Like any
kind of sport, competition arising from scarcity has to have game rules.
Without rules there is no way to decide winners from losers. Without winners,
there is no objective to compete. Athletics has rules, tennis has rules. If
there are no rules at all, success or failure cannot be determined. Even when
competing under the law of the jungle, the rule is the winner survives while
the loser dies.
From the
perspective of economics, the relevant rules in people’s daily competition are
laws, disciplines, customs, etc. Similar to the rules in sports, these rules
restrain competitors from behaving in certain ways under certain circumstances.
That is, in a society’s economic competition, the rules, be they laws,
disciplines or customs, are all restraining instruments to delineate rights
among people. Such delineation of rights is precisely the system of property
rights. In Volume III I will expound
that when the system of property rights is viewed from a different perspective,
the arrangement to restrain competition is the arrangement of contracts. This
will be later discussed.
The system
of property rights is the rules of competition, which is also a constraint to
restrain competitive behavior. The rules are ever-changing if we try to
differentiate them in detail, with private property rights being only one of
them. It is possible to generalize the system of property rights into a few
broad categories, and systematically analyze the impact of the change in each
category on human behavior. This is an issue of institutional economics, which
I will elucidate in Volume III.
“Property”
is no simple word. From the viewpoint of economics, property is a competitive
economic good. This is somewhat different from its definition in law. In law,
property generally refers to an asset (especially real estate); but in
economics, it means not only an asset, but also a consumer good. Scarcity is an
element that consumer good and real estate have in common. Both are
competitive, and both are economic goods.
As
insightfully said by Alchian, the three words property, competition and
scarcity are synonymous. Readers should ponder thoroughly about this
“synonymous” viewpoint until recognizing that in the society, competition is a
ubiquitous concept. Without understanding this generalized “competition”
concept, do not expect any significant achievement from studying economics.
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