Monday, November 4, 2013

property rights and selfishisim

From an economic perspective people are very selfish or to put it another way most people are optimizing individuals. This means that people will try to do what is in their best interest whatever they perceive their best interest to be. In fact it can be argued that any decision any person makes is a result of self interest. This is an economic principle that must be taken into consideration when looking at an economy.

In a command economy The vast majority of people have very little if any property rights and as such they don't really own anything which means they have very little incentive to be productive due to the simple fact that whatever they produce is not in fact their own. From this perspective it is not hard to see why a command economy is often less than successful. When the same people have some form of property rights so they can keep whatever goods they produce and whatever value they impart to the land is theirs they have incentives to work and to make profit and overall improve their quality of life.

In a capitalist or market economy property rights are much more prevalent as people have goods and can trade those goods to increase their personal wealth. Adam Smith said that the trade within the economy will increase the economy as if guided by an invisible hand to greater and greater wealth. However, this is only possible when property rights are respected this means that when people own a good they have the right to use the good, The right to earn income from the good, the right to transfer the good to others, and the right to enforce their property rights, whether that be by having a government enforce property rights for them or being able to enforce property rights themselves. this leads to people having a vested interest in there own goods and provides incentives to increase their own personal wealth.

in short if people are selfish, which they are, than when a means is presented to better themselves in wealth or other value they then have good incentives to use that means so long as the value is retained.

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