Why is Private Property Important?
Explaining why it’s essential to economic growth
Why do we need private property laws? Couldn’t we all just share property together?
No, not really. As Daniel Cole and Peter Grossman write in “Principles of Law and Economics,” productive capital is the result of both “economically valuable assets and the sociolegal fact of functional and secure property systems to govern those assets.”
The authors quote the Peruvian economist Hernando de Soto, who wrote that property rights are a “staircase” that allows countries to move “from the university of assets in their natural state to the conceptual universe of capital where assets can be viewed in their full productive potential.”
It’s important to recognize that the right to property is not just one singular right; instead, property rights are a bundle of many rights that are grouped together.
According to Cole and Grossman, property rights include “the right to possess, the right to use, the right to alienate, and the right to exclude.”
The big takeaway is that private property rights encourage investment. This increase in investment spurs growth, allowing communities to develop and prosper.
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