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The Elgar Companion to the Economics of Property Rights

The Elgar Companion to the Economics of Property Rights

Elgar original reference

Edited by Enrico Colombatto

Economics is a matter of choice and growth, of interaction and exchange among individuals. Because property rights define the rules of these interactions and the objects of exchange, it is vital to fully understand the institutions and implications of the various property-rights regimes. With over 20 original and specially commissioned chapters, this book takes the reader from the historical and moral foundations of the discipline to the frontiers of scholarly research in the field.

Chapter 3: The Origins and Evolution of Property Rights Systems

Francesco Parisi

Subjects: economics and finance, public choice theory, public sector economics, politics and public policy, public choice


Francesco Parisi* Introduction The institution of property is nearly as old as recorded history. In spite of its stability as a fundamental institution of human society, the concept of property and the privileges, obligations and restrictions that govern ownership have undergone substantial changes throughout history. In this chapter, I shall consider the main stages in the emergence and consolidation of property and discuss some economic theories on the evolution of legal and social conceptions of property. The history of property is illuminated by economic theory. The concept of scarcity – which some notable authorities believe is at least a necessary condition for the establishment of enforceable property rights – is valuable in explaining the limited domain of property in early societies and the changing contours of property protection as a result of changes in the economic structure of society.1 As pointed out by Demsetz (1967), property rights develop to internalize externalities in the use of scarce resources. However, there are costs associated with the establishment of property. While scarcity may be necessary for giving objects value and prompting the desire to have property rights, the establishment of such rights also requires that the protection of the rights be economically efficient from a societal standpoint. That is, the marginal benefit of protection (internalization) exceeds the marginal cost of protection. Property rights emerge only when the gains of internalization become larger than the cost of internalization. The study of the historical evolution of property confirms these economic propositions and reveals that...

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