Private property

Last updated
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 refers to a kind of system that allocates particular objects like pieces of land to particular individuals to use and manage as they please, to the exclusion of others and to the exclusion of any detailed control by society. [1] In legal terms it's usually a designation for the ownership of property by non-governmental legal entities. [2] [ full citation needed ] Private property is distinguishable from public property, which is owned by a state entity; and from collective (or cooperative) property, which is owned by a group of non-governmental entities. [3] Certain political philosophies like socialism and anarchism make a clear distinction between private and personal property [4] while others blend the two together. [5] Private property is a legal concept defined and enforced by a country's political system. [6]

Contents

History

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

Ideas about and discussion of private property date back at least as far as Plato. [7] Prior to the 18th century, English speakers generally used the word "property" in reference to land ownership. In England, "property" came to have a legal definition in the 17th century. [8] [9] Private property as commercial property was invented[ by whom? ] with the great European trading companies of the 17th century. [10]

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. [11]

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 labour theory of property. This stated that property is a natural result of labor improving upon nature; and thus by virtue of labor expenditure, the laborer becomes entitled to its produce. [12]

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, the latter of which referred to land. His chief argument for property in land was 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, drew a distinction 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 government's main function was to safeguard property ownership. [12]

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 anarchist, communist and socialist political movements, and led to the widespread association of private property with capitalism.

Private property is a legal concept defined and enforced by a country's political system. [6] 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 man-made objects, such as buildings), personal property (movable man-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. [13]

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. [14]

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 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. [15]

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. [16]

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 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. [17] [18]

In Marxian economics and socialist politics, there is distinction between "private property" and "personal property". The former is defined as the means of production in reference to 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. [19] [20] Prior to the 18th century, private property usually referred to land ownership.

Criticism

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. [21] 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. [22] Socialists critique the private appropriation of property income on the grounds that 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 virtue of 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. [23]

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 as follows: because passive property income requires no mental or physical exertion on the part of the recipient and because 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. [24] Weyl and Posner argue that private property is another name for monopoly and can hamper allocative efficiency. Through 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. [25]

See also

Related Research Articles

Anarcho-capitalism is a political philosophy and economic theory that advocates the elimination of centralized states in favor of self-ownership, private property and free markets. Anarcho-capitalists hold that in the absence of statute, society tends to contractually self-regulate and civilize through the spontaneous and organic discipline of the free market which they describe as a voluntary society. Anarcho-capitalists support wage labour as a "voluntary trade" and believe that neither protection of person and property nor victim compensation requires a state.

In economics, a free market is a system in which the prices for goods and services are self-regulated by the open market and by consumers. In a free market, the laws and forces of supply and demand are free from any intervention by a government or other authority, and from all forms of economic privilege, monopolies and artificial scarcities. Proponents of the concept of free market contrast it with a regulated market in which a government intervenes in supply and demand through various methods such as tariffs used to restrict trade and to protect the local economy. In an idealized free-market economy, prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without intervention by government policy.

Anti-capitalism 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, usually some form of socialism.

In economics and sociology, the means of production are physical and non-financial inputs used in the production of economic value. These include raw materials, facilities, machinery and tools used in the production of goods and services. In the terminology of classical economics, the means of production are the "factors of production" minus financial and human capital.

A market economy is an economic system in which the decisions regarding investment, production and distribution 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.

A mixed economy is variously defined as an economic system blending elements of market economies with elements of planned economies, free markets with state interventionism, or private enterprise with public enterprise. As such, there is no single definition of a mixed economy. One definition is about a mixture of markets with state interventionism, referring specifically to capitalist market economies with strong regulatory oversight and extensive interventions into markets. The other definition is apolitical in nature, strictly referring to an economy containing a mixture of private enterprise with public enterprise.

State ownership type of property

State ownership, also called government ownership and public ownership, is the ownership of an industry, asset, or enterprise by the state or a public body representing a community as opposed to an individual or private party. Public ownership specifically refers to industries selling goods and services to consumers and differs from public goods and government services financed out of a government's general budget. Public ownership can take place at the national, regional, local, or municipal levels of government; or can refer to non-governmental public ownership vested in autonomous public enterprises. Public ownership is one of the three major forms of property ownership, differentiated from private, collective/cooperative, and common ownership.

Economic system system of 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 or a given geographic area. 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. As such, an economic system is a type of social system. The mode of production is a related concept. All economic systems have three basic questions to ask: what to produce, how to produce and in what quantities, and who receives the output of production.

The nature of capitalism is criticized by anarchists, who reject hierarchy and advocate stateless societies based on non-hierarchical voluntary associations. Anarchism is generally defined as the libertarian philosophy which holds the state to be undesirable, unnecessary and harmful as well as opposing authoritarianism, illegitimate authority and hierarchical organization in the conduct of human relations. Capitalism is generally considered by scholars to be an economic system that includes private ownership of the means of production, creation of goods or services for profit or income, the accumulation of capital, competitive markets, voluntary exchange and wage labor which has generally been opposed by anarchists historically. Since capitalism is variously defined by sources and there is no general consensus among scholars on the definition nor on how the term should be used as a historical category, the designation is applied to a variety of historical cases, varying in time, geography, politics and culture.

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.

Mutualism is an anarchist school of thought and economic theory that advocates a socialist society based on free markets and usufructs, i.e. occupation and use property norms. One implementation of this system involves the establishment of a mutual-credit bank that would lend to producers at a minimal interest rate, just high enough to cover administration. Mutualism is based on a version of the labor theory of value which it uses as its basis for determining economic value. According to mutualist theory, when a worker sells the product of their labor, they ought to receive money, goods, or services in exchange that are equal in economic value, embodying "the amount of labor necessary to produce an article of exactly similar and equal utility".

