Reference no: EM132415544

Property Rights and Enforcement Costs.

STORY 1: From Demsetz, Toward a Theory of Property Rights "A close relationship existed, both historically and geographically, between the development of private rights in land and the development of the commercial fur trade. Because of the lack of control over hunting by others, it is in no persons interest to invest in increasing or maintaining the stock of game. Overly intensive hunting takes place.

Before the fur trade became established, hunting was carried on primarily for purposes of food and the relatively few furs that were required for the hunters family.

The advent of the fur trade had two immediate consequences. First, the value of furs to the Indians was increased considerably. Second, and as a result, the scale of hunting activity rose sharply."

STORY 2: From Friedman, Law's Order "The date is 10,000 or 11,000 B.C. You are a member of a primitive tribe that farms its land in common. Farming land in common is a pain; you spend almost as much time watching each other and arguing about who is or is not doing his share as you do scratching the ground with pointed sticks and pulling weeds.

It has occurred to several of you that the problem would disappear if you converted the common land to private property. Each person would farm his own land; if your neighbor chose not to work very hard, it would be he and his children, not you and yours, that would go hungry.

There is a problem with this solution. Private property does not enforce itself. Someone has to make sure that the lazy neighbor doesnt solve his food shortage at your expense.

Now you will have to spend your nights making sure they are not working hard harvesting your fields. All things considered, you conclude that communal farming is the least bad solution. Agricultural land continues to be treated as a commons for another thousand years, until somebody makes a radical technological innovation: the domestication of the dog.

Dogs, being territorial animals, can be taught to identify their owners property as their territory and respond appropriately to trespassers."

a) In Story 1 why did the development of commercial fur trade cause an increase in private property rights?

b) In Story 2, why did the domestication of dogs cause an increase in private property rights? c) In what ways are these stories related? How are they different?