Property Rights

… a core concept in Economic Analysis and Atlas102

PropertyRightsConcept description

The Armen Alchian, in the Concise Encylopedia of Economics (reference below), defines a property right as the exclusive authority to determine how a resource is used, whether that resource is owned by government or by individuals. He asserts that a strong system of property rights as one of the most fundamental – and most misunderstood – requirements of a capitalist economic system.

Alchian writes:

“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.

“The definition, allocation, and protection of property rights comprise one of the most complex and difficult sets of issues that any society has to resolve, but one that must be resolved in some fashion. For the most part, social critics of “property” rights do not want to abolish those rights. Rather, they want to transfer them from private ownership to government ownership. Some transfers to public ownership (or control, which is similar) make an economy more effective. Others make it less effective. The worst outcome by far occurs when property rights really are abolished (see tragedy of the commons).

“A property right is the exclusive authority to determine how a resource is used, whether that resource is owned by government or by individuals. Society approves the uses selected by the holder of the property right with governmental administered force and with social ostracism. If the resource is owned by the government, the agent who determines its use has to operate under a set of rules determined, in the United States, by Congress or by executive agencies it has charged with that role.

“Private property rights have two other attributes in addition to determining the use of a resource. One is the exclusive right to the services of the resource. Thus, for example, the owner of an apartment with complete property rights to the apartment has the right to determine whether to rent it out and, if so, which tenant to rent to; to live in it himself; or to use it in any other peaceful way. That is the right to determine the use. If the owner rents out the apartment, he also has the right to all the rental income from the property. That is the right to the services of the resources (the rent).

“Finally, a private property right includes the right to delegate, rent, or sell any portion of the rights by exchange or gift at whatever price the owner determines (provided someone is willing to pay that price). If I am not allowed to buy some rights from you and you therefore are not allowed to sell rights to me, private property rights are reduced. Thus, the three basic elements of private property are (1) exclusivity of rights to choose the use of a resource, (2) exclusivity of rights to the services of a resource, and (3) rights to exchange the resource at mutually agreeable terms.”

Atlas topic, subject, and course

The Study of Economics (core topic) in Economic Analysis and Atlas102 Economic Analysis.

Source

Armen A. Alchian, Property Rights, The Concise Encyclopedia of Economics, at http://www.econlib.org/library/Enc/PropertyRights.html, accessed 5 May 2016.

Page created by: Ian Clark, last modified 5 May 2016.

Image: Detectives India.Net, at http://www.detectivesindia.net/intellectual-property-rights.html, accessed 5 May 2016.