Private Property Rights: The Moral and Economic Foundation of a Free Society
by Dr. Edward Younkins
Professor of Accountancy and Business Administration at Wheeling Jesuit University in West Virginia and author of Capitalism and Commerce.
The institution of private property is based on the natural human desire and right to survive and pursue one's vision of happiness. The idea of "freedom under the law" is rooted in the property acquiring instinct and the need for safeguarding the possession of one's property. The body of law that has developed to protect ownership is based on the assumption that every rational man knows his interests best and should be permitted to pursue them. The right of private property is a moral and economic preqrequisite for making the pursuit of individual excellence possible. There can be no morality without self-responsibility and self-determination which, in turn, depend upon the existence of private property rights.
Private Property Rights: A Moral Concept
According to John Locke, the blending of an individual's labor with God's created universe produces private property. Private property results when something has been added by individual effort to transform previously unowned property. In Locke's view, individuals form societies in order to gain the strength to secure and defend their properties. It follows that the proper end of government is the preservation of property. Locke's main theme was that the ownership of private property is a natural right of every individual and that this right pre-existed government. The inalienable rights of life, liberty, and the pursuit of happiness, included in the Declaration of Independence, are Lockean in nature and must be protected. Without protection of one's private property, other rights would have little meaning.
The Lockean approach is rooted in the idea that people own their own labor. Locke has implied that any man who has transformed an unowned resource owns the transformation that he has created. If a person owns what he has created from an unowned resource, he logically also owns whatever he or his agent creates from his property which could then be sold for whatever price the market will yield. In other words, the voluntary transfer of justly acquired property is morally proper.
If men, who are at least partly material beings, have the right to life, then they have the right to maintain their lives with their own means and time as long as they do not infringe on the equal rights of others. Since human physical survival depends on the use of material objects, people have the right to determine the uses of these material objects.
All men are self-owners who have property in the free use of their time, abilities, and efforts. Each man has the moral right to control his own labor power and to claim ownership of the fruits of his labor. The right to property is a natural right and shares the characteristics of any natural right. The hallmark of our free market economy is that we have a moral right to property.
A distinction exists between innate and acquired property. A person possesses innate property as part of his own nature, along with the right to its control. Innate property refers to the productivity that is inherent in an individual's ability to work physically and mentally. Acquired property refers to things external to one's own person. It is not only the possession of material property, but the possession of scientific know-how, technical skills, and experience that determines the value of an individual in society.
Property may be viewed as mainly consisting of actions and knowledge rather than things. This idea is compatible with intellectual property such as patents and copyrights. This form of property does not refer to specific objects, but rather to the right of an inventor to build a mechanism or of an author to publish a work.
Property is best understood as a relationship between persons. One person has the right to exclude others from the current or future use of a certain resource. In addition, we have evolved from the idea of property as real assets to the idea of property as promises stocks, bonds, mortgages, paper money, bank books, etc. These are symbols of ownership and do not refer to actual possession. Ownership of this type of property requires a specialized knowledge such as that possessed by accountants, bankers, lawyers, brokers, and managers who aid the owner in determining the best uses of his resources.
Knowledge is a type of property. Persons engaged in professions requiring long and advanced education have invested time, effort, and intelligence in a special kind of property, knowledge, and thus have a legitimate claim on the professional use of it.
Included in the concept of private property are the notions that an individual's work creates private property and that a person owns himself and therefore has property in the free use of his time, abilities, and efforts. Work requires the expenditure of time and energy. It is in work that we can find the foundations of profit, property, and corporations all are justified in terms of the perfection of the human being.
Private Property and Individual Freedom
Private property, the bedrock institution of capitalism, is essential for the preservation of individual freedom. When property rights are respected and protected, a person is able to keep and enjoy the product of his labor. In addition, human creativity and flourishing require property ownership by individuals. The free market requires that a person has the right to possess, use for consumption or further production, exchange for money or other property, dispose of, and restrict the access of others to his property. He may do whatever he wishes with his legitimately-held possessions as long as he does not in so doing violate the natural rights of another person. In other words, individuals may possess, purchase, give away, and sell property (including their own labor) if they do not do so fraudulently, and they can do what they want with their property as long as they do not injure others.
