chap1theories of property

7/26/2019 Chap1theories of PROPERTY

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THE THEORIES OF PROPERTY

A. A Natural Right to Property

B. Positivism an !on"eptualism

!. # tilitarianism

$. Relational !on"eptions o% Property

E. Neo&!on"eptualism an #tilitarianism

INTRO$#!TION

The sense of having and the desire to acquire property exclusively continues to

dominate many modern cultures. Monopolization of the worlds resources and the

desire to own and control is the backbone of the current social and economic

ideology. Property is social dynamic mutable! mercurial and value laden! it forms the

primal core of most social activity in the modern world.

Private property has become important dominant form of property relationship in the

modern capitalist world where it promotes liberalists! laissez"faire society whereby

individual have the rights to accumulate property and wealth for their exclusive

means.

WHERE DO PROPERTY RIGHTS COME FROM?

Property rights come from culture and community. # person living totally apart from

others! on a remote island! does not need to worry aboutproperty rights. $hen people

come together! however! the need for speci%c arrangements

about property ownership becomes apparent. This group or community then de%nes

and enforces rules of access to the bene%ts that come from owning land orother property.

WHO REALLY OWNS MY PROPERTY?

&This land is mine! mine to use and en'oy! mine to treat as ( wish!) is a common

sentiment among many owners concerning their rights to land. This is called the

*human territorial imperative.* +arious actions by governments and courts in recent

years suggest that private owners propertyrights are shared with the public and that

these rights are limited and can change over time. $e are all part of a society that

de%nes our rights and has the power to rede%ne them over time.

WHAT ARE PROPERTY RIGHTS?

, Property rights establish relationships among participants in any social and

economic system. *Property* is actually the stream of bene%ts from a particular

resource. The *right* to that stream of bene%ts is an expression of the relative power

of the bearer.

-wnership of a property right commands certain responses from other people that areenforced by the government and culture.


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, Property rights are a function of what others are willing to acknowledge.

# property owners actions are limited by the expectations and rights of other people!

as formally sanctioned and sustained in law. The boundary between an obligation and

a right varies. Patterns of rights and obligations re/ect prevailing 'udgments about

fairness! based on peoples values.

, Property rights can be likened to a bundle of sticks! with each stick representing a

right! or a stream of bene%ts .The bundle expands as sticks are added and it contracts

as they are taken away. (mportant sticks! for example! may be the right to sell! to

mortgage! to subdivide! to lease! and to grant easements. 0overnment has the overall

responsibility to protect public health and safety! and to promote general welfare

through selective exercise of discretion that sustains quality of life. (n addition to the

formal rights of government! communities can use other powers to in/uence

private property owners. These other powers include public spending! public

ownership power! and public opinion.

1rom a historical point of view! it appears that the rights we hold in property springfrom society. (ndividuals may believe that their rights are 0od"given or endowed by

natural law! but in practice! the nature of ones rights depends upon the

interpretations accepted by the society in which we live. 2ights are real only when the

sovereign power or government! which acts as the agent of society! recognizes them

and is willing to defend and enforce them.

WHY ARE PROPERTY RIGHTS IMPORTANT?

Property rights are culturally de%ned and enforced and because di3erent groups gain

and lose power! no one can be certain how the current scope go to broaden public

powers over private property. The interests of di3erent groups vary greatly. Those

seeing private ownership as an opportunity for making money and acquiring wealth

have obvious reasons for trying to stop or reverse the trend toward more public

power. -thers! who view land as a scarce and fragile resource! the use of which is

closely intertwined with community concerns! argue for even more public supervision.

Mostly attitudes lie between these two points.

$ith the prospect of stronger demands and pressures for public programs to directland use! individual owners may very well fear that attitude changes will strip them of

certain rights. # growing sentiment for wider acceptance of a public trust view of

rights calls for recognition that the rights en'oyed by owners of private property are

balanced by their responsibilities. (t is to societys advantage that owners use land for

productive purposes.

-wners have the responsibility to use land! or other streams of bene%ts! in ways that

do not cause in'ury or loss of bene%ts to others or work against the basic interests of

others in the community.

4istory shows that property rights have evolved over time. -ur recognition

of property rights has not been linear! but schizophrenic and dynamic in nature.


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-n one hand! we %rmly believe that people should be able to do what they want with

the property they own. The desire to maintain strongproperty rights protection is

based not only on utilitarian grounds! but also on fairness grounds. -n the other hand!

we hold an equally strong conviction that there is a public interest in how property is

used! and at some point! the publics interest outweighs the individuals rights.

