Property Rights (Economics)

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Property rights are a controversial, theoretical construct in economics for determining how a resource is used, and who owns that resource—government, collective bodies, or individuals.^[1] Property rights can be viewed as an attribute of an economic good. This attribute has four broad components^[2] and is often referred to as a bundle of rights:^[3]

1. the right to use the good
2. the right to earn income from the good
3. the right to transfer the good to others
4. the right to enforcement of property rights.

In economics, property usually refers to ownership (rights to the proceeds of output generated) and control over a resource or good.
The concept of property rights as used by economists and legal scholars (see property for the legal concept) are related but distinct. The distinction is largely seen in the economists' focus on the ability of an individual or collective to control the use of the good. For example, a thief who has stolen a good would not be considered to have legal (de jure) property right to the good, but would be considered to have economic (de facto) property right to the good.^{[citation needed]}

Contents 1 Property-rights regimes 2 Property rights and the environment 3 See also 3.1 Related Terms and Disciplines 3.2 Economists working on property rights issues 4 References

[edit] Property-rights regimes

Property rights to a good must be defined, their use must be monitored, and possession of rights must be enforced. The costs of defining, monitoring, and enforcing property rights are termed transaction costs.^[4][5] Depending on the level of transaction costs, various forms of property rights institutions will develop. Each institutional form can be described by the distribution of rights. The following list is ordered from no property rights defined to all property rights being held by individuals^[6]

1. Open access (res nullius)
2. State property
3. Common property
4. Private property

Open-access property is property that is not owned by anyone. It is non-excludable (no one can exclude anyone else from using it) but may be rival (one person's use of it reduces the quantity available to other users). Open-access property is not managed by anyone, and access to it is not controlled. There is no constraint on anyone using open-access property (excluding people is either impossible or prohibitively costly). The tragedy of the commons should be called the tragedy of open access. 'Open-access property may exist because ownership has never been established, because the state has legislated it, or because no effective controls are in place, or feasible, i.e., the cost of exclusion outweighs the benefits. The state can sometimes effectively convert open access property into private, common or public property by legislating to define rights and enforce them'.^[7] Examples of open-access property are the atmosphere or ocean fisheries.
State property (also known as public property) is property that is owned by all, but its access and use is controlled by the state. An example is a national park.^[7]
Common property or collective property is property that is owned by a group of individuals. Access, use, and exclusion are controlled by the joint owners. True commons can break down, but, unlike open-access property, common property owners have greater ability to manage conflicts through shared benefits and enforcement.^[7]
Private property is both excludable and rival. Private property access, use, exclusion and management are controlled by the private owner or a group of legal owners.

[edit] Property rights and the environment

Implicit or explicit property rights can be created by regulating the environment, either through prescriptive command and control approaches (e.g. limits on input/output/discharge quantities, specified processes/equipment, audits) or by more flexible market-based instruments (e.g. taxes, transferable permits or quotas).^[7]
It has been proposed by Ronald Coase (Jnl of Law and Economics, 5 October 1960) that clearly defining and assigning property rights would resolve environmental problems by internalizing externalities and relying on incentives of private owners to conserve resources for the future. Critics of this view argue that this assumes that it is possible to internalize all environmental benefits, that owners will have perfect information, that scale economies are manageable, transaction costs are bearable, and that legal frameworks operate efficiently.^[7]

[edit] See also

• Alienation (property law)
• Social ownership
• Common ownership
• Private property
• Public ownership
• State ownership
• Common resource pool or open-access

[edit] Related Terms and Disciplines

• Bundle of rights
• Legal theory of Property rights
• Law and Economics
• Transaction Costs

[edit] Economists working on property rights issues

• Armen Alchian
• Yoram Barzel
• Ronald Coase
• Steven N. S. Cheung
• Harold Demsetz
• Walter Block
• Hernando de Soto Polar
• Daniel Bromley

[edit] References

1. ^ Alchian, Armen A. (2008). "Property Rights," The Concise Encyclopedia of Economics, 2nd ed.
2. ^ • "Economics Glossary". Retrieved 2007-01-28. 
      • Thrainn Eggertsson (1990). Economic behavior and institutions. Cambridge, UK: Cambridge University Press. ISBN 0-521-34891-9. 
      • Dean Lueck (2008). "property law, economics and," The New Palgrave Dictionary of Economics, 2nd Editio. Abstract.
3. ^ Klein, Daniel B. and John Robinson. "Property: A Bundle of Rights? Prologue to the Symposium." Econ Journal Watch 8(3): 193-204, September 2011.[1]
4. ^ Barzel, Yoram (April 1982). "Measurement Costs and the Organization of Markets". Journal of Law and Economics 25 (1): 27–48. doi:10.1086/467005. ISSN 0022-2186. JSTOR 725223.  |accessdate= requires |url= (help)
5. ^ Douglas Allen, (1991). What are Transaction Costs? (Research in Law and Economics). Jai Pr. ISBN 0-7623-1115-0. 
6. ^ Daniel W. Bromley, (1991). Environment and Economy: Property Rights and Public Policy. Cambridge, MA: Blackwell Pub. ISBN 1-55786-087-4. 
7. ^ ^{a b c d e} Guerin, K. (2003). Property Rights and Environmental Policy: A New Zealand Perspective. Wellington, New Zealand: NZ Treasury

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