A key foundation of market systems is property rights. If we don’t know who owns what, it’s next to impossible to talk in terms of markets and exchange. But it’s more difficult than it would seem to determine who owns what, and more importantly, whether it’s fair that they do.
For example, if you buy a car, you own it, right? But what if you just robbed a bank and used the money to buy the car? What if your friend robbed the bank and gave you the money? What if your grandfather robbed a bank 60 years ago and you just found the money buried in your backyard? The answers to these questions can’t be determined in the free market, because someone’s got to make a call on right and wrong. That’s where governments and a justice system become necessary.
Property rights are laws that governments create to determine who owns what and why. The decisions made by governments about property rights have a huge impact on our individual ability to take part in the economy. Everything from indigenous land rights, to laws around inheritance, is in some way related to them. For example, if someone owns a farm, and a massive oil reserve is found underneath it, who owns the oil? Do they? Does the government? Does no-one?
This isn’t just a question for economics – it’s about politics and values as well. In the case of oil, the difference in property rights in Texas and Norway are a good example of how much they affect the economy - Norway’s North Sea oil revenue has been channelled into an independent wealth fund, and it’s now one of the most equal states in the world; Texas’ oil is owned by a handful of billionaires, with some of the highest inequality levels in the country. So beyond the question of who would run a resource more efficiently, there's a deeper question to be asked about what's fair, and what isn't.