Home / News / Article


November 17 2006

The Role of Property Rights , Karol Boudreax - Mercatus

The Role of Property Rights , Karol Boudreax Mercatus

In the Cato book, The Libertarian Reader: Table of Contents, there is a chapter, "Rights and Responsibilities of Women" by Angelina Grimke.

Also Economic Freedom & Development An essay about property rights, competition, and prosperity by Wolfgang Kasper gives a good overview, but is not specifically aimed at women -- also it is called an essay, but it's a short book. Here's some info on it:

ISBN : 81-87984-05-8000 Rs.200

Overpopulation, colonial exploitation, pervasive corruption, chaotic democracy, high illiteracy, and antimaterialist and fatalist culture do not explain India's poverty. Lack of economic freedom does. Let the natural prosperity of the Indian to truck, barter, and exchange flourish within the spontaneous order of the market. Parth J. Shah

Reviewed in Freedom Daily, April 2003

Summary

It has become increasingly obvious that people in free, open societies generate relatively fast economic growth, whereas planned and controlled economic systems make for stagnation or decline. This essay addresses the factors and rules that expand productivity and incomes and those that retard economic progress or even lead to economic decline. Although India lagged behind East Asia, the easing of bureaucratic controls and central planning in recent years has allowed the spontaneous forces of growth to emerge in India too. Much remains to be done, including the tackling of discrimination on grounds of caste, religion and other such criteria within civil society, apart from reforming the State and its interventions and opening the economy so that Indians can freely compete in world markets.

It is the purpose of this essay to explicate the connection between freedom and growth to an Indian audience, where remnants of an opposing philosophy-- that growth can be generated by planning from the top down and by copious controls and regulations-- still have lingered, despite much global and historical evidence to the contrary.

We begin by asking about the causes of economic growth: Is it investment, learning, innovation, resource development, or something else? All these factors have played a role in economic progress throughout history and around the world. But focussing on these factors begs the question why people invest, learn, innovate in some and not in other societies! The reason for such differences in behaviour lies in different sets of rules of coordination, which we call 'institutions'. The institutions have to evolve if economic and social development is not to stall in its tracks. What might have been good 'traffic rules' to coordinate a tribal society are not necessarly the institutions that help a nation's prosperity in the era of globalisation. This essay therefore restates the fundamental insights of the new and rapidly spreading discipline of Institutional Economics. It explains in particular what has come to be known as the "constitution of capitalism," which has been widely recognised as essential for general material progress, as well as a free, peaceful and just society.

A modern economy is a complex system that evolves in ways similar to a natural ecological system. Enterprising people search spontaneously for new wants and new resources, if they are able to rely on simple, stable and non-discriminatory ground rules. Discretionary market interventions by governments and powerful groups tend to have unforeseen and harmful side effects and, if allowed to cumulate, make the entire economic system dysfunctional. This applies a fortiori to developing countries. They are going through disorienting and confusing structural changes, so that past experience is frequently a poor guide in coordinating people. Economic development therefore depends on the cultivation of good, citizen-friendly institutions and habits that enhance economic freedom and an effective, honest and just division of labour.

The most successful set of ground rules for coordinating economic activities is the system of protected private property rights, as well as private autonomy to compete under the rule of law. An important part of this is the protection of life and limb, a condition regrettably absent in many shantytowns and rural areas. Under well-run protective institutions, propertied and talented people have an incentive to compete. They incur the costs of searching for useful knowledge and test whether such knowledge is sufficiently valued by others (reflected in a profit). Genuine competition thus stimulates innovation and economic growth. It also induces people to abandon errors that are signalled by losses. In a competitive market economy, property owners who shirk the shouldering of the costs of knowledge exploration probably incur losses in the value of their assets.

Governments must therefore not protect the existing socio-economic positions of the competition-shy. Yet, such favouritism and interventionism are frequent pursuits of corrupt politicians and officials.

A genuine competitive system tends to go along with a high degree of equality of opportunity. Therefore, the control of competition- and growth-impeding collusion between corrupt officials and 'crony capitalists' must be made one of the fundamental tasks of economic development.

Public policy and collective action normally do not coordinate human conduct as well as free markets. Many traditional collective pursuits-- such as the provision of water or electricity-- are nowadays satisfied more effectively by competing private providers. Nevertheless, public policy and the visible hand of government are sometimes needed to back up the institutions of civil society and to control concentrations of power. It must, however, be kept in mind that governments cannot protect the private property rights and other economic freedoms of all citizens, when they engage in the promotion of specific industries or intervene in trade. This always occurs at the expense of some property owners, typically the weaker and less keep 'well' organised members of society.

The domain of collective action has been relentlessly expanded over the past 100 years by self-serving military men, elected parliamentarians, an activist judiciary and bureaucratic influence-seekers. Where the power of well-connected political and industry groups is unbridled, public policy has not served the ordinary people well; and where economic freedom and the ground rules are poorly protected (as in India), economic growth, which benefits all, remains an illusive goal. Political and economic power therefore have to be constrained by just rules if the challenges of economic development, the open economy and the communications revolution are not to inflict further pain and traumatic experiences on the majority of citizens.

Wolfgang Kasper is emeritus Professor of Economics at the University of New South Wales in Australia and a Senior Fellow at the Centre for Independent Studies, Sydney. While working with international agencies, he gained first-hand knowledge of virtually all East Asian economies and has visited India and Latin America repeatedly.

Independent Women’s Forum’s mission is to improve the lives of Americans by increasing the number of women who value free markets and personal liberty. Sister organization of Independent Women’s Voice.
Follow us