Private Property Allows for Division of Labor

Private Property Allows for Division of Labor

I have previously explained the importance of the division of labor for human flourishing. The door to the division of labor is opened by voluntary exchange, because the possibility for exchange allows us to produce goods that are of service to others and not for merely our own use.
If no exchange took place, we would have to make our own food, shirts, pants, shoes, socks, books, desks, notebooks, houses, automobiles, computers, stereos, compact disks, mp3 players, DVD players, bibles—everything. Our standard of living would fall dramatically.
No one has the time to make everything listed above. Our clothes, food, and shelter would be much more crude and much less plentiful. Many goods we would simply have to do without. A noticeable segment of our population would not even survive.
We can benefit from the division of labor, therefore, only if dwelling in a society with institutions supporting voluntary trade. Ownership is one of these institutions. People cannot exchange what they do not own. In order to benefit from the economic development that flows from the division of labor, people must be secure in their property.
Private Property is Necessary for Capital Formation
For people to have the incentive to accumulate capital, they also must be secure in their property. If, for example, the state enforces confiscatory taxation, capital accumulation is hindered in two ways.
Taxes increase the cost of production, reducing the net income from any business venture. When people reap smaller incomes, they are able to save and invest less, which results in a smaller capital stock over time. Additionally, people have less incentive to save and invest, because they a guaranteed a smaller return due to some of profit being taxed away.
Additionally, people are discouraged from putting their savings at long-term risk if they are afraid that at any moment, it may be claimed by the government. The social institution that makes saving and investment both possible and attractive is private property.