The Jubilee Laws

“Proclaim liberty throughout all the land and unto all the inhabitants thereof.” These are the words inscribed on the Liberty Bell. Today they ring like feel good fluff to commemorate a nation liberated from a far away king, but that was not their original purpose, nor was it the reason they were inscribed on the bell. The words come from Chapter 25 of Leviticus. It behooves all who love liberty to read this chapter carefully, for it contains the keys to make liberty work for centuries at a time, to prevent the descent into oligarchy or the converse evils of socialism or a bureaucratic welfare state.

In ancient times freedom as we know it was an alienable right. You could legally pawn your own freedom, and if you did not pay your debt in time, you became a servant. But the Law of Moses made loss of freedom temporary for most Hebrews. Every seven years – every sabbath year – debts were cancelled and Hebrew servants were freed (save for those who married their masters or took a wife while enslaved). Today we may consider the arrangement barbarous, but let us pause to observe its benefits. Hebrews were entitled to zero interest loans in return for putting up their freedom as pledge. Freedom, including free agency, was the default. Today, wage serfdom is the default, a state between free agency and outright servitude.

The passage above speaks of an even broader definition of freedom. Leviticus 25 details the Jubilee Laws. After seven sabbath years, the Israelites were to celebrate an extra Sabbath year: the Jubilee year. On this year not only were people freed, the land was freed as well. How this was done provides keys to community, childcare, secure retirement, and a large volunteer army. Why this was done exposes the missing link in libertarian natural rights theory, as well as why classical liberalism failed the poor and why so many still clamor for communism despite its repeated failures. This important principle, this key to sustainable liberty, can be summarized in one sentence:

The Land Belongs to God

Every seven years the Israelites were commanded to let the land rest, to neither plant nor prune. They were to live off what the land provided on its own during the Sabbath years. After seven Sabbath years, they were to let the land rest an extra year, and on that year the land was returned to its owners by virtue of inheritance. Even during years that farmers worked the land, the poor could legally eat in the fields plucking grains and grapes by hand, just as everyone was told to do during the Sabbath years. Finally, farmers had to pay tithes from their harvests and sacrifice the firstborn animals from their herds. All these practices point to one idea: land has value in and of itself, and the Creator created that value.

To understand the importance of this idea, let us look at natural rights theorists who downplay the inherent value of land: most radical libertarians. While radical libertarians are a tiny minority, their ideas are a purified form of ideas that underlie our republic, and are held in diluted form by many millions. A look at the purified form of an idea can expose both the beauties and the errors of its actual pragmatic implementation. The idea is spelled out in detail in Murray N. Rothbard’s The Ethics of Liberty. You can read it online for free following the link, or settle for my very brief summary.

Libertarian theory starts with the idea that you own yourself, but you cannot sell yourself. That is, self-ownership is an inalienable right. By extension, that which you create is yours. You can, however, sell or give away that which you produce of yourself. These ideas provide a foundation for personal property and self defense, and they rule out slavery, victimless crime laws, and taxation of labor and personal property. But they provide a shaky foundation for real property, for land.

The standard finesse is to note that many creative acts mix labor with land (and natural resources in general). For example, a farmer works hard to clear land and plow it to make it suitable for farming. Without land as property, the farmer cannot own the fruits of his labor. So the idea, going back to John Locke at least, is that first ownership of land goes to the person who first “improves” the land. This is a pretty good rule for Antarctica, the moon or the middle of the Sahara Desert. It fails for good land, for all the good land is already owned (by individuals, corporations or governments). And the right to “improve” what little good unimproved land that remains is quite valuable. Should we open up the state-owned beaches of the Outer Banks to anyone on a first come, first served basis? And what constitutes “improvement” anyway? Is a virgin forest “improved” by clear cutting? What of the population of wild game? Standard libertarian theory breaks down once we consider the inherent value of unimproved land (and other natural resources).

And as the world population grows, the marginal unimproved value of land and other natural resources grows. Those who claim that man made capital is now the primary pillar of our civilization are dead wrong, and the environmentalists are right: we do need to be very aware of the diminishing natural resources per person. Land has inherent value as we can easily see using the principle of revealed preference. Throughout history, men have fought and died over good land. Indeed, this is how the Israelites came into possession of their land: genocidal war. (The descendents of Abraham had to wait 400 years for the Amorites to commit sufficient iniquities to justify this harsh treatment [Genesis 15:13-16].) Then the land was divided up according to tribal population. And this division was made a perpetuity. Land passed through inheritance only. Farmland could be leased, but not sold. If your grandfather disliked farming, or if he was profligate and had to sell away his right to the family farm, the land came back to you on the year of Jubilee. Land, like freedom, could be alienated from Hebrews, but only for a limited time.

The Law of Moses made the distinction between Man-created and God-created wealth. The poor were allowed to pick the fruits of the field; they were not allowed to shoplift the tents of merchants. Farmers had to tithe the produce of their land. Craftsmen did not have to tithe the products of their workshops. (But they were to give freewill offerings as they were blessed [Deuteronomy 16:10].) Farmland could not be bought and sold outright. Land within walled cities could be. For within walled cities, most of the wealth was in what Man had wrought.

Some of you make think this is all vacuous moral philosophy, but it is not. The distinction between Man-created and God-created wealth has operational significance, and would even apply if God was a myth, a mere personification of Nature.

Runaway Wealth Gaps

Karl Marx complained about the runaway gap in wealth and power between laborers and owners of capital. According to Marx, capitalists exploited laborers which gave them more capital. Meanwhile, the lower laborers got paid, the harder they would work for capitalists in order to merely survive. Over time wealth would concentrate to a few or even just one business, at which time capitalism would crumble under its own internal contradictions and a dictatorship of the proletariat would nationalize the remaining business(es). As such, Marx predicted inevitable revolution in the most advanced capitalist nations.

