Why Property Rights Are Indispensable
In today’s political discussion, one of the fundamental principles our society is built on has been on the defense: private property rights and the protection of such rights. Just take the current debate about the housing shortage in Germany as a prime example. A very prominent policy proposal is flat-out expropriation of housing. Another one is the limitation of ownership of residential apartments.
Ideas such as these are not only supported by extremists. An activist group in Berlin collected over 77,000 signatures for the expropriation of private real estate corporations in Berlin. No worries, the appropriate vehicle for something like this already exists by the way: the German capital city already has an expropriation authority (Enteignungsbehörde).
Some proposals are less obvious, though they have the same basis. Rent control or the prohibition of “luxury renovations” seem harmless – but they are still major intrusions in one’s property. After all, these policies would result in the owner, in the legal sense, without real power or control over his own property.
Opponents of those policies correctly emphasize that housing in public ownership will lead to a state of disrepair, as it happened back in East Germany and as it still does to this day in socialist countries. The reason is that if the government has its hands in the housing sector to such a large extent, an imbalance of supply and demand will occur. And, as Mises and Hayek have shown, if too much tinkering with market prices fails, the price system will ultimately fail as well, leading to chaos, or that state of despair. At this point, socialists will point to a central planning board as a solution, but that would be no more than a “pretense of knowledge.”
However, the fundamental problem, of course, is the attack on private property itself. Property rights have not been created – they are a result of human action. Property rights developed over time through the interaction of people. Through a bottom-up process, this institution came into being organically, as Carl Menger, the founder of the Austrian School of Economcis, put it. It was not someone deciding top-down that we shall have property rights now. It came into being because people who accepted and protected property rights had an advantage over others, and so those others adopted the same approach.
The reason property rights have to be in place is scarcity. If the world was a utopia without any scarcity, private property would not be necessary. In such a world there would be no conflict between people over goods and services. There would be no necessity of an economy at all, as there would be no reason to trade. You could just have whatever you want. But the real world is characterized by scarcity. In the real world, not all dreams come true and human wishes stay unfulfilled. Some people have certain desirable goods, while others don’t.
At this point, there are two options: a Hobbesian anarchy, where everyone fights it out with hands and fists (or worse) who “owns” what – owning it only until someone else, someone stronger, comes along again. Or, you safeguard ownership, so that property is protected and the owner can be assured that he or she will own whatever he or she owns for longer, ultimately having the option to cultivate, to further develop the property – or to trade it for something else. Thus, property rights are at the basis of a genuine rule of law.
Without property rights, distrust and violence gain the upper hand. But with property rights, a peaceful order can emerge. It is this that Berlin’s expropriators seemingly have not realized yet.