When property rights are clear and well-defined, one knows that what belongs to one person must be respected and will be protected under the law. With little uncertainty, a person can make informed decisions about whether to sell and/or invest in his/her own property, and what risks he/she is willing to take to move up the income scale and prosper.
RULE OF LAW
When laws are not stable or unclear, or when they change constantly, it is hard to know when one is acting lawfully. The business owner expends more resources to just keep up with the laws (and avoid breaking them), and less in producing, expanding and creating jobs. He or she may even need to hire a lawyer. Just consider how difficult the task can become for aspiring entrepreneurs to become business owners when their resources become more limited due to unstable laws.
(The Rule of Law comprises more principles than those highlighted in this summary.)
SOUND MONEY SUPPLY
When the value of a country’s money changes constantly, it creates a lack of trust among prospective investors. If they consider the risk of investing in one country too high, then they will likely decide to invest in another country with a more stable currency. And, less investment usually means creation of fewer jobs, resulting in decreased economic opportunities that can help individuals, families and communities prosper.
Protecting our system of free trade is important because no single person can ever possibly know how to allocate resources in society. It is impossible to know what each person needs or wants, in what quantity and how much each individual is willing to pay for any particular item. Business opportunities surface when entrepreneurs explore current consumer needs and wants that no one is providing. If they produce something needed or desired for those who are willing to pay for it, they create their opportunity to prosper.
When the government starts getting involved in activities that the private sector can do better, it stops doing the things that it should be doing in an effective an efficient manner, such as defending our property rights. When the government makes too many laws and regulations, it makes it more difficult for entrepreneurs to innovate, expand or simply manage their businesses.