Property Rights, Consumption and the Market Process

Property Rights, Consumption and the Market Process

New Horizons in Institutional and Evolutionary Economics series

David Emanuel Andersson

Property Rights, Consumption and the Market Process extends property rights theory in new and exciting directions by combining complementary insights from Austrian, institutional and evolutionary economics. Mainstream economics tends to analyse property rights within a static equilibrium framework. In this book David Andersson reformulates property rights theory as an evolutionary theory of the market process.

Chapter 1: Attributes, Entrepreneurship and Institutions

David Emanuel Andersson

Subjects: economics and finance, evolutionary economics, institutional economics

Extract

This study is about theories of entrepreneurship and institutions and their application to the analysis of the attributes that make up exchangeable goods and services. It is thus not about applying microeconomic equilibrium models, as would be the case if the objective were to model an optimal allocation of property rights over attributes. As Dan Johansson (2004) concludes after analysing the contents of intermediate textbooks on microeconomics, the terms ‘entrepreneurship’ and ‘institution’ are rarely found in such works. This absence is implicit in the convention of assuming perfect knowledge (interpreted as information) in most mainstream microeconomic models. Perfect knowledge or even perfect economizing of incomplete knowledge precludes any role for entrepreneurs (Kirzner, 1973) or any efficiency effects of different institutional structures (Coase, 1960). The present study arises from a different tradition. Richard Zerbe and Nicholas Medema (1998) call it the ‘British tradition’, with reference to the works of Adam Smith, Alfred Marshall and Ronald Coase.1 They write that the ‘British tradition’: . . . emphasizes understanding, rather than prediction, as the first function of theory. It stresses the use of inductive methodology2 in the building of theory rather than the development of a theory largely by deductive means. The focus on induction in turn leads to an emphasis on the understanding of the behavior of individuals and institutions rather than their treatment as black boxes which carry out certain functions. (Zerbe and Medema, 1998, p. 210, italics in original) Another precursor of the present undertaking is Friedrich Hayek’s Austrian...

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