Clarifying Property Rights Relationships Is a Necessary Premise

In contrast to a planned economic system, in a market economy, capital funds, material resources, and personnel are not allocated by and among the various administrative departments of government through administrative channels, but are circulated through market exchange. The willingness of the buyer and seller to conduct a transaction between themselves is entirely based on their awareness of their own interests. It is precisely in this that the importance of the property rights issue lies. Only when there is a clear set of property rights relationships can the various parties to a transaction know what ought to belong to them and what ought not to belong to them. This is a foundation for a market economic system. If we use this viewpoint to evaluate the realities with which we are living today, we would discover that the existing set of property rights relationships is far short of what is called for in the market economic system.