Law Outlines Property (Duke Wiener) Outlines
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Utilitarian theory of Evolution of Property Rights
How does property arise from non-property? Non-property = tragedy of open access in which:
Overuse = benefit to self, harm to others (externality)
Conservation = cost to self, benefit to others
Incentive to “free ride” on others’ conservation
Inadequate “collective action” to conserve the resource
Question – How do we solve this Tragedy? What form of property should the solution take? Each provides different incentives & costs…
Blackstone’s Account of Evolution of Property Rights
Very similar to utilitarian point of view
Contrasts idea of absolute dominion with the gradual creation of property rights with social change
Originally all was commons (from the Creator), all we had was temporary use rights at first
Rising demand for resources
Privatization to motivate production
“Necessity begat Property” (scarcity begat property)
Need social institution to enforce property rights, so need system of government and law
First occupancy – weakest part of chapter because he neglects other ways of allocating property rights
Demsetz’s Account of Evolution of Property Rights (200 years later)
Open-access + demand = yields overuse
Overuse = externality (harm to others)
Private (excludable) property would “internalize the externality” (user would have to face the cost of the loss of the resource)
We privatize when the benefit of doing so (i.e., the benefit of internalizing the externality) exceeds the cost of doing so (i.e. the costs of negotiation, monitoring, enforcement – transaction costs of ensuring property rights)
NE Indians – fur trade; animals territories confined to small areas, so cost of internalizing the effect of husbanding these animals is small compared to high commercial value of animals productive to establish private hunting lands.
SW Indians – plains animals are not as commercially valuable, and roam, so high cost of preventing animals from moving to other tracts of land.
As benefits rise, have more property
Rising demand for fur pelts
Higher income
New uses for animals (whale oil for heating & lighting)
As costs decline, have more property
Better methods of communication
Better methods of fencing/dividing up parcels
Invention of barbed wire
Tradable permits for sulfur oxide emissions (cost of reducing pollution is allocated to firm who can do so most cheaply)
Transferable development rights (Penn Station case)
ITQs (individual transferable quotas for how much fish can catch) – Atlantic Cod Fishery
Rising demand Internalize Externalities, which kind of property systems to do this?
Private Property?
Communal Property/Social Norms?
The Privatization Puzzle
If users cannot cooperate to stop overuse of the resource (hence tragedy, hence need for privatization), how/why do they cooperate to create the legal regime?
Where they are repeat players – norms which ripen into law. As opposed to sporadic players who don’t have much contact with each other
Only where small close-knit group? (gets to communication)
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