an Economic Analysis of Ownership Rights in Islam (With Emphasis on the Concept of Transaction Costs)

In previous decades, the spread of the Coase proposition and coming to light of the economics of Ownership Rights, have made the necessity and possibility of economic analyses of legal principles and regulations, more and more obvious. The main question of this research is the manner in which the Islamic juristic rules, regarding ownership rights, influence the transaction costs. In the era before the rise of Islam, Northern Arabia was void of any particular legal system efficiently defining the ownership rights. As a result the costs of establishment and application of contracts were extraordinary. In such conditions it was expected that rise of a specific legal system, like the one of Islam, which defined and explained the ownership right on a very broad scale, will have an important role in reducing the transaction costs. While presenting a new categorization of the types of ownerships accepted in Islam, the current article strives to analyze three important subjects of Private ownership, Public ownership and Free Access Systems in the perspective of transaction costs, and discuss the effects of instruments, which support ownership, on the costs of execution of contract. The conclusions show that by relying on the available historical and legal facts, this hypothesis cannot be accepted: “the teachings of Islamic law did not result in a reduction of transaction costs, in the realm of ownership rights.