Wednesday, April 19, 2017

Fraud in a Private Property Society

By Robert Wenzel

There is quite a debate in the comment section of the post, The Moral Foundations of a Free Market Society, as to whether fraud is "inherently wrong."

First, I don't think anything is "inherently wrong."

I am with Henry Hazlitt on this and don't believe there are such things as "natural rights."

That said, there are plenty of reasons not to lie, cheat and steal and plenty of reasons to protect oneself in exchanges from those who lie, cheat and steal. One may not lie, cheat or steal because one believes in a certain religious code. One may not lie, cheat or steal because one realizes that this is the best way to gain the most in exchanges in the long-run.

According to the definition of fraud is:
deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage.
Basically, fraud is
a case of lying, cheating or stealing in a transaction.

This would not be a difficult problem to solve in a Private Property Society. There would certainly be plenty of property owners who would say, "lying, cheating or stealing via a transaction is not allowed here."

Indeed, it would be difficult to think of a mall or retail store that wouldn't operate under these terms.

Who would shop at a store where lying about products is an allowable practice?

Case solved.

This eliminates completely the debate at the above-referenced post where comments were made such as:
Fraud is not per se aggressive whereas murder and theft are. Fraud is merely deception. Is there to be a positive obligation on all to be “honest”?
A libertarian society, or as I call it a Private Property Society, would not be a form of the wild west where anything would go almost everywhere. Just because there is no "government law" or "natural right" to protect someone doesn't mean that most people are going to allow aberrant behavior on their property.

There is no reason to divine what is "inherently wrong" or debate "positive obligations" in a PPS. The owner sets the rules for his property---any way he wants

To be sure, there could be areas where all kinds of nutjobs roam but sane people are just going to stay out of "bad areas" just like they do now.

This is not complicated stuff where all kinds of determinations must be made as to what is a "violation" of some abstract guideline and what is not. Each property owner gets to set his own rules, which I suspect will result in some degree of rough uniformity over time.

The key difference between a PPS and a government set of laws is that in a PPS each property owner gets to set his own rules and this means that if he so chooses he can base his rules on what he thinks is "inherently" right or wrong, on "positive obligations" or phases of the moon for that matter. The key being that no other property owner is required on one's own property to honor such laws.

And I want to emphasize there may be some yahoos who have some pretty insane laws for their properties, The thing would be to stay away from such properties, Again, not complicated. But to think government or some cultural values must have a ruling power over private property is the first step away from freedom. And once a step is taken in that direction, it is very difficult to reverse because most have a pet law or cultural value that they want to be instituted on all property. And then the battles begin: Which rules, which laws, which cultural values should be imposed on everyone.

Freedom is always about moving toward PPS. 

Robert Wenzel is Editor & Publisher of and Target Liberty. He also writes EPJ Daily Alert and is author of The Fed Flunks: My Speech at the New York Federal Reserve Bank. Follow him on twitter:@wenzeleconomics, on LinkedIn and Facebook. The Robert Wenzel podcast is on  iphone and stitcher.


  1. Bob,

    "According to the definition of fraud is:
    deceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonest advantage.

    Basically, fraud is a case of lying, cheating or stealing in a transaction."

    No, fraud is not "a case of stealing in a transaction." There is a difference between theft and fraud- namely, the element of aggression. Theft is "the action or crime of stealing"; fraud is "wrongful or criminal deception":

    The claim that deception is aggression is entirely mystical.

    1. Wenzel spends an entire post showing why this type hairsplitting wouldn't matter in a PPS and yet you are obsessed with hairsplitting.

      In a PPS your property would be one strange and lonely place.

    2. Rick, I'm not sure you're pointing out any distinction. Theft is the taking of someone's property without their consent. In a fraudulent transaction, that's exactly what happens. A consents to transfer title in his money to B on the condition that B transfers his title in what is represented by B as a Widget 2.0. If in fact what B transfers to A is a Widget 1.0, then B has received A's money but the condition to consensual transfer of title in that money has failed, and thus if B keeps A's money he has taken it without A's consent.

      While it's true that theft generally is thought of as taking someone's property when they're not there, whereas fraud involves what looks like an exchange, the NAP analysis is substantially the same: the thief/fraudster has someone else's property without their consent.

  2. Very interesting column, RW. In this PPS, suppose that Crazy Harry owns some land and has a rule that anyone who enters his land must be bare-headed, or he/she will be shot dead. This rule is posted at various places on the border of his land. Locals are well aware of Harry's crazy rules, and carefully avoid his property. However, George arrives on a train from the East Coast, and, through a cruel twist of fate, blunders onto Harry's land, having failed to see any of Harry's signs. Harry shoots George dead (did I mention that George is wearing a hat?). George's relatives are somewhat put out by this sequence of events. Do they, should they, have recourse against Harry?

    1. Crazy Harry has been addressed as a nutjob. See:


      So ... too bad for George, and his family can pound sand. Maybe it's worth the price to get rid of government. In practice, perhaps Harry's neighbors would put up their own signs warning the unwary not to venture onto his property, just to avoid being horrified by the occasional stranger getting executed.

    3. I assume Crazy Harry needs an easement to leave his property or have other people come in with food and water. Just starve him out unless and until he agrees to operate based upon "community standards".

      Presently, you would just arrest him and drag him away. The NAP prohibits that but you are not without a sanction to enforce good behavior.

    4. I'm not happy with the "starve him out" option: a small number of people might own land completely surrounding Slightly Strange Sam, for example, and might capriciously decide to literally starve him. I would think that people would not want to purchase property without some kind of guaranteed means of passage in and out, to avoid just that kind of situation.


    "Fraud is most common in the buying or selling of property, including real estate, Personal Property, and intangible property, such as stocks, bonds, and copyrights...

    Fraud must be proved by showing that the defendant's actions involved five separate elements: (1) a false statement of a material fact,(2) knowledge on the part of the defendant that the statement is untrue, (3) intent on the part of the defendant to deceive the alleged victim, (4) justifiable reliance by the alleged victim on the statement, and (5) injury to the alleged victim as a result."

  4. Fraud is a violation of NAP. The government should use The State to punish violations of NAP and only violations of NAP. PPS Society is crazy as property owners can change their rules whenever they want to and on a whim. Might as well call it the Red Queen Society.

    1. Right now the state can change the rules whenever it wants (legislation, regulation, executive discretion). Its rules don't conform with the NAP and are arbitrary. And it enforces those rules using money and resources confiscated from private property owners.

      If you have a state punishing NAP violators, there is a huge contradiction as the state first has to violate the NAP to gather the resources necessary to punish violators. To paraphrase Hoppe, the so-called rights protector is the biggest rights violator.

    2. Simple fix. The new constitution says Government shall make no law or other rules that violate NAP.

      Laws are OK with me so long as they are useful, ie do not violate NAP. For instance, a law that bans fraud or homicide are ok. PPS says no law.

    3. But the government asserts for itself the power to interpret the constitution, and to rob its citizens (collect taxes) in violation of the NAP to pay for its interpretative and enforcement powers. Thus its powers expand without limit. As they have since 1788. If you have a monopoly provider of law, just as with a monopoly provider of anything, the cost increases and the service decreases, and there no limits.

      It is wrong to say that "PPS says no law." PPS provides competing systems of law. "Law" is merely a framework to resolve disputes. There is nothing inherent in that concept that requires a monopolist provide it.