Freedom is based on ownership. If it is possible for a man to own assets, it is also possible for him to have freedom of speech, religion, the press, etc. Private property increases individual freedom by dispersing ownership and control of property among a great number of people.
Inequality of abilities and property ownership is a manifestation of the human condition. Nevertheless, it should be realized that every person (even the poorest) owns his own life and should be free to engage in peaceful activities in his efforts to acquire property. However, there is no positive right guaranteeing that one will possess property and no positive duty for someone to create property and hand it over to someone else. There is only the negative duty of others to not coercively keep a person from engaging in peaceful actions in his attempts to acquire and keep property. Through the division of labor, each person is free to capitalize on natural inequalities in abilities, energy levels, motivations, and moral strengths in his efforts to manage his own life and pursue his own well-being. Property can legitimately be acquired by directly creating it or by creating something of value to another and freely trading with the other. A poor person's chances of becoming wealthy are maximized in a market economy.
A violation of a man's property rights is an expression of force against the man himself. The state should not use its coercive power to force a person to share his wealth with the less fortunate. True charity cannot be compelled.
Private Property Promotes Economic Performance
A system of well-defined, secure private property rights not only protects freedom, it also promotes economic performance and progress. The rule of law protecting life and property is necessary for the development of a free society. When life and property are protected, social cooperation emerges and a nation of traders evolves into a capitalist economy. Voluntary exchange depends on private property – every trader is a property owner who is responsible for himself and his possessions and free to pursue his own good in his own way. A person's right to life, to the disposal of his time, and to the use of his abilities, derives from the fact that they are his own life, time, and abilities.
Wants and satisfaction vary greatly among individuals. Underlying our free market system is the fact that each person seeks the greatest amount of satisfaction with the least amount of effort. Private property and free markets allow men to choose different occupations, products, lifestyles, etc. without interfering with the freedom of others to do the same. Since men possess a wide variety of abilities and talents, it follows that specialization increases productivity. By specializing and exchanging scarce economic goods with each other, each person is able to gain the maximum of satisfaction he seeks as limited by his creative capacities. Private property thus allows the widest possible amount of knowledge to be applied to the problem of scarcity as numerous individuals, possessing different combinations of abilities, apply their knowledge to the creation of goods and services.
Since all persons have greater respect for what they own than for what they hold in common, it follows that private ownership fosters wise stewardship. It is the "tragedy of the commons" that rivers, parks, beaches, lakes, and roads are all taken care of less well than private homes and businesses. Incentives explain why "publicly owned" resources and operations are outproduced by private enterprises and in a constant state of disrepair. Unowned natural resources such as grazing lands, timber tracts, and wildlife are quickly depleted. Similarly, unowned land, water, and air are frequently polluted.
The free market, as an impersonal mechanism, pressures individuals to satisfy the needs of others. Private property ownership encourages men to develop and use their resources in a way that is advantageous to others. Not only does such employment produce income, in a market economy the owner of resources such as capital and land can continue to enjoy their property only by employing it for the satisfaction of others' wants. The property owner cannot escape the costs of ownership and the need to act as a steward of his resources for the benefit of others. In a free society, the property needed for production and marketing can only be amassed and kept by an owner as long as he uses it as consumers want him to. The best way to hold and increase one's resources is to compete by catering to the customer's wishes – otherwise one is out of business. Consumers also compete with one another for available goods and services. Competition works to keep buyers and sellers honest in their business dealings and efficient in their use of scarce resources.
Private ownership makes men accountable for their actions. A person who harms another or damages another's property is responsible for the damages. People are responsible for the costs they impose on others and can profit from the positive things they do for others. Private property rights provide the link between the rational use of resources and the rewards or penalties of the decision makers. If property is owned by a man, all the costs and all the benefits accrue to him, so he seeks to make the best possible use of his resources.
Private ownership encourages owners to conserve for the future. The owner of property is an entrepreneur in the sense that he needs to predict future valuations that others will make and act accordingly. Whenever the estimated present value of using a resource in the future is greater than value of using the resource currently, the resource will be preserved for the future. Since property is transferable in a market economy, it follows that the market value of the resource will increase in expectation of the projected increased future value of the resource.
