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Alchian and Demsetz: Property Right Paradigm

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Alchian and Demsetz. 1973. Property Right Paradigm. Journal of Economic History 33 (March): 16-27

In Brief: The Structure of Rights

We don't own something, we own socially-structured rights to use something in certain ways. Thus, if you "own" land, you own the right to till it, mine it, sell these rights, but not the right to throw the soil at people.

Thus, the strength of your "ownership" is merely the probability that what you want done with the land will actually be done.

This gives rise to two questions: what rights exist in a society? Who owns things (states, private citizens, communities)? The structure of rights has social consequences. For example, does ownership allow exclusion?

  • Community goods don't. Hence...traffic jams, pollution, etc.
  • Private goods do. Hence, toll roads, private property rights

Development of property rights structures

Under a communal system, people will try to convert communal goods into private goods (e.g. by hunting beavers from communal land--the captured beaver becomes "theirs"). Private rights can be good b/c they lead people to consider social costs. As value of a communal good rises, it is more likely to be converted to a private good--e.g. the advent of the fur trade among NW Indians