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Annu. Rev. Sociol. 2004. 30:2346 doi: 10.1146/annurev.soc.30.012703.110538 Copyright c 2004 by Annual Reviews.

All rights reserved First published online as a Review in Advance on January 7, 2004

THE SOCIOLOGY OF PROPERTY RIGHTS


Bruce G. Carruthers and Laura Ariovich
Department of Sociology, Northwestern University, Evanston, Illinois 60208; email: b-carruthers@northwestern.edu
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Key Words economic sociology, law, transition economies, intellectual property I Abstract Property rights matter for their effects on economic inequality and economic performance, and they unfold at the intersection of law, the state, politics, and the economy. Five dimensions of property are discussed: the objects of property (what can be owned), the subjects of property (who can own), the uses of property (what can be done with it), the enforcement of rights (how property rules are maintained), and the transfer of property (how property moves between different owners). We offer examples of how property rights systems vary along these dimensions and how they change over time. We illustrate the arguments with two contemporary empirical cases: the transition economies of Eastern and Central Europe, Russia, and China, and the transformation of intellectual property rights.

INTRODUCTION
Property is ubiquitous. The idea of private property suffuses classic liberal thought. Property rights lie at the intersection of law, economy, the state, and culture. For example, intellectual property rights (IPR) concern leading-sector industries like biotechnology and computers; property constitutes the foundation for many kinds of inequality; and property rights preoccupy scholars studying the transition economies of Eastern and Central Europe. And yet contemporary sociology has said much less about property than its centrality warrants, largely ceding the topic to economics and law. Ownership involves socially recognized economic rights. Property is that over which such rights obtain, and owners are those who possess the rights. In a sense, property concerns the dyadic relationship between people and things. Sir William Blackstone famously dened property as: . . . that sole and despotic dominion which one man claims and exercises over the external things of the world, in total exclusion of the right of any other individual in the universe(Blackstone 1766, p. 2). His denition poses private ownership as an individuals exclusive control over property. Yet despite its ideological power, this dyadic conception misses the social and political dimensions of property (Fligstein 2001, p. 33; Shipton 1994, p. 349). The right to control, govern, and exploit things entails the power to inuence, govern, and exploit people (Roemer 1989). Owners of productive
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assets can prevent nonowners from using them, and thereby shape nonowners life-chances. Furthermore, what separates ownership from mere possession is the fact that others recognize ownership rights, either directly or through a formal legal system. If private property appears to be dyadic, in reality it always involves triadic relationships. Swedberg (2003, p. 203) observes that property has not been much studied by sociologists. Property rights are discussed by some (e.g., Emigh 1999, Fligstein 2001, Sorensen 2000, Stinchcombe 1983), and they gure into studies of transition economies (e.g., Nee 1992, Stark 1996, Walder 1992), class analysis (Wright 2002), comparative capitalisms (Dore 2000, Hall & Soskice 2001), and specic types of property (Patterson 1982), but they have not received an encompassing sociological treatment. By contrast, economists have long been interested in property rights (Alchian & Demsetz 1973, Barzel 1989, Libecap 1989, Eggertsson 1990). Sociologys neglect is unfortunate, for the founders of sociology knew that property rights have great sociological relevance (Weber 1981; Marx & Engels 1947, pp. 79 81; Durkheim 1992, p. 121170). The most obvious connection, Marx recognized, is with social stratication. Ownership constitutes one of the most enduring dimensions of inequality (Earle 2000). Property in modern societies is maintained by the legal system, and so directly implicates law and the state, but informal property rights emerge as practices decouple from formal institutions. Many instances of dramatic political change involved shifts in property rights (e.g., the Russian and French Revolutions). In addition, to exchange property rights is the elemental market transaction, and so property grows in importance with expanding markets. We begin with Reeves (1986, p. 11) denition of property. Owner A owns property P if and only if: 1) A has the right to use P; 2) A may exclude others from using P; 3) A may transfer rights dened by rules 1 and 2 to others by consent. Property involves a bundle of rights, including the rights of usufruct, exclusivity, and alienability. The entire bundle can be held by one person or divided among multiple parties. Property rights confer power. They are rules that constrain and enable, and they locate decision-making power over assets. Property rights vary over time (Horwitz 1977) and between countries in terms of who (or what) can be an owner. Similarly, they differ according to what may be owned, and what constitutes legitimate use of property. Property also varies in how it is transferred, alienated, or enforced, and in its exclusivity (private versus public).

DIMENSIONS OF PROPERTY
Below we discuss ve basic dimensions to show how property varies. Property systems often cluster into familiar types (e.g., private versus communal property, contingent versus absolute property), and recombinations among these produce

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new types (Stark 1996). Then we consider propertys implications for inequality and economic performance. Lastly, we apply our framework to discuss transitional economies and intellectual property.

