The law of property determines who owns something, but the market determines how it will be used.
Interpretation
Ownership defines who has rights over an asset, while the market dictates its practical application and value.
This quote by Ronald Coase emphasizes the distinction between legal ownership and economic utility. While laws of property establish the ownership of goods or resources, it is ultimately the market dynamics β influenced by supply, demand, and personal or societal preferences β that govern how those resources are utilized or valued in real-world scenarios.
In practice
In a business seminar discussing the importance of asset management and market strategies.
Roughly speaking, when you are dealing with business firms operating in a competitive system, you can assume that they're going to act rationally. Why? Because someone in a firm who buys things at $10 and sells them for $8.00 isn't going to last very long in that firm.
During the two centuries since the publication of 'The Wealth of Nations,' the main activity of economists, it seems to me, has been to fill the gaps in Adam Smith's system, to correct his errors and to make his analysis vastly more exact.
We must first note that economic factors are taken into account in a world in which ignorance, prejudice, and mental confusion, encouraged rather than dispelled by the political organization, exert a strong influence on policy making.
Conventional economic theory... counts the depletion of resources as the accumulation of wealth.
The accepted ideas of any period are singularly those that serve the dominant economic interest...What economists believe and teach, whether in the United States or in the Soviet Union, is rarely hostile to the institutions - the private business enterprise, the Communist Party - that reflect the dominant economic power. Not to notice this takes effort, although many succeed.
Cutting government spending and government intrusion in the economy will almost surely involve immediate gain for the many, short-term pain for the few, and long-term gain for all.
Addressing the weaknesses of capitalism will require us, above all, to do two things: first, to take a long-term perspective, and second, to re-set the priorities of business.
We cannot live without trade. A society can neither advance nor improve without excess of disposable income. This excess can only be amassed through the production of goods and services necessary or attractive to the mass. A financial system which allows this leads to inequality; one that does not leads to mass starvation.
I will not let anyone tell me we must spend more money. This crisis did not come about because we issued too little money but because we created economic growth with too much money and it was not sustainable growth.
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