Private property

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Private property is a legal designation for the ownership of property by non-governmental legal entities. [1] Private property is distinguishable from public property, which is owned by a state entity, and from collective or cooperative property, which is owned by one or more non-governmental entities. [2] John Locke described private property as a Natural Law principle arguing that when a person mixes their labor with nature, the labor enters the object conferring individual ownership. [3]

Contents

Private property is foundational to capitalism, an economic system based on the private ownership of the means of production and their operation for profit. [4] As a legal concept, private property is defined and enforced by a country's political system. [5]

History

The first evidence of private property may date back to the Babylonians in 1800 BC, as evidenced by the archeological discovery of Plimpton 322, a clay tablet used for calculating property boundaries. However, written discussions of private property were not seen until the Persian Empire, and emerged in the Western tradition at least as far back as Plato. [6]

Before the 18th century, English speakers generally used the word "property" about land ownership. In England, "property" came to have a legal definition in the 17th century. [7] Private property defined as property owned by commercial entities emerged with the great European trading companies of the 17th century. [8]

The issue of the enclosure of agricultural land in England, especially as debated in the 17th and 18th centuries, accompanied efforts in philosophy and political thought—by Thomas Hobbes (1588–1679), James Harrington (1611–1677) and John Locke (1632–1704), for example—to address the phenomenon of property ownership. [9]

In arguing against supporters of absolute monarchy, John Locke conceptualized property as a "natural right" that God had not bestowed exclusively on the monarchy; the labor theory of property. This stated that property is a natural result of labor improving upon nature; and thus by labor expenditure, the laborer becomes entitled to its produce. [10]

Influenced by the rise of mercantilism, Locke argued that private property was antecedent to and thus independent of government. Locke distinguished between "common property", by which he meant common land, and property in consumer goods and producer-goods. His chief argument for property in land ownership was that it led to improved land management and cultivation over common land.

In the 18th century, during the Industrial Revolution, the moral philosopher and economist Adam Smith (1723–1790), in contrast to Locke, distinguished between the "right to property" as an acquired right, and natural rights. Smith confined natural rights to "liberty and life". Smith also drew attention to the relationship between employee and employer and identified that property and civil government were dependent upon each other, recognizing that "the state of property must always vary with the form of government". Smith further argued that civil government could not exist without property, as the government's main function was to define and safeguard property ownership. [10]

In the 19th century, the economist and philosopher Karl Marx (1818–1883) provided an influential analysis of the development and history of property formations and their relationship to the technical productive forces of a given period. Marx's conception of private property has proven influential for many subsequent economic theories and for communist, socialist, and anarchist political movements, and led to the widespread association of private property—particularly private property in the means of production—with capitalism.

Proprietas Privata (PP) British period marker in San Martin, St. Paul's Bay, Malta Niches and reliefs in Wardija 02.jpg
Proprietas Privata (PP) British period marker in San Martin, St. Paul's Bay, Malta

Private property is a legal concept defined and enforced by a country's political system. [5] The area of law that deals with the subject is called property law. The enforcement of property law concerning private property is a matter of public expense.

Defence of property is a common method of justification used by defendants who argue that they should not be held liable for any loss and injury that they have caused because they were acting to protect their property. Courts have generally ruled that the use of force may be acceptable.

In many political systems, the government requests that owners pay for the privilege of ownership. A property tax is an ad valorem tax on the value of a property, usually levied on real estate. The tax is levied by the governing authority of the jurisdiction in which the property is located. It may be imposed annually or at the time of a real estate transaction, such as in real estate transfer tax. Under a property-tax system, the government requires or performs an appraisal of the monetary value of each property, and tax is assessed in proportion to that value. The four broad types of property taxes are land, improvements to land (immovable human-made objects, such as buildings), personal property (movable human-made objects), and intangible property.

