PART I: AN INTRODUCTION TO SOME FUNDAMENTALS
CHAPTER 1: FIRST POSSESSION: ACQUISITION OF PROPERTY BY DISCOVERY, CAPTURE, AND CREATION
A. What is Property?
· Theories:
1. Locke’s Labor Theory:
a. “Every man has a property in his own person and thus is entitled to whatever he removes out of the state of nature and mixes his labor with
i. B/c you own your own labor, when you mix the labor w/ something UNOWNED BY ANYONE, you own the resulting mixture
ii. Locke restricted the application of this theory to contexts in which:
1. There is enough and as good left in common for others
2. Laborer is limited to as much as anyone can make use of to any advantage of life before it spoils
2. The Personhood Theory:
a. “everyone has their own will, and that will has an effect on the world – through one’s own will, one has the ability to mark things as their own property.” – Georg Hegel
b. Margaret Radin’s interpretation of this: the distinction between fungible and personal property is crucial, with the strength of entitlement increasing as the object becomes more central to one’s personhood
c. i.e.: our property book is fungible, a wedding ring might be so personal that there is more entitlement attached
3. Utility and Efficiency:
a. Economists explain property as an efficient response to scarcity
b. Economic explanation is that externalities are internalized (borne by their maker)
c. What are externalities?
i. Costs/benefits that a property owner does not have to internalize, that fall on other 3rd parties
ii. Actor fails to take into account the actions of his/her actions on 3rd parties
iii. Externalities exists when someone (X) makes a decision about how to use resources w/out taking full account of the effects of the decision (they are external to X- thus “externalities”)
iv. i.e.: X owns a swamp that has tons of mosquitoes. It hurts the neighbors. It would cost X money to drain it, a cost, but a benefit to the neighbors.
1. SOLUTION: X and neighbors could bargain to make sure it worked for everyone – X probably won’t drain the swamp unless the neighbors give X more money than it would cost to do it (i.e.: costs X $500 to drain, neighbors willing to pay $1000, could negotiate somewhere in between – this is efficient for society)
v. *NOTE*once X is aware of the effect that his actions has on another but proceeds anyway, then you can’t call it an “externality”, b/c X has taken account of it in deciding to continue his present course of action
d. Rationale behind the idea: few people would undertake costly, time-consuming activities unless they can be assured that they will keep the benefits of their actions
e. When dealing w/ externalities need to take into account transaction costs:
i. There is a cost of just getting everyone together (i.e.: neighbors live too far away, there are too many, raising money could be costly) and maybe finding out the identity of who they are dealing with
ii. Where might transaction costs be highest and lowest?
1. Highest: where lots of people are involved, parties’ interests are not direct (if people really don’t feel that strongly about an issue it is going to be harder to get them together)
2. Lowest: where small motivated groups are acting partied (b/c they are easier to motivate)
ii. Transaction costs lead to inefficiencies because they can make bargaining less likely. Where bargaining is less likely, resources are more likely to be misused.
iii. Free riders are problematic b/c they would contribute very little to the neighbor’s cause and still reap the benefits (i.e.: a free rider who claims they are unaffected/slightly affected by problem may donate $1 toward draining X’s swamp)
f. When the value of a commodity increases, consumption of that commodity increases, and externalities increase b/c everyone is for themselves, not worrying about the effect on others (i.e.: fur value goes up, hunting increases, fur animal population plummets – property is meant to deal with this externality problem)
g. Communal ownership – right to exclude outside of the community, but no right to exclude between individuals within the community, and no right to interfere with any person’s exercise of communally owned rights
i. DANGER: no incentive to consider the cost of your activity on others = more externalities
h. Private ownership – community recognizes the right of individuals to exclude others from exercising the owner’s private rights.
i. Without private ownership, no guarantee that anything will be left for the future – there could be externalities w/private property, but tend to be much lower than w/communal property
i. Coase Theorem: absent of transaction costs, it does not matter what the parties rights or liabilities are, the parties will just bargain to an efficient solution
i. We are not in a vacuum. This is purely theoretical – there will always be transaction costs.
j. Demsetz Theorem: encourages privatization (by excluding people you can protect the resources for longer; when you have a problem you deal w/ less people, rather than more if it were in community)
k. Tragedy of the commons – when there are not enough rights to exclude
i. resources that are owned in common will be abused/overused (i.e.: rule of capture could lead to ToC)
ii. no regulations on how much of something you can take OR no regulations on how much of something you can put into the environment (i.e.: pollution) – could give parties incentive to capture a fugitive resource – nobody is looking to the future – resource becomes depleted
l. Tragedy of the anticommons – when there are too many rights to exclude
i. when the owners exercise the right to exclude extensively, the resource will not be sufficiently utilized or used at all
ii. i.e.: in Moscow, too many rights to exclude in store-front buildings so the store fronts lied vacant and goods were sold in metal kiosks outside
4. Custom:
a. Customs are intended to maximize aggregate wealth of the customary participants
b. Ex: Ghen v. Rich: Whalers, had custom designed to deal w/ the uncertain business of capturing animals when got on shore
c. If altered this custom: PROBLEM:Then this branch of industry would cease, for no person would engage in it, if the fruits of his labor could be appropriated by any chance finder – no incentive to catch whales
5. Relativity of title:
a. RULE: a person in possession of land or goods, even as a wrongdoer, is entit
possession (shot at and sunk to bottom)
3. RATIONALE: disregarding the custom and making a first physical possession rule of ownership would eliminate all incentive to hunt whales, thus depriving the society of the benefits of a continued supply of whale oil
4. Custom important b/c it’s how everyone in that area does business – it is efficient and courts should defer to it – b/c there is nothing else you can do to secure the animal, it is already mortally wounded (enough for capture under Pierson)
v. Problems with custom: slow to change, does not always overlap with the greater social interest, maybe without the custom, they would go out get better tools and find better ways to capture whales
d. PROPERTY RIGHTS:
i. Ex: Keeble v. Hickeringill:
1. K creates decoy pond mimicked after H’s design; H, unpleased, frightened the ducks away from K’s pond by shooting a shotgun
2. Such conduct was ACTIONABLE – MALICIOUSLY INTERFERING W/ POND OWNER’S LAWFUL ACTIVITY – (where a violent/malicious act is done to a man’s occupation, profession, way of livelihood – an action lies b/c it imports damage
3. NOTE: building a duck pond would be fine (no action) b/c both K and H had equal liberty to make/use their own duck ponds – this is competition and competition is okay
a. BUT if you fire a gun- you don’t capture the ducks and neither does your neighbor (so this does not achieve the goal – the goal, like Pierson, is to kill as many ducks as possible) – gunshot deters goal – having another pond would lead to killing of more ducks/promote goal
4. RATIONALE: fair competition improves society – this conduct was a dead-weight drag on societal improvement
e. ESCAPEES AND DOMESTICATED ANIMALS:
i. When wild animal escapes it is un-owned- belongs to the NEXT FIRST POSSESSOR
ii. A trespasser who captures a wild animal on the land of another might not have rights to the animal against the landowner, even though the landowner never had actual physical possession or control and even though the trespasser does. Court would say that the landowner had “constructive possession.”
1. T steals wild animal from property of O. O might have a claim against T b/c O had constructive possession. T1 steals animal from T, saying T stole it and didn’t have right to ownership. T had actual possession and would win the claim. O could not take it back from T because: actual possession trumps constructive possession
iii. Domesticated animals are not wild, so they continue to belong to their prior possessor when they wander off. Owners have actual possession of domesticated animals.
