THE ECONOMIC SPHERE AND THE RULE-MAKING SPHERE

The following essay by William Riker and Itai Sened analyzes a fascinating case of institutional change: the evolution of property rights in time slots (the rights to land and to take off) at four heavily used U.S. airports. In these airports, the structure of rights in slots changed in 1969 from open access and queuing on a first-come, first-served basis to communal property governed by the established carriers. In 1985 the structure changed again, to exclusive salable property rights.

Riker and Sened take their analysis beyond the naive model of property rights, which examines the behavior of only economic actors and organizations (the demand side of institutional change), and strongly emphasize the role of political actors and organizations (the supply side). In other words, the study analyzes the behavior of actors in both the economic sphere and the rule-making or public-choice sphere, but not in the constitutional sphere, since the institutional change in question did not involve new procedures for public choice.

In society, the design of formal rules for granting property rights is ultimately the domain of the actors who control the state, because they (usually) have the resources and the will to determine the basic structure of property rights in their territory. Riker and Sened assume that these political actors act rationally and grant property rights in order to promote their own welfare, broadly defined to include individual wealth, power, and social ideals.