Last year Israel Kirzner, one of the economists I most enjoy, said something during a lecture that was at once simple, true, and deceptively powerful. How powerful I did not appreciate immediately. But in the ensuing months, I have come to see how much was packed into that statement.

Professor Kirzner said that the market economy can be reduced to two powerful words: private property. At first glance that may seem so obvious as to be uninteresting. At second glance it might summon an objection along these lines: No, private property isn't enough. The market also requires individual liberty, the rule of law, limits on government, respect for contrasts, and more.

But as I understand the matter (and Professor Kirzner), all those things are subsumed by "private property." A society characterized by private property will necessarily have the other features we typically associate with free markets.

Property, for example, is a limitation on government power (once property of course includes one's person) because it necessary entails rules governing how people may be treated, whether by other private individuals or state officials. […]

Property helps to separate the wheat from the chaff in the matter of civil liberties, such as privacy and freedom of speech. Take the issue of falsely shouting "fire" in a crowded theater. This is traditionally used to demonstrate that freedom cannot be "absolute." But as Murray Rothbard long ago pointed out, it does nothing of the sort. On the contrary, it affirms property and its extension, contracts. If a theatergoer shouts fire, he violates the property rights of the theater owner. If the theater owner does the shouting, he violates his contract with the patrons.

Privacy issues, which modern law and the American Civil Liberties Union have so badly muddled, can only be sorted out when the right of privacy is understood as rooted in private property. For example, contrary to ACLU, it is not a violation of privacy for an employer to refuse to hire smokers, even if they smoke only at home. It is simply a matter of freedom of association, which is an extension of private property.

If you're ever asked to stand on one leg and sum up the free society in two words, you know how to do it.