The Neoclassical Definition of Property

Following the radical changes in Central and Eastern Europe, the question of how property came to be and how it is changing was of minor importance. Discussions were held mainly about the functional aspects of ownership, especially pertaining to its efficiency. The superiority of a market economy in comparison to a planned economy was often justified based on the argument of the increased efficiency of private property. The countries in the midst of transformation were advised to permit private property and to strengthen the private sector by forcing privatization of state enterprises. At the beginning, it was therefore assumed that a quick single jump from a planned system to a market economy could be accomplished. It has become obvious meanwhile that changing the framework, more precisely the rules of the game, is a long and difficult process. It could even lead to negative, unexpected repercussions for the economy. Sometimes, such problems are attributed to an insufficient implementation of reform programs, or to a lack of willingness of the persons involved in economic policy. This means that the problem of institutional changes is being referred back to politics. Indeed, and that is my project in the following, economic theory can also contribute to explaining and solving problems occurring during institutional changes, including property reform.