Objects of Property
What can be owned? Different societies give different answers, but none permits everything to be owned. The inclusion of new objects or the exclusion of old ones is a process variably shaped by political, cultural, economic, and technological factors. Changes in the objects of property depend on commodication and decommodication, and on permeable boundaries between legal and illegal markets. In agrarian societies, land is key for production. Common law property rights reect the importance of land during the Middle Ages when the law originated (Baker 1979, p. 193). Law developed for tangible property had to be adapted to accommodate new forms of intangible property. The crime of trespass originally concerned unauthorized entry onto someones physical property, but it was extended to cover unauthorized access onto a computer system (Nimmer & Krauthaus 1992, pp. 118119). In the early twentieth century, U.S. copyright laws were expanded to cover motion pictures and other new media (Merges 2000). Various social, cultural, and economic processes alter the set of objects that can be legally owned. For many millennia, human beings were property (Patterson 1982). U.S. abolition meant that humans could no longer be owned and caused slaveholders to lose much of their wealth. In the past, ideas were not something to own (during the Middle Ages, knowledge was viewed as a gift from God), but with patent, trademark, and copyright laws, designs, symbols, and forms of writing could become property (Hesse 2002). And current U.S. law states that laws of nature, physical phenomena, and abstract ideas cannot be patented (Hunt 2001, p. 6). Recent developments have allowed living animals, bioengineered bacteria, nancial formulae, and business methods to become patentable (Hall 2003, Kevles 2002). IPR does not expand monotonically, however, for people sought to abolish patents in the nineteenth century (Janis 2002), and similar arguments are made today to weaken these property rights (Heller & Eisenberg 1998, Lessig 2001). Outside of IPR, new forms of property, like SO2 emissions permits for example, help shift U.S. environmental policy toward markets (Levin & Espeland 2002). The development of radio and television coincided with commodication of the electromagnetic radiation spectrum. Early objects of property were physical things like land and cattle, but property now includes many intangibles (bonds, shares, trademarks, patents). An overall shift occurred away from tangible and toward intangible forms of property, but intangible property has existed for centuries. Roman law acknowledged incorporeal things as property (Justinians Inst. 1987, p. 61), but also stipulated that some things could not be owned (e.g., sacred or religious objects; see Justinians Inst. 1987, p. 55). Venal or proprietary ofces were common in early modern European states and turned owners into political supporters and frequently also into public creditors (Ertman 1997, p. 102). By making public functions a matter of

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ownership rather than merit, however, venality could undercut the efciency of public organizations. Why some objects can be owned and others cannot depends on culture and formal law. Objects possessing powerful, noncommercial social meanings are often deemed inappropriate for ownership. For example, traditional Native American conceptions of land clashed with those of European settlers, who viewed land as private property (McEvoy 1998). Today, tribal lands are owned by Native Americans, but the cultural meaning of land precludes its treatment as a mere commodity (Espeland 1998). The adoption and enforcement of modern IPR law in contemporary China has been undercut by the fact that Imperial Chinese law and culture did not conceive of ideas as property (Alford 1995). Current attempts to patent human genetic material violate moral sensibilities about the commercialization of life (Bright 1995, Drahos 1999). The appropriateness of property status for objects is more than just dichotomous, however, for even granted that something can be owned, legal rules and social norms still inuence how it is owned. For example, medieval scholars did not doubt that things could be property, but they disputed whether God gave the things of nature to be owned privately or communally (Wood 2002, pp. 1741).

Subjects of Property
Who may own? The set of potential owners varies across societies. One important difference lies between natural and ctive persons, but these two groups subdivide further. No society grants full ownership rights to all natural persons, and the rights of ctive persons often differ across public/private or prot/nonprot lines. Furthermore, many societies recognize ownership by households, lineages, villages, kin groups, or other collectivities. A single owner often owns multiple pieces of property, and multiple owners may have rights in the same piece of property. Such arrangements are common in many societies (see, e.g., Kumar 1985), and reach a high degree of contractual specicity in time-share condominiums. Natural persons who are foreigners or minors may enjoy only limited ownership rights, or even no rights at all. People who are owned (slaves) do not themselves have full rights to own (Patterson 1982, p. 182). Sometimes specic owner-property pairings are prohibited, as with restrictions on foreign investment in strategic industries, felon ownership of handguns, or minority ownership of homes in white neighborhoods (Rice 1968). Such prohibitions have strong implications for patterns of exchange. Ownership by natural persons poses problems of what to do with property that outlives its owner. Some societies tried to send property along with the deceased owner (for example, by burying it with the corpse or burning it on the funeral pyre), but the disposition of durable property like land was governed by rules of inheritance. Patriarchy and property are closely connected. Under traditional common law, ownership rights varied by gender, and upon marriage a wifes property became her husbands (marital status did not matter for men). Marriage was not just a

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liability for women, however, because widows had special claims on family property, and marriage settlements also offered wives some protection. Only during the nineteenth century did legal reforms bestow full property rights on American married women (Salmon 1986). The English practice of primogeniture favored sons over daughters in inheritance. In early modern China, property rights also favored men (Bernhardt 1999). In general, differences over property rights have been a central axis of gender inequality (Salmon 1986, Staves 1990) and remain so in much of the developing world (Agarwal 1994). Since the late nineteenth century, general laws of incorporation have helped to make ctive individuals like corporations increasingly important as owners (Perrow 2002, pp. 3640; Roy 1997). Corporations function simultaneously as subjects of property (they own) and objects (they are owned). Some corporations have owned property for many centuries (e.g., the Catholic Church), but the proliferation of corporations has made ctive owners more salient. Unlike natural persons, ctive persons can continue indenitely (they possess perpetual succession), and so the problem of inheritance need never arise. Through a steady accumulation over centuries, the medieval Church became Europes biggest landowner. Corporations cannot die, but they can go bankrupt and be liquidated (in which case the property goes to the creditors). Corporations also enjoy limited liability, which means that shareholders have limited responsibility for corporate debts (Moss 2002). Institutional change produces new combinations of owners and property. Thanks to the Bayh-Dole Act of 1980, American universities can now own patent rights in intellectual property produced by federally funded research. Universities have acquired an interest in strong IPR, and their research and pedagogical missions are inuenced by commercial interests, particularly in areas like biotechnology. Science and commerce became conjoined in universities (Powell & Owen-Smith 1998), and this has shifted the metric of academic success from publications to patents (Owen-Smith 2003).

