State Versus Private Ownership

Private ownership should generally be preferred to public ownership when the incentives to innovate and to contain costs must be strong. In essence, this is the case for capitalism over socialism, explaining the "dynamic vitality" of free enterprise. The great economists of the 1930s and 1940s failed to see the dangers of socialism in part because they focused on the role of prices under socialism and capitalism, and ignored the enormous importance of ownership as the source of capitalist incentives to innovate.