certain rights. In this case, it is an agreement between the human race and the buyer. The buyer will own the permission of the human race to keep all production of the farm above the first $2 million it produces each year. (The buyer will not own any land; she will only own a permission slip.)
Essentially, she will be buying the right to lease the land for a lease payment of $2 million a year. There are several different kinds of leases people can create. If a lease is granted by a document that can be bought or sold, it is called a ‘leasehold’ (rather than simply a ‘lease’ or a ‘rental agreement’). The yearly payment is called a ‘leasehold payment’ (rather than simply a ‘lease’ payment or ‘rent’). The document itself grants ownership of special rights to the land to the buyer of the document. The buyer will not own the land itself. She will, however, own certain rights that we will see are extremely valuable and that can be sold for very large amounts of money. A document that grants marketable leasehold rights, and which is sellable after it has been issued, is called a ‘leasehold title.’
If we decide we want to sell only specific, limited, and conditional rights to the farm, we can do this using a leasehold ownership system.
Now consider this:
A 100% ownability system sells 100% of the rights to the property. A system based on 100% ownability is a 100% ownability society.
What if we create an entire society on the foundation of a partial ownability system? The above example involved selling the right to 16⅔% of the free cash flow. (The buyer would have to turn over $2 million of the free cash flow as a leasehold payment, leaving her owning only the right to $400,000 of it. $400,000 is 16⅔% of the total $2.4 million in free cash, so the buyer of this document will be buying the right to get 16⅔% of the free cash flow, plus any increases in cash flows she is able to generate by improving the property.) If this system was used for all properties that the group sold, people would be able to buy rights to operate land privately which will include the right to keep 16⅔% of the free wealth that flows from the land. You might call a society based on a property control system like this a ‘16⅔% ownability society.’ It doesn’t sell all rights to the land, but it does sell some rights.
For now, let’s not worry about whether this is the ‘right’ percentage to sell. We will look through the different percentages we can sell later in the book and compare them. We will see that we can sell any percentage of the rights to the free cash flow that we want from 0% to 100%. This means that, if we consider a scale of possible ownership systems that ranges from 0% ownability societies (natural law societies) to 100% ownability societies (sovereignty-based societies) we can go anywhere we want along this range. Is the option here, 16⅔%, the best place to go? That requires a lot of analysis. Here, I am just trying to explain the basic idea. I want you to realize that there is something in between natural law societies and sovereignty-based societies. The two systems that have existed on Earth in our history are both extreme systems. The example above is simply designed to show you that it would be possible for a group of people in the right position to build something that is NOT extreme.
If you look on the back cover of the book, you will see a chart. This chart shows the different possible societies that humans can form. The ‘degrees of ownability’ are on the vertical (up-down) scale. Go up and you move to systems with lower ownability. If you go to the extreme top, you get to 0% ownability societies, or natural law societies. If you go down, you go to systems with greater ownability. The extreme systems on the bottom are sovereignty-based societies. The scale on the on the right side of the chart shows the strength of various different kinds of incentives that can exist in societies.
Some societies work in ways that send wealth to people who harm the world and create violence. I call these incentives ‘destructive incentives.’ You can see by the chart that destructive incentives don’t exist in natural law societies, they are very strong in sovereignty-based societies, and they have various strengths at various intermediate levels.
Some societies work in ways that send wealth to people who improve the world and make it capable of producing more value with less inputs. (In other words, they reward people who increase the bounty or free cash flow of the planet Earth.) Note that natural law societies don’t have these incentives at all. Sovereignty-based societies do have these incentives. Intermediate societies have these incentives with various strengths.
We will see that the incentives come from flows of value that can be measured with absolute precision. Since they are measurable, we can quantify them and put numbers on their strength. On the chart, higher numbers mean stronger incentives.
Incentives are not behaviors; they are behavioral motivations. They are the forces that push people to act certain ways. In other books, people have compared incentives to the idea of an ‘invisible hand’ pushing people to act certain ways. For example, some societies have incentives that push people to deploy their ‘industry’ (their time, skills, effort, talent, and wealth) in ways that lead to more creation of value on the planet. People have examined these incentives and said things like:
Every individual neither intends to promote the public interest, nor knows how much he is promoting it. He intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.
