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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Armen A. Alchian on Property Rights - Dictionary of Arguments
Henderson I 13 Property rights/Alchian/Henderson/Globerman: „One of the most fundamental requirements of a capitalist economic system - and one of the most misunderstood concepts - is a strong system of property rights. For decades social critics in the United States and throughout the Western world have complained that "property" rights too often take precedence over "human" rights, With the result that people are treated unequally and have unequal opportunities. Inequality exists in any society. But the purported conflict between property rights and human rights is a mirage. Property rights are human rights.“(1) >Human rights, >Rights, >Law, >Justice, >Property, >Inequalities, >Equality. Henderson I 17 Property rights/Alchian/Henderson/Globerman: Alchian (1965)(1) defines a system of property rights as a method of assigning to particular individuals the authority to select, for the goods or services owned, any use from a non-prohibited set of uses. Having a property right, therefore, means that the owner enjoys protection against other people acting against the owner's will. Henderson I 18 Example: A complaint: [you say] “I need to talk to the owner.” (…) an understanding of property rights helps us move beyond intuition to a clear theoretical understanding. The reason to talk to the owner is that the owner has the most to gain by keeping his reputation intact or to lose by not being accountable to the customer. Residual value claimant/Alchian: The owner is what Alchian calls the "residual value claimant." Henderson: Economists have shortened the term to "residual claimant." The owner is the residual claimant because he gets all the difference between revenues and costs. This gives him an incentive to care strongly not only about current revenues and costs but also about future revenues and costs. Government/public enterprise/Alchian: Alchian (1965)(1) used this focus on property rights to explain the difference between a privately-run and a government-run enterprise. He gave the example of garbage collection. Henderson I 19 Government bureaucracy: A government bureaucrat is not a residual claimant. If he ineffciently manages a municipally owned garbage collection service, he suffers no direct financial loss other than possibly being fired. But because he is a government offcial working for a government agency, his boss or bosses, who are also government offcials, don't have a strong incentive to fire him. His and his bosses' actions would have to be so egregious that voters demand that their elected offcials fire him. Private business: But this threat is likely to be much less effective than that faced by the owner of a privately-owned service who would suffer substantial and direct financial losses if the city terminated its contract for the service. Incentives: And the incentive for good performance would be even stronger if garbage collection companies sold their services directly to customers. In other words, effcient performance is more likely when the property right to the rewards for effcient garbage collection is held privately rather than held collectively by a municipal government. >Residual risk. 1. Alchian, Armen (1965). Some Economics of Property Rights. Il Politico 29, 4: 816-829._____________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. |
Alchian I Armen A. Alchian William R. Allen Exchange and Production: Competition, Coordination and Control Belmont, CA: Wadsworth 1977 Henderson I David R. Henderson Steven Globerman The Essential UCLA School of Economics Vancouver: Fraser Institute. 2019 |
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