Imagine a sunny day in beautiful Galt's Gulch - entrepreneurial paradise home of the few and worthy. All who live in the gulch have earned all the privileges that Gulch residency provides. One such privilege is dog ownership. For the present, put off speculation about what breed or breeds of dogs would thrive inside of Gulch residencies, and imagine that Mr. Galt and Mr. Galt's pooch are out for a walk. Although Galt is privileged to let the pooch run freely, his choice is NOT to do so, and on this particular occasion, pooch and Galt are separated by only the length of the ten-foot leather strap conveniently fitted to pooch's collar at one end, and Galt's hand at the other. Under such circumstances, it is hard to imagine that Galt is unaware of pooch's activities.
Then imagine that fellow Gulch resident Smith is similarly walking his dog. Somewhere on the streets of the gulch, the two dogs encounter each other and Galt's dog, for no apparent reason, attacks and kills Smith's dog. This is Galt's Gulch, of course, and the rules are restricted to prohibition of human murder. So, by rule, Galt is under no obligation to Smith. Presumably, the incident ends with Galt leading pooch back home and Smith carrying off the corpse of his former dog. Because there is no guarantee of happiness and no force that commands respect of the happiness of others, the death of Smith's dog is the final resolution, although Smith may be somewhat unhappy that this is the resolution of the conflict. Galt owes nothing too Smith because the occurrence was simply the natural victory of the stronger dog - a graphic demonstration of survival of the fittest. The recourse allotted to Smith is to get a bigger and stronger dog next time. Although Smith may have been an entrepreneur before moving to paradise, paradise seems not to have been productive of Smith's happiness.
Societies have a long tradition of establishing common areas. They generally have another tradition of imposing social mores to govern behavior in common areas. In the paradise of Galt's Gulch, the streets between Galt's and Smith's homes would have been a common area. As such, it would have been governed by common consent to go beyond the non-murdering standard to a not-harming-possessions standard.
Rand is, by no means, a utilitarian. But one would presume that Galt would have founded the Gulch as a resource for his own happiness, which he would have derived from association with other entrepreneurs very much like Smith. At this point, Smith is very likely to move out of the Gulch. It is very likely that Smith will have conferred with at least a few neighbors before moving out. And it is within the realm of possibility that some of the neighbors would have recognized that they were there for the privilege of associating with the likes of Smith as well as association with the likes of Galt. Behavior on Galt's part that violates the mores of a viable common area makes the Gulch less desirable and encourages Galt's neighbors to avoid association with Galt. Galt, therefore, loses the company of the entrepreneurial class that he had believed would contribute to his own happiness. A commons with no rules is a major source of unhappiness, and should, by reasonable people who seek to live together in harmony, be avoided.
Privilege isn't taken, as Rand would have readers believe. It is extended by the social community. And it carries responsibilities. Responsibilities accompany privilege. In some instances - like driver's licenses - there is a formal and documented process of privilege having been extended in lieu of agreement to follow the rules. But even without the formal license, there is always responsibility. Galt is responsible to pull back the leash and restrain his dog. Smith was out for a joyful walk to the same extent as Galt was. Smith had the same privilege. In the example above, Galt failed his responsibility to honor Smith's privilege of using the common. Whether through force of law and jailing or through isolation that results from becoming a social pariah, the privileged will punish those who violate the commons. Unless the commons will be given up entirely - in which case there is no path by which Galt can enjoy Smith's company, or the commons must be respected.