Front Page Titles (by Subject) 1: The Nature of Ownership - Socialism: An Economic and Sociological Analysis
The Online Library of Liberty
A project of Liberty Fund, Inc.
Search this Title:
1: The Nature of Ownership - Ludwig von Mises, Socialism: An Economic and Sociological Analysis 
Socialism: An Economic and Sociological Analysis, trans. J. Kahane, Foreword by F.A. Hayek (Indianapolis: Liberty Fund, 1981).
About Liberty Fund:
Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.
The copyright to this edition, in both print and electronic forms, is held by Liberty Fund, Inc.
Fair use statement:
This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
The Nature of Ownership
Regarded as a sociological category ownership appears as the power to use economic goods. An owner is he who disposes of an economic good.
Thus the sociological and juristic concepts of ownership are different. This, of course, is natural, and one can only be surprised that the fact is still sometimes overlooked. From the sociological and economic point of view, ownership is the having of the goods which the economic aims of men require.1 This having may be called the natural or original ownership, as it is purely a physical relationship of man to the goods, independent of social relations between men or of a legal order. The significance of the legal concept of property lies just in this—that it differentiates between the physical has and the legal should have. The Law recognizes owners and possessors who lack this natural having, owners who do not have, but ought to have. In the eyes of the Law ’he from whom has been stolen’ remains owner, while the thief can never acquire ownership. Economically, however, the natural having alone is relevant, and the economic significance of the legal should have lies only in the support it lends to the acquisition, the maintenance, and the regaining of the natural having.
To the Law ownership is a uniform institution. It makes no difference whether goods of the first order or goods of higher order form its subject, or whether it deals with durable consumption goods or non-durable consumption goods. The formalism of the Law, divorced as it is from any economic basis, is clearly expressed in this fact. Of course, the Law cannot isolate itself completely from economic differences which may be relevant. The peculiarity of land as a means of production is, partly, what gives the ownership of real property its special position in the Law. Such economic differences are expressed, more clearly than in the law of property itself, in relationships which are sociologically equivalent to ownership but juristically allied to it only, e.g., in servitudes and, especially, in usufruct. But on the whole, in Law formal equality covers up material differences.
Considered economically, ownership is by no means uniform. Ownership in consumption goods and ownership in production goods differ in many ways, and in both cases, again, we must distinguish between durable goods and goods that are used up.
Goods of the first order, the consumption goods, serve the immediate satisfaction of wants. In so far as they are goods that are used up, goods, that is, which in their nature can be used but once, and which lose their quality as goods when they are used, the significance of ownership lies practically in the possibility of consuming them. The owner may also allow his goods to spoil unenjoyed or even permit them to be destroyed intentionally, or he may give them in exchange or give them away. In every case he disposes of their use, which cannot be divided.
The position is a little different with goods of lasting use, those consumption goods that can be used more than once. They may serve several people successively. Here, again, those are to be regarded as owners in the economic sense who are able to employ for their own purposes the uses afforded by the goods. In this sense, the owner of a room is he who inhabits it at the time in question; the owners of the Matterhorn, as far as it is part of a natural park, are those who set foot on it to enjoy the landscape; the owners of a picture are those who enjoy looking at it.2 The having of the uses which these goods afford is divisible, so that the natural ownership of them is divisible also.
Production goods serve enjoyment only indirectly. They are employed in the production of consumption goods. Consumption goods emerge finally from the successful combination of production goods and labour. It is the ability to serve thus indirectly for the satisfaction of wants which qualifies a thing as a production good. To dispose of production goods is to have them naturally. The having of production goods is of economic significance only because and in so far as it leads finally to a having of consumption goods.
Goods to be used up, which are ripe for consumption, can be had but once—by the person who consumes them. Goods of lasting use, which are ripe for consumption, may be had, in temporal succession, by a number of people; but simultaneous use will disturb the enjoyment of others, even though this enjoyment is not quite excluded by the nature of the commodity. Several people may simultaneously look at a picture, even though the proximity of others, who perhaps keep him from the most favorable viewpoint, may disturb the enjoyment of any individual in the group; but a coat cannot be worn simultaneously by two people. In the case of consumption goods the having which leads to the satisfaction of wants by the goods cannot be further divided than can the uses which arise from the goods. This means that with goods to be used up, natural ownership by one individual completely excludes ownership by all others, while with durable goods ownership is exclusive at least at a given point of time and even in regard to the smallest use arising from it. For consumption goods, any economically significant relationship other than that of the natural having by individuals is unthinkable. As goods to be used up absolutely and as durable goods, at least to the extent of the smallest use arising from them, they can be in the natural ownership of one person only. Ownership here is also private ownership, in the sense that it deprives others of the advantages which depend upon the right of disposing of the goods.
