08 carruthers & ariovitch 2004

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Annu. Rev. Sociol. 2004. 30:2346doi: 10.1146/annurev.soc.30.012703.110538

Copyright c 2004 by Annual Reviews. All rights reservedFirst published online as a Review in Advance on January 7, 2004

THE SOCIOLOGY OF PROPERTY RIGHTS

Bruce G. Carruthers and Laura AriovichDepartment of Sociology, Northwestern University, Evanston, Illinois 60208;

email: [email protected]

Key Words economic sociology, law, transition economies, intellectual property

I Abstract Property rights matter for their effects on economic inequality andeconomic 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 (whatcan 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 offerexamples of how property rights systems vary along these dimensions and how theychange over time. We illustrate the arguments with two contemporary empirical cases:the transition economies of Eastern and Central Europe, Russia, and China, and thetransformation 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 defined 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 definition 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 influence, govern, and exploit people (Roemer 1989). Owners of productive

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24 CARRUTHERS ARIOVICH

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 involvestriadic 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 figure into studies of transi-

tion economies (e.g., Nee 1992, Stark 1996, Walder 1992), class analysis (Wright

2002), comparative capitalisms (Dore 2000, Hall & Soskice 2001), and specific

types of property (Patterson 1982), but they have not received an encompassing so-

ciological 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 stratification. Ownership constitutes one of the most enduring di-

mensions of inequality (Earle 2000). Property in modern societies is maintained

by the legal system, and so directly implicates law and the state, but informal prop-

erty 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 elementalmarket transaction, and so property grows in importance with expanding markets.

We begin with Reeves (1986, p. 11) definition 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 defined 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 five 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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SOCIOLOGY OF PROPERTY RIGHTS 25

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 commodification and de-

commodification, and on permeable boundaries between legal and illegal markets.

In agrarian societies, land is key for production. Common law property rights

reflect 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 ac-

commodate new forms of intangible property. The crime of trespass originally con-

cerned 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 na-

ture, physical phenomena, and abstract ideas cannot be patented (Hunt 2001, p. 6).

Recent developments have allowed living animals, bioengineered bacteria, fi-

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 commodification 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 incor-

poreal 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 offices were common in early modern Eu-

ropean 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 efficiency of

public organizations.

Why some objects can be owned and others cannot depends on culture and for-

mal law. Objects possessing powerful, noncommercial social meanings are oftendeemed 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 Amer-

icans, but the cultural meaning of land precludes its treatment as a mere commodity

(Espeland 1998). The adoption and enforcement of modern IPR law in contem-

porary 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 objectsis more than just dichotomous, however, for even granted that something can be

owned, legal rules and social norms still influence 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 importantdifference lies between natural and fictive persons, but these two groups subdivide

further. No society grants full ownership rights to all natural persons, and the rights

of fictive persons often differ across public/private or profit/nonprofit lines. Fur-

thermore, 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 specificity in time-share condominiums.

Natural persons who are foreigners or minors may enjoy only limited ownershiprights, or even no rights at all. People who are owned (slaves) do not themselves

have full rights to own (Patterson 1982, p. 182). Sometimes specific owner-property

pairings are prohibited, as with restrictions on foreign investment in strategic in-

dustries, felon ownership of handguns, or minority ownership of homes in white

neighborhoods (Rice 1968). Such prohibitions have strong implications for pat-

terns 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 landwas 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 prop-

erty, 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 favoredsons 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 fictive individuals like corporations increasingly important as owners (Per-

row 2002, pp. 3640; Roy 1997). Corporations function simultaneously as sub-

jects of property (they own) and objects (they are owned). Some corporations have

owned property for many centuries (e.g., the Catholic Church), but the prolifera-tion of corporations has made fictive owners more salient. Unlike natural persons,

fictive persons can continue indefinitely (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 producesnew combinations of owners and property. Thanks

to the Bayh-Dole Act of 1980, American universities can now own patent rightsin intellectual property produced by federally funded research. Universities have

acquired an interest in strong IPR, and their research and pedagogical missions

are influenced 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 specific 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,

fish, cut turf, gatherfirewood, 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 flammable 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 policepowers 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 qualified: One cannot

