Individual Ownership: Bedrock of Modern Affluence

Who would cultivate the soil and sow the grain if he had no special interest in the harvest? Who would rear and tend the flocks and herds if they could be taken from him by anyone who should come to demand them? ... What belongs to no one is wasted by everyone. What belongs to one man in particular is the object of his economy and care.       -James Wilson

Individual Ownership Creates Wealth: Private property and its voluntary exchange is the source of wealth creation. This was clear to James Wilson (signatory of the Declaration of Independence and Associate Justice of the US Supreme Court, 1789 to 1798) more than 200 years ago, as noted above. Since that time it has been made even more clear by the experience of communism and socialism, which sought to replace individual private ownership with collective ownership.
  • Generally, the societies that were most aggressive in establishing collective ownership instead of individual ownership produced widespread poverty. For example, the Soviet Union concluded its brief history in virtual third world poverty, because the individual incentives that would have mmaximized the return on property and created wealth were not present. In Poland, a saying arose that recalled the Wilson quote above, "what everyone owns, no one owns."

  • Because of the demonstrated failure of collective ownership, virtually all socialist and communist nations have taken significant strides to replace collective ownership with individual ownership.

  • At the same time, nations that have relied to a greater degree on individual ownership have achieved unparalleled affluence over the past 20 years. The United States, which has been among the most dedicated to individual ownership, remains by far the world's most affluent major nation (based upon purchasing power parities).

  • Even so, free market nations have sectors that consume rather than produce wealth. Government is the best example of this. A certain level or amount of government is beneficial and necessary. However, governments have become involved in inappropriate functions and have become too large. Moreover, governments tend to avoid using the commercial sector to produce their services, even where it is demonstrated that such an approach is feasible and would conserve individual resources (by reducing taxes and allowing people to produce more wealth).
Individual Ownership Must be Certain: A recent book by Hernando DeSoto, The Mystery of Capital, shows that free markets have not produced wealth in third world nations in the same manner as in the first world. This, he suggests, has largely to do with the fact that clear title to property is not easily obtained in third world nations. The uncertainty of de jure individual ownership makes it impossible for most people convert their de facto property into capital. (See Book Review: Trickle-Up Economics: The Mystery of Capital)

Individual Ownership is Seriously Threatened by So-Called "Smart Growth:" At the same time, even in the United States, there are significant threats to individual ownership. The greatest current threat is from the "smart growth" (anti-"urban sprawl") movement, that seeks to materially limit the ability of individuals to use and dispose of their property. Besides retarding the quality of life by increasing traffic congestion and air pollution, smart growth imposes limits on individual ownership that restrict its potential for development and exchange. Typical smart growtn strategies are land rationing (urban growth boundaries), impact fees on new homes, mandated amenities in residential construction and legislation with respect to matters of architectural taste (such as through mandatory "new urbanist" zoning ordinances).

"Smart" Growth Rations Wealth and Opportunity: The net effect of smart growth individual property restrictions is to retain formality with respect to individual ownership, while removing genuine control. Perhaps the most perfidious impact is that it closes off opportunities to move into the economic mainstream for large numbers of lower and lower middle income people whose principal source of wealth accumulation, acquisiting of homes, is made more difficult. Smart growth limitations on individual ownership will lead to less efficient use of resources and less wealth creation. Already, the results are clear in areas that have adopted "smart growth" strategies. For example Portland (land rationing and densification strategies), Oregon and metropolitan areas in California (impact fees and mandated amenities) are now far less affordable than in the past, relegating large numbers of households who would otherwise buy homes to rental units.

Individual Ownership Serves the Common Good: Fundamentally, the purpose of individual ownership is not so much to create wealth for individuals as it is to create wealth for society in general, thereby increasing the affluence of all. There is no longer any question but that free market societies produce much more wealth than any economic alternative. As recent history has shown, the poor in free market societies tend to live more affluent lives than middle income people in socialist societies. Individual ownership is the very bedrock of our modern and unprecedentedly affluent society. It is crucial that current assaults on individual ownership be turned back.

The Public Purpose Commentary #43

(c) 2001 --- Wendell Cox Consultancy --- Permission granted to use with attribution.
Demographia is "pro-choice" with respect to urban development.
People should have the freedom to live and work where and how they like.

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