Economics Dictionary of ArgumentsHome
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| Property rights: Property rights in economics define legal ownership and control over resources, including the right to use, transfer, or exclude others. They are essential for efficient market functioning, as they create incentives for investment, trade, and resource conservation. Well-defined and enforced property rights reduce conflict and uncertainty in economic activities. See also Property, Rights._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Ronald Coase on Property Rights - Dictionary of Arguments
Kiesling I 5 Property rights/Coase/Kiesling: One important institution for economic activity is understanding what property rights are, how they are defined, and how they are enforced. Human societies have long developed concepts of what is “mine” and “not mine” (Wilson 2020)(1). That concept of having property in an item specifies what a property owner can do with that item - use it, change or improve it, loan it, lease its use to someone else, let it lie unused, give it, sell it. A property right is a right to take particular actions or make certain decisions about the use of a resource. A property rights framework reflects the activities that are and are not permissible for property owners to do with their property. Kiesling I 6 That framework affects their incentives to use the resource productively over time. For example, rent control restricts how someone uses their property, which affects their incentives. Limiting the rent owners can charge limits their revenue and thus their incentive to improve the property, which is why properties often fall into disrepair under rent control. In situations where rent control legislation is very onerous or burdensome, that legislation can even induce owners to stop renting, thereby reducing the supply of rental housing and contradicting the policymaker’s original intentions. In general, a property rights framework in which rights are defined clearly and transparently, and where rights can be enforced at reasonable cost, is an institution that creates incentives for the efficient use of resources and for efficient production, consumption, investment, and innovation. Coase’s insights on property rights sparked a new literature that further developed the concept of property rights theory and applying it to a variety of situations (see, for example, Demsetz (1967)(2), Libecap (1989)(3), and Barzel (1989)(4)). Markets/Contracs/Price: Another important implication arising from the property rights framework concerns transaction costs. Coase defined transaction costs as consisting of all costs of using markets, contracts, and the price system. Allen(5) defines transaction costs as the costs of “establishing and maintaining property rights” (1999(5): 898). Transaction cost: Transaction costs affect the distribution of property rights across all types of governance structures and organizations. Coase never defined transaction costs explicitly, relying instead on examples to illustrate how they affect contracts, incentives, and outcomes. Much of a society’s property rights framework depends on its formal legal institutions because legal definitions and enforcement of property rights are inputs into the specifics of property rights. Norms: Some aspects of property rights emerge out of more customary norms and conventions that societies form around property over time, but the bulk of Coase’s work focuses on legal institutions, the effect of the law on economic decisions, and the role of the judicial system and legal precedent in defining property rights. Importantly, Coase stressed that various forms of government regulation, including state-owned property, are alternative ways of performing the coordinating tasks of property rights and entail their own transactions costs. >Firms/Coase, >Social cost/Coase. Kiesling I 33 Production factors/Coase/Kiesling: „If factors of production are thought of as rights, it becomes easier to understand that the right to do something which has a harmful effect (such as the creation of smoke, noise, smells, etc.) is also a factor of production.… The cost of exercising a right (of using a factor of production) is always the loss which is suffered elsewhere in consequence of the exercise of that right—the inability to cross land, to park a car, to build a house, to enjoy a view, to have peace and quiet or to breathe clean air.“ Coase (1960)(6), p. 44 >Transaction costs/Coase, >Social cost/Coase. 1. Wilson, Bart J. (2020). The Property Species: Mine, Yours, and the Human Mind. Oxford University Press. Yandle, Bruce (1998). Coase, Pigou, and Environmental Rights. In Peter J. Hill and Roger E. Meiners (eds.), Who Owns the Environment? (Rowman & Littlefield). 2. Demsetz, Harold (1967). “Toward a Theory of Property Rights.” American Economic Review 57, 2: 3473.-359. 3. Libecap, Gary D. (1993). Contracting for Property Rights. Cambridge University Press. 4. Barzel, Yoram (1997). Economic Analysis of Property Rights. Cambridge University Press. 5. Allen, Douglas W. (1999). Transaction Costs. Encyclopedia of Law and Economics. 6. Coase, Ronald H. (1960). The Problem of Social Cost. Journal of Law and Economics 3: 1-44._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Coase, Ronald Kiesling I L. Lynne Kiesling The Essential Ronald Coase Vancouver: Fraser Institute. 2021 |
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