The social and political context in which private property is administered will determine the extent to which an owner will be able to exercise rights over the same. The rights to private property often come with limitations. For example, local government may enforce rules about what kind of building may be built on private land (building code), or whether a historical building may be demolished or not. Theft is common in many societies, and the extent to which central administration will pursue property crime varies enormously.

Some forms of private property are uniquely identifiable and may be described in a title or a certificate of ownership.

The rights to a property may be transferred from one "owner" to another. A transfer tax is a tax on the passing of title to property from one person (or entity) to another. An owner may request that, after death, private property be transferred to family members, through inheritance.

In certain cases, ownership may be lost to the public interest. Private real estate may be confiscated or used for public purposes, for example, to build a road.

Theory

Factories and corporations are considered private property. Hallesche Maschinenfabrik.jpg
Factories and corporations are considered private property.

The legal framework of a country or society defines some of the practical implications of private property. There are no expectations that these rules will define a rational and consistent model of economics or social system.

Although contemporary neoclassical economics—currently the dominant school of economics—rejects some of the assumptions of the early philosophers underpinning classical economics, it has been argued that neoclassical economics continues to be influenced by the legacy of natural moral theory and the concept of natural rights, which has led to the presentation of private market exchange and private property rights as "natural rights" inherent in nature. [11]

Economic liberals (defined as those who support a private sector-driven market economy) consider private property to be essential for the construction of a prosperous society. They believe private ownership of land ensures the land will be put to productive use and its value protected by the landowner. If the owners must pay property taxes, this forces the owners to maintain a productive output from the land to keep taxes current. Private property also attaches a monetary value to land, which can be used to trade or as collateral. Private property thus is an important part of capitalization within the economy. [12]

Socialist economists are critical of private property as socialism aims to substitute private property in the means of production for social ownership or public property. Socialists generally argue that private property relations limit the potential of the productive forces in the economy when the productive activity becomes a collective activity, where the role of the capitalist becomes redundant (as a passive owner). Socialists generally favor social ownership either to eliminate the class distinctions between owners and workers and as a component of the development of a post-capitalist economic system. [13]

In response to the socialist critique, the Austrian School economist Ludwig Von Mises argued that private property rights are a requisite for what he called "rational" economic calculation and that the prices of goods and services cannot be determined accurately enough to make efficient economic calculation without having clearly defined private-property rights. Mises argued that a socialist system, which by definition would lack private property in the factors of production, would be unable to determine appropriate price valuations for the factors of production. According to Mises, this problem would make rational socialist calculation impossible. [14]

In capitalism, ownership can be viewed as a "bundle of rights" over an asset that entitles its holder to a strong form of authority over it. Such a bundle is composed of a set of rights that allows the owner of the asset to control it and decide on its use, claim the value generated by it, exclude others from using it, and the right to transfer the ownership (set of rights over the asset) of it to another holder. [15] [16]

In Marxian economics and socialist politics, there is a distinction between "private property" and "personal property". The former is defined as the means of production about private ownership over an economic enterprise based on socialized production and wage labor whereas the latter is defined as consumer goods or goods produced by an individual. [17] [18] Prior to the 18th century, private property usually referred to land ownership.

Criticism

Gate with a private property sign PrivatePropertySign.jpg
Gate with a private property sign

Private property in the means of production is the central element of capitalism criticized by socialists. In Marxist literature, private property refers to a social relationship in which the property owner takes possession of anything that another person or group produces with that property and capitalism depends on private property. [19] The socialist critique of private ownership is heavily influenced by the Marxist analysis of capitalist property forms as part of its broader critique of alienation and exploitation in capitalism. Although there is considerable disagreement among socialists about the validity of certain aspects of Marxist analysis, the majority of socialists are sympathetic to Marx's views on exploitation and alienation. [20]

Socialists critique the private appropriation of property income because such income does not correspond to a return on any productive activity and is generated by the working class, it represents exploitation. The property-owning (capitalist) class lives off passive property income produced by the working population by their claim to ownership in the form of stock or private equity. This exploitative arrangement is perpetuated due to the structure of capitalist society. Capitalism is regarded as a class system akin to historical class systems like slavery and feudalism. [21]