Not everyone reacts to incentives. Some people may feel the pressure of an ‘invisible hand’ pushing them to do things that create value, but may not react: they may want to spend time with their families or may not have the freedom to quit their jobs so they can devote their effort to something that they think will lead to the creation of value. But the incentive/invisible hand is still there. It pushes on everyone. The stronger the incentive, the greater the force of the invisible hand.
This book claims that the problems that threaten us come from forces that are side-effects of the operation of the sets of structures our ancestors have created to determine who has the right to use the wealth the land produces and what rights they have. These structures work in ways that generate very powerful destructive incentives. They send wealth to people who do things that harm the human race and planet Earth. We will see that we can measure the strength of these incentives with great precision. We can determine the impacts of small differences in the structures on the strength of the incentives. We can see what changes are necessary to reduce the strength of the destructive incentives to manageable or acceptable levels.
If we understand all of the intermediate options, and know how to create them, we can basically pick and choose the exact incentives that we want our societies to have. (We can do this by mathematical analysis described later, or by merely looking at the chart.)
Our group in Pastland is in an ideal situation. We have passed a moratorium that is only going to run a few years more. After it is over, we will be back basically where we started, with every single option on the table. We can take advantage of the next few years to figure out what is possible, find the best system, and put it into place.
We are actually very lucky in this regard. We have people in our group with many different backgrounds. Some of these people happen to have experience in fields that can help us figure out how to make our societies work the way we want them to work.
Back in the future, partial ownership systems were used in certain specialized areas. There were a lot of people who wanted to protect land. They wanted to grant rights to it that would create incentives for the people who controlled it to keep it healthy and productive and even make certain specialized improvements to it. (The example below involves one of the most important of such people, President Teddy Roosevelt of the United States.) They created partial ownability systems to make this happen. We happen to have a few people in our group who have experience in these areas. They worked with leasehold ownership and other partial ownability systems their entire adult lives, until they took this trip. We can take advantage of their specialized skills and backgrounds to help us create a system that brings the exact incentives we want. If we want systems with zero destructive incentives (no forces pushing people toward violence and destruction), and very powerful constructive incentives, we can create them. We can make our finished system work any way we want.
Tools To Use To Create Partial Ownability Societies
Theodore Roosevelt was born and raised in New York. But he always considered himself to be an outdoorsman and moved to the part of North America called ‘the west’ and spent a lot of time there. Roosevelt realized that the land in North America east of the Mississippi had been granted to and exploited by corporations that only cared about money. They had no regard for the land and destroyed each area as soon as they arrived.
The corporations were running out of land in the east to exploit. They were petitioning the government for grants of land west of the Mississippi. When corporations arrived, they took out the trees first and sold them, mostly in other countries (lumber was still relatively rare and therefore expensive, with the bulk of forests having already been destroyed in Europe, Asia, and the parts of Africa that Europeans had colonized). They then concentrated on gold and other valuable minerals. They took everything worth taking and moved on, offering the land to companies that would sell it as farmland. But the land west of the Mississippi had not been under the control of the government for very long and most of it was still intact, preserved in the same pristine condition as the American native people kept it in.
By the time Roosevelt became president, most of the American native people had already been removed (either exterminated or transferred to barren and inhospitable reserves), but the land was still intact.
Roosevelt was in love with the land. He didn’t want it to fall under the control of the corporations, which he knew would destroy it.
But how could he prevent this?
He knew that the corporations had massive lobbies and basically owned enough government officials to get their way. If the government controlled this land, and the Congress had the authority to give it away, it would be given to the corporations (or sold for trivial amounts) and be destroyed. To save the land from corporations, he had to take it out of the hands of the Congress and future presidents. How to do this?