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".

Criticism of capitalism ranges from expressing disagreement with the principles of capitalism in its entirety to expressing disagreement with particular outcomes of capitalism.

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 capital assets and natural resources 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.

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.

Social ownership is any of various forms of ownership for the means of production in socialist economic systems, encompassing state ownership, employee ownership, cooperative ownership, citizen ownership of equity, common ownership and collective ownership. Historically 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 by a single entity or network of entities representing society, but 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. Social ownership of the means of production is the common defining characteristic of all the various forms of socialism.

Market socialism is a type of economic system involving the public, cooperative or social ownership of the means of production in the framework of a market economy. Market socialism differs from non-market socialism in that the market mechanism is utilized for the allocation of capital goods and the means of production. Depending on the specific model of market socialism, profits generated by socially owned firms 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.

The socialist calculation debate, sometimes known as the economic calculation debate, was a discourse on the subject of how a socialist economy would perform economic calculation given the absence of the law of value, money, financial prices for capital goods and private ownership of the means of production. More specifically, the debate was centered on the application of economic planning for the allocation of the means of production as a substitute for capital markets and whether or not such an arrangement would be superior to capitalism in terms of efficiency and productivity.

References

  1. Jeremy Waldron (Mar 21, 2020). "Property and Ownership". Stanford Encyclopedia of Philosophy.
  2. McConnell, Campbell; Brue, Stanley; Flynn, Sean (2009). Economics. Boston: Twayne Publishers. p. G-22. ISBN   978-0-07-337569-4.
  3. Gregory and Stuart, Paul and Robert (February 28, 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).
  4. Friedland, William H.; Rosberg, Carl G. (1965). African Socialism. Stanford University Press. p. 25. ISBN   978-0804702034.
  5. Hoppe, Hans-Hermann (May 20, 2002). "Rothbardian Ethics". LewRockwell.com . Retrieved June 15, 2020.
  6. 1 2 Bertrand Badie; Dirk Berg-Schlosser; Leonardo Morlino (2011). International Encyclopedia of Political Science. SAGE Publications, Inc. 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.
  7. Garnsey, Peter (2007). Thinking about Property: From Antiquity to the Age of Revolution. Ideas in Context. 90. Cambridge University Press. p. 1. ISBN   978-1139468411 . Retrieved 2018-08-28. The defence 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 [...].
  8. The Meaning and Definition of "Property" in Seventeenth-Century England, 1980"
  9. 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.
  10. 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.
  11. Thompson, Paul B (2014). "agriculture". In John, Barry (ed.). International Encyclopedia of Environmental Politics. Routledge. p. 8. ISBN   978-1-135-55403-3 . 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.
  12. 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).
  13. O'Hara, Phillip (2003). Encyclopedia of Political Economy, Volume 2. Routledge. pp. 782–83. ISBN   0-415-24187-1. 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’.
  14. Connell, Shaun. "Property Rights 101: The Foundation of Capitalism Explained". Capitalism Institute. Archived from the original on 29 October 2012. Retrieved 25 October 2012.
  15. The Political Economy of Socialism, by Horvat, Branko. 1982. Chapter 1: Capitalism, The General Pattern of Capitalist Development (pp. 15–20)
  16. ZERA (2013). "The Socialist Calculation Debate". economictheories.org. Retrieved 2020-03-21.
  17. "Property Rights and Capitalism" (PDF).
  18. "Property Law 440" (PDF).
  19. Gewirth, Alan. (1996). The Community of Rights. University of Chicago Press. p. 168
  20. Capital, Volume 1, by Marx, Karl. From "Chapter 32: Historical Tendency of Capitalist Accumulation": "Self-earned private property, that is based, so to say, on the fusing together of the isolated, independent laboring-individual with the conditions of his labor, is supplanted by capitalistic private property, which rests on exploitation of the nominally free labor of others, i.e., on wage-labor. As soon as this process of transformation has sufficiently decomposed the old society from top to bottom, as soon as the laborers are turned into proletarians, their means of labor into capital, as soon as the capitalist mode of production stands on its own feet, then the further socialisation of labour and further transformation of the land and other means of production into socially exploited and, therefore, common means of production, as well as the further expropriation of private proprietors, takes a new form. That which is now to be expropriated is no longer the labourer working for himself, but the capitalist exploiting many laborers."
  21. "Glossary of Terms". marxists.org. Retrieved 2 March 2017.
  22. 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 basically two systemic evils to capitalism’s economic system: alienation and exploitation.
  23. O'Hara, Phillip (2003). Encyclopedia of Political Economy, Volume 2. Routledge. p. 1135. ISBN   0-415-24187-1. Property income is, by definition, received by virtue of 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 virtue of 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 virtue of 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.
  24. The Social Dividend Under Market Socialism, by Yunker, James. 1977. Annals of Public and Cooperative Economics, Vol. 48, No. 1, pp. 93–133: "From the human point of view, return paid to non-human factors of production is unearned and equivalent to a free gift of nature. It is the personal appropriation of this free gift of nature by a small minority of society under contemporary capitalism which 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."
  25. Posner, A. Posner and E. Glen Weyl. “Property is Monopoly: Creating a Competitive Market in Uses Through Partial Common Ownership.” Chap. 1 in Radical Markets: Uprooting Capitalism and Democracy for a Just Society. Princeton: Princeton University Press, 2018.