drive a car, fly an airplane, or operate a medical hospital without a license. Such li-

censing 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 inmarkets 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 regula-

tion. Informal and internal restrictions on the use of corporate property by share-

holders are reflected in stakeholder models of the firm (Donaldson 1995). In the

Anglo-Saxon corporate model, owner-shareholders ultimately control the firm,

although they cede control to their agents, the managers. Stakeholder models,

in contrast, recognize the importance of other constituents of the firm (employ-ees, creditors, customers, suppliers, etc.), who also influence what a firm 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 cove-

nants in loan contracts let creditors constrain how debtors use borrowed money

(Smith & Warner 1979). Fast-food franchise agreements constrain how owner-

operators may operate their franchise [this helps achieve extreme uniformity of

appearance, service, and taste (see Hadfield 1990)]. Other constraints are externaland 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 find it impossible to obtain insurance

(Cheit 1990). Some private standards now have a global reach (Braithwaite &

Drahos 2000).

Informal, social influences on property use are legion. They include the noblesse

oblige that comes with wealth. As Ostrower (1995) documents, the culture ofAmerican 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 influence 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 specifies and enforces these rules? According to North (1990), it is the state.

Specializing in coercion, the state is uniquely qualified to ensure compliance with

all kinds of rules, including property. For North, the state specifies rules serving

its own fiscal 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 firms

they protect (Volkov 2002, p. 51).

North focuses on formal legal enforcement, but many rules are enforced infor-

mally, and some compliance occurs voluntarily. Voluntary compliance depends

on the perceived legitimacy of the rules, and without legitimacy enforcement is

difficult. As Thompson (1975) argued, much resistance in eighteenth-century Eng-

land to private ownership of the former commons stemmed from the perception

that it was illegitimate. The authorities increased coercion by turning many prop-

erty 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 sub-

stantially 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 en-

forcing informal property rights over space in an urban flea market.

The formalization of property does not just crystallize claims but offers sig-nificant 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 cus-

tomary rights were seldom translated perfectly into the new system (Scott 1998,

pp. 3336). But formalization can also help those with informal rights. Mod-

ern intellectual property law potentially can protect practitioners of traditional

medicine and indigenous farmers from uncompensated appropriation of their valu-

able knowledge by pharmaceutical and agribusiness companies (Cleveland &

Murray 1997; Zhuge 2003, unpublished manuscript), although this depends ontheir 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 prop-

erty 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 negotiationsthat established the World Trade Organization (Maskus 2000). Less encompass-

ing 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 belongsnominally to the king, ruler, or government (by treaty, conquest, fiat, 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

office. 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 Office (USPTO)

and their application and interpretation have evolved (Lerner 2002). Considerable

cross-national variation characterizes patent office 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 filed, 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 finders [but these

rules vary substantially over time and across jurisdictions (West 2003)]. A more

significant 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 unilat-

eral 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 influenced by the Church and ecclesiastical law (Berman

1983, pp. 230237). Many inheritance rules (e.g., primogeniture, impartible inher-

itance) favor particular heirs (sons over daughters, close kin over distant kin, eldest

sons over others) and thus structure how patterns of inequality are reproduced in-

tergenerationally (Spring 1993). Inheritance rules differ significantly 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 otherpersonal factors to influence inheritance.

IMPLICATIONS OF PROPERTY

The five 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 stratification 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 andhence 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 dejure 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. Dra-

matic 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 specific. In the early eighteenth century, Englands parliament imposed part-

ible 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, theEnglish hoped that within two or three generations their opponents, the Irish aris-

tocracy, 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 ofinheritance, 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 offices 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 passon their assets. In the United States, estate taxes influence how wealthy families

make their bequests (Brownlee 2000), whereas Islamic economies grapple with

Koranic strictures against excessive wealth inequality (Kuran 1995). Intergenera-

tional conflict 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 accumu-

lation and preservation of capital (Nazzari 1995).

Differences in property ownership beget different political interests. For ex-ample, most of the worlds intellectual property is owned by Europe, the United

States, and Japan. Developing countries consume intellectual property. This dif-

ference 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).

