Private property

Private property is a legal designation for the ownership of property by non-governmental legal entities.^[1] Private property is distinguishable from public property, which is owned by a state entity; and from collective (or cooperative) property, which is owned by a group of non-governmental entities.^[2][3] Private property is further distinguished from personal property, which refers to property for personal use and consumption. Private property is a legal concept defined and enforced by a country's political system.^[4]

History

Gate with a private property sign.

Prior to the 18th century, English-speakers generally used the word "property" in reference to land ownership. In England, "property" did not have a legal definition until the 17th century.^[5][6] Private property as commercial property was invented with the great European trading companies of the 17th century.^[7]

The issue of the enclosure of agricultural land in England, especially as debated in the 17th and 18th centuries, accompanied efforts in philosophy and political thought—by Thomas Hobbes (1588-1679), James Harrington (1611-1677), and John Locke (1632-1704), for example—to address the phenomenon of property ownership.^[8]

John Locke, in arguing against supporters of absolute monarchy, conceptualized property as a "natural right" that God had not bestowed exclusively on the monarchy. Influenced by the rise of mercantilism, Locke argued that private property was antecedent to, and thus independent of, government. Locke distinguished between "common property", by which he meant open-access property; and property in consumer goods and producer-goods, the latter of which referred to land. His chief argument for property in land was improved land management and cultivation over common (open-access) land. Locke developed a normative theory of property rights based on labor, which stated that property is a natural result of labor improving upon nature; and thus by virtue of labor expenditure, the laborer becomes entitled to its produce.^[9]

In the 18th century during the Industrial Revolution, the moral philosopher and economist Adam Smith (1723-1790), in contrast to Locke, drew a distinction between the "right to property" as an acquired right and natural rights. Smith confined natural rights to "liberty and life". Smith also drew attention to the relationship between employee and employer and identified that property and civil government were dependent upon each other, recognizing that "the state of property must always vary with the form of government". Smith further argued that civil government could not exist without property, as its main function was to safeguard property ownership.^[9]

In the 19th century the economist and philosopher Karl Marx (1818-1883) provided an influential analysis on the history and development of private property. Drawing a distinction between pre-capitalist property formations and property in the context of capitalism, Marx's definition of private property referred to ownership of productive (value-producing) assets - termed the "means of production" - by a small class of owners who appropriate, and thus live off of, the value produced by mental and material labor operating the means of production. In a capitalist economy, the surplus value takes the form of profit, enabling a small class to subsist on the resulting property income in an exploitative relationship with non-property owners who produce society's wealth.^[10] Tied to his analysis of capital accumulation and crisis, Marx believed that private property in the means of production would ultimately be replaced by social ownership. When Marx called for the abolition of private property, he was not referring to "personal property" such as clothing and furniture that was not used to produce the "social wealth," but to productive property that requires collective effort to operate.^[11] This conception of private property has proven influential for many subsequent socialist political movements and economic theories, and led to the widespread association of "private property" with capitalism.

Economics

Although contemporary neoclassical economics, currently the dominant school of economics, rejects some of the assumptions of early philosophers that underpinned classical economics, it has been argued that neoclassical economics continues to be influenced by the legacy of natural moral theory and the concept of "natural rights", which has led to the presentation of private market exchange and private property rights as "natural rights" inherent in nature.^[12]

Economic liberals (defined as those who support a private sector-driven market economy) consider private property to be essential for the construction of a prosperous society. They believe private ownership of land ensures the land will be put to productive use and its value protected by the landowner. If the owners must pay property taxes, this forces the owners to maintain a productive output from the land to keep taxes current. Private property also attaches a monetary value to land, which can be used to trade or as collateral. Private property thus is an important part of capitalization within the economy.^[13]

Socialist economists are critical of private property as socialism aims to substitute private property in the means of production for social ownership or public property. Socialists generally argue that private property relations limit the potential of the productive forces in the economy when productive activity becomes a collective activity, where the role of the capitalist becomes redundant (as a passive owner). Socialists generally favor social ownership either to eliminate the class distinctions between owners and workers, and as a component of the development of a post-capitalist economic system.^[14]

