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The Creation of Effective Property Rights

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  • Herschel I. Grossman
Abstract
Traditionally, general-equilibrium models have taken effective property rights to be given and have been concerned only with analysing the allocation of resources among productive uses and the distribution of the resulting product. But, this formulation of the economic problem is incomplete because it neglects that the appropriative activities by which people create the effective property rights that inform allocation and distribution are themselves an alternative use of scarce resources.This paper develops two canonical general-equilibrium models of resource allocation and income distribution that allow for the allocation of time and effort to the creation of effective property rights to valuable resources. In one model the valuable resources are initially in a common pool. In the other model agents initially have nonoverlapping claims to the valuable resources. For both models the analysis reveals how the amount of time and effort that agents allocate to the creation of effective property rights, rather than to production,depends on the environment for creating effective property rights, on the technology of production, and on the scale of the economy. The paper also analyses the security of initial claims to valuable resources and speculates about why initial claims sometimes are perfectly secure.

Suggested Citation

  • Herschel I. Grossman, 2000. "The Creation of Effective Property Rights," NBER Working Papers 7897, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:7897
    Note: EFG
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    References listed on IDEAS

    as
    1. Bush, Winston C. & Mayer, Lawrence S., 1974. "Some implications of anarchy for the distribution of property," Journal of Economic Theory, Elsevier, vol. 8(4), pages 401-412, August.
    2. Dani Rodrik, 2006. "Institutions for High-Quality Growth: What They Are and How to Acquire Them," Chapters, in: Kartik Roy & Jörn Sideras (ed.), Institutions, Globalisation and Empowerment, chapter 2, Edward Elgar Publishing.
    3. Muthoo, Abhinay, 2000. "On the foundations of basic property rights, Part I: A model of the state-of-nature with two players," Economics Discussion Papers 9986, University of Essex, Department of Economics.
    4. Alston, Lee J & Libecap, Gary D & Schneider, Robert, 1996. "The Determinants and Impact of Property Rights: Land Titles on the Brazilian Frontier," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 12(1), pages 25-61, April.
    5. Herschel I. Grossman & Minseong Kim & Juan Mendoza, 2000. "Decisiveness and the Viability of the State," Working Papers 2000-02, Brown University, Department of Economics.
    6. repec:bla:econom:v:65:y:1998:i:260:p:461-77 is not listed on IDEAS
    7. Grossman, Herschel I & Kim, Minseong, 1995. "Swords or Plowshares? A Theory of the Security of Claims to Property," Journal of Political Economy, University of Chicago Press, vol. 103(6), pages 1275-1288, December.
    8. Hirshleifer, Jack, 1995. "Anarchy and Its Breakdown," Journal of Political Economy, University of Chicago Press, vol. 103(1), pages 26-52, February.
    9. Herschel I. Grossman & Juan Mendoza, 1999. "Scarcity and Conflict," Working Papers 99-24, Brown University, Department of Economics.
    10. Grossman, Herschel I., 1995. "Insurrections," Handbook of Defense Economics, in: Keith Hartley & Todd Sandler (ed.), Handbook of Defense Economics, edition 1, volume 1, chapter 8, pages 191-212, Elsevier.
    11. Grossman, Herschel I., 2002. ""Make us a king": anarchy, predation, and the state," European Journal of Political Economy, Elsevier, vol. 18(1), pages 31-46, March.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions

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