Dynamic property rights and the market process
| DOI | https://doi.org/10.1108/JEPP-10-2015-0031 |
| Published date | 07 November 2016 |
| Date | 07 November 2016 |
| Pages | 273-284 |
| Author | Alexander Cartwright |
| Subject Matter | Strategy,Entrepreneurship,Business climate/policy |
Dynamic property rights
and the market process
Alexander Cartwright
Department of Economics, George Mason University, Fairfax, Virginia, USA
Abstract
Purpose –Clearly defined and enforceable property rights are commonly recognized as prerequisites to
economic calculation and the market process. The purpose of this paper is to argue that when entrepreneurs
add or subtract certain rights from the bundle of rights that constitute a property right they face a classic
planner’s dilemma: the need to separate the technologically possible from the economically feasible.
Traditionally, prices provide the signals needed to resolve the planners dilemma, but because prices refer to
the entire bundle of rights that constitutes property, the entrepreneur is unable to immediately identify the
combination of rights that isolates the attribute of a good consumers desire to purchase. Creating new
bundles of property rights results in new prices, which generate new information essential to further
developing economically viable arrangements of property rights; hence, property rights are dynamic.
Design/methodology/approach –The paper develops the theory of dynamic property rights, and
then offers two case studies that illustrate different elements in the theory. One case study applies the
theory to productive entrepreneurship, specifically in the sharing economy. The second case study
applies the theory to protective entrepreneurship via a historical study of land title use in England and
France. The author concludes with policy implications.
Findings –Recognizing that property rights are dynamic has several important implications.
Restrictingthe bundling or de-bundlingof property rights is a form of interventionin the market process
equivalent to price fixing. Similarly, efforts to support property rights protecting institutions need to
account forthe fact that property rights bundlesare not necessarily static but controlover them needs to
be stable and predictable. Finally, a morerobust and accurate conceptualizationof the marking process
and what it means to “economize”on scarce resources does not just include the efficient allocation of
property rights, but also the efficient allocation of the underlyingrights bundles themselves.
Social implications –A dynamic theory of property rights allows the author to understand how
property rights evolve and offer an account of different property rights regimes by highlight the living
connection between productive and protective entrepreneurship.
Originality/value –This paper aims to integrate ideas from market process theory with
entrepreneurship and institutional evolution. The paper extends the ideas in the UCLA property rights
school to illuminate two case studies –one highly relevant to current policy makers, and the other
relevant to development economists.
Keywords Political entrepreneurship, Law and economics, Market process, Dynamic property rights,
Two-tiered entreprene urship
Paper type Research paper
I. Introduction
Why cannot a consumer buy the clock out of an iPhone? Because, iPhones are sold as a
bundle of rights: the rights include ownership of a phone, camera, calendar, clock, etc.
While consumers might not be able to buy the clock out of an iPhone, the y can buy
airline tickets without having to pay a fee for checked luggage. Other than asserting the
obvious: firms select the most profitable bundle of rights to sell their customers, there is
little explanation for why bundles of property rights exist in the forms they do.
Clearly defined and enforceable property rights are commonly recognized as
prerequisites to economic calculation and the market process. Studying economics is
Journal of Entrepreneurship and
Public Policy
Vol. 5 No. 3, 2016
pp. 273-284
©Emerald Group Publis hing Limited
2045-2101
DOI 10.1108/JEPP-10-2015-0031
Received 8 October 2015
Revised15February2016
30 March 2016
30 March 2016
Accepted 31 March 2016
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/2045-2101.htm
JEL Classification —P14, L26, B5
273
Dynamic
property rights
and the market
process
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