Protecting property helps with job creation

By DAVID MOON, Moon Capital Management, LLC
October 30, 2011

Recent mayoral candidate banter revisited the tired topic of whether or not government can or should be run like a business. Most of the disagreement is simply about semantics. Government is not a business, but it requires professional management principals to be both effective and efficient. The city of Knoxville is not a large PTA.

A government – either in Knoxville or Washington – does not create jobs. Government plays a role in creating an environment in which job growth occurs or doesn't.

A private sector is more likely to take chances and deploy the capital needed to create demand for employment in certain types of environments. The government helps create a positive environment for job creation by safeguarding our private property.

Locally, police and fire departments safeguard our property. But so do the folks in the City County Building who record deeds and keep other property records.

Ignoring that we base much of our tax base on property values in this community, what business does the government have estimating the value of my home, recording liens against my house and making that information publicly available to anyone who is mildly curious?

As strange as it may sound, this function of government is the foundation for our success as a capitalistic society.

Your home has value because your house and land carry with it certain rights – rights that are recorded and protected by the government. In America we can pledge those intangible rights in exchange for a mortgage on the house or a loan to start a business. We don't have to sell an asset (turning it into its monetary equivalent) in order to utilize the intangible rights that accompany all that property.

This is true of real property (such as our houses) and intellectual property (such as book rights). Without a system of organization, clearly defining who owns specific assets and what rights accompany those assets, we would not be able to fully utilize the capital intrinsically embedded in every asset.

Would Apple Computer or Microsoft exist without the government recording and protecting the property rights of those companies? What about Merck and Pfizer?

Our property laws can only successfully exist as long as the market participants have a reasonable expectation and desire for these types of laws. In this sense, the law (and, by extension, the government) is merely a reflection of society, not an instrument of creation.

Because of our system of legally preserving the intangible rights (the actual capital) that accompanies real property, people can borrow money to start businesses, pay for college and invest in new productive resources. Lenders rely on our government's system of record keeping to make that capital useful. Without such a system, how could we verify who owns a specific piece of property or if someone else already has a prior claim on the property?

Without these assurances, the financial capital would remain useless, still hidden within the physical asset or mind of the entrepreneur. And in the United States, the protector of these assurances is the government.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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