Privatization & Property Rights

1. New palgrave entry
2. From French to English Mrs. H bringing word from French to English Washington Post

Case studies:

1. India Reservations Hanke-Dowdle
2. Grazing Lands Reagan’s privatization guru (CATO insiders view and inFOCUS)
3. Timberlands Hanke-Dowdle
4. Wildlife Richard Leakey RIP summarized privatization for wildlife. Botswana hunting ban (https://www.forbes.com/sites/stevehanke/2019/06/20/lift-the-hunting-ban-save-botswanas-elephants/)
5. Yugoslavia Walter Block Feschrift chapter
6. Water Resources Privatizing water internationally (articles with Steve Walters in JACP)
7. Oil PDVSA Georgetown article

Property rights and privatisation are core tenets of Hanke’s free market philosophy. He views property rights not as a subsidiary concern but as core institutions, alongside a stable currency, that are preconditions for functioning free market. This article explains key concepts and philosophies to do with privatisation and property rights underneath the free market umbrella.

Definitions

Private property means exclusive legal control over resources or assets by individuals or firms. It gives owners the right to use, transfer, or rent the resource, and to exclude others. Economists like Hanke, who consider strong property rights essential because they create clear incentives to invest, maintain, and allocate resources. Adam Smith famously argued that protection of property rights enables the “invisible hand” guiding the free market.

Privatisation, on the other hand, is the transfer of assets or services from public (state) control to private ownership. Hanke, together with his wife Liliane, is attributed with coining the term ‘privatisation’ itself. By converting public property into private property, proponents of privatisation argue that it increases efficiency in the market. For example, privatizing a state-owned enterprise gives managers an ownership stake and aligns their incentives with productivity. Effective privatisation depends on effective legal systems, as without enforceable ownership rights or contract law, privatization may fail to yield improvements to efficiency.

Hanke’s Views on Property Rights and Privatisation

Hanke strongly endorses secure property rights and privatisation as pro-market reforms (Hanke & Sekerke 2025). He argues that private ownership and enforcement of property titles create incentives to use resources efficiently. In Making Money Work, Hanke emphasizes that market institutions must include not just money rules but also reliable claims on assets (Hanke & Sekerke 2025). Hanke’s policy work reflects his stance: he has advocated privatizing state services (e.g. water utilities) and removing price controls, thereby reinforcing private property in economic output.

In Hanke’s Oral History, he contrasts the theory-oriented Austrian tradition with his own brand of pragmatism. He credits experiences in Latin America and Eastern Europe for instilling a belief that privatization and strong property rights are essential to solving real-world problems. For example, he mentions how privatizing urban water systems or infrastructure can reduce shortages and corruption by aligning managers’ and users’ incentives. Hanke also cites currency boards and dollarization as part of the same institutional toolkit, as by fixing the unit of account, these reforms stabilise property values and protect wealth from inflation (Hanke & Sekerke 2025).

Hanke approaches privatisation and property rights from an applied, case-study perspective. In interviews and writings, he consistently imparts his learnings from a wealth of field experience and data rather than through abstract models (List, Schuler & Hofmann 2025). His career as an adviser – on everything from water, telecoms, to currency boards – is a reflection of this pragmatism. In his advisory career, Hanke insists on “the right incentives” and the right rules without one-size-fits-all theories when it comes to putting his core philosophies, like privatisation, into practice (List, Schuler & Hofmann 2025). Thus, his method is empirical, as he relies on his lived experience advising on the outcomes of privatization in Eastern Europe, Latin America, and other governments where he has played prominent advisory roles, and uses those cases to shape how he views policy today, home, in the U.S. and France, and abroad.

Policy Implications and Examples

In practice, Hanke has advocated broad privatization of government assets and deregulation to clarify property rights. For example, he supported rapid privatization in the post-Soviet Baltics, where companies once owned by the state were sold to private investors (List, Schuler & Hofmann 2025). He also promotes mechanisms that complement property rights. For instance, he helped design currency boards in countries like Lithuania (1994) and currency stabilization in Montenegro (1999), reasoning that monetary stability aides to sure up property values (Hanke & Sekerke 2025).

In infrastructure, Hanke argues for private contracting in roads and utilities. During his tenure on Reagan’s Council of Economic Advisors, he argued that under public monopoly, “water systems are chronically under-capitalized” (Hanke 1987). However, Hanke cautions that privatization without proper legal frameworks can fail, looking to case studies whereby some privatized utilities in Eastern Europe struggled because of delayed regulatory reforms (List, Schuler & Hofmann 2025).

Limits and Conditions for Success

Hanke acknowledges that strong property rights and privatization are not in themselves remedies for all free market ails. Their benefits depend on robust legal institutions. If courts are weak or corrupt, private owners cannot be sure their rights will be upheld. Similarly, without regulatory oversight, privatization can lead to private monopolies or asset-stripping. However, critics tend to point out issues like inequality or social impact of quick sell-offs. Hanke recognizes these risks, but argues that state actors should focus on establishing clear, minimal rules (e.g. anti-corruption laws, contract enforcement) before and during privatization. In short, he sees clear property-rights as necessary but requires pragmatic institutions to enable them in order to fully realise the benefits of privatisation.

In sum, Hanke’s free-market philosophy treats property rights and privatisation as essential pillars of any successful free-market economy. By privatizing state assets and enforcing ownership claims, he argues, economies unleash private incentives for investment and efficiency. However, he also stresses pragmatism, as without supporting institutions and careful design, privatization can fail to deliver benefit. Ultimately, Hanke sits broadly with classical liberal and institutional thinkers on the importance of rights but insists on a practical, rule-based approach to implementing them in policy.

The Reagan Administration Privatization Program

In 1981–82, as a Senior Economist on President Reagan's Council of Economic Advisers, Hanke developed a comprehensive program for privatizing federal public assets — specifically municipal water systems, public grazing lands, and timber lands. The program was endorsed by Senator Paul Laxalt (Nevada), one of Reagan's closest allies. It put Hanke in conflict with Interior Secretary James Watt, who preferred transferring the same lands to state governments (the Sagebrush Rebellion) rather than to private ownership.

Formative Origins: Kenya 1972

Hanke's privatization thinking was shaped in part by a formative 1972 experience at the National Museums of Kenya, where he worked as a research associate with famed anthropologist Richard Leakey. Together they studied the economics of big game cropping and the privatization of game reserves as a method of combating poaching — using market incentives rather than prohibition to protect wildlife.

The New Palgrave Dictionary

References:

1. List, Mitchell, Kurt Schuler, and Caleb Hofmann. 2025. An Interview with Steve H. Hanke on His Life and Work in Economics. Studies in Applied Economics No. 330. Baltimore: Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise.
2. Hanke, Steve H., and Matt Sekerke. 2025. Making Money Work: How to Rewrite the Rules of Our Financial System. Hoboken, NJ: Wiley.
3. Hanke, Steve H. 1987. Privatization and Development. ICS Press.

Recent Publications (2025–2026)

• Why Does Washington Hold So Much Land? — Op-ed, WSJ
• Privatizing Fannie Mae & Freddie Mac — Op-ed, Fortune Magazine
• Pittsburgh Public Water Authority — Op-ed, Pittsburgh Post-Gazette

Related Pages

• Principles of Free Market Economics
• Intellectual Roots
• Money as a Free-Market Institution
• Home: Free Market Economics — Return to the Free Market Economics overview