Answer to Question #207993 in Economics for Kiki

Question

Essay writing of 600 words

Property rights and the process of bargaining can shift economies to efficient output levels, regardless of 

who is assigned the property rights. Use an example to discuss this statement. Your discussion should 

show how efficient outcome is reached with property rights assigned to either group.

Answer 1

Ownership is one of the fundamental concepts of economic theory. On the one hand, it can be viewed as a property regime, as an important institution, and on the other, as individual rights that are elements of an integral system.

In the first case, property rights are certain "rules of the game" governing the relationship between people about limited resources. The second approach examines the bundles of powers that an agent has. S. Pejovich and E. Furubotn gave the following definition: “Property rights are understood as sanctioned behavioral relationships that arise between people in connection with the existence of goods and concerning their use. These relations determine such norms of behavior regarding the benefits that any person must either observe in their interactions with other people or incur costs due to non-compliance ... The prevailing system of property rights in society is in this case the sum of economic and social relations in about scarce resources, within the framework of which individual members of society confront each other. "

The important points that follow from this definition are as follows. Ownership of property rights must be distinguished from property objects, i.e. tangible or intangible objects to which the right of ownership applies. Property relationships are relationships between people, not relationships between people and things. Establishing property rights makes sense in a resource-limited setting where conflicts can arise over their use, and property rights can be used to limit and resolve these conflicts. In other words, property rights determine the possible ways of using limited resources as the exclusive prerogative of individual individuals or groups. Property rights are multi-subject (individual, firm, state, etc.), multi-level (lower-level rights are the object of higher-level rights), and also differ in the modes of their application.

Property rights are secured not only by state power (laws, court decisions, etc.), but also by traditions, customs, norms, and therefore are really “rules of the game” adopted in society. The behavioral implication of property rights is that they stimulate activity by changing the costs of different behaviors. For example, unauthorized behavior dictated by negative incentives increases the costs of its implementation due to possible punishment. As a result, compliance with or violation of the rules is reduced to acts of voluntary economic choice, and the rights themselves have economic value.

Property rights are defined and guaranteed by some governing structure or order, i.e. a system of norms, as well as instruments that protect this order. The maintenance of order can be purely internal, or it can be established by expectations of specific external consequences. Institutional economics deals with the second case, i.e. with guarantees based on sanctions established either by law or by custom.

So property is an institution that gives people the freedom to dispose of limited resources. This freedom means securing certain rights for the owner and prohibiting others from interfering in the exercise of these rights. Owners have the legal authority to act or refrain from acting, but without a rigid obligation to do one or the other, unless they have voluntarily assumed contractual obligations.

The pure property regime combines a body of laws that establishes full and perfect property rights and provides for their protection. Complete and perfect protection against private or government interference includes prohibitions against trespassing, intrusion, theft, destruction, malice, pollution, flooding, unauthorized use, appropriation, expropriation, seizure, and nationalization. Violation of property rights threatens to bring civil, judicial, or criminal liability for the damage caused.

The owner enjoys the greatest freedom when he has the opportunity to do with his resources everything that does not harm others, i.e. the owner's freedom of action is limited by the requirement of harmlessness for others. This provision is called the principle of limited maximum freedom. Harm includes causing pain, fear, injury, loss of income or property. What should be considered causing harm to others is determined by social and legal norms. The legal norms used to assess harm and determine the measure of liability are enshrined in property law, civil, contract, criminal law, etc., as well as in antitrust law and administrative law. Consequently, the property is legally embedded in the broader regulatory framework.

Consider micro ownership as a set of partial powers. There are two approaches to understanding property rights - continental and Anglo-Saxon. The first approach means concentrating all ownership of an object in the hands of one owner. This approach is embodied in the Napoleonic Code, where private property is declared inviolable, unlimited, and indivisible. The Anglo-Saxon approach allowed for the possibility of splitting the ownership of an object on the powers of several persons. Currently, the Anglo-Saxon tradition prevails as more real, flexible, and responsive to the complex processes of modern society. In this approach, ownership is defined as a “bundle of partial powers,” although the classification can be based on different criteria.