Institutional theory of property rights

Property rights are the powers of individual individuals or groups of individuals to use resources. This relationship between people, which arises in connection with the availability of goods and their further use.

The theory of property rights determines the norms of people's behavior about the benefits. Their non-compliance causes a significant increase in costs.

It should also be noted that property relations are based on the resource scarcity problem. Establishment of powers allows to limit and regulate conflicts over the use of specific resources. They reduce the uncertainty of the economic environment, make it more predictable. The rights are protected by a complex of traditions, unwritten customs.

The theory of property rights is related to the behavior of the economic subject. However, prohibitions and restrictions do not ensure the unambiguous implementation of these prescriptions.

The institutional theory of property rights considers the exchange of rights as the exchange of points of power, which includes eleven elements: possession, management, use, rights to income, the capital value of the thing, security, property transfer under a will or inheritance, liability in the form of recovery, perpetuity , The expectation of a natural return, the prohibition of harmful use.

Problem specification

Specification implies the precise definition of all the powers of the owner. If the set of rights is clearly defined, but there is insufficient protection, then the risk of uncertainty increases. In the real world, there can not be 100 percent protection and specification of powers, because this requires complete, comprehensive information.

Blurring occurs when inaccurately established rights, or powers fall under restrictions that reduce the effectiveness of resource use and their value.

The Coase Theorem

According to Coase, externalities (externalities) arise when the powers are unclear. He blames the market for the existence of failures. Therefore, it is necessary to improve the legislation. If the market failures still remain, then the state is to blame for this.

The theory of property rights through the theorem of Coase shows that the problem lies not in the existence of private property, but in its shortcomings. Transaction costs play a key role here . In the event that they are equal to zero, legal regulation is necessary. When they are positive, the distribution of rights ceases to be neutral. It begins to influence the structure of production and its effectiveness. Thus, the economic theory of property rights, in particular the Coase theorem, opens new approaches to understanding the role of the state.

The main achievements of the theory

The theory of property rights recognized in the explicit form the existence of alternative property systems. There are three main legal regimes. Under private ownership, an individual is the owner. His word in the decision of any questions of use of resources is considered as the final. Thus, individuals are privileged in terms of access to certain resources: it is open only to the owner or persons to whom he has delegated or transferred the powers. Under state ownership, access to scarce resources is ensured on the basis of the collective interest of society. In fact, no one has a privileged position, since no one's personal interest is considered sufficient for the use of any resource. With common property , no one has a privileged position, but access to benefits is open to all.