Property rights

Question 1

What were Arrow and Debreu’s ideologies?

Answer 1

For General Equilibrium (GE) to be Pareto Efficient, we need a complete set of markets (allowing for optimal allocation of resources)

A complete set of markets requires a complete set of property rights

Question 2

Property rights?

Answer 2

Rights that individuals hold over assets that grant exclusive control to the owner of the property

Question 3

What are property rights used for?

Answer 3

Indirect method to deal with externalities > internalises external costs, e.g. well-defined property rights over natural resources, e.g. water, can allow owners to seek legal action for damages to the other party

Question 4

What is the Coase Theorem?

Answer 4

Private bargaining between parties leads to an efficient allocation of resources given property rights are well-defined, no transaction costs, all parties are rational and have complete info.

Question 5

What was the Tobacco Master Settlement Agreement of 1998?

Answer 5

Big tobacco companies fined $200m for labellling their product as not harmful and had to follow restrictions, e.g. banning the use of cartoon characters such as Joe Camel, previously used on Camel cigarettes, to avoid appealing to younger audiences

Question 6

Problems of the Tobacco Master Settlement Agreement of 1998?

Answer 6

• Property rights have to be enforceable
• Legal jurisdiction (only covered damages within the USA)
• Funding of tame scientists made it hard for prosecutors to prove their case

Question 7

Intellectual property rights + provide examples?

Answer 7

Legal rights granted to entities for their inventions, providing exclusive control + a temporary monopoly, e.g. copyrights, patents

Question 8

Patent grants?

Answer 8

Owner has a temporary monopoly > can produce the good, can license to others, or can stop it from being used for a limited time, e.g. ibuprofen/Tesco value ibuprofen

Question 9

Provide evidence of property rights in use + downsides of this in context

Answer 9

Human genome project in the 90s > property rights temporarily over the human genome, later could be taken on by govt institutions + private companies to drive development > huge success

Downsides: gene patents hindered scientific research and slowed down scientific progress

Question 10

Provide disadvantages of the patent system

Answer 10

• “Patent puzzle” - no empirical evidence to suggest they drive innovation, encourage higher prices as creates monopoly, reduce consumer welfare + may be for a monetary incentive rather than innovative