The concept of state ownership is particularly ambiguous. In a democratic society, state property may have some of the characteristics of common prop… - Þráinn Eggertsson

We begin by introducing what we refer to as the naive theory of property rights and its application in several areas. The naive theory looks at the emergence or nonemergence of exclusive rights in terms of the costs and benefits of exclusion and the cost of internal governance when individuals share property rights.

In general terms, transactions costs are the costs that arise when individuals exchange ownership rights to economic assets and enforce their exclusive rights. A clear definition of transactions costs does not exist, but neither are the costs of production in the neoclassical model well defined.

Adam Smith began his Wealth of Nations with an examination of the internal works of a pin factory, but he soon turned his attention to other things: the coordination of a market system and the economics of growth and development. For more than a century and a half following the publication of Smith's masterpiece, the nature and internal organization of the firm received little attention in mainstream economic theory.