The Foundations of Free Enterprise
by Allen, Armstrong, and Wolken
Generally, when we think of “property” we think of land or real estate. But its meaning is much broader. Property refers to all kinds of personal possessions. Our pets, our garden vegetables, our clothing, our books, our cars, our money, our radios, our watches — all are forms of property. Bank balances, stocks, bonds, and other financial assets are also property. In addition, property includes all of the natural resources of the earth (minerals, timber, rivers, etc.), tools, machinery, factories, school buildings, court houses, streets, and all the merchandise in the stores. Even our own skills and talents, our ability to produce and perform services, represent a kind of property. In other words, our property represents what we call wealth.
In a pure free enterprise system, all property is owned by private citizens and businesses. None is owned by society in general or by the government. All property is private property, as opposed to public property.
Identifying who owns property in any economic system tells us a great deal about that system. This is true for several reasons. First, ownership of property is also ownership of power. Those who control property are able to influence the actions/of others. For example, if we live in an apartment, the owner makes such decisions as whether pets and, sometimes, children are allowed. But if we own a home, we make these decisions. Since private property allows ownership to be spread among a large number of people, power is also widely distributed. This reduces the danger of too much power being controlled by a few. When property is owned by society at large or by the government, the power that goes with it is concentrated in the hands of relatively few people. Historically, such concentrations of power have led to abuses of that power.
Private ownership of property also acts to conserve resources. To understand this idea, we need to recall that property is wealth. The way we treat property is strongly influenced by the rights enjoyed by property owners. By property rights we mean three things:
1. The owner’s right to determine how his property is used.
2. The owner’s right to transfer ownership to someone else.
3. The owner’s right to enjoy income and other benefits that come his way as a result of his ownership of the property.
With private property, all of us can enjoy these rights. We therefore protect and take care of property. It is in our best interest to do so because our property represents our wealth. If property is mistreated and loses value, the individual owner loses some of his wealth. If we do not have these rights of ownership, we have little reason to maintain or take care of property.
By looking at public property, we realize the importance of private ownership. For example, the air we breathe is surely a valuable resource. But, since it is public and not privately owned, no single individual has a stake in keeping it clean. When the air we breathe becomes polluted, we do not have the same rights we possess if someone damaged our lawn by driving a heavy car over it.
Similarly, our public parks and highways are covered with litter. Very few of us could claim we have never thrown litter out a car window. Fewer of us have bothered to spend our own time cleaning it up. Since the roads and parks are not privately owned, no one of us has a stake in maintaining their cleanliness. By contrast, how often do we throw trash on our own yards? If litter does find its way onto our yard, do we ignore it or clean it up? We act differently when it’s our own yard than when it’s the public’s highway or park.
Thus, when property is privately owned, less pollution occurs as the owners seek to protect and maintain the value of their property. We do not write on our own bathroom walls, place gum under our dining room tables, or litter our yards. Such actions would reduce the quality of our property and diminish our wealth. There is an important difference between private and public property.
To summarize, then, property is wealth. When property is owned privately, we have an incentive to add to our wealth by becoming property owners and to preserve our wealth by maintaining the quality of our property. The rights of private ownership of property encourage us to work hard and be productive so that we can own property. This productivity leads to economic growth (a larger pie), which provides better opportunities for all.