Property is important. 5elieved by some to be a keystone right! or even the core

of liberty!property lies at the foundation of both contract and tort law. #s a legal term!property is prominent in many doctrines and statutes. (mportantly! in contrast tocontractual rights that avail only against other parties to an agreement! propertyrights avail against the rest of the world! irrespective of consent. 4ence! classifying aninterest as property has far"reaching implications in our legal system. # simple example demonstrates the power and importance of property.6onsider the conveyance of an automobile. # contract can su7ciently allocate legalrights between 5uyer and 8eller and! as between them! can render property lawredundant. The 5uyer and 8eller! however! have no contractual relationship with thirdparties who may covet the automobile. 4ere! as between people out of contractual

reach from one another! property is dominant. 5ecause it is practically impossible forcontracts to arrange most of societys relationships! property law determines most ofthe legal interactions regarding assets among people. 9et! property law often seemsto su3er from a characteristic disease of legal categories everyone knows what it is!but no one can de%ne it. :espite the recent renaissance of property as a sub'ect of academic inquiry!the %eld seems to be in insoluble theoretic disarray! with scholars scrambling toassemble a giant puzzle of ill"%tting pieces. ;ew theories tend toward the extremes ofeither denying any meaning to property at all! or towards the magic of formalism! andboth proclaim loudly"either proudly or shamefacedly"the complete disconnect withpopular conceptions of what property is and why it should be protected. ;owhere is

the is'ointedness of property theory more manifest than in the gap between the twoleading methodological approaches to property analysis"instrumentalism! representedin the main by law and economics!and formalism! or conceptualist scholarship. Thetwo approaches seem so incompatible with one another that scholars belonging toeach of the vying camps accuse their counterparts of misunderstanding their topic ofstudy. no di3erent than the legal rights aggregated underany other legal category. #t the basis of many economic treatments lies a 6oasianapproach. This approach calls for well"de%ned legal rights to be %rst assigned andthen allocated through voluntary exchanges mediated by the law of contracts. (n6oases view! property rights are simply background rules"legally created entitlementsawaiting reallocation through contract. #nd! although 6oase acknowledged that theinitial rights allocation could a3ect the e7ciency of an economic system! mostsubsequent economic theorists have declined to elaborate on this point! choosinginstead to devote their attention to the contractual institutions allocating propertyrights. 6onsequently! law and economics scholars attach no importance to property asa distinct %eld of law for purposes of the standard economic analysis! property might'ust as well be the part of contract law that speci%es default rules.

The conceptualists counter with notions derived from 2oman law! insisting on

the primacy of in rem rights and specially privileged rights! including the rights toexclude! use! and transfer property. 8ome conceptualists advance instrumentalreasons for certain ancient rules! but they fail! or do not bother! to explain theinstitution of property in its entirety.The instrumentalists! on the other hand! haveexplained some enforcement rules and property characteristics! but have little


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explanation"and! frankly! little use"for the aggrega" tion of ancient forms de%ning thelaw of property.-3 to the side! scholars occasionally note that neither theoreticalapproach connects very well with the popular conceptions of what property is and whyit is valuable!but the critics have not been able to create a theory to compete witheither the instrumentalists or the conceptualists. 2emarkably! what some might consider the central feature of property"itsfunction as a device for capturing and retaining certain kinds of value"is almostcompletely absent from modern conceptual discussions of property. (t was not alwaysso. (n earlier centuries! the issue of value almost completely dominated theories ofproperty? how property created value! to whom it properly belonged! and how ithelped capture and retain value for its rightful =or wrongful> owner. @ohn


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property rights because it allowed ownersto display virtue by waiving this right andsharing the bene%ts of property ownership with others. (n this tradition! early post"Bnlightenment theories of property focused on a*natural* right to property. Perhaps the most famous of these theories is *the labortheory* associated with @ohn


