 All things can be coded as capital with the right legal coding. An asset is any object, a piece of land, a car, a cow, a plow, that I can flip into a capital asset. But it could also be a promise to future payment. I promise you to give you $100 tomorrow and you might promise to give it back. Ideas, know-how. I know how to develop a machine. I have an idea about how to manipulate a genetic code. I created a wonderful composition of music. The law gives a comparative advantage to the holders of assets relative to others who don't have the same legal coding. It's not just the stuff that we're coding, it's in the code. That's the point. It all started with land. Land has been used for millennia by people to grow their crops, harvest fruit, graze their cattle. They've buried their ancestors. We also use the land to create housing, to build buildings, to build office space, to create roads and railroads. We're using land for recreation purposes. We go into parks and use land as well. So there are many different uses of the land. Not all of them necessarily are meant to create private wealth. But the wealth creation aspect has taken over and that's why we see a particular form of legal coding of land as well. But who decides how we should use the land? It could be me, it could be you, it could be your grandfather, it could be some kind of other authority. Who should decide? That's really the fundamental question that the legal system is trying to answer. How it answers this? Who has the better right relative to others? Who can go to a court maybe and enforce her claim against others who have competing claims that will ultimately decide who has the better right and maybe who can monetize his or her right to the piece of land. I want to tell you a story about the Maya of Belize. Indigenous people who have lived on the territory that is now the state of Belize for centuries and they have practiced for centuries certain collective use rights. They decided together or they still decide together today how to use the land, whether to grow in a given year or maybe whether to lay the land fallow, whether to grow trees or crops, whether to bury the ancestor and where to bury the ancestors. There were no property rights, there is no property register. Now the government of Belize which became independent from the United Kingdom in 1981 decided that it would dole out licenses to harvest the natural resources underneath the land where the Maya lived. And it said I can do this because it's actually our land, it's the government's land, it's not the Maya's land. So who's right? That's the fundamental question. Now the Maya had been there before the Brits, the Maya had been there before the independent government of Belize of course and the Maya said actually it's our land. We've lived there for centuries, we have collective use practices and we believe that our use practices shall be recognized by the government and the courts of Belize as a property right under the constitution of Belize. So can they do that? Well they tried, they tried very hard. They first went to the courts in the 1990s and no one would give them a hearing, the courts would just ignore their claim. Then they went to the Inter-American Commission on Human Rights which is a regional tribunal and there they won. The Inter-American Commission on Human Rights says actually you have a right to the land, it is protected as a human right and the government of Belize shall protect you. The glitch here is that the international human rights law doesn't have a direct bearing on what the domestic law enforcement agencies or even the government of Belize does. So the Maya went back into the local court system and this time they got a hearing. So they looked at the evidence. They had anthropologists come in and said yes, they have practiced the same use rights for centuries. Sometimes they were dispossessed by the colonial powers or by the government but by and large they have lived here for centuries, done the same thing over and over again. So the court said okay these are the facts, they are the same thing, but is this a property right? How do you find out? The government of course repeated its argument, says no, they don't have a property right, they are not registered. So the court in the end decided to take a very close look at the Belize Constitution which simply says every person has a right to protection from arbitrary deprivation of property. It also says no property of any description shall be compulsory, acquired, except by or under law. It doesn't say what property is. The constitutions don't say what property is. They assume property. And that's something important to understand. The de facto property rights that came before the constitutions are very often incorporated wholesale in the constitutions that we have today. That's why people always claim this is ours. It's almost naturally ours. But there was a decision made to simply recognize what was property as property under a new law. So the court wiggled around this a little bit and said how do we define this? They said there are also other provisions in the constitutions that actually protect indigenous people that say that the identity, dignity, and social and cultural values of all peoples of Belize shall be protected. Then they also took a look into the property law of Belize which is underneath the Constitution. It's actually determined by the Constitution but we use it now to interpret the Constitution. There it says anything in action and any interest in real and personal property is property. So they gave the Maya the right. They said a collective use right is protected under the property rights protection of the Belize Constitution. Now this is a great victory. A great victory in the law for indigenous people. It wasn't the first in Australia, Canada, New Zealand, other places where we still have indigenous people. Many court cases have been battled over the last two decades and finally indigenous people got their right. They weren't compensated. And in fact in the case of Belize the government it shows to ignore the court ruling and continue to hand out licenses to investors. So in the end the law counts only if you can also enforce it. It's always hard to enforce the law against the government because the government controls the coercive powers and you need to harness the coercive powers to enforce your claims but it's nonetheless an important lesson that we can define property in many different ways. Let's just take a ride back in time and look into the 16th and 17th century in England and look at the enclosure movement there because just with the Maya centuries ago the commoners in England were dispossessed from their land. So you had a situation where you had landlords and you had many peasants, we call them the commoners because they also used the land, the commonly owned land according to use practices that they just grew into. There were no titles. Then in the beginning of the 16th century the landlords realized that if they didn't share the land with the commoners as they used to they might actually make more money because they realized if they grew cash crops rather than just use the land to graze cattle they could sell the cash crops