*2.1. Property Rights*

Property rights refer to the behavioural relationships of people resulting from the existence of objects and their use. Property rights are rights unified by government enforcement and market forces. The property rights system refers to the systemised property rights relationships and system support for dividing, determining, defining, protecting, and exercising one's property rights [18]. The property rights system can be further divided into formal rules, including laws, regulations, social contracts, the construction and

determination of organisations, and informal rules, including cultural traditions, habits, conventions, moral rules, and so on [19,20].

Property rights include ownership, power of possession, right of control, and right of use. Coase holds a view in *The Problem of Social Cost*, which won the Nobel Prize, that the initial delimitation of legal rights affects the efficiency of an economic system [21]. If property rights are not explicitly defined, then individuals cannot have reasonable expectations whilst making transactions with others, and society will lose benefits generated by labour division and cooperation. Additionally, opportunistic behaviours, such as encroachment on the rights and interests of others, will emerge, and social disruption will be inevitable. Similarly, when individual property rights cannot be protected by society, individuals cannot make long-term economic plans and arrangements and thus lose incentive to accumulate and protect resources. Furthermore, negative drawbacks include the act of wasting and destroying resources [10]. If we want to optimally allocate limited resources, we need to consider and avoid the damaging impact caused by two parties whilst determining their actions [21].

The Coase Theorem shows the decisive effect of property rights on transaction costs [21]. The key points are summarised by Chappelow [22] as:


The clear delineation of private property rights is an essential prelude to market transactions. The clearer the property rights, the lower the transaction costs and the higher the efficiency. This theorem can be reflected in the protection of historical buildings; that is, when the property rights of historical buildings are clear, the operation of the market mechanism and adaptive reuse of historical buildings are efficient and can be used appropriately. However, when property rights are unclear, the protection of historical buildings is hindered and their destruction is exacerbated.

Coase holds the view that 'The delimitation of rights is an essential prelude to market transactions' [19]. In the process of urban renewal and adaptive reuse of historical buildings, clarifying property rights is a prime concern [17]. Coase further states that a government is a super firm because it can influence the use of production factors through administrative decisions. For example, a given government can establish a set of legal systems about rights that can be adjusted through market transactions. It can also compulsorily stipulate laws and require people to obey them. The adjustment of one kind of right produces more output values than other arrangements [21].
