The formation and establishment of Coase's property right theory can be roughly divided into two stages:
The first stage is the critical thinking of orthodox microeconomics in 1930s, pointing out that there is friction in the operation of market mechanism, the main factor leading to this friction is the defect of property right structure, and the fundamental way to overcome this friction lies in defining enterprise property rights.
Masterpiece: The Essence of Enterprise, a famous paper published in The Economist and Journal of London School of Economics from 65438 to 0937.
In the second stage, from the end of 1950s to 1960s, Coase systematically discussed the economic function of property rights, analyzed the role of property rights, and especially investigated the key role of property rights structure in reducing social costs and overcoming market failures such as externalities, thus making the property rights system a necessary condition to ensure the effectiveness of resource allocation.
The representative work of this stage is Social Cost published by Coase in Journal of Law and Economics 1960. The most outstanding achievement at this stage is the thought of Coase theorem. In the real economy, the market economy often has "externalities" and the market mechanism itself has defects. Modern property rights theory holds that externality is caused by the inequality between private cost and social cost, that is, social cost is greater than private cost, which leads to the loss or inefficiency of social welfare. Therefore, in the process of market operation, the definition and rational allocation of property rights occupy an important position.
According to the definition of "New palgrave Dictionary of Economics", "property right is a kind of right to choose a variety of uses of an economic article through social compulsion." Al Chian (1969) defines property rights as people's right to use resources under the condition of scarce resources, or as appropriate rules for people to use resources. Demsetz (1989) thinks that "property right is a social tool. It is meaningful because it makes people form reasonable expectations in communication with others. One of the main functions of property rights is to provide power for greater internalization of external effects. " It can be seen that property rights are related rules that define how people benefit, how they suffer and how they compensate each other in economic activities, and are an organism that combines income rights and control rights. In order to explain the importance of property rights, the concept of "transaction cost" is introduced into modern property rights theory.
Coase first put forward the concept of transaction cost, but did not point out the reason and nature of transaction cost. Williamson further developed Coase's transaction cost theory. Williamson pointed out that "the occurrence, influence and expansion of transaction costs occupy a dominant position in new institutional economics. It is obviously unreasonable to organize economic activities regardless of transaction cost, because any advantage of one organizational form over another will disappear because of contracting activities regardless of cost. The reality that transaction cost has become the topic of economic research center is increasing day by day. " . Transaction cost is the decisive factor of comparing who is superior and who is inferior in economic system. Any kind of system and organizational system will produce transaction costs in its operation process, and the level of transaction costs is a measure of the pros and cons of various systems. The famous Coase theorem holds that as long as the transaction cost is zero and free transactions are allowed, the initial arrangement of property rights has no effect on efficiency. Because the existence of transaction costs is the normal state of real economic life, the essence of Coase theorem is to explain that the existence of transaction costs makes the definition of property rights very important. The core of modern property right theory is to study how to reduce or eliminate the transaction cost in market operation through the definition, change and arrangement of ownership, so as to improve the efficiency of resource allocation. Hirschlai (1984) pointed out: "Coase theorem strongly shows that no matter how property rights are distributed, clarifying property rights can be an important means to improve efficiency."
Modern property right theory holds that the property right system arrangement that can effectively realize the internalization of externalities is an efficient form of property right. Private property right means that the right to control, use and transfer resources and the right to enjoy the benefits are clearly given to a specific person, who can control, use or transfer these resources in any way he thinks fit without any constraints. Public property rights mean that any member has the right to share these rights, thus eliminating the exclusiveness and transferability of property rights. Property right * * * has the phenomenon of "hitchhiking" and the asymmetry of cost and income. In the same subject of property rights, there are many owners and diverse interests, and the negotiation cost of reaching an optimal action is very high. Public property right leads to root externalities, so it is an inefficient form of property right.