Property Outline
Summer 2006
I. Origin of Property rights: when and how something becomes someone’s property – transfer of property over time
A. Theories of Property
1. Demsetz – economic view of property
a. Utilitarian view of the origins of property (see Livingston) “what is best for society”
b. Private property replaces communal ownership b/c it internalizes externalities
c. If it is community property, it will be over-used, but if it belongs to you, you will conserve it
d. Externality: benefit or cost that results from a transaction which is not felt by the parties to the transaction
e. Economists would say that the tort law forces me to internalize the external costs, if tort law forces me to pay my neighbor for the damages I have caused
f. Fairness – individual or community/bystanders who bear high risk
g. Assumptions – parties involved have perfect information, all values can be quantified, *people act rationally and self interested, wealth maximizers
2. Hunting Ground Story (Demsetz):
a. Fur trade creates shift in hunting market and external costs go up.
b. Led to creation of property rights: it became economic for those affected by externalities to internalize benefits and costs (they were responsible for their own tract of land and if they killed all animals, they would be out).
c. Other possible solutions to assigning property rights (although these impose problems of cooperation)
i. Common property regimes
ii. Education
iii. Impose liability
iv. Peer pressure
d. Chocolate hypo:
i. Value to each class member = .1
ii. Josh takes one – value to each class member = .09
iii. Josh’s value = 1.09
iv. People move to different solutions so everyone doesn’t grab all the chocolate
e. Result of shared resources and external costs associated with their use:
i. Effects of a person’s activity on his neighbors and subsequent generations will not be fully taken into account.
ii. Results in great externalities: full costs of owner’s activities are not borne by him and he is not forced to take them into account.
iii. Owner has no direct incentive to use land economically and therefore land not used economically.
3. Coase Theorem:
a. Holds: if no transaction costs, and it is a perfect world, we would always reach efficient result and it doesn’t matter where you allocate property right b/c interested parties will bargain to correct externality
b. why this doesn’t work in REAL WORLD:
i. there are transaction costs, external costs
a. because there are initial transaction costs, then initial allocation of property rights does matter
ii. imperfect information
iii. negotiations are complicated
B. Labor Theory of Property
1. People entitled to property that is produced by their labor – b/c add to land to make It your own. Social utility – it is good for society
C. Law and Economics:
1. Private property exists to maximize overall wealth of society if can measure human happiness i
r escape after capture
a. Ownership rights end when a wild animal escapes or is released into wild.
b. if a captured wild animal is tamed such that it has the habit of returning from the wild to its captor, it is still owned by the captor
9. Constructive possession: not possession but pretend that it is
a. Dissent of post argued that pursuit was constructive possession
b. Usually useful for owners of land with natural resources beneath surface – have constructive possession over them
c. Landowner is not in constructive possession of wild animals on his own land, but because LO may bar others from trespassing, LO has exclusive opportunity to capture wild animals on the land.
F. Actionable Interference
1. where a violent or malicious act is done to a man’s occupation, profession, or way of getting a livelihood, there an action lies in all cases
2. Keeble v. Hilleningwell – neighbor deliberately scared ducks from P’s decoy pond
a. Issue: under prop law, does a person owe damages to land owner when he knowingly and intentionally uses physical means to scare chattels off his land, when the person also knows that such action will result in decreased business and threat to land owner’s livelihood
