presentation copyright 1997, 1998 by Barry and Deborah Brownstein Property Rights and Markets

Why Are Property Rights Important? The market economy is a ‘vast network’ of voluntary exchanges of property titles –voluntary transactions insure win-win trades property rights facilitate the spontaneous order –spontaneous orders facilitate discovery, help correct errors, fulfil expectations and generate new knowledge because knowledge is imperfect and decentralized, errors are frequent and pervasive; thus coercion is unwise.

Why Are Property Rights Important? (Continued) “each man should be free to make full use of his knowledge and skill, that he must be allowed to be guided by his concern for the particular things of which he knows and cares.” without ownership a ‘tragedy of the commons’ develops –without roles and responsibilities in the firm things fail to get done –with “property rights” employees are free to “utilize local knowledge, make judgements and bear the consequences.”

John Locke (Two Treatises of Government) n Built on the ideas of Sophocles, Cicero and many others n people have rights before the existence of government (natural rights) n the purpose of government is to protect their rights n people are justified in dissolving governments that do not protect their rights.

Positivism’ as an Alternative To Natural Rights ‘Positivism’ as an Alternative To Natural Rights Law established by governmental authority All rights are man-made can be granted or taken away by man ‘rights’ can advance ‘common good’ at the expense of individuals

Time Line n John Locke ( ) – Two Treatises on Civil Government n Thomas Jefferson ( ) – 3rd President-author of Declaration of Independence n James Madison ( ) – 4th President-"master builder" of the Constitution n US. Constitution – amended with the Bill of Rights 1791

Thomas Jefferson- Declaration Of Independence “We hold these truths to be self evident: that all men are created equal; that they are endowed by their Creator with inherent and inalienable rights; that among these are life, liberty and the pursuit of happiness; that to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed…”

The revolutionary basis (of this country) is recognition of the fact that human rights are natural rights, born in every human being with his life, and inseparable from his life; not rights and freedoms that can be granted by any power on earth.- Rose Wilder Lane

James Madison on Government "All power is originally vested in, and consequently derived from, the people.” “The powers delegated by the proposed Constitution to the Federal Government, are few and defined.”

Arguments Against The Bill of Rights n not necessary- "because the powers are enumerated, and it follows, that all that are not granted by the constitution are retained ; the great residuum being the rights of the people ; and therefore, a bill of rights cannot be so necessary as if the residuum was thrown into the hands of the Government." n subject to misinterpretation- "by enumerating particular exceptions to the grant of power, it would disparage those rights which were not placed in the enumeration; and it might follow, by implication, that those rights which were not singled out were intended to be placed into the hands of the General Government.."

The Solution-The Ninth Amendment The enumeration in the Constitution, of certain rights shall not be construed to deny or disparage others retained by the people.

Property in One's Own Person n Three Possibilities – absolute right to own one's body – certain person or persons own other people – every one has an equal share in everyone else

Natural Rights In the Constitution (Amendment 1) Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press;....

Ownership of Physical Property n Three Possibilities – transformer or creator has the property right, (homesteading principle) including the right to pass on property to one's heirs – another man or group of men have the right to appropriate the property by coercion – everyone has equal quotal share in all property ("property is theft")

Property Rights in the Constitution (Amendment 5)...Nor shall private property be taken for public use without just compensation.

Appendix- “Bread-Store Chain Tells Franchisees: Do Your Own Thing” Great Harvest Bread Company- 151 stores “Anything not expressly prohibited by the language of this agreement is allowed” Simple rules allow for faster adaptation, innovation and collaboration In contrast with ‘Roman Law’ organizations which prohibit everything that they don’t permit