into the cities and make money or they could simply use the land to graze sheep take the wool from the sheep and put them into the textile factories. That's where money could be made and they decided to build fences and to grow hedges and not to open the gates anymore when the commoners wanted to come and graze that cattle. What did the commoners do? Well they broke the fences and they broke the hedges and they went on to the property and plowed over the crops that had been planted. In the end this physical battle that also of course was violent to some extent the physical battle however ended up in the courts. The court's written procedure the commoners very often didn't know how to read or write they needed to have somebody to write this down that already put them into a disadvantage. Many courts said actually we don't hear collective rights you don't have standing as the technical word for it you can't come to court with the collective rights we hear individual rights. Nonetheless many courts actually did hear the complaints from the commoners and for about a century actually the battle went back and forth. There was no clear evidence there was no document that gave the landlords the superior right it had to be argued in court. Ultimately the winning argument for the landlords was to say since time immemorial we had the better right we just granted the commoners the right to use the land we have the right to take it back and we're now taking it back. That basically was created a legal precedent it fundamentally altered property rights the new land in England in the 16th century through a gradual process of case law there was no property right well defined before it was defined through these battles. Property rights just don't exist in a certain form they are being created, they are socially contested economically and politically contested. Another story about the land we're talking about colonialism. The settlers from England went to North America to Australia to New Zealand and they occupied the land in here and the argument we were here first and we always had the better right because we were here first couldn't count because obviously the indigenous people of these new territories had been there first. So what did they say now? Now they had a new argument one that John Locke wrote about and John Locke basically created this labor theory of value if you put your labor together with some object a piece of land if you cultivate the land and improve the land then the land is yours and so they said the indigenous people don't know what they're doing they don't have property rights they might gray some cattle or their horses or whatever on the land but they don't really own the land but we are now settling here and we are cultivating the land we are improving the land the land is ours so a new creation of property right again. So what is property rights? As you can see you can define it in many different ways many people say it might be innate because even a little baby will say this is mine but that's a little bit too simple because we socialize babies to respect the rights of others and as you see in the case of the Maya they had collective use practices and babies would grow into these institutions as well. William Blackstone the lawyer credited with writing down the laws of England that were then transposed to North America William Blackstone said that property is that soul and despotic dominion it's an absolute right inherent in every English man the US constitution that came later of course has had no specific provisions on property rights in general but the 5th amendment and also the 14th amendment said something about property no person shall be deprived of life, liberty or property without due process of law nor shall property be taken for public use without just compensation again property is assumed it's not defined the German constitution is an interesting case I mentioned this here because it's one of the very few constitutions that actually say something about who has the right to create property property and the right of inheritance shall be guaranteed but then there's another sentence that says their content and limits shall be defined by the laws legislatures tell you what the contents and limits of property is it's not just a given it's something that we can create over time once you have set the groundwork for property rights in a constitution in property law property law is still not fixed it changes over time it changes because people dispute what it actually means there's a little doubt that once you have developed a property right that tells you as a land lord you really own the land and you can control the land that you have physical possession of the land if I own a cow I can touch it and I can put it in my barn I have physical control over that cow that's kind of a right to possession that's very often identified with the property right even though there's a slight little difference between the two but over time the question came up if I have a business and I can't use my business for a while the government doesn't take it away but it might build a road in front of the business I can't use the business for three months I'm losing profits can I say that I have a property right to this profit and lo and behold courts eventually said yes so the expected value of using a business becomes a property right it's nowhere written in the constitution people didn't think about this in the 16th century but they did in the 19th and 20th century and courts recognized this as a property right over time people try to push a particular understanding of property rights which is the understanding that most people have which is a little bit like Blackstone's despotic dominion what is mine is mine and nobody can take it away from me it is an individual right it is a right that gives you the right to exclude others it's not only tangible use right but it's all about expected returns expected value as well think about the Maya the Maya didn't want to sell the land they didn't want to monetize the land they just wanted to practice their use practices their culture on the land and that basically questioned in the eyes of many whether they should have a property because property nowadays is understood as an asset that can be alienated you exclude others and you can extract the value of the asset just for yourself that's the quintessential definition of property rights in capitalism but it could also be different let me switch from land to something more abstract ideas, knowledge or art the US constitution which assumes property in the fifth amendment that we read earlier says explicitly that congress can actually create property rights to promote the arts and to promote the sciences and create intellectual property rights recognizing that these rights don't exist outside the law they have to be created in the law with land we assume actually that it was already there before the constitution came about which is not true but nonetheless I think the intellectual property rights the idea of using know-how or ideas or art as examples really brings home the point that property rights have to be created before they can possibly exist so what's the difference between