Articulation of Use
Usufructuary rights stipulate what can be done with property. As property has evolved, so have use rights. Clearly one does not use a negotiable security in the same manner as a piece of land: Owners use corporate shares to make claims on residual income and to vote in company elections. Pure absolute private ownership (sole and despotic dominion) supposes that owners can do whatever they please, but use is almost never unlimited. Sometimes, people possess very specic use rights, allowing them to exploit property in one particular way. For example, different rights over the traditional English commons included the right to hunt, sh, cut turf, gather rewood, cultivate, graze animals, and fell trees (Neeson 1993; Simpson 1986, pp. 107108). Persons and groups might hold one or two of these valuable rights, but seldom more. The enclosure movement turned the English commons into private property, but that still did not allow owners unrestrained use. Use of real estate is commonly

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regulated to restrict what owners may do with their property [e.g., requirements to build houses with brick or stone rather than ammable wood (Plotkin 1987, p. 77)]. Many municipalities zone real estate for different uses (commercial, residential, etc.) and so dictate spatial patterns of land use. In the United States, the police powers of government allow it to impinge on private property to protect public safety, health, and morals (Ely 1992, p. 60). Eminent domain gives government the right to condemn and seize private property (subject to due process and just compensation). Use of some property requires that owners be properly qualied: One cannot drive a car, y an airplane, or operate a medical hospital without a license. Such licensing is a long-standing American practice (Novak 1996, pp. 9095). Ownership may also involve an obligation to pay taxes. All regulations shape how owners use their property (in intended and unintended ways), and government intervention in markets can repose not in visible regulatory agencies but in the details of property rights (Campbell & Lindberg 1990). Some view such regulation as necessary for market stability (Polanyi 1944). Not all restraints are imposed externally through formal government regulation. Informal and internal restrictions on the use of corporate property by shareholders are reected in stakeholder models of the rm (Donaldson 1995). In the Anglo-Saxon corporate model, owner-shareholders ultimately control the rm, although they cede control to their agents, the managers. Stakeholder models, in contrast, recognize the importance of other constituents of the rm (employees, creditors, customers, suppliers, etc.), who also inuence what a rm does (Freeland 2001, Ziegler 2000). What owners do with their property is constrained by these other constituencies, whether or not the latter play a formal role in governance. Some restraints are adopted consensually, through contracts. Restrictive covenants in loan contracts let creditors constrain how debtors use borrowed money (Smith & Warner 1979). Fast-food franchise agreements constrain how owneroperators may operate their franchise [this helps achieve extreme uniformity of appearance, service, and taste (see Hadeld 1990)]. Other constraints are external and coercive, but not strictly legal. The production and operation of many kinds of equipment, ranging from electrical lighting to steam boilers, are regulated by private standard-setting bodies (e.g., Underwriters Laboratory, which currently promulgates over 800 different standards). Owners who fail to conform to these standards are not acting illegally, but they will nd it impossible to obtain insurance (Cheit 1990). Some private standards now have a global reach (Braithwaite & Drahos 2000). Informal, social inuences on property use are legion. They include the noblesse oblige that comes with wealth. As Ostrower (1995) documents, the culture of American elites makes certain philanthropic activities crucial to their identity, obliging social elites to give away part of their property. But all individual owners, not just elites, have reference groups and communities that inuence what property they acquire and how they use it (Grassby 1995).

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Enforcement of Rights
The social rules that constitute property are neither self-evident nor self-enforcing. Who species and enforces these rules? According to North (1990), it is the state. Specializing in coercion, the state is uniquely qualied to ensure compliance with all kinds of rules, including property. For North, the state species rules serving its own scal interests in tax revenues. This linkage between government and property has long been recognized (e.g., by Adam Smith in the Wealth of Nations), and implies that property and politics are necessarily connected. Enforcement varies with property. Enforcement of private property is more intensive than for communal property (because the latter involves open access). The means for protecting private land will not work when used to protect intangible property, like patents. Weak or failing states often cannot maintain property rights, and so citizens who wish to protect their property and transfer it securely often rely on private enforcement services. Informal coercion is common in contemporary Russia, and protection can turn into control as racketeers take over the rms they protect (Volkov 2002, p. 51). North focuses on formal legal enforcement, but many rules are enforced informally, and some compliance occurs voluntarily. Voluntary compliance depends on the perceived legitimacy of the rules, and without legitimacy enforcement is difcult. As Thompson (1975) argued, much resistance in eighteenth-century England to private ownership of the former commons stemmed from the perception that it was illegitimate. The authorities increased coercion by turning many property crimes into capital crimes, but people continued to resist. De facto property rights also diverge from de jure rights in the developing world, where on paper women often possess property rights equal to men, but in practice they have substantially weaker rights (Agarwal 1994). Smarts (1986) discussion of squatter housing in Hong Kong demonstrates the effectiveness of informal enforcement. Morales (1993) found that community norms and sanctions were effective in enforcing informal property rights over space in an urban ea market. The formalization of property does not just crystallize claims but offers signicant opportunities for redistribution. The land registries introduced during the early modern era and in todays developing world formalized property claims, but they also allowed opportunistic individuals to expand their claims. Complex customary rights were seldom translated perfectly into the new system (Scott 1998, pp. 3336). But formalization can also help those with informal rights. Modern intellectual property law potentially can protect practitioners of traditional medicine and indigenous farmers from uncompensated appropriation of their valuable knowledge by pharmaceutical and agribusiness companies (Cleveland & Murray 1997; Zhuge 2003, unpublished manuscript), although this depends on their legal and political resources (Brush 1993, p. 664). Despite informal arrangements, the modern state remains a primary locus of property enforcement. With the emergence of global markets, however, the locus of enforcement is shifting to an international level. International treaties, agreements,

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and institutions now specify and protect property rights, and the politics of property has shifted to different arenas (Braithwaite & Drahos 2000, pp. 5457). The Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement of 1994 established rules to govern intellectual property as part of the trade negotiations that established the World Trade Organization (Maskus 2000). Less encompassing agreements were also negotiated during the nineteenth century (e.g., Paris and Berne Conventions on copyrights and industrial property rights).

