Property rights are approved and enforced by the
government and society according to Armen Alchian. The person responsible for
assigning these rights must uphold the set of rules entitled. Private property rights are important in that
it helps create healthy competition, eliminate discrimination, and prevents
government interference. The need for healthy competition is important, as
Alchian states, “well-defined and well-protected property rights replace
competition by violence with competition by peaceful means”. Without such means
competition would become stagnate because there would be no need to significantly
alter prices. Consider running
shoes and the many different styles and options available. If the government
decided to interfere with the private property rights of the owners or
corporations of these companies than the land that the people once owned would
become a mean of commons or public lands. Several problems might occur: competition
would decrease because there would be no incentive and the use of resources
would not be effectively utilized. Incentives are motivators that help increase
competition. If the equilibrium price for running shoes is $45 then the sellers
would try to reach that price to meet the buyers, thus the competition would be
constantly changing regarding monetary value. The use of resources would then
be utilized effectively. If the government interrupts the concept of the
invisible hand then shortages or surpluses can occur. Thus the use of resources
would not be effectively used.
With private property rights, such uses are controlled by
the owner. The owner can decide who utilizes the resource, at what price, and
whether they want to delegate, sell or rent pieces of the resource. This
creates competition between sellers that helps eliminate discrimination, “more
complete property rights make discrimination more costly” (Alchian). In
government controlled rights discrimination easily seeps into the system.
Alchian considers the example of a landlord renting an apartment to a black
woman when no price control is put into effect. He makes the point that the
landlord would be less likely to discriminate because he can set the price of
renting his establishment at the price he wants to whoever is willing to agree
to that price. The landlord would not care if a black woman was renting from
him as long as he was receiving the rent dues he desired.
But when price controls are established by the government
than the landlord would become pickier because he would not be making the same
amount of money that he was before, he lost his incentive. If the price control for rent was set at $800
when the landlord was previously receiving $1200 in rent then the landlord
would not be as happy and might not welcome a minority as he had before. All of
a sudden the landlord would receive a line-up of people waiting for apartment rentals;
he would then carefully select his renter to his liking. As Alchian states,
“The landlord, now unable to receive the full money price, will discriminate in
favor of tenants whose personal characteristics—such as age, sex, ethnicity,
and religion—he favors. Now the black woman seeking an apartment cannot offset
the possible disadvantage of her skin color by offering to pay a higher rent”.
Private property rights are necessary and can be
controlled through means of patents and copyrights. Corporations are a form of
private property rights in that a large amount of people share or own the
company, receiving a portion of the profits obtained. Unfortunately there are
certain circumstances that make private property rights too difficult such as
when a factory is emitting clouds of black smoky fog into the air near farming
land. This can cause problems as to who should pay for the damage to the air
that cannot be physically contained which then in return damaged the crops of
the farmer’s land. The consequences of poorly defined property rights can
result in legal matters which can cost vast amounts of money. When these
situations occur sometimes the need for coercive measures is appropriate. This
is why the government controls the rights of air and use of water.
In some situations, the government is needed to minimally
control the use of resources than to be privately owned, “when private property
rights are unavailable or too costly to establish and enforce, substitute means
of control are sought. Government authority, expressed by government agents, is
one very common such means” (Alchian). The problem of the matter is that people
no matter how good take advantage of something as simple as air or water and
they disrupt the natural flow by pollution. This is why the government has interfered
and now does not allow private property rights.
Overall private property rights are in an economic point
of view, excellent and necessary. Private property rights are human rights that
prevent discrimination, create healthy competition, and prevent unnecessary
government interference.http://www.econlib.org/library/Enc/PropertyRights.html
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