Question

Explain how the US free market economic system is founded upon the concept of private property rights as stated in the US Constitution. Be explicit concerning which parts of the US Constitution apply, how they apply, and give real world examples of how this relates to how a market economy answering the 3 fundamental questions of economics as opposed to how a command economy answers the 3 fundamental questions.

Answer 1

Three fundamental questions arise due to scarcity of resources and existing scarce resources have alternative use and hence opportunity cost exists for all resources.

These questions are: 1. What to produce? 2. How to Produce and 3. For whom to produce?

First two questions answer allocation of resources while the third question answers distribution of resources.

Relevant part in US constitution: Under 5th amendment property owner rights are mentioned. It also explains just compensation. US constitution makes regulation and seizure of property the same. It also asks govt. to provide single forum in which property owners may seek injunctive relief and just compensation promptly.

This will make resource allocation as per the will and ability of private owners. Govt. cannot interfere in that. Seeking justice is easy.Hence what, how and for whom to produce depends on individual ability.

Apple Inc. even if it becomes a trillion dollar company. Govt. cannot claim it and nationalize it saying that its financial resources can be used for USA fiscal deficit balancing because 5th and 14th amendments will bar govt.from doing this. Apple can also file a case court easily and a speedy trial will ensure that private enterprise is protected.

If we contrast this with India in which right to property (article 31-part 3 of constitution) has been taken away and hence state may control any resources by paying compensation and there is difference between regulation and seizure of property.