Transfer of Rights
Property rights are established and extinguished, and they move between owners. Today, many transfers are accomplished through market exchanges, but other types also occur. Consider the establishment of property, when objects not subject to rights become owned by someone. Physical property, like land, which belongs nominally to the king, ruler, or government (by treaty, conquest, at, or some other method) may be distributed to settlers, political supporters, or clients. More interesting are situations in which individuals unilaterally seize land as squatters rather than receive it in a grant. Much of Australia was settled via squatting and encroachment by white settlers, whose illegal actions could not be controlled by a distant government (Weaver 1996). The state played catch-up, giving de jure status to de facto facts on the ground. Intangible property does not precede the property rights that govern it. Patents, for example, are created through a bureaucratic process in a government patent ofce. In the United States, innovations must satisfy three criteria to be patented: utility, novelty, and nonobviousness (Hunt 2001). Like beauty, these criteria exist in the eyes of the beholderthe U.S. Patent and Trademark Ofce (USPTO) and their application and interpretation have evolved (Lerner 2002). Considerable cross-national variation characterizes patent ofce standards and practiceswhat is patentable in one country may not be elsewhere (Somaya 2000). For example, Amazon.com obtained a U.S. patent for its one-click purchase method but the companys patent application was denied in Japan. Intellectual property not only appears at discrete points in time (when a patent is granted, a trademark led, etc.), but it also lapses. Unlike other forms of property, intellectual property rights are only temporary (e.g., U.S. patents last for 20 years). Tangible property rights can also be extinguished. For example, lost property that is turned in to the authorities and unclaimed often becomes the nders [but these rules vary substantially over time and across jurisdictions (West 2003)]. A more signicant termination of property rights occurs in formal bankruptcy, where the assets belonging to an individual or corporate debtor are distributed to creditors (Carruthers & Halliday 1998, Skeel 2001), and the debtors property rights are extinguished. Almost all property is alienable in some measure and so shifts between different owners. Its movement may occur through bilateral market exchange or as a unilateral gift. Gift exchange helps to build and sustain social relations, and so it is deeply embedded in social structure (Caplow 1982). But even market exchange is shaped by social factors. Purnell (1999), for example, discusses informal prohibitions on
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the sale of land to outsiders in Mexico. Property also shifts intergenerationally through inheritance. Normally this occurs after the owners death and may or may not be governed by a formal will, but bequests also occur inter vivos (e.g., investment in a childs college education, dowries, marriage settlements). The state has not been the only enforcer of inheritance rules. For centuries, inheritance was heavily inuenced by the Church and ecclesiastical law (Berman 1983, pp. 230237). Many inheritance rules (e.g., primogeniture, impartible inheritance) favor particular heirs (sons over daughters, close kin over distant kin, eldest sons over others) and thus structure how patterns of inequality are reproduced intergenerationally (Spring 1993). Inheritance rules differ signicantly across legal traditions and even within the same country (Erickson 1990, Shammas et al. 1987). Societies that support testamentary freedom allow the decedent to determine how property will be distributed post mortem, and this allows sentiment and other personal factors to inuence inheritance.

IMPLICATIONS OF PROPERTY
The ve dimensions just summarized lay out the important ways in which property varies, but propertys importance stems from its consequences. Two in particular have been of interest to sociologists: inequality and economic performance.

Inequality
Property rules govern access and control over things of value, and consequently undergird social inequality (Brudner & White 1997). Most stratication research focuses on occupational and income differences, although Sorensen (2000) and Wright (2002) make property rights the center of their class analysis. Property rights matter most for wealth inequality, which tends to be more extreme and stable than income inequality (Jianakoplos & Menchik 1997, Keister 2000). Inheritance concerns how unequal accumulations of property are transmitted down through succeeding generations. Unequal ownership of certain kinds of property engenders other inequalities. Secure title over land allows it to function as collateral for loans and hence generates access to credit (Islam 1995; Soto 2000, p. 39). U.S. racial differences in the level and composition of household wealth have been a topic of recent interest (Conley 1999, Oliver & Shapiro 1997). Racial patterns in home ownership lead to other differences because education and jobs are tied to residential geography (Massey & Denton 1993, Stuart 2003). Although de jure property rights are now formally equal between whites and blacks, persistent differences in wealth and home ownership show how substantially de facto property rights can diverge from the ideal of equality (Munnell et al. 1996). Sometimes, property rights are used to alter patterns of social inequality. Dramatic changes like mass privatization in the transition economies of the 1990s, or the abolition of feudal property during the French Revolution, were clearly intended to alter the social distribution of wealth. Other manipulations have been

