Property rights (economics)

The theory of property rights (also available legal theory, English property rights theory ) as a branch of the New Institutional Economics examines action and property rights ( property rights, property rights ) of goods.

Basics

Property rights

The theory of property rights distinguishes the following property rights (examples of a car in brackets):

The value of a commodity is determined from an economic point of view not only of the substance ( what it is ), but mainly from what you can do with the estate (which I may give ). A plot of land in a prime location, for example, worth considerably less if the approval for construction is refused.

Property rights and externalities

Explained on the basis of a historical example of Harold Demsetz, as the adverse effects of external effects can be prevented by internalization by property rights.

In the Middle Ages there were, for example, a right of disposal for mining, mountain shelf.

Freedom and property rights

As one already sees in the example with the Indians, clear property rights are a prerequisite for economic growth through investment. Based on Thomas Hobbes James M. Buchanan explains the consequences of inadequate legal system: If no defined and enforced property rights exist, there is little incentive to invest (in the example above: even consideration for the animal population, something advanced perhaps the beaver - breeding), as no one can be sure the benefits ( fruits, usus fructus ) be drawn from these investments. The Indian family runs without property rights namely risk that another family kills protected by their animals, so they will either do not "invest" and himself as hunt young animals, or they must exert extremely high costs to protect their investment ( guarding, fighting, etc.).

This is the definition and enforcement of property rights in the common interest of all, even if it continues to be in the individual interest, not to adhere to it (that is not to invest and go on a rampage ). There is a double prisoner's dilemma, as it:

Among the tasks that ascribes the finance the state, the law and the allocation of property rights is seen as part of the allocation function.

Changes in the distribution of property rights

As you could see from the example above of Demsetz, property rights distributions are not immutable. As new, previously unknown externalities occur, there is a pressure to adapt, so that the changed distribution of property rights internalize these externalities. This does not work without friction from, it usually occur on transaction costs, for example, the Indian families have to sit down and discuss the change and the like. Therefore, must be balanced between:

  • The benefit of the existing structure of property rights, the transaction costs of a change on one page
  • The added benefit of a change in the distribution of property rights on the other side

It may not always be state intervention, regulates the changes in the property rights distribution. If there is already a complete distribution of property rights, and market mechanisms to emerging externalities can respond.

Rights of disposal of goods are transferred by contracts. If a welfare loss would result from emerging externalities, it can also be found through negotiated settlements between the parties a the common interest of all serving solution; plays the previous distribution of property rights (as long as they are fully allocated ) does not matter. Under the assumption that there are no transaction costs ( above all: that the parties can negotiate free) there is any complete distribution of property rights efficiently (see Coase theorem ).

However, once transaction costs exist, creates a trade-off between a complete allocation and enforcement of property rights ( externalities fall, transaction costs rise ) and a dilute property rights structure (more externalities, less transaction costs). This is also important for the allocation of property rights in non-governmental organizations such as companies.

In the presence of transaction costs, the state must also set not authoritarian property rights or internalize external effects, it can also redesign of institutions reduce transaction costs to the point that again negotiated solutions can be found. Examples of different government interventions to internalize external effects on the environment are here, for example:

  • Eco-tax: A Pigouvian tax, the power consumption is more expensive.
  • Emissions Trading: Due to the allocation of a certain amount of emission rights and the provision of a market for these rights, the producing companies will change on negotiated solutions, the available distribution rights independently.

Conclusion

The theory of property rights is concerned with accurately assigned rights and related laws. It takes into account sub-optimal solutions due to transaction costs and dilution of property rights.

Credentials

298568
de