2nd March 2018
Reputation is not private property – therefore defamation law has no legs to stand on
I used to accept the received wisdom that reputation is private property. But now that I’ve started analysing it in some detail – given the massive harmful effects it has on the economy – it has become increasingly clear to me that it is not private property.
- Widely held view that reputation is private property
It is quite common to hear that reputation is a form of private property – or that one has a claim on the fruits of one’s reputation as if it were a real asset.
For instance, Fred Foldvary, a lecturer in economics at San Jose State University, California and a research fellow at The Independent Institute, noted that: Defamation is theft of income from one’s lost reputation.
Tim Wilson, a Human Rights Commissioner in Australia wrote that: “In broad principle, defamation law comes from a direct conflict between free speech and people’s ownership over their earned reputation – essentially a property right. Defamation law makes it justifiable to limit speech when it unjustly harms that reputation and the right for an individual to earn from it.” .
Law journals regularly argue that reputation is private property, e.g. this article: Reputation as Property in Virtual Economies and this one that says: “the law of defamation … protects a property right in reputation” [Source]
2. But reputation is not private property – the proof, below.
First, we need to consider how reputation is built.
Reputation can be considered to be a public “Producer Blockchain” built from information blocks generated by the producer’s consumers.
The key properties of reputation can be seen from the diagram below:
An information “block” about a transaction and the producer’s characteristics is relayed to the other consumers (the market) by each consumer
These other consumers do not take this information at face value and validate it before including it in the “blockchain”.
This validated “blockchain” is then owned by everyone in the society excluding the producer. It is about the producer, i.e. others’ opinions. It cannot possibly be owned by the producer. No producer has grounds to lay claim over this information. He can, at best, influence it through his output/conduct. At no stage does P have a claim for compensation for “damage” to “his” reputation.
Therefore we clearly see that reputation is not private property.
Murray Rothbard was crystal clear about this in his Libertarian Manifesto which means I should probably pay more attention to his views.
“It has generally been held legitimate to restrict freedom of expression if that speech has the effect of either falsely or maliciously damaging the reputation of another person. What the law of libel and slander does, in short, is to argue a “property right” of someone in his own reputation. Yet someone’s “reputation” is not, and cannot be “owned” by him, since it is purely a function of the subjective feelings and attitudes held by other people. But since no one can ever truly “own” the mind and attitude of another, this means that no one can literally have a property right in his “reputation”. A person’s reputation fluctuates all the time, in accordance with the attitudes and opinions of the rest of the population. Hence, speech attacking someone cannot be an invasion of his property right and therefore should not be subject to restriction or legal penalty.”
Further, Kate Galloway, an academic, writes:
“The foundation of this idea of enforceability is that if we have property in a thing, we can exclude others from it. [Thus] if through our endeavours we develop a reputation that puts us in good standing in the community and may even be of monetary (exchange) value in terms of job prospects, or friendships or business opportunities, this reputation is not property. It may be protected by law, but it is not property.”
If this interpretation is correct, then many implications flow from it, in particularly, regarding defamation law.
We can see from the blockchain analogy that:
1) Consumers verify before including inconsistent information. They do not blindly accept the information that others provide. They validate it (somewhat like a blockchain node). If the information they receive is inconsistent with information from other consumers, they will check it thoroughly before including it in their copy of the blockchain.
2) If C1 provides false information, P can put out a public clarification (this is very easy through blogs and advertising). Two things can happen:
- If C1 is a honest consumer, he will accept the true information and revise his “information block”
- If C1 is malicious, he will become known to the community as a liar.
There is therefore no case for defamation law applying at least to any commercial activity.