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more specic. In the early eighteenth century, Englands parliament imposed partible inheritance on Catholic Ireland and forbade land sales from Protestants to Catholics (Staves 1990, p. 93). By prohibiting primogeniture, the chief strategy for reproducing aristocratic landholdings, and by proscribing land purchases, the English hoped that within two or three generations their opponents, the Irish aristocracy, would have so subdivided their estates among their heirs as to be reduced to yeoman farmer status. The extent to which wealth depends on inheritance (as opposed to savings) is a matter of some debate (Altonji et al. 2000), but by most estimates a considerable proportion of wealth is inherited (Gale & Scholz 1994, Keister & Moller 2000). The reproduction of inequality depends on the heritability of assets, which in turn depends on rules of inheritance, demographic and economic circumstances (number of surviving children, divisibility and liquidity of assets), strategies of inheritance, and the unit of social reproduction (nuclear families, patrilineages, villages, etc.). Longhofer (1993) shows how Mennonites adapted their inheritance practices to reproduce their community as they migrated from Russia to the United States. Marcus (1980) describes the use of formal trusts to maintain elite Galveston families through multiple generations. Giesey (1977) shows that venal ofces in old regime France were part of the family patrimony, to be passed down through the generations (see Adams 1994 on the United Provinces). Intergenerational transmission of wealth also depends on formal and informal rules governing the legitimacy of inequality and the ability of the wealthy to pass on their assets. In the United States, estate taxes inuence how wealthy families make their bequests (Brownlee 2000), whereas Islamic economies grapple with Koranic strictures against excessive wealth inequality (Kuran 1995). Intergenerational conict occurs as testators try to restrict the rights enjoyed by inheritors so as to preserve the estate for subsequent generations (Alexander 1997, Chapter 10). Family trusts are designed not only to avoid taxes, but also to protect wealth from spendthrift heirs. Inheritance rules that treat heirs unequally facilitate the accumulation and preservation of capital (Nazzari 1995). Differences in property ownership beget different political interests. For example, most of the worlds intellectual property is owned by Europe, the United States, and Japan. Developing countries consume intellectual property. This difference emerges in trade negotiations where advanced countries want strong IPR and developing countries seek weaker rules (Drahos 1999). Sub-Saharan African countries want weaker patents for HIV drugs so that they can offer cheaper medical treatment to their citizens (Nash 2000). Similar differences exist over copyright rules and intellectual piracy (Neigel 2000).

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Performance
Property rights determine who controls which resources and set the incentives that property owners face. According to the Coase Theorem, when there are no transaction costs, the initial allocation of property rights makes no difference for outcomes; rational actors will simply do what is most efcient (Coase 1960).

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Of course, transaction costs are never zero (and are seldom trivial), so property rights matter. This means that property rights inuence economic performance, both within rms (Hart & Moore 1990) and without. Economists studying the connection between property rights and efciency recommend private property as best for economic growth (Soto 2000) and have argued that property rights matter for resource exploitation, investment, growth, rm performance, credit, and innovation. As legal claims, property rights invoke Webers famous argument about the necessity of calculable law for capitalism (Weber 1981). Economists echo Weber in claiming that insecure property rights erode market activity (Johnson et al. 2002, Soto 2000) and this claim has become a centerpiece of IMF and World Bank policymaking (Stiglitz 2002). Others, however, have shown that uncertain property rights are not nearly so problematic and may even be advantageous under some circumstances (Wank 1999, Shipton 1994). Unlike communal property, private property internalizes externalities. The extension of private property is behind new market-based environmental policy, in which SO2 emissions permits internalize the externality of air pollution (Levin & Espeland 2002). Private property is also touted as a solution to tropical deforestation (Mendelsohn 1994). Internalization of externalities supposedly helps to avoid overexploitation of common-pool resources [the tragedy of the commons (see Eggertsson 1990, pp. 8491)]. However, even with fully specied private property, owners may not act rationally (Moxnes 1998), and people nd many other ways to avoid such tragedies (Ellickson 1991, Ostrom 1990). In the case of the English commons, informal social institutions effectively prevented overexploitation (Neeson 1993). Similarly, the effects of IPR have not been sorted out. Some claim that strong IPR produces high levels of foreign direct investment (Lee & Manseld 1996) and encourages innovation and technological progress (Khan 1995). Others do not nd simple relationships between patent strength and patent lings (Lerner 2002).

DYNAMICS OF PROPERTY
Property changes along the ve dimensions discussed above. New forms of ownership may be constituted, and new objects may appear and old ones disappear. Different uses of property can be discovered and old ones may be prohibited or become dormant. Changes in the transferability and heritability of property rights have important implications for markets and patterns of inequality. Altered property rights have an impact on the economy, but economic change can also transform property rights (Ensminger & Rutten 1991). Given that property rights depend on the state, dramatic transformations in property often coincide with big political changes: the French, Russian, and Chinese Revolutions all altered property as well as politics. The enclosure movement that privatized the English commons was largely accomplished through acts of Parliament (Neeson 1993). The experience of the transition economies underscores

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that property rights are sustained by particular political constituencies (Stiglitz 2002), and interest groups exploit their political clout to advocate favorable kinds of property rules. Political rhetoric, legal argumentation, and cultural framings are all used to push the envelope on what is legitimate property, especially in controversial areas like biotechnology. But the role of political factors, economic interests, and ideology are equally visible among older forms of property (Firmin-Sellers 1995). Some economists offer efciency explanations for how property rights change (Barzel 1989). Private property rights are more specic and costly to enforce than public property rights, but an increase in the value of a resource makes it efcient to move from public to private property rights. Others acknowledge that change does not always lead to greater efciency (North 1990). In particular, property rights have distributional implications, and these unleash conicts that can prevent efciency-enhancing changes (Kantor 1998, Knight 1992). Property rights sometimes change through legal transplantation, whereby legal codes developed in one jurisdiction diffuse to other jurisdictions. Sometimes legal transplants are part of the legacy of colonialism (Benton 2002), but many countries have modied their own legal codes to emulate foreign models. Japan, for example, looked to French and German law at the end of the nineteenth century, whereas India and Malaysia inherited common law from Britain (Pistor & Wellons 1998, pp. 3649). Formal adoption of a new property system starts off a variable and complex process of implementation that may result in substantial decoupling. Some legal transplants are more successful than others (Berkowitz et al. 2003).

