Chapter 3: Property Rights, Institutions and Co-ordination Costs
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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