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Property rights (economics)

Property rights are constructs in economics for determining how a resource or economic good is used and owned,[1] which have developed over ancient and modern history, from Abrahamic law to Article 17 of the Universal Declaration of Human Rights. Resources can be owned by (and hence be the property of) individuals, associations, collectives, or governments.[2]

Property rights can be viewed as an attribute of an economic good. This attribute has three broad components,[3][4][5] and is often referred to as a bundle of rights in the United States:[6]

Property rights can be categorized with excludability and rivalry. Excludability describes the characteristic regarding whether a good can be withheld from certain consumers. In terms of the same good, rivalry describes its accessibility to competing consumers. The combination of excludability and rivalry as parameters is reflected through various types of property rights.

Open-access property is owned by nobody ().[11] It is non-excludable, as excluding people is either impossible or prohibitively costly, and can be rivalrous or non-rivalrous. Open-access property is not managed by anyone, and access to it is not controlled. This is also known as a common property resource, impure public good or a common pool resource.[12] Examples of this can be air, water, sights, and sounds. Tragedy of the commons refers to this title. An example would be unregulated forests as there's limited resources available and therefore rivalrous, but anyone may access these resources. If non-rivalrous, it would be a public good (cannot be rivalrous, no matter how much it is used, for example, the ocean (outside of territorial borders)).[9]

res nullius

Property-rights theory[edit]

Introduction[edit]

Property rights theory is an exploration of how providing stakeholders with ownership of any factors of production or goods, not just land, will increase the efficiency of an economy as the gains from providing the rights exceed the costs.[18] A widely accepted explanation is that well-enforced property rights provide incentives for individuals to participate in economic activities, such as investment, innovation and trade, which lead to a more efficient market.[19] Implicit or explicit property rights can be created through government regulation in the market, either through prescriptive command and control approaches (e.g. limits on input/output/discharge quantities, specified processes/equipment, audits) or by market-based instruments (e.g. taxes, transferable permits or quotas),[17] and more recently through cooperative, self-regulatory, post-regulatory and reflexive law approaches.[20] In economics, depending on the level of transaction costs, various forms of property rights institutions will develop.[15] In economics, an institution is defined thusly: