Theories of property and economic development

According to economic theory, the clear definition of property rights is essential for well-functioning markets. Comparatively little attention, however, is given to explaining the development of these rights. Economic reasoning suggests that markets themselves call property rights into existence: Persons contract to set up institutions enforcing stable, definite entitlements to scarce resources in order to facilitate investment, production, and exchange. Thus, contracts constituting property rights and institutions precede those contracts dealing with existing property rights; both can be conceived as market transactions made in pursuit of gains. As McCloskey observes, in order to understand the emergence and function of property rights, econonlics "enlists the theory of self-interest to define the very object of self-interested desire. An historical approach to the development of property rights may suggest further explanation adding to the economist's parsimonious theory. Economic institutions and activities need not be subsumed within purely econoinistic interpretations; they are also susceptible to legal and historical analysis. Much can be learned from studying the ideas, institutions, and laws of property during England's pioneering industrialization in the eighteenth and nineteenth centuries-the period known as the Industrial Revolution. This essay in the history of ideas describes the origins of the modern economic theory of property. The theory traces back to nineteenth- and twentieth-century historical and social-scientific models of the Industrial Revolution. The sources of property theory in the world of the classical economists are now forgotten, and this lapse of ineinory has blunted the critical self-consciousness necessary for the theory to be effective and fruitful. The solution lies in a restoration of historical self-consciousness and an openness to alternative disciplinary approaches.