partnership agreement. The corporation is the legal entity
having a right to issue stock certificates. The people who own
such stock certificates (or shares) are called stockholders/
shareholders. They in fact own the corporation.
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LESSON 11 PROPERTYRIGHTS(continue)
The market values of property reflect the preferences and
demands of the rest of society. Thisinteresting paradox: although
property is “private”, owners make private decisions in
accordance with public, or social, evaluation of their property.
Thus one cannot sell his or her house at a price which is higher
than the market price. The fundamental purpose of property rights
is that they eliminate destructive competition for control of
economic resources. Well-defined and well-protected property
rights replace competition by violence with competition by
peaceful means.
Private property rights do not conflict with human rights.
They are human rights. Private property rights are the rights of
humans to use specified goods and to exchange them. Private
property rights protect individual liberty.
Under socialism private property rights are reduced. Here
government agents control resources. The rights of these agents
to make decisions about the property they control are highly
restricted. People cannot put the resources to more valuable
uses by purchasing the rights because the rights are not for sale
at any price. As socialist managers neither gain when the values
of the resources they manage increase, nor lose when the values
fall, they have little incentive to work. Consider, in this case,
the socialist managers of a collective farm. If he works every
night for one week, he can make, say, I million roubles of
additional profit for the farm by arranging to transport the
farm’s wheat to the city before it rots. But if neither the
manager nor those who work on the farm can keep even a
portion of this additional profit, the manager is more likely to
go home early and let the crops rot.