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property belongs to a single individual! or as 5lackstone put it! *one man.* Third!where land is concerned! property rights extend inde%nitely upwards into the heavensand downwards to the center of the earth. 1ourth! the principal right attached toproperty is the right to exclude *any other individual in the universe.* $hile5lackstone probably did not intend this result! modern theorists associated thisformulation with an absolutist view of property that eventually came to be known!somewhat inaccurately! as the *5lackstonian bundle of land entitlements.* The5lackstonian bundle presupposes impeccably demarcated parcels whose boundariesextend upward to the heavens and downward to the depths of the earth! and bestowsupon owners unbridled powers andprivileges to use! transfer! and even abuse land.5y the beginning of the twentieth century! however! the 5lackstonian conceptionbegan to wear. (n a highly in/uential series of articles! $esley 4ohfeld sought torender legal thought more coherentby clarifying the basic concepts of the law. 6oncerned about the looseness with whichlegal terminology had been used! 4ohfeld re%ned existing concepts and created newones to develop a comprehensive legal taxonomy.-f particular importance here is histreatment of property rights. $hile 4ohfeld listed ownership as his paradigmatic

example of an in rem right! he reconceived of in rem rights as mere expressions of inpersonam rights vis"#"vis an inde%nitely large class of people. 4ohfeld also pointedout that property! as a legal concept! comprises not only rights! but also privilegesand powers.he further elucidated that the crux of property is not a relationshipbetween a person and an ob'ect! as 5lackstone had suggested! but rather a nexus oflegal relationships among people regarding an ob'ect. 4ohfeld did not intend to createa comprehensive view. $hile his analysis of whether property should properly beviewed as an in rem right has since become a staple of property theory!

4ohfeld saw no need to address the practical implications of histaxonomy$orking from a purely conceptual perspective! 4ohfeld did not concernhimself with policy issues at all. ;evertheless! 4olifelds observations generally are

credited with having created an entirely new understanding of property as a *bundleof rights.* The *bundle of rights* concept of property denies any %xed meaning to theterm property and deemphasizes the importance of the thing with regard to which therights are claimed. (n the bundle metaphor! each right! power! privilege! or duty is butone stick in an aggregate bundle that constitutes a property relationship. $hetherremoving a stick =or set thereof> from the bundle will negate the classi%cation of theremainder as property cannot be determined in advance.* Thus! the bundle of rightstheory transformed property into an almost in%nitely malleable concept! amenable tonumerous permutations! and sub'ect to ad hoc decisionmaking. #.M. 4onore played a decisive role in advancing the bundle of rights metaphor

by cataloguing a generally accepted list of the *incidents* of property or ownership.#cknowledging that the *fashionCofD speakCingD of ownership as if were 'ust a bundle of rights* might require smallmodi%cation of the list! 4onor nevertheless con%dently asserted? -wnership comprisesthe right to possess! the right to use! the right to manage! the right to the income ofthe thing! the right to the capital! the right to security! the rights or incidents oftransmissibility and absence of term! the prohibition of harmful use! liability toexecution! and the incident of residuarity? this makes eleven leading incidents.(mportantly! 4onor noted that the importance of the list lay in it being an alternativeto the *distortion* of the past! in which it wasviewed as property in the concentration of absolute rights of use! exclusion and

transfer in a single individual. 4onor emphasized instead the lack of primacy of anyindividual stick in the bundle. Today! the bundle of rights conception of property rules the academic %eld.#s 5ruce #ckerman noted acerbically! the concept has become a *consensus view so


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pervasive that even the dimmest law student can be counted upon to parrot the ritualphrases on command. The result has been what some lament as the end of propertylaw. (n Thomas 0reys words! $e have gone . . . in less than two centuries! from aworld in which property was a central idea mirroring a clearly understood institution toone in which it is no longer a coherent or crucial category in our conceptual scheme.

The concept of property and the institution of property have disintegrated ...The substitution of a bundle"of"rights for a thing"ownership conception of property hasthe ultimate consequence that property ceases to be an important category in legaland political theory.

!. #tilitarianism

#s the legal conceptualization of property changed! so too did the 'usti%cationsfor property. The seeds planted by 5entham struck root! and today! many in/uentialscholars 'ustify property on instrumental and positive grounds. Today! there iswidespread agreement that the law orders property in response to societal needs!rather than in obeisance to a moral command or the natural order of the universe . Property! like many other legal %elds! has been heavily in/uenced by themovement to apply economic analysis to legal questions. 6redit for generating this%eld has been ascribed at di3erent times to -liver $endell 4olmes! 2onald 6oase!

and 2ichard Posner today! however! it is 6oases ideas that have had the most lastingimpact in the %eld. 6lassical economicsviews externalities as a market failure that prevents otherwise competitive marketsfrom achieving allocative e7ciency. 2onald 6oase revolutionized the %eld by notingthat externalities will only lead to ine7ciency where transactioncosts impair private bargaining. (n the absence of transaction costs! he wrote! partieswould always negotiate for an e7cient result notwithstanding externalities. $hile6oase paid no heed to the content ofproperty! his analysis set the groundwork for subsequent contributions. 4arold :emsetz built on 6oases foundation in advancing his importantevolutionary theory of private property. :emsetzs point of departure was identical to


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third parties in exchange for the payment of a price determined by the third party theowner has no veto power!and must su7ce herself with the compensation she receives. The taxonomy devisedby 6alabresi and Melamed! although ingenious! confused the concept of property.