For this reason, also, it would be quite absurd to think of removing or even of reforming ownership in consumption goods. It is impossible in any way to alter the fact that an apple which is enjoyed is used up and that a coat is worn out in the wearing. In the natural sense consumption goods cannot be the joint property of several or the common property of all. In the case of consumption goods, that which one usually calls joint property has to be shared before consumption. The joint ownership ceases at the moment a commodity is used up or employed. The having of the consumer must be exclusive. Joint property can never be more than a basis for the appropriation of goods out of a common stock. Each individual partner is owner of that part of the total stock which he can use for himself. Whether he is already owner legally, or owner only through the division of the stock, or whether he becomes legal owner at all, and whether or not a formal division of the stock precedes consumption—none of these questions is economically material. The fact is that even without division he is owner of his lot.
Joint property cannot abolish ownership in consumption goods. It can only distribute ownership in a way which would not otherwise have existed. Joint property restricts itself, like all other reforms which stop short at consumption goods, to effecting a different distribution of the existing stock of consumption goods. When this stock is exhausted its work is done. It cannot refill the empty storehouses. Only those who direct the disposal of production goods and labour can do this. If they are not satisfied with what they are offered, the flow of goods which is to replenish stocks ceases. Therefore, any attempt to alter the distribution of consumption goods must in the last resort depend on the power to dispose of the means of production.
The having of production goods, contrary to that of consumption goods, can be divided in the natural sense. Under conditions of isolated production the conditions of sharing the having of production goods are the same as the conditions of sharing consumption goods. Where there is no division of labour the having of goods can only be shared if it is possible to share the services rendered by them. The having of non-durable production goods cannot be shared. The having of durable production goods can be shared according to the divisibility of the services they provide. Only one person can have a given quantity of grain, but several may have a hammer successively; a river may drive more than one water wheel. So far, there is no peculiarity about the having of production goods. But in the case of production with division of labour there is a two-fold having of such goods. Here in fact the having is always two-fold: there is a physical having (direct), and a social having (indirect). The physical having is his who holds the commodity physically and uses it productively; the social having belongs to him who, unable to dispose physically or legally of the commodity, may yet dispose indirectly of the effects of its use, i.e. he who can barter or buy its products or the services which it provides. In this sense natural ownership in a society which divides labour is shared between the producer and those for whose wants he produces. The farmer who lives self-sufficiently outside exchange society can call his fields, his plough, his draught animals his own, in the sense that they serve only him. But the farmer whose enterprise is concerned with trade, who produces for and buys in the market, is owner of the means of production in quite a different sense. He does not control production as the self-supporting peasant does. He does not decide the purpose of his production; those for whom he works decide it—the consumers. They, not the producer, determine the goal of economic activity. The producer only directs production towards the goal set by the consumers.
But further owners of the means of production are unable in these conditions to place their physical having directly into the service of production. Since all production consists in combining the various means of production, some of the owners of such means must convey their natural ownership to others, so that the latter may put into operation the combinations of which production consists. Owners of capital, land, and labour place these factors at the disposal of the entrepreneur, who takes over the immediate direction of production. The entrepreneurs, again, conduct production according to the direction set by the consumers, who are no other than the owners of the means of production: owners of capital, land, and labour. Of the product, however, each factor receives the share to which he is economically entitled, according to the value of his productive contribution in the yield.
In essence, therefore, natural ownership of production goods is quite different from natural ownership of consumption goods. To have production goods in the economic sense, i.e. to make them serve one’s own economic purposes, it is not necessary to have them physically in the way that one must have consumption goods if one is to use them up or to use them lastingly. To drink coffee I do not need to own a coffee plantation in Brazil, an ocean steamer, and a coffee roasting plant, though all these means of production must be used to bring a cup of coffee to my table. Sufficient that others own these means of production and employ them for me. In the society which divides labour no one is exclusive owner of the means of production, either of the material things or of the personal element, capacity to work. All means of production render services to everyone who buys or sells on the market. Hence if we are disinclined here to speak of ownership as shared between consumers and owners of the means of production, we should have to regard consumers as the true owners in the natural sense and describe those who are considered as the owners in the legal sense as administrators of other people’s property.3 This, however, would take us too far from the accepted meaning of the words. To avoid misinterpretation it is desirable to manage as far as possible without new words and never to employ, in an entirely different sense, words habitually accepted as conveying a particular idea. Therefore, renouncing any particular terminology, let us only stress once more that the essence of the ownership of the means of production in a society which divides labour differs from that found where the division of labour does not take place; and that it differs essentially from the ownership of consumption goods in any economic order. To avoid any misunderstanding we will henceforth use the words, ’ownership of the means of production’ in the generally accepted sense, i.e. to signify the immediate power of disposal.
[1. ]Böhm-Bawerk, Rechte und Verhältnisse vom Standpunkte der volkswirtschaftlichen Güterlehre (Innsbruck, 1881), p. 37. Publisher’s Note: This has been translated into English by George D. Huncke as “Whether Legal Rights and Relationships Are Economic Goods,” in Shorter Classics of Böhm-Bawerk (South Holland, Ill.: Libertarian Press, 1962), vol. 1, pp. 25-138. Passage cited here is on page 58 of this edition.
[2. ]Fetter, The Principles of Economics, 3rd ed. (New York, 1913), p. 408.
[3. ]See the verses of Horace:
The attention of economists was first drawn to this passage by Effertz (Arbeit und Boden, new ed. [Berlin, 1897], vol. 1, pp. 72, 79).