Having completed the destructive task of tearing down what others have built up the time has come to begin the construction of an alternative framework, free of the detectable defects of existing structures which purport to be models of the open field system. In this chapter, we shall lay the conceptual and methodological foundations for a theory that will be shown to yield a consistent explanation of the riddles left unsolved from the previous chapter. However, since the theoretical framework to be used is based on a new and developing branch of economic theory, one that has not yet crystallized into a set of final propositions and theorems, it will be necessary to extend the existing analysis in order to demonstrate how a property rights and transaction costs approach can further the understanding of the functioning of institutions. In this context, the concept of transaction costs, its specific relationship to economic institutions, and what is meant by ‘choosing’ institutional arrangements will form these extensions.

First, however, a proper justification must be advanced for choosing the particular methodology that will be employed here, for it is not immediately clear why we shall have to turn to such a relatively undeveloped branch of economic theory as the property rights paradigm in order to find the keys to the open field system. Returning to the stylized facts of the representative open field village in the previous chapter, it will be seen that these facts can be condensed into four main determinants.