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COMPETITION ALONG A LINE: A basic analysis of location theory that demonstrates how and why competing firms tend to locate next to each other. This analysis indicates that as firms attempt to attract customers from each other, they edge increasingly closer. In particular, while an efficient situation (indicated by minimum transportation cost) is obtained by a more disperse location of firms, competition brings them together and creates inefficiency (by increasing transportation cost)

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OWNERSHIP AND CONTROL:

Having simultaneous legal "title" to a resource, good, or commodity and the ability to determine how the resource, good, or commodity is used. Ownership means that having legal title. Control means having the ability to determine use.
Ownership and control generally come as part of the same package in a market-oriented capitalist economy. People buy a good, they own the good, they decide how to use it. People own a resource, they have the resource, they decide who can buy it. Combined ownership and control is important to the efficient allocation of resources. However, in some cases ownership comes without control and control comes without ownership. In those circumstances efficiency is not as easily attained.

Private Property

Ownership and control is a direct consequence of the institution of private property underlying capitalism. When someone has legal ownership of a resource, good, or commodity, then that someone usually has control over how the resource, good, or commodity is used.

For example, Jonathan McJohnson owns a 19-inch color television set, which he purchased from the MegaMart Discount Super Center a few years back. Jonathan has the ability to activate this television whenever he chooses. He can turn it on. He can turn it off. He can select any of the 100 cable channels he wants to display on the screen. He can relocate this television to any room of his suburban home. In fact, if he wants, he could sell this television to someone else. Jonathan has ownership and control of this television.

Ownership and control helps create incentives that contribute to an efficient allocation of resources. When someone has legal ownership and control of a resource, good, or commodity, then that someone can direct it to the highest valued used. That someone can retain ownership and control until suitable compensation is received. In other words, if Jonathan McJohnson so chooses to sell his 19-inch color television set, then he can hold out for the highest price.

One or the Other

While it would seem as though ownership and control of resources, goods, or commodities always go together, such is not necessarily the case. In some circumstances ownership is absent of control and control exists without ownership.

Consider a few examples of ownership without control:

  • Corporate stock is one example in which control is not necessarily attached to ownership. For many who own corporate stock, and thus the assets of the corporation, control is often relinquished to corporate officers. Jonathan McJohnson, for example, owns several hundred shares of OmniConglomerate, Inc., which is an infinitesimally small fraction of total shares. Jonathan owns part of OmniConglomerate, including its factories, equipment, natural resource holdings, etc. However, he has virtually no say over how OmniConglomerate operates or how its resources are used. Those decisions are made by the corporate managers.

  • Government is another example, on an even larger scale. Citizens, taxpayers, and the public, in principle, own government property and assets (The White House, military bases, paper clips used by Congress), but have almost no control over how they are used. Once again Jonathan McJohnson, as a taxpaying citizen, provides an illustration. While he owns an incredibly small fraction of U. S. Department of Defense, that does not mean he can take a fighter jet out for a test flight or assume command of a Navy battleship.

If there is ownership without control, then there must be control without ownership.

  • The other side of corporate stockholders having ownership without control is the corporate officers who have control without ownership. Oreta Hempleton, for example, is the Human Resources Director for OmniConglomerate, Inc. She owns no OmniConglomerate corporate stock, but she makes the hiring, firing, and employment decisions for the company. She has control, but no ownership.

  • And the other side of the public having ownership of government assets without control is government officials having control over these resources without ownership. For example, Admiral Pluckingstick of the United States Navy, does not own the battleship he commands, but he does control it. He can order the crew to turn port or starboard, to go full speed ahead or come to a stop, or even to fire on an enemy nation. He has control, but no ownership.

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Recommended Citation:

OWNERSHIP AND CONTROL, AmosWEB Encyclonomic WEB*pedia, http://www.AmosWEB.com, AmosWEB LLC, 2000-2014. [Accessed: September 1, 2014].


Check Out These Related Terms...

     | private property | property rights | nationalization | privatization | exploitation |


Or For A Little Background...

     | incentive | third rule of inequality | production | institution | capitalism | market-oriented economy | efficiency |


And For Further Study...

     | seven economic rules | government functions | distribution standards | four estates | economic system | political views | legal business organizations |


Related Websites (Will Open in New Window)...

     | American Enterprise Institute | Libertarian Party | Internal Revenue Service |


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