#4 Private Ownership Promotes Responsibility...

What Every Debater Should Know... Why economics? If you could only know 10 things... 1. TANSTAAFL 2. Incentives matter 3. "Hazlitt's lesson 4. Ownership promotes responsibility and coorperation 5. Trade creates wealth 6. Profits direct businesses to create wealth 7. Competition increases efficiency and innovation 8. Taxation and regulation discourage production and destroy wealth 9. Political decision-making favors plunder over production 10. Central planning wastes resources and retards economic progress Conclusion Off-Site Link to:   NCPA Debate Central Home Page

#4 Private ownership promotes responsibility and cooperation. Private ownership is one of the least understood institutions of the free society -a fact that can be of enormous value to debaters and extempers looking for a fresh, unexpected angle on an issue. Many people assume that since ownership entails the right to use property as one sees fit and to exclude others from using it that private property is anti-social and dangerous. A resource that is owned by a private individual (rather than commonly owned, or government-owned) is subject to whatever capricious idea that person might have about its use. The public has no recourse to prevent irresponsible or even dangerous uses of resources when property rights are consistently defended, the argument goes. From there the argument continues that government control is the answer, either through outright public ownership or through regulations that take away some of the property owners' rights. Economic reasoning shows that this argument gives too little credit to private owners and too much to government's wisdom and beneficence. Private property does give owners a degree of freedom but it also makes them accountable for their actions. The owner of a dog is legally responsible for the damage his dog does to his neighbor's rose garden. The owner of a building is responsible for making repairs if the roof leaks on his tenants. This accountability ensures that property is not used in a way that harms other peoples' rights. Consider furthermore that one of a private owner's rights is the right to sell his resource to someone who values it more than he. This opportunity forces people (both owners and potential buyers) to take into account the value that others place on the property. When natural gas was discovered under the Rainey Wildlife Preserve in Southern Louisiana, the environmentalist group that owned the land considered the commercial value of the gas and sold the right to extract it under tightly controlled conditions. The environmentalists didn't care so much about heating homes as they did about the additional wilderness areas that the gas revenue would permit them to buy. Likewise, the gas company that won the bid for the right to drill didn't develop special extraction technologies with low environmental impact because they loved the wildlife but because they knew that this would increase their chances of winning the drilling rights. Each party had the incentive to cooperate with the other and to take their values into account. When property rights are not clearly established or property is held in common, the incentives are reversed. This typically results in irresponsible resource use. The water crisis is a good example5. Farmers who share the water in underground aquifers throughout the Western United States know that the aquifers are being exhausted faster than they can be replenished. Without plentiful ground water, millions of acres of valuable cropland will some day be useless, yet no farmer has much incentive to conserve this dwindling resource. Each knows that his own conservation efforts will be to no avail unless others do the same. Each pays little or no cost for wasteful uses of water. He may as well use the water while it lasts and hope that his children don't go into farming. By contrast, if each farmer had a share of the water that was his own, his conservation efforts would be rewarded since he could sell the rights to any unused water to other water users. If water became more scarce the price would increase and the reward for conservation would become even greater. Responsible water use would prevail. The reckless waste and abuse of commonly owned (or unowned) resources has been dubbed the "Tragedy of the Commons" by economists and is a problem that is evident in some form in almost every area of public policy. Here are just a few examples. Learn to watch for the signs of the "Tragedy" and to trace its cause: Housing: Publicly owned housing projects quickly fall into disarray and disrepair since no one has any stake in maintaining them. Apartments that the government deeds back to the tenants are better maintained and the owners take more responsibility for getting involved in issues that affect their building. Endangered Species: Unowned blue whales are hunted to extinction while privately owned African elephants flourish in Zimbabwe, despite (or because of?) large profits to be had from the sale of their tusks6. Law Enforcement: Much of the time and resources of "commonly-owned" government police is wasted with false alarms, low-priority calls, and functions inessential to providing security. Meanwhile hired private police focus on the crime problems most important to the customers who hire them and charge customers who have excessive false alarms7. Wilderness Land Use: Timber companies operating on private land have the highest rate of replanting and sometimes generate extra income by maintaining scenic areas for hunters, hikers, and other sportsmen. Meanwhile companies on public land have the highest rates of clear-cutting and are not allowed to collect revenue from sportsmen. Health Care: People who pay for their health care out of a common insurance pool spend 25 percent more on health care and are more likely to receive unnecessary treatment than people who spend their own money from a medical savings account. Today only 19 cents out of each dollar of physician's fees is paid by patients using their own funds. Meanwhile the demand for health care has exploded, and health care costs with it. Countries where all health care is financed out of tax revenues are scrambling to privatize their systems8. Many of these examples also illustrate the conflict that results when political forces are inevitably brought to bear to control common-pool resources. Political control of resources does not eliminate competition; it only changes it from market competition to competition among political interest groups. Whereas competitors for privately owned resources have strong incentives to accommodate each other (as in the Rainey Wildlife Preserve example), political competition is usually a winner-take-all affair. Political struggles over health care, the environment, and now the legal protection of private, personal information have been heated and sometimes even violent because competing groups have nothing to gain from accommodating each other and everything to lose. 5 See Terry Anderson, Water Crisis: Ending the Policy Drought, Cato Institute, 1983 for a more detailed exposition. 6 See Randy Simmons and Urs Kreuter, "Herd Mentality," Policy Review, Fall 1989, pp. 46-49 7 See Bruce Benson, The Enterprise of Law, 1990 8 John Goodman and Gerald Musgrave, Patient Power, 1992, p. 20