Private property

Private property is a system of property rules under which each contested resource is assigned to the decisional authority of a particular person or firm. The owner decides what is done with the thing, is not acting as an agent of society in doing so, need give no one an account of the decision, and may transfer that authority to another, who then holds it on the same terms.

The alternative systems are commonly distinguished as common property, where the resource is open to all, and collective property, where its use is determined by a body acting for society as a whole.

Why the Austrian argument turns on it

For Austrian economists private property is not primarily a moral posture but the institution on which the possibility of economic calculation rests. Where the factors of production are owned and exchanged, they acquire money prices; where they do not, there are no prices for them, and no way to compare the many technically possible methods of producing a thing and identify which wastes least. Ludwig von Mises's argument against socialism is therefore an argument about ownership rather than about incentives: it holds even for planners who are diligent and well intentioned.

The complementary argument is that private property is what makes peaceful use of a world of scarce means possible at all. Two people can want the same resource for incompatible purposes; assigning it to a determinate owner settles who decides, and so converts a potential conflict into a question about title. On this account property rights are not an imposition on an otherwise harmonious world but the means by which the conflict scarcity implies is resolved without violence.

Owning does not mean being unaccountable

The owner's freedom from having to justify a decision is a legal fact, not an economic one. An owner who uses a resource in ways consumers do not value bears the loss himself, and continued misuse costs him the resource, since he must eventually sell it to someone who values it more. This is the sense in which private ownership subjects even the unaccountable owner to the judgment of others, and the sense in which consumer sovereignty operates through property rather than against it.

The point cuts against a common objection. When a factory owner closes a plant, the decision may fall heavily on employees and on the surrounding town. That the decision is his to make is precisely what makes him bear its consequences; the alternative is not that the loss disappears but that it is borne by people who did not choose it and cannot be held to account for it.

Original appropriation

Since ownership is transferred by exchange and gift, a complete theory needs an account of how a thing came to be owned in the first place. Austrians in the Lockean tradition, above all Murray N. Rothbard, hold that unowned resources become owned through original appropriation: bringing a thing into use establishes the title, which may then be transferred. The rival view, that titles derive from the state or from social convention, is rejected on the ground that it makes property a grant revocable by the granter and so no property at all.

Hans-Hermann Hoppe developed the economic and ethical case at length in The Economics and Ethics of Private Property.

See also

• Property
• Economic calculation problem
• Scarcity
• Consumer sovereignty
• Socialism
• Contract

Links

• Private Property by Ludwig von Mises (excerpted from chapter 24 of Human Action: The Scholar's Edition (1949))
• Private Property and Its Critics by Ludwig von Mises (from Liberalism (book))
• All Hail Private Property by Tibor R. Machan, April 2002
• Private Property's Philosopher by David Gordon, September 2009
• The Economics and Ethics of Private Property by Hans-Hermann Hoppe
• Coase and Demsetz on Private Property Rights (pdf) by Walter Block, 1977
• Enforcement of Private Property Rights in Primitive Societies: Law without Government (pdf) by Bruce L. Benson, 1989
• Private property at Wikipedia