PerformanceProperty 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 efficient (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 influence economic performance,

both within firms (Hart & Moore 1990) and without. Economists studying the

connection between property rights and efficiency recommend private propertyas best for economic growth (Soto 2000) and have argued that property rights

matter for resource exploitation, investment, growth, firm 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 somecircumstances (Wank 1999, Shipton 1994).

Unlike communal property, private property internalizes externalities. The

extension of private property is behind new market-based environmental pol-

icy, in which SO2 emissions permits internalize the externality of air pollution

(Levin & Espeland 2002). Private property is also touted as a solution to tropi-

cal 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 specified

private property, owners may not act rationally (Moxnes 1998), and people findmany 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 & Mansfield 1996) and encourages innovation and technological progress

(Khan 1995). Others do not find simple relationships between patent strength and

patent filings (Lerner 2002).

DYNAMICS OF PROPERTY

Property changes along the five dimensions discussed above. New forms of own-

ership 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 prop-

erty 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 prop-

erty 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 Par-

liament (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 controver-sial 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 efficiency explanations for how property rights change

(Barzel 1989). Private property rights are more specific and costly to enforce than

public property rights, but an increase in the value of a resource makes it efficient

to move from public to private property rights. Others acknowledge that change

does not always lead to greater efficiency (North 1990). In particular, property

rights have distributional implications, and these unleash conflicts that can preventefficiency-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 modified 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 analy-

sis. It reveals the political and institutional foundations of property because transi-

tion governments have deliberately attempted to create the property rights appro-

priate for a market economy. In most transition economies, privatization remains

a central aspect of reform: Individuals and private organizations gained owner-ship over state-owned property. Transition economies involve new property ar-

rangements and means of enforcement, with various consequences for economic

performance and social stratification.

Understanding property arrangements in transition economies requires unty-

ing the bundle of property rights. King (2001, p. 39) concludes that rights to

take residual profits, to control and organize production, and, to a lesser ex-

tent, to sell property are mostly with nonstate actors. But private ownership

in Eastern Europe often differs from that in the West: Control belongs to man-

agers embedded in networks, but ownership resides in the firms themselves. Byearly 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 firms, government-

management 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 superfluous 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 re-

spects (Johnson et al. 2002). In Russia, weak laws in combination with high busi-ness costs fostered mafia-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 net-

works 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 restruc-

turing. Privatization would eliminate soft budget constraints and the agency

problems associated with public ownership (Kornai 1992). Although there is ev-

idence 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, blamingthe rapid and massive transfer of state property in the absence of laws for cor-

porate 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 firm in a value-enhancing

direction.

Some look to China to show how to run state companies efficiently. Accord-

ing to Naughton (1995), Chinese authorities changed state managers incentives

by relaxing the state monopoly in industry and establishing long-term profit con-tracting for state-owned companies. Walder (1995) argues that local governments

are more likely than central authorities to impose hard budget constraints, espe-

cially when they face market and fiscal 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, alteredstratification patterns. According to Nees theory, marketization and new property

rights reduce the advantage ofredistributive 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 mar-

ket reforms accelerated, with the winners including both workers with market

connected jobs and workers with redistributive power. Income inequality also in-

creased in Russia during the early 1990s (Gerber & Hout 1998). Market reform

benefited proprietors but hurt professionals, skilled and unskilled manual work-ers, 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

conflicts, 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 East-ern 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, pri-

vatization of the largest companies led to a self-reinforcing kleptocracy devotedto 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 experi-

ment 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 eco-nomic growth. Extolling the virtues of state-led development in East Asia, scholars

have called for active state engagement in industrial policy and company restruc-

turing. 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 socialchange 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 efficient enterprises (Amsden

et al. 1994, p. 210). Some scholars dispute the possibility of combining democ-

racy 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 dauntingfor liberal democracy. In contrast, Stark & Bruszt (1998, p. 135) dismiss social

change from above, arguing that deliberative associations, connecting local gov-

ernments, banks, firms, 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 ex-

trication from state socialism brought about different forms of interest mediation,

which produced divergent privatization strategies. Appel (2000) emphasizes ideo-

logical variables. In contrast to Russia, anticommunist ideology in the Czech Re-public 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 pro-

cesses through which property rules in capitalist economies are extended into

new realms. Intellectual property rights have existed since the first 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 artificial language.

