People do hard work not to let anyone to run away with theirs hard earned money. Actually, they desperately desire to exercise ownership and control. Therefore, the importance of property rights cannot be bypassed to be called a market economy.
In market economy, property rights are highly essential by which individuals could own and exercise control over resources they owned.
Unthinkably, how do people dare to do business when they are not sure about their hard earned money? So, to enforce property rights, government needs well established institutions so that it could guard the financial interests of diligent individuals.
Understanding the importance of property rights
In legal terms, property rights are claims or ability to own, lease, or exercise control over the resources he or she earned.
Suppose, you have a entertainment park and around 200 people visit every day. What would happen if they enjoy service you offered without paying anything? Definitely, you would be bankrupt sooner.
So, it is indispensable to have property rights who aspire to do businesses to make money. Understandably, we need much more than invisible hand to guard the interests of market participants.
For this, it is a well said principle of economics that government can sometimes improve market outcomes by enforcing rules, regulations and policies sourced by institutions.
Common resources and tragedy of commons
Common resources like air, water, environment, wildlife etc.are the most exploited and least protected asset of the common people.
People at large always expect governments or public authority to take care these pristine asset. Simply, common resources are always on the mercy of government care and protection.
Some economists call it as the tragedy of commons because people for the sake of private interests, ready to sacrifice common resources.
Hence, property rights need to be established properly so that the given resources could be saved from being stolen or damaged by general public.
Relevancy and Importance of property rights in market economy
Proper protection and establishment of property rights are highly essential not only to ensure optimum, judicious use but also stakeholders can care, protect, and grow for long-run benefits.
For example, if you visit to unprotected forest or park, you will easily witness piles of decaying waste, free movements of stray cattles, degradation of resources.
But, if it is carefully protected and cared by private owner or public authority, it is too difficult to imagine the earlier situation there.
Last words on importance of property rights
First of all, enforcement of property rights by institutional support is utmost important.
Second, the proper establishment of these rights are equally essential to avoid tragedy of commons.
And, third, there should be optimum scope to freely develop these resources for efficient use.
Hence, it is well said that free market forces and well established property rights are prerequisites in market economy.
So, this is all about the importance of property rights and its relevancy in market economy.
Solved questions on Property rights
Q. 1 What is mean by property rights in today’s economic world?
Ans: To own and exercise right over the property is natural intent of an economic man. Property rights are claims or ability to own, lease or exercise control over the resources he or she earned.
Q. 2 What is the importance of property rights?
Ans: In market economy it is highly essential to have rights of property Without the rights of property individual could not own and exercise control over resources or property he owned. Property rights motivate people to do business freely by assuring and guarding financial interests of people.
Q. 3 What do you understand from the principle “tragedy of commons? “
Ans: This principle tells about the loss and deterioration of public property for the the individual interests. People always sacrifice public property for the narrow individual private interests. Common examples of this principle is qualitative degradation and pollution of natural resources like air, water, soil etc. It shows that nobody cares the ignored but precious resources.
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