Coase and Demsetz: The Limits of Economic Property Rights

Abstract

I examine the timing of the "institutional revolution" in the last half of the 20th century and focus on the property rights developments outlined in the literature. Despite the opportunities described by Coase, Demsetz, and others for well defined economic property rights and markets, subsequent adoption in practice and policy has been abbreviated. I outline the key arguments and then confront them with evidence. I argue that both the economics criticized by Coase/Demsetz and others as well as their arguments took a very naive view of political actors and lobbyists. These parties had little to gain by advances in economic property rights and markets, and could achieve their objectives, often presented as public goods, via government actions, while imposing general costs on others. These action are not pareto optimal, but they are characteristic of many government policies, particularly environmental, in contast to Coase. The paper is part of a volume on Economic Property Rights at Cambridge University Press and a series edited by Mary Shirley, Alexandra Benham, and Lee Benham.