Property rights foundation of economic & social progress

February 20, 2009

New Zealanders’  high level of home ownership ought to ensure a high regard for property rights but this is disputed in a paper by Professor Lewis Evans and Professor Neil Quigley of the Institute for the Study of Competition and Regulation at Victoria University of Wellington with Kevin Counsell of NERA Economic Consulting.

Protection of Property Rights and Just Compensation argues that we have a poor record of safeguarding property rights and puts the case for including them in the Bill of Rights Act because they are a human right and essential for economic and social progress.

The authors undertook five case studies of the harm done by the current lack of protection of property rights, one of which looked at the confiscation of the value of crown pastoral leases and concluded:

In our view this taking of the lessee’s property right should be possible only if the lessee is compensated for the loss of income. This conclusion holds whether the taking is actually the destruction of the economic viability of the lessee’s pastoral farming by the change in the rent, or whether it is the taking of public access rights or conservation land in exchange for remission of the new rental charges back to the level at which pastoral farming is viable.

Another case study of particular relevance to rural property owners was on the destruction of value of pre-1990 forests under the Emissions Trading Scheme. But a threat to any property right is a threat to all so the other case studies are equally interesting: the destruction of Maori land value by Crown pre-emption rights; the nationalisation of petroleum; the confiscation of the foreshore and seabed; and the attack on the value of shares in Auckland International Airport Ltd.

The study looks at legislation which devolves the ability to take property rights:


The RMA is particularly notable for the power that it provides for local body administrators to routinely set aside private property rights without compensation.


The authors also took issue with Fish and Games’ challenge to pastoral leaseholders’ right to exclusive use of their land.

. . . Fish and Game New Zealand is advocating confiscation of rights which Crown pastoral lessees have long presumed that they held (albeit that this is to be determined by the courts). . . because Fish and Game is taxpayer funded, its actions illustrate the substantial asymmetry that may exist between rights holders and special interest groups who ‘represent’ popular causes that are supported by politicians: the resources of the latter are very often vastly in excess of those of the rights holders. . . property rights are a solution to the problem of the commons created by open access. Overriding rights of exclusive occupation will create an outdoor commons that will itself require regulation and inhibit socially desirable multiple-use activities in a world of increasing scarcity.


Investment and growth depend on confidence. Safeguards to property rights would give businesses and individuals greater confidence to invest and from that would come growth with obvious economic and social benefits.


HAT TIP: Matthew Hooton & the Exceltium Quarterly.

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