01 January 2011

Less respect for property rights

It has become more difficult to attract investment in urban development because less respect is being given to the concept of property rights.

Planning authorities wield enormous discretion. The planning system, with its arbitrary decision making and unpredictable levies, has weakened the link between land ownership and the ability to create value by developing land.

Property rights serve a purpose

Property rights serve a social and economic purpose.

Firstly, property rights are, unquestionably, human rights.  Most major human rights documents set out to protect private property rights

Secondly, as has been stated by the United States Supreme Court, the right not to be deprived of property prevents the government from forcing some people to alone bear public burdens which, in all fairness and justice, should be borne by the public as a whole.

Thirdly, there are strong economic arguments for high-level and serious protection of property rights.  Economist, Frank Michelman, argues that losses should be socialised when it would be either inefficient or unjust to allow the government to take the property without compensation.

The principal economic explanation for the compensation requirement is that otherwise the government would take an inefficiently large amount of property - that is, the price system provides an efficient discipline on the governments consumption of private property.

Both efficiency and fairness are also invoked to limit the ability of government to expropriate property of politically vulnerable groups and individuals.