Under a system of well-defined, protected, and enforced property rights, the only economic transactions people engage in are positive-sum (i.e., wealth creating) ones in which both parties to the economic exchange believe they will benefit. After all, who would enter a one-sided bargain to his expected detriment.
Proper Role of the State
Contract law evolved to protect ownership and free trade. Business could not flourish if contracts were not usually fulfilled. One role of the state is to enforce performance. With the advent of specialization of labor, people found it necessary to develop an exchange mechanism through which a producer of one item could exchange it for something he would produce less efficiently than another. This type of bargaining relationship led to protection through the use of formal contracts. Property rights comprise the subject matter of all contracts. In addition to the above pragmatic basis for contract law, there is an ethical basis for requiring a man to keep his promise. Deceit is wrong. A man ought to do what he says he will do, especially when his word causes another, who relies on that word, to give a promise or take action. Private ownership would be precarious without a political system that protects property rights. The proper role of government under capitalism is therefore limited to protecting man's natural rights (including property rights) and enforcing contractual agreements – a breach of contract is an indirect use of force.
Private ownership circumscribes the power of the state. When a state controls all of the productive resources in society, it can suppress dissent, enforce conformity, and stifle democracy. However, in a system in which ownership is held by many individuals, power is more diffused resulting in greater political and economic freedom for the individual.
The absence of property rights results in a zero-sum society – one in which a person can gain more wealth only by decreasing the wealth of others. In a collectivist society, people would simply take from each other – if everyone owned everything, trade would be impossible since every person's agreement would be needed for every transfer of property. People in such a society, either by themselves or through the use of government power, obtain wealth from others without their consent.
Contemporary Encroachments on Private Property
The private character of property is restricted today. Contemporary public encroachments on private property include, but are not limited to, the requirement to pay taxes on both real and person property or face eventual loss of the property; land use control and zoning regulations; building codes; occupancy restrictions and facilities requirements on property used for economic gain; restrictions on the donative ability of the possessor of property to bequeath or transfer possessions (through the testator) upon his demise; rent controls; acreage quotas for farmers; government trade controls or quotas on international exchanges; the "right" of eminent domain; "open housing" legislation that takes away from the seller the right to choose his own customers; government grants of exclusive access to certain markets; price supports; price ceilings; minimum wage laws; maximum profit laws; rate regulations; controls over utilities, travel, housing, communications, insurance, interest, banking, etc.; taxation of individuals and businesses; unfunded employer mandates (such as family leave); and welfare transfers.
More and more the political process is being substituted for the market process and for private property. Government interference and the consequent loss of control over one's property constitutes a direct assault on individual freedom. Control over property is the means for control over men. Government interferences impair an individual's freedom to realize his potentialities as he chooses and as his abilities allow. Today, government supremacy over individual property owners means that the state may permit individuals to temporarily hold title to its possessions and use them in limited ways at its discretion.
Since, as has often been said, human rights are property rights (and vice versa), it follows that all rights will become worthless if the state (or some person or group of persons) holds pre-emptive power over the property of the individual owner. Unfortunately, America has proceeded in the direction of subjugating property rights as the belief in the origin of rights has shifted from natural law to society and government.
Americans need to be reminded that the loss of property rights either preceded or accompanied the loss of other rights in totalitarian countries. A country without secure private property rights will ultimately be unable to defend any human rights at all. The person who is not allowed to own property becomes the property of someone else. The exercise of any right requires the use of property. People need a place to assemble and speak freely, materials to work on, etc.
All rights may be viewed as extensions or elaborations of property rights. For example, the right of freedom of the press is dependent upon private property. The press cannot be free if the state owns all the printing presses, paper, and distribution systems. In addition, religion cannot be free if the government owns all the buildings and prints all the reading materials. Freedom of trade also presupposes property rights – without property rights individuals would simply take from each other. In our contemporary democratic society, government takes property without consent through the majority vote of people and the actions of the members of Congress and other government officials. Although considered to be "legal," actions such as government transfer programs can be deemed immoral since they violate individual rights.
The means of maintaining one's life is property and the loss of these means to the State results in the loss of the power of self-determination. When government acts to downplay the importance of property rights, the result will be the opposite – property rights will become more important to individuals. More and more will men realize that property rights are foundational to a free society – there can be no political or personal freedom without the right to use one's property as one sees fit.