A Short Course in Economics

3. Property Rights

A prerequisite for a free market is the concept of property rights.  For something to be exchanged, it must first be owned.  In an exchange, the actor gives up ownership of good X in order to attain ownership of good Y.  Ownership (by one or more owners) implies exclusive control and the use of the goods owned.  The goods owned are known as property.  Freedom from violence implies that no one may seize the property of another by means of violence or the threat of violence.

On a free, unhampered market, a man may acquire property in goods as follows:

1. Self-ownership - In the first place, each man has ownership over himself, his will and actions, and the manner in which he will exert his labor.
2. Appropriation - Nature-given factors can be acquired either by appropriating presently unused factors for his own use, or by receiving them as a gift from someone else.
3. Production - Capital goods and consumer goods can be acquired either by mixing his labor with nature-given factors, or by receiving them as a gift from someone else.
4. Exchange - He may exchange any type of factor (labor service, nature-given factor, capital good, consumers’ good) for any type of factor.