Private ownership has also been criticized on non-Marxist ethical grounds by advocates of market socialism. According to the economist James Yunker, the ethical case for market socialism is that because passive property income requires no mental or physical exertion on the part of the recipient, and its appropriation by a small group of private owners is the source of the vast inequalities in contemporary capitalism, social ownership in a market economy would resolve the major cause of social inequality and its accompanying social ills. [22] Weyl and Posner argue that private property is another name for monopoly and can hamper allocative efficiency. Through the use of taxation and modified Vickrey auctions, they argue that partial common property ownership is a more efficient and just way to organize the economy. [23]

The justifications for private property rights have also been critiqued as tools of empire that enable land appropriation. [24] According to academic commentator Brenna Bhandar, the language implemented in property legislation dictates colonized peoples as unable to effectively own and utilize their land. [24] It is suggested that personal rights are interchangeable with property rights, therefore communities that utilize communal methods of land ownership are not equally validated by private property ideals. [25]

It is also argued by critical race theorist Cheryl Harris that race and property rights have been conflated over time, with only those qualities unique to white settlement recognized legally. [26] Indigenous use of land, focusing on common ownership, is distinguished from private property ownership and Western understandings of land law. [27]

See also

Related Research Articles

Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. Central characteristics of capitalism include capital accumulation, competitive markets, price systems, private property, property rights recognition, economic freedom, profit motive, commodification, voluntary exchange, wage labor and the production of commodities. In a market economy, decision-making and investments are determined by owners of wealth, property, or ability to maneuver capital or production ability in capital and financial markets—whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.

In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets, as modeled, operate without the intervention of government or any other external authority. Proponents of the free market as a normative ideal contrast it with a regulated market, in which a government intervenes in supply and demand by means of various methods such as taxes or regulations. In an idealized free market economy, prices for goods and services are set solely by the bids and offers of the participants.

<span class="mw-page-title-main">Anti-capitalism</span> Political ideology and movement opposed to capitalism

Anti-capitalism is a political ideology and movement encompassing a variety of attitudes and ideas that oppose capitalism. In this sense, anti-capitalists are those who wish to replace capitalism with another type of economic system, such as socialism or communism.

In political philosophy, the means of production refers to the generally necessary assets and resources that enable a society to engage in production. While the exact resources encompassed in the term may vary, it is widely agreed to include the classical factors of production as well as the general infrastructure and capital goods necessary to reproduce stable levels of productivity. It can also be used as an abbreviation of the "means of production and distribution" which additionally includes the logistical distribution and delivery of products, generally through distributors; or as an abbreviation of the "means of production, distribution, and exchange" which further includes the exchange of distributed products, generally to consumers.

<span class="mw-page-title-main">Market economy</span> Type of economic system

A market economy is an economic system in which the decisions regarding investment, production and distribution to the consumers are guided by the price signals created by the forces of supply and demand. The major characteristic of a market economy is the existence of factor markets that play a dominant role in the allocation of capital and the factors of production.

<span class="mw-page-title-main">Economic system</span> System of ownership, production, and exchange

An economic system, or economic order, is a system of production, resource allocation and distribution of goods and services within a society. It includes the combination of the various institutions, agencies, entities, decision-making processes, and patterns of consumption that comprise the economic structure of a given community.

Anarchist economics is the set of theories and practices of economic activity within the political philosophy of anarchism. Anarchists are anti-authoritarian and anti-capitalist, with anarchism usually referred to as a form of libertarian socialism, i.e. a stateless system of socialism. Anarchists support personal property and oppose capital concentration, interest, monopoly, private ownership of productive property such as the means of production, profit, rent, usury and wage slavery which are viewed as inherent to capitalism.

A theory of capitalism describes the essential features of capitalism and how it functions. The history of various such theories is the subject of this article.

