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Private Property

Key Takeaways

  1. The system of private property allows individuals to maintain control over the means of producing private wealth and public benefits.
  2. Legally protected private property rights allow individuals and businesses to acquire, use, transfer, and exclude others from tangible and intangible resources.
  3. For a capitalist economy to function properly, the law must protect private property rights. However, some critics argue that misuse of those rights can threaten democratic principles.

Private Property

In a capitalist economy, the private ownership of property allows individuals and corporations to acquire, use, and transfer resources freely to promote economic growth. The term “private property” refers to any real or personal property held by a private entity or person.1 Property may take the form of tangible goods or intangible ideas. Tangible goods include real property such as land and the buildings attached to it, as well as any physical good movable. Intangible goods include intellectual assets such as copyrights, patents, and trademarks. The legal protection of private property facilitates the free exchange of goods among equals in a capitalist economy by assuring the ownership of profit derived from the trade in goods and services.

Understanding Private Property

Property rights describe the system by which individuals manage the possession and use of their property as well as the ability to exclude others from possession and use of the resource. The private right to possession coupled with the ability to exclude others from use creates a free market for the trading of goods and ideas.2 The free market exchange, in turn, creates the incentive and opportunity to compete with sellers of similar goods. The owner holds the rights to use and transform the property as well as transfer or exchange it to others. The buying and selling of physical assets enables the enhancement of an object’s value through demand for limited resources as well as the ability to add value to an asset that is then resold. Protecting the ability to market intellectual property facilitates the monetization of viable ideas.


Capitalist democracies afford legal protection to private property ownership in order to promote the values of wealth and public benefit. The capitalist system, by promising universality, exclusivity, and transferability of property, thereby promotes the best use of resources through maximization of value.3 In a capitalist system, resources will always move to the person or business that places the highest value on the asset.Critics of capitalism argue that a lack of constraints on property ownership means that scarce resources will accumulate in the hands of small, powerful groups within society.4 These critics argue that what starts out as a democracy, ends up an oligarchy where large corporations and powerful individuals deny the public access to privately owned resources usingthe pricing mechanism. In response, the defenders of capitalism offer the “Tragedy of the Commons” theory, arguing that publicly shared property diffuses responsibility for resources and disincentivizes labor or production to increase value. This tension between the equal right to acquire property and the inequality of its acquisition seems to reflect a fundamental tension between the values of a democratic order and the benefits of a capitalist economy.


1 Ahmed Mahmud and Sarwat Jahan, “What Is Capitalism?,” International Monetary Fund (IMF Finance & Development magazine), accessed September 25, 2022, https://www.imf.org/external/pubs/ft/fandd/basics/2_capitalism.htm.

2 Jeremy Waldron, “Property and Ownership,” Stanford Encyclopedia of Philosophy (Stanford University, March 21, 2020), https://plato.stanford.edu/entries/property/.

3 Paul H. Rubin et al., “Law and Economics,” Econlib, June 27, 2018, https://www.econlib.org/library/Enc/LawandEconomics.html.