Property Rights and the State

Abstract

Property rights determine the incentives for resource use. Property rights consist of the set of formal and informal rights to use and transfer resources. Property rights range from open access to a fully specified set of private rights. By open access we mean that anyone can use the asset regardless of how their use affects the use of others. A full set of private rights consists of the following: 1) the right to use the asset in any manner that the user wishes, generally with the caveat that such use does not interfere with someone else’s property right; 2) the right to exclude others from the use of the same asset; 3) the right to derive income from the asset; 4) the right to sell the asset; and 5) the right to bequeath the asset to someone of your choice. In between open access and private property rights are a host of commons arrangements. Commons arrangements differ from open access in several respects. Under a commons arrangement only a select group is allowed access to the asset and the use rights of individuals using the asset may be circumscribed. For example, a societal group, e.g., a village, tribe or homeowner’s association, may allow its members to place cattle in a common pasture but limit the number of cattle that any member may put on the commons.