I. Open Access & The Commons
Property Rights Include 3 Bundled Rights
Privilege to Use
Right To Exclude
Right To Transfer
i. Ex. owning a hotel: you will use all of these tights but only to a point
1. Can’t discriminate based on race
2. Eminent domain
Privilege to Use
Limited Access/Common Property
Anyone outside a limited community
Anyone but the owner
No one, (purely open access, ex. high seas, outer space)
Rules or norms (library)
“Tragedy of the Commons”
What happens when someone appropriates property in an open access environment?
i. Results in selfish behavior with an overall negative impact
ii. No ownership stake, no motivation to take care of it (how about the internet?)
iii. This is rational, logical behavior
iv. Creates a race to the bottom
v. Rush to consume degrades the resource
Assumptions in the Theory
i. Few environments are actually totally open access (norms may still apply, more akin to common property)
ii. People really might have a stake in the resource which would induce cooperation amongst parties (may depend on the number of potential users).
iii. Hardin is too much of a legal centrist (maybe laws and rules aren’t the answer). Social norms may be more powerful.
Alternatives to Open Access – How to prevent a tragedy of the commons.
Private contracting, creating rights restrictions w/ some form of enforcement. Allow transfer of grazing rights among parties?
Examples: street kiosks in Russia, wilderness and wildlife areas (everyone has standing to sue to prevent access).
Unclear how or what transformations might occur to make these
The Coase Theorm
If there is no cost to the bargaining (Transaction) parties will always bargain to the best result.
Where the initial entitlement is placed determines the parties’ bargaining position which will enrich the party through subsequent transactions.
i. However, we do live in a world with transaction costs (especially with multiple parties).
1. High transaction costs are found when there is a bilateral monopoly
ii. Assumes law is only way to assign entitlements (as opposed to business and bargaining)
iii. Ignores psychology
1. Not everyone is 100% motivated by money
2. Spite, affection, sentiment
3. People don’t always act rationally/logically
4. “Entitlement effects” – people feel worse about losing something that people feel better about acquiring it.
iv. “Externalities” ignored
1. local (Billboards)
2. big picture (factories/jobs/pollution)
Calebresi & Melamed
Assignmet of Entitlement & How It is Protected
Property Rule: Only the party with the initial property right can agree to sell it.
Liability Rule: Entitlement holder can be forced to give up property right with a 3rd party determination of equity.
Inalienability: Something that cannot be transferred. (ex. organs)
Under Rule 1, π could enjoin a neighbor to prevent construction of a dam.
Under Rule 2 (liability regime), the π could NOT enjoin the dam, bout would receive damages after it was built.
Under Rule 3, a developer can do whatever. P’s only option is to bargain, and the costs will be high.
Rule 4: least used. P can stop the dam with an injunction, but then D is owed damages.
i. Advantages of Liability Rules
1. Avoids hold-out problems.
ii. Advantages of Property Rules
1. Clear entitlements
2. Reduced administrative costs
3. Can protect interests which are subjective
Ex poste/ex ante
i. With enough knowledge, an ex ante bargaining position can under a different property regime (property/liability)
ii. In a Coasian world, the theory is that the result should be the same. However, see page…
5 methods of acquisition of (unowned) property, examples:
1. By owning the land on which the thing exists.
2. By signaling, posting a sign signifying ownership.
3. Investing labor in the thing.
a. Locke: Mixing labor with a thing is the strongest claim of ownership
4. In wild animals, by killing or wounding it.
1. First Possession
a. Pierson v. Post p. 81
a. Under common law, wounding the animal wou
Accession [p. 165]
Common law > If you own something intimately related to another thing, than that thing is yours.
i. Examples: cattle offspring, fruit from trees.
Intellectual Property (mostly federal law, real property mostly state law).
1. Needs to be new, useful, and non-obvious.
2. Genes may be patented if they’re designed or engineered.
3. Anti-commons theory.
1. Anything fixed in a tangible medium.
2. No formal registration, on-line, $35.
3. Proves an original work.
Incentive for discovery, commercialization, and innovation.
Principles of All Property applied to IP
i. Privilege to Use
1. Patents do not necessarily convey the privilege to use it if it needs FDA approval, or requires an existing patented object. Pharmaceutical patents expire in 10 years.
2. Copyright does not necessarily prevent the use, only copying. Good for life of author +7 years.
3. Trademarks go away if not in use.
ii. Right to Exclude
1. Patents – Prevent manufacture (or sale).
2. Copyright – prevents copy or performance.
iii. Right to Transfer
1. Most transfer rights are found in IP.
2. IP rights are usually non-rival, consumption of the property does not diminish the value.
International News Service v. Associated Press [p.135]
i. INS was cherry-picking AP’s stories off the wires, selling it on the coasts.
ii. Ct. finds that the news is public domain, and was no longer protected by copyright when it was.
1. At the time, copyright required registration.
iii. Creates a quasi-property right in the news, limited to distribution & making a profit on the story, afterwards the right disappears.
1. Court seeking to reward the AP for gathering news, by creating a legal fiction? (quasi-property)
2. Holmes dissent: more bright-line rule: requiring acknowledgement of the source and a ban on publishing for a number of hours after it is released.
3. Brandeis dissent: Doesn’t care about labor, doesn’t like “quasi-property”. Wants to punt to legislature.
Int’l News was a pre-Erie case, using federal common law on