Property is a bundle of rights (check out Wesley Hohfeld).
Property = right to use + right to forbid use by others.
[My comment: this seems insufficient as it doesn’t distinguish ownership from rent.]
Right to exclude is more fundamental than the rest of the rights in the bundle (all the others are conditional on it for their existence).
Property rule: others need your consent in order to use it.
Liability rule: if others use it without your permission they have to compensate (e.g. eminent domain).
Inalienability rule: can't use/sell at all (illegal to sell your kidney, prostitution, voluntary slavery contracts etc.).
Purpose of rights is to organize social behavior efficiently. Corollary of this: We should have the minimum number of rights that are able to achieve this because beyond that minimum we are inflicting unnecessary constraints.
Contracts = algorithms that grant permissions for the use of property.
A system of property rights is working when it facilitates:
- creative destruction (i.e. experimentation)
- growth of businesses
- limits externalities
- minimizes transaction costs
[Question: Doesn’t the minimization of transaction costs cover all the other conditions?]