Property rights are the powers of individual individuals or groups of individuals to use resources. This is a relationship between people that arises in connection with the availability of goods and their further use.
The theory of property rights determines the norms of human behavior regarding benefits. Non-compliance causes a significant increase in costs.
It should also be noted that property relations are based on the rarity of resources. The establishment of competencies allows you to limit and organize conflicts over the use of specific resources. They reduce the uncertainty of the economic environment, make it more predictable. Rights are protected by a complex of traditions, unwritten customs.
The theory of property rights is associated with the behavior of an economic entity. However, prohibitions and restrictions do not ensure the unambiguous implementation of these requirements.
The institutional theory of property rights considers the exchange of rights as an exchange of points of competence, which includes eleven elements: ownership, management, use, rights to income, capital value of a thing, security, transfer of property by testament or inheritance, liability in the form of foreclosure, perpetuity , the expectation of a natural return, the prohibition of harmful use.
Specification Problem
The specification implies an accurate definition of all the rights of the owner. If the set of rights is clearly defined, but there is not enough protection, then the risk of uncertainty increases. In the real world, there can be no one hundred percent protection and specification of competencies, because this requires complete, comprehensive information.
The erosion takes place when rights are inaccurately established, or powers fall under restrictions that reduce the efficiency of use of resources and their value.
Coase's theorem
According to Coase, externalities (external effects) arise when competencies are not clearly defined. He blames the market for failures. Therefore, it is necessary to improve legislation. If, nevertheless, market failures remain, then the state is to blame.
The theory of property rights through Coase's theorem shows that the problem is not the availability of private property, but 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 Coase's theorem, opens up new approaches to understanding the role of the state.
The main achievements of the theory
The theory of property rights explicitly recognized the existence of alternative property systems. Three main legal regimes stand out. In private ownership, an individual is the owner. His word in resolving any issues regarding the use of resources is considered final. Thus, individuals are privileged in the sense of access to certain resources: it is open only to the owner or persons to whom he has delegated or delegated authority. Under state ownership, access to rare resources is provided on the basis of the collective interest of society. In fact, no one has a privileged position, since no one's personal interest is recognized as sufficient to use any resource. With common ownership , no one also has a privileged position, but access to benefits is open to all.