The Study of the Foundations of Economic Analysis of the Property Rights, with an Emphasis on the Concept of Externalities

Property rights entered the field of economic analysis since Demsetz’s pioneer article called “Toward a Theory about Property Rights”. This relationship is analyzable based on externalities and searching its solution. Pigou emphasized the role of government in solving the problem of externalities, but since then market-oriented approaches became the prevailing views in this regard. Ronald Coase, based on market theory with emphasis on the role of transaction costs, and the assumption of zero transaction costs, persisted in non-necessity of government intervention to achieve the desired economic results. Then Calabresi and Melamed using Coasian Model proposed property- liability approach. In common law, the traces of market-oriented theories, in the form of trespass and nuisance, are visible. What appears in a glimpse is that these solutions, which are proposed in common law, may not be applicable in the Iranian law. However, in this article we show that there is hope to solve the externalities problem in an economically desirable method by taking advantage from liability contract. These issues will be examined respectively in this article.