- The first is expropriation risk – insecure property rights imply that individuals may fail to realise the fruits of their investment and efforts.
- Second, insecure property rights lead to costs that individuals have to incur to defend their property, which, from the economic point of view, is unproductive.
- The third is failure to facilitate gains from trade – a productive economy requires that assets be used by those who can do so most productively, and improvements in property rights facilitate this. In other words, they enable an asset's mobility as a factor of production (e.g., via a rental market).
- The fourth is the use of property in supporting other transactions. Modern market economies rely on collateral to support a variety of financial market transactions, and improving property rights may increase productivity by enhancing such possibilities.
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