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 3: Property Rights, Institutions and Co-ordination Costs

David Emanuel Andersson

Subjects: economics and finance, evolutionary economics, institutional economics


An advantage of property rights theory is that its application is not limited to market phenomena. One can use the same tools to analyse the impact of government rules and regulations that one uses to analyse the impact of firms and markets. Alchian and Allen (1977) even go so far as to claim that it is impossible to make a meaningful distinction between property rights and human rights. They see human rights as a subset of property rights. These rights may be difficult to exchange, but so are many ordinary productive resources, including knowledge and information. A locality offering a ‘freedom of speech’ attribute, for example, may see the utility (or disutility) of that attribute capitalized as a component of land prices. More prosaic regulations, such as the British requirement that there be at least two doors between a public-access dining room and a toilet, also have straightforward applications. The imposition of such a regulation implies a redistribution of property rights in the form of use and income rights from the business owner to the regulatory authority. There is even an indirect impact on transfer rights, since the restriction applies to the next owner of the structure, too. The two-door requirement leads to higher minimal fixed costs, which means that expected revenues must be greater for those owners who would not have installed two doors in the absence of the regulation. It may even cause a prospective restaurant owner to abandon a start-up plan, if the cost of...

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