Test Two Outline

Test Two Outline - Chapter Seven - The Property System What...

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Chapter Seven - The Property System What is property? Property indicates legal ownership, that something is recognized by law as being ‘mine’ or ‘yours.’ Property indicates exclusiveness. You can legally exclude others from things that are yours. Property is the legal right to exclude others from resources that are originally possessed or are acquired without force, theft, or fraud. A ‘resource’ includes anything that someone may need or want. The Property System As long as people need or want more resources than they have available to them, society will order how people relate to each other in acquiring and possessing these resources. The Problem of Limited Resources Through law, the state establishes a framework for handling the problem. In one framework the state itself, represented by a ruler or legislature, makes the major decisions about the production and distribution of resources. Distribution of resources occurs through sate planning. Communism is one system providing such a framework. The communist state expects people to want to do this, but it legally coerces them when necessary. Private property, which we will just call ‘property,’ is a system of law under which the state recognizes and enforces an individual’s rights to acquire, possess, use, and transfer scarce resources. The people themselves determine how resources are distributed through voluntary exchange. The available evidence suggests that a property system produces more for a society than a state planning system. Property and Prosperity Property creates some of the maximum conditions known for producing and sustaining prosperity. First, property powerfully promotes incentive People will generally expend more effort when they have a protected property in what they produce than when they do not. Property helps generate prosperity by establishing the conditions necessary for capital formation , which refers to that quality of resources that produces new or different resources Lenders are willing to loan money at affordable rates primarily because property law guarantees (1) that a borrower’s house is on an identifiable piece of land recognized by the state, (2) that the state recognizes a borrower’s claim to the house, and (3) that the state permits lenders to enforce the mortgage agreement through the courts and sell a borrower’s house to satisfy the loan if the borrower fails to repay it A final contribution property makes to prosperity is to make resources easily divisible. Divisibility also relates to capital formation and refers to how property permits resources to be broken into parts and used in many ways while the owner still retains a property interest in each part.
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Two Basic Divisions of Property Two basic legal division of property: real property and personal property Real property law applies ownership to land and interests in land. Because of the historical importance of land, rules are very formal.
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Test Two Outline - Chapter Seven - The Property System What...

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