Left-libertarianism, also known as left-wing libertarianism, is a political philosophy and type of libertarianism that stresses both individual freedom and social equality. Left-libertarianism represents several related yet distinct approaches to political and social theory. Its classical usage refers to anti-authoritarian varieties of left-wing politics such as anarchism, especially social anarchism, communalism, and libertarian Marxism, collectively termed libertarian socialism. A portion of the left wing of the green movement, including adherents of Murray Bookchin's social ecology, are also generally considered left-libertarian.

Unearned income is a term coined by Henry George to refer to income gained through ownership of land and other monopoly. Today the term often refers to income received by virtue of owning property, inheritance, pensions and payments received from public welfare. The three major forms of unearned income based on property ownership are rent, received from the ownership of natural resources; interest, received by virtue of owning financial assets; and profit, received from the ownership of capital equipment. As such, unearned income is often categorized as "passive income".

<span class="mw-page-title-main">Criticism of capitalism</span> Arguments against the economic system of capitalism

Criticism of capitalism is a critique of political economy that involves the rejection of, or dissatisfaction with the economic system of capitalism and its outcomes. Criticisms typically range from expressing disagreement with particular aspects or outcomes of capitalism to rejecting the principles of the capitalist system in its entirety.

Property income refers to profit or income received by virtue of owning property. The three forms of property income are rent, received from the ownership of natural resources; interest, received by virtue of owning financial assets; and profit, received from the ownership of capital equipment. As such, property income is a subset of unearned income and is often classified as passive income.

The social dividend is the return on the natural resources and capital assets owned by society in a socialist economy. The concept notably appears as a key characteristic of market socialism, where it takes the form of a dividend payment to each citizen derived from the property income generated by publicly owned enterprises, representing the individual's share of the capital and natural resources owned by society.

Economic democracy is a socioeconomic philosophy that proposes to shift ownership and decision-making power from corporate shareholders and corporate managers to a larger group of public stakeholders that includes workers, consumers, suppliers, communities and the broader public. No single definition or approach encompasses economic democracy, but most proponents claim that modern property relations externalize costs, subordinate the general well-being to private profit and deny the polity a democratic voice in economic policy decisions. In addition to these moral concerns, economic democracy makes practical claims, such as that it can compensate for capitalism's inherent effective demand gap.

Exploitation is a concept defined as, in its broadest sense, one agent taking unfair advantage of another agent. When applying this to labour it denotes an unjust social relationship based on an asymmetry of power or unequal exchange of value between workers and their employers. When speaking about exploitation, there is a direct affiliation with consumption in social theory and traditionally this would label exploitation as unfairly taking advantage of another person because of their vulnerable position, giving the exploiter the power.

In Karl Marx's critique of political economy and subsequent Marxian analyses, the capitalist mode of production refers to the systems of organizing production and distribution within capitalist societies. Private money-making in various forms preceded the development of the capitalist mode of production as such. The capitalist mode of production proper, based on wage-labour and private ownership of the means of production and on industrial technology, began to grow rapidly in Western Europe from the Industrial Revolution, later extending to most of the world.

In Marxian economics, surplus value is the difference between the amount raised through a sale of a product and the amount it cost to manufacture it: i.e. the amount raised through sale of the product minus the cost of the materials, plant and labour power. The concept originated in Ricardian socialism, with the term "surplus value" itself being coined by William Thompson in 1824; however, it was not consistently distinguished from the related concepts of surplus labor and surplus product. The concept was subsequently developed and popularized by Karl Marx. Marx's formulation is the standard sense and the primary basis for further developments, though how much of Marx's concept is original and distinct from the Ricardian concept is disputed. Marx's term is the German word "Mehrwert", which simply means value added, and is cognate to English "more worth".