Roosevelt was an attorney from a family of attorneys. His family and friends knew more about the law than just about anyone else in the world. He worked with these people to try to solve his problem. He decided to create a new kind of organization, one that would control the land but not own the land. It would be dedicated to protecting the land and would have the legal authority to take steps to protect it, but it would not have the legal authority to ever sell even a single square inch of this land to any corporations or any other persons. The organization that would control the land would be called a ‘conservatorship.’
He called the organization he created the ‘United States Forest Service.’
Roosevelt wanted to protect the land, but he also wanted to make it available for people to use and enjoy. He gave the conservatorship organization a mission: it had to provide uses that would allow people to enjoy the forests, but which would still keep them healthy and preserve them as forest lands. One of the ways people might enjoy forests is to build little cabins where they can live in a protected forest environment.
People aren’t going to invest their money in building a cabin unless they own some rights to it; they need to at least own the right to live in the cabin and the right to sell this right to others, or it just doesn’t make sense to build. The Forest Service could make this right ownable by creating something called ‘leaseholds’ on the land and selling these leaseholds. The buyers of the leaseholds don’t own the land. (The Forest Service doesn’t own the land and therefore can’t sell ownership of the land itself; you can’t sell it if you don’t own it.) But they would own a document issued by the Forest Service that granted the permission of the Forest Service to build a cabin on a site and live in it for a period of time. These agreements are issued for a limited period of time, usually 30 years, after which they expire. So far, the Forest Service has always agreed to renew them, meaning they will offer an additional 30 years to the term, but there is an increase in the leasehold rate to reflect inflation.
A leasehold title is a document that grants certain rights to land to the buyer/owner of the document. These documents are bought and sold in markets. If you buy one of these leaseholds (and you can; many are for sale) you will not own any actual land. If you buy one of these documents, you will be buying the permission of the conservator (in this case, the Forest Service) to live on land and make certain changes to it. The Forest Service is very strict about the things you can do and can’t do on the land. Generally speaking, it wants the improvements to be small cabins (you can’t build a mansion) consistent with the natural forest setting. Certain parts of the lot you have will be private property. For example, inside the cabin, you will have the same rights to protection of your property as if you had actually owned the cabin. If someone you don’t want in your house refuses to leave, you can call the police and they will arrest her and charge her under the same laws that protect private owners.
You won’t own the land or the cabin, but you will own certain specific rights to it. If you ever decide you don’t want these rights anymore, you can sell them; many of the leaseholds sell for hundreds of thousands of dollars, because people want the right to live in these homes. (Most leasehold cabins are near lakes or rivers, or in mountains with fantastic views of the surrounding land.) You can advertise the leasehold for sale, accept offers, and sell to the highest bidder.
Since you will be leasing, not owning, you will have to pay money over time to keep your rights to the property. You have a landlord: the United States Forest Service. Your landlord has created very strict rules designed to protect the land, keep the forest healthy, and maintain the residential areas in a condition that makes them look like ‘a forest with small cabins’ and not a ‘residential housing development with trees.’
If you buy one of these leaseholds, you will have to agree to follow these rules your landlord has set. However, as long as you make your leasehold payment as required, and follow the rules, you will own certain rights. You will own the right to live in the cabin and this right can’t be taken away from you without due process, under the same rules that affect people who own freehold rights to property. You will have a document called a ‘leasehold title’ registered with the state, in the same way that a regular title, called a ‘freehold title,’ would be registered. This document will guarantee you the same protection of your ownership rights as you would have if you had owned freehold rights to the land.
A Restaurant In Manhattan
You may wonder why anyone would pay money for a document that only grants them the right to rent the land.
Isn’t rental a totally separate thing, and don’t people do only one or the other (either buy or rent, with nothing in between)?
Actually, people buy leaseholds all the time. It is possible to mix and match owning and renting in many ways. I want to give an example to show you why someone would buy the right to rent a property that should make it pretty easy to understand.
Say you are interested in opening a restaurant in New York City. You first look for a building to buy with an open store on ground level that you can use as a restaurant. Of course, most buildings in New York are high rise buildings and you aren’t going to find any high rise buildings for sale at prices that you, or anyone else interested in opening a restaurant, can afford.
