Paper #1308

Title:

Property as an economic concept: Reconciling legal and economic conceptions of property rights in a Coasean framework

Author:

Benito Arruñada

Date:

March 2012

Abstract:

Adopting a simplistic view of Coase (1960), most economic analyses of property rights disregard both the key advantage that legal property rights (that is, in rem rights) provide to rightholders in terms of enhanced enforcement, and the difficulties they pose to acquirers in terms of information asymmetry about legal title. Consequently, these analyses tend to overstate the role of "private ordering" and disregard the two key elements of property law: first, the essential conflict between property (that is, in rem) enforcement and transaction costs; and, second, the institutional solutions created to overcome it, mainly contractual registries capable of making truly impersonal (that is, asset-based) trade viable when previous relevant transactions on the same assets are not verifiable by judges. This paper fills this gap by reinterpreting both elements within the Coasean framework and thus redrawing the institutional foundations of both property and corporate contracting.

Keywords:

property rights, enforcement, transaction costs, registries.

JEL codes:

D23, K11, K12, L85, G38, H41, O17, P48.

Area of Research:

Business Economics and Industrial Organization

Published in:

International Review of Economics, Vol. 59(2), 121-144, 2012

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