Question

Define the term "property rights" and explain why the lack of well-defined and enforceable property rights is detrimental to the smooth functioning of a market system.

Answer 1

PROPERTY RIGHTS

In economics the property rights defines the ownership of the resources available in the economy and who is the eligible person who make the use of such property or resources. For a smooth running of the economic system, the idea of the property of rights is very significant. It is because of the reason that the property rights actually denotes the four main concepts; the right of ownership of that particular commodity, and who is the person who can earn the income from that; and the Transfer or convey of that particular commodity and last the enforcement of the property  rights. These above mentioned are the important factors which gives a clear idea of the property rights.

Generally the property own by the private individuals or a group of individuals or the property own by the government. In an economic transaction the property rights are very important in order to attain a transparency in the economic transaction. Hence for the smooth and self-assured economic progress and development it is very important to explain the property rights in an economy in the nation.

LACK OF PROPERTY RIGHTS

When the property rights lack in an economy, the economic transactions in an economy will be negatively affected. The opportunism will be observed throughout the economy there will be no protection for the economic resources in the nation. Anyone can steal or hijack the economic resources as the boundary is not mentioned and detailed anywhere. Many of the resources and the property are scarce{ or exiguous which means very limited in nature}, hence the proper management and conservation of this resources are very important. And the property rights play a crucial role in the management of this resources.

And when there is no limit in the use of this resources this will lead to the over use of this resources and they will be exhausted within no time. The transaction and usage of this resources will be complex and it will definitely affect the economic progress and development. And when there the property rights completely lack then government will forcedly arbitrate the rights and it breaks the free market system. And the government decides who will benefit and who doesn't benefit.