Saturday morning May 27, 2006 at 6.00 am, residences of Yogyakarta City, Indonesia were scared by strong shakes that interrupted their routine activities. Earthquake on the 5.9 Richter scale had caused severe damages in this area, killed thousands people and ruined thousand buildings including valuable cultural heritages.
This tragedy has stimulated government awareness to take strategic actions to reduce the lost of precious cultural heritages. It is due to diversified additional values attached on the heritage not only upon the economic values but also non economic values to people who live in this environment. Otherwise, by ignoring this critical condition of the importance of preserving cultural heritage and its values, we are neglecting the heritage values and hence putting it into a worst physical obsolescence. As a result, the cultural city of Yogyakarta will lose its identity and sentimental values. Therefore, a comprehensive reconstruction programs which consider all actors and institutions related to this heritage should be taken into account and acted upon.
Rojas (2002) mentioned that in order to be more sustainable, the urban heritage conservation should consist of three conditions. First, it should involve all social actors. Second, the heritage properties are income-producing or fulfilling the social need. Third, the program should encompass both the monuments and their environments. In heritage management, the system should cover various interrelated factors (Adishakti, 2004) including people orientation, consider multi-disciplines and multisectors, accommodate community appreciation and initiative and receive full support from the government, strong legal back-up and enforcement, public-private partnership as well as the development of a heritage conservation market by the private sectors.
In this study, institutional economics analysis which concern about the role of actors, the way actors interact to each other, the way actors' decision influenced the legal aspect provides facilities to understand how revitalization of cultural heritage in Kotagede should be taken. Therefore, this paper discusses about the use of institutional economics analysis in identifying the way land rights may impede the reconstruction of cultural values in Kotagede, Yogyakarta.
2. Institutional economics analysis
Institutional economics analysis is an analysis that attracts people, particularly economists, because its ability to provide rich facilities to understand the way human beings interact to one another and produce economics products in the market. Within limited resources, agents may use technology to push for their economic activities and producing quality economic products. This institutional analysis emerges due to the failures of the conventional approach (neoclassical) to approach the real world since in economic activities human behavior is dynamic and a perfect cum equilibrium condition involving fully rational economic man is something rarely encountered. Institutional economics analysis tried to expand the conventional approach by incorporating social factors such as individual's preferences, technological possibility and constraints which influence people actions in the economy analysis (Hodgson, 1988).
North (1996) defines institution as constraints on behavior imposed by "the rules of the game" in society: "Institutions include any form of constraint that human being devise to shape human interaction". In term of operational environment, Williamson in Parto (2003) distinguishes between institutional micro and macroeconomics. The macroeconomic deals with the institutional environment while in the micro scale deals with the institutions of governance. According to North (1996) the institutional environment can be in the form of formal rules or informal rules. Institutional governance deals with the coordination in transferring good or right through market, quasi-market or hierarchical modes. …