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LESSON 10
PROPERTY RIGHTS
The fundamental requirement of a market economy is a
strong system of property rights. A property right is the
exclusive authority to determine how to use and service a
resource. Thus, for example, the owner of an apartment with
complete property rights to the apartment has the right to
determine whether to rent it out or to live in it himself. He has
the right to determine which tenant to rent the apartment to. He
can also use it in any other peaceful way. If the owner rents out
the apartment, he also has the right to all the after-tax rental
income from the property.
A private property right includes the right to delegate, rent,
or sell any portion of the rights by exchange or gift at the price the
owner determines. If I am not allowed to buy some rights from
you and you therefore are not allowed to sell rights to me, private
property rights are reduced. Thus, the three basic elements of
private property are (1) exclusivity of rights to the choice of use of
a resource, (2) exclusivity of rights to the services of a resource,
and (3) rights to exchange the resource at mutually agreeable
terms.
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