Social ownership is a type of property where an asset is recognized to be in the possession of society as a whole rather than individual members or groups within it. Social ownership of the means of production is the defining characteristic of a socialist economy, and can take the form of community ownership, state ownership, common ownership, employee ownership, cooperative ownership, and citizen ownership of equity. Within the context of socialist economics it refers particularly to the appropriation of the surplus product, produced by the means of production, or the wealth that comes from it, to society at large or the workers themselves. Traditionally, social ownership implied that capital and factor markets would cease to exist under the assumption that market exchanges within the production process would be made redundant if capital goods were owned and integrated by a single entity or network of entities representing society. However, the articulation of models of market socialism where factor markets are utilized for allocating capital goods between socially owned enterprises broadened the definition to include autonomous entities within a market economy.

Market socialism is a type of economic system involving social ownership of the means of production within the framework of a market economy. Various models for such a system exist, usually involving cooperative enterprises and sometimes a mix that includes public or private enterprises. In contrast to the majority of historic socialist economies, which have substituted the market mechanism for some form of economic planning, market socialists wish to retain the use of supply and demand signals to guide the allocation of capital goods and the means of production. Under such a system, depending on whether socially owned firms are state-owned or operated as worker cooperatives, profits may variously be used to directly remunerate employees, accrue to society at large as the source of public finance, or be distributed amongst the population in a social dividend.

Socialist economics comprises the economic theories, practices and norms of hypothetical and existing socialist economic systems. A socialist economic system is characterized by social ownership and operation of the means of production that may take the form of autonomous cooperatives or direct public ownership wherein production is carried out directly for use rather than for profit. Socialist systems that utilize markets for allocating capital goods and factors of production among economic units are designated market socialism. When planning is utilized, the economic system is designated as a socialist planned economy. Non-market forms of socialism usually include a system of accounting based on calculation-in-kind to value resources and goods.

