… is from pages 15-16 of Richard Epstein’s superb 1995 book, Simple Rules for a Complex World:
Even the failure and disintegration of socialism in Eastern Europe and the former Soviet Union has not led to a clear response to the next question: if government ownership of the means of production is so bad, why is government regulation of the private means of production so good?
DBx: An excellent question.
Ownership, after all, is a bundle of decision-making rights over property along with claims on the value of the property. And so what matters is not who has formal title to these rights and claims but, rather, who actually possesses these rights and claims. Ideally, those with formal title to the rights and claims are the same people as those who possess the decision-making rights.
If decision-making rights over property are separated from the rights to claims on the value of the property, then irresponsible decision-makers are underfoot. Jones decides how the factory is used while Smith enjoys any resulting increase in the factory’s value and suffers any resulting decrease in the factory’s value. It’s difficult to believe that Jones will be a good – a responsible – decision-maker regarding the factory given that Jones does not experience a key response to his or her decisions.