Property Rights Economics is the study of theories related to the utilization of goods and services (Encarta Dictionary). In layman terms, economics is how supply and demand controls the reallocation of resources. With the utilization of theses good and services there has to be a system in place to monitor the process. The exchange of goods and services are conducted through the exchange of property rights. Property rights are “the exclusive authority to determine how a resource is used” (Alchian, n. d. ). These types of exchanges are primarily found and used in capitalist society; where economic freedom is more prevalent.
Economic freedom is the “right of individuals and organizations to pursue their own interests through voluntary exchange of goods and services under the rule of law” (Scott, 2009). Armen Alchian and Paul Rubin authored articles located in the Concise Encyclopedia of Economics; that explore the importance of property rights and the interdependence of property rights and the law. Alchian establishes that to have an efficient or prosperous capital economic system, a “strong property rights system” must be in place. In a capitalist society it is commonly understood that supply and demand, determines the value of a property right.
The more sacred a resource, the more valuable it becomes. Also, by having an efficient property rights system the likelihood of decimating a resource is greatly reduced. When you have common ownership rights there are no rules to regulate the use of certain resources. The opponents of Alchian’s position feel that human rights are often usurped by property rights; that the use of certain resources are to the detriment of the greater good. However, a resource is only as valuable as the demand for its usage. Rubin’s article discusses the importance of having an efficient property rights system.
An efficient system limits the overuse a resource and this translates into a win-win situation (Livingstone, 2007, p. 7). Rubin’s article also sets the foundation for defining the efficiency of the property rights system. He states, “a legal situation is deemed, to be efficient if a right is given to the party who would be willing to pay the most for it” (Rubin, n. d. ) This correlates to Livingstone’s position that an efficient property rights system is good for all parties involved. Rubin’s article furthermore examined the importance of the law and how it supports property rights.
The example for not having a rule of law to support a property rights system can be found in many third world countries and in the economic fallout following the fall of the former Soviet Union. The three main elements of the law that support property rights are property law, this defines property rights; contract law, controls the transfer of property; and tort and criminal law, provides protection of property rights (Rubin, n. d. ). Economic freedom is ever-present in the efficient property rights system of industrialized nations.
This freedom has allowed the United States to become one of the most prosperous countries in the world. This success was achieved with the support of the countries’ legal system that supports the property rights system. Despite the detractor’s position that property rights may supersede human rights, without the ability to generate wealth, there wouldn’t be sufficient resources to support the human rights cause. Bibliography Alchian, A. A. (n. d. ). Property rights. Retrieved from The Concise Encyclopedia of Economics website. http://www. econlib.org/library/Enc/PropertyRights. html. Encarta Dictionary (n. d. )
Retrieved from http://encarta. msn. com/encnet/features/dictionary/dictionaryhome. aspx. Livingstone, L. (2007) Economics made easy. Freeload Press. Retrieved from http://www. textbookmedia. com/. Rubin, P. H. (n. d. ). Law and economics. Retrieved from The Concise Encyclopedia of Economics website. http://www. econlib. org/library/Enc/LawandEconomics. html. Scott, D. L. (2009) The American heritage dictionary of business terms. Houghton Mifflin Harcourt Publishing Company.