Introduction to Property Theory

Abstract

A theory of property needs to give an account of the whole life-cycle of a property right: how it is initiated, transferred, and terminated. Economics has focused on the transfers in the market and has almost completely neglected the question of the initiation and termination of property in normal production and consumption (not in some original state or in the transition from common to private property). The institutional mechanism for the normal initiation and termination of property is an invisible-hand function of the market, the market mechanism of appropriation. Does this mechanism satisfy an appropriate normative principle? The normative principle of assigning or imputing legal responsibility according to de facto responsibility is developed on individualist-subjectivist principles in what is essentially a modern explication of the Lockean theory. Then the fundamental theorem of the property mechanism is proven which shows that if Hume's conditions (no transfers without consent and all contracts fulfilled) are satisfied, then the market automatically satisfies the Lockean responsibility principle, i.e., Hume implies Locke. As a major application, the results in their contrapositive form, Not Locke implies Not Hume, are applied to a market economy based on the employment contract. It is shown the production based on the employment contract violates the Lockean principle (all who work in an enterprise are de facto responsible for the positive and negative results) and thus Hume's conditions must also be violated in the marketplace (in spite of the labor contract, de facto responsible human action cannot be transferred from one person to another as is readily recognized when an employer and employee together commit a crime).

Keywords: Property rights, responsibility, appropriation

JEL Classification: D63, J54, K11