You are not going to buy the building with a standard freehold ownership sale. You are going to have to find someone who already owns one of these buildings that has a suitable space available for lease.
You can’t expect the space that is offered to be perfect for your particular restaurant. You will have to put some money into it to fix it up. You may have to put in a lot of kitchen facilities, and this may cost thousands of dollars. Obviously, you don’t want to make an investment like this unless you have long-term rights to the space. If you only have a one month lease, for example, you could put thousands of dollars into the improvements and then the landlord may simply choose not to renew and you will be out all the money you put into the improvements.
You want a long-term lease.
The longer the better.
Say that you find two suitable sites. The first is unimproved, just basically an open room, that is offered on a lease with a rent of $5,000 a month, on a 20-year lease. If you choose this option, you will have to put about $500,000 into improvements, like building the kitchen, putting in the tables and chairs, and all of the decorations.
The second site is the same except that the person who is currently leasing it already has a restaurant there that is already open and already operating. The original lease of the person who runs this restaurant was for 30 years, but she has had it for 10 years, so there are only 20 years left on this lease. She is offering to let you ‘take over’ this lease from her. A lease that can be taken over is called a ‘leasehold.’ The leasehold payment on this property is also $5,000 a month.
The current operator of this restaurant has put more than $400,000 of her own money into the restaurant, including buying everything, getting it open, and establishing a clientele and a reputation, so that the restaurant currently makes a profit. She will let you take over her leasehold, but she isn’t going to let you take it over for nothing. You will have to give her $500,000. That will cover the amount she paid to build out the restaurant and a reasonable profit for her time and effort.
If you agree to her offer, you will both sign some papers. The papers will transfer the rights to the leasehold title from the current owner to you, in exchange for a payment of $500,000. You will be ‘buying her leasehold’.
Your other option is to take on the lease of the unimproved property. If you do this, you will not have to pay anything up front to ‘buy the leasehold.’ You will get ownership of the leasehold for free and continue to own it as long as you make the $5,000 monthly leasehold payment. But you will have to come up with $500,000 anyway to build out the facilities and establish it as a restaurant. You know that this is going to take a lot of time and it will probably be a year before you even open. After you open, you will have to establish a reputation and clientele to begin generating profit and it may take a second year before you begin making a profit.
If you buy the leasehold on the existing restaurant, you can simply change the name and open the next day, without any lag at all. I hope you can see that buying a leasehold is not a silly idea at all: it makes total sense.
A Cabin in the Woods
Let’s now look at the idea of buying a leasehold on a cabin. The basic idea is the same:
Take two properties offered for lease, both at a rate of $50 per month. One is unimproved and has the right to build a cabin, but no cabin. The second already has a cabin on it. Someone bought the leasehold and built a cabin for $40,000. That was 10 years ago. The lease has 20 years left to run. She is offering the leasehold for $50,000; she wants to recover her money and get a reasonable profit for her time.
If you take out the leasehold on the unimproved lot, you won’t have to pay any cash up front, but you won’t be able to move in right away. You can put a cabin on it for $40,000 but you won’t be able to actually move in until the cabin has been built, inspected by the Forest Service, and approved. This is going to take a lot of time and effort (the rules for these cabins are very strict and you have to follow them to the letter or your leasehold can be canceled and you will be out all the money you invested).
This is basically the same decision as the New York Restaurant.
What if you buy the leasehold on the cabin, live there for a year, and then have to move to another state so you can no longer live in the cabin? Are you out the $50,000 you paid for the leasehold?
Not at all: you can put it back on the market. There is a ‘market price’ for these leaseholds. In this case, after a year there will only be 19 years left on the lease, so buyers won’t be able to pay as much as you paid for it. But consider the fact that you will have been living in the cabin for only $50 per month, far less than you could rent even an RV or tent to live in the forest anywhere else. If you would have been willing to pay $500 rent for the right to live in this cabin (and many are rented out for market rates), you actually saved $450 a month or $5,400 by owning the leasehold rather than paying simple rent. If you sell for $47,500 (19/20th of the price you paid), you are still $2,900 ahead of where you would have been if you had rented the property.
