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Video transcript

in other videos we have touched on the idea of property rights but in this video we're going to go a little bit deeper and think about how property rights connects to the notion of a market so first of all think about what a market means to you you have probably heard of things like the stock market or you have probably gone to a supermarket to do your groceries what's common about these things well if we want to say as broad of a definition of a market you could view it as a market forms let me write this down well this is an informal definition forms when multiple parties multiple parties exchange things of value exchange things of value and let's see whether our notions of a market hold up or whether this definition holds up when we think about our notions of a market well in a stock market you have a bunch of people together and they are trading stocks and usually what happens is let's see if this is a stock right over here these are all different shares of could be the same stock or of different stocks what typically happens is if there might be parties who want to sell this stock and then there's other parties who want to buy this stock and then whoever of whoever of the buyers is willing to offer the most for that chair well then that money will go to the seller of the stock and then that stock will go to the party that just paid that amount and so you see that there's an exchange of things of value at a supermarket you will see aisles and aisles of goods this is my drawing of a aisle of goods and there's all sorts of merchandise on them and you put them in your shopping cart and then when you're done you go to the checkout it's my little shopping cart here you go to the checkout and you pay for them so once again you are picking which items you want there's a price on them so the seller which in this case is the supermarket tells you what they're willing to take for those items and then when you put them in your cart and then take it to the checkout that you agreeing to pay those prices and so you exchange once again money for those things of value so the money has value and those groceries or whatever you're buying might have value now we tend to believe that markets are the best way of allocating resources and different markets work different ways as you could just see the stock market could be very different than a supermarket and then you could have an auction where things are auctioned off that would also be a form of a market but the actual mechanics of how things happen would be a little bit different but a key factor that you need in order for markets to function properly is that you need to have a notion of property rights and as we've talked about in previous videos property rights are the idea that things can be owned now what does it mean to own something we almost just take this for granted but it's not some law of the universe it's something that we just assume culturally and it's become so embedded in us that we just say of course you can own something but at the end of the day there's three real properties to owning something one is the idea of a party being able to exclusively own something so let's say that you own a piece of land that you want to farm on well that means that you can exclude others from using that land and whatever that land produces it might just be a fun place for you to run around or to sunbathe or it might be a place where you grow some food that you have the rights to the benefits of that thing now another key dimension of property rights is that those rights have to be enforceable enforceable what does that mean well if someone obnoxious wants to come in sunbathe on your property that you have enjoyed running around and sunbathing on you say hey you're infringing on my property rights and you should be able to call the police or some type of enforcers to take that person off your land if you really do have property rights and if they are truly exclusive or let's say you have property rights on your shoes and if someone were to steal your shoes you should be able to call the police and say a crime has been committed and the police should enforce those property rights they should go and get those shoes back and punish that shoe stealer in some way and then last but not least in order for markets to work well those property rights have to be transferable remember a market is all about transferring property rights in the stock market the one party is giving is transferring their property rights to that money to the seller of the stock in exchange for getting the seller of the stocks property rights to the actual stocks if this was not transferable then it would actually make no sense to have a market as we know it so I'll leave you there these are things in our daily life that most of us take for granted because we live in a market economy and we are used to things like ownership but there are definitely ways of organizing society where it's not as based on markets in terms of who gets what and even today markets in many sectors are in many parts of the world don't operate as well as they could because some of these dimensions of property rights aren't working as properly as they should it might be hard to transfer property rights in certain markets and for certain markets if someone let's say just takes over a property the government might not be so good at enforcing those property rights or it might be hard to keep one party from using something of value that is at least according to the property rights owned by someone else
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