References

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  2. Gregory and Stuart, Paul and Robert (2013). The Global Economy and its Economic Systems. South-Western College Pub. p. 30. ISBN   978-1285055350. There are three broad forms of property ownership – private, public, and collective (cooperative).
  3. Locke, John. "The Project Gutenberg eBook of Second Treatise Of Government, by John Locke". www.gutenberg.org. Archived from the original on May 30, 2024. Retrieved 2024-05-31.
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  5. 1 2 Bertrand Badie; Dirk Berg-Schlosser; Leonardo Morlino (2011). International Encyclopedia of Political Science. Sage Publications. p. 2132. ISBN   978-1412959636. Private property cannot exist without a political system that defines its existence, its use, and the conditions of its exchange. That is, private property is defined and exists only because of politics.
  6. Garnsey, Peter (2007). Thinking about Property: From Antiquity to the Age of Revolution. Ideas in Context. Vol. 90. Cambridge University Press. p. 1. ISBN   978-1139468411 . Retrieved 2018-08-28. The defense of private property has been a feature of philosophical, theological and legal discourse from antiquity to the present day. [...] I begin with Plato's thoughts on property in the Republic [...].
  7. The Meaning and Definition of "Property" in Seventeenth-Century England, by G. E. Aylmer, 1980. Oxford University Press. Past and Present, No. 86 (Feb. 1980), pp. 87–97.
  8. Compare: Bertrand Badie; Dirk Berg-Schlosser; Leonardo Morlino (2011). International Encyclopedia of Political Science. SAGE Publications, Inc. p. 2132. ISBN   978-1412959636. Oliver Letwin, a British conservative theorist, observed that the private sector had to be invented. This occurred with the great European trading companies, such as the British and Dutch East India companies, founded in the 17th century. Notions of property before the Renaissance assumed that different actors had different relations to the same property.
  9. Thompson, Paul B (2014). "agriculture". In John, Barry (ed.). International Encyclopedia of Environmental Politics. Routledge. p. 8. ISBN   978-1135554033 . Retrieved 2014-08-05. [D]ebates [on enclosure] […] laid down many of the basic terms for political debate about private property, and especially property in land.
  10. 1 2 Property Rights in the History of Economic Thought: From Locke to J.S. Mill, by West, Edwin G. 2001. Property Rights: Cooperation, Conflict, and Law, ed. Terry Lee Anderson and Fred S. McChesney, Princeton University Press, 2003, Ch. 1 (pp. 20–42).
  11. O'Hara, Phillip (2003). Encyclopedia of Political Economy, Volume 2. Routledge. pp. 782–783. ISBN   0415241871. The derivation of natural moral theory has provided the foundation for the use of economic theory to support specific ideological viewpoints. The main strength of the legitimating role of economic theory is that it allows one set of ideological viewpoints to posture as if their conclusions were unbiased scientific conclusions, while those opposing them were merely expressing their value-laden opinions. At its apex, this tendency has justified laissez-faire economic policies as if they were based on natural laws. Always behind the legitimization activities of economists is the belief that markets are 'natural' institutions and market outcomes are natural outcomes, and the institutions necessary for markets, such as private property rights, are 'natural rights'.
  12. Connell, Shaun. "Property Rights 101: The Foundation of Capitalism Explained". Capitalism Institute. Archived from the original on 29 October 2012. Retrieved 25 October 2012.
  13. The Political Economy of Socialism, by Horvat, Branko. 1982. Chapter 1: Capitalism, The General Pattern of Capitalist Development (pp. 15–20)
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  19. "Glossary of Terms". Marxists Internet Archive . Retrieved 2 March 2017.
  20. Arnold, Scott (1994). The Philosophy and Economics of Market Socialism: A Critical Study. Oxford University Press. p. 50. ISBN   978-0195088274. Though socialists have disagreed with Marx about how to conceptualize the notion of class, about the dynamics of class societies, and indeed about a whole host of other matters, most socialists seem to be broadly sympathetic to his views about what is wrong with the capitalist (free enterprise) economic system and, by implication, capitalist society ... Marx's critique attributes two systemic evils to capitalism's economic system: alienation and exploitation.
  21. O'Hara, Phillip (2003). Encyclopedia of Political Economy, Volume 2. Routledge. p. 1135. ISBN   0415241871. Property income is, by definition, received by owning property ... Since such income is not an equivalent return for any productive activity, it amounts to an entitlement to a portion of the aggregate output of others' productive activity. The workforce produces output but surrenders part of it to people who have nothing directly to do with production. Arguably, this occurs by a social system to which those in the workforce have never given their full consent, i.e. that of private property. Alternatively, it occurs by a structure of power to which the workforce is subject: property income is the fruit of exploitation. The fact that it is essential to capitalism makes the latter a class system akin to such other historical cases as slavery and feudalism.
  22. Yunker, James (1977). "The Social Dividend Under Market Socialism". Annals of Public and Cooperative Economics. 48 (1): 93–133. doi:10.1111/j.1467-8292.1977.tb01728.x. From the human point of view, the return paid to non-human factors of production is unearned and equivalent to a gift of nature. It is the personal appropriation of this gift of nature by a small minority of society under contemporary capitalism that establishes the ethical unworthiness of capitalism and the desirability of a socialist transformation...The employment of capital instruments and natural resources in economic production requires no personal hardship or exertion from any human being. The economic services provided by these factors of production are not corporeally inherent in human beings. The opposite is true of labor services, which can only be provided through the physical and mental activity of human beings...the really grossly exaggerated personal incomes in society are dominated by property income, and this source of inequality would be abrogated by the equalization of property income distribution.
  23. Posner, A.; Glen Weyl, E. (2018). "Property is Monopoly: Creating a Competitive Market in Uses Through Partial Common Ownership". Radical Markets: Uprooting Capitalism and Democracy for a Just Society. Princeton: Princeton University Press.
  24. 1 2 Bhandar, Brenna (2018). "Introduction: Property, Law, and Race in the Colony". Colonial Lives of Property. Duke University Press.
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Further reading