Property and Property Rights

To have a right of property or to own property is to have, with regard to some resource or thing, a relation to other people that establishes a rightful claim as to how one may use, enjoy, or deploy that resource. Although we often think of property in terms of some [Page 1707]material good or resource (e.g., “This land is my property”), the assertion of property, property ownership, or a property right is, in fact, a statement that one's relation to that thing is defined in terms of rules that establish what one may do with that thing and what others may or may not do. If one owns one's bicycle, then one has the right to drive it on a municipal street, to paint it blue rather than red, or to loan it for a fee. If one owns one's house and the land on which it sits, then one may plant a flower garden on the south side, paint the shutters, attach a porch, or sell the house and land to someone else. However, ownership may not include a right to build a bonfire on one's front lawn or to raise swine or chickens in the backyard.

The concept of property has played a pivotal role in political and social philosophies throughout the ages, and since ancient Greece, property has been regarded as a fundamental institution of society. In what follows, the major focus is on the nature of property rights, specifically, the rights of private ownership or private property. What is the importance of private property? What goods in society should be privately rather than publicly held? As a first approximation, one may note that private property is an institution essential to business. Market exchange involves a transfer of property from one person (or organization) to another. Private property has other important functions in market societies. Private property ensures that current owners take into account future income, thus ensuring that the owners consider the long-run effects of their decisions. Since private property is necessary for exchange and since it encourages prudential decision making, it is an institution essential to business competition. Thus, private property provides the foundation for the complex or spontaneous order that characterizes markets.