I think Cass Sunstein is missing an important aspect of property rights when he claims that they can't exist without the rule of law. He writes:
What Holmes is saying here is that even though property is exchangeable, it doesn't arise from value; it's a creation of law. And that's simply a matter of fact. With these sixteen words, Holmes captured much of the legal realist critique of laissez-faire -- and a key part of legal thinking between 1890 and 1930. A system of free markets isn't law-free; it depends on law. Property rights, as we enjoy and live them, are a creation of law; they don't predate law. ...Do property rights not exist without laws and government to enforce them? Not at all. A "right" is, after all, something that I myself, as an individual, am morally entitled to defend using physical violence. The world is certainly a more peaceful and pleasant place to live if we all agree to solve disagreements and to respect each others' rights without the use of violence, and laws and government are established to facilitate that. But the rights themselves are endowed to humanity by our Creator, and do in fact predate any institutions we build to aid in protecting them.
Roosevelt insisted that no one is really opposed to "government intervention." Those who complain about "government" depend on it every day of every year. Their "property rights could not exist" without its assistance (which costs a lot of money). And he believed that further "intervention," designed to protect decent opportunities (recall the right to education and the right to be free from monopoly) and minimal security, could be necessary to protect not equality but "individualism."
Even if you believe that morality is a purely human construct, it still makes much more sense to say that the desire to more easily defend fundamental "natural" rights led to the creation of government, rather than vice versa. It is nonsensical to argue that laws predate rights; even anarchists believe in morality, and rights flow from morality.
Clayton Cramer has some further thoughts. I'm not a libertarian either (although I also have libertarian sympathies), but I think that Mr. Cramer and Mr. Sunstein both miss the point that governments with the power to redistribute wealth will always degenerate into doing it poorly, to the detriment of all, no matter how well the system works at its inception. That's just a function of bureaucracy, and of the fact that there are only so many high-quality individuals available to put into government jobs. It's impossible to design a system so well that it can efficiently govern a huge number of people with only mediocre civil servants. And, given the evidence, it's apparently not efficient to pay bureaucrats in such a way so as to attract the best among us.
Iain Murray agrees that Mr. Sunstein has it backwards.