Property Institutions and Economic Behavior

It is the purpose of this essay to identify and evaluate the contributions of neoinstitutionalist-heterodox economists to the elucidation of the complex interrelationships between property institutions and economic performance. As the term neoinstitutionalist-heterodox suggests, this is a somewhat ill-defined group, the product of diverse intellectual influences. In order to place these economists and their contributions in perspective, it is necessary, first, to consider how concepts of property have been handled by earlier schools of economic thought and by contemporary noninstitutional economists. John Locke, Adam Smith, and the classical economists, the neoclassical economists, and the Chicagoans developed and sharpened an economic theory which found social virtue in the outcome of myriad independent decisions, each based on individual self-interest.' While self-interest was the motivating force behind individual decisions, individual ownership and control of resources were essential in order to permit the decentralization of allocative decisions. The competitive, laissez-faire, free enterprise system, which has served generations of mainstream economists as both a subject for study and a utopian ideal, requires the existence and wide distribution of private property. Not only does the laissez-faire system guarantee all manner of desirable