As property, text is traditionally protected by copyright law. But computer pro-

grams also embody algorithms, and so resemble patentable industrial procedures

(Nalley 2000). Which applies, patent or copyright law? Or consider that bioengi-neers 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 artificial and natural became much fuzzier (Kevles 2002).

These developments also challenge cultural prohibitions against the commodifi-

cation of life (Andrews & Nelkin 2001). Furthermore, the extreme mobility of

informational products eludes the political boundaries that make clear which ju-risdiction, and therefore which property rules, applies. Samuelson (1996) offers

the example of a digitized, colorized silent movie, part of the U.S. public do-

main, 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 col-

orize 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 reflect a set of changes: new objects and sub-

jects of property, a shifting locus of enforcement, and new political coalitionsfavoring (or opposing) particular property rights. These changes unfold at the na-

tional and international levels. Consider the objects of intellectual property: thanks

to scientific and technological progress, biotechnological and pharmaceutical re-

searchers invent products with enormous commercial potential. But to capture

those profits, new products must be brought within intellectual property law and

constituted as legitimate objects of property. Similarly, the development of com-

puters 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 profit, producers of informational products seek effectiveenforcement of their property rights and deterrence of cyber-piracy.

In general, those who create informational, biotechnological or pharmaceutical

products want to see IPR defined expansively and enforced rigorously. Business

groups like the International Intellectual Property Alliance and the Business Soft-

ware 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 organiza-

tions harmonize varying national rules and standards, interest groups can use their

domestic political power to influence global rules. For example, the criteria for

patentability enshrined in TRIPS are essentially U.S. standards. However, harmo-nization 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 entertainloosening 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 pressurefor 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 first recognizes that whether an innovation becomes property depends on

the patent office. Patent offices operate by fiat: if they bestow a patent on an

idea, that idea becomes property. Yet observers note the variable competence and

capacity of patent offices. Patent examiners evaluate submissions by the three

criteria mentioned earlier, often in highly esoteric areas for which they are notwell qualified. The USPTO has been criticized for being overly generous to patent

applicants. Lerner (2003) observes that in awarding patents on financial 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 benefits. But a number of schol-

ars 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 innova-

tion 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 andoriginality. Locking up ideas with strong property rights privileges owners at the

expense of everyone else, and ultimately stifles scientific 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, document-

ing 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 reflect 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 xii

PREFATORY CHAPTER

Reflections on a Half-Century of Organizational Sociology,

W. Richard Scott 1

THEORY AND METHODS

Narrative Explanation: An Alternative to Variable-Centered Explanation?

Peter Abell 287

Values: Reviving a Dormant Concept, Steven Hitlin and

Jane Allyn Piliavin 359

Durkheims Theory of Mental Categories: A Review of the Evidence,

Albert J. Bergesen 395

Panel Models in Sociological Research: Theory into Practice,

Charles N. Halaby 507

SOCIAL PROCESSES

The New Science of Networks, Duncan J. Watts 243

Social Cohesion, Noah E. Friedkin 409

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 65

Consumers and Consumption, Sharon Zukin and Jennifer Smith Maguire 173

The Production of Culture Perspective, Richard A. Peterson and N. Anand 311

Endogenous Explanation in the Sociology of Culture, Jason Kaufman 335

POLITICAL AND ECONOMIC SOCIOLOGY

The Sociology of Property Rights, Bruce G. Carruthers and

Laura Ariovich 23

Protest and Political Opportunities, David S. Meyer 125

The Knowledge Economy, Walter W. Powell and Kaisa Snellman 199

v

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vi CONTENTS

New Risks for Workers: Pensions, Labor Markets, and Gender,

Kim M. Shuey and Angela M. ORand 453

Advocacy Organizations in the U.S. Political Process, Kenneth T. Andrews

and Bob Edwards 479

Space in the Study of Labor Markets, Roberto M. Fernandez and Celina Su 545

DIFFERENTIATION AND STRATIFICATION

Gender and Work in Germany: Before and After Reunification,

Rachel A. Rosenfeld, Heike Trappe, and Janet C. Gornick 103

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 Identification, Jennifer Lee and Frank D. Be

08 carruthers & ariovitch 2004

Documents