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Quotation of the Day…

… is from pages 20-21 of Ludwig von Mises’s insightful January 1962 essay “The Elite Under Capitalism,” as this essay is reprinted in the original, 1990 edition of the collection of some of Ludwig von Mises’s shorter essays, Economic Freedom and Interventionism (Bettina Bien Greaves, ed.) (footnote deleted):

The second deficiency of the customary treatment of the problems of society’s economic organization is the confusion produced by the indiscriminate employment of juridical concepts, first of all the concept of private property.

In the precapitalistic ages there prevailed by and large economic self-sufficiency, first of every household, later – with the gradual progress toward commercialism – of small regional units.  The much greater part of all products did not reach the market.  They were consumed without having been sold and bought.  Under such conditions there was no essential difference between private ownership of producers’ goods and that of consumers’ goods. In each case property served the owner exclusively.  To own something, whether a producers’ good or a consumers’ good, meant to have it for oneself alone and to deal with it for one’s own satisfaction.

But it is different in the frame of a market economy.  The owner of producers’ goods, the capitalist, can derive advantage from his ownership only by employing them for the best possible satisfaction of the wants of the consumers.  In the market economy property in the means of production is acquired and preserved by serving the public and is lost if the public becomes dissatisfied with the way in which it is served.  Private property of the material factors of production is a public mandate, as it were, which is withdrawn as soon as the consumers think that other people would employ the capital goods more efficiently for their, viz., the consumers’, benefit.  By the instrumentality of the profit and loss system the capitalists are forced to deal with “their” property as if it were other people’s property entrusted to them under the obligation to utilize it for the best possible provision of the virtual beneficiaries, the consumers….

In the feudal society the economic situation of every individual was determined by the share allotted to him by the powers that be.  The poor man was poor because little land or no land at all had been given to him.  He could with good reason think (to say it openly would have been too dangerous): “I am poor because other people have more than a fair share.”  But in the frame of a capitalistic society the accumulation of additional capital by those who succeeded in utilizing their funds for the best possible provision of the consumers enriches not only the owners but all of the people, on the one hand by raising the marginal productivity of labor and thereby wages, and on the other hand by increasing the quantity of goods produced and brought to the market.

(This collection of Mises’s essays is available for free on-line here.)