Transaction Costs and Property Rights

Property rights concepts and thinking go back to antiquity, but it was only in the 1960s, when the concept of transaction costs was introduced into the analysis of property rights by Ronald Coase, that the modern treatment of property rights got underway. Applications to externalities, common pool problems, variable access, the theory of the firm, rent seeking, economic development and reform, and de facto property rights are sketched. Although property rights concepts and property rights thinking have gone a long way to reshape our understanding of economic institutions and effect public policy reform, the early ambitions of the economics of property rights have been realized incompletely. Here, as elsewhere, there can be too much of a good thing. Examples include unduly sanguine recommendations to jetison regulation, over-reaching interpretations of the modern corporation, and undue reliance on mass and rapid privatization as the way to implement economic reform.