The structure of property rights critically affects economic outcomes by influencing the incentives of actors to create new wealth or to dissipate resources. In the economics of institutions, the term property rights refers to an actor's rights, which are recognized and enforced by other members of society, to use and control valuable resources. The control over resources also has an internal component. Various rules, and their enforcement by political organizations and by custom and social norms, provide external control, but usually actors also invest privately in control, depending on how much external enforcement the community provides. Although governments, for instance, outlaw breaking and entering and provide enforcement through the police and the courts, the level of external protection varies across polities, as does the level of trespassing. Owners respond by investing in various amounts of internal enforcement – with locks on doors, burglar alarms, guard dogs, and other measures. However, economies of scale make well-functioning social control, with formal and informal rules, a much more effective arrangement than heavy reliance on private (internal) control, and the economics of institutions pays much attention to the origins and nature of property rights because of their potential significance for economic prosperity and the creation of wealth.

The following essay by Gary Libecap is a case study of the determinants of mineral law in the western United States in the nineteenth century – a study of the evolution of property rights to mineral deposits.