In this short essay I attempt to show that private ownership, economic
freedom, and competition are the ultimate power sources that propel persistent
economic growth. Among the three, I argue, ownership is the most basic. In
order to prove this assertion, I utilize a streamlined version of Lucas’ dynastic
model and study how people would behave differently under two contrasting
ownership arrangements: common ownership vs. private ownership.
Numerical exercises applied to the stationary solutions of the model indicate
that when we move from common ownership to private ownership, income per
person would increase by more than 76%. This substantial increase in income
is caused by investment inducement effects of private ownership. When efforts
inducement effects of private ownership is added, income would increase by
much more than 76%.
In order for an economy to persistently grow, it is essential to maintain
unceasing investment in human capital, knowledge capital, and technology
capital. Investments in these kinds of capital would occur most vigorously
when private ownership is firmly established. When ownership is in doubt,
people would be hesitant to undertake long term investment projects. It is,
therefore, essential to secure private ownership if we want to keep the
economy growing indefinitely.