We’d all like something for nothing. In the BBC comedy series Private Schulz, the Nazis plot to undermine the British economy by flooding the country with counterfeit currency. The hero parachutes into Britain carrying £2m of fake five-pound notes, and the fun begins.
How nice it would be to own a printing press that could produce fabulous amounts of money. Common sense tells us this would be immoral and wrong—a counterfeiter creates no real wealth himself and freeloads on the economic activity of others. It also tells us that society would stamp down hard on any form of economic freeloading. But common sense is mistaken.
The ability of individuals to make something for nothing is so pervasive that it even has a special name: “economic rent.” It was identified by the great eighteenth-century economist Adam Smith as one of the three main types of income. In The Wealth of Nations, Smith divided income into wages, profits and “rent.” He refers to “rent” in a way that confuses the modern reader, so I’ll use the term “economic freeloading.”
Freeloading, once it is recognised, provokes instinctive revulsion. Recent studies indicate human morality evolved partly as a response to the damage done by “free riders.” In primitive societies, anyone hitching a free ride was lethal to the social group, since hunter-gatherer existence required everyone to pull their weight. Humans had to develop a finely tuned sense of fairness and root out free riders, or their social group would become extinct. Most people (except Private Schulz) feel guilty when they hitch a free ride on others, and therefore avoid doing so.
One group engages in economic freeloading on a gigantic scale: landowners. This group, consisting of commercial property owners and private homeowners, sucks billions of pounds out of society each year. The average homeowner would be shocked and indignant at being described as a freeloader. A house is somewhere to live. Freeloading suggests some sort of sneaky behaviour, but those buying a home are overwhelmingly law-abiding and responsible, supporting themselves and their dependents without calling on assistance from the state. But the tax system makes them freeloaders, whether they know it or not.
In a speech supporting…