In response to the socialist critique, the Austrian School economist Ludwig Von Mises argued that private property rights are a requisite for what he called "rational" economic calculation and that the prices of goods and services cannot be determined accurately enough to make efficient economic calculation without having clearly defined private-property rights. Mises argued that a socialist system, which by definition would lack private property in the factors of production, would be unable to determine appropriate price valuations for the factors of production. According to Mises, this problem would make rational socialist calculation impossible.^[15]

In Marxian economics and socialist politics, there is distinction between "private property" and "personal property". The former is defined as the means of production in reference to private ownership over an economic enterprise based on socialized production and wage labor; the latter is defined as consumer goods or goods produced by an individual.^[16][17] Prior to the 18th century, private property usually referred to land ownership.

Criticism

Private property in the means of production is criticized by socialists. The socialist critique of private ownership is heavily influenced by the Marxian analysis of capitalist property forms as part of its broader critique of alienation and exploitation in capitalism. Although there is considerable disagreement among socialists about the validity of certain aspects of Marxian analysis, the majority of socialists are sympathetic to Marx's views on exploitation and alienation.^[18] Socialists critique the private appropriation of property income on the grounds that, because such income does not correspond to a return on any productive activity and is generated by the working class, it represents exploitation. The property-owning (capitalist) class lives off passive property income produced by the working population by virtue of their claim to ownership in the form of stock, bonds or private equity. This exploitative arrangement is perpetuated due to the structure of capitalist society. From this perspective, capitalism is regarded as class system akin to historical class systems like slavery and feudalism.^[19]

Private ownership has also been criticized on non-Marxist ethical grounds by advocates of market socialism. According to the economist James Yunker, the ethical case for market socialism is as follows: because passive property income requires no mental or physical exertion on the part of the recipient, and because its appropriation by a small group of private owners is the source of the vast inequalities in contemporary capitalism, social ownership in a market economy would resolve the major cause of social inequality and its accompanying social ills.^[20]

See also

• Common ownership
• Enclosure
• Ideology
• Personal property
• Public property
• Property
• Property income
• Property rights (economics)
• Rule of law

