THE ROLE OF PRIVATE PROPERTY IN A CAPITALIST MARKET ECONOMY

Theft and Involuntary Transfers

Although private property is sometimes claimed to be a contributor to society’s problems, the discussion here shows why it is a necessary component of the wealth of nations. A better target and a more notable contributor to society’s problems is the violation of private property claims. Violations can include theft, damage, injury, or obstructions to property ownership.

Theft cannot occur unless there is property. A thief takes something that belongs to, or is owned by another. If I possess something and someone takes it away from me, I cannot object if the object cannot be claimed as mine. But if I do claim something as mine, then I will suffer a loss if the object is taken away from me. Loss of the object means the loss of the utility, or happiness, that I obtain from its consumption, or the utility I receive by trading it or its byproducts, at a market.

Property violations include any type of damage to someone’s property that lowers the value to the owner, either because its consumption will be worth less, or its value in trade will be lower. The argument also applies to injury to another person’s body, which can reasonably be claimed to be self-owned. Hence we consider it an offense if someone murders, assaults or rapes another person because it damages personal property.

Because through theft or damage, the value of property is either reduced or eliminated against the will of the owner, it is useful to refer to these violations as involuntary transfers. Involuntary transfers, refers to any sort of damage, injury, or theft to private property. Indeed, these transfers are so unwelcome and widespread that societies across the globe have implemented laws that proscribe and punish violations of private property. Laws against murder, assault, rape, larceny, burglary, robbery, etc., are on the books because every society recognizes the positive value that springs forth by protecting personal property claims. Besides merely writing laws though, governments also establish police forces that are empowered to arrest offenders, judicial systems that make judgments about the guilt of offenders and issue legislated penalties, and a prison system to provide for incarceration, or in some cases, the death, of guilty offenders.

These protection systems fulfill an important purpose. Without them, people would have greater fear for their personal safety and would lose incentives to produce and trade. Consider, for example, a farmer who works hard to produce a crop that can be stored for future use or sold at the market for a greater profit for himself and his family. But imagine further that the systems to protect private property are not in place. If he is unable to defend his possessions, then he may be subject to periodic thefts that significantly reduce his well being. If much of his effort fails to return much profit, eventually he may stop efforts at specialization and revert back to a simpler subsistence life. In other words, he may only produce enough that can be quickly consumed, thereby preventing even the possibility of theft.

Alternatively, consider business owners who fear for their own personal safety because of neighborhood gangs that commit random violent acts against people in the community. The greater the danger and the higher the cost of maintaining protection from violence, the less likely business will choose to produce in such a location.

These cases demonstrate how involuntary transfers can reduce incentives to engage in economic activity. However, the reverse is true too; economic activity is encouraged when people are protected from the violation of property claims.

Steven Suranovic, April 26, 2020

 

Additional Readings about Property

• The Role of Private Property in a Capitalist Market Economy
• Identifying and Claiming Property
• Socially-Constructed Property Claims
• The Necessity of Property
• Theft as Involuntary Transfers
• The Role of Government in Protecting Property
• Reality Check: Do we have a "Right" to Property?
• Why Not Socialism?

INTERESTING ASIDES

 

 

John Adams

"The moment the idea is admitted into society that property is not as sacred as the law of God, and that there is not a force of law and public justice to protect it, anarchy and tyranny commence."

 

Marquis de Sade - An Alternative View

"All, all is theft, all is unceasing and rigorous competition in nature; the desire to make off with the substance of others is the foremost - the most legitimate - passion nature has bred into us and, without doubt, the most agreeable one."

The desire to steal in order to succeed may be an inherent trait of humans, but it is also one that human societies have strived to root out. Holding up theft as agreeable is antithetical to a well-functioning economic system.