Property rights and economic development

The phrase “property right” refers to the owner’s legal entitlement to use an asset for personal consumption or the production of income. It is also possible to include the right to give it to another party through a sale, gift or inheritance. Classical economists such as Smith and Marx accorded property rights a central position in economic development. However, it has only been relatively recently that mainstream economics has come to the view that property rights play an important role in this process. The fundamental findings of economics with regard to the function of competitive markets are predicated on the assumption that property rights are both well-defined and easily and effectively enforced. The literature on economic growth has generally centred its attention on savings and the accumulation of wealth in a society devoid of institutions and characterised by flawless property rights. Property rights are essential to prosperity. Economists and politicians understand the importance of well-defined property rights. A private property system offers people exclusive use of their resources.