1or while the term *prop" erty rule protection* implies a tight relation toproperty! this allusionis misleading. #longside the normative 'usti%cations for property and the descriptiveanalyses of propertys incidents! 6alabresi and Melamed described property as amode of protection that enabled entitlement holders to en'oin nonconsensual uses oftheir entitlement"a power they dubbed *property rule protection.* Moreover! 6alabresiand Melamed aggravated the confusion at the descriptive level by suggesting thatany legal entitlement could be sub'ect to property rule protection! thereby con/atingthe entire 4ohfeldian vernacular* into a single! catch"all term that fails to discriminatebetween property rights and other legal rights.

9oram 5arzel introduced yet another division of property. 5arzeldistinguished between *economic property!* de%ned as "the individual's ability, inepected terms, to consume the good !or the services of the asset directly or toconsume it indirectly through exchange!* and *legal property!* de%ned as those

economic property rights that are "recogni#ed and enforced, in part, by thegovernment$ "Bconomic property! for 5arzel! is an exceptionally broad term!encompassing the rights of anyone with any ability to consume the good in anyfashion.* 1or instance! in 5arzels view! a car thief is a co"owner of a car along with thetite holder! because each has the ability to consume! in certain circumstances!a portion of the attributes of the asset.

5arzel also relied upon 6oases insights to argue that the crux of property isthe allocation of rights in environments of positive transaction costs. 5arzels modelstipulated that private contracting would invariably fail to capture certain valuableattributes of assets. The legal institution of property! on 5arzels view! simplyorganized some forms of protection for those attributes of an asset not addressed by

optimal contracting. 1or 5arzel! therefore! property is a residual institution subordinateto the institution of contracts legal property is an even less signi%cant factor! becauseit is concerned with some instancesin which the state might protect economic property rights. #s 5arzel put it! *CaDt theheart of the study of property lies the study of contracts.* 9et! as 8mith and Merrillastutely observed! 5arzels analysis su3ers from a potential baseline problem. 5arzelsanalysis is predicated on the primacy of contracts over property! but as Merrill and8mith point out *one cannot enter into contracts over the use of resources withoutsome baseline to determine who contracts with whom.* (n the %nal tally! the positivist and utilitarian analyses have splintered the

institution of property in several ways. Positivists have driven a wedge betweendescriptive and normative dimensions of property.Etilitarians have contributed to the incoherence by breaking the concept of propertyinto legal rights and economic rights =5arzel>! and divorcing the issue of primary rightsfrom the issue of enforcement =6alabresi and Melamed>.

$. Relational !on"eptions o% Property

(n 'uxtaposition to the utilitarian and conceptualist property theories! a di3erentanalysis recently arose emphasizing the interpersonal relationships surroundingproperty rights. The most notable work in this genre is Margaret @ane 2adins %ropertyand %ersonhood5uilding on 4egels theory! 2adin introduced an important distinctionbetween personal and fungible property. #n ob'ect belongs in the former category *if

its loss causes pain that cannot be relieved by the ob'ects replacement.* (n contrast!it comes within the latter if *perfectly replaceable with other goods of equal marketvalue.* Personal property constitutes ones self fungible property is held for *purelyinstrumental reasons.* 2adin! then! suggested that ob'ects


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could be ordered on a continuum running from personal to fungible. (ll Moving to thenormative implications! 2adin proposed a *twolevel* property system that o3ersdi3erential protection to entitlements in accordance with their classi%cation aspersonal or fungible. 1urthermore! 2adin suggested that her theory might imply anobligation on the part of the government to *guarantee citizens all entitlementsnecessary for personhood* and to ensure *that fungible property of some people doesnot overwhelm the opportunities of the rest to constitute themselves in CpersonalDproperty.*

;otwithstanding its ingenuity and importance! 2adins analysis furtherobscured the concept of property. 2adin implied that theorists could no longer simplyrefer to property as a generic relationship among people with regard to ob'ects.2ather! 2adins analysis requires careful scrutiny of the nature of ob'ects sub'ect toproperty rights and the roles ob'ects play in constituting the personalities of thepersons claiming them.

