Theories of Property Rights: Transaction Cost and Beyond

Abstract

This chapter lays the theoretical foundation of property rights by analyzing the contribution of the philosophical school, the mainstream view, and institutional political economics. In particular, the evolution of property rights reflected in the interpretation of prominent philosophers, including Thomas Hobbes, John Locke, and Jean-Jacques Rousseau, is analyzed. Analysis shows that the mainstream theories, dominated by the transaction cost school, seem to deviate to a great extent from the typical philosophical ideology. The point of their departure and the suitability of the transaction cost school in explaining the prevailing property right structure in developing countries are analyzed in depth. It is argued that the embedded weaknesses of the mainstream view have facilitated the evolution of institutional political economics of property rights. In light of these theories, the chapter finally points out the basic elements that facilitate the evolution of property rights and the determinants that change their distributive aspects.