Transition Economies
The transformation of property rights in transition economies illustrates our analysis. It reveals the political and institutional foundations of property because transition governments have deliberately attempted to create the property rights appropriate for a market economy. In most transition economies, privatization remains a central aspect of reform: Individuals and private organizations gained ownership over state-owned property. Transition economies involve new property arrangements and means of enforcement, with various consequences for economic performance and social stratication. Understanding property arrangements in transition economies requires untying the bundle of property rights. King (2001, p. 39) concludes that rights to take residual prots, to control and organize production, and, to a lesser extent, to sell property are mostly with nonstate actors. But private ownership in Eastern Europe often differs from that in the West: Control belongs to managers embedded in networks, but ownership resides in the rms themselves. By early 1996, 77.2% of large and mid-size Russian enterprises had been privatized (Blasi et al. 1997, p. 2). The result, however, was often a fragmented ownership structure and the consolidation of insider control (Heller 2001). By contrast, in China there has been little outright privatization. But extensive change of property

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rights created new ownership forms, including reformed state rms, governmentmanagement partnerships, leased public assets, and private companies (Walder & Oi 1999). The creation of a legal infrastructure often lagged behind economic change. Initially, policymakers in Eastern Europe and Russia followed Western advice and put privatization, liberalization, and macroeconomic stabilization ahead of legal reforms. Many believed that a legal framework would be superuous before markets developed (Rapaczynski 1996). But after some disappointments, Western advisors began to recognize the importance of legal institutions for the success of transition (Clement & Murrell 2001, pp. 56). Cross-national comparisons suggest that the perceived security of property rights affects investment. Thus, Russia has fared worse than Poland in both respects (Johnson et al. 2002). In Russia, weak laws in combination with high business costs fostered maa-type arrangements to protect property (Volkov 2002, p. 44). One cultural legacy of socialism, the perception of law as an arbitrary tool of the state, also encouraged extralegal means of enforcement (Hendley 1997, p. 237). Networks are another response to an inadequate legal framework (Boisot & Child 1996, Wank 1999). However, some scholars consider particularistic networks a poor substitute for a formal legal system. Selecting business partners based on personal trust instead of market conditions discriminates against new entrants and reduces the number of partners (Hendley 1997, p. 243; Kali 2001, p. 223). One of the main goals of privatization was to encourage economic restructuring. Privatization would eliminate soft budget constraints and the agency problems associated with public ownership (Kornai 1992). Although there is evidence of company restructuring in Eastern Europe (Brada & Singh 1999), in Russia privatized companies seem locked in a vicious circle of capital starvation, asset stripping, and demodernization (King 2003, p. 15). Neoliberal thinkers blame lax monetary policy and continuous government subsidies for the failure to restructure (Aslund 1995). Others point to poor privatization policies, blaming the rapid and massive transfer of state property in the absence of laws for corporate governance and the ownership structure (Black et al. 2000). Heller (2001, p. 297), for example, argues that privatization in Russia gave different groups of owners, including workers, managers, and local governments, enough power to block each other but not enough to restructure the rm in a value-enhancing direction. Some look to China to show how to run state companies efciently. According to Naughton (1995), Chinese authorities changed state managers incentives by relaxing the state monopoly in industry and establishing long-term prot contracting for state-owned companies. Walder (1995) argues that local governments are more likely than central authorities to impose hard budget constraints, especially when they face market and scal pressures. However, some dispute Chinas achievements. They downplay Chinas recent economic growth as easy gains from

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limited reforms, and they also contend that many township and village companies, the engines of Chinese economic performance, are not really publicly owned but a case of hidden privatization (Putterman 1995). The transformation of property relations, combined with other reforms, altered stratication patterns. According to Nees theory, marketization and new property rights reduce the advantage of redistributive power and increase returns to human capital. Producers (including entrepreneurs, managers, and technicians) gain in relation to cadres (Nee 1996, pp. 916917; Nee & Matthews 1996). But Bian & Logan (1996) report increased income inequality in the early 1990s, when market reforms accelerated, with the winners including both workers with market connected jobs and workers with redistributive power. Income inequality also increased in Russia during the early 1990s (Gerber & Hout 1998). Market reform beneted proprietors but hurt professionals, skilled and unskilled manual workers, and technicians. Additionally, workers in the service branches did better than workers in manufacturing. In Gerber and Houts view, these outcomes are less consistent with Nees vision than with Burawoy & Krotovs (1992) model of merchant capitalism. Like other large-scale changes, privatization created winners and losers, set off conicts, and had enduring social and political effects. Two circumstances made privatization politically challenging. First, various stakeholders, including branch ministers, regional authorities, managers, and workers had overlapping property claims on public companies (Aslund 1995, p. 240). Second, in Russia and Eastern Europe, privatization occurred simultaneously with political democratization (Przeworski 1991). Neoliberal advice to Russian and Eastern European reformers was based on the window of opportunity argument. Policymakers had to privatize quickly and comprehensively before interest groups could mount a counterattack and before the general public lost its faith in reform (Aslund 1995). Critics raised two arguments against this policy. First, fast privatization in an unfriendly business climate and before the creation of a legal infrastructure involves political risks. In Russia, privatization of the largest companies led to a self-reinforcing kleptocracy devoted to asset stripping and opposed to the rule of law. The kleptocrats rise to power nurtured a political backlash against privatization (Black et al. 2000; Stiglitz 2002, pp. 157160). Second, a more gradual approach allows policymakers to experiment with limited changes without major social costs and then to build on initial successes. For example, the rural responsibility system in China, which involved a partial transfer of property rights to peasant families, set in motion a virtuous circle of reform, economic growth, political support for reform, and further reform (Naughton 1995, pp. 138142). Another dimension concerns the states role in company restructuring and economic growth. Extolling the virtues of state-led development in East Asia, scholars have called for active state engagement in industrial policy and company restructuring. From this perspective, reinventing planning, in fact, is the other side of effective privatizations coin (Amsden et al. 1994, p. 210). However, pervasive

