Enforcement of property rights during the Russian transition: Problems andsome approaches to a new liberal solution

The paper examines economic inefficiency stemming from the replacement of t he public property rights enforcement mechanism by private ("mafia-type") e nforcement in the transitional economy of Russia. It is shown that private enforcement leads to the entrenchment of small-scale inefficient monopolies . The state becomes a vehicle for rent seeking and free loading. A simple m odel is employed to argue that a naive laissez-faire approach to the proble m is not likely to work. The paper then argues that any attempt at a once-a nd-for-all institutional solution relying on coordination by a benevolent g overnment is also basically impossible. A step-by-step incentive-based appr oach is advocated; in particular, the paper proposes the nonconventional li bertarian idea of establishing a commercialized government property protect ion service, and it discusses some of its theoretical and practical aspects . The role of the devolution and competition of power is also examined.