Property Rights Theory

Property Rights Theory posits that clearly defined and enforced ownership rights are essential for efficient resource allocation and economic growth. It suggests that individuals or entities who hold rights to assets can use, trade, or sell them, thereby incentivizing investment and responsible management. When property rights are secure, people are more likely to innovate and improve their resources because they can reap the benefits of their efforts. Conversely, weak property rights can lead to conflicts, waste, and underutilization of resources, undermining economic development. Essentially, well-defined property rights foster trust and cooperation in economic activities.