Parisi, Francesco --- "The Origins and Evolution of Property Rights Systems" [2004] ELECD 100; in Colombatto, Enrico (ed), "The Elgar Companion to the Economics of Property Rights" (Edward Elgar Publishing, 2004)

Book Title: The Elgar Companion to the Economics of Property Rights

Editor(s): Colombatto, Enrico

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781840649949

Section: Chapter 3

Section Title: The Origins and Evolution of Property Rights Systems

Author(s): Parisi, Francesco

Number of pages: 21

Extract:

3 The origins and evolution of property rights
systems
Francesco Parisi*


Introduction
The institution of property is nearly as old as recorded history. In spite of its
stability as a fundamental institution of human society, the concept of prop-
erty and the privileges, obligations and restrictions that govern ownership
have undergone substantial changes throughout history. In this chapter, I shall
consider the main stages in the emergence and consolidation of property and
discuss some economic theories on the evolution of legal and social concep-
tions of property.
The history of property is illuminated by economic theory. The concept of
scarcity ­ which some notable authorities believe is at least a necessary
condition for the establishment of enforceable property rights ­ is valuable in
explaining the limited domain of property in early societies and the changing
contours of property protection as a result of changes in the economic struc-
ture of society.1 As pointed out by Demsetz (1967), property rights develop to
internalize externalities in the use of scarce resources. However, there are
costs associated with the establishment of property. While scarcity may be
necessary for giving objects value and prompting the desire to have property
rights, the establishment of such rights also requires that the protection of the
rights be economically efficient from a societal standpoint. That is, the mar-
ginal benefit of protection (internalization) exceeds the marginal cost of
protection. Property rights emerge only when the gains of internalization
become larger than the cost of internalization. The study of the ...