He was wrong. Instead the first Marxist revolutions happened in agrarian nations: Russia and China. And to this day Marxism has its greatest appeal in economies dominated by agriculture and natural resource extraction. Marx had it backwards.

Capitalism does help the rich get richer. If you have capital, you can invest it to get more. We do indeed have a positive feedback mechanism which can widen the wealth gap. But when capitalists invest capital to make more capital, total capital increases. Society as a whole gets wealthier. The rich get richer but so do the poor. Not only that, as capital accumulates the return on investment drops. John Maynard Keynes bemoaned the phenomenon and called for measures to artificially create investment opportunities. Adam Smith celebrated the phenomenon and predicted that wages would naturally rise over time at the expense of profits.

Land ownership, on the other hand, can be a zero-sum game. The landowner with surplus land can rent out the extra land and invest the extra income in buying yet more land. Over time the rich get richer and the poor pay rent to the rich for the privilege of using what God has created. The wealthy landowner need not make any new improvements to the land in order to profit and accumulate more income generating property. He need only defend his ownership, be it by politics in nations where central government is strong (as in ancient Rome), or by private warfare where central government is weak (as in Medieval Europe).

As for the capitalist exploitation decried by Marx and Dickens, it was a symptom of land accumulation by the rich. While the rich in Britain long controlled the land through feudal grants, those grants provided some reciprocal protections for the peasants, protections which stood because the lords needed the peasants to work the land. When agricultural efficiencies increased, the estates morphed into modern land ownership, the feudal commons were fenced in, and peasants became paupers. Exploitation by capitalist factory owners was better than starving in the countryside. The capitalists were actually a progressive force, albeit marginally. If the peasants had their own land as a fallback, the factory owners would have had a higher market wage to bid against. They would have had to offer a better combination of wages and working conditions than the fallback of working on the family farm.

Conservatives take note: unchecked accumulation of land leads to plantation societies or feudalism, not capitalism. And when the upper caste loses its grip, the result is usually centralized dictatorship or worse. Caesar, Lenin, Napoleon, and Chavez are all the products of landless peasants looking to the central government as checks against local oppressors. Even in the United States, the descendents of oppressed agricultural laborers vote overwhelmingly for big government Democrats.

The Jubilee Laws provided a check against both feudalism and socialist centralization. With a large property-owning yeoman class, the idea of private property had plenty of defenders. So did the nation as a whole. The Hebrew anarchy followed by kingdoms managed to survive surrounded by empires in part because they had a large body of small farmers – rednecks if you will – who had a stake in the nation. When the Jubilee Laws fell out of favor, Israel and Judah were conquered by foreign empires. Conservatives should take note of this as well.

Modern Applications

We cannot obey the Jubilee Laws precisely. The original land division of Israel is long lost. We never had an equal land distribution in the United States. Indeed, we had just the opposite: huge land grants for those who lent the king money and no land for slaves dragged here from Africa. Other countries also lack an equal distribution to start with. And most moderns would find the idea of being tied to the family farm to be rather constraining to say the least.

Nonetheless, we can apply some of the underlying principles. The underlying value of land (and other preexisting aspects of nature such as oil, bandwidth, air rights of way, etc.) exists before human improvement. Tax it, and you cut down on what economists call rent-seeking. Unlike general taxes on income or property, taxes on rent-seeking activity can actually improve economic productivity. Taxes on natural resource consumption, such as tapping scarce groundwater, can be beneficial even if the tax money is spent stupidly.

The idea is not new. Adam Smith described the idea of taxing ground rent vs. property in general. Thomas Paine recommended taxing ground rent to provide a universal inheritance to all. Henry George made a political career out of calling for a “single tax” on the rental value of land minus human made improvements. See the Further Readings below for more details.

The idea of taxing land and distributing the proceeds gives most farmers and forest owners the willies – for good reason. Today, most real estate value is in towns, cities and right-of-ways. We are no longer an agrarian society. For this reason most modern advocates of redistributing ground rent include city land, right of ways, bandwidth, air pollution rights and other fixed natural constraints of modern civilization.

Ground rent can be calculated thus: take the market price of a piece of land and subtract the cost of the improvements (buildings, land clearing, etc.). Multiply this cost by the prevailing real rate of interest (interest minus inflation) and you have the ground rent. Many single tax advocates call for the government to collect and redistribute the entirety of the ground rent. This doesn’t work. Collect such a tax and the market price drops in response. Ground rent value suffers an uncertainty principle similar to that found in quantum mechanics. An attempt to tax away all ground makes ground rent value disappear from the market price.

We can better approximate the Jubilee Laws by taxing ground rent value with a deductible. Suppose we allow each adult citizen $50,000 worth of unimproved ground value tax free. Then the tax would be the greater of $0 or real interest rate * (market value – improvements - $50,000). Such a tax would preserve property values since there would be a market for land above the value of the improvements thereon. It would also tend to distribute property ownership vs. merely lowering other taxes or providing a source of free money to all citizens. We could expect a return of the small family farm, and we could encourage homeownership without the debt-encouraging/economy-destabilizing mortgage deduction. (Note: the $50,000 figure is illustrative. A more suitable figure would require some serious study by a well funded think tank, university, or government bureau.)

A few well-designed approximations to the ancient Jubilee laws could remedy with the worst defects of modern capitalism and crush the remaining calls for socialism as well. But the modern approximations still leave problems. The single tax contains a moral hazard with respect to population. And tying people to the family farm, while constraining and sometimes annoying, has its benefits as we’ll explore in the future.