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Property I
University of Pennsylvania School of Law
Parchomovsky, Gideon

Outline Property

Policy Issues and Conflicts

Rules vs. Standards
-activity that occurs frequently: Rule (reliance) from legislature
-activity that occurs infrequently: Standard (flexibility) from court

-does a custom exist?
-is behavior in question consistent with custom?

Efficiency Theories
-increase welfare of society overall
-sometimes competing arguments of efficiency
Pierson v. Post
1. Encourage standards for possession so hunters can begin chase with certainty, promote killing foxes, promotes professional hunting.
2. Create no standards, promote killing of foxes by anyone who sees one, encourages better capture methods
-Efficiency: choose right goal along with right means, maybe killing all foxes is inefficient as will die out, maybe they are needed to ecosystem.

Free alienability
-maximize utilization of land
-protect creditors by access to land
-prevent wealth accumulation by a few

Transaction costs

Internalize externalities
– exist whenever an actor is not forced by market to fully bear costs of his actions
– Least Cost Avoider (who can avert problem cheapest)

– Demsetz and Hardin: Agree that communal property regimes always lead to abuse and over-exploitation.
– Feminist Theory: People are not self-interested maximizers and have the ability to cooperate and solve the overuse problem.
– Q: Will P.P. always be more efficient than communal property?
– A: NO! Under certain circumstances P.P. may give rise to inefficiencies of another sort.

– Tragedy of the Anti-Commons:
– Under a P.P. regime rights to resources may often be too fractured and dispersed and this will lead to under-utilization of valuable resources (e.g. when a person divides property among a lot of people).

– Charles Reich: P.P> is instrumental in maintaining independence, dignity, and pluralism by protecting individual owners from state intervention. Likewise, Milton Friedman argues that P.P. is essential to political freedom. On the other hand, P.P. might break down notions of sharing and community. The choice between communal property and P.P. turns on a score of economic and non-economic factor. Common ownership is most desirable under conditions of abundance or if we wish to foster values of sharing and community. Private ownership will work better when resources are scarce and a problem of waste exists. Or if we wish to inculcate value of liberty and individualism.

I. Acquisition and Conflicting Claims

A. Acquisition by Capture (wild animals)
Theories of acquisition:
1. First Possession (first in time)
-Either call it, put some labor to its capture, or actually capture it
2. Labor Theory (Locke)
-own body, own labor, so when you mix your labor with un-owned resource it becomes your property
Limitations: (1) Cannot commit waste and (2) leave enough as is good for others

Rule of Capture, capture or possession needed to gain right to animal
How to determine when capture occurs? Options in Pierson v. Post (fox):
-actual possession
-mortal wounding or trapping (Pierson v. Post majority)
-pursuit by large dogs
-reasonable prospect of capture

Pierson v. PostRule of Capture
– Issue: What acts amount to occupancy or possession for acquiring the right to wild animals?
– Holding: Animals, ferae naturae, is still in the commons until an act of possession creates occupancy over it. The Court conceded that acts not amounting to actual killing may suffice. Such acts may include mortal wounding or trapping. Pursuit alone is insufficient to establish possession. Therefore, Post’s chasing the fox with his hounds did not establish possession.

Ghen v. Rich
Possession may be maintained, even when corpse is left, if efficiency is supported by a differing custom (harpoon whale and wait for it to wash up on

oaming and grazing
– 3. Rule of Increase
– RULE: The title to offspring of domesticated animals will always fall under the title to the mother.
This rule promotes certainty.

Popov v. Hayashi (barry bonds case)/ possession may be established but not maintained due to custom (ballparks). Value split between first possessor and eventual possessor. Splitting does not affect behavior, creates no incentives to change.

B. Gas, Oil, and Water (Acquisition by Capture and Alternative Regimes)

1. Gas
Rule of Capture (first rule)

Hammonds v. Central Kentucky Gas (putting oil back under ground for storage). Gas, oil, water are minerals ferae naturae, tend to escape on their own. Treated like animals, if returned to nature they are dispossessed. Similar rules for capture, first in time.
– Rule: The Court established that due to the migratory nature of gas it remains in common ownership until actual possession has been taken via extraction. However, the owner of land under which the gas lies, may acquire and appropriate, the oil and gas directly beneath.

-Inefficient system, led to over-drilling and tragedy of commons. Overturned.

Alternative Management Regimes for Gas:
1. Proportional extraction.
-Problems with information cost and enforcement.
2. Pooling, unitization with voting rights (Cartel).
-Set up costs high, always displeased minority
-Does not take into account relative preferences of actors
3. Regulation
-Must turn towards regulated industry for information, abuse
-Enforcement costs