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2 - Economic Property Rights
Yoram Barzel, University of Washington, Douglas W. Allen, Simon Fraser University, British Columbia
Book:

Economic Analysis of Property Rights

Published online:

17 August 2023

Print publication:

31 August 2023, pp 14-32
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Summary

There are many notions of property rights. The critical concept in this book is an Economic Property Right, which is defined as an individuals ability in expected terms to exercise a choice with respect to a commondity. Such rights depend on the individuals legal and moral rights to that commodity. Such rights are complicated because they might be spread out across different subsets of a commoditys attributes, and different people might hold different types of rights to the commodity. Furthermore, the strength of any given property right can vary and is under the choice of various people.

3rd edition
Yoram Barzel, Douglas W. Allen
Published online:

17 August 2023

Print publication:

31 August 2023
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The standard neoclassical model of economics is incapable of explaining why one form of organization arises over another. It is a model where transaction costs are implicitly assumed to not exist; however, transaction costs are here defined as the costs of strengthening a given distribution of economic property rights, and they always exist. Economic Analysis of Property Rights is a study of how individuals organise resources to maximise the value of their economic rights over these resources. It offers a unified theoretical structure to deal with exchange, rights formation, and organisation that traditional economic theory often ignores. It explains how transaction costs can be reduced through reorganization and, in the end, how the distribution of property rights that exists is the one that maximizes wealth net of these transaction costs. This necessary hypothesis explains much of the puzzling organizations and institutions that exist now and have existed in the past.

On the primacy of economic property rights
Douglas W. Allen
Journal:

Journal of Institutional Economics / Volume 19 / Issue 2 / April 2023

Published online by Cambridge University Press:

12 October 2022, pp. 272-275
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Bart Wilson suggests that economists interested in property rights have it all backwards when they define ownership as a bundle of rights. Rather he argues that ownership comes first in the form of an abstract concept. I claim there is a small element of truth to this, but the bulk of what he argues is already understood through the concept of economic property rights. Wilson's consternation is mostly the result of a failure to appreciate this latter concept.