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Questions On Property Rights And Income Rights

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In this paper I will be summarizing three economic papers related to property rights and taxes, they are: “The Exchange and Enforcement of Property Rights” and “Some Aspects of Property Rights” by Harold Demsetz, and “External Diseconomies, Corrective Taxes, and Market Structure” by James M. Buchanan.
In order to have an ideal system of property rights, all rights must be completely assigned to individuals; the assigned individual can have an exclusive right to use their resources; all property can be freely transferred between owners, and all properties must be protected from involuntary seizure. “The fundamental purpose of property rights, and their fundamental accomplishment, is that they eliminate destructive competition for control …show more content…

Summarize
“The Exchange and Enforcement of Property Rights” by Harold Demsetz
This paper mainly talked about two important problems regarding the efficiency of welfare economics: “zero pricing of scarce goods need not result in inefficiency, and zero pricing of public goods may result in inefficiency” (page 2/17). Looking at these two problems, Demsetz assumes that individuals do not make errors in calculations, that means, people knows exactly their own preferences and maximizes their utilities based on the correct calculations. He also assumes that there will be no monopoly problems by either a firm or the government, but the imperfect information problems are treated.
When considering efficiency for produced goods, there is an optimal theorem that requires all marginal rates of substitution to be equal. Some says even perfectly competitive markets fail to achieve efficiency, the production of some goods may have side effects that are not exchanged over the market, and markets do not take into consideration of those side effects, which can lead to inefficiency of over or under producing of a good than society desires. This reasoning fails to take account of the fact that the provision of side effects is a valuable and costly service, so that a market of this service might not even exist. If this service is not being produced, it is the inequalities of some produced goods among marginal rates of substitution that may be consistence with efficiency.

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