The Property Ace Outline
– Property: “Basic problem of property law is nothing more or less than determining the relation of the individual to the community w/ regard to the use and exploitation of a resource” (property depends on enforcement mechanisms of the state)
o The legal relationship among people in regard to a res or even an intangible subject such as an idea (i.e. patent/copyright).
o Developed through need to allocate resources among people w/ competing interests. To accomplish this allocation of resources in ways that provide people w/ consistent expectations when the same or similar factual circumstances arose, society adopted rules of law.
o Property doesn’t just come from law, it is a response to society’s needsàlaw recognizes society’s property needs for other reasons:
– Law: Allocates property rights, interests, etc
– What is law?
o Custom, tradition (i.e. that is my chair, it has always been that way)
– Legal Theories: Adopted by various social groups to assure the realization of expectations in the allocation of resources.
– Efficiency-powerful explanation for legal rules (wealth maximizing rules)
o 1) Occupation Theory: Property belongs to 1st to seize it. Applies today when property is found w/ no discoverable owner.
o 2) Natural Rights Theory: Through middle ages, concept of private ownership of property was considered a “natural right”
o 3) Labor Theory: Title to property is derived from the labor & effort experienced in creating it (communist system failed because people who did work felt they should have title)
o 4) Legal Theory: Whatever is recognized by the law as private property may be the subject of private ownership
o 5) Social Utility Theory: Private ownership of property is encouraged because it promotes & increases social welfare
o 6) Expectation Theory: “Property is a basis of expectation. It is the expectation of deriving certain advantages from a thing which a person possesses, as a consequence of the relationship between the person & the thing”
o 7) Welfare economist: rational person is one who always wants more. People tend to respond when they are rewarded.
o 8) Economic Theory (Posner): Property rights recognized & legally protected to create incentives to use resources efficiently. These incentives created by parceling out mutually exclusive rights to use resources. This theory is based on the concept that the relative efficiency of
ing (can be zero)
– External Costs: Costs born by someone other than a producer (i.e. pollution that causes damage to goods other than those of the manufacturer)
– Welfare Economics Optimality: Economic system where the goal is society benefiting as a whole. When we allocate property we are seeking optimality, this can be achieved if the social benefit is greater than another optimality (& sometimes a person will be hurt in this allocation)
– Another way to allocate: Property allocation in terms of efficiency
o Pereto Optimal=economic system where if A is benefited more than B is harmed, that is ok if overall utility is best for all
– Lien=owner of a piece of property transfers a piece of the property to bank, etc (owner still owns the vehicle)
o Ownership is divided upà”owner has a bundle of sticks and they give some sticks to the bank”
Note: Banks cannot own vehicles or real-estate fully, only partial interest in the property that they finance.