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state weakness in Russia and Eastern Europe undermines the feasibility of state-led development (Stark & Bruszt 1998). Scholars disagree on the roles of elites and civil society in policy design and implementation. In the neoliberal conception, reformist elites carry out social change from above, avoiding compromise with interest groups and using demo cratic institutions to legitimate a preset reform agenda (Aslund 1995, pp. 291311; Przeworski 1991, pp. 136187). Advocates of Asian-style industrial policy, in turn, seek to create an economically functional bureaucracy to control restructuring, privatization, and then regulation and guidance of efcient enterprises (Amsden et al. 1994, p. 210). Some scholars dispute the possibility of combining democracy and economic development in transitional economies. For Burawoy & Krotov (1992, pp. 3336), the withdrawal of the party-state aggravated the distortions of the socialist economy, and the task of building market institutions is too daunting for liberal democracy. In contrast, Stark & Bruszt (1998, p. 135) dismiss social change from above, arguing that deliberative associations, connecting local governments, banks, rms, and community actors, should lead property transformation and company restructuring. Some authors address the connections among institutions, politics, and property transformation. Stark & Bruszt (1998, p. 101) conclude that different paths of extrication from state socialism brought about different forms of interest mediation, which produced divergent privatization strategies. Appel (2000) emphasizes ideological variables. In contrast to Russia, anticommunist ideology in the Czech Republic eroded interest groups capacity to affect the privatization program. Roland (2002), however, stresses geopolitics. Whereas transition in Russia meant the loss of the Soviet empire, in Central Europe it created the opportunity to join Western Europe. Central European nations geopolitical position enhanced the credibility of market reforms, cementing government authority and strengthening property rights.

Intellectual Property
Intellectual property illustrates the political, economic, legal, and cultural processes through which property rules in capitalist economies are extended into new realms. Intellectual property rights have existed since the rst patent laws (Venice passed one in 1474), but recent developments in biotechnology, computer software, and information processing have subverted older rules (Merges 2000). For example, computer programs are like text written in an articial language. As property, text is traditionally protected by copyright law. But computer programs also embody algorithms, and so resemble patentable industrial procedures (Nalley 2000). Which applies, patent or copyright law? Or consider that bioengineers can now genetically modify forms of life. Traditionally, products of nature could not be patented (Eisenberg 2002, p. 4), but after the U.S. Supreme Court upheld the patentability of genetically engineered organisms in the 1980 Diamond v. Chakrabarty decision, and after the USPTO patented an animal in 1988, the

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distinction between articial and natural became much fuzzier (Kevles 2002). These developments also challenge cultural prohibitions against the commodication of life (Andrews & Nelkin 2001). Furthermore, the extreme mobility of informational products eludes the political boundaries that make clear which jurisdiction, and therefore which property rules, applies. Samuelson (1996) offers the example of a digitized, colorized silent movie, part of the U.S. public domain, uploaded onto an Internet server and then accessed by someone in France or Germany. The movie may not be in the public domain in Germany because that country offers longer periods of protection than the United States, and to colorize a black-and-white movie violates French rules about the integrity of artistic products. Which countrys law applies? Is the movie illegal? Intellectual property rights today reect a set of changes: new objects and subjects of property, a shifting locus of enforcement, and new political coalitions favoring (or opposing) particular property rights. These changes unfold at the national and international levels. Consider the objects of intellectual property: thanks to scientic and technological progress, biotechnological and pharmaceutical researchers invent products with enormous commercial potential. But to capture those prots, new products must be brought within intellectual property law and constituted as legitimate objects of property. Similarly, the development of computers and networks has not only supported a large software industry, but also made it much easier to copy and distribute digital products (Healy 2002; Shapiro & Varian 1999, pp. 34). To prot, producers of informational products seek effective enforcement of their property rights and deterrence of cyber-piracy. In general, those who create informational, biotechnological or pharmaceutical products want to see IPR dened expansively and enforced rigorously. Business groups like the International Intellectual Property Alliance and the Business Software Alliance lobby governments on behalf of industries producing intellectual property (Braithwaite & Drahos 2000, pp. 7071). Producers also use contracts to augment property rights law if they deem the latter inadequate (see Nimmer 1999 on shrink-wrap licensing agreements between software companies and users) or inappropriate (general public licenses and open-source code, see OMahony 2003). The U.S. government has been particularly responsive to such concerns and pushes for strong IPR internationally (Braithwaite & Drahos 2000, pp. 66, 79). The costs of duplication and distribution of many informational products are close to zero, so global trade has developed rapidly (Maskus 2000, pp. 7383). Along with global markets, the locus for enforcement has shifted from the national to the supranational level, changing the politics of IPR. As international organizations harmonize varying national rules and standards, interest groups can use their domestic political power to inuence global rules. For example, the criteria for patentability enshrined in TRIPS are essentially U.S. standards. However, harmonization remains very incomplete, and national differences persist. U.S. sponsorship of agreements like TRIPS represents a turnaround from the nineteenth century when American support for intellectual property was much weaker. The Copyright Act of 1790 protected only U.S. citizens and residents

