The idea is that an assignment of property rights should be such that agents do not need to engage in trade negotiations thereafter simply to fix a bad assignment. This is because negotiation is itself costly, and sometimes even impossible (as in the case of asymmetric information). Thus, property assignments should try to anticipate the outcome of these “fixup” negotiations. For instance, when the Soviet Union has the right to station nukes in Cuba then we need to negotiate in order to fix this, when it’s quite clear ex-ante that the negotiations will result in no nukes being allowed in Cuba.
Thus, property assignments should try to anticipate the outcome of these “fixup” negotiations.
Generally speaking, yes, but the whole point of relying on the market as opposed to central planning is that quite often you do not know (or are mistaken about) the outcome of the negotiations.
For instance, it’s not obvious to me at all that ex ante it was clear that the Soviet nukes would not be allowed in Cuba.
The idea is that an assignment of property rights should be such that agents do not need to engage in trade negotiations thereafter simply to fix a bad assignment. This is because negotiation is itself costly, and sometimes even impossible (as in the case of asymmetric information). Thus, property assignments should try to anticipate the outcome of these “fixup” negotiations. For instance, when the Soviet Union has the right to station nukes in Cuba then we need to negotiate in order to fix this, when it’s quite clear ex-ante that the negotiations will result in no nukes being allowed in Cuba.
Generally speaking, yes, but the whole point of relying on the market as opposed to central planning is that quite often you do not know (or are mistaken about) the outcome of the negotiations.
For instance, it’s not obvious to me at all that ex ante it was clear that the Soviet nukes would not be allowed in Cuba.
That is not clear, especially given the precedent of Turkey.
But thanks for clarifying that definition!