a piece of land or a cow or a car and an idea well the first is that you and I we can share an idea and nobody takes away something from the other intellectual property rights as economists would say are non-rivorous we could share all ideas, everybody can use them it's not like I eat your apple pie and you can no longer eat it as well we can share, you can be the owner of the land you can still rent it to others you can have temporal use rights it's more complicated than this very primitive idea of this is mine, I exclude everybody else but with intellectual property rights with arts and ideas is I think even clearer that we could share all human knowledge that we have accumulated over millennia and perhaps everybody would be better off the one thing that we could not do if we did this was to monetize the value of these ideas of the know-how because if everybody shares it nobody will pay for accessing it or another that's the real problem if we want to capitalize knowledge, ideas even art then we have to enclose it first as we enclose land with fences and hedges but ultimately with legal title we are enclosing intellectual property rights patents, copyrights, trademarks with the help of the law once you have registered a patent you can take this registration show others you have the exclusive right to use this particular idea you can get a lawyer to write cease and desist orders and force others not to use the same idea but you need the legal system to do so that raises of course the question how far this goes how much power should a patent holder a copyright holder, a trademark holder have what is patentable what kind of monopolies can we create about a century ago Justice Brandeis formulated that there is a general rule of law that is that the noblest of human productions namely knowledge, truths, conceptions and ideas become after voluntary communication to others free as the air to common use so he basically said there are certain things that you can't monopolize you can't appropriate for yourself fundamental truth you can't appropriate for yourself nature but what if you manipulate nature a little bit what if you not only discover an algorithm but maybe you sort of write down a completely new formula how far can we go in saying we want to credit human ingenuity by giving them intellectual property rights and where do we draw the line actually it's a human resource it belongs to all of humanity it doesn't belong to an individual let me tell you a story about Angelina Jolie she wrote an op-ed in 2013 in the New York Times in which she revealed that she had just had a double mastectomy and the reason was that she underwent a test to find out whether she had the same genetic defect that would give her a reasonably high probability of getting breast cancer of a very aggressive type so she decided to have a mastectomy to avoid getting that disease ever she also alluded to the fact in this op-ed that the test that she had to do to discover whether she was a carrier of this gene cost $3,000 the story behind that is that a consortium of scientists at the National Institutes of Health at other institutions around the world funded mostly by government Monday had actually discovered the gene that causes this specific form of breast cancer they published this in a famous scientific journal so that was now to see for the rest of the world that's the kind of knowledge that we share with everybody but also everybody knew that in order to identify the gene in individual patients and maybe to develop diagnosis in the future you need the sequence of the genes and there was a competition again scientists funded by governments went out and tried to identify the sequence but so did a small little private company Mirage Genetics in Utah which got venture capital money and said we'll try the same they were first and then with their discovery of the sequence that went to the US patent office making the case that it was their own ingenuity the particular methods by which they had discovered this and also a little bit of a manipulation of a certain aspect of the genetic code that they should have a patent and they were granted the patent in 1994 the result was that the company then wrote letters to doctors and hospitals, clinics the scientists that they could no longer use whatever kits they might have developed themselves to test for the gene but they now had to exclusively use the test kit that Mirage Genetics had developed because now they had the patent they had a monopoly right they could use the monopoly right to say you have to use this and of course you have to pay our fees at some point the doctors and scientists organized themselves and started litigating against them and said this doesn't make sense we're talking about the human genetic code it makes no sense that a private little company can appropriate that knowledge for itself force us to use that kit and force these costs on the patients and of course the health insurance system as well so they sued. In the end in 2013 the US Supreme Court overturned the patent 2013 they got the patent in 1994 20 years of making money not the entire patent was struck down but by and large it was struck down but the court also made absolutely clear that whenever there was some sort of human intervention like a synthetic CDNA it was different from what we find in nature or if humans were to manipulate the genome in the future that this might still be patentable they wouldn't speak about this right now the company did remarkably well nonetheless because they had forced everybody to use that kit they had the database you know how important data is today they created a huge database of women that had been tested for breast cancer that's the largest database and at some point in the early 2000s they decided to no longer share that database with others it was theirs, it was their monopoly and so people continued to use the kit and people continued to send them to that particular company because having a big database makes all the difference in diagnosing genetic defects in your patient so some people have called this a data creating patent or data generating patent so use a patent you get a temporal monopoly you might even have it shorter than what the law says because it might be struck down by a chord but in the interim you can use it to create a big database and now you have the monopoly over the database and that's your new monopoly and that has no time limit so here you can see how the law allows congress to create a patent law how the law is extensively interpreted by the lawyers who want to help a company, a client like mirror genetics to patent a particular invention when you have a right in private law that has been recognized by the law it can be challenged but somebody has to challenge it it has to be a competitor and that means that if you are an aggressive coder of capital you always have a first mover advantage you can capitalize on your rights as long as you still have the right and when it's struck down nobody asks you to crawl back and share the money that you've made you can make a lot of money in the meantime and it's yours forever for the time that you can claim this was a property right that had been recognized in law