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and permitted literary piracy by domestic publishers (something Charles Dickens complained about; see Vaidhyanathan 2001, pp. 5052). But as the United States began to produce and export intellectual property, its position in international trade negotiations altered. Like other countries, however, the United States will entertain loosening IPR in case of national emergency. For example, during the anthrax scare of 2001, politicians debated whether to override Bayers patent on the antibiotic CIPRO (Resnik 2002). Today, the United States faces opposition from developing countries whose citizens seek cheaper medicines and who pirate videos, software, recordings, and other information products. Given the imbalance of power, countries seldom oppose the United States directly but instead combine formal compliance with weak implementation (a decoupling strategy). As countries develop their own internal producers of intellectual property, however, domestic political pressure for stronger protections emerges (Maskus 2000, p. 97). Of course, U.S. citizens practice their own piracy by downloading and exchanging popular music (witness Napster), but two streams of scholarly argumentation have emerged in the United States to oppose strong IPR. The rst recognizes that whether an innovation becomes property depends on the patent ofce. Patent ofces operate by at: if they bestow a patent on an idea, that idea becomes property. Yet observers note the variable competence and capacity of patent ofces. Patent examiners evaluate submissions by the three criteria mentioned earlier, often in highly esoteric areas for which they are not well qualied. The USPTO has been criticized for being overly generous to patent applicants. Lerner (2003) observes that in awarding patents on nancial methods and formulas, the USPTO often ignored academic research that anticipated the supposed discovery, while Hall (2003, p. 12) emphasizes the low quality of many recent patent decisions. The second, more fundamental criticism addresses the purpose of intellectual property law. Intellectual property is created, not found, and owners receive a temporary monopoly (Posner 2002, pp. 89). They enjoy monopoly rents, but when the patent or copyright expires, their contribution joins the public domain, where others can freely use or exploit it. This arrangement encourages innovation in a way that provides both public and private benets. But a number of scholars worry that in the rush to extend private property rights into new realms, the balance has tipped too much toward private interests and now discourages innovation and creativity. Lessig (2001), Rose (1998), Eisenberg & Nelson (2002), and Vaidhyanathan (2001) discuss the tension between information as property (with the emphasis on exclusivity and controlled access) and information as expression (open access becomes predominant). Free expression is one of the foundations of a liberal society, and the information commons is a source of creativity and originality. Locking up ideas with strong property rights privileges owners at the expense of everyone else, and ultimately sties scientic and artistic invention. Others contest the status quo directly and have tried to decommodify computer software through the open-source software movement (Boyle 2002). Universities

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are now caught on both sides of the issue: As patent owners they prefer strong property rights, but as academic institutions they try to sustain an information commons (Eisenberg 2003).

CONCLUSION
Property rights encompass law, economy, state, politics, science, and culture, and so they possess much sociological relevance. Future research should focus on variations in property rights along the dimensions discussed above, documenting empirical patterns and building toward explanations. Some obvious questions include: how do new objects and new subjects of property become constituted? Does the distribution of new assets reect older inequalities, and what are the implications for the reproduction of inequality? Will global integration lead to a single, dominant, property rights regime? What balance exists between formal and informal property rights, and are these two substitutes or complements? How do the politics of property unfold during periods of institutional transformation? What is the interplay between formal property interests in things and social or cultural interests (e.g., formal ownership fails to capture the pricelessness of a family heirloom)? How necessary are transparent and predictable property rights? Doubtless, many other questions will arise. ACKNOWLEDGMENTS We thank Lisa Bruggeman and Aaron Novod for their able research assistance, John L. Campbell, Neil Fligstein, and Wendy Espeland for very helpful comments, and the Lochinvar Society for its warm support.
The Annual Review of Sociology is online at http://soc.annualreviews.org

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Annual Review of Sociology Volume 30, 2004

CONTENTS
FrontispieceW. Richard Scott
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xii

PREFATORY CHAPTER
Reections on a Half-Century of Organizational Sociology, W. Richard Scott 1

THEORY AND METHODS


Narrative Explanation: An Alternative to Variable-Centered Explanation? Peter Abell Values: Reviving a Dormant Concept, Steven Hitlin and Jane Allyn Piliavin Durkheims Theory of Mental Categories: A Review of the Evidence, Albert J. Bergesen Panel Models in Sociological Research: Theory into Practice, Charles N. Halaby 287 359 395 507 243 409

SOCIAL PROCESSES
The New Science of Networks, Duncan J. Watts Social Cohesion, Noah E. Friedkin

INSTITUTIONS AND CULTURE


The Use of Newspaper Data in the Study of Collective Action, Jennifer Earl, Andrew Martin, John D. McCarthy, and Sarah A. Soule Consumers and Consumption, Sharon Zukin and Jennifer Smith Maguire The Production of Culture Perspective, Richard A. Peterson and N. Anand Endogenous Explanation in the Sociology of Culture, Jason Kaufman

65 173 311 335

POLITICAL AND ECONOMIC SOCIOLOGY


The Sociology of Property Rights, Bruce G. Carruthers and Laura Ariovich Protest and Political Opportunities, David S. Meyer The Knowledge Economy, Walter W. Powell and Kaisa Snellman 23 125 199 v

vi

CONTENTS

New Risks for Workers: Pensions, Labor Markets, and Gender, Kim M. Shuey and Angela M. ORand Advocacy Organizations in the U.S. Political Process, Kenneth T. Andrews and Bob Edwards Space in the Study of Labor Markets, Roberto M. Fernandez and Celina Su

453 479 545

DIFFERENTIATION AND STRATIFICATION


Gender and Work in Germany: Before and After Reunication, Rachel A. Rosenfeld, Heike Trappe, and Janet C. Gornick
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INDIVIDUAL AND SOCIETY


The Sociology of Sexualities: Queer and Beyond, Joshua Gamson and Dawne Moon 47

DEMOGRAPHY
Americas Changing Color Lines: Immigration, Race/Ethnicity, and Multiracial Identication, Jennifer Lee and Frank D. Bean 221 427

URBAN AND RURAL COMMUNITY SOCIOLOGY


Low-Income Fathers, Timothy J. Nelson

POLICY
Explaining Criminalization: From Demography and Status Politics to Globalization and Modernization, Valerie Jenness Sociology of Terrorism, Austin T. Turk 147 271 81

HISTORICAL SOCIOLOGY
Comparative-Historical Methodology, James Mahoney INDEXES Subject Index Cumulative Index of Contributing Authors, Volumes 2130 Cumulative Index of Chapter Titles, Volumes 2130 ERRATA An online log of corrections to Annual Review of Sociology chapters may be found at http://soc.annualreviews.org/errata.shtml

571 591 595