My last post explored our sustenance from the miraculous biosphere that is supplying our every need. We looked at our responsibility to be stewards of this life-giving planet including the proper allocation of resources based on value. We saw that value is a factor of how much we need or want something (demand) as well as the scarcity and value-added production of the good or service (supply). Distribution of resources is a factor of negotiated exchange through trade or monetary systems based on demand and supply.
All of this is based on the assumption that people have ownership of property. Ownership is an elusive concept. The earth with its sustaining resources was created before human life even existed. Therefore, man had nothing to do with it and has no claim to it other than as stewards or caretakers. To declare that anything on earth is “ours” is really arrogance. As concluded in my previous post, everything in our biosphere is made from elements that have been here from the beginning of time. How can we possibly declare ourselves owners of any of it during our blink-of-an-eye existence on earth?
Then, what is this property ownership thing? Well, ages ago humans advanced from roaming on earth as hunters and gatherers to more organized inter-dependent groups. The concept emerged of rights to the use of property and exchange of goods and services based on value. Man developed agreements, contracts, and titles to provide rights to oversee and manage certain properties. Over time, many societies saw this concept evolve into some type of centralized authority with power to determine who would have responsibility for what property. Proceeds from use of the property would be given to the centralized authority and distributed among the property stewards at the whim of the authority. This was a monarchy system with a serfdom economy which dominated the world for centuries. It was the forerunner of today’s communism and socialism.
Although small pockets of free trade economies have existed in the world throughout history, only the establishment of the “new world” of America provided the opportunity for freedom-loving people to begin a broad economic experiment. Such a free economy had never before been tested on a large scale. America’s economy was born with free market and private property concepts hammered out by our forefathers.
The revolutionary economic model initially allocated land obtained by either war or decree to American settlers. The early settlers received title to manage and add value to the land by growing crops, producing products, offering services, setting up trade venues, or renting it to others. Proceeds from these endeavors were kept by the owners of the property, not given over to a central authority for redistribution. The government only provided the granting and enforcement of legal rights to properties. This was pure and non-interference exercise of free trade and individual private property ownership. Keep in mind that what we call private property ownership was and always has been the official guaranteed right to control and use whatever we “own.” When we sell or buy property, real or personal, we are just legally transferring the right to manage and use that property. That right is legally enforced by government to prevent theft, encroachment, damage, or abuse.
The free market democratic right to our private property includes the right to use that property to our personal advantage. That might be to sell the resources of real property such as plants or minerals, use the resources to produce goods or services such as growing crops or operating a business, or simply to allow the property to increase in value through scarcity or increased demand.
The only advantage of owning private property is to add value to it for individual self-interest. National economic growth is dependent on citizens adding value to private property. An empty house does not add value. It adds value when it is purchased and becomes a home providing a venue for sustaining life. A vacant piece of land does not add value. It adds value when it is purchased and becomes a site for a business which produces goods or services. A piece of equipment adds value during its fabrication, but its added value stops after it is manufactured until it is purchased to produce things that adds further value.
So, owning property actually means just having the legal right to use or sell the property as desired. The only benefit to owning property is to add to its value in order to advance self-interest. Individuals or groups adding value to owned property is the heartbeat of a nation’s economy.
My next post will examine how firms, industries, and nations determine what and how much to produce to add value and stay economically healthy.
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