appropriate improvements for the advantage of future owners. The present owner of farmland will fertilize it for the benefit of future owners because that will allow him to sell the land to them at a higher price (b) Both forms of incentives to maintain and improve durable things, those deriving from ownership and those associated with a supervisory regime, seem importa in reality. Individuals own many things, ranging from their clothing and other personal articles, to electronic equipment, automobiles, and real estate, and because they own such things, they are naturally led to take care of them. Where durable things are not owned but are rented(or are used by employees of enterprises), the present possessors need inducement to take into proper account the interests of future possessors. This is accomplished generally by use of maintenance requirements(to fertilize leased farmland), obligations to allow others to maintain things( to admit a landlord into an apartment to make repairs), and penalties for harm done( for damaging a rented vehicle) (c)At the same time, we observe problems with the care of durable things when no one owns them or when there are substantial difficulties in monitoring the behavior of users of the things. For example, public parks often are treated irresponsibly (or are vandalized), the reason being that an individual will not generally be able to benefit personally in the future from any effort that he makes to maintain the park (if a person cleans a picnic table, he will probably not profit from that in the future because he will be unlikely to use that particular table again, or at least not before someone else does) 2.4 Incentives to transfer things. An additional advantage of property rights is that they foster the beneficial transfer of things. Let us now consider a model in which there are several types of goods. Then there are both direct and indirect reasons why it will be socially desirable for goods to be transferred among people The direct advantage of transfer of goods, that is, of trade, is that it raises the utilities of those who engage in it. This may be because the preferences of individuals differ. If a person who possesses parcel of land X and prefers parcel Y makes a trade with a person who possesses Y but prefers X, both will be made better off by the exchange Trade may also raise the utility of individuals who have similar, or even identical preferences, because they may wish to consume a mix of different types of goods but possess only one or only several types of goods prior to trade Suppose one person possesses two apples and no bananas, another possesses two bananas and no apples, and each would prefer to consume one piece of each fruit than two pieces of the same fruit Then each person will be made better off by trading one piece of fruit for a piece of the other fruit In addition, the ability to trade enhances social wel fare indirectly because it allows the use of efficient methods of production. Efficient methods of production take advantage of specialization and of agglomerations of individuals who devote themselves to making just one or several related goods. But this means that the allocation of good immediately after they are produced is far from what is best for purposes of consumption the individuals at a factory who produce thousands of units of some good cannot individual to consume many different types of goo oduced goods enables each consume that good alone. The transfer and trade of pro It is clear that if only possessory rights exist, optimality will not be achieved because things that exist will not be traded Individuals will produce solely for personal consumption rather than collectively organize and employ efficient production methods pter 7-Page 7appropriate improvements for the advantage of future owners. The present owner of farmland will fertilize it for the benefit of future owners because that will allow him to sell the land to them at a higher price. (b) Both forms of incentives to maintain and improve durable things, those deriving from ownership and those associated with a supervisory regime, seem important in reality. Individuals own many things, ranging from their clothing and other personal articles, to electronic equipment, automobiles, and real estate, and because they own such things, they are naturally led to take care of them. Where durable things are not owned but are rented (or are used by employees of enterprises), the present possessors need inducement to take into proper account the interests of future possessors. This is accomplished generally by use of maintenance requirements (to fertilize leased farmland), obligations to allow others to maintain things (to admit a landlord into an apartment to make repairs), and penalties for harm done (for damaging a rented vehicle). (c) At the same time, we observe problems with the care of durable things when no one owns them or when there are substantial difficulties in monitoring the behavior of users of the things. For example, public parks often are treated irresponsibly (or are vandalized), the reason being that an individual will not generally be able to benefit personally in the future from any effort that he makes to maintain the park (if a person cleans a picnic table, he will probably not profit from that in the future because he will be unlikely to use that particular table again, or at least not before someone else does). 2.4 Incentives to transfer things. An additional advantage of property rights is that they foster the beneficial transfer of things. Let us now consider a model in which there are several types of goods. Then there are both direct and indirect reasons why it will be socially desirable for goods to be transferred among people. The direct advantage of transfer of goods, that is, of trade, is that it raises the utilities of those who engage in it. This may be because the preferences of individuals differ. If a person who possesses parcel of land X and prefers parcel Y makes a trade with a person who possesses Y but prefers X, both will be made better off by the exchange. Trade may also raise the utility of individuals who have similar, or even identical, preferences, because they may wish to consume a mix of different types of goods but possess only one or only several types of goods prior to trade. Suppose one person possesses two apples and no bananas, another possesses two bananas and no apples, and each would prefer to consume one piece of each fruit than two pieces of the same fruit. Then each person will be made better off by trading one piece of fruit for a piece of the other fruit. In addition, the ability to trade enhances social welfare indirectly because it allows the use of efficient methods of production. Efficient methods of production take advantage of specialization and of agglomerations of individuals who devote themselves to making just one or several related goods. But this means that the allocation of goods immediately after they are produced is far from what is best for purposes of consumption; the individuals at a factory who produce thousands of units of some good cannot consume that good alone. The transfer and trade of produced goods enables each individual to consume many different types of goods. It is clear that if only possessory rights exist, optimality will not be achieved because things that exist will not be traded. Individuals will produce solely for personal consumption rather than collectively organize and employ efficient production methods. Chapter 7 - Page 7