Property Rights- Application in Modern Economics: Difference between revisions
No edit summary |
No edit summary |
||
| Line 4: | Line 4: | ||
'''Privatization''' is the process of transferring public rights into public rights. It is considered to be a possible solution of the Tragedy of the Commons because it simply puts an end to the existence of the commons. Once all costs internalized, the individuals take care of their own property in the best possible way, assuming all individuals have self- regarding preferences. Privatization does not always lead to a Pareto efficient outcome, though. The free competitive market is not always achieved, and even when it is attained, it is not always the most efficient decision ( consider the case of natural monopoly). For further application, please refer to the Games of the Common and Private Bunnies. [[http://www.theihs.org/media/flash/commonsgame.php]] | '''Privatization''' is the process of transferring public rights into public rights. It is considered to be a possible solution of the Tragedy of the Commons because it simply puts an end to the existence of the commons. Once all costs internalized, the individuals take care of their own property in the best possible way, assuming all individuals have self- regarding preferences. Privatization does not always lead to a Pareto efficient outcome, though. The free competitive market is not always achieved, and even when it is attained, it is not always the most efficient decision ( consider the case of natural monopoly). For further application, please refer to the Games of the Common and Private Bunnies. [[http://www.theihs.org/media/flash/commonsgame.php]] | ||
'''Economic rent''' is a kind of profit that non-optimal output brings about. It should be distinguished from economic profit that is simple the total revenue minus the total cost because economic rent takes into account any opportunity cost, such as external social cost, created by the misuse of resources. | |||
Revision as of 22:47, 27 April 2006
Modern property rights regard possession as a right of legal individuals, corporations, or governments. Exceptions to the model of individual ownership include the public domain, to which there exists free access, and the commons, which belong to a given community.
Let's observe some intersting applications of the concept of modern property rights in the modern market:
Privatization is the process of transferring public rights into public rights. It is considered to be a possible solution of the Tragedy of the Commons because it simply puts an end to the existence of the commons. Once all costs internalized, the individuals take care of their own property in the best possible way, assuming all individuals have self- regarding preferences. Privatization does not always lead to a Pareto efficient outcome, though. The free competitive market is not always achieved, and even when it is attained, it is not always the most efficient decision ( consider the case of natural monopoly). For further application, please refer to the Games of the Common and Private Bunnies. [[1]]
Economic rent is a kind of profit that non-optimal output brings about. It should be distinguished from economic profit that is simple the total revenue minus the total cost because economic rent takes into account any opportunity cost, such as external social cost, created by the misuse of resources.
