Property I Outline

Property
Professor Peter Lee
Spring 2017
 
Establishing Property Rights
 
Why study property
Basis of capitalist economy
Foundational for all of law
What is property law?
Source of property = common law
Statutory laws, state and federal
Constitution defines different provisions of eminent domain
Fair Housing Act
Civil Rights Act 1866 and 1964 with respect to discrimination in housing
Property rights are often used to encourage or discourage different types of human behavior
Harold Demsetz & Economic Theory about Property Rights
Argued that property rights were the result of the internalization of externalities
Externalities
Costs or benefits imposed on other that a decision-maker doesn’t take into account à Ie. Co2 Emissions
Native Americans and game hunting for fur
Fur became more valuable à overhunting à cost of overhunting greater than transaction cost of creating property rights à creation of property rights (internalized the cost of overhunting)
Before property rights were established, everyone overhunted because they had no incentive to keep up the stock of game. Idea = kill as many animals as you can before someone else does
With property rights, people were reaping what they sowed; internalized the benefits of not hunting as much; put an effort into keeping up the stock of game
Tragedy of the Commons
Communal property/absence of property rights leads to inefficient overexploitation of resources
Future is discounted because if you are in race w/ your neighbors over consumption of goods, you will consume as much as you can as fast as you can because you know it’ll soon be gone. No thought given to future generations
Voluntary coordination is difficult
Negotiation (transaction) costs will be high
Holdouts – people who don’t agree to voluntary coordination and continue to do what’s solely in their best interests w/ no consideration for good of others / Free riders
Policing costs
Solution?            
Private property reduces externalities
Internalizes costs and benefits, creates more incentives for people to preserve resources
Lowers the costs of voluntary negotiations (possibly because you have less people to negotiate with)
Tragedy of the Anti-commons
Overabundance of property rights leads to inefficient underuse of resources
Too many people having too many property rights makes it difficult to get things done; need permission to do something from too many people; creates high transaction costs that are similar to those of the tragedy of the commons
First Possession by Discovery and Capture
Doctrine of Discovery: First person or people to discover or conquer à own whatever it was that was discovered or conquered
Policy: Property rights diffuse tensions amongst people. Early European conquerors used the Doctrine of Discovery in order to peacibly divide up the new world (at least among themselves)
Lockean Labor Theory: If you use something and make something of the thing, then you can have property rights over it à Although the land was occupied already by Native Americans, Europeans did not consider them as having possession of the land because they didn’t work the land (no agriculture/improvements to the land)
Principle of First in Time and Property Rights as a Bundle of Rights
Johnson v. M’Intosh (NAs occupied land but didn’t own title to it)
Principle of First in Time à US Government owned land because British passed it to them. Handover of land by NA to Johnson wasn’t valid because NA didn’t have right to title over land.
Ratione Soli & Ferae Naturae
Ferae Nature: Wild animal that belongs to no one until it has been captured
Ratione Soli: Meaning it belongs to the soil. If you owned the soil à you owned the things in it, on it, and under it
If A captures a fox on B’s land, A would assert Ferae Nature while B would assert Ratione Soli
Rule of Capture applies to ferae naturae, doesn’t apply to animus revertendi à animals that return such as domesticated animals
Accession: Property rights in some things are allocated by that thing’s relationship with something that already belongs to someone (ie. property owner owns animal on his land because the animal is on his land)
Addition of value to property by the expenditure of labor or the addition of new materials
Ratione soli
Landowner has title to everything on his land because his land has a relationship to the things on it/in it/under it, and he owns the land
Rule of Increase (Increase here means offspring)
Owner of mother of the offspring owns the offspring as well
First Possession and Capture
In order to establish first possession through capture, you need:
Intent to possess
Some type of occupancy, some type of physical relation between you and that object
Occupancy:
Could be mere chase
Could be having a reasonable prospect of getting the property
Could be having certain control over property
Pierson v. Post (Property rights established by capture)
Court held that possession through capture requires person to mortally wound an animal + stay in hot pursuit of animal
Policy: Rule promotes stability because it creates a clear definition of what possession must entail – ie. if property rights could be established just by pursuit, people would argue over what constitutes pursuit.
Dissent argued for local rules for hunters due to them being better informed about customs à “Reasonable prospect”
Policy: Dissent considers foxes nuisances and wanted rules that would encourage people to hunt foxes
Dissent believed that majority decision would discourage people from hunting because their kill could be snatched from under them
On the other hand, if reasonable prospect were enough to establish possession à more people would hunt because their possession of the fox would be established earlier on and no one could steal their work. Sought to reward effort to incentivize fox hunts
Method of Determining Property Rights
Legal Precedent
Instrumentalism:
What law will advance society’s objective in creating the law the most just or better society
Social Norms & The Rules of Capture
Ghen v. Rich (Whaling customs à Adhere to local rules when appropriate)
Killed whale belongs to hunter even though he could not physically capture it
Court applied local norm of finder to report whale’s location and receive finder’s fee à Has limited case application (whales only)
In contrast to Pierson v. Post à Can physically capture fox. Can’t with whale.
“In Rem” nature of property rights & “In Personam”
In rem = Good as against the world
Ghen v Rich: Ghen killed the whale, which established his right of possession + title to the whale. He had “in rem” rights to the whale à He could sue anyone in the world who infringed on his right to the whale
In personam = Good as against one other party. Applies more to subsequent possession.
Property Rules & Productivity (Malicious Interference of Trade vs. Fair Competition
Keeble v. Hickeringill (Duck decoys à Difference between fair & malicious competition)
Court held there was a difference between legitimate and illegitimate eharm to economic endeavors – Competition is okay but malicious interference isn’t.
First Possession by Creation
Intellectual Property
Exclusive rights to intangible assets (movies, designs, inventions, music)
Theory:
At most basic level, we are creating informational goods
Information is a public good (nonrivalrous + nonexcludeable) and left to the market, the market will not produce an optimal level of public goods (according to economic theory) why?
Free rider phenomenon
Policy for Intellectual Property Rights?
Incentivizes people to create assets that are good for the public; giving exclusive rights to the benefits of creating these assets encourages people to continue to create
Doctrines that regulate intellectual property rights
Patents (Inventions)
Processes, machines, manufacturers, compos