References

1. McConnell, Campbell; Brue, Stanley; Flynn, Sean (2009). Economics. Boston: Twayne Publishers. p. G-22. ISBN 978-0-07-337569-4.
2. Gregory and Stuart, Paul and Robert (February 28, 2013). The Global Economy and its Economic Systems. South-Western College Pub. p. 30. ISBN 978-1285055350. There are three broad forms of property ownership – private, public, and collective (cooperative).
3. "?".
4. Bertrand Badie; Dirk Berg-Schlosser; Leonardo Morlino (2011). International Encyclopedia of Political Science. SAGE Publications, Inc. p. 2132. ISBN 978-1412959636. Private property cannot exist without a political system that defines its existence, its use, and the conditions of its exchange. That is, private property is defined and exists only because of politics.
5. The Meaning and Definition of "Property" in Seventeenth-Century England, 1980"
6. The Meaning and Definition of "Property" in Seventeenth-Century England, by G. E. Aylmer, 1980. Oxford University Press. Past and Present, No. 86 (Feb., 1980), pp. 87–97.
7. Bertrand Badie; Dirk Berg-Schlosser; Leonardo Morlino (2011). International Encyclopedia of Political Science. SAGE Publications, Inc. p. 2132. ISBN 978-1412959636. Oliver Letwin, a British conservative theorist, observed that the private sector had to be invented. This occurred with the great European trading companies, such as the British and Dutch East India companies, founded in the 17th century. Notions of property before the Renaissance assumed that different actors had different relations to the same property.
8. Thompson, Paul B (2014). "agriculture". In John, Barry. International Encyclopedia of Environmental Politics. Routledge. p. 8. ISBN 978-1-135-55403-3. Retrieved 2014-08-05. [D]ebates [on enclosure] [...] laid down many of the basic terms for political debate about private property, and especially property in land.
9. Property Rights in the History of Economic Thought: From Locke to J.S. Mill, by West, Edwin G. 2001. Property Rights: Cooperation, Conflict, and Law, ed. Terry Lee Anderson and Fred S. McChesney, Princeton University Press, 2003, Ch. 1 (pp. 20–42).
10. "MIA: Encyclopedia of Marxism: Glossary of Terms: (Pr)".
11. Norman Levine. (1991) Introduction to Györgi Lukács, The process of democratization. SUNY Press. p 8
12. O'Hara, Phillip (September 2003). Encyclopedia of Political Economy, Volume 2. Routledge. pp. 782–783. ISBN 0-415-24187-1. The derivation of natural moral theory has provided the foundation for the use of economic theory to support specific ideological viewpoints. The main strength of the legitimating role of economic theory is that it allows one set of ideological viewpoints to posture as if their conclusions were unbiased scientific conclusions, while those opposing them were merely expressing their value laden opinions. At its apex, this tendency has justified laissez-faire economic policies as if they were based on natural laws. Always behind the legitimization activities of economists is the belief that markets are ‘natural’ institutions and market outcomes are natural outcomes, and the institutions necessary for markets, such as private property rights, are ‘natural rights’.
13. Connell, Shaun. "Property Rights 101: The Foundation of Capitalism Explained". Capitalism Institute. Retrieved 25 October 2012.
14. The Political Economy of Socialism, by Horvat, Branko. 1982. Chapter 1: Capitalism, The General Pattern of Capitalist Development (P.15-20)
15. "?".
16. Gewirth, Alan. (1996). The Community of Rights. University of Chicago Press. p 168
17. Capital, Volume 1, by Marx, Karl. From "Chapter 32: Historical Tendency of Capitalist Accumulation": "Self-earned private property, that is based, so to say, on the fusing together of the isolated, independent laboring-individual with the conditions of his labor, is supplanted by capitalistic private property, which rests on exploitation of the nominally free labor of others, i.e., on wage-labor. As soon as this process of transformation has sufficiently decomposed the old society from top to bottom, as soon as the laborers are turned into proletarians, their means of labor into capital, as soon as the capitalist mode of production stands on its own feet, then the further socialisation of labour and further transformation of the land and other means of production into socially exploited and, therefore, common means of production, as well as the further expropriation of private proprietors, takes a new form. That which is now to be expropriated is no longer the labourer working for himself, but the capitalist exploiting many laborers."
18. Arnold, Scott (1994). The Philosophy and Economics of Market Socialism: A Critical Study. Oxford University Press. p. 50. ISBN 978-0195088274. Though socialists have disagreed with Marx about how to conceptualize the notion of class, about the dynamics of class societies, and indeed about a whole host of other matters, most socialists seem to be broadly sympathetic to his views about what is wrong with the capitalist (free enterprise) economic system and, by implication, capitalist society ... Marx’s critique attributes basically two systemic evils to capitalism’s economic system: alienation and exploitation.
19. O'Hara, Phillip (September 2003). Encyclopedia of Political Economy, Volume 2. Routledge. p. 1135. ISBN 0-415-24187-1. Property income is, by definition, received by virtue of owning property ... Since such income is not an equivalent return for any productive activity, it amounts to an entitlement to a portion of the aggregate output of others’ productive activity. The workforce produces output, but surrenders part of it to people who have nothing directly to do with production. Arguably, this occurs by virtue of a social system to which those in the workforce have never given their full consent, i.e. that of private property. Alternatively, it occurs by virtue of a structure of power to which the workforce is subject: property income is the fruit of exploitation. The fact that it is essential to capitalism makes the latter a class system akin to such other historical cases as slavery and feudalism.
20. The Social Dividend Under Market Socialism, by Yunker, James. 1977. Annals of Public and Cooperative Economics, Vol. 48, No. 1, pp. 93-133: "From the human point of view, return paid to non-human factors of production is unearned and equivalent to a free gift of nature. It is the personal appropriation of this free gift of nature by a small minority of society under contemporary capitalism which establishes the ethical unworthiness of capitalism and the desirability of a socialist transformation...The employment of capital instruments and natural resources in economic production requires no personal hardship or exertion from any human being. The economic services provided by these factors of production are not corporeally inherent in human beings. The opposite is true of labor services, which can only be provided through the physical and mental activity of human beings...the really grossly exaggerated personal incomes in society are dominated by property income, and this source of inequality would be abrogated by the equalization of property income distribution."

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