Law, Endowments And Property Rights

"The security of property rights, however, is not a natural occurrence; rather, it is anoutcome of policy choices and social institutions. Any government strong enough to define andenforce property rights is also strong enough to abrogate those rights (North and Weingast,1989). Thus, protection of property rights requires finding a balance between: 1) an activegovernment that enforces property rights, facilitates private contracting, and applies the lawfairly to all, and 2) a government sufficiently constrained that it cannot engage in coercion andexpropriation. This paper describes two views of what leads a society to greater or lesser protection ofproperty rights. The law view stresses that differences in legal traditions formed centuries ago inEurope and spread via conquest, colonization and imitation around the world continue to accountfor cross-country differences in property rights. The endowment view argues that differences innatural resources, climate, the indigenous population, and the disease environment affected theconstruction of institutions and these self-sustaining institutions continue to shape property rightstoday. These views are not mutually exclusive, nor do they exhaust the possible explanations ofcross-country differences in property rights."

Levin sums up his investigation this way:

"Property rights affect individual liberty and national prosperity. While scholars have hypothesized about the sources of variation in property rights for over 2500 years, researchers have begun to test theories empirically only recently. Researchers have made enormous strides in empirically assessing different theories of the determinants of property rights, but these investigations are in their nascent stages. The law and endowment views offer compelling theories of how legal heritage and natural selection endowments shape property rights today. I see no reason to neglect either explanation but believe that considerably more work is needed in each."

[Editor's note: The link below is to a 150KB PDF document.]