Property Rights & Allocations of Resources

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Property Rights & Allocations of Resources

Property Rights & Allocations of Resources

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AbstractIn discussing the significance of property rights in the efficient allocation of resources it is essential to present an overview of what is meant by efficient allocation of resources. Efficient allocation of resources refers to the permutation of outputs, inputs, and distribution of outputs and inputs, in a manner that changes in the economy may make somebody better off only by making somebody else worse off (Demsetz, 2003).

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TOC o “1-3” h z u Abstract PAGEREF _Toc314618801 h 2Introduction PAGEREF _Toc314618802 h 3Significance of Property Rights in the Efficient Allocation of Resources PAGEREF _Toc314618803 h 4Examples from resources markets PAGEREF _Toc314618804 h 4Why Property Rights May Not Be Well-Defined PAGEREF _Toc314618805 h 5How Does the Lack of Property Rights Affect the Demand (MV) and Supply (MC) and the Efficient Allocation of Environmental and Natural Resources PAGEREF _Toc314618806 h 5Conclusion PAGEREF _Toc314618807 h 6References PAGEREF _Toc314618808 h 7

IntroductionEfficiency in regard to property rights is achieved in the event that property rights may be non- attenuated. This means that the property rights are

Transferable.

Completely specified.

Enforceable and enforced.

Exclusive.

Significance of Property Rights in the Efficient Allocation of ResourcesProperty rights essentially enhance resource allocation and investments in a society through limiting expropriation as well as to facilitate market transactions. In reality, economic growth occurs if property rights make it meaningful to embark on socially constructive activities. Consequently, the frailty of property rights is regarded as a crucial impediment to economic development (Yoram, 2008).

Examples from resources marketsIn reality, land is most likely the asset with the most delicately defined property rights amongst excludable and rival assets, particularly in the developing countries. Property rights of assets such as land provide the holder manifold rights. In the complete form, these entail the rights to utilize the land, to exclude other parties from utilizing it, to transfer the land to others, as well as to maintain these rights (Velasquez, 2010). However, in the event of absence of property rights, individuals hold economic rights in regard to land, which includes their ability, to consume directly the services of the land, or to indirectly consume it through exchange.

Why Property Rights May Not Be Well-DefinedIn analyzing natural resource concerns, it is significantly essential to review the form as well as property rights ownership in resources. Governments characteristically exercise immense discretionary powers in this regard. This is because, discretionary powers over access to natural and environmental resources confers power and status to the holder. The factors to consider in this regard include whether the perception is historical, prescriptive, or predictive (Yoram, 2008).

It is essential to distinguish who controls the property rights, the pertinent conditions. Property rights in natural and environmental resources entail control over the resource. The most vital feature of in property right is the capability to prohibit others from utilizing the resource. The right to utilize, but not prohibit others from usage, is an extremely ill-defined or imperfect property right (Daniel, 2009).

How Does the Lack of Property Rights Affect the Demand (MV) and Supply (MC) and the Efficient Allocation of Environmental and Natural ResourcesIf property rights are not properly allocated and defined, it causes consequences that may not have come about if property rights had been properly allocated and defined. These consequences usually have considerable effects on demand and supply, and therefore influence the efficient allocation of resources. Natural resources are predominantly vulnerable to this problem since natural resources were in existence prior to the development of human economies. This creates a scenario whereby, people utilize natural resources prior to the establishment of formal regulations and property rights. Since such a situation is not managed by the policies and laws that usually govern the utilization of resources, the market does not have the capability to allocate the resources efficiently by use of demand and supply mechanisms (Demsetz, 2003).

ConclusionThe development of property rights in natural and environmental resources depend on the significance of the resource as well as its implied productivity. It also depends on the cost of establishment as well as enforcement of more efficient regimes. It is evident that, as a resource, or its output, becomes increasingly valuable; it produces motivation to establish a well-defined property rights regime. On the other hand, even with increasing valuation of a resource, the property rights might not develop towards more efficient regimes if the outlay of instituting a new regime overshadows the benefits.ReferencesDaniel, H. (2009). The S Corporation Financial Adjustment. Handbook of Business Appraisal & Intellectual Property Evaluation. New York, McGraw Hill.

Demsetz, H. (2003). Property Rights Paradigm. Economic History Journal, 23, (1), 7.

Velasquez, M. (2010). Business Ethics Concepts & Cases. Upper Saddle River: Pearson Education.

Yoram, B. (2008). Economic Rights & the Capacity of the State. N. Y: Free Press.

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