Property rights (economics)

A property right is the exclusive authority to determine how a resource is used, whether that resource is owned by government or by individuals. All economic goods have a property rights attribute. This attribute has four broad components:

· the right to use the good; the right to earn income from the good; the right to transfer the good to others; the right to enforcement of property rights.

The concept of property rights as used by economists and legal scholars (see property rights) are related but distinct. The distinction is largely seen in the economists' focus on the ability of an individual or collective to control the use of the good. For example, a thief who has stolen a good would not be considered to have legal (de jure) property right to the good, but would be considered to have economic (de facto) property right to the good.

Property rights to a good must be defined, their use must be monitored, and possession of rights must be enforced. The costs of defining, monitoring, and enforcing property rights are termed transaction costs.[3][4] Depending on the level of transaction costs, various forms of property rights institutions will develop. Each institutional form can be described by the distribution of rights. The following list is ordered from no property rights defined to all property rights being held by individuals[5]

1. Open access (res nullius)

2. State property

3. Common property

4. Private property

Open-access property is property that is not owned by anyone. It is non-excludable (no one can exclude anyone else from using it) and non-rival (one person's use of it does not prevent others from simultaneously using it). Open-access property is not managed by anyone, and access to it is not controlled. There is no constraint on anyone using open-access property (excluding people is either impossible or prohibitively costly). The tragedy of the commons should be called the tragedy of open access. 'Open-access property may exist because ownership has never been established, because the state has legislated it, or because no effective controls are in place, or feasible, ie, the cost of exclusion outweighs the benefits. The state can sometimes effectively convert open access property into private, common or public property by legislating to define rights and enforce them'.[6] Examples of open-access property are the atmosphere or ocean fisheries.

State property (also known as public property) is property that is owned by all, but its access and use is controlled by the state. An example is a national park.[6]

Common property or collective property is property that is owned by a group of individuals. Access, use, and exclusion are controlled by the joint owners. True commons can break down, but, unlike open-access property, common property owners have greater ability to manage conflicts through shared benefits and enforcement.[6]

Private property is both excludable and rival. Private property access, use, exclusion and management are controlled by the private owner or a group of legal owners.

С помощью теоремы Коуза были сделаны важные теоритические и практические выводы. Во-первых, она позволила полнее раскрыть экономический смысл прав собственности. Согласно Коузу, внешние эффекты возникают только тогда, когда права собственности недоопределены. Когда они четко специфицированы, все экстерналии «интернализуются» (внешние издержки становятся внутренними). Отсюда следовало, что путь к преодолению внешних эффектов лежит через создание прав собственности на них. Во-вторых, теорема Коуза выявила ключевое значение трансакционных издержек. Когда они высоки, распределение прав собственности перестает быть нейтральным фактором и начинает влиять на эффективность и структуру производства. В-третьих, она продемонстрировала, что ссылки на внешние эффекты – недостаточное основание для государственного вмешательства. В случае низких трансакционных издержек такое вмешательство излишне, в случае высоких далеко не всегда оправдано: поскольку действия государства также не обходятся без издержек

10. Transaction costs: the origin, nature, classification, measurement problems.

In economics and related disciplines, a transaction cost is a cost incurred in making an economic exchange (restated: the cost of participating in a market). For example, most people, when buying or selling a stock, must pay a commission to their broker; that commission is a transaction cost of doing the stock deal. Or consider buying a banana from a store; to purchase the banana, your costs will be not only the price of the banana itself, but also the energy and effort it requires to find out which of the various banana products you prefer, where to get them and at what price, the cost of traveling from your house to the store and back, the time waiting in line, and the effort of the paying itself; the costs above and beyond the cost of the banana are the transaction costs. When rationally evaluating a potential transaction, it is important to consider transaction costs that might prove significant.

A number of kinds of transaction cost have come to be known by particular names:

* Search and information costs are costs such as those incurred in determining that the required good is available on the market, which has the lowest price, etc.

* Bargaining costs are the costs required to come to an acceptable agreement with the other party to the transaction, drawing up an appropriate contract and so on. In game theory this is analyzed for instance in the game of chicken. On asset markets and in market microstructure, the transaction cost is some function of the distance between the bid and ask.

* Policing and enforcement costs are the costs of making sure the other party sticks to the terms of the contract, and taking appropriate action (often through the legal system) if this turns out not to be the case.

In financial economics, transaction costs are generally understood as the cost of investing in financial markets, including brokerage fees and ask-bid spreads

The idea that transactions form the basis of an economic thinking was introduced by the institutional economist John R.Commons (1931).

Institutions and market as a possible form of organization to coordinate economic transactions. When the external transaction costs are higher than the internal transaction costs, the company will grow. If the internal transaction costs are higher than the external transaction costs the company will be downsized by outsourcing, for example.

Why Difficult to measuer: Managerial perceptions matter, and transactions costs cannot be quantified or measured separately from these perceptions. Managers undertake a conscious (not random) selection from among arrays of potential transaction costs, and among the most important transaction costs are those which are avoided by this process. From the observer's point of view, transaction costs are thus difficult to measure in any objective fashion.

Measurement problems are clearly just a manifestation of bounded rationality, without which transaction costs cannot exist. So suggestion that local managers have better knowledge of local conditions may prevent a shadow price system operating effectively.

For example, transaction costs for institutional investors (mutual funds & pension funds) are the following: TC(transaction costs)=commissions + fees + taxes + execution costs + opportunity costs, where Execution costs=market impact costs + market timing costs. Market impact costs represents the cost resulting from the bid-ask spread; market timing costs represents the cost resulting from the adverse price movement during the transaction which cannot be attributed to the particular transaction. Therefore, the problem with measuring transaction costs is that they depend on the supply and demand conditions at the margin which is not always observable and predictable. The availability of high quality data has increased, thus the measurement of the true cost of transaction is improving.