What are Private Property Rights?
Property and prosperity rights are inseparably linked. The significance of having strongly protected and clearly defined property rights is currently widely recognized among policymakers and economists. A private property right provides people the exclusive right to utilize their resources as they see appropriate (Calandrillo, et al., 2015). That power over what belongs to them leads property users to be responsible of all the costs and benefits of employing those assets in a certain way. The process of weighing between benefits and costs gives what economists refer as efficient outcomes. Thus leading to advanced standards of living to everyone.
Ancient experiences with the tragedy of collective ownership and the advantages of private ownership can be seen in the examples of Plymouth and Jamestown colonies, less developed countries and the Soviet Union. Collective ownership or weakly enforced as well as poorly defined private property rights, leads to perverse incentives with respect to the utilization of scarce resources and insecurity with respect to investment in the improvement of those assets. The significance of private property rights is not clear with regard to historical evidence. Economics as a discipline has devoted much of its time and effort to explain the functional importance of private property on an economic system (Becker, 2014).
How it works
Private property rights are significant to economic development.
First, documented private property rights give the legal confidence necessary for persons to commit resources to projects. The threat of elimination, by either public officials or private individuals weakens confidence in market activity and limits venture possibilities.
Second, Well-defined property rights usually make decision makers pay much attention to utilization of resources and reduced value of the future use of limited resources. Failure to have private property rights, economic actors will be short-sighted in their decision making and not able to conserve resources with time.
Third, property rights are important in exchange and the extension of ownership to capital goods give the foundation for the development of financial markets that are important for economic growth and development. Lastly, secure private property rights is the basis for partial and enlightened government.
In the recent past economists have accepted the importance of property rights. In the entire history of modern economics, the issue was given little shrift. Also committed supporters of the market economy annotated over the matter (Du and Park, 2014, p.14). Despite the fact that policymakers in international institutions and developed countries today recognize the critical role played by private property system in economic development, they are limited in what they are able to perform to enable third world countries to advance such a system.
However, policymaker can avoid endorsing policies that weaken private property. Development failures excuses are many inadequate funding of education, religion, culture, geographical location, history and lack of natural resources. The difference between poverty and prosperity is property.
With clearly defined and enforced private property rights nations do prosper. In America where majority of people have benefited from free enterprise and private property, the major threat to continuous prosperity lies in the gradual erosion of the respect for private property by government through regulation and taxation (Murtazashvili and Murtazashvili, 2016, p.122). Therefore, among the most important roles that economists can play as teachers and scholars is to articulate evidently the importance of private property for social cooperation and economic development. In case we don’t, we will have failed in our scientific role to deliver the basic teachings of our subject and the lessons gained from history of man.
Calandrillo, S. P., Deliganis, C. V., & Woods, A. (2015). When Private property rights collide with growth management legislation. Cornell Real Estate Review.Becker, L. C. (2014). Property rights (Routledge revivals): Philosophic foundations.
Routledge.Du, D., & Park, W. G. (2014). How private property protection influences the impact of intellectual property rights on economic growth: Working paper series-14-03.
Murtazashvili, I., & Murtazashvili, J. (2016). The origins of private property rights: states or customary organizations? Journal of Institutional Economics 12, no. 1 (2016): 105-128.`