ABSTRACT
It is a well-established theory in economics since Demsetz’ seminal paper (1967) that institutions, and especially the formal variant of property rights, have their origin in beneficial or harmful effects that human action can have on others and that they change in order to internalize these upcoming externalities over time. It is equally commonplace by now that the devices to internalize (positive and negative) external effects work more or less efficiently. External effects may be due to external shocks as is the case in Demsetz’ paper with the colonial commercialization of fur trade in the case of the North American Labrador Indians. Another example from anthropology of an external shock is the introduction of the horse for hunting buffalo among the Blackfeet Indians (Nugent 1993). External effects can also arise from endogenous technological progress, however, a variant that is mentioned by Demsetz, but not further discussed. Nor in his (2002) article, where he broadly outlines the history of dissemination of private property along the line of technological revolutions furthering specialization, Demsetz is clear about the mechanisms of change.
