The Korean Journal of Economic Studies
Freedom, Private Ownership, Competition - Resource Allocation of Market Economy
Seung-Hoon Lee (Seoul National University)Year 2017Vol. 65No. 1
Freedom and ownership are honored if people have agreed to take hazardscreated therefrom. System of property right is designed to harness humangreed to produce more value without invading others’ property right. Peoplecompete for owner’s consent to transfer property if the target is already ownedby an owner, and to discover, invent or devise new resource, technology andidea which is to be owned by the first mover. The competition is fair if nocompetitor is intruded upon property rights in the process of competition. FirstWelfare Theorem supports static efficiency by showing competitive equilibriumallocates resources efficiently under no externality. Prize-penalty function ofprice system raises(lowers) price to encourage(discourage) production inexcess demand(supply) to realize dynamic efficiency. People compete for moreincome to result in resource allocation and income distribution. Market failureoccurs when property rights are unduly violated to make resource allocationinefficient and income distribution unfair. Social welfare benefits are not theright of the beneficiaries but the favor of benefactors under fair competition.