If you buy one of these leasehold cabins, you will not be buying and will not own the land or the cabin itself. You will only be buying and owning rights to use the land and improvements, together with the right to make certain improvements that your landlord accepts.
You won’t be buying and owning 100% of the rights to the land. But you will own more than 0% of the rights. The leasehold ownership system is an ‘in between’ system, that allows people to buy and own some rights to land without buying and owning all rights.
Who Owns The Land?
If you buy a leasehold on a national forest, you may think that someone must own the land and the cabin.
After all, someone owns everything in our world today, don’t they? The Forest Service may not be the owner, you may not be the owner, but someone must be the owner, right?
This is where Roosevelt and his lawyer friends and relatives have made things very confusing. Roosevelt knew that if anyone had the right to sell this land, the corporations would find ways to buy it. The best way to make sure that the Forest Service never sold the land would be to make sure the Forest Service never owned the land in the first place.
Roosevelt made this happen by setting up a new relationship with the land that he called a ‘conservatorship.’
The American native people who still lived freely in the west when Roosevelt first visited western lands were basically interacting with the land as conservators. They didn’t own the land, and so they didn’t have any authority to sell it (at least not in their own minds).
They were just there to take care of it.
Roosevelt wanted to set up the Forest Service to have the same basic relationship with the land as the American native people who had been taking care of the land for thousands of years before Europeans arrived.
Who does own the land?
Roosevelt knew a few legal tricks. He created something called a ‘public trust’ to hold the title to the land. The ‘trust’ would own the land and ‘the public’ would own the trust, so ‘the public’ would be the technical owners of this land. But the terms of the trust would make it so difficult for ‘the public’ to actually do any of the things that owners do that, for practical purposes, no one would be able to do the kinds of things that owners do to land.
The term ‘public’ is defined in such a way that it includes people who have not yet been born: the land is to be protected ‘for future generations to enjoy.’ Perhaps, if all members of ‘the public’ were to vote on the issue and consent to sell the land, it could be sold. But the great majority of the members of ‘the public’ (as defined by Roosevelt) have not yet been born and therefore can’t consent to anything. You might say that the land is technically owned by ‘the public’ but, in practice, no one owns this land: it is unowned and unownable.
Partial Ownability Societies
Our group in Pastland is in a position to form any kind of society we want. We have seen that we can interact with the land in extreme ways, allowing 100% ownability or 0% ownability, but neither of these systems will meet the long-term needs of the human race. If we want a partial ownability system, we can build one. In fact, we can choose from a great many different types of partial ownability societies, with different ‘degrees of ownability’ of the world.
What ‘degree of ownability’ do we want?
We might choose a high degree of ownability, one that is close to 100% ownability but not identical; we would expect systems that are close to 100% ownability systems to work almost identically to sovereignty-based societies, with only minor differences.
We might choose a low degree of ownability, one that is close to 0%. We would expect systems that are close to 0% ownability systems to work almost identically to sovereignty-based societies, with only minor differences.
We could also choose somewhere that is not close to either extreme system. If we do this, we will end up with property control that is entirely different than the property control systems that we have now. If we use these systems as a foundation for our societies, we will end up with societies that operate entirely differently than the societies that have existed in the past.
If we want something in between, it makes sense to come to understand the different options. It turns out that, due to a rather strange set of circumstances, there is one place in the world where people commonly buy rights that are very close to the middle of the range. Let’s look at this system so we can see how it works:
Roosevelt created a partial ownability society for a specific reason: he wanted to protect the land, while still making it available for use. Other people have put together partial ownability systems for entirely different purposes. Since they had something else in mind when they built these other systems, they set them up different ways.
One important example of this involves the current United States state of Hawaii.
