Comments on: What’s in a Name? Property Rights, Legal Rights, and Economic Rights

By: Gary Shiu

Gary Shiu — Thu, 14 Sep 2006 01:00:52 +0000

I am always puzzled by why we need opportunism when we have individuals pursuing their self-interests as a postulate.

By: Gary Shiu

Gary Shiu — Tue, 12 Sep 2006 05:17:52 +0000

I would also add that Cheung made significant contribution on the notion of rent dissipation…His idea is that under the postulate of constrained maximization, any dissipation of rent has to be a constrained minimum otherwise it would violate that postulate….This has of course has significant implication on the rent-seeking literature…If my memory served me right, Barzel in his “Economics of Property Rights” does argue that he does not think the notion of rent-seeking very informative..

By: Gary Shiu

Gary Shiu — Tue, 12 Sep 2006 01:36:06 +0000

Indeed Barzel’s emphasis on product attribute does come from Cheung when they were colleagues at UW back in the 1970s…Barzel admitted as much in his introductory essay in his 1995 collected works published in 1995 by EE.

Product attributes play an important role in the Washingtonian approach to TCE as they are the source of the measurement problem. They drive behavior, both sellers and buyers, in the direction of measurement costs minimization…

About two years ago, Cheung has completed a three volume set on his approach to economics…too bad that the set is only available in Chinese…

The importance of using the choosing the attribute for pricing, the importance of contract, and the reinterpretation of traditional cost analysis to turn it into a forward-looking concept all get discussed in the set.

Also important, but few people tend to stress (and I think extremely important for ANY work of internal organization) is Cheung’s concept of pricing by proxy (like monthly wage is a way of pricing labor contribution which invokes a proxy) first espoused in 1983 piece on the contractual nature of the firm and get further development in his three volume set.

By: Nicolai Foss

Nicolai Foss — Mon, 11 Sep 2006 09:21:28 +0000

You are absolutely right! I forgot that C. was Alchian’s student. You are also right that he goes much beyond Alchian. Barzel greatly admires Cheung’s intellectual innovations, and I suspect that Barzel’s emphasis on the attributes of assets, rather than assets themselves, may come from Cheung.

By: Gary Shiu

Gary Shiu — Mon, 11 Sep 2006 09:09:44 +0000

It is no surprise that Cheung is close to Alchian in their approach to property rights because he was Alchain’ student…

I will suggest two observations that separate Cheung from his teacher though;

1) Cheung’s stress of product attributes and their measurements does not recieve the same emphasis in Alchain’s work…

2) Alchain does not operationalize the notion of property rights/transaction costs economics the way Cheung does, especially in his 1974 piece (his emphasis on specifying constraints for instance)

So while there is no denying the importance of Alchain’s contribution to the field, Cheung definitely is not simply reinterating his master’s thesis….

By: Nicolai Foss

Nicolai Foss — Mon, 11 Sep 2006 06:37:23 +0000

Gary, I couldn’t agree more: there is definitely a distinct Washington approach to prop rights theory. I also strongly agree that it is different from Hart’s. Kirsten Foss and I developed this point in the paper I cite above. ! I an am admirer of Cheung and should have mentioned him. But I wonder whether his definition is really different from the earlier writers? Cheung seems very close to Alchian intellectually.

By: Gary Shiu

Gary Shiu — Mon, 11 Sep 2006 01:34:44 +0000

How about using the definition of economic rights found in Steve N.S. Cheung’s article “A Theory of Price Theory” in Journal of Law and Economics back in 1974.

Nicholas, Steven Cheung was a colleague of Barzel back in the early 1970s and early 1980s before Steve moved back to HK.

Not only is the branch of property rights approach to economics advocated by Cheung and Barzel quite different from the one offered by Hart and his colleagues, actually the type of transaction costs economics contained in their analysis is quite different from that one offered by O E Williamson and his colleagues…

Steve has repeatedly attacked the notion of opportunism arguing that it is double counting (since one has already assumed individuals are after they self-interests)…his emphasis on measurement of the different attributes of goods and services….

So in my opinion there exists a Washingtonian Approach to Transaction Costs Economics quire distinct from the Williamsonian approach….Starting with Steve, Barzel and Barzel’s students (like Doug Allen and Dean Leuck)

By: Jung-Chin Shen

Jung-Chin Shen — Sat, 09 Sep 2006 18:27:11 +0000

Nicolai, Perhaps you are right. Your reply also reminds me that Demsetz once uses “one-person firm” to illustrate his definition of the firm. Perhaps the use of these extreme examples is just to highlight certain aspect of a complex phenomenon.

By: Nicolai Foss

Nicolai Foss — Sat, 09 Sep 2006 18:03:32 +0000

Jung-Chin, You may have misunderstood me here: It is calling Crusoe’s ability a right that is farfetched. E.g., Demsetz insists that property rights relate to social relations (i.e., relations to other humans and not “birds and other animals”). For this reason, it seems strange to apply the notion of right to Crusoe.

By: Jung-Chin Shen

Jung-Chin Shen — Sat, 09 Sep 2006 17:52:24 +0000

I do not have any particular opinion on the name of rose but one minor point: I do not think that talking Crusoe’s ability to consume the vegetables he grows is far-fetched. He must spend resources and efforts to protect his vegetables from birds or other animals. This is how the old property rights school links the unconventional Coasian approach to the traditional economic choice model, so scholars can use the more traditional tools to deal with the property rights issues.