The property rights school: Is economic ownership the missing link?

Abstract

With property rights almost completely suppressed in socialist countries, it would come as a surprise had economists not detected this as a source of inferior economic performance (for some estimates, see Bergson 1987; Bajt 1988). However, since the right to express one’s opinion as one of the property rights had been suppressed as well, it would also be a surprise had property rights been discussed openly and explicitly. Yugoslavia appears to have been an exception. During the last forty years a relatively coherent theory of “economic ownership” has been elaborated.’ With the wide-ranging, indirect (for instance, via control of prices and rents) de facto nationalizations (as opposed to the direct constitutional nationalizations of means of production) and, consequently, incomes flowing to persons from many, usually unidentified, goods-factors without any civil law right, this analysis of economic ownership quite naturally started by contrasting property in the economic sense to property in the legaLjuridic (ownership) sense (Bajt 1953). In the legal sense, the owner of a thing-good is the one to whom the law assigns maximum authority over its use, in the sense of including entitlements to all allowed uses and of excluding interference with these by all other persons, provided he acquired it lawfully (through production, exchange, inheritance, gift, occupancy, extent, etc.). In modern times, entitlements governing the right of ownership are defined and protected by civil and criminal law, and their observance enforced by the judicial and/or administrative branch of government. To make this easier, assignment of tangibles, particularly immovables, is usually documented in public books, such as land registers, real estate cadastres, car registers, and similar records, and also by transferable titles, such as shares. In every society the right of ownership embraces the broadest bundle of entitlements (“domain of rights, ” “decision domain”: Alchian 1971: 237, 239); its law system assigns to people-deemed full right individuals-pertaining to the use of things-goods. Following the postglossators (13th and 14th century A.D.), this bundle