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CH 1] Business 101 1-5

Figure 1.2 Basic Rights of the Private Enterprise System
1

The Private Enterprise System foundation built upon these basic rights.

Private Freedom of Profits Competition
Property Choice

Private Property: The private enterprise system guarantees property owners the
right to own, use and exploit, buy, sell, and bequeath tangible and intangible property.
Tangible property includes: land, buildings, machinery, and equipment. Intangible private property
property would be ideas for inventions and written works, stocks, bonds, contracts, Property that can be owned,
and royalties. The right to private property is the most fundamental of all rights used, bought, sold, and
under the private enterprise system and the Founding Fathers guaranteed that right bequeathed under the private
enterprise system, and is
under the U.S. Constitution. Most people in American society believe they should necessary for a free people.
have the right to any property they work to acquire and to all benefits resulting from
such ownership. Though one could rightly think that, with the burdensome number of
regulations and laws, including the 16th Amendment, private property is to be
redistributed. There are cases in which the right to private property was denied
without due process nor compensation—in violation to the Constitution. Freedom of Choice: Under a
Freedom of Choice: Under a private enterprise system, citizens have the private enterprise system,
maximum amount of freedom of choice in employment, purchases, and investments. citizens have the maximum
This means people can go into or out of business with a minimum of government amount of freedom of choice
interference. They can change jobs, negotiate compensation levels, join labor unions, in employment, purchases,
and investments.
and quit as they desire. Consumers choose among different brands, products, and
other goods and services.
Americans are so accustomed to this freedom of choice that they sometimes forget
its importance: that the private enterprise economy tries to maximize human welfare
and happiness by providing alternatives. Other systems limit freedom of choice to Profits: Total Revenues
accomplish governmental goals, such as production increases in one particular minus Total Expenses equals
profit for the firm. Profit
industry or product, thus minimizing human welfare. belongs (ownership) to the risk
Profits: The private enterprise system guarantees the property owner the right to taker, the entrepreneur or the
all profits (after taxes) rightly earned by the business. There is no guarantee that the investor in a business without
business will earn a profit, but when it does, the owner has a legal, moral and ethical guarantee of profit.
right to all of it. Competition: the ability for
Competition: Under the private enterprise system people have the freedom to consumers to decide from
compete with others. Competition, along with profits, is the cornerstone of the private whom to buy without
enterprise system. Firms compete by developing better products, reducing the costs of interference or limitation.
production through efficiencies, setting prices, developing individual advertising
programs, and have their product, good or service where and when the consumer
wants it and in a form preferred by the consumer. The advantage of competition for
the consumer is that competition results in better products and increased
responsiveness to the consumer and his needs. The private enterprise system also
guarantees the public the right to set ground rules for competitive activity. Speaking
on behalf of the public, the U.S. Congress has passed legislation that prohibit
monopolistic "cutthroat" competition designed to eventually eliminate competition. It
has also established ground rules that prohibits price discrimination, fraudulent
dealings in financial markets, and deceptive practices in advertising and packaging.
Finally, the framers of the United States and its Constitution established
governments role to protect certain inalienable rights. They understood that for this
nation to succeed the right to own private property, the freedom to choose, to keep factors of production
Basic inputs into the private
and enjoy the profit for ones endeavors, and competition are fundamental and enterprise system, including
endowed, and not a function of man, and whereas without them, the nation returns to natural resources, labor,
tyranny. capital, and entrepreneurship.

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