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The Property Right Paradigm

  • Armen A. Alchian (a1) and Harold Demsetz (a1)

Economics textbooks invariably describe the important economic choices that all societies must make by the following three questions: What goods are to be produced? How are these goods to be produced? Who is to get what is produced? This way of stating social choice problems is misleading. Economic organizations necessarily do resolve these issues in one fashion or another, but even the most centralized societies do not and cannot specify the answer to these questions in advance and in detail. It is more useful and nearer to the truth to view a social system as relying on techniques, rules, or customs to resolve conflicts that arise in the use of scarce resources rather than imagining that societies specify the particular uses to which resources will be put.

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Grateful acknowledgement for aid is made to the E. Lilly Endowment Inc. grant to the Economics Department, U.C.L.A. for research on behavioral effects of different property rights.

1 Alternatively, of course, the communal right can be converted to a state right in which the state seeks to exclude, perhaps by adopting a price mechanism, the issue raised by state vs. private ownership as not so much one of what can be done but one of what will be done by state owners.

2 North, D. and Thomas, R., “The Rise and Fall of the Manorial System: A Theoretical Model,” Journal of Economic History, XXXI (December 1971), pp. 777803.

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The Journal of Economic History
  • ISSN: 0022-0507
  • EISSN: 1471-6372
  • URL: /core/journals/journal-of-economic-history
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