Der Apriorist - Abstracts 22. Dec. 2010

The A Priori Foundations of Property Economics

by Jörg Guido Hülsmann

Tags: Coase, property, appropriation, argumentation ethic, transaction costs, consent, aprioristic analysis
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Jörg Guido Hülsmann. The A Priori Foundations of Property Economics. The Quarterly Journal of Austrian Economics 7.4 (2004): 41–68.

Introduction: Court decisions and legislation have a profound impact on the econ- omy because they define and modify property rights. Economists have therefore always been interested in analyzing this impact. In the past 70 years or so, the dominant way of doing this was to construct equilib- rium models of the economy before and after a modification of property rights and to compare these models. Starting in the early 1960s, then, Ronald Coase and his followers have added another dimension to the study of the relationship between law and economics, trying to show that a comparative analysis of government interventionism has something to say about how the positive law, especially judge-made law, should define property rights. Both approaches—the positive and the normative—are at the forefront of “Law and Economics,” today an important field within economic science.

In the present work, we will deliver a critique of Coase’s approach and then outline an alternative approach to the study of law and economics. Although this alternative approach has a venerable tradition in economic science, it lacks a generally recognized name. We will call it “property economics.”

Property economics is not a tool for the normative definition of property rights, and it does not rely on equilibrium modeling to analyze the impact of the positive law on the workings of a market economy. Rather, it is a compara- tive analysis of two mutually excluding types of appropriation. It compares the effects that when appropriation takes place with the consent of the present owner to the effects that result if appropriation takes place without the present owner’s consent. These relative effects are constant in time and space. They are thus a special class of economic laws, namely, counterfactual laws of appropriation.1 We will argue that the study of such laws allows us to evaluate the impact of the law on the economy without any additional hypotheses concerning equilibrium states. The implication is that policy analysis can be realistic; it does not have to rely on fictional equilibrium models of the economy. Again, we do not claim that this approach is new; rather, the purpose of the following pages is to clarify the logical character of a type of analysis that has a venerable tradition in our science.

Our paper is organized into three parts. In the first part, we will deliver a critique of the basic concepts of Coasian economics. The discussion of these familiar grounds will serve us as an introduction to the subsequent outline of our realist approach. The second part deals with the foundations of property economics, in particular, with property, appropriation, and with the justifi- cation of property and appropriation through speech acts. In the third part, then, we will argue that property economics stresses counterfactual laws of appropriation and that these laws are at the heart of realistic policy analy- sis.

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