In the late 1800s and early 1900s, five massive corporations gained ownership of the great bulk of the land on the island chain. These companies originally used the land to raise tropical crops. Most of their markets were on the east coast of the United States, a very long distance from Hawaii. In the 1950s, these corporations got tropical land that could raise the same crops in Central America, which was much closer to their markets. They moved their agricultural operations to these new locations. They found themselves with a lot of land in Hawaii that wasn’t generating revenue for them. They began to look for new uses for this land.
They didn’t want to sell the land.
Land is forever. If you sell it for a pile of money, the money will eventually be gone and spent. But if you keep it in the form of land, you have something that will always be there. The owners of the corporations wanted to keep the land, but they wanted to make money from it over time.
Hawaii has one of the best climates in the world with an almost perfect climate year-round. If they had nice facilities, including hotels, resorts, condos, and shopping malls, people would pay a lot to live there. The ‘big five corporations of Hawaii’ wanted to have other companies and private investors come to the islands and invest their own money to build these facilities on the land that the big five corporations owned. The owners of these corporations wanted to turn the islands into a paradise that would belong to them.
They hired professionals to help them analyze ways to make this happen. They eventually found that they could use leasehold ownership to grant partial rights to the land that would allow private individuals to come in, invest their own money in the property and improve so that, when the leasehold was renewed, the rights to use the property would be worth more money and they could increase the leasehold payment rates, causing the income of the big five corporations to go up and up and up as time passed.
Roosevelt set up a leasehold ownership system to protect the land. The big five of Hawaii set up a leasehold ownership system for a different reason: they wanted to collect revenue from the land and wanted outsiders to come in and invest massively to improve the land so it would generate more income for the big five. The owners of the corporations were incredibly rich already, but they wanted to get even richer.
Here in Pastland, we are in a position to form any kind of society we want. If we decide we don’t want absolute ownability (a sovereignty-based society) and don’t want absolute unownability (a natural law society) we can choose a partial ownability system. There are actually a lot of different ways to set up partial ownability systems. Some of them work in ways that preserve and protect the land and don’t have any particularly valuable rewards for improvements (but still offer more rewards than natural law societies, which don’t offer any). Other systems focus less on protecting the land and more on creating incentives that encourage investment, progress, and improvement. Before we make a final decision here in Pastland, we might want to know more about our options, by coming to understand the partial ownability structures that we know are workable because they are currently in place and operating. Let’s consider a system that was designed around entirely different goals than the system that Roosevelt set up to protect forests:
Freehold And Leasehold Ownership in Hawaii
If you want to live in Hawaii today, you can.
If you want your own home there, you can have it.
But you almost certainly aren’t going to be able to buy a ‘freehold title’ to a home, which will allow you to own the home ‘free and clear.’ There are almost no homes available with this kind of ownership and they are so expensive that very few people can afford them. If you want your own home in Hawaii, someplace you can live and improve to fit your needs, you will probably have to buy a leasehold on a property that is offered by one of the big five corporations of Hawaii.
Because there are two kinds of ownership in Hawaii, if you want to buy something there you have to specify what kind of property rights you want to buy so your agent will know what kinds of properties to show you. Most properties offered for sale in Hawaii are offered with leasehold ownership. Some are offered with freehold ownership. Prices for freeholds are extremely high and there are very few available, so unless you are among the super rich, you will probably have to focus on leasehold properties.
If you buy a condo or home or some other property with leasehold ownership, you will not end up owning the land or even the improvements on the land. One of the big five corporations owns it and these owners are not selling, for any price. You will be buying a permission slip generated by the owner. This slip grants you certain rights to the property. The exact rights you will own are specified on the documents you sign on the closing and vary from property to property. But, in general, you will own the right to use the land as a private residence with the full protections of the law that go to owners of private property, provided you follow the rules of the landlord (the freehold owner of the property, meaning whichever of the big five corporations owns that part of the world). You will own the right to improve the leasehold as long as you get the proper permits from the proper government agencies and the improvements meet the standards of the landlord as specified in the leasehold document. You will own the right to renew the leasehold, provided you agree to have the property assessed and to determine if a higher leasehold payment is justified, and agree to pay the increases levied at the renewal. You will also own the right to sell all of these rights to buyers who meet the standards of the landlords.
