Evolution of Economic Thought
Economics is often defined as the science about production, distribution, and consumption of scarce resources. As trite as this definition may sound, it contains the primary challenge of our world- scarcity. Thus,the modern economist Steve Pejovich concludes that “ a student of economics discovers early that the entire body of the standard theory of production and exchange is built upon the assumption of private property rights and resources”. Property is the problem that makes the existence of economics a necessity, and gives rise to exciting economic concepts such as the concept of property rights. The institution of property dates from centuries ago and it exists to some extent in any society, as long as resources are limited and individuals rational.
As any other economic concept, property rights have been commented by a wide range of economists. Each of them shed new light to the subject, thus turning the evolution of property rights into an interesting journey of economic thought.
Overview of Economic Theories on Property Rights:
In his work “Of Property”, John Locke (1632-1704) is the first one to suggest the idea of the common property- “God…has given the Earth to the Children of Men, given it to the mankind in common”. Still communuality does not have to signify absence of ownership as stated by Valcke in 1989: “That which is common is not ownership”.
Adam Smith (1723-1790) as we all know,develops the concept of the invisible hand and the natural regulation of markets. His major contribution to the evolution of property rights is that he makes the distinction between natural rights, such as the right to have "your body free from injury” and the rights to property, such as to own a home.
The utilitarian Jeremy Bentham(1748-1832) also applies property rights to laws. He criticizes the application of property rights in his book “Theory of legislation” (1795). His view may be summarized in the following way: “Property and law are born together and die together”. Bentham goes to some extremes concerning proprty rights, denying even the natural right of a person to own her body: if torturing her body would bring pleasure to another person, this latter person has the right to do this (explained by Bethamite felicific utilitarianism).
John Stuart Mill ( 1806-1873) also acknolwledges property rights such as the right to the exclusive disposal of what individuals have ”produced by their own exertions”.
Armen Alchian (1914) is rather concerned with the reason for emergence of property rights. Alchian is one of the founders of the "law and economics" school, and especially a promoter of the use of the property rights approach. This approach applies property rights to risk bearing and incentive reasons, and shows the resulting from common ownership inefficiencies. He is particularly interested in the application of property rights in the theory of the firm. He makes also the distinction between property ownership and property control and aaplies to politics. According to him, the political system should favor stability and liberty.
Another contemporary economist, Jonathan Macey(1955), a follower of Locke and professor at Yale Law School, emphasizes the difference between right and power. For Macey, natural law is based on morality: “ A state’s mere exercise of its power to deprive citizens of their property does not mean that these rights do not exist” (Macey ,1994)
We are not aiming to present a thourough analysis of the evolution of the property rights because we do not claim this to be the purpose of the project. We considered this brief overview to be important to the goals of the project, because it shows the attempts of the brilliant minds of philosophers and economists to explain, apply and justify property rights. This struggle of theirs is explained by the permanent and tangible presence of property rights in our life. The interdependence between our understanding of property rights and the economic welfare of the individual and the society is successfully captured by Thomas Malthius (1766-1834)- “ There is indeed a fatal deficiency in one of the greatest sources of prosperity, the perfect security of property”. The lack of this security is what justifies the behavior in the commons of the subjects in our experiments.