E. Neo&!on"eptualism an #tilitarianism

Most recently! a new body of scholarship has sought to recover the conceptualcoherence of property by 'oining traditional doctrines with some basic utilitarian'usti%cations. (n an important series of articles! Thomas Merrill and 4enry 8mith

sought to reintroduce some coherence to property law by stressing the centrality oftwo basic features of property law? the in rem nature of property rights and thenumerus clausus principle! under which property rights *must track a limited numberof standard forms.* Merrill and 8mith observed that *CwDhen property rights arecreated! third parties must expend time and resources to determine the attributes ofthese rights! both to avoid violating them and to acquire them from present holders. 6onsequently! the creation of idiosyncratic property rights increases the informationcosts property imposes on third parties. 8tandardization! on the other hand! reducesthem.

Note'!ompare a(ove theories )ith (elo)&SamePHI*OSOPHI!A* SYSTE+S FOR ,#STIFYIN- PROPERTY RI-HTS

There are various theories of property for 'ustifying its existence and its changing

realm. The 2oman Philosophers believed that in pre Flegal state the things were in

abundance. (ndividuals acquired control over these things for their survival. Thus the

2omans divided things into two "Things in %atrimony=things capable of being taken in

private ownership> and things out of %atrimony =things which cannot be owned

privately>.

Theories propounded by 0rotius and Pufendrof seem to be the earliest in Natural

Law Theoriesaccording to 0rotius! the property was originally &res nulliuisbut the

man in society came to a division of things by agreement. 4owever Pufendrof di3ers

with 0rotius slightly and holds that the things were &negative community) i.e.

originally things were &res communes). ;o one owed them. This is called negative

community to distinguish it from a7rmative ownership by co"owners.

@ohn


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economists understand e7ciency. #nd %nally! he stresses that propertyrights are

limited by equality! so that one would be limited in the acquisition and the extension

of property rights by a principle of equality. #ccording to


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The Fe(eralist Pers%e"ti'eembodied in 1ederalist thinkers such as @ames Madison!

who believed that individual property rights were of crucial importance and deserved

stringent protection. *0overnment!* Madison said! &is instituted no less for the

protection of property than of individuals). 1ederalists understood that other rights

were of no use unless property was safe. #rthur


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Title o+ %a%er *& Pro+5 Har(i# "alle( !Tra)e(& o+ the Co,,o#s4 which meant

to demonstrate the necessity of individualistic propertyrights! although it actually

conveys the more limited idea that scarce resources needs regulation! rather

unrestricted freedom. 2egulation over scarce resource! as the product of the

relationship between individual! power and legal restrictions! give arise to di3erent

form of property Flargee of the state. The way to avoid the tragedy is to develop

techniques that rather than allowing free exploitation of scarce resources are able to

determined a &price) that corresponds with social cost.

(n recent times! economic arguments have emerged in defence of

private property structures! although such theories do not focus upon the humanist

concerns about the inequality and oppression that the expansion of

private property has engendered.(t has been suggested that

communal property encourages waste and an ine3ective use of resources. $here

the property is privately owned these resources may be utilized more e7ciently.

(ndividuals are not competing against each other for use! and may therefore spend

more time and e3ort planning the most resources e3ective activities.These argumentsare particularly potent in a society increasingly concerned with resource e7ciency and

environmental protection.

#ccording to


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The same sort of debate! between individualism and society! goes on today over

topics like welfare! social security! gun control! and a7rmative action. +iewpoints

stressing individual rights can be traced back to the 1ederalists! while those stressing

societys interests are rooted in the colonial 2epublicans. 5ut as the nature of the

economy changed! property rights changed with it. @obs and bene%ts! or stock

ownership! became 'ust as important as land. The law changed to give employees

some protection and to recognize intangible property as well as

real property.Property rights should really be understood as a balance between these

competing interests.

#s the information age has evolved! we have seen additional changes in property.

Trademarks and copyrights may be far more valuable than land. The framers of the

6onstitution could not have foreseen property rights in (nternet web sites! body parts!

and fertilized human eggs! and yet we must adapt their ideas to %t these new

realities.

4istory teaches that what we mean by *property* and *property rights* has neverbeen set in stone. (nstead! our recognition of these interests is constantly evolvingH

what may have been allowed yesterday may be unacceptable to society today.

Particularly in the environmental area! the absolutist view of property rights seems

misplacedHwhat we see as the proper use of land =and therefore the *right* of

the propertyowner> is bound to re/ect the constantly changing needs of our society.

chap1theories of property

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