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Edited by Enrico Colombatto
Chapter 6: Judicial System and Property Rights
6 Judicial system and property rights Christian Barrère Introduction Property rights (PRs) constitute a system that deﬁnes relative rights with respect to the utilization of scarce resources, that is to say somebody’s rights in relation to the rights of anybody else. As law is inefﬁcient without law enforcement it cannot work without a judicial system. The judicial system enforces PRs by monopolizing the power of constraint that obliges everyone to accept the PR distribution and its consequences. But the judicial system plays other roles in the application of property rights. In particular, it speciﬁes the conditions of use of property rights when there are different interpretations and when opposite claims are advanced. Hence the judicial system is a system of legitimate interpretation and distribution of the concrete effects of PRs in a social context. The judicial system has two main effects on PRs: efﬁciency and distribution – hence, equity. This applies to the three functions concerning the judicial system: (i) PR enforcement, (ii) PR interpretation and (iii) PR speciﬁcation. First, we shall see that the judicial enforcement of PRs is an efﬁcient way to strengthen the incentives to cooperate and therefore to increase social welfare, especially when competition becomes tighter and when opportunism undermines the substitutes for a judiciary such as ethics or customs. Therefore judicial enforcement is a public and a club good; but as it allows the distribution of effective rights, powers and wealth to be modiﬁed, judicial enforcement does not...
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