The leaseholds are set up so that the total monthly payments, which include both the monthly leasehold payment and the mortgage on the price, are affordable to people who want to have something they can treat as their own (they can improve them; this is normally not allowed for rented properties). Most people looking for housing care about their monthly payment. If they like the property and can afford the payment, they buy; if not, they don’t. Because most people who want to live in Hawaii can’t afford the payments on freeholds, but can afford them on leaseholds, most buy leaseholds.
We happen to have someone in our group in Pastland who has experience with different land control systems.
Her name is Frances. Frances got her bachelor’s degree in land management and did Ph.D. work in a field called ‘land tenure systems.’ The word ‘tenure’ is from the Latin verb ‘tenere,’ which means ‘to have or to hold’. Land tenure refers to the different ways that people can ‘have or hold’ land. It basically is a study of the different ways that we human beings can interact with the planet around us.
Freehold ownership is a land tenure system. Because leasehold ownership can be set up many different ways, leasehold ownership is basically a large group of land tenure systems. The pre-conquest American people interacted with the land and had land tenure systems. (They didn’t own the land, but they used it. Any interaction between humans and land is a form of land tenure.)
Frances was interested in all land tenure systems. She studied all of the tenure systems that she could verify existed in the past, together with many that didn’t exist but which scientists in her field realized could exist if we wanted to have them.
Frances has a lot of background in many aspects of the field. For her Ph.D., she studied the land tenure system of the pre-conquest American people. During the period of the conquest itself, the conquering governments discouraged any study of or even any interaction with these people. (They were the enemy. The government wanted them defeated and any objective analysis would tend to generate empathy for them that would harm the morale of the fighting troops.) The conquering governments wanted to take away everything from these people, and didn’t want people standing in their way, possibly trying to protect them or their way of life. The more people knew about these people and their societies, the more likely people would be to protest the government activities, so the governments did their best to keep any legitimate researchers from being involved.
Now that the conquest is over, people are starting to study these things. They are finding that many natural law societies actually had some rather complex systems of interacting with the land that allowed the people in them to meet their needs without having to accept ownability of the land. Frances studied these systems.
After she got her Ph.D., she went to work as a consultant for conservatorship organizations like the Forest Service, park services around the world, and private conservatorship organizations like the Nature Conservancy. She helped these organizations put together systems that encouraged conservation but still allowed the people trying to take care of the land to generate revenue from the land and make improvements that didn’t harm it. Many of the systems she set up to make this happen involved creating partial ownability societies and leasehold ownership systems.
Then she went to Hawaii and met some people from Castle and Cooke, the largest of the big five corporations of Hawaii. The company uses leasehold ownership systems on nearly all of its properties. There are many different ways to set up leasehold ownership.
As soon as she got to the company, she started looking at the different systems the company had set up for different kinds of properties. She found that the company actually owned so much land that it had lost track of a great deal of it. A lot of its land was just sitting there, doing nothing, not being cared for or protected and not generating any revenue at all for the company.
Most people in management positions at Castle and Cooke get most of their income from bonuses. Frances knew that if she could do things that increased the income the company generates, she would be well rewarded for this. She wanted to get this ‘ignored’ land generating revenue for the company and get people involved with it that would protect it and improve it, so that it would generate even higher revenues for the company later. She started with a little rice farm that was almost identical to the Pastland Farm.
Please try to bear with me. I will have to explain a lot of fairly complex things to make sure that every single base is covered (critics of change are always looking for weaknesses in arguments that claim a better society is possible). This will include discussions of interest rates, money markets, types of property deeds and titles, and the forces that determine the prices of ownership rights to farms and other productive properties when they are offered in markets. You don’t need to understand all of the details to know that we can have societies without problems that threaten us (and therefore prevent extinction) but you do have to be convinced that these structures are not fanciful